-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J2JRx+C6HqiHld7Hxzyu//ElLOTOjNIIxVJyLEw2TCnbI+eS4ni+qFd0mgeUfNHM NF0G/j3sEXPOSysyMbEGCA== 0001068800-02-000287.txt : 20030213 0001068800-02-000287.hdr.sgml : 20021011 20021011142422 ACCESSION NUMBER: 0001068800-02-000287 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20021011 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL INC CENTRAL INDEX KEY: 0000920321 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 841250533 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509 FILM NUMBER: 02787302 BUSINESS ADDRESS: STREET 1: 8310 S VALLEY HWY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: 8310 S VALLEY HWY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: MAIL WELL HOLDINGS INC DATE OF NAME CHANGE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCO III LLC CENTRAL INDEX KEY: 0001198203 IRS NUMBER: 841366163 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-01 FILM NUMBER: 02787303 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL GRAPHICS CO CENTRAL INDEX KEY: 0001198201 IRS NUMBER: 840692676 STATE OF INCORPORATION: CO FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-02 FILM NUMBER: 02787304 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL WEST INC CENTRAL INDEX KEY: 0001198200 IRS NUMBER: 840692676 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-03 FILM NUMBER: 02787305 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL TEXAS FINANCE LP CENTRAL INDEX KEY: 0001198199 IRS NUMBER: 522360462 STATE OF INCORPORATION: TX FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-04 FILM NUMBER: 02787306 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL SERVICES INC CENTRAL INDEX KEY: 0001198198 IRS NUMBER: 841513702 STATE OF INCORPORATION: CO FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-05 FILM NUMBER: 02787307 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL MEXICO HOLDINGS INC CENTRAL INDEX KEY: 0001198197 IRS NUMBER: 841461875 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-06 FILM NUMBER: 02787308 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL COMMERCIAL PRINTING INC CENTRAL INDEX KEY: 0001198196 IRS NUMBER: 841461875 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-07 FILM NUMBER: 02787309 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILL GRAPHICS INC CENTRAL INDEX KEY: 0001198195 IRS NUMBER: 741993976 STATE OF INCORPORATION: TX FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-08 FILM NUMBER: 02787310 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DISCOUNT LABELS INC CENTRAL INDEX KEY: 0001198194 IRS NUMBER: 351119834 STATE OF INCORPORATION: IN FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-09 FILM NUMBER: 02787311 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABP BOOKS INC CENTRAL INDEX KEY: 0001198193 IRS NUMBER: 331957430 STATE OF INCORPORATION: MI FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-10 FILM NUMBER: 02787312 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POSER BUSINESS FORMS INC CENTRAL INDEX KEY: 0001198202 IRS NUMBER: 752195786 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-100509-11 FILM NUMBER: 02787313 BUSINESS ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: C/O MAIL WELL INC STREET 2: 6310 S. VALLEY HIGHWAY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 S-4 1 eos4.txt MAIL-WELL I CORPORATION FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 2002 REGISTRATION NO. 333- --------- ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- MAIL-WELL I CORPORATION AND AFFILIATE GUARANTORS LISTED ON SCHEDULE ATTACHED HERETO (Exact name of registrant as specified in its charter) DELAWARE 2677 84-1250533 (State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.) Incorporation or Organization) Classification Code Number)
--------------- 8310 S. VALLEY HIGHWAY, SUITE 400 ENGLEWOOD, CO 80112 (303) 790-8023 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------- ROGER WERTHEIMER VICE PRESIDENT--GENERAL COUNSEL & SECRETARY MAIL-WELL, INC. 8310 S. VALLEY HIGHWAY, SUITE 400 ENGLEWOOD, CO 80112 (303) 790-8023 (Name and address, including zip code, and telephone number, including area code, of agent for service) --------------- COPIES TO: HERBERT H. DAVIS III DOUGLAS R. WRIGHT SENIOR VICE PRESIDENT--CORPORATE DEVELOPMENT JEFFREY A. SHERMAN AND CHIEF LEGAL OFFICER MICHAEL M. MCGAWN MAIL-WELL INC. FAEGRE & BENSON LLP 8310 S. VALLEY HIGHWAY, SUITE 400 370 SEVENTEENTH STREET, SUITE 2500 ENGLEWOOD, CO 80112 DENVER, CO 80202 (303) 790-8023 (303) 592-9000 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC: As soon as practicable after this registration statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] CALCULATION OF REGISTRATION FEE
============================================================================================================================ PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE(1) --------------------------------------------- ------------ ---------------- ------------------ ------------------- 9 5/8% Senior Notes due 2012................. $350,000,000 100% $350,000,000 $ 32,200 Guarantee of 9 5/8% Senior Notes due 2012.... -- -- -- --(2) ============================================================================================================================ (1) Calculated in accordance with Rule 457(f)(2). For purposes of this calculation, the offering price per senior note was assumed to be the stated principal amount of each senior note that may be received by the registrants in the exchange transaction in which the senior notes will be offered. (2) Pursuant to Rule 457(n), no registration fee is required for the guarantees of the senior notes registered hereby.
--------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ============================================================================== ADDITIONAL REGISTRANTS
STATE OR PRIMARY OTHER STANDARD I.R.S. JURISDICTION OF INDUSTRIAL EMPLOYER NAME OF INCORPORATION CLASSIFICATION IDENTIFICATION ADDITIONAL REGISTRANT OR FORMATION CODE NUMBER NUMBER ------------------------------------- ------------ ----------- ------ ABP Books, Inc....................... MI 2732 38-1957430 Discount Labels, Inc................. IN 2759 35-1119834 Hill Graphics, Inc................... TX 2752 74-1993978 Mail-Well, Inc....................... CO 6719 84-1250533 Mail-Well Commercial Printing, Inc... DE 2752 84-1461875 Mail-Well Mexico Holdings, Inc....... CO 2677 84-1468396 Mail-Well Services, Inc.............. CO 7331 84-1513702 Mail-Well Texas Finance, L.P......... TX 2677 52-2360462 Mail-Well West, Inc.................. DE 2677 84-1313079 National Graphics Company............ CO 2761 84-0692676 Poser Business Forms, Inc............ DE 2761 75-2195786 Wisco III, LLC....................... DE 2677 84-1362168
The name and address of the principal executive office for each of the additional registrants is the same as is set forth for Mail-Well I Corporation on the facing page of this registration statement. ****************************************************************************** The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ****************************************************************************** Subject to completion, dated June 11, 2002 PROSPECTUS [MAIL-WELL LOGO] MAIL-WELL I CORPORATION EXCHANGE OFFER FOR $350,000,000 OF 9 5/8% SENIOR NOTES DUE 2012 --------------- Material terms of the exchange offer: o We are offering to exchange the notes that we sold on March 13, 2002 in a private offering for new notes to be issued in registered transactions. o The exchange offer expires at 5:00 p.m., New York City time, on , 2002, unless we extend it. -------------- o The new notes will be identical to the old notes in all material respects, except that they will not have transfer restrictions, registration rights, or certain rights to additional interest that the old notes had. o The exchange of old notes for new notes will not be taxable for U.S. Federal income tax purposes, but you should see the discussion under the caption "Material Federal Income Tax Considerations" for more information. o We will exchange all old notes that are properly tendered. You should carefully review the procedures for tendering the old notes beginning on page of this prospectus. -- o Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. o We will not receive any cash proceeds from the exchange offer. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 8 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. --------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. There is no established trading market for the new notes or the old notes. However, you may trade the old notes and the new notes in the PORTAL market. This prospectus is dated , 2002 Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new 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 new notes received in exchange for old notes where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date of the exchange offer (as defined herein), we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." i TABLE OF CONTENTS PAGE ---- Summary....................................................... 1 Risk Factors.................................................. 8 Forward Looking Statements.................................... 16 Use of Proceeds............................................... 16 Selected Consolidated Financial Information................... 17 Unaudited Pro Forma Condensed Consolidated Financial Information................................................. 18 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 21 Business...................................................... 38 Management.................................................... 46 The Exchange Offer............................................ 49 Description of the New Notes.................................. 56 Description of Certain Indebtedness........................... 91 Description of Capital Stock.................................. 95 Material Federal Income Tax Considerations.................... 96 Plan of Distribution.......................................... 100 Legal Matters................................................. 101 Experts....................................................... 101 Where You Can Find More Information........................... 101 Index to Financial Statements................................. F-1 --------------- This prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus. This information is available without charge to security holders upon written or oral request to Mail-Well, Inc., Attn: Secretary, 8310 S. Valley Highway, Suite 400, Englewood, Colorado, 80112, telephone (303) 790-8023. To obtain timely delivery of such information, you must request the information no later than , 2002. ----------- ii SUMMARY This summary highlights selected information about us and does not contain all of the information that is important for you to consider in deciding whether to participate in the exchange offer. In addition to reading this summary, you should carefully review this entire prospectus, especially the "Risk Factors" section beginning on page 7. The data used in this prospectus are drawn from the financial statements of Mail-Well, Inc. and its subsidiaries on a consolidated basis. Mail-Well, Inc. is the direct parent company of Mail-Well I Corporation. Because Mail-Well, Inc. has immaterial assets, revenues and expenses (other than through ownership of Mail-Well I Corporation), the financial condition and results of operations of Mail-Well I Corporation and its subsidiaries on a consolidated basis do not materially differ from those of Mail-Well, Inc. on a consolidated basis. Mail-Well, Inc. and certain of its subsidiaries will guarantee all of Mail-Well I Corporation's obligations under the new notes. OUR COMPANY We are one of the largest printers in North America competing primarily in the commercial printing and envelope market segments. We believe we are the world's largest manufacturer of envelopes, the leading printer of envelopes in the United States and Canada, the largest high impact color printer in the United States, and a leading general commercial printer in several major U.S. markets. Our principal executive offices are located at 8310 S. Valley Highway, Suite 400, Englewood, Colorado, 80112, and our phone number is (303) 790-8023. We operate in the following market segments: Commercial Printing. We serve two primary commercial printing markets: (i) high impact color printing, in which we print a wide range of longer run premium products for national and regional accounts; and (ii) general commercial printing, in which we print a wide array of products and offer printing services to local commercial customers. Our commercial printing segment operates 29 plants throughout the United States and one in Canada. Envelope. We serve two primary markets with our envelope business: (i) customized envelopes and packaging products, including Tyvek(R) mailers used by the U.S. Postal Service, sold directly to end users or to independent distributors who sell to end users; and (ii) envelopes and other products sold to wholesalers, paper merchants, printers, brokerage firms, office product establishments and superstores. We manufacture envelopes in 30 U.S. plants and 13 Canadian plants. Printed Office Products. In addition to our two primary business segments, we also operate a printed office products segment. As discussed below, we are seeking to sell this business and therefore account for it as a discontinued operation. Our printed office products segment has 12 manufacturing facilities located throughout the United States. 2001 STRATEGIC PLAN In May 2001, we completed a comprehensive review of our operations and adopted a new strategy that focuses on our two core businesses--commercial printing and envelope. In support of this strategy, we sold our label segment and announced our intention and are in the process of seeking to sell our printed office products segment and certain other non-core assets in our commercial printing and envelope businesses. We intend to use any proceeds from these divestitures to reduce our senior secured debt. Accordingly, in the second quarter of 2001 we began reporting the label and printed office products segments as discontinued operations, began reporting the other non-core assets as assets held for sale, and recorded the loss 1 anticipated on these dispositions. In February 2002, we sold Curtis 1000 Inc., a printed office products company, for approximately $40 million. Also, in May 2002, we sold our label segment for approximately $75 million. As of the date of this prospectus, we have not entered into any other definitive agreements to sell the remaining operations of our printed office products segment or our other non-core assets. We expect to realize proceeds of approximately $290 million from the sale of these companies and assets including the sale of our label segment and Curtis 1000 Inc. In connection with our new strategic plan, we also announced plans to consolidate three of our commercial printing plants into one facility, to close eleven of our envelope plants and to redeploy the equipment and other assets at other facilities. As of March 2002, we completed the consolidation of the commercial printing plants and closed seven of the envelope plants. We plan to complete the remaining plant consolidations by the end of 2002. Our new strategy also includes the launch of several initiatives to significantly improve operations and marketing effectiveness. Both the commercial printing and envelope businesses have programs in place to institute best practices, install pricing disciplines and align equipment and services to better serve our customers and markets. 2
SUMMARY DESCRIPTION OF THE EXCHANGE OFFER Issuer.......................................... Mail-Well I Corporation. Old Notes....................................... 9 5/8% Senior Notes due 2012, which we issued on March 13, 2002 in transactions exempt from registration under the Securities Act of 1933. New Notes....................................... 9 5/8% Senior Notes due 2012, the issuance of which has been registered under the Securities Act. The form and terms of the new notes are identical in all material respects to those of the old notes, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes. Exchange Offer.................................. We are offering to issue up to $350,000,000 aggregate principal amount of the new notes in exchange for a like principal amount of the old notes to satisfy our obligations under the registration rights agreement that we entered into when the old notes were issued. Expiration Date................................. The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, or a later date and ------------------ time to which we extend it. Withdrawal...................................... You may withdraw your tender of the old notes pursuant to the exchange offer at any time prior to 5:00 p.m., New York City time, on , 2002, or a later date -------------- and time to which we extend the offer. We will return any old notes that we do not accept for exchange for any reason without expense to the tendering holder as soon as practicable after the exchange offer expires or terminates. Interest on the New Notes and the Old Notes..... Interest on the new notes will accrue from the date of the original issuance of the old notes or from the date of the last periodic payment of interest on the old notes, whichever is later. No additional interest will be paid on old notes tendered and accepted for exchange. Conditions of the Exchange Offer................ The exchange offer is subject to customary conditions, some of which we may waive. See "The Exchange Offer--Conditions of the Exchange Offer." Procedures for Tendering Old Notes.............. To accept the exchange offer, you must complete, sign and date the letter of transmittal in accordance with the instructions contained in this prospectus and in the letter of transmittal, and send the letter of transmittal and the old notes and any other required documentation to the exchange agent at the following address: State Street Bank and Trust Company, Exchange Agent Attn: MacKenzie Elijah, Corporate Actions 2 Avenue de Lafayette, Sixth Floor Boston, Massachusetts 02111 Telecopier No.: (617) 662-1452 3 If you hold the old notes through the Depository Trust Company, to accept the exchange offer you must use the DTC's Automated Tender Offer Program, by which each tendering participant will agree to be bound by the letter of transmittal. By executing or agreeing to be bound by the letter of transmittal, each holder will represent to us that, among other things, o it is acquiring the new notes in the exchange offer in its ordinary course of business; o it has no arrangement or understanding with any person to participate in a distribution of the new notes, and if it is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of the new notes; o it is not an "affiliate" of Mail-Well I Corporation, as defined in Rule 405 of the Securities Act, or if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; and o if it is a broker-dealer, it will receive new notes for its own account in exchange for old notes that it acquired as a result of market-making activities or other trading activities. Each broker-dealer that receives new notes for its own account in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. See "Plan of Distribution." We will accept for exchange any and all old notes that are properly tendered and not withdrawn in the exchange offer prior to 5:00 p.m., New York City time, on , 2002. ------------- The exchange agent will deliver the new notes issued pursuant to the exchange offer promptly following the expiration date. See "The Exchange Offer--Terms of the Exchange Offer; Period for Tendering Old Notes." Federal Income Tax Considerations............... The exchange of old notes for new notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. See "Material Federal Income Tax Considerations." Effect of Not Tendering......................... Old notes that are not tendered or that are tendered but not accepted will, following the completion of the exchange offer, continue to be subject to the existing restrictions on transfer. Except as described in "Description of the New Notes--Registration Rights; Liquidated Damages," we will have no further obligation to provide for the registration under the Securities Act of the old notes. Holders of old notes do not have any appraisal or dissenters' rights in connection with the exchange offer. 4 SUMMARY DESCRIPTION OF THE NEW NOTES Issuer.......................................... Mail-Well I Corporation. Interest Rate................................... The new notes will bear interest at an annual rate of 9 5/8%. Interest Payment Dates.......................... We will pay interest on the new notes semi-annually on March 15 and September 15 of each year, beginning September 15, 2002. Optional Redemption............................. We may redeem the new notes, in whole or in part, on or after March 15, 2007, at the redemption prices specified under "Description of the New Notes--Optional Redemption." In addition, prior to March 15, 2005, we may redeem new notes, in an aggregate principal amount not to exceed 35% of the aggregate principal amount of notes originally issued and at a redemption price of 109.625%, with the net cash proceeds of certain equity offerings. See "Description of the New Notes--Optional Redemption." Change of Control............................... If we experience a change of control, we may be required to make an offer to purchase the new notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any. Ranking......................................... The new notes will be: o senior unsecured obligations and equal in right of payment with all of our existing and future senior unsecured indebtedness and that of the subsidiary guarantors; o senior to all of our existing and future subordinated obligations and those of the Parent Company and the subsidiary guarantors; and o effectively subordinated to our secured obligations. Asset Sale Proceeds............................. We may be obligated to offer to purchase new notes at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, with the net cash proceeds of certain sales or other dispositions of assets. We intend to use the proceeds of the sale of our label segment to either pay down the balance on our senior secured debt or reinvest in our business. Guarantees...................................... The new notes will be unconditionally guaranteed on a senior unsecured basis by our parent company and certain of our existing domestic subsidiaries and our future domestic subsidiaries. Restrictive Covenants........................... We will issue the new notes under the indenture among us, the guarantors and State Street Bank and Trust Company, as trustee. The indenture will contain covenants that will limit our ability and the ability of our restricted subsidiaries to: o incur or guarantee additional indebtedness; o pay dividends or distributions on, or redeem or repurchase, our capital stock; 5 o make investments; o engage in transactions with affiliates; o transfer or sell assets; o create liens; o restrict dividend or other payments to us from our subsidiaries; o issue or sell capital stock of our subsidiaries; and o consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries. These covenants are subject to important exceptions and qualifications. Resale of the New Notes......................... We believe that the new notes may be offered for sale, resold or otherwise transferred by holders without compliance with the registration and prospectus delivery requirements of the Securities Act. Our belief is based on interpretations by the staff of the Securities and Exchange Commission, as set forth in no-action letters issued to persons unrelated to us, and is conditioned upon the new notes being acquired in the ordinary course of the holders' business and the holders having no arrangement with any person to engage in a distribution of new notes. Furthermore, each holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of the new notes and has no arrangement or understanding to participate in a distribution of new notes. Each broker-dealer that receives new notes for its own account in this exchange offer must acknowledge that it will comply with the prospectus delivery requirements of the Securities Act in connection with any resale of the new notes. Broker-dealers that acquired old notes directly from us and not as a result of market-making activities or other trading activities may not rely on the staff's interpretations discussed above or participate in the exchange offer and must comply with the prospectus delivery requirements of the Securities Act in order to resell the old notes. Please note that the Commission has not considered this exchange offer in the context of a no-action letter and we cannot be sure that the staff of the Commission would make a similar determination with respect to this exchange offer as it did in the no-action letters to the unrelated persons upon which we are relying. Use of Proceeds................................. We will not receive any proceeds from this offering. Risk Factors.................................... See "Risk Factors" for a discussion of the factors you should carefully consider before deciding to participate in the exchange offer.
6 RISK FACTORS You should carefully consider all of the information in this prospectus, including the following risk factors, before tendering your shares in the exchange offer. When we use the term "notes" in this prospectus, the term includes the old notes and the new notes. RISKS RELATING TO THE EXCHANGE OFFER HOLDERS WHO FAIL TO EXCHANGE THEIR OLD NOTES WILL CONTINUE TO BE SUBJECT TO RESTRICTIONS ON TRANSFER. If you do not exchange your old notes for new notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your old notes described in the legend on the certificates for your old notes. The restrictions on transfer of your old notes arise because we issued the old notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the old notes if they are registered under the Securities Act and applicable state securities laws, or are offered and sold under an exemption from these requirements. We do not plan to register the old notes under the Securities Act. For further information regarding the consequences of tendering your old notes in the exchange offer, see the discussions below under the captions "The Exchange Offer--Consequences of Failure to Exchange" and "Material Federal Income Tax Considerations." YOU MUST COMPLY WITH THE EXCHANGE OFFER PROCEDURES IN ORDER TO RECEIVE NEW, FREELY TRADABLE NEW NOTES. Delivery of new notes in exchange for old notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of the following: o certificates for old notes or a book-entry confirmation of a book-entry transfer of old notes into the exchange agent's account at DTC, New York, New York as a depository, including an agent's message if the tendering holder does not deliver a letter of transmittal; o a completed and signed letter of transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message in lieu of the letter of transmittal; and o any other documents required by the letter of transmittal. Therefore, holders of old notes who would like to tender old notes in exchange for new notes should be sure to allow enough time for the old notes to be delivered on time. We are not required to notify you of defects or irregularities in tenders of old notes for exchange. Old notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offer, certain registration and other rights under the registration rights agreement will terminate. See "The Exchange Offer--Procedures for Tendering Old Notes" and "The Exchange Offer-- Consequences of Failure to Exchange." SOME HOLDERS WHO EXCHANGE THEIR OLD NOTES MAY BE DEEMED TO BE UNDERWRITERS. If you exchange your old notes in the exchange offer for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. 7 RISKS RELATING TO HOLDING THE NEW NOTES OUR SUBSTANTIAL EXISTING DEBT SERVICE REQUIREMENTS COULD IMPAIR OUR FINANCIAL CONDITION AND OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER OUR INDEBTEDNESS, INCLUDING THE NOTES. We have incurred substantial amounts of debt, and our level of debt may affect our operations and our ability to make payments on the new notes. As of March 31, 2002, our total indebtedness was approximately $971.7 million, representing 71.4% of our total capitalization (net of cash), and our interest expense for the three months ended March 31, 2002 was approximately $12.1 million. Our substantial indebtedness could have several important effects on our future operations. For example: o our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other corporate purposes in the future may be limited; o a substantial portion of our cash flow from operations will be dedicated to the payment of principal and interest on indebtedness, and will not be available to fund working capital, capital expenditures, acquisitions and other business purposes; o we may be more vulnerable to economic downturns or other adverse developments than less leveraged competitors; o borrowings under our senior credit facility bear interest at fluctuating rates, which could result in higher interest expense in the event of an increase in interest rates; and o we may be unable to repurchase all of the notes tendered to us if we undergo a change of control. Our ability to make scheduled payments of principal or interest on, or to reduce or refinance, indebtedness will depend on our future operating performance and resulting cash flow. To a certain extent, our future performance will be subject to prevailing economic conditions and financial, competitive and other factors beyond our control. We cannot be certain, however, that our business, or businesses that we acquire in the future, will generate sufficient cash flow from operations to enable us to service all of our debt, including the new notes or any old notes that remain outstanding after completion of the exchange offer. We may need additional funding from either debt or equity offerings in the future in order to refinance our existing debt, including the new notes, or to continue to grow our business. We cannot be sure that we will have access to any such sources of funding on satisfactory terms or on a timely basis or at all. THE TERMS OF OUR INDEBTEDNESS IMPOSE SIGNIFICANT RESTRICTIONS ON OUR BUSINESS. The indentures governing the new notes and our senior subordinated notes and the agreement governing the senior credit facility contain various covenants that limit our ability, and that of our restricted subsidiaries, to, among other things: o incur or guarantee additional indebtedness; o make restricted payments, including dividends; o create or permit to exist certain liens; o enter into business combinations and asset sale transactions; o make investments; o enter into transactions with affiliates; and o enter into new businesses. These restrictions could limit our ability to obtain future financing, make acquisitions or needed capital expenditures, withstand a future downturn in our business or the economy in general, conduct 8 operations or otherwise take advantage of business opportunities that may arise. Our senior credit facility also requires us to maintain specified financial ratios. Our ability to meet future financial ratios may be affected by events beyond our control, such as general economic conditions. Our failure to maintain applicable financial ratios would prevent us from borrowing additional amounts under our senior credit facility, and could result in a default under that facility. A default could cause the indebtedness outstanding under the facility, and by reason of cross- acceleration or cross-default provisions, the new notes and any other indebtedness we may then have, to become immediately due and payable. If we are unable to repay those amounts, the lenders under our senior credit facility could initiate a bankruptcy proceeding or liquidation proceeding or proceed against the collateral granted to them to secure that indebtedness. If the lenders under our senior credit facility were to accelerate the repayment of outstanding borrowings, we might not have sufficient assets to repay our indebtedness, including the new notes. THERE ARE ADDITIONAL BORROWINGS AVAILABLE TO US THAT COULD FURTHER EXACERBATE THE RISKS DESCRIBED ABOVE. Despite current indebtedness levels, we and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the new notes limit but do not prohibit us from doing so. Our senior credit facility would permit additional borrowings of up to $150 million (less any outstanding letters of credit) after completion of this offering. All of those borrowings would be secured and effectively senior to the new notes and the guarantees. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify. NOT ALL SUBSIDIARIES ARE GUARANTORS OF THE NEW NOTES, AND YOUR RIGHT TO RECEIVE PAYMENTS ON THE NEW NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE OR REORGANIZE. Some of our subsidiaries, including our subsidiaries held for sale as part of our strategic plan, will guarantee the new notes. These and other guarantor subsidiaries would be released from their guarantees upon their sale if we satisfy certain conditions under the indenture regarding application of the sale proceeds. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. Such actions by the non-guarantor subsidiaries could adversely affect our debt coverage ratios or our ability to make payments on the new notes when they become due. Assuming we had completed this offering on December 31, 2001 and after giving effect to the offering of the old notes, the new notes would have been effectively junior to approximately $128 million of indebtedness and other liabilities, including trade payables, of our non-guarantor subsidiaries. In addition, an indeterminate amount may be available to those subsidiaries for future borrowing. The non-guarantor subsidiaries generated approximately 12% of our consolidated pro forma revenues in the year ended December 31, 2001 and held approximately 25% of our consolidated assets and approximately 11% of our consolidated liabilities as of December 31, 2001. THE GUARANTEES MAY BE SUBJECT TO FRAUDULENT CONVEYANCE LAWS, AND A COURT MAY VOID THE GUARANTEES OF THE NEW NOTES OR SUBORDINATE THE GUARANTEES TO OTHER OBLIGATIONS OF THE SUBSIDIARY GUARANTORS. Although standards may vary depending on the applicable law, generally under U.S. federal bankruptcy law and comparable provisions of state fraudulent transfer laws, if a court were to find that, among other things, at the time any guarantor of the new notes incurred the debt evidenced by its guarantee of the new notes, the guarantor: either: o was insolvent or rendered insolvent by reason of the incurrence of the guarantee; 9 o was engaged or about to engage in a business or transaction for which that guarantor's remaining assets constituted unreasonably small capital; o was a defendant in an action for money damages, or had a judgment for money damages docketed against it, if in either case, after a final judgment, the judgment were unsatisfied; or o intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature; and o the guarantor received less than reasonably equivalent value or fair consideration for the incurrence of its guarantee; or o incurred the guarantee or made related distributions or payments with the intent of hindering, delaying or defrauding creditors, there is a risk that the guarantee of that guarantor could be voided by the court, or claims by holders of the new notes under the guarantee could be subordinated to other debts of that guarantor. In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor. The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: o the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets; o the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or o it could not pay its debts as they become due. On the basis of historical financial information, recent operating history and other factors, we believe that each guarantor, after giving effect to its guarantee of the new notes, will not be insolvent, will not have unreasonably small capital for the business in which it is engaged and will not have incurred debts beyond its ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making such determinations or that a court would agree with our conclusions in this regard. THE NEW NOTES AND THE GUARANTEES THEREOF ARE EFFECTIVELY JUNIOR TO ALL OF OUR AND THE GUARANTORS' EXISTING AND FUTURE SENIOR SECURED DEBT TO THE EXTENT OF THE COLLATERAL. The new notes and the guarantees provided by the guarantors will be general unsecured obligations. This means that you will have no recourse to our or the guarantors' specific assets upon any event of default under the indenture governing the new notes. Accordingly, the new notes will be effectively subordinated to any of our secured obligations to the extent of the value of the assets securing such obligations. Under certain circumstances, we may also incur secured debt to other creditors that will have the right to be repaid out of specific property. Your right to be repaid principal and interest on the new notes will be secondary to the right of our lenders to be repaid for all current and future borrowings under our senior credit facility and other secured debt. We may also issue additional unsecured and unsubordinated debt, which will also rank equally with your right to be repaid. Your right to be repaid amounts owing under the guarantees will rank equally to the rights of other unsecured and unsubordinated obligations of the guarantors. 10 If we default on the new notes, become bankrupt, liquidate or reorganize: o you will be entitled to be repaid from our remaining assets only after any secured creditors have been paid out of proceeds from the sale of their collateral; and o to the extent there are assets available after all of the foregoing creditors have been paid, then you will be entitled to be repaid on a pro rata basis with and only to the extent that there are sufficient assets to repay any other obligations of the Company and its subsidiaries that rank equally with the new notes in right of payment. In the event we or the guarantors become bankrupt, liquidate or reorganize or become involved in a similar proceeding, if we have secured debt, the holders of the new notes will participate with all other holders of our or the guarantors' unsecured and unsubordinated indebtedness in the assets remaining after we and the guarantors have paid all of our secured debt. In any such case, we and the guarantors may not have sufficient funds to pay all of our unsecured creditors. If the holders of our secured debt are not fully paid, the holders of the new notes will not receive any payments. If, at the time of a bankruptcy, liquidation, reorganization or similar proceeding relating to us or the guarantors, we and the guarantors have no secured debt, holders of the new notes will participate ratably with all of our and the guarantors' other unsecured and unsubordinated creditors, including unsecured trade creditors and tort claimants, in our and the guarantors' assets. Assuming we had completed this offering on December 31, 2001 and after giving effect to the offering of the old notes, the new notes and the guarantees would have been effectively subordinated to approximately $187 million of secured debt, and approximately $150 million (less any outstanding letters of credit) would have been available for borrowing as additional secured debt under our senior credit facility. Under the terms of the indenture, we will be permitted to borrow substantial additional indebtedness, including secured debt, in the future. THE INSTRUMENTS GOVERNING OUR CURRENT DEBT CONTAIN CROSS DEFAULT PROVISIONS THAT MAY CAUSE ALL OF THE DEBT ISSUED UNDER SUCH INSTRUMENTS TO BECOME IMMEDIATELY DUE AND PAYABLE AS A RESULT OF A DEFAULT UNDER AN UNRELATED DEBT INSTRUMENT. Our senior credit facility and the indenture pursuant to which our existing 8 3/4% senior subordinated notes were issued, as well as the indenture under which the new notes are being issued, contain numerous financial and operating covenants and require us and our subsidiaries to meet certain financial ratios and tests. Our failure to comply with the obligations contained in the senior credit facility, the senior subordinated indenture or the indenture governing the new notes could result in an event of default under our senior credit facility, the senior subordinated indenture or the indenture, which could result in the related debt and the debt issued under other instruments to become immediately due and payable. In such event, we would need to raise funds through any number of alternative available sources, which funds may not be available to us on favorable terms, on a timely basis or at all. Alternatively, such a default would require us to sell our assets and otherwise curtail operations in order to pay our creditors. WE MAY BE UNABLE TO REPURCHASE THE NEW NOTES IF WE EXPERIENCE A CHANGE OF CONTROL. If we were to experience a change of control, as defined in the indenture governing the new notes, we will be required to make an offer to purchase all of the new notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. Our senior credit facility restricts our ability to repurchase new notes, including the repurchase of new notes under a change of control offer. Our failure to repay holders tendering new notes upon a change of control would result in an event of default under the new notes. A change of control, or an event of default under the new notes, may also result in an event of default under our senior credit facility, which may result in the acceleration of the indebtedness under that facility requiring us to repay that indebtedness immediately. If a change of control were to occur, we cannot assure you that we would have sufficient funds to repay debt outstanding under the senior credit facility or to purchase the new notes or any other securities which 11 we would be required to offer to purchase or that become immediately due and payable as a result. We expect that we would require additional financing from third parties to fund any such purchases, and we cannot assure you that we would be able to obtain financing on satisfactory terms, or at all. THERE IS NO PUBLIC TRADING MARKET FOR THE NOTES, AND THEY ARE SUBJECT TO TRANSFER RESTRICTIONS. The new notes will be a new issue of securities for which there will be a limited trading market. The initial purchasers of the old notes have advised us that they are making a market in the notes and will do so for the new notes following the completion of this offering. However, the initial purchasers are not obligated to do so, and may discontinue any market-making activities with respect to the new notes at any time without notice. In addition, such market-making activity will be subject to the limitations imposed by the Securities Act and the Securities Exchange Act of 1934, and may be limited during this exchange offer. If an active market for the new notes were to exist, the new notes might trade at prices lower than their initial offering price. The trading price would depend on many factors, such as prevailing interest rates and the market for similar securities, general economic conditions and our financial condition, performance and prospects. RISKS RELATED TO OUR BUSINESS OUR PARENT COMPANY'S CONVERTIBLE NOTES BECOME DUE IN NOVEMBER 2002, AND WE MAY NEED TO BORROW ON OUR SENIOR CREDIT FACILITY TO REPAY A PORTION OF THOSE NOTES. Mail-Well, Inc. has outstanding $139 million in aggregate principal amount of 5% convertible notes. The convertible notes are due November 1, 2002. We expect to use available cash and, to the extent necessary, borrowings under our senior credit facility to repay an inter-company note between the Company and the Parent Company, which will use those funds to repay the holders of the convertible notes. The senior credit facility has several conditions to borrowing. If we are unable to satisfy all of these conditions, we would be unable to borrow under the senior credit facility to repay the convertible notes. We would then need to obtain the funds to repay the convertible notes through other sources, which funds may not be available to us on favorable terms, on a timely basis or at all. The Parent Company's failure to pay the convertible notes when due would be an event of default under the convertible notes. WE MAY NOT BE ABLE TO EFFECTIVELY IMPLEMENT OUR STRATEGIC PLAN. In May 2001, we announced the adoption of a strategic restructuring plan that calls for the divestiture of our label and printed office products segments. We currently continue to operate those businesses much as we have in the past but, for accounting purposes, we account for these operations as "discontinued operations." The implementation of our plan to sell these businesses may adversely affect the results of operations of these businesses due to diversion of management's attention, the impact on customers and other factors. As of the date of this prospectus, we have sold our subsidiary Curtis 1000 Inc. and our label segment, but we have not entered into any other definitive agreements of sale. There can be no assurance that we will be able to consummate any sale of those businesses, or that the terms, conditions or timing of any sale, if consummated, will achieve the results contemplated by our strategic plan. We intend to use the proceeds of these proposed sales to repay some of our existing debt under our senior credit facility. There can be no assurance that we will receive cash proceeds in the amounts contemplated by our strategic plan to retire a material amount of existing debt. In addition, if any proposed sale is consummated, we may have to retain certain liabilities associated with those business segments' prior operations, including pension benefit obligations, environmental liabilities and indemnification obligations customarily contained in sale agreements. 12 WE HAVE RECENTLY REPORTED LOSSES, AND IT IS UNCERTAIN WHEN WE WILL RETURN TO PROFITABILITY. We reported losses for the last three fiscal quarters of 2001 primarily as a result of expenses related to our restructuring initiatives and the economic slowdown, which in particular adversely affected our sales to significant advertising and automotive customers and direct mail. These adverse factors have continued to affect our results in the first quarter of 2002, and our results in the first quarter of 2002 were below the results of the comparable period in 2001. Our ability to return to profitability depends in part on our customers' recovery from this slowdown and the success of our efforts to reduce operating expenses through our plant consolidations and ongoing cost-cutting measures in connection with our recent strategic initiatives. Our operating results are difficult to predict, and we cannot assure you that we will be successful in achieving increased revenues, positive cash flows or profitability. TO THE EXTENT THAT WE MAKE SELECT ACQUISITIONS, WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE THE ACQUIRED BUSINESSES INTO OUR BUSINESS. In the past, we have grown rapidly through acquisitions. Although we believe that our experience in making acquisitions is an important asset, our strategic plan and the terms of our senior credit facility limit the acquisitions that we may currently pursue. To the extent that we pursue acquisitions, we cannot be certain that we will be able to identify and acquire other businesses on favorable terms or that, if we are able to acquire businesses on favorable terms, we will be able to successfully integrate the acquired businesses into our current business or profitably manage them. THE PRINTING BUSINESS DOES NOT GENERALLY USE LONG-TERM AGREEMENTS, AND OUR PRINTING OPERATIONS MAY BE SUBJECT TO QUARTERLY AND CYCLICAL FLUCTUATIONS. The printing industry in which we compete is generally characterized by individual orders from customers or short-term contracts. Most of our customers are not contractually obligated to purchase products or services from us. Most customer orders are for specific printing jobs, and repeat business largely depends on our customers' satisfaction with the work we do. Although our business does not depend on any one customer or group of customers, we cannot be sure that any particular customer will continue to do business with us for any period of time. In addition, the timing of particular jobs or types of jobs at particular times of year may cause significant fluctuations in the operating results of our various printing operations in any given quarter. We depend to some extent on sales to certain industries, such as the advertising and automotive industries. We estimate that approximately 50% of our commercial printing sales are related to advertising. To the extent these industries experience downturns, as is currently the case in advertising, the results of our operations are adversely affected. OUR INDUSTRY IS HIGHLY COMPETITIVE. The printing industry in which we compete is extremely fragmented and highly competitive. In the commercial printing market, we compete against a number of large, diversified and financially stronger printing companies, as well as regional and local commercial printers, many of which are capable of competing with us on volume, price and production quality. In the envelope market, we compete primarily with a few multi-plant and many single-plant companies servicing regional and local markets. There currently is excess capacity in the printing industry, which could result in excessive price competition. We are constantly seeking ways to reduce our costs and become more efficient competitors. However, we cannot be certain that these efforts will be successful or that our competitors will not be more successful in their similar efforts to reduce costs and become more efficient. If we fail to reduce costs and increase productivity, we may face decreased profit margins in markets where we encounter price competition, which in turn could reduce our cash flow and profitability. 13 FACTORS AFFECTING U.S. AND CANADIAN POSTAL SERVICES CAN IMPACT OUR BUSINESS. Most envelopes used in the United States and Canada are sent through the mail and, as a result, postal rates can significantly affect envelope usage. Historically, increases in postal rates, relative to changes in the cost of alternative delivery means and/or advertising media, have resulted in temporary reductions in the growth rate of mail sent, including direct mail, which is a significant portion of our envelope volume. We cannot be sure that direct mail marketers will not reduce their volume as a result of any increases. Because rate increases in the United States and Canada are outside our control, we can provide no assurance that any increases in U.S. and/or Canadian postal rates will not have a negative effect on the level of mail sent, or the volume of envelopes purchased, in either or both countries. In such event, we would expect to experience a decrease in cash flow and profitability or financial position. Factors other than postal rates that detrimentally affect the volume of mail sent through the U.S. and Canadian postal systems may also negatively affect our business. If the threats of mass bio-terrorism in the U.S. mail system persist, or if there is a perception of a lack of safety in the U.S. or Canadian postal systems, we cannot be sure that direct mail marketers will not reduce their volume as a result of any such persisting threats or insecurity, or that such decreases in demand will not have a negative effect on the level of mail sent or the volume of envelopes purchased. INCREASES IN PAPER COSTS AND ANY DECREASES IN THE AVAILABILITY OF PAPER COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. Paper costs represent a significant portion of our cost of materials. Changes in paper pricing generally do not affect the operating margins of our commercial printing business because we historically have been able to pass on paper price increases and increased proceeds from waste paper sales. Paper pricing does, however, impact the operating margins of our envelope business because we generally are not able to increase our prices as quickly as paper prices increase. We cannot be certain that we will be able to continue to pass on future increases in the cost of paper. Moreover, rising paper costs and their consequent impact on our pricing could lead to a decrease in our volume of units sold. For example, successive paper price increases during late 1995 and early 1996 resulted in a decline in demand for our products, particularly from the direct mail advertising industry. Although we have been successful in negotiating favorable pricing terms with paper vendors, we cannot be certain we will be successful in negotiating favorable pricing terms in the future. This may result in decreased sales volumes as well as decreased cash flow and profitability. We depend on the availability of paper in manufacturing most of our products. During periods of tight paper supply, many paper producers allocate shipments of paper based on the historical purchase levels of customers. As a result of our large volume paper purchases from several paper producers, we generally have not experienced difficulty in obtaining adequate quantities of paper, although we have occasionally experienced minor delays in delivery. Although we believe that our attractiveness to vendors as a large volume paper purchaser will continue to enable us to receive adequate supplies of paper in the future, unforeseen developments in world paper markets coupled with shortages of raw paper could result in a decrease in supply, which in turn would cause a decrease in the volume of products we could produce and sell and a corresponding decrease in cash flow and profitability. THE AVAILABILITY OF ALTERNATIVE DELIVERY MEDIA MAY ADVERSELY AFFECT OUR BUSINESS. Our envelope manufacturing and printing business is highly dependent upon the demand for envelopes sent through the mail. Such demand comes from utility companies, banks and other financial institutions, among others. Our printing business also depends upon demand for printed advertising and business forms, among others. Consumers increasingly use the Internet and other electronic media to purchase goods and services, and for other purposes such as paying utility and credit card bills. Advertisers use them for targeted campaigns directed at specific electronic user groups. Large and 14 small businesses use electronic media to conduct business, send invoices and collect bills. As a result, we expect the demand for envelopes and other printed materials for these purposes to decline. Although we expect countervailing trends, such as the growth of targeted direct mail campaigns based upon mailing lists generated by electronic purchases, to cause overall demand for envelopes and other printed materials to continue to grow at rates comparable to recent historical levels, we cannot be certain that the acceleration of the trend towards electronic media such as the Internet and other alternative media will not cause a decrease in the demand for our products. If demand for our products decreases, we may not generate sufficient cash flow to make required payment on the notes. WE DEPEND ON GOOD LABOR RELATIONS. Following the sale of our label segment, as of May 31, 2002, we had approximately 11,800 full-time employees, of whom approximately 2,200 were members of various local labor unions. If our unionized employees were to engage in a concerted strike or other work stoppage, or if other employees were to become unionized, we could experience a disruption of operations, higher labor costs or both. A lengthy strike could result in a material decrease in our cash flow or profitability. ENVIRONMENTAL LAWS MAY AFFECT OUR BUSINESS. Our operations are subject to federal, state, local and foreign environmental laws and regulations, including those relating to air emissions, wastewater discharge, waste generation, handling, management and disposal, and remediation of contaminated sites. In addition, some of the sellers from which we have bought businesses in the past have been designated as potentially responsible parties under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, or similar legislation in Canada, with respect to off-site disposal of hazardous waste at two sites. CERCLA imposes strict, and in certain circumstances joint and several, liability for response costs. Liability may also include damages to natural resources. We believe that we have minimal exposure as a result of such designations, either because indemnities obtained in the course of acquisitions or because of the de minimis nature of the claims, or both. We also believe that our current operations are in substantial compliance with applicable environmental laws and regulations. We cannot be certain, however, that available indemnities will be adequate to cover all costs or that currently unknown conditions or matters, new laws and regulations, or stricter interpretations of existing laws and regulations will not have a material adverse effect on our business or operations in the future. WE ARE DEPENDENT ON KEY MANAGEMENT PERSONNEL. Our success will continue to depend to a significant extent on our executive officers and other key management personnel. We do not as a matter of policy have employment agreements with our executive officers. We cannot be certain that we will be able to retain our executive officers and key personnel or attract additional qualified management in the future. The success of our new strategic plan may depend, in part, on our ability to retain management personnel during the implementation of the plan. In addition, the success of any acquisitions we may pursue may depend, in part, on our ability to retain management personnel of the acquired companies. We do not carry key person insurance on any of our managerial personnel. 15 FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. All statements other than statements of historical facts included in this prospectus regarding the prospects of our industry and our prospects, plans, financial position and business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "intend," "estimate," "anticipate," "believe," "predict," "potential" or "continue" or the negatives of these terms or variations of them or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. Important factors that could cause actual results to differ materially from our expectations are disclosed in this prospectus, including in conjunction with the forward-looking statements included in this prospectus and under "Risk Factors." All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this document. These forward-looking statements speak only as of the date of this prospectus. We do not intend to update these statements unless the securities laws require us to do so. USE OF PROCEEDS We will not receive any proceeds from the issuance of the new notes or consummation of the exchange offer. In consideration for issuing the new notes as contemplated in this prospectus, we will receive corresponding old notes in like principal amount. The old notes will be retired and cancelled and cannot be reissued. Accordingly, issuance of the new notes will not result in any change in our indebtedness. The approximate net proceeds from our sale of the old notes, after deducting underwriting fees and expenses of the offering, were $341.0 million. We used the net proceeds to repay $197.0 million of term loans outstanding under our senior credit facility, to repay all outstanding amounts under our revolving credit facility and to repay approximately $22.0 million of other senior debt. The remaining proceeds will be used to fund working capital needs and provide the liquidity needed for the repayment of our convertible debt due in November 2002. 16 SELECTED CONSOLIDATED FINANCIAL INFORMATION The selected consolidated historical financial information for the years ended December 31, 1999 through 2001 are derived from our consolidated financial statements and notes, which have been audited by Ernst & Young LLP. The previously audited financial statements for the years ended December 31, 1997 and 1998 have been restated to reflect our discontinued operations. This information for 1997 and 1998 has been prepared by management, and these adjustments have not been reviewed by our current or prior auditors. The following summary information for the three months ended March 31, 2002 and 2001 is derived from our interim unaudited consolidated financial statements. Since the information presented below is only a summary and does not provide all of the information contained in our financial statements, including the related notes, you should read this information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and accompanying notes included elsewhere in this prospectus.
THREE MONTHS ENDED ------------------ YEAR ENDED DECEMBER 31, MARCH 31, ----------------------- --------- 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- STATEMENT OF OPERATIONS: Net sales..................................... $1,086,401 $1,337,006 $1,533,840 $1,823,583 $1,653,471 $432,976 $391,729 Cost of sales................................. 847,393 1,054,072 1,182,893 1,438,435 1,324,091 345,142 317,695 ---------- ---------- ---------- ---------- ---------- -------- -------- Gross profit............................... 239,008 282,934 350,947 385,148 329,380 87,834 74,034 Selling, general and administrative expenses..................................... 153,712 175,603 212,130 261,465 250,774 66,150 59,139 Restructuring, asset impairments and other charges................................ -- 32,123 1,807 6,160 44,790 -- 13,647 ---------- ---------- ---------- ---------- ---------- -------- -------- Operating income........................... 85,296 75,208 137,010 117,523 33,816 21,684 1,248 ---------- ---------- ---------- ---------- ---------- -------- -------- Interest expense.............................. 29,930 31,132 40,208 62,127 52,751 14,751 12,008 Other expense (income), net................... (2,088) (995) (1,228) 974 1,790 526 254 ---------- ---------- ---------- ---------- ---------- -------- -------- Income (loss) before income taxes.......... 57,454 45,071 98,030 54,422 (20,725) 6,407 (11,014) Provision (benefit) for income taxes.......... 22,663 21,679 39,428 20,213 (7,684) 2,220 (2,749) ---------- ---------- ---------- ---------- ---------- -------- -------- Income (loss) from continuing operations................................... 34,791 23,392 58,602 34,209 (13,041) 4,187 (8,265) Income (loss) from discontinued operations, net of income tax expense (benefit).......... 185 2,449 5,880 (8,038) (123,176) (564) (8,580) ---------- ---------- ---------- ---------- ---------- -------- -------- Income (loss) before extraordinary gain....... 34,976 25,841 64,482 26,171 (136,217) 3,623 (16,845) Extraordinary gain (loss), net............. 6,100 4,132 -- 1,447 -- -- (4,763) ---------- ---------- ---------- ---------- ---------- -------- -------- Net income (loss)............................. $ 28,876 $ 21,709 $ 64,482 $ 27,618 $ (136,217) $ 3,623 $(21,608) ========== ========== ========== ========== ========== ======== ======== OTHER FINANCIAL DATA: Ratio of earnings to fixed charges(1)......... 2.55x 2.09x 2.69x 1.56x N/A N/A DECEMBER 31, ---------------------------------------------------------------- MARCH 31, 1997 1998 1999 2000 2001 2002 -------- ---------- ---------- ---------- ---------- ----------- BALANCE SHEET DATA: Working capital................................... $ 75,064 $ 153,099 $ 91,591 $ 513,346 $ 133,656 $ 214,069 Property, plant and equipment net................. 262,797 359,193 413,984 431,025 375,415 361,555 Intangible assets net............................. 153,927 250,070 315,827 389,148 347,061 348,010 Total assets...................................... 665,974 1,099,453 1,294,412 1,652,957 1,449,124 1,526,445 Total debt........................................ 340,890 583,657 663,349 919,793 852,999 969,253 Shareholders' equity.............................. 171,820 299,375 375,310 385,853 241,877 219,076 Book value per share.............................. 3.99 6.13 7.63 8.13 5.01 4.53 - -------- (1) For purposes of calculating the ratio of earnings to fixed charges, (i) earnings consist of income (loss) from continuing operations before fixed charges and income taxes, and (ii) fixed charges consist of interest expense on all indebtedness (including amounts allocated to discontinued operations), including the amount of amortization of deferred financing costs and capitalized interest in 2001 and 2000. For the three months ended March 31, 2002 and the year ended December 31, 2001, the earnings, as defined above, were less than fixed charges, as defined above, by $11.0 million and $21.0 million, respectively.
17 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial data include an unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2001 and the three months ended March 31, 2002. The pro forma statements are derived from our audited consolidated financial statements for the year ended December 31, 2001 and our unaudited consolidated financial statements for the three months ended March 31, 2002, which are included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial data have been prepared for illustrative purposes only and do not purport to represent what our financial condition or results of operations would actually have been had the transactions described below in fact occurred as of the dates specified. In addition, the unaudited pro forma condensed consolidated financial data do not purport to project our results of operations as of any date or for any future period. The unaudited pro forma condensed consolidated statement of operations includes the effects of the issuance of the new notes and other adjustments related to the issuance of the new notes. The unaudited pro forma condensed consolidated financial data should be read in conjunction with our audited financial statements as of December 31, 2001 and the year then ended and our unaudited consolidated financial statements as of March 31, 2002 and the quarter then ended and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. 18 PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND THE YEAR ENDED DECEMBER 31, 2001 (in thousands) (Unaudited) YEAR ENDED DECEMBER 31, 2001 ----------------------------
PRO FORMA OFFERING HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Net sales............................. $ 1,653,471 $ $ 1,653,471 Cost of sales......................... 1,324,091 1,324,091 ----------- ---------- ------------ Gross profit....................... 329,380 329,380 Selling, general and administrative expenses........................... 250,774 250,774 Restructuring, asset impairments and other charges...................... 44,790 ----------- ---------- ------------ Operating income...................... 33,816 33,816 Interest expense (income)............. 52,751 33,688 (a) 67,333 (19,015)(a) (1,299)(b) 904 (c) Other expenses........................ 1,790 1,790 ----------- ---------- ------------ Loss from continuing operations before income taxes................ (20,725) (14,278) (35,307) Provision (benefit) for income taxes.. (7,684) (5,497)(d) (13,181) ----------- ---------- ------------ Loss from continuing operations....... $ (13,041) $ (8,781) $ (21,822) =========== ========== ============ THREE MONTHS ENDED MARCH 31, 2002 --------------------------------- PRO FORMA OFFERING HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Net sales............................ $ 391,729 $ $ 391,729 Cost of sales........................ 317,695 317,695 ----------- ---------- ------------ Gross profit...................... 74,034 74,034 Selling, general and administrative expenses.......................... 59,139 59,139 Restructuring, asset impairments and other charges..................... 13,647 13,647 ----------- ---------- ------------ Operating income..................... 1,248 1,248 Interest expense (income)............ 12,008 8,422 (a) 16,512 (3,927)(a) (217)(b) 226 (c) Other expenses....................... 254 254 ----------- ---------- ------------ Loss from continuing operations before income taxes............... (11,014) (4,504) (15,518) Benefit for income taxes............. (2,749) (1,734)(d) (4,483) ----------- ---------- ------------ Net loss from continuing operations.. $ (8,265) $ (2,770) $ (11,035) =========== ========== ============
19 NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Amounts in thousands) (a) Adjustment to record interest on the new notes, less interest incurred on the portions of the Tranche A and B term loans and on other senior debt repaid by the new notes and the reduction of interest expense as a result of assumed decrease in balances outstanding under the revolving credit facility.
December 31, March 31, 2001 2002 ---- ---- Interest on new notes......................... $ 33,688 $ 8,422 Less: Interest on Tranche A term loan repaid....... (7,114) (1,393) Interest on Tranche B term loan repaid....... (7,242) (1,429) Interest on other senior debt repaid......... (937) (158) Interest on revolving credit facility........ (3,722) (946) -------- --------- (19,015) (3,927) -------- --------- $ 14,673 $ (4,495) ======== =========
(b) Adjustment to remove amortization of deferred financing fees related to the senior credit facility, which were written off as a result of the sale of the new notes, net of additional amortization on fees incurred to amend the senior credit facility. The pro forma adjustment does not include the impact on results of the write-off of these fees since the write-off is nonrecurring. (c) Adjustment to record amortization of deferred financing fees related to the new notes. (d) Adjustment to record the taxes on the above adjustments at the statutory rate of 38.5%. Ratio of Earnings to Fixed Charges--For purposes of calculating the pro forma ratio of earnings to fixed charges, (i) earnings consist of income (loss) from continuing operations before fixed charges and income taxes, and (ii) fixed charges consist of interest expense on all indebtedness (including amounts allocated to discontinued operations), including the amount of amortization of deferred financing costs and capitalized interest. For the pro forma three months ended March 31, 2002 and the pro forma year ended December 31, 2001, the earnings, as defined above, were less than fixed charges, as defined above, by $15.5 million and $35.6 million, respectively. 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CORPORATE OVERVIEW We are one of the largest printers in North America competing primarily in the commercial printing and envelope market segments. We believe we are the world's largest manufacturer of envelopes, the leading printer of envelopes in the United States and Canada, the premier high impact color printer in the United States, and a leading general commercial printer in several major U.S. markets. We operate 73 facilities throughout North America in our commercial printing and envelope businesses. The combination of our broad printing facility network and our sales force, which is among the largest in the industry, has enabled us to build our primary customer base to over 20,000 customers. In May 2001, we completed a comprehensive review of our operations and adopted a new strategy that focuses on our two primary businesses-- commercial printing and envelopes. In support of this strategy, we announced our intention to sell of our label and printed office products businesses and certain other non-strategic assets. In February 2002, we sold Curtis 1000 Inc., a printed office products company, for approximately $40 million. In addition, we sold our label segment for approximately $75 million in May 2002. We intend to use the net proceeds from the divestitures to reduce our senior secured debt. In connection with our new strategic plan, we also announced plans to consolidate three of our commercial printing plants into one facility, to close 11 of our envelope plants and to redeploy the equipment and assets at other facilities. We have completed the plant consolidations in commercial printing and seven of the closures in envelope, and plan to complete the remaining consolidations by the end of 2002. Our new strategy includes the launch of several initiatives to significantly improve operations and marketing effectiveness. Both the envelope and commercial printing businesses have programs in place to institute best practices, install pricing disciplines and align equipment and services to better serve our customers and markets. We believe these initiatives will significantly improve the performance of our businesses. Paper is our most significant raw material. We purchased approximately 437,000 tons of paper in 2001 for our envelope and commercial printing businesses. Prices of uncoated papers, which are the principal grades of paper used to manufacture envelopes, decreased 10% in 2001 after an increase of approximately 5% at the end of 1999. Prices of coated papers, which are used principally in commercial printing, increased approximately 3% in 2000 but decreased approximately 8% in 2001. Changes in paper pricing generally do not affect the operating results of our commercial printing business because we can pass on paper price increases to our customers. Paper pricing does, however, impact the operating margins of our envelope business. When paper prices are rising, operating margins on our envelope products tend to be lower because we generally are not able to increase our prices as quickly as paper prices increase. Thus, when uncoated paper prices increased at the end of 1999, operating margins of the envelope business were negatively impacted in 2000. We expect uncoated and coated paper pricing to be stable in 2002. Our significant growth has been primarily due to our acquisition strategy. However, we curtailed our acquisitions in 2001 in order to concentrate on implementing our strategic plan. In 2000, we acquired American Business Products, Inc. and four smaller companies. In 1999, we acquired eight companies. The acquisitions completed in 2000 and 1999 were accounted for as purchase transactions. Recording acquisitions in this manner impacts comparability of our financial statements because the results of each of the acquired companies are included in the consolidated results from the dates acquired. The impacts of our acquisitions are included in the following discussions of our results. CONSOLIDATED RESULTS OF OPERATIONS The financial statements for all periods presented have been restated as required by generally accepted accounting principles to report the results of our label and printed office products businesses 21 as discontinued operations. The summary financial data set forth in the tables that follow present reported amounts as well as comparable financial data for New Mail-Well. When we refer to "New Mail-Well," we are referring to results of the operations that will constitute Mail-Well subsequent to the planned divestitures of the operations reported as discontinued operations and assets held for sale and that exclude restructuring, asset impairments and other charges reported in the consolidated statements of operations for the years ended December 31, 2001, 2000 and 1999, and for the three-month periods ended March 31, 2002 and 2001. The economic downturn in 2001 adversely affected the sales and margins of both of our primary businesses, especially the portion of our commercial printing business related to print advertising. The economy continues to adversely affect our business in 2002. The reduced sales and margins have resulted in corresponding decreases in operating income and net income mitigated in part by reductions in operating expenses and interest expense. SALES Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE ---------------------- -------- 2002 2001 2001 ---- ---- ---- (DOLLARS IN THOUSANDS) Reported................... $391,729 $432,976 (9.5)% New Mail-Well*............. $364,836 $410,889 (11.2)% - -------- * Excludes sales of certain operations of our envelope and commercial printing businesses held for sale. New Mail-Well's sales include sales of $4 million and $7 million in 2002 and 2001, respectively, to Curtis 1000 Inc. as well as other operations being divested, which sales are anticipated to continue subsequent to the disposition of the operations.
New Mail-Well's sales in the first quarter of 2002 were $364.8 million, or 11.2% below sales during the first quarter of 2001. Despite reported improvements in the general economy, we have yet to see improvements in the key markets we serve. Demand for commercial printing continues to be weak, and sales of envelopes into the resale and direct mail markets are below levels of a year ago. Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE ---------------------------------------- ------------------- 2001 2000 1999 2001 2000 ---------- ---------- ---------- ---- ---- (DOLLARS IN THOUSANDS) Reported................... $1,653,471 $1,823,583 $1,533,840 (9)% 19% New Mail-Well*............. $1,563,749 $1,719,393 $1,436,068 (9)% 20% - -------- * Excludes sales of certain operations of our envelope and commercial printing businesses held for sale. New Mail-Well's sales include sales of $23 million and $16 million in 2001 and 2000, respectively, to Curtis 1000 Inc. as well as other operations being divested, which sales are anticipated to continue subsequent to the disposition of the operations.
New Mail-Well's sales were down $155.6 million, or 9%, in 2001. Excluding the impact of acquisitions completed during 2000, the sales decline was 11%. The slowdown in the economy during 2001 significantly impacted sales. Reductions by our customers in spending on printed advertising material and direct mail promotions impacted sales of commercial printing and envelopes. Problems in the technology, telecommunications and travel industries also adversely affected our business. New Mail-Well's sales of $1.7 billion in 2000 were $283.3 million higher than sales in 1999. Sales contributed by acquisitions completed in 2000 and 1999 accounted for $159 million of this increase. Internal growth in both our commercial printing and envelope businesses accounted for the remainder. 22 Reported sales in 2001 and 2000 changed from the prior year in the same proportions and were impacted by the same factors as the sales of New Mail-Well. RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES 2002. As announced in 2001, we are consolidating certain operations to eliminate excess internal capacity in order to reduce costs and improve our long-term competitive position. In addition, we are significantly reducing the size of certain of our facilities in response to current market conditions. The restructuring charge related to these plans totaled $11.7 million in first quarter of 2002. The following table and discussion present the details of this restructuring charge, as well as other related charges recorded during the quarter:
COMMERCIAL ENVELOPE PRINTING CORPORATE TOTAL -------- ---------- --------- ------- (IN THOUSANDS) Employee separation and related expenses.......... $ -- $ 233 $ -- $ 233 Other exit costs.................................. 3,498 -- -- 3,498 Asset impairment charges.......................... 4,895 -- -- 4,895 Implementation expenses........................... 3,040 -- -- 3,040 ------- ------ ---- ------- Total restructuring costs.................... 11,433 233 -- 11,666 Other charges..................................... 580 774 627 1,981 ------- ------ ---- ------- Total restructure and other charges.......... $12,013 $1,007 $627 $13,647 ======= ====== ==== =======
In addition to the three envelope manufacturing facilities consolidated in 2001, our envelope business consolidated four facilities in the first quarter of 2002 and will consolidate four additional operations during the remainder of 2002. When this consolidation plan is completed we will have closed 11 envelope plants and substantially reduced excess internal capacity and improved utilization of equipment and resources at the remaining 27 domestic plants and 12 plants in Canada. In 2001, we accrued the separation and related employee costs covering the 923 employees expected to be terminated over the course of this project. As of March 31, 2002, 553 employees had been separated. Other exit costs of $3.5 million are primarily training costs and other incremental expenses incurred in connection with those employees added at the plants that are absorbing the sales of the plants being closed. Incremental external implementation expenses were $3.0 million. Equipment taken out of service during the first quarter of 2002 as a result of our consolidation program was written down $4.9 million to its fair market value. Our commercial printing business completed the consolidation of its operations in the Philadelphia, Pennsylvania area in 2001. We are also reducing fixed costs at certain of our commercial printing facilities in response to changes in market conditions. As a result, we reduced headcount in the first quarter of 2002 by 143 employees and incurred severance costs of $233,000. In 2001, we initiated several programs to significantly improve operations and marketing effectiveness. Both the envelope and commercial printing businesses have programs in place to institute best practices, install pricing disciplines and align equipment and services to better serve our customers and markets. We believe these initiatives will significantly improve the performance of our businesses; accordingly, we have expedited the implementation of these programs by investing in outside assistance. The external incremental expenses incurred on these initiatives totaled $2.0 million during the first quarter of 2002 and are reported in other charges. We expect to complete our restructuring and other strategic initiatives by the end of 2002 and anticipate further charges of approximately $35.0 million. Implementation expenses are expected to total $4 million and training and other exit costs are estimated to be $15 million. In addition, $16 million of equipment, which will not be sold or redeployed, will be written-off. 23 2001. The restructuring charges related to our new strategic plan totaled $37.4 million in 2001. The following table and discussion present the details of these restructuring charges, as well as other charges recorded in 2001:
COMMERCIAL ENVELOPE PRINTING CORPORATE TOTAL -------- -------- --------- ----- (IN THOUSANDS) Employee separation and related expenses..... $ 9,042 $ 385 $ -- $ 9,427 Lease termination costs...................... 1,368 346 -- 1,714 Other exit costs............................. 13,174 1,632 -- 14,806 Asset impairment charges..................... 8,178 601 -- 8,779 Strategic assessment costs................... -- -- 2,677 2,677 ------- ------ ------ ------- Total restructuring costs................. 31,762 2,964 2,677 37,403 Other charges................................ 1,360 1,482 1,600 4,442 ------- ------ ------ ------- Total restructuring, asset impairments and other charges............................. $33,122 $4,446 $4,277 $41,845 ======= ====== ====== =======
Our envelope business has implemented a plan to consolidate nine (the decision to close two additional plants was made in the first quarter 2002) of our manufacturing facilities over an 18-month period. This plan will substantially reduce excess internal capacity and improve utilization of equipment and resources at the remaining 41 plants. The separation and related employee costs cover 923 employees to be terminated over the course of this project, of which 359 had been separated as of December 31, 2001. Other exit costs include training costs for those employees at the plants that are absorbing the sales of the plants being closed and external assistance in implementing the plant closures. As of December 31, 2001, we had completed the closure of our facilities in Omaha, Nebraska; Allentown, Pennsylvania; and Santa Fe Springs, California. The $8.2 million asset impairment charge relates to the write down of equipment taken out of service as a result of these plant closures. Our commercial printing business consolidated three printing operations in the Philadelphia, Pennsylvania area into one. This consolidation was done to improve the cost effectiveness of these operations and their competitive position in the Philadelphia market. The costs associated with this consolidation included severance and related expenses covering the termination of 25 employees, all of whom have been terminated. Other exit costs include expenses incurred to move and reinstall equipment. Equipment taken out of service was written down $0.6 million to its fair market value. In developing our new strategic plan, we engaged outside advisors to research and evaluate our markets, survey our customers and assess existing strategies. In addition, we engaged financial advisors to evaluate options for improving our capital structure. The cost of these advisors was $2.7 million. The external incremental cost incurred for the initiatives to improve operations and marketing effectiveness described above totaled $2.1 million in 2001 and is reported as other charges. Other charges include the write-off of a $1.6 million investment in a company developing a service to enable online management of the creative process of a printing job and a $0.7 million write-off of the cost incurred for a human resource information system that will not be implemented. 24 2000. We began our comprehensive review of our operations in 2000 and identified certain actions that could be taken at that time. The following table and discussion present the details of restructuring charges, as well as other charges recorded in 2000:
COMMERCIAL ENVELOPE PRINTING TOTAL -------- -------- ----- (IN THOUSANDS) Employee separation and related employee costs.................... $ 86 $ 188 $ 274 Lease termination costs........................................... -- 428 428 Asset impairment charges.......................................... -- 749 749 Other exit costs.................................................. -- 45 45 ------ ------ ------ Total restructuring costs...................................... 86 1,410 1,496 Other asset impairments........................................... 1,872 2,036 3,908 ------ ------ ------ Total restructuring, asset impairments and other charges...... $1,958 $3,446 $5,404 ====== ====== ======
Our envelope business closed a resale operation in Vancouver, Washington. The separation and related employee costs covered the termination of 19 employees, all of whom have been terminated. Our commercial printing business consolidated two operations in St. Louis into an existing facility and closed our bindery operation in Mexico. We reduced our total workforce by 165 employees by taking these actions. We also incurred asset impairment charges in 2000 totaling $3.9 million that were unrelated to the restructuring. These assets were taken out of service and could not be redeployed or sold, and therefore were written off. We completed a restructuring program initiated in 1998 during 2000. Changes related to that program, which were recorded in 2000, totaled $0.8 million. IMPAIRMENT OF ASSETS HELD FOR SALE As part of our new strategy, the sale of certain assets that are not strategic to our envelope or commercial printing businesses was approved in May 2001. We incurred a charge of $2.9 million in 2001 to write down certain of these assets to fair value. OPERATING INCOME Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE ---------------------- -------- 2002 2001 ---- ---- (DOLLARS IN THOUSANDS) Reported Operating income.................. $ 1,248 $21,684 (94)% Operating margin.................. 0.3% 5.0% New Mail-Well* Operating income.................. $12,607 $19,230 (34)% Operating margin.................. 3.5% 4.7% - -------- * Excludes income from continuing operations of certain operations of our envelope and commercial printing businesses held for sale, and restructuring and other charges of $13.6 million in 2002.
New Mail-Well's operating income declined 34% in the first quarter of 2002 to $12.6 million. The reduction in operating income was due primarily to the contribution lost on the decline in sales, estimated to be approximately $12.5 million. Increased competition resulting from the lower demand reduced contribution margins by more than 6% and total contribution by approximately another 25 $8.7 million. Offsetting these declines were reductions in fixed costs, which totaled approximately $12 million during the quarter. The $13.6 million restructuring and other charges discussed above are the primary difference between reported operating income and the operating income of New Mail-Well. Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE ---------------------- ------------------- 2001 2000 1999 2001 2000 ------- -------- -------- ---- ---- (DOLLARS IN THOUSANDS) Reported Operating income................... $33,816 $117,523 $137,010 (71)% (14)% Operating margin................... 2% 6% 9% New Mail-Well* Operating income................... $65,848 $110,497 $127,233 (40)% (13)% Operating margin................... 4% 6% 9% - -------- * Excludes operating income in 2001, 2000 and 1999 of certain operations of our envelope and commercial printing businesses held for sale, the $2.9 million impairment of assets held for sale in 2001 and restructuring, asset impairments and other charges of $41.8 million, $6.2 million and $1.8 million in 2001, 2000 and 1999, respectively.
New Mail-Well's operating income declined 40% in 2001 to $65.8 million. Excluding earnings contributed by acquisitions completed in 2000, the decline was 42%. The reduction in operating income was primarily due to the estimated $53 million of contribution margin lost on the decline in sales. Increased competition resulting from the lower demand due to the slowdown in the economy impacted contribution margins by approximately $6 million. Offsetting these declines were reductions in fixed manufacturing costs, primarily production support, and administrative expenses, which totaled approximately $13 million during 2001. New Mail-Well's operating income in 2000 declined 13%. Excluding the $8.2 million attributable to acquisitions completed in 2000 and 1999, the decline was 19%. This decline was the result of lower margins in our envelope business due to higher paper prices and lower profits in our commercial printing business. The lower earnings of our commercial printing business were due to a change in the mix of the products sold and to poor operating performance at four manufacturing facilities, including asset write-offs and accrual adjustments, totaling $6.1 million at two of these plants. Corporate expenses were also higher primarily due to special retirement expenses of $2.6 million recorded in 2000. INTEREST EXPENSE Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE ---------------------- -------- 2002 2001 ---- ---- (DOLLARS IN THOUSANDS) Total interest expense............................ $18,482 $21,533 (14)% Less: Allocation to discontinued operations...... (6,474) (6,782) ------- ------- Reported interest expense......................... 12,008 14,751 (19)% Less: Allocation to assets held for sale......... (968) (1,621) ------- ------- New Mail-Well..................................... $11,040 $13,130 (16)% ======= =======
During the quarter ended March 31, 2002, interest before allocations to discontinued operations and assets held for sale declined 14% due to lower average debt balances and lower average interest 26 rates. Our weighted average interest rate will increase as a result of the issuance of $350 million of 9 5/8% senior notes on March 13, 2002. Reported interest excludes an allocation of total interest expense to discontinued operations based on the net assets of those operations. Interest expense applicable to New Mail-Well excludes interest allocated to certain operations of the envelope and commercial printing businesses that are held for sale based on the net proceeds anticipated from the sales of these assets. Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE ---------------------- ------------------ 2001 2000 1999 2001 2000 -------- -------- -------- ---- ---- (DOLLARS IN THOUSANDS) Total interest expense.................... $ 78,891 $ 92,138 $ 55,247 (14)% 67% Less: Allocated to discontinued operations............................. (26,140) (30,011) (15,039) -------- -------- -------- Reported interest expense................. 52,751 62,127 40,208 (15)% 55% Less: Allocated to assets held for sale... (5,255) (6,013) (4,796) -------- -------- -------- New Mail-Well............................. $ 47,496 $ 56,114 $ 35,412 (15)% 58% ======== ======== ========
In 2001, total interest expense declined 14% due to lower average debt balances and lower average interest rates. Interest rates and expense are expected to increase in 2002 due to anticipated debt refinancing related to the repayment of our 5% convertible notes on or before their maturity at November 1, 2002. In February 2000, we entered into a new senior secured credit facility to finance the acquisition of American Business Products, Inc. The increase in interest in 2000 was due to higher total borrowings and higher average interest rates. INCOME TAXES Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 ---------------------- 2002 2001 ---- ---- (DOLLARS IN THOUSANDS) Reported Provision (benefit) for income taxes................. $(2,749) $2,220 Effective tax rate................................... 25.0% 34.6% New Mail-Well Provision for income taxes........................... $ 524 $2,500 Effective tax rate................................... 41.0% 45.5%
New Mail-Well's effective tax rate for 2002 decreased by 4.5 percentage points due to higher estimated pre-tax income in 2002, which decreased the impact of nondeductible permanent differences on the effective rate. The reported effective tax rate for 2002 reflects the tax impact of the restructuring and other charges. 27 Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 ---------------------- 2001 2000 1999 ---- ---- ---- (DOLLARS IN THOUSANDS) Reported Provision (benefit) for income taxes........................... $(7,684) $20,213 $39,428 Effective tax rate............................................. 37.1% 37.1% 40.2% New Mail-Well Provision for income taxes..................................... $ 7,146 $19,242 $37,428 Effective tax rate............................................. 43.4% 36.1% 40.2%
New Mail-Well's effective tax rate for 2001 increased by 7.3 percentage points due to lower pre-tax income, which increased the impact of nondeductible goodwill amortization on the effective rate. The 4.1 percentage point decline in New Mail-Well's effective tax rate for 2000 was due in part to a reduction in the statutory rates in Canada. In addition, net impact of permanent differences reduced taxable income in 2000. The reported effective tax rate for 2001 reflects the tax impact of the restructuring charge. INCOME (LOSS) FROM CONTINUING OPERATIONS AND INCOME PER SHARE--ASSUMING DILUTION Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE ---------------------- -------- 2002 2001 ---- ---- (DOLLARS IN THOUSANDS) Income (loss) from continuing operations Reported......................................... $(8,265) $4,187 (297)% New Mail-Well*................................... $ 755 $2,779 (73)% Income (loss) from continuing operations per share Reported......................................... $ (0.17) $ 0.09 (289)% New Mail-Well*................................... $ 0.02 $ 0.06 (67)% - -------- * Excludes income from continuing operations of certain operations of our envelope and commercial printing businesses held for sale, and restructuring and other charges of $13.6 million in 2002.
New Mail-Well's income from continuing operations per share declined 67% in the first quarter of 2002, reflecting a similar decrease in income from continuing operations. The earnings decline was due to lower sales and lower margins partially offset by lower fixed costs, lower amortization expense and lower interest expense. Lower amortization expense was due to the implementation of SFAS 142 whereby goodwill is no longer required to be amortized. Our reported loss from continuing operations of $8.3 million, or $.17 per share, includes the restructuring and other charges of $13.6 million. 28 Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE ---------------------------------- -------------------- 2001 2000 1999 2001 2000 -------- ------- ------- ------ ----- (DOLLARS IN THOUSANDS) Income (loss) from continuing operations Reported................................... $(13,041) $34,209 $58,602 (138)% (42)% New Mail-Well*............................. $ 9,319 $34,060 $55,622 (73)% (39)% Income (loss) from continuing operations per share--assuming dilution Reported................................... $ (0.27) $ 0.69 $ 1.10 (139)% (38)% New Mail-Well*............................. $ 0.19 $ 0.69 $ 1.05 (72)% (34)% - -------- * Excludes income from continuing operations in 2001, 2000 and 1999 of certain operations of our envelope and commercial printing businesses held for sale, the $2.9 million impairment of assets held for sale in 2001 and restructuring, asset impairments and other charges of $41.8 million, $6.2 million and $1.8 million in 2001, 2000 and 1999, respectively.
New Mail-Well's income (loss) from continuing operations per share declined 72% in 2001, reflecting a similar decrease in income from continuing operations. The earnings decline was due to lower sales and lower margins partially offset by lower fixed costs and lower interest expense. In addition, our reported loss from continuing operations of $13 million, or $0.27 per share, was also negatively impacted by the restructuring, asset impairments and other charges of $41.8 million and the impairment charge recorded on assets held for sale of $2.9 million which are excluded from income from continuing operations of New Mail-Well. In 2000, income from continuing operations for New Mail-Well declined 39% with a corresponding 34% decrease in earnings per share. This decline in earnings reflected lower operating margins, higher fixed costs, higher amortization expense and higher interest expense than in 1999. LOSS ON DISCONTINUED OPERATIONS In June 2001, we announced our intention to sell our label and printed office products businesses. Generally accepted accounting principles require that our financial statements be restated to exclude the sales and expenses of these business and that their results be reported as discontinued operations. During the quarter ended March 31, 2002, we recorded a loss of $8.6 million from discontinued operations, which included a loss from operations of $1.0 million after the allocation of interest and taxes and $7.6 million of additional loss estimated on the disposition of our label and printed office products businesses. During the quarter, we competed the sale of Curtis 1000 for approximately $40.0 million, which includes the assumption of debt. Curtis 1000 was reported as part of our printed office products business. Our estimates of the sales proceeds expected from the divestitures are based on data provided by our financial advisors and indications of value received from prospective buyers. The loss is adjusted once the actual sales proceeds are known or management has information indicating that the actual sales proceeds are likely to be different than the estimates. We do not expect the actual sales proceeds to be significantly different from those assumed, and we expect to complete these dispositions during the second quarter or early in the third quarter of 2002. Sales of our label and printed office products businesses during the first quarter of 2002 totaled $127.8 million. The operating income earned by these businesses was $6.7 million. 29 The loss reported from discontinued operations for the year ended December 31, 2001 was $123.2 million, or $2.59 per share, after income tax benefits from the loss and included the following: o A write-down to net realizable value based on estimated sales proceeds; and o The actual and forecasted results of these businesses from the date of the announcement through the expected date of disposal, including an allocation of interest expense. Sales of our label and printed office products businesses in 2001 totaled $605.6 million. The operating income earned by these businesses in 2001 was $19.3 million. EXTRAORDINARY ITEM Results for the quarter ended March 31, 2002 include an extraordinary charge of $4.8 million, net of tax, or $0.10 per share. We wrote-off the pro rata portion of the deferred financing fees, $8.2 million, incurred in connection with our bank credit facility which related to the portion of the term debt repaid with the proceeds from the senior notes issued in March 2002 and from the sale of Curtis 1000 in February 2002. NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE--ASSUMING DILUTION Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE ---------------------- -------- 2002 2001 ---- ---- (DOLLARS IN THOUSANDS) Net income (loss) Reported....................................... $(21,608) $3,623 (696)% New Mail-Well*................................. $ 755 $2,779 (73)% Net income (loss) per share - assuming dilution Reported....................................... $ (0.45) $ 0.08 (663)% New Mail-Well*................................. $ 0.02 $ 0.06 (67)% - -------- * Excludes income from continuing operations of certain operations of our envelope and commercial printing businesses held for sale, and restructuring and other charges of $13.6 million in 2002.
30 Our reported net loss for the first quarter of 2002 was $21.6 million, or $0.45 per share. This loss was due to lower income from continuing operations, the charges taken in connection with our restructuring and other strategic initiatives, the loss on discontinued operations and the extraordinary charge. Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE -------------------------------------- ------------------- 2001 2000 1999 2001 2000 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) Net income (loss) Reported..................................... $(136,217) $27,618 $64,482 (593)% (57)% New Mail-Well*............................... $ 9,319 $34,060 $55,622 (73)% (39)% Net income (loss) per share--assuming dilution Reported..................................... $ (2.86) $ 0.56 $ 1.20 (611)% (53)% New Mail-Well*............................... $ 0.19 $ 0.69 $ 1.05 (72)% (34)% - -------- * Excludes operating income in 2001, 2000 and 1999 of certain operations of our envelope and commercial printing businesses held for sale, the $2.9 million impairment of assets held for sale in 2001 and restructuring, asset impairments and other charges of $41.8 million, $6.2 million and $1.8 million in 2001, 2000 and 1999, respectively.
In 2001, the reported net loss was $136.2 million, or $2.86 per share assuming dilution. This loss was due to lower operating results from continuing operations, the restructuring, asset impairments and other charges and the losses recognized on discontinued operations and assets held for sale. Net income in 2000 included an extraordinary gain of $1.4 million. Reported net income and net income per share in 2000 were down over 50% from 1999 because of lower operating results, higher amortization expense and higher interest expense. New Mail-Well's net income and net income per share are the same as shown from New Mail-Well's continuing operations because New Mail-Well excludes results of discontinued operations, the impairment on assets held for sale and the restructuring, asset impairments and other charges. BUSINESS SEGMENTS ENVELOPE The following tables present the reported sales and operating income of our envelope business, as well as sales and operating income excluding the results of operations that are held for sale ("New Envelope") and restructuring and other charges. Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE ---------------------- -------- 2002 2001 ---- ---- (DOLLARS IN THOUSANDS) Net sales Reported.................... $200,975 $221,616 (9)% New Envelope*............... $185,099 $209,022 (11)% Operating income Reported.................... $ 7,738 $ 22,975 (66)% New Envelope*............... $ 18,318 $ 21,022 (13)% - -------- * Excludes sales and operating income of certain operations of our envelope business held for sale. New Envelope sales include sales of $3 million and $7 million in 2002 and 2001, respectively, to Curtis 1000 Inc. as well as other operations being divested, which sales are anticipated to continue subsequent to the disposition of the operations.
31 New Envelope's sales in the first quarter of 2002 were down 11.0% from the first quarter of the prior year. We continue to experience lower sales in the direct mail segment of our market. Sales to our direct mail customers were down approximately $8.0 million in the quarter. Demand in the resale segment of our market, which began to soften in the second half of 2001, continues to be weak. Sales to our merchant and office products customers were down $8.5 million. Operating income of New Envelope declined 13%. Reductions of $8.1 million in fixed costs were not sufficient to offset the contribution lost due to lower sales and lower margins. Margins are down from the prior year due to competitive pressures and lower sales of higher value added products. Reported results of our envelope business are significantly lower due to the $12.0 million of restructuring and other charges recorded during the first quarter of 2002. Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE ---------------------- ----------------- 2001 2000 1999 2001 2000 -------- -------- -------- ---- ---- (DOLLARS IN THOUSANDS) Net sales Reported..................... $835,534 $861,803 $738,288 (3)% 17% New Envelope*................ $781,463 $801,253 $679,257 (2)% 18% Operating income Reported..................... $ 54,168 $ 90,202 $ 90,996 (40)% (1)% New Envelope*................ $ 79,286 $ 84,980 $ 86,344 (7)% (2)% - -------- * Excludes sales and operating income of certain operations of our envelope business held for sale. New Envelope sales include sales of $20 million and $15.5 million in 2001 and 2000, respectively, to Curtis 1000 Inc. as well as other operations being divested, which sales are anticipated to continue subsequent to the disposition of the operations.
New Envelope's sales in 2001 were down 2% from the prior year. Excluding the impact of acquisitions completed in 2000, sales were down approximately $35.6 million, or approximately 4%. This decline was due primarily to the general decline in the economy. Sales to direct mail customers were lower in 2001 by approximately $12.2 million due to reductions in spending on direct mail promotions. Sales of specialty packaging were down approximately $12.6 million primarily due to reduced demand from the U.S. Postal Service. We also experienced lower sales of approximately $4.7 million in the resale segment of our market as customers reduced inventories. In 2000, approximately $78.2 million of New Envelope's sales increase was due to the impact of companies acquired in 2000. Internal growth accounts for the remaining increase of $43.8 million. Operating income of New Envelope was down 7% in 2001 from the prior year. Excluding the earnings of companies acquired in 2000 the decline was 9%. The decline in operating income in 2001 was due to lower sales and the resulting decrease in gross profit of $11.2 million. In response to the lower sales, we reduced fixed manufacturing costs in 2001 such that gross profit margin was down only 50 basis points to 20.5%. Excluding the impact of acquisitions, selling and administrative expenses were down $3.5 million from 2000 reflecting lower sales commissions and reductions in administrative overhead. In 2000, New Envelope's operating income was also down from the prior year. Excluding earnings of companies acquired in 2000 and 1999, the decline in operating income was 10%. In 2000, selling prices remained relatively constant with selling prices in 1999 despite higher paper costs in 2000 compared to 1999. Lower margins reduced gross profits by $14.5 million. Excluding the impact of acquisitions, administrative expenses were $1.8 million lower in 2000 than in 1999. 32 COMMERCIAL PRINTING The following tables present the reported sales and operating income of our commercial printing business, as well as sales and operating income excluding the results of its operations that are held for sale ("New Commercial Printing") and restructuring and other charges. Comparison of First Quarter 2002 to 2001
QUARTER ENDED MARCH 31 % CHANGE ---------------------- -------- 2002 2001 ---- ---- (DOLLARS IN THOUSANDS) Net sales Reported................................ $190,754 $211,360 (10)% New Commercial Printing*................ $184,588 $203,587 (9)% Operating income (loss) Reported................................ $ (3,463) $ 6,361 (154)% New Commercial Printing*................ $ (2,473) $ 5,585 (144)% - -------- * Excludes sales and operating income of certain operations of our commercial printing business held for sale. New Commercial Printing sales include sales of $1 million in 2002 to Curtis 1000 Inc. as well as other operations being divested, which sales are anticipated to continue subsequent to the disposition of the operations.
Sales of New Commercial Printing in the first quarter of 2002 were down 9.0% from the prior year. While total revenues from our annual report and car brochure business were lower than in the first quarter of 2001, they were higher than the first quarter of 2000. Demand for general commercial printing continues to decline. Approximately 50% of the first quarter sales decline was low margin work, which we chose not to retain due to competitive pricing pressures in the market. The decline in operating income of New Commercial Printing in the first quarter of 2002 is due the contribution lost on lower sales and lower margins, which were down 270 basis points from the first quarter of 2001. Fixed costs are $2.8 million lower than the first quarter of 2001. Reported results of our Commercial Printing business were lower due to the $1.0 million of restructuring and other charges recorded during the first quarter of 2002. Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE ---------------------------------- ------------------ 2001 2000 1999 2001 2000 -------- -------- -------- ---- ---- (DOLLARS IN THOUSANDS) Net sales Reported............................... $817,937 $961,780 $795,552 (15)% 21% New Commercial Printing*............... $782,286 $918,140 $756,811 (15)% 21% Operating income Reported............................... $ 14,763 $ 54,758 $ 65,108 (73)% (16)% New Commercial Printing*............... $ 15,974 $ 52,648 $ 59,673 (70)% (12)% - -------- * Excludes sales and operating income of certain operations of our commercial printing business held for sale. New Commercial Printing sales include sales of $3 million and $0.5 million in 2001 and 2000, respectively, to Curtis 1000 Inc. as well as other operations being divested, which sales are anticipated to continue subsequent to the disposition of the operations.
The economic slowdown in 2001 had a significant impact on our commercial printing business. Sales of New Commercial Printing were down 15% from the prior year. Excluding the impact of acquisitions completed in 2000, the sales decline was $147.3 million, or 16%. Customers have reduced spending on advertising in reaction to the recession, which has directly impacted our commercial 33 printing business. We estimate that approximately 50% of commercial printing sales are related to advertising. Reductions in spending by our customers on print advertising account for approximately 28% of the sales decline in 2001. In addition, sales to our technology and telecommunications customers were down approximately $30 million, or approximately 20% of the decline, in 2001. The remaining sales decline was due to general reductions in demand and increased competition. New Commercial Printing's sales in 2000 were up 21%. Excluding the impact of sales by companies acquired in 2000 and 1999, the increase was 13%. Sales of annual reports, automotive brochures, magazine inserts and printed educational materials were strong in 2000 and responsible for much of this growth. The decline in operating income of New Commercial Printing in 2001 was primarily related to the significant sales decline in 2001. Contribution margin lost due to lower sales was more than $40 million. This reduction was offset by a reduction in administrative expenses, before considering acquisitions, of $3.3 million. In 2000, New Commercial Printing's operating income declined 12%. Excluding the impact of acquisitions completed in 2000 and 1999, the decline in operating income was 17%. Despite the increase in sales during 2000, margins declined primarily due to significant operating problems at four of our printing plants. The operating income at these four plants was $10.1 million lower in 2000 than in 1999, before considering charges of $6.1 million to write-off assets and adjust accruals at two of these plants. A change in mix of business in 2000 also had a negative impact on results. LIQUIDITY AND CAPITAL RESOURCES In March 2002, we sold $350 million of 9 5/8% senior notes due 2012. We used the proceeds from this offering to repay $197.0 million of our bank term debt and $22.0 million of other debt. The remaining proceeds will be used to fund working capital needs and provide the liquidity needed for the repayment of our convertible debt due in November 2002. In March 2002, we applied $20.5 million of the proceeds received from the sale of Curtis 1000 to the repayment of our bank term debt. Also, in May 2002, we applied $65.0 million of the net proceeds received from the sale of our label segment to the repayment of our bank term debt. Since December 31, 2001, we have reduced the bank borrowings under our secured senior credit facility from $393.7 million to $168.8 million at March 31, 2002. Our senior secured credit facility contains certain cash flow financial covenants which we could violate if some or all of our divestitures are successfully completed in the near future. Even if the divestitures do not occur as planned, these covenants could be violated if our operating results continue to be disappointing. Rather than seek a waiver from these restrictive covenants, as we have done successfully in the past, we have determined to pursue an asset-based lending arrangement of the kind which does not typically have similar restrictions. We believe we will be able to refinance our senior secured credit facility in such a manner prior to any possible violation of the existing covenants. Cash flow from continuing operations was $3.6 million in the first quarter of 2002 compared to $58.1 million in the first quarter of 2001. Capital expenditures totaled $8.0 million in the first quarter of 2002 compared to $4.9 million in the first quarter of 2001. In addition, we made a $1.0 million contractual payment on a small acquisition that was consummated in the first quarter of 2001 for $3.9 million. Our debt, net of cash, was 71.4% to total capital at March 31, 2002, up from 70.2% at December 31, 2001. 34 The following table summarizes our cash obligations as of March 31, 2002:
PAYMENTS DUE BY YEAR -------------------- 2002 2003 AND 2004 2005 AND 2006 THEREAFTER TOTAL ---- ------------- ------------- ---------- ----- (IN THOUSANDS) Long-term debt................... $310,372 $ 45,059 $ 95,951 $517,871 $ 969,253 Operating leases................. 33,844 56,913 42,545 32,066 165,368 -------- -------- -------- -------- ---------- Total cash obligations........... $344,216 $101,972 $138,496 $549,937 $1,134,621 ======== ======== ======== ======== ==========
Long-term debt due during 2002 includes the retirement of our convertible notes, other current debt and the portion of our bank borrowings that will be paid from the proceeds from our planned divestitures pursuant to the terms of our senior credit facility, net of amounts that would become available as a result of such repayments under our revolving credit facility. Our convertible notes mature in November 2002. We have provided for the mandatory retirement of these notes as a result of our bond offering in March 2002 and the amendment obtained on our secured senior credit facility. At March 31, 2002, we had outstanding letters of credit of approximately $6.2 million related to performance and payment guarantees. In addition, we have issued letters of credit of $2.4 million as credit enhancements in conjunction with other debt. Based on our experience with these arrangements, we do not believe that any obligations that may arise will be significant. We expect to be able to fund our operations, capital expenditures and debt and other contractual commitments within the next year from the proceeds from the sales of our planned divestitures, which we expect to approximate $290 million (of which approximately $40 million has been received from the sale of Curtis 1000 and approximately $75 million from the sale of Label), internally generated cash flow and funds available under our revolving credit facility. At March 31, 2002, we had $150 million of unused credit available under our revolving credit facility. We generated cash of $152.0 million from continuing operations in 2001 compared to $131.4 million in 2000 and $107.2 million in 1999. While earnings declined in 2001 and 2000, noncash charges increased primarily due to the increase in the noncash portion of the restructuring and asset impairment charges recorded in 2001 and 2000. In addition, working capital, which consists of current assets exclusive of cash and cash equivalents, net assets of discontinued operations and net assets held for sale, less current liabilities, exclusive of the current portion of long-term debt, was reduced $88.5 million in 2001 to $135.2 million at December 31, 2001 compared to a reduction of $35.0 million in 2000 and an increase of $4.3 million in 1999. Capital expenditures, excluding acquisitions, were $26.8 million in 2001, $57.8 million in 2000 and $65.1 million in 1999. We anticipate capital expenditures of approximately $42 million in 2002. Consistent with our new strategy to reduce our leverage, free cash flow in 2001 was used primarily to reduce debt. There were no significant acquisitions in 2001 or during the quarter ended March 31, 2002. In 2000, we obtained a new senior secured credit facility to fund the acquisition of American Business Products, Inc. for $331.1 million in cash plus $7.5 million of assumed debt. We sold the extrusion coating and laminating operation of American Business Products in September 2000 for after-tax cash proceeds of approximately $110.6 million. Other acquisitions in 2000 included three commercial printing companies and an envelope company. The cash paid for these four companies totaled $48.1 million. Debt was the principal source of funds used in 1999 for the acquisitions of seven printing companies and one envelope company for purchase prices totaling $130.9 million. We repurchased 1,821,000 shares of common stock for an aggregate purchase price of $10.0 million during 2000. We did not repurchase any common stock in 2001 and have no plans to do so in 2002. In addition, we repurchased $13.0 million of our outstanding convertible subordinated notes in 2000. These transactions reduced the number of shares outstanding on a fully diluted basis by 473,402 and 541,491, respectively. The impact on diluted earnings per share was not material. 35 SEASONALITY AND ENVIRONMENT Our commercial printing business experiences seasonal variations. Our revenues from annual reports are generally concentrated from February through April. Revenues associated with holiday catalogs and automobile brochures tend to be concentrated from July through October, and calendars from May to September. As a result of these seasonal variations, we are at or near capacity in some facilities at certain times during these periods. Several consumer direct market segments served by our envelope business, such as photo finishing packaging and certain segments of the direct mail market, experience seasonality, with a higher percentage of the volume of products sold to these markets occurring during the fourth quarter of the year. This seasonality is due to the increase in sales to the direct mail market due to holiday purchases. Seasonality is offset by the diversity of our other products and markets, which are not materially affected by seasonal conditions. Environmental matters have not had a material financial impact on our historical operations and are not expected to have a material impact in the future. CRITICAL ACCOUNTING POLICIES AND JUDGMENTS In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and judgments on an ongoing basis, including those related to bad debts, inventory valuations, property, plant and equipment, intangible assets, income taxes, restructuring costs, and contingencies and litigation. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. The most significant judgments made in our financial statements for 2001 involve the estimation of net sales proceeds to be received form the sales of our discontinued operations and assets held for sale. We have based our estimates on indications of value expressed by prospective buyers and the advice of our financial advisors. We do not expect the actual proceeds to be significantly different from our estimates; however, until we have completed each of our planned divestitures, the possibility exists that actual proceeds could be materially different from our estimates. We exercise judgment in evaluating our long-lived assets for impairment. We believe our businesses will generate sufficient undiscounted cash flow to more than recover the investments we have made in property, plant and equipment, as well as the goodwill and other intangibles recorded as a result of our acquisitions. We are self insured for the majority of our workers' compensation costs and group health insurance costs. We rely on claims experience and the advice of consulting actuaries and administrators in determining an adequate liability for self-insurance claims. The determination of our tax provision is complex due to the number of acquisitions we have completed and due to operations in several tax jurisdictions outside the United States. In addition, realization of certain deferred tax assets is dependent upon our ability to generate future taxable income. NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business 36 combinations completed after June 30, 2001. Statement 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. Statement 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. Additionally, Statement 142 requires that goodwill included in the carrying value of equity method investments no longer be amortized. We began our application of Statement 142 beginning on January 1, 2002. We have completed the first step of the two-step process prescribed in Statement 142 to test goodwill for impairment and have concluded that a portion of the $213.5 million of goodwill related to our commercial printing business is impaired. We will not know the extent of this impairment until we have completed step two of the process, which we expect to begin prior to the end of the second quarter. We will recognize the amount of the impairment as a cumulative effect of a change in accounting principle as of January 1, 2002, when it is determined. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. Statement 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Mail-Well will adopt Statement 143 on January 1, 2003. We are evaluating the impact of the adoption of Statement 143 on the consolidated financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes one accounting model to be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. Statement 144 supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of ABP Opinion No. 30, Reporting the Results of Operations--Reporting the Effects Of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Mail-Well adopted Statement 144 as of January 1, 2002 and there was no impact from the adoption of this statement. Because the sale of the discontinued operations and the assets held for sale were amortized in 2001, these were accounted for under APB 30. MARKET RISK We are exposed to market risks such as changes in interest and foreign currency exchange rates, which may adversely affect results of operations and financial position. Risks from interest and foreign currency exchange rate fluctuations are managed through normal operating and financing activities. We do not utilize derivatives for speculative purposes, nor do we hedge interest rate exposure through the use of swaps and options or foreign exchange exposure through the use of forward contracts. Exposure to market risk from changes in interest rates relates primarily to our variable rate debt obligations. The interest on this debt is the London Interbank Offered Rate ("LIBOR") plus a margin. At March 31, 2002, we had outstanding variable rate debt outstanding of $171.0 million. A 1% increase in LIBOR on the maximum amount available under our credit agreement, which is $321.0 million, would increase our annual interest expense by $3.2 million and reduce annual net income by approximately $2.0 million. We have operations in Canada, the United Kingdom and Mexico, and thus are exposed to market risk for changes in foreign currency exchange rates of the Canadian dollar, the British pound and the Mexican peso. RECENT DEVELOPMENT On May 21, 2002, we consummated the sale of our label segment to MWL Acquisition Corp., for approximately $75 million. The label segment generated $219 million of sales for the year ended December 31, 2001, $53 million of sales for the three months ended March 31, 2002 and $56 million of sales for the three months ended March 31, 2001. 37 BUSINESS We are one of the largest printers in North America competing primarily in the commercial printing and envelopes market segments. We believe we are the world's largest manufacturer of envelopes, the leading printer of envelopes in the United States and Canada and the largest high impact color printer in the United States. We operate 85 printing manufacturing facilities throughout North America. The combination of our broad printing facility network and our sales force, which is among the largest in the industry, has enabled us to build our customer base to over 20,000 in the commercial printing and envelope segments, including major national and regional accounts. In addition to our two primary business segments, we also operate a printed office products segment. As discussed below, we are actively trying to sell this business. In May 2001, we completed a comprehensive review of our operations and adopted a new strategy that focuses on our two core businesses--commercial printing and envelopes. In support of this strategy, we sold our label segment and announced our intention and are in the process of seeking to sell our printed office products segment and certain other non-core assets in our commercial printing and envelope businesses. We intend to use any proceeds from these divestitures to decrease our secured indebtedness. Accordingly, in the second quarter of 2001 we began reporting the label and printed office products segments as discontinued operations, began reporting the other non-core assets as assets held for sale, and recorded the loss anticipated on these dispositions. In February 2002, we sold Curtis 1000 Inc., a printed office products company, for $40 million, including the assumption of debt. In addition, we sold our label segment for $75 million in May 2002. As of the date of this prospectus, we have not entered into any other definitive agreements to sell any of the companies in these segments or our other non-core assets. In connection with our new strategic plan, we also announced plans to consolidate three of our commercial printing plants into one facility, to close nine of our envelope plants and to redeploy their assets for other facilities by the end of 2002. Our new strategy also includes the launch of several initiatives to significantly improve operations and marketing effectiveness. Both the commercial printing and envelope businesses have programs in place to institute best practices, install pricing disciplines and align equipment and services to better serve our customers and markets. THE PRINTING AND ENVELOPE INDUSTRIES The printing industry is one of the largest and most fragmented industries in the United States with total estimated 2000 sales of $163 billion among an estimated 47,667 printing businesses, according to the Printing Industry of America, Inc. The printing industry includes general commercial printing, financial printing, printing and publishing of books, labels, newspapers and periodicals, quick printing and production of business forms and greeting cards. The envelope industry is not as highly fragmented as the print industry, and envelope printing and manufacturing combined constitute a $4.3 billion market in North America. Products in the envelope industry include customized envelopes for direct mailing, transactional envelopes, non-custom envelopes for resale and specialty envelopes and files. OUR COMPETITIVE STRENGTHS We believe that our business is characterized by the following competitive strengths: SUPERIOR INFRASTRUCTURE AND SCALE. We currently operate one of the world's largest print, envelope and label manufacturing and distribution networks, with 103 printing and manufacturing facilities throughout North America and three in the United Kingdom. Our extensive network allows us to cost-effectively deliver high quality products to our customers on a just-in-time basis. Our network also has enabled us to increase sales to national customers that require our products and services in multiple regions of the country. In addition to the distribution and marketing advantages provided by our strategically located infrastructure, our scale enables us to realize cost savings as a result of volume related purchases of paper, ink and other raw materials used in the printing process. We are one of the largest U.S. buyers of several paper grades. In 2001, we purchased 38 466,000 tons of coated and uncoated paper. Our scale also enables us to achieve cost savings through the consolidation of insurance administration, financial management and other administrative functions. BROAD RANGE OF QUALITY PRODUCTS AND SERVICES. We provide one of the broadest offerings of quality products and services in our industry. We print virtually anything that can be printed, from business cards to premium full-color brochures and annual reports and from white envelopes to highly customized direct mailers. We offer a broad range of services that are tailored to our customers' needs, including direct-to-plate technology and color sheet-fed presses. The quality of our work has been recognized in the commercial printing industry, and we were awarded numerous Gold Ink Awards in 2001 for various brochures and reports that we printed. We believe our commitment to quality, combined with our broad range of specialized products and services, has allowed us to continually meet our customers' needs. STRONG, LONGSTANDING CUSTOMER RELATIONSHIPS IN DIVERSE END MARKETS. We sell our products to more than 20,000 customers in our commercial printing and envelope segments and over 24,000 customers in our label and printed office products segments, and we maintain longstanding relationships with leading retailers, advertising agencies and other Fortune 500 Companies. Our largest ten customers for 2001 included United Stationers Inc., the U.S. Postal Service, Corporate Express, Inc., the U.S. Government Printing Office and Compaq Computer Corporation. The length of our relationships with our ten largest 2001 customers ranged from seven to 42 years, with an average of approximately 16 years. INDUSTRY LEADING TECHNOLOGY AND INNOVATION. Since our inception, we have dedicated significant resources to our print technology in order to be a leading innovator in the industry. We were one of the first printing companies in the United States to operate an eight-unit web press and ten color sheet-fed press. In addition, we were one of the earliest adopters of direct-to-plate technology. Our state of the art Anderson printing facility in Los Angeles is considered one of the premier high impact printing facilities in the United States. Our leading technology enables us to better meet our customers' needs for product innovation, consistent quality and cost efficiency. EXPERIENCED MANAGEMENT AND OPERATIONS TEAM. Our senior management team has significant experience in printing and manufacturing and has substantial experience implementing cost-cutting and facility consolidation programs, integrating acquisitions, and managing a company through changing economic conditions. Our chief executive officer, Paul Reilly, has spent over 20 years in the printing and publishing industry with our company and at Polychrome Corporation, a pre-press supplier to the printing industry. Our chief financial officer, Michel P. Salbaing, has served as chief financial officer of several businesses over the course of his 34 year career, including with Quebecor World, a leading Canadian printing company. Our plant managers in the commercial printing and envelopes segments are some of the most experienced in the business, averaging over 19 years in the printing industry. OUR STRATEGY Our objective is to continue to increase our cash flows and profits through a business strategy that enhances operating leverage and achieves cost efficiencies in our core business segments. The key elements of our strategy include: FOCUS ON COMMERCIAL PRINTING AND ENVELOPE CORE BUSINESSES. As mentioned previously, in May 2001 we completed a comprehensive review of our operations and adopted a new strategy that focuses on our two core businesses--commercial printing and envelope. We decided to sell our label and printed office products segments and certain other non-core assets in order to concentrate our resources on our core businesses in which we believe there is significant opportunity for growth. Additionally, we plan to target our resources on specific companies and industries that offer the greatest potential opportunities for our core business. In conjunction with our new strategy, we plan to consolidate operations within the commercial printing and envelope 39 segments and improve our financial condition by reducing our outstanding debt. We are taking these measures in order to optimize capacity utilization and the use of our resources. We expect the consolidation of our operations to generate approximately $26 million in annual cost savings. IMPLEMENT INITIATIVES TO INCREASE OPERATING EFFICIENCY AND CASH FLOW. We continually reevaluate our cost structure and processes to identify potential cost savings and productivity improvements that will increase our profitability and cash flow. In addition to the significant savings we expect to realize from consolidating our plants, we commenced the Excellence Demands Group Effort or EDGE Initiative in June 2001. The EDGE Initiative and other initiatives we commenced in 2001 include implementing firm-wide "best practices," installing standard pricing and cost accounting models across our business, more effectively aligning equipment and employee capabilities with the needs of targeted customers and industries, reducing waste, and regionalizing our sales and general administration functions. As part of all these initiatives, we have developed dedicated teams to track and benchmark operating performance as well as implement organizational changes. EXPAND OUR PRODUCT AND SERVICE OFFERINGS. Since our inception, we have worked closely with our customers to develop innovative products that meet their specific requirements. During 2001, we introduced several new commercial printing and envelope products and services. The Visulope(TM), which is an envelope we began to manufacture in the fourth quarter of 2001, has an extra window to detect unusual substances prior to opening. In addition, we introduced Mail-Well 1-2-1, an Internet-based advertising solution that allows our clients to send out personalized marketing materials. We also implemented our innovative "Go-to" marketing program, a team approach to expanding customer service relationships that we believe is unique in the printing industry. We will continue our focus on product and service improvements and new innovations in order to meet our customers needs and grow our business. OUR PRODUCTS Commercial Printing. We believe we are the leading printer of envelopes in the United States and Canada, the largest high impact color printer in the United States, and a leading general commercial printer in several major U.S. markets. Our commercial printing segment generated $818 million of sales for the year ended December 31, 2001, representing 39% of our total pro forma sales. We serve two primary commercial printing markets: (i) high impact color printing, in which we print a wide range of longer run premium products for national and regional accounts; and (ii) general commercial printing, in which we print a wide array of products and offer printing services to local commercial customers. Our printing products include advertising literature, corporate identity materials, annual reports, car brochures, calendars, greeting cards, brand marketing materials, catalogs, maps, CD packaging and direct mail. We offer a wide range of commercial printing services to our customers, including electronic prepress, digital archiving, direct-to-plate technology, and high quality web and color sheet-fed presses. Our high impact printing customers include The Coca-Cola Company, Microsoft Corporation and DaimlerChrysler AG, and our general commercial customers include Anheuser-Busch Inc., Compaq Computer Corporation and GlaxoSmithKline PLC. In 2001, we served over 12,000 commercial customers. We printed over 24 million annual reports for 122 public companies, including 10 of the Fortune 50 companies, and we printed over 40 million auto brochures for 14 automobile manufacturers. Our commercial printing segment operates 29 plants throughout the United States and one in Canada. Envelope. We believe we are the world's largest manufacturer of envelopes. Our envelopes segment generated $836 million of sales for the year ended December 31, 2001, representing 40% of our total pro forma sales. We serve two primary markets: (i) customized envelopes and packaging products, including Tyvek(R) mailers used by the U.S. Postal Service, sold directly to end users or to independent distributors who sell to end users; and (ii) envelopes and other products sold to wholesalers, paper merchants, printers, brokerage firms, office product establishments and superstores. In the customized envelope market, we offer printed customized conventional envelopes for billing and 40 remittance, filing systems, direct mail marketers, photo processing, medical records, catalog orders and other end-users, such as banks, brokerage firms and credit card companies. In addition to the U.S. Postal Service, our major customized envelope customers include State Farm Insurance Company, Reader's Digest and the Internal Revenue Service. In the wholesale envelope market, we manufacture and print a broad line of custom envelopes that are featured in national catalogs for the office products market or offered through office products retailers, including contract stationers. Our wholesale market customers include United Stationers Inc., S.P. Richards Co., Boise Cascade Office Products and Corporate Express, Inc. In 2001, we served over 8,000 envelope customers. We manufacture envelopes in 30 U.S. plants and 13 Canadian plants. Printed Office Products. In addition to our two primary business segments, we also operate a printed office products segment. As discussed elsewhere in this prospectus, we are seeking to sell this business and therefore account for it as discontinued operation. Our printed office products segment generated $215 million of sales for the year ended December 31, 2001, representing 10% of our total pro forma sales. We believe we are the largest manufacturer of printed office products sold through distributors. The printed office products segment prints a diverse line of custom products for small and medium-sized businesses including both traditional and specialty forms for use with desktop PCs and laser printers. Printed office products customers include Data Supplies, Wall Street Business Products and Minuteman Press International, Inc. Our printed office products segment has 12 manufacturing facilities located throughout the United States. OUR SERVICES We offer our customers a wide variety of related services to enhance the value of our products, such as: Prepress. The traditional design phase typically requires us to incorporate customer-submitted graphics, photograph the artwork, develop the file and prepare a plate from which to print. Electronic Prepress. This is a fully automated electronic process that allows the customer to submit its artwork and other data in digital format, either on a diskette, high speed transmission line or in hard copy that can be computer-scanned. We can then manipulate the image, prepare color separations and edit the design on a computer to create the file from which the printing plate is made. Electronic prepress greatly reduces the time and the number of people involved in the production of plates, and we believe that we are an industry leader in fully automated electronic prepress operations. Direct-to-Plate Technology. We offer digital direct-to-plate technology, which eliminates the production of film and several manual functions in the platemaking process. This technology offers a complete digital workflow, providing a better printed product and faster turnaround without additional cost. Mail-Well 1-2-1. We offer on-demand digital printing services using variable imaging and other features to produce personalized marketing material, direct mail and other forms of targeted customer communications. Digital Archiving. We allow customers to store digitally rendered artwork on our file servers. The artwork can then be accessed and retrieved either at the plant during the prepress stage or from a remote site via high speed transmission during the design stage. Delivery Systems. We offer a flexible "just-in-time" delivery program. This program allows customers to receive their products just prior to when they are needed. Warehousing Services. A customer will often place an order for significantly more product than it may need at the time. When this occurs, we offer to store the finished product and drop-ship them on an "as-needed" basis. Inventory Management Systems. We offer this service primarily to large national organizations with centralized purchasing and supply departments that service multiple locations. We facilitate order 41 processing by giving customers information on usage by item and/or available supply in our warehouses and provide for summary billing. Fulfillment. We offer a complete fulfillment center with online ordering, pic n' pac and barcoding located in Denver. E-commerce. We have the capability to offer our customers a full range of e-commerce services to order printing or other products through their web page. Printmailwell.com. We offer a full range of robust Internet-based print procurement and print management solutions via our Printmailwell.com e-commerce platform, powered by PrintCafe. Our goal is to offer the highest standards in meeting our customers' needs with our primary focus on responding quickly and competitively to customer demands and requirements. Many of our production facilities are open 24 hours a day, seven days a week, to allow for timely production of materials. At certain facilities we also offer a number of unique services to our customers such as complimentary transportation between the airport and our offices, in-plant overnight accommodations, on-site meeting rooms and lounge, travel and hotel arrangements and computers for use by the customers when on-site. We believe that the consolidation of the printing industry is being driven in part by the rapid pace of technological change. Recent advances in computer-based prepress equipment, such as electronic prepress, allow for faster and more precise manipulation of images and text prior to printing. Similarly, recent advances in photo imaging technology have greatly increased the quality of the final image produced in the printing process. These advances have increased the capital requirements for maintaining technologically advanced equipment. We believe that many smaller local and regional commercial printers will find it increasingly difficult to obtain adequate financial resources to remain competitive in the segments of the commercial printing market in which we operate. MARKETING, DISTRIBUTION AND CUSTOMERS As a result of the wide array of applications, customer preferences and order sizes, our marketing efforts vary significantly among markets and by region. Although our marketing efforts traditionally have been local or regional, we continue to emphasize a more focused national accounts program to attract customers whose needs are national or cover multiple regions. We now have a national marketing director and a print marketing campaign. We maintain one of the largest sales staffs in the industry, with over 640 sales representatives in the commercial printing and envelope segments and 85 in the label and printed office products segments as of December 31, 2001. The vast majority of our printed products are sold through sales representatives, the exception being occasional "house" or company accounts. Our sales representatives work closely with customers from the initial concept through prepress, proofing and finally the press run. Because our sales representatives are our primary contacts with our customers, our goal is to attract, train and retain an experienced, qualified sales force in each of our business segments. Sales representatives typically are compensated by straight commission. Commissions generally depend on such factors as order size and type, prepress work, reruns or rework and overall profitability of the job. We also coordinate sales efforts among regions within our operating segments, and among the operating segments themselves, in order to compete for national account business, enhance the internal dissemination of successful new product ideas, efficiently allocate our production equipment, share technical expertise and increase company-wide selling of specialty products manufactured at selected facilities. In commercial printing our marketing efforts differ between two broad product areas: high impact color products, such as auto brochures, annual reports and high-end catalogs, and general commercial work. We market high impact printing primarily on a regional basis, through sales representatives working out of sales offices across the United States. Because of the highly fragmented nature of the general commercial printing and envelope businesses, and the wide array of customer needs and 42 preferences, we market most of our general commercial printing and envelopes locally. Due to the project-oriented nature of these market segments, sales to particular customers may vary significantly from year to year depending upon the number and size of their projects. Our customer supply agreements are typically on an order by order basis or for a specified period of time. The sales force is supported by a technical service team that provides customers with highly customized printing solutions. Most of our printing facilities have customer service representatives that work with the sales team and the customers to manage orders efficiently and effectively. In some cases, the customer service representatives have direct responsibility for accounts. In 2001, we implemented our innovative "Go-to" marketing program as part of our strategic plan. This program utilizes a team approach to customer service relationships that we believe is unique in the printing industry. Our customer base totals more than 20,000 in the commercial printing and envelope segments, and over 24,000 in the label and printed office products segments. Our customers in the high impact commercial printing market include Fortune 500 companies, graphic designers and advertising agencies. Our customers in the general commercial printing and envelope businesses include national and local businesses, government agencies and not for profit organizations. None of our customers accounted for more than 2% of revenue in 2001. PRINTING AND MANUFACTURING Our commercial printing segment operates 29 printing facilities throughout the United States, and one in Canada. These plants combine advanced prepress technology with high-quality web and sheet-fed color presses and extensive binding and finishing operations. Many of our commercial printing facilities operate seven days a week, 24 hours a day to meet customer printing requirements. Our envelope segment operates 43 printing facilities throughout North America. Envelopes are produced from either flat sheets or rolls of paper. The paper is folded into an envelope, which is glued at the seams and on the flap, and then printed as required. Webs are typically used for larger runs with multiple colors and numerous features, and die cut machines, which require a preliminary step to provide die cut envelope blanks from paper sheets, are used primarily for smaller orders typically including customized value-added features. The manufacturing process used is dependent upon the size of a particular order, custom features required, machine availability and delivery requirements. In our printed office products segment, we operate 12 facilities in North America. In printed office products, we design and print forms and other customized materials for a wide range of businesses. A majority of printed office products orders are delivered to us "camera ready," and we perform prepress and platemaking functions and print on web presses. MATERIALS AND SUPPLY ARRANGEMENTS The primary materials used in each of our printing divisions are paper, ink, film, offset plates, chemicals and cartons, with paper accounting for the majority of total material costs. We are the largest U.S. buyer of several paper grades. In 2001, we purchased 466,000 tons of coated and uncoated paper. We purchase these materials from a number of suppliers and have not experienced any significant difficulties in obtaining the raw materials necessary for operations. We have implemented an inventory management system in which a limited number of paper suppliers supply all of our paper needs. These suppliers are responsible for delivering paper on a "just-in-time" basis directly to our facilities. We believe that this system has allowed us to enhance the flexibility and speed with which we can serve customers, improve pricing on paper purchases, eliminate a significant amount of paper inventory and reduce costs by reducing warehousing capacity. We believe that we purchase our materials and supplies at very competitive prices due to our volume leverage. 43 PATENTS, TRADEMARKS AND BRAND NAMES We market products under a number of trademarks and brand names. We also hold or have rights to use various patents relating to our envelope business, which expire at various times through 2012. Our sales do not materially depend upon any single or related group of patents. COMPETITION The commercial printing industry is highly competitive and fragmented. We compete against a number of large, diversified and financially stronger printing companies, as well as regional and local commercial printers, many of which are capable of competing with us in both volume and production quality. Although we believe customers are price sensitive, we also believe that customer service and high quality products are important competitive factors. We believe we provide premium quality and customer service while maintaining competitive prices through stringent cost control efforts. The main competitive factors in our markets are customer service, product quality, reliability, flexibility, technical capabilities and price. We believe we compete effectively in each of these areas. In envelope printing, we compete with a few multi-plant and many single-plant companies that primarily service regional and local markets. We also face competition from alternative sources of communication and information transfer such as facsimile machines, electronic mail, the Internet, interactive video disks, interactive television and electronic retailing. Although these sources of communication and advertising may eliminate some domestic envelope sales in the future, we believe that we will experience continued demand for envelope products due to (i) the ability of our customers to obtain a relatively low-cost information delivery vehicle that may be customized with text, color, graphics and action devices to achieve the desired presentation effect, (ii) the ability of our direct mail customers to penetrate desired markets as a result of the widespread delivery of mail to residences and businesses through the U.S. Postal Service and the Canadian Post Corporation and (iii) the ability of our direct mail customers to include return materials in their mail-outs. Principal competitive factors in the envelope business are quality, service and price. Although all three are equally important, various customers may emphasize one or more over the others. We believe we compete effectively in each of these areas. EMPLOYEES Following the sale of our label segment, we employed approximately 11,800 people as of May 31, 2002. Approximately 2,200 people we employ at the various facilities are represented by unions affiliated with the AFL-CIO or Affiliated National Federation of Independent Unions. These employees are governed by collective bargaining agreements, each of which covers the workers at a particular facility, expires from time to time and is negotiated separately. Accordingly, we believe that no single collective bargaining agreement is material to our operations as a whole. PROPERTIES Following the sale of our label segment, as of May 31, 2002, we occupied 85 printing and manufacturing facilities in the United States and Canada, of which 43 were owned and 42 were leased. In addition to on-site storage at these facilities, we store products in 16 warehouses, of which two are owned. We also lease 47,754 square feet of office space in Englewood, Colorado for our corporate headquarters and an additional 10,258 square feet of office space in Chicago, Illinois for information systems support persons. We believe that we have adequate facilities for the conduct of our current and future operations. LEGAL PROCEEDINGS From time to time we may be involved in claims or lawsuits that arise in the ordinary course of business. Accruals for claims or lawsuits have been provided for to the extent that losses are deemed probable and estimable. Although the ultimate outcome of these claims or lawsuits cannot be 44 ascertained, on the basis of present information and advice received from counsel, it is our opinion that the disposition or ultimate determination of such claims or lawsuits will not have a material adverse effect on us. In the case of administrative proceedings related to environmental matters involving governmental authorities, we do not believe that any imposition of monetary damages or fines would be material. ENVIRONMENTAL Our operations are subject to federal, state, local and foreign environmental laws and regulations, including those relating to air emissions, wastewater discharge, waste generation, handling, management and disposal, and remediation at contaminated sites. We have implemented environmental programs designed to ensure that we operate in compliance with the applicable laws and regulations governing environmental protection. We believe that we are in substantial compliance with applicable laws and regulations relating to environmental protection. We do not anticipate that material capital expenditures will be required to achieve or maintain compliance with environmental laws and regulations. However, there can be no assurance that newly discovered conditions or new or stricter enforcement of existing requirements will not result in material expenses. 45 MANAGEMENT The name, age and position of each of the directors and executive officers of the Parent Company are set forth below:
DIRECTOR NAME AGE POSITION SINCE(1) - ---- --- -------- -------- Paul V. Reilly.................. 49 Director, Chairman of the Board & Chief 1998 Executive Officer Michel P. Salbaing.............. 56 Senior Vice President & Chief Financial Officer Herbert H. Davis III............ 54 Senior Vice President--Corporate Development & Chief Legal Officer Gordon Griffiths................ 59 Chief Executive Officer--Commercial Print Robert C. Hart.................. 64 Chief Executive Officer--Envelope Roger Wertheimer................ 42 Vice President--General Counsel & Secretary D. Robert Meyer, Jr............. 45 Vice President--Treasurer Mark L. Zoeller................. 42 Vice President--Corporate Development William W. Huffman, Jr.......... 53 Vice President--Controller Keith T. Pratt.................. 55 Vice President--Purchasing Frank P. Diassi(4).............. 68 Director 1993 Frank J. Hevrdejs(2)(3)......... 56 Director 1993 Janice C. Peters(3)............. 50 Director 1999 Jerome W. Pickholz(2)(4)........ 69 Director 1994 W. Thomas Stephens(2)(3)........ 59 Director 2000 Alister W. Reynolds............. 45 Director 2002 - -------- (1) Directors serve one-year terms. (2) Member of the Nominating Committee. (3) Member of the Compensation Committee. (4) Member of the Audit Committee.
PAUL V. REILLY was named our Chief Executive Officer in March 2001 and he became Chairman of the Board in September 2001. Prior to that Mr. Reilly was our President and Chief Operating Officer from January 1998 to March 2001 and was our Senior Vice President--Finance and Chief Financial Officer from September 1995 to January 1998. Mr. Reilly spent 14 years with Polychrome Corporation, a prepress supplier to the printing industry, where he held a number of positions including Assistant Corporate Treasurer, Corporate Treasurer, Vice President and Chief Financial Officer, and General Manager of United States Operations. Mr. Reilly is a Certified Public Accountant. MICHEL P. SALBAING has been our Senior Vice President--Finance and Chief Financial Officer since November 2000. From 1996 to November 2000, Mr. Salbaing was with Quebecor World, the largest North American printer, where he held a number of positions including Chief Financial Officer of the overall corporation, President and Chief Executive Officer of Quebecor Printing Europe and Senior Vice President and Chief Financial Officer of Quebecor World North America. Prior to 1996, Mr. Salbaing held various senior financial positions with three large Canadian manufacturing firms and spent eight years with Ernst & Young LLP. Mr. Salbaing is a member of the Canadian Institute of Chartered Accountants. HERBERT H. DAVIS III has been our Senior Vice President--Corporate Development and Chief Legal Officer since August 2001. Prior to that time, Mr. Davis was in the private practice of law and 46 was a partner at the Denver, Colorado law firm of Rothgerber Johnson & Lyons LLP for over 20 years. GORDON GRIFFITHS has served as Chief Executive Officer of the commercial print segment of the Company since April 8, 2002. Mr. Griffiths most recently served as the chairman, CEO and co-founder of Caxton Group, a marketing services organization. Prior to founding Caxton Group, Mr. Griffiths served Canada's largest privately owned printer, St. Joseph Corporation, as president and chief operating officer. St. Joseph is Canada's third largest printing and communications organization. For 18 years, Mr. Griffiths was associated with Quebecor Printing, Inc., serving in various positions including president of Quebecor Printing Canada. His experience in the printing industry dates back to 1964. ROBERT C. HART has served as Chief Executive Officer of the envelope segment of the Company since October 2000. From 1998 until he joined Mail-Well, he owned his own consulting firm after having spent over thirty years, from 1967 to 1998, with Riverwood International, a $1.3 billion paperboard and packaging company headquartered in Atlanta, GA. Throughout his tenure with Riverwood, Mr. Hart served as Vice President & Mill Manager; Vice President, Sales and Marketing; Vice President, and General Manager of Paperboard Operations. Most recently, as Senior Vice President of the $600 million Paperboard Operation, Mr. Hart directed the operations of three paper mills, producing 1.4 million tons of packaging products to improve productivity over 250,000 tons in eight years. ROGER WERTHEIMER has been our Vice President--General Counsel and Secretary since February 1995. Mr. Wertheimer began practicing law in 1984 and served as Corporate Counsel for PACE Membership Warehouse, Inc. from 1988 to 1994. Mr. Wertheimer was in private practice from March 1994 until February 1995, when he joined us. D. ROBERT MEYER, JR. has been our Vice President--Treasurer and Tax since 1998. Mr. Meyer is a licensed attorney, Certified Public Accountant and Certified Financial Planner. From 1988 to 1998, Mr. Meyer was a partner in the tax department of the accounting firm of Deloitte & Touche LLP. MARK L. ZOELLER has been our Vice President--Corporate Development since May 2001. Mr. Zoeller joined us in 1997 as Corporate Counsel, and from May 2000 to May 2001, he was Assistant General Counsel. Prior to joining us, Mr. Zoeller was an associate at the law firm of Rothgerber Johnson & Lyons LLP, and he is a licensed attorney. WILLIAM W. HUFFMAN, JR. has been our Vice President--Controller since November 2000. Prior to that he served in various financial capacities at Custom Papers Group, Specialty Coatings International, and James River Corporation. Mr. Huffman began his career with Coopers & Lybrand, and is a Certified Public Accountant. KEITH T. PRATT has been our Vice President--Purchasing since 1998. From 1994 to 1998, Mr. Pratt was Vice President of Material Sourcing and Logistics of Ply Gem Industries. From 1981 to 1994, Mr. Pratt was responsible for purchasing and logistics with several companies where he held a variety of positions up to the director level. FRANK P. DIASSI has been a director since our inception in 1993. Mr. Diassi was Chairman of Sterling Chemicals, Inc., a manufacturer of commodity petrochemicals and chemicals used primarily in the pulp and paper industry, from August 1996 through December 2001. He was a founding director of Arcadian Corporation, the largest nitrogen fertilizer company in North America. From 1989 to 1994, Mr. Diassi was a Director and Chairman of the Finance Committee of Arcadian Corporation. Mr. Diassi is a director of Fibreglass Holdings, Inc., a truck accessory manufacturer, a director and Chairman of Amerlux Inc., a commercial lighting company, and director and Chairman of Software Plus, Inc., a human resources/payroll software design firm. On July 16, 2001, Sterling Chemicals, Inc., a company for which Mr. Diassi has served as an executive officer, filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. Mr. Diassi is a member of the Audit Committee of the Board of Directors. 47 FRANK J. HEVRDEJS has been a director since our inception in 1993. In 1982 Mr. Hevrdejs co-founded The Sterling Group, L.P., a major management buyout company, where he is currently a principal shareholder and president. He also serves as Chairman of First Sterling Ventures Corp., an investment company, Endoro Holdings, Inc., a structural and electrical manufacturing company, and Fibreglass Holdings, Inc., a truck accessory manufacturer. He is a director of Eagle U.S.A., an air-freight company, Sterling Chemicals, Inc., a petroleum chemical company and serves on the Houston Regional Board of J.P. Morgan Chase and Co., a financial institution. Mr. Hevrdejs serves as Chairman of the Nominating Committee and is a member of the Compensation Committee of the Board of Directors. JANICE C. PETERS has been a director since 1999. From 1997 to 2000, Ms. Peters served as President and Chief Executive Officer of MediaOne(R), the broadband services arm of MediaOne Group. From 1995 to 1997, Ms. Peters was employed by US WEST, MediaOne's former parent company, in various positions including Executive Vice President of Media One Group, Managing Director of One2One, a United Kingdom wireless communications joint venture between US WEST and Cable & Wireless, and President of Wireless Operations for US WEST Media Group. Ms. Peters serves as a director of Primus Knowledge Solutions, Inc., a knowledge-enabled software provider and 3COM, a communications company specializing in network solutions. Ms. Peters serves as Chairperson of the Compensation Committee of the Board of Directors. JEROME W. PICKHOLZ has been a director since September 1994. From 1978 until 1994, he was Chief Executive Officer of Ogilvy & Mather Direct Worldwide, a direct advertising agency. From 1994 until September 1995, he served as Chairman of the Board of Ogilvy & Mather Direct worldwide where he is now Chairman Emeritus. Since January 1, 1996, Mr. Pickholz has served as founder and Chairman of Pickholz, Tweedy, Cowan, L.L.C., a marketing communications company. Mr. Pickholz serves as the Chairman of the Audit Committee and as a member of the Nominating Committee of the Board of Directors. W. THOMAS STEPHENS has been a director since 2000 and served as Chairman of the Board from February 2001 to June 2001. From 1997 to 1999, Mr. Stephens served as President and Chief Executive Officer of MacMillan Bloedel, Canada's largest forest products company. From 1986 to 1996, he served as CEO and President of Johns Manville Corporation serving as Chairman from 1993 to 1996. Currently, Mr. Stephens is a director of Qwest Communications International, Inc., Norske Skog Canada Limited, Xcel Energy, Inc., TransCanada PipeLines Ltd., and a trustee of Putnam Mutual Funds. Mr. Stephens is a member of the Compensation Committee and the Nominating Committee of the Board of Directors. ALISTER W. REYNOLDS was elected a director at the 2002 Annual Meeting. Mr. Reynolds has been employed by Quest Diagnostics, Inc., a Delaware corporation, since 1996 in various positions, including Senior Vice President--U.S. Operations, and, most recently, Senior Advisor to the Chairman and CEO. He serves as director of Soma Logic Incorporated, a Delaware corporation, and Health Care Waste Solutions, a Delaware corporation. 48 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER Mail-Well I Corporation originally issued and sold $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012 on March 13, 2002, in an offering that was exempt from registration under the Securities Act of 1933 pursuant to Section 4(2), Rule 144A and Regulation S of the Securities Act. Accordingly, the old notes may not be transferred in the United States unless registered under the Securities Act or unless an exemption from the registration requirements of the Securities Act and applicable state securities laws is available. As a condition to the sale of the old notes, we entered into a registration rights agreement dated as of March 13, 2002 with the initial purchasers of the old notes. In the registration rights agreement, we agreed to file with the Securities and Exchange Commission a registration statement under the Securities Act no later than June 11, 2002, with respect to the $350,000,000 aggregate principal amount of 9 5/8% senior notes due 2012 offered by this prospectus. We also agreed to use our reasonable best efforts to have the registration statement declared effective within 90 days after June 11, 2002. In addition, we agreed to use our reasonable best efforts to cause the registration statement to be effective for a period of not less than 20 business days after the date notice of the exchange offer is mailed to the holders of the old notes, to keep the exchange offer open for a period of not less than 20 business days, and to cause the exchange offer to be consummated no later than the 30th business day after the registration statement is declared effective by the Commission. Pursuant to the exchange offer, holders of the old notes may exchange their old notes for registered new notes. For each old note surrendered pursuant to the exchange offer, the holder of the old note will receive a new note having a principal amount equal to that of the surrendered old note. Interest on each new note will accrue from the last interest payment date on which interest was paid on the old note surrendered in exchange for the new note or, if no interest has been paid on such old note, from the date the old note was issued. To participate in the exchange offer, each holder must represent that: o it is acquiring the new notes in the exchange offer in its ordinary course of business; o it has no arrangement or understanding with any person to participate in a distribution of the new notes, and if it is not a broker-dealer, it is not engaged in, and does not intend to engage in, a distribution of the new notes; o it is not an "affiliate" of Mail-Well I Corporation, as defined in Rule 405 of the Securities Act, or if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; and o if it is broker-dealer, it will receive new notes for its own account in exchange for old notes that it acquired as a result of market-making activities or other trading activities. Each broker-dealer that receives new notes for its own account in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. See "Plan of Distribution." The Commission has taken the position that these broker-dealers may fulfill their prospectus delivery requirements with respect to new notes, other than a resale of an unsold allotment from the original sale of the old notes, with this prospectus. Under the registration rights agreement, we are required to allow these broker-dealers and other persons, if any, with similar prospectus delivery requirements to use this prospectus in connection with the resale of the new notes. We have filed a copy of the registration rights agreement as an exhibit to the registration statement of which this prospectus is a part. 49 RESALE OF THE NEW NOTES Based on no-action letters issued by the staff of the Commission to persons who are not associated with us, we believe that the new notes issued in exchange for old notes pursuant to this exchange offer will in general be freely transferable after this exchange offer without further registration under the Securities Act and without the holder's delivery of a prospectus under the Securities Act. This presumes that the holder of the new notes makes the representations described above and, if the holder is a broker-dealer, it represents that it will receive new notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of the new notes. However, the Commission has not considered this exchange offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to this exchange offer as it made in the no-action letters to the unrelated persons. Holders of old notes wishing to accept the exchange offer must complete and sign the letter of transmittal that will be mailed to each holder of the old notes. The letter of transmittal contains the required representations described above and an agreement to comply with the agreements and covenants set forth in the registration rights agreement. This prospectus, as it may be amended or supplemented from time to time, may be used by broker-dealers in connection with resales of new notes received in exchange for old notes where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. A broker-dealer that signs a letter of transmittal and delivers a prospectus to purchasers in connection with resales may be deemed to be an "underwriter" within the meaning of the Securities Act; however, the holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES Upon the terms and subject to the conditions described in this prospectus and contained in the letter of transmittal, we will accept for exchange any and all old notes that are properly tendered on or prior to the expiration date of the exchange offer, , 2002, and are not ------------- withdrawn as permitted below. We will issue $1,000 principal amount of new notes in exchange for each $1,000 principal amount of outstanding old notes surrendered pursuant to this exchange offer. Old notes may be tendered only in integral multiples of $1,000. The form and terms of the new notes are the same as the form and terms of the old notes except that: o the new notes will be registered under the Securities Act and hence the new notes will not bear legends restricting their transfer, and o holders of the new notes will not be entitled to most rights under the registration rights agreement, which will terminate upon the closing of the exchange offer. The new notes will evidence the same debt as the old notes and will be issued under, and be entitled to the benefits of, the same indenture. As of the date of this prospectus, an aggregate of $350,000,000 in principal amount of the old notes is outstanding. This prospectus, together with the letter of transmittal, is first being sent on or about , 2002, to all holders of old notes known to us. - ----------------- Holders of the old notes do not have any appraisal or dissenters' rights under the indenture in connection with the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and the applicable requirements of the federal securities laws. 50 We expressly reserve the right, at any time or from time to time, to extend the period of time during which the exchange offer is open, and by the extension to delay acceptance for exchange of any old notes. Notice of any extension will be issued by means of a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. During the extension, all old notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by Mail-Well I Corporation. We will return any old notes not accepted for exchange for any reason without expense to the tendering holder as promptly as practicable after the expiration of the exchange offer. We will give written notice of any extension, amendment or nonacceptance to the holders of the old notes as promptly as practicable. PROCEDURES FOR TENDERING OLD NOTES Your tender to Mail-Well I Corporation of old notes as described below and our acceptance of the old notes will create a binding agreement between us upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal. Except as set forth below, a holder who wishes to tender old notes for exchange must send a completed and signed letter of transmittal, including all other documents required by the letter of transmittal, to the exchange agent, State Street Bank and Trust Company, at the address set forth below under "--Exchange Agent" on or before the expiration date. In addition, either: (1) certificates for the old notes must be received by the exchange agent, or (2) a timely confirmation of a book-entry transfer of the old notes into the exchange agent's account at the Depository Trust Company pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent before the expiration date, or (3) the holder must comply with the guaranteed delivery procedures described below. The method of delivery of old notes, letters of transmittal and all other required documents is at the election and risk of the holders. If the delivery is by mail, we recommend you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. No letters of transmittal or old notes should be sent to Mail-Well I Corporation. Any beneficial owner whose old notes are registered in the name of a broker, dealer, commercial bank, trustee or other nominee and who wishes to tender should contact the registered holder of the old notes promptly and instruct the registered holder to tender on behalf of the beneficial owner. If the beneficial owner wishes to tender on its own behalf, the beneficial owner must, prior to completing and executing the letter of transmittal and delivering its old notes, either make appropriate arrangements to register ownership of the old notes in the beneficial owner's name or obtain a properly completed power of attorney from the registered holder of the old notes. The transfer of record ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal need not be guaranteed if the old notes surrendered for exchange are tendered: (1) by a registered holder of the old notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal, or (2) for the account of an eligible institution. An "eligible institution" means a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trustee having an office or correspondent in the United States. In the event that signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantees must be by an eligible institution. If old notes are registered in the name of a person other than a signer of the letter of transmittal, the old notes surrendered for exchange must be endorsed by the registered holder, or be accompanied by appropriate powers of attorney or by a written instrument or instruments of transfer 51 or exchange, in satisfactory form as determined by Mail-Well I Corporation in its sole discretion, signed by the registered holder with the signature guaranteed by an eligible institution. We will determine all questions as to the validity, form, eligibility and acceptance of old notes tendered for exchange in our sole discretion, and our determination shall be final and binding. We reserve the absolute right to reject any tenders of any particular old notes not properly tendered or not to accept any particular old notes whose acceptance might, in our judgment or the judgment of our counsel, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular old notes either before or after the expiration date, including the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer. Our interpretation of the terms and conditions of the exchange offer as to any particular old notes either before or after the expiration date shall be binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes for exchange must be cured within a reasonable period of time as we shall determine. Neither Mail-Well I Corporation, the exchange agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of old notes for exchange, nor shall any of them incur any liability for failure to give the notification. If the letter of transmittal or any old notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing, and, unless waived by Mail-Well I Corporation, proper evidence satisfactory to Mail-Well I Corporation of their authority to so act must be submitted. BOOK-ENTRY TRANSFER The exchange agent will request to establish an account for the old notes at DTC for the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC's systems may make book-entry delivery of old notes by causing DTC to transfer the old notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Although delivery of old notes may be effected through book-entry transfer at DTC, the letter of transmittal or facsimile, or an agent's message, with any required signature guarantees and any other required documents, must, in any case, be received by the exchange agent at the address set forth below under "--Exchange Agent" on or before the expiration date or the guaranteed delivery procedures described below must be complied with. The term "agent's message" means a message, transmitted by DTC to, and received by, the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant stating that the participant has received and agrees to be bound by the terms of the letter of transmittal, and Mail-Well I Corporation may enforce the letter of transmittal against the participant. GUARANTEED DELIVERY PROCEDURES If a registered holder of the old notes wishes to tender the old notes and the old notes are not immediately available, or time will not permit the holder's old notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on time, a tender may be effected if: (1) the tender is made through an eligible institution; (2) prior to the expiration date, the exchange agent has received from the eligible institution: (a) a completed and signed letter of transmittal, or a facsimile; 52 (b) notice of guaranteed delivery substantially in the form provided by Mail-Well I Corporation, setting forth the name and address of the holder of the old notes and the amount of old notes, stating that the tender is being made by that holder and guaranteeing that within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery the certificates for all physically tendered old notes, in proper form for transfer, or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and (3) the certificates for all physically tendered old notes, in proper form for transfer, or a book-entry confirmation and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the date of signing the notice of guaranteed delivery. ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all old notes properly tendered and will then promptly issue the new notes. For purposes of the exchange offer, we will be deemed to have accepted properly tendered old notes for exchange when, as and if we have given either oral or written notice to the exchange agent. Oral notices will promptly be confirmed in writing. Holders whose old notes are accepted for exchange will be deemed to have waived the right to receive any accrued but unpaid interest on the old notes. In all cases, the issuance of new notes for old notes that are accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of certificates for the old notes or a timely book-entry confirmation of the old notes into the exchange agent's account at DTC, a completed and signed letter of transmittal, or an agent's message, and all other required documents. If any tendered old notes are not accepted, or if old notes are submitted for a greater amount than the holder desires to exchange, the unaccepted or non-exchanged old notes will be returned without expense to the tendering holder as promptly as practicable after the exchange offer expires or terminates. In the case of old notes tendered by book-entry procedures described above, the non-exchanged old notes will be credited to an account maintained with DTC designated by the tendering holder as promptly as practicable after the exchange offer expires or terminates. CONDITIONS OF THE EXCHANGE OFFER Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or to issue new notes in exchange for, any old notes. We may terminate or amend the exchange offer prior to the expiration date if any of the conditions to the exchange offer are not met. These conditions include that the exchange offer, or the making of any exchange by a holder of old notes, does not violate applicable law or any applicable interpretation of the staff of the Commission. The conditions also include that none of the following has occurred which in our judgment would reasonably be expected to impair our ability to proceed with the exchange offer: (1) institution or threat of an action or proceeding in any court or by or before any governmental agency or body with respect to the exchange offer; (2) adoption or enactment of any law, statute, rule or regulation; (3) declaration of a banking moratorium by United States federal or New York State authorities; or (4) suspension of trading on the New York Stock Exchange or generally in the United States over-the-counter market by order of the Commission or any other governmental authority. 53 In addition, we may impose such other conditions as may be reasonably acceptable to the initial purchasers of the old notes. We will give written notice of any termination to the holders of the old notes as promptly as practicable. WITHDRAWAL RIGHTS Tenders of old notes may be withdrawn at any time prior to the expiration date. For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent at the address set forth below under "--Exchange Agent." Any notice of withdrawal must specify the name of the person who tendered the old notes to be withdrawn, identify the old notes to be withdrawn, including the amount of the old notes, and specify the name in which the old notes are registered, if different from that of the withdrawing holder. If certificates for old notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of the certificates the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an eligible institution unless the holder is an eligible institution. If old notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn old notes and otherwise comply with the procedures of DTC. We will determine all questions as to the validity, form and eligibility of the notices, and our determination will be final and binding on all parties. Any old notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes that have been tendered for exchange but that are not exchanged for any reason will be returned to the holder without cost to the holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. In the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described above, the old notes will be credited to an account with DTC specified by the holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be re-tendered by following one of the procedures for tendering old notes as previously described at any time on or before the expiration date. EXCHANGE AGENT State Street Bank and Trust Company has been appointed as the exchange agent for the exchange offer. All signed letters of transmittal should be directed to the exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows: State Street Bank and Trust Company, Exchange Agent 2 Avenue de Lafayette, Sixth Floor Boston, Massachusetts 02111 Telecopier No.: (617) 662-1452 Attention: MacKenzie Elijah, Corporate Actions Delivery of a letter of transmittal to an address other than as set forth above or transmission of instructions via facsimile other than as set forth above does not constitute a valid delivery of the letter of transmittal. FEES AND EXPENSES We will pay the cash expenses we will incur in connection with the exchange offer. Also, in connection with the registration statement for the new notes, we will reimburse the holders for the reasonable fees and disbursements of not more than one counsel, who shall be chosen by the holders 54 of a majority in principal amount of the old notes for whose benefit the registration statement has been prepared. ACCOUNTING TREATMENT For accounting purposes, we will recognize no gain or loss as a result of the exchange offer. The expenses of the exchange offer will be amortized over the term of the new notes. TRANSFER TAXES Holders who tender their old notes for exchange will not be required to pay any transfer taxes, except that holders who instruct Mail-Well I Corporation to register new notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder, will be responsible for paying any applicable transfer tax. REGULATORY MATTERS We are not aware of any governmental or regulatory approvals that are required in order to complete the exchange offer. CONSEQUENCES OF FAILURE TO EXCHANGE Participation in the exchange offer is voluntary. Holders of the old notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. See "Material Federal Income Tax Considerations." The old notes that are not exchanged for the new notes in the exchange offer will remain restricted securities. Accordingly, those old notes may only be transferred: (1) to Mail-Well I Corporation or any of its subsidiaries, (2) to a person whom the seller reasonably believes is a qualified institutional buyer purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A, (3) in an offshore transaction meeting the requirements of Rule 903 or Rule 904 under the Securities Act, (4) in a transaction meeting the requirements of Rule 144 under the Securities Act, (5) in accordance with another exemption from the registration requirements of the Securities Act, and based upon an opinion of counsel acceptable to Mail-Well I Corporation, or (6) pursuant to an effective registration statement, and, in each case, in accordance with the applicable securities laws of any state of the United States or any other applicable jurisdiction. 55 DESCRIPTION OF THE NEW NOTES Mail-Well I Corporation will issue the new notes under an indenture dated March 13, 2002, among itself, the guarantors and State Street Bank and Trust Company, as trustee. The terms of the new notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act. The following description is a summary of the material provisions of the indenture for the old notes and the new notes. It does not restate those provisions in their entirety. You may obtain a copy of the indenture from us; the indenture has also been filed as an exhibit to the registration statement of which this prospectus is a part. BRIEF DESCRIPTION OF THE NEW NOTES AND THE GUARANTEES THE NEW NOTES The new notes: o are identical to the old notes in all material respects, including the guarantees on the new notes, except that the new notes are registered under the federal securities laws and will not contain any legends restricting their transfer; o are general unsecured obligations of Mail-Well I Corporation; o are not secured by any of our assets and will be effectively subordinated to any of our secured obligations to the extent of the value of the assets securing such obligations, including obligations under our credit facilities; o are pari passu in right of payment to all of our other existing and future unsecured and unsubordinated obligations; o are senior in right of payment to our existing and future subordinated indebtedness, including Mail-Well I Corporation's 8 3/4% Senior Subordinated new notes, Mail-Well, Inc's 5% Convertible Subordinated new notes, and any obligations of the guarantors with respect thereto; and o are unconditionally guaranteed by the guarantors. THE GUARANTEES The new notes are unconditionally guaranteed on an unsecured basis, jointly and severally, by Mail-Well, Inc. and certain of the current subsidiaries of Mail-Well I Corporation that were formed under the laws of a state of the United States (including the District of Columbia) and have their principal place of business within the United States. The following is a list of the guarantors as of the date of this prospectus: ABP Books, Inc. Hill Graphics, Inc. Mail-Well Commercial Printing, Inc. Mail-Well Mexico Holdings, Inc. Mail-Well Services, Inc. Mail-Well Texas Finance LP Mail-Well West, Inc. Wisco III, L.L.C. The new notes also will be guaranteed by the following subsidiaries, which are subsidiaries that are held for sale under our strategic plan. These subsidiaries will be released from their guarantees upon 56 their sale or other disposition, provided that we comply with the requirements for release set forth in "Note Guarantees; Restrictions on Mail-Well, Inc. and Subsidiaries" below. Discount Labels, Inc. Mail-Well Label USA, Inc. National Graphics Company Poser Business Forms, Inc. The new notes will be guaranteed by each new subsidiary of Mail-Well I Corporation or Mail-Well, Inc., other than any special purpose financing vehicle, that: o has not been designated as an unrestricted subsidiary by Mail-Well I Corporation's board of directors under the indenture, o is or becomes a "significant subsidiary," as defined in Article 1, Rule 1-02 of Regulation S-X under the Securities Act of 1933, of Mail-Well I Corporation or Mail-Well, Inc., as applicable, o is formed under the laws of the state of the United States or the District of Columbia, and o has its principal place of business within the United States. The guarantees of the new notes: o are general unsecured obligations of each guarantor; o are not secured by any assets of any of the guarantors and will be effectively subordinated to any secured obligations of the guarantors to the extent of the value of the assets securing such obligations, including obligations of the subsidiaries under our credit facilities; o are pari passu in right of payment to all other existing and future unsecured and unsubordinated obligations of each guarantor; and o are senior in right of payment to any existing and future subordinated indebtedness of each guarantor including guarantees of the obligations under Mail-Well I Corporation's 8 3/4% Senior Subordinated new notes. As of December 31, 2001, and after adjustment for the application of the net proceeds from the sale of the old notes, we would have had total secured indebtedness of approximately $187 million, with an additional $150 million (less any outstanding letters of credit) available under our senior credit facility. As indicated above, payments on the new notes and under the guarantees will be effectively subordinated to the payment of the secured indebtedness to the extent of the value of any assets securing such secured indebtedness. The indenture permits us to incur additional secured indebtedness under certain circumstances. Not all of our subsidiaries will guarantee the new notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor subsidiaries, these non-guarantor subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us. The subsidiary guarantors generated approximately 69% of our consolidated revenues in the year period ended December 31, 2001 and held approximately 61% of our consolidated assets as of December 31, 2001. In addition, following their sale the subsidiary guarantors that are held for sale will be released from their guarantees upon their sale or other disposition, provided that we comply with the conditions to release set forth in "Note Guarantees; Restrictions on Mail-Well, Inc. and Subsidiaries" below. These subsidiaries generated approximately 22% of our consolidated revenues in the year ended December 31, 2001 and held approximately 17% of our consolidated assets as of December 31, 2001. PRINCIPAL, MATURITY AND INTEREST We will issue new notes with an aggregate principal balance of $350 million in exchange for old notes, which have an aggregate outstanding principal amount of $350 million. We will issue the new 57 notes in denominations of $1,000 and integral multiples of $1,000. The new notes will mature on March 15, 2012. Subject to our compliance with the covenant described under the caption "--Certain Covenants--Incurrence of Indebtedness," we may, without the consent of the holders, issue more notes under the indenture on the same terms and conditions and with the same CUSIP numbers as the new notes, in an unlimited principal amount. Any such additional notes that are actually issued will be treated as issued and outstanding new notes for all purposes of the indenture and this "Description of the New Notes" unless the context indicates otherwise. Interest on the new notes will accrue at the rate of 9 5/8% per annum and will be payable semiannually in arrears on March 15 and September 15 commencing on September 15, 2002. We will make each interest payment to the holders of record of the new notes on the immediately preceding March 1 and September 1. Interest on the new notes will accrue from the date the old notes were issued or, if interest has already been paid on the old notes, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. NOTE GUARANTEES; RESTRICTIONS ON MAIL-WELL, INC. AND SUBSIDIARIES The guarantors will jointly and severally guarantee the obligations of Mail-Well I Corporation under the new notes. Each guarantee will be effectively subordinated to the prior payment in full of all secured indebtedness of that guarantor to the extent of the value of any assets securing such obligations. Each guarantee will be pari passu with all unsecured and unsubordinated obligations of that guarantor and to the guarantees of that guarantor of our future unsecured and unsubordinated obligations. The guarantees will rank at least on a parity with claims of all unsecured creditors (including unsecured trade creditors and tort claimants) of the respective guarantors. The obligations of each guarantor under its guarantee will be limited as necessary to prevent that guarantee from constituting a fraudulent conveyance under applicable law. Except in a transaction as a result of which a subsidiary guarantor would be released from its guarantee as provided in the indenture and described below, no guarantor may sell or otherwise dispose of all or substantially all of its assets, or consolidate with or merge with or into (whether or not such guarantor is the surviving person), another person (other than Mail-Well I Corporation or a subsidiary guarantor) unless: (1) either: (a) such guarantor is the surviving corporation; or (b) the person formed by or surviving any such consolidation or merger (if other than such guarantor) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia or the jurisdiction in which such guarantor is organized and under the laws of which it is existing; (2) the person formed by or surviving any such consolidation or merger (if other than such guarantor), or the person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of such guarantor under the guarantees and the indenture, as applicable, pursuant to agreements reasonably satisfactory to the trustee; (3) immediately after such transaction no default or event of default exists under the indenture; and (4) such guarantor or the person formed by or surviving any such consolidation or merger (if other than such guarantor) will have consolidated net worth immediately after the transaction equal to or greater than the consolidated net worth of such guarantor immediately preceding the transaction. 58 The guarantee of a subsidiary guarantor will be released: (1) in connection with any sale or other disposition of all or substantially all of the assets of that subsidiary guarantor (including by way of merger or consolidation), if we apply the net proceeds of that sale or other disposition in accordance with the applicable provisions of the indenture; or (2) in connection with any sale of all of the capital stock of a subsidiary guarantor, if we apply the net proceeds of that sale in accordance with the applicable provisions of the indenture. See "Repurchase at the Option of Holders--Asset Sales." OPTIONAL REDEMPTION The new notes will not be redeemable at our option prior to March 15, 2007. After March 15, 2007, we may redeem all or a part of the new notes (which includes additional notes, if any) upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below: YEAR PERCENTAGE ---- ---------- 2007........................ 104.813% 2008........................ 103.208% 2009........................ 101.604% 2010 and thereafter......... 100.000% In addition, prior to March 15, 2005, we may at our option on any one or more occasions redeem new notes (including additional notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the new notes (including additional notes, if any) originally issued at a redemption price of 109.625% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date, with the net cash proceeds of one or more equity offerings; provided that: (1) at least 65% of such aggregate principal amount of new notes (including additional notes, if any) originally issued remains outstanding immediately after the occurrence of such redemption (other than new notes held directly or indirectly by us and our affiliates); and (2) each such redemption must occur within 90 days of the date of the closing of such equity offering. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL If a change of control under the indenture occurs, each holder of new notes will have the right to require us to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that holder's notes pursuant to the offer described below. In a change of control offer, Mail-Well I Corporation will offer a change of control payment in cash equal to 101% of the aggregate principal amount of new notes repurchased plus accrued and unpaid interest thereon, if any, to the date of purchase. Within 30 days following any change of control, we will mail a notice to each holder describing the transaction or transactions that constitute the change of control and offering to repurchase new notes on the date specified in such notice, pursuant to the procedures required by the indenture and described in such notice. We will comply with the requirements of Rule 14e-l under the Securities Exchange Act of 1934 and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the new notes as a result of a change of control. To the extent the provisions of any securities laws are inconsistent with the 59 terms of the indenture, we will not be deemed to have breached this covenant by complying with such laws. On the change of control payment Date, we will, to the extent lawful: (1) accept for payment all new notes or portions thereof properly tendered pursuant to the change of control offer; (2) deposit with the paying agent an amount equal to the change of control payment in respect of all new notes or portions thereof so tendered; and (3) deliver or cause to be delivered to the trustee the new notes so accepted together with an officers' certificate stating the aggregate principal amount of new notes or portions thereof that we are purchasing. The paying agent will promptly mail to each holder of new notes so tendered the change of control payment for such new notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book-entry) to each holder a new note equal in principal amount to any unpurchased portion of the new notes surrendered, if any; provided that each such new note will be in a principal amount of $1,000 or an integral multiple thereof. We will publicly announce the results of the change of control offer on or as soon as practicable after the change of control payment date. The provisions described above that require us to make a change of control offer following a change of control will be applicable regardless of whether or not any other provisions of the indenture are applicable. Except as described above with respect to a change of control, the indenture does not contain provisions that permit the holders of the new notes to require that we repurchase or redeem the new notes in the event of a takeover, recapitalization or similar transaction. We will not be required to make a change of control offer upon a change of control if a third party makes the change of control offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a change of control offer made by Mail-Well I Corporation and purchases all new notes validly tendered and not withdrawn under such change of control offer. The definition of change of control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of Mail-Well I Corporation and its subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of new notes to require us to repurchase such new notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of Mail-Well I Corporation and its subsidiaries taken as a whole to another person or group may be uncertain. ASSET SALES We will not, and will not permit any of our restricted subsidiaries to, consummate an asset sale unless: (1) We, or our restricted subsidiary, as the case may be, receive consideration at the time of such asset sale at least equal to the fair market value of the assets or equity interests issued or sold or otherwise disposed of; (2) such fair market value is determined by our board of directors and evidenced by a resolution of the board of directors set forth in an officers' certificate delivered to the trustee; and (3) at least 80% of the net proceeds received by us or our restricted subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash: o any liabilities (as shown on the most recent balance sheet of us or our restricted subsidiary, of us or any of our restricted subsidiaries (other than contingent liabilities and liabilities that are by their terms subordinated to the new notes or any guarantee) that are assumed by the 60 transferee of any such assets pursuant to a customary novation agreement that releases us or our restricted subsidiary from further liability; and o any securities, new notes or other obligations received by us or any of our restricted subsidiaries from such transferee that we contemporaneously (subject to ordinary settlement periods) convert into cash (to the extent of the cash received in that conversion). Within 360 days after the receipt of any net proceeds from an asset sale, we must apply such net proceeds: (1) to be reinvested in our business; (2) to the extent that the net proceeds relate to a disposition of assets or stock of a restricted subsidiary that is not formed under the laws of a state of the United States, including the District of Columbia, or which does not have its principal place of business within the United States, to repay or retire indebtedness under credit facilities; or (3) to make an offer to purchase the new notes at 100% of principal amount, plus accrued and unpaid interest, if any, and if applicable, to make an offer to the holders of other indebtedness that ranks pari passu with the new notes and that by its terms requires us to make an offer to purchase such other debt upon consummation of an asset sale, to purchase such other debt on a pro rata basis with the new notes. SELECTION AND NOTICE If less than all of the new notes are to be redeemed at any time, the trustee will select new notes for redemption on a pro rata basis, by lot or by such method as the trustee shall deem fair and appropriate. No new notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of new notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any note is to be redeemed in part only, the notice of redemption that relates to that note shall state the portion of the principal amount thereof to be redeemed. A note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder thereof upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on new notes or portions of them called for redemption. CERTAIN COVENANTS RESTRICTED PAYMENTS We will not, directly or indirectly, make any of the following restricted payments: (1) declare or pay any dividend or make any other payment or distribution on account of Mail-Well I Corporation's or any of its restricted subsidiaries' equity interests (including, without limitation, any payment in connection with any merger or consolidation involving Mail-Well I Corporation or any of its restricted subsidiaries) or to the direct or indirect holders of Mail-Well I Corporation's or any of its restricted subsidiaries' equity interests in their capacity as such (other than dividends or distributions payable in equity interests of Mail-Well I Corporation or to Mail-Well I Corporation or one of its restricted subsidiaries); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving us) any of our equity interests (other than any such equity interests owned by Mail-Well I Corporation or any of its restricted subsidiaries); 61 (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any indebtedness that is pari passu with or subordinated to the new notes or the guarantees (other than the new notes or the guarantees), except a payment of interest or principal at the stated maturity thereof; or (4) make any restricted investment, unless, at the time of and after giving effect to such restricted payment: (1) no default or event of default under the indenture shall have occurred and be continuing or would occur as a consequence thereof; and (2) at the time of such restricted payment and after giving pro forma effect thereto as if such restricted payment had been made at the beginning of the applicable four-quarter period, we would have been permitted to incur at least $1.00 of additional indebtedness pursuant to the fixed charge ratio test set forth in the first paragraph of the covenant described below under the caption "--Incurrence of Indebtedness;" and (3) such restricted payment, together with the aggregate amount of all other restricted payments we made or make after December 31, 2001 (excluding restricted payments permitted by clauses (3), (5), (7), (8) and (9) of the next succeeding paragraph), is less than the sum, without duplication, of o 50% of our consolidated net income (or, in each case such consolidated net income is a deficit, minus 100% of such deficit) since December 31, 2001, plus o the aggregate net cash proceeds we receive after December 31, 2001 from the sale of equity interests or any indebtedness that is convertible into capital stock and has been so converted, plus o the aggregate cash received by Mail-Well I Corporation as capital contributions after December 31, 2001, plus o $25 million. So long as no default under the indenture has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the indenture; (2) the repurchase, redemption, defeasance, retirement or other acquisition of any pari passu or subordinated indebtedness of Mail-Well I Corporation or any guarantor or of any equity interests of Mail-Well I Corporation or any restricted subsidiary in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a subsidiary of Mail-Well I Corporation) of, equity interests of Mail-Well I Corporation; (3) the redemption, repurchase, defeasance, retirement or other acquisition of pari passu or subordinated indebtedness of Mail-Well I Corporation or any guarantor with the net cash proceeds from an incurrence of permitted refinancing indebtedness; (4) the payment of any dividend by any of our restricted subsidiaries to the holders of its common equity interests on a pro rata basis; (5) the repurchase, redemption or other acquisition or retirement for value of any equity interests of Mail-Well I Corporation or any restricted subsidiary of Mail-Well I Corporation held by any member of Mail-Well I Corporation's (or any of its subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement in effect as of the date of the indenture; provided that the aggregate price paid for all such repurchased, 62 redeemed, acquired or retired equity interests shall not exceed $1 million in any twelve-month period; (6) the making of any restricted investment, directly or indirectly, out of the net cash proceeds of substantially concurrent sales (other than to a subsidiary) of equity interests of Mail-Well I Corporation; (7) the repurchase, redemption, retirement or other acquisition of equity interests of Mail-Well I Corporation or any restricted subsidiary issued, or indebtedness incurred, by Mail-Well I Corporation or any restricted subsidiary in connection with the acquisition of any person or any assets to the former owners of such person or assets; (8) the redemption, repurchase, defeasance, retirement or other acquisition of Mail-Well, Inc.'s 5% Convertible Subordinated new notes, and the payment of a demand note issued by Mail-Well I Corporation to Mail-Well, Inc. in connection with the new notes, in an aggregate amount not to exceed $140 million of principal, plus accrued interest thereon; and (9) permitted payments to Mail-Well, Inc. under the indenture. The amount of all restricted payments (other than cash) shall be the fair market value on the date of the restricted payment of the asset(s) or securities proposed to be transferred or issued by Mail-Well I Corporation or such restricted subsidiary, as the case may be, pursuant to the restricted payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the board of directors whose resolution with respect thereto shall be delivered to the trustee. The board of directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $10 million. Not later than the date of mailing any restricted payment, we will deliver to the trustee an officers' certificate stating that such restricted payment is permitted and setting forth the basis upon which the calculations required by this "restricted payments" covenant were computed, together with a copy of any fairness opinion or appraisal required by the indenture. INCURRENCE OF INDEBTEDNESS Mail-Well I Corporation will not, and will not permit any of its restricted subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to any indebtedness, including acquired debt); provided, however, that Mail-Well I Corporation and any restricted subsidiary may incur indebtedness (including acquired debt), if the fixed charge coverage ratio for Mail-Well I Corporation's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional indebtedness is incurred would have been at least 2 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional indebtedness had been incurred at the beginning of such four-quarter period. The first paragraph of this covenant will not prohibit the incurrence of any of the following items of indebtedness (collectively, "permitted debt"): (1) the incurrence by Mail-Well I Corporation and any restricted subsidiary of indebtedness under credit facilities (including amounts outstanding on the date we sold the old notes); provided that the aggregate principal amount of all indebtedness under such credit facilities (including all permitted refinancing indebtedness incurred to refund, refinance or replace any indebtedness incurred pursuant to this clause (1)) permitted by this clause (1) does not exceed an amount equal to $375 million, less any repayments actually made thereunder with the net proceeds of asset sales in accordance with clause (2) of the second paragraph of the covenant described under "Repurchase at the Option of the Holders--Asset Sales;" (2) the incurrence by Mail-Well I Corporation and its subsidiaries of existing indebtedness (excluding amounts outstanding under credit facilities on the date we sold the old notes); 63 (3) the incurrence by Mail-Well I Corporation and the subsidiary guarantors of indebtedness represented by the new notes and the guarantees issued on the date we sold the old notes; (4) the incurrence by Mail-Well I Corporation or any of its restricted subsidiaries of indebtedness represented by capital lease obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of Mail-Well I Corporation or such restricted subsidiary, in an aggregate principal amount (including all permitted refinancing indebtedness incurred to refund, refinance or replace any indebtedness incurred pursuant to this clause (4)) not to exceed $50 million at any time outstanding; (5) the incurrence by Mail-Well I Corporation or any of its restricted subsidiaries of permitted refinancing indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace, indebtedness (other than intercompany indebtedness) that was permitted by the indenture to be incurred under the first paragraph of this covenant or clause (1), (2), (3), (4) or (9) of this paragraph; (6) the incurrence by Mail-Well I Corporation or any of its restricted subsidiaries of intercompany indebtedness between or among Mail-Well I Corporation and any of its wholly owned restricted subsidiaries; provided, however, that: o indebtedness is owed to or held by a restricted subsidiary that is not a subsidiary guarantor, such indebtedness must be expressly subordinated to the prior payment in full in cash of all obligations with respect to the new notes, in the case of Mail-Well I Corporation, or the guarantee of such subsidiary guarantor, in the case of a subsidiary guarantor, and o (i) any subsequent issuance or transfer of equity interests that results in any such indebtedness being held by a person other than Mail-Well I Corporation or a wholly owned restricted subsidiary thereof and (ii) any sale or other transfer of any such indebtedness to a person that is not either Mail-Well I Corporation or a wholly owned restricted if Mail-Well I Corporation or any subsidiary guarantor is the obligor on such indebtedness and such subsidiary thereof, shall be deemed, in each case, to constitute an incurrence of such indebtedness by Mail-Well I Corporation or such restricted subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by Mail-Well I Corporation or any of its restricted subsidiaries of hedging obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate indebtedness that is permitted by the terms of this indenture to be outstanding; (8) the guarantee by Mail-Well I Corporation or any of its restricted subsidiaries of indebtedness of Mail-Well I Corporation or a restricted subsidiary of Mail-Well I Corporation that was permitted to be incurred by another provision of this covenant; (9) the incurrence by Mail-Well I Corporation or any of its restricted subsidiaries of additional indebtedness in an aggregate principal amount (or accrued value, as applicable) at any time outstanding, including all permitted refinancing indebtedness incurred to refund, refinance or replace any indebtedness incurred pursuant to this clause (9), not to exceed $50 million; (10) the incurrence by Mail-Well I Corporation's unrestricted subsidiaries of non-recourse debt; provided, however, that if any such indebtedness ceases to be non-recourse debt of an unrestricted subsidiary, such event shall be deemed to constitute an incurrence of indebtedness by a restricted subsidiary of Mail-Well I Corporation that was not permitted by this clause (10); (11) the incurrence by Mail-Well I Corporation or any of its restricted subsidiaries of indebtedness in respect of judgment, appeal, surety, performance and other like bonds, 64 bankers acceptances and letters of credit provided by Mail-Well I Corporation and its subsidiaries in the ordinary course of business (including any indebtedness incurred to refinance, retire, renew, defease, refund or otherwise replace any indebtedness referred to in this clause (11)); and (12) indebtedness incurred by Mail-Well I Corporation or any of its subsidiaries arising from agreements or their respective bylaws providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees of letters of credit, surety bonds or performance bonds securing the performance of Mail-Well I Corporation or any of its subsidiaries to any person acquiring all or a portion of such business or assets of a subsidiary of Mail-Well I Corporation. For purposes of determining compliance with this incurrence of indebtedness covenant, in the event that an item of proposed indebtedness meets the criteria of more than one of the categories of permitted debt described in clauses (1) through (12) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, we will be permitted to classify such item of indebtedness on the date of its incurrence in any manner that complies with this covenant. LIENS Mail-Well I Corporation will not, and will not permit any of its restricted subsidiaries to, directly or indirectly, create, incur, assume or suffer to own any lien of any kind securing indebtedness, attributable debt or trade payables on any asset now owned or hereafter acquired, except permitted liens under the indenture. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES Mail-Well I Corporation will not permit any of its restricted subsidiaries to, directly or indirectly, create or permit to exist or become effective any encumbrance or restriction on the ability of any restricted subsidiary to pay dividends or make any other distributions or pay indebtedness to Mail-Well I Corporation or any of Mail-Well I Corporation's restricted subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Mail-Well I Corporation or any of Mail-Well I Corporation's restricted subsidiaries. MERGER, CONSOLIDATION, OR SALE OF ASSETS Mail-Well I Corporation may not, directly or indirectly: (1) consolidate or merge with or into another person (whether or not Mail-Well I Corporation is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to another person; unless: (1) either: (a) Mail-Well I Corporation is the surviving corporation; or (b) the person formed by or surviving any such consolidation or merger (if other than Mail-Well I Corporation) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (2) the person formed by or surviving any such consolidation or merger (if other than Mail-Well I Corporation) or the person to which such sale, assignment, transfer, conveyance or other disposition shall have been made, expressly assumes all the obligations of Mail-Well I Corporation under the new notes and the indenture pursuant to agreements reasonably satisfactory to the trustee; (3) immediately after such transaction no default or event of default exists under the indenture; and 65 (4) Mail-Well I Corporation or the person formed by or surviving any such consolidation or merger (if other than Mail-Well I Corporation): (1) will have consolidated net worth immediately after the transaction equal to or greater than our consolidated net worth immediately preceding the transaction; and (2) will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional indebtedness pursuant to the fixed charge coverage ratio test set forth in the first paragraph of the covenant described above under the caption "Incurrence of Indebtedness." In addition, we may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other person. This "Merger, Consolidation, or Sale of Assets" covenant will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among Mail-Well I Corporation and any of its wholly owned subsidiaries. For the avoidance of doubt, this covenant also will not apply to sales of the assets or stocks of subsidiaries Mail-Well I Corporation currently is holding for sale as part of its strategic plan. TRANSACTIONS WITH AFFILIATES Mail-Well I Corporation will not, and will not permit any of its restricted subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any affiliate, unless: (1) such affiliate transaction with an affiliate is on terms that are no less favorable to Mail-Well I Corporation or the relevant restricted subsidiary than those that would have been obtained in a comparable transaction by Mail-Well I Corporation or such restricted subsidiary with an unrelated person; and (2) we deliver to the trustee: o with respect to any affiliate transaction or series of related affiliate transactions involving aggregate consideration in excess of $1 million, a resolution of the board of directors set forth in the officers' certificate certifying that such affiliate transaction complies with this covenant and that such affiliate transaction has been approved by a majority of the disinterested members of the board of directors; and o with respect to any affiliate transaction or series of related affiliate transactions involving aggregate consideration in excess of $10 million, an opinion as to the fairness to the holders of such affiliate transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The following items shall not be deemed to be affiliate transactions and, therefore, will not be subject to the provisions of the prior paragraph: (1) any employment agreement entered into by Mail-Well I Corporation or any of its restricted subsidiaries in the ordinary course of business and consistent with the past practice of Mail-Well I Corporation or such restricted subsidiary; (2) indemnification agreements permitted by law entered into by Mail-Well I Corporation or any of its restricted subsidiaries with any of its affiliates who are directors, employees or agents of Mail-Well I Corporation or any of its restricted subsidiaries; (3) transactions between or among Mail-Well I Corporation and/or its restricted subsidiaries; (4) payment of reasonable directors fees to persons who are not otherwise our affiliates; and 66 (5) restricted payments that are permitted by the provisions of the indenture described above under the caption "--Restricted Payments." ADDITIONAL SUBSIDIARY GUARANTEES If after the date we sold the old notes Mail-Well I Corporation or any restricted subsidiary of Mail-Well I Corporation acquires or creates another restricted subsidiary (other than a special purpose financing vehicle) and such restricted subsidiary is formed under the laws of a state of the United States (including the District of Columbia) and has its principal place of business within the United States, then at such time as such restricted subsidiary first becomes a significant subsidiary of Mail-Well I Corporation, that newly acquired or created restricted subsidiary must become a guarantor and execute a supplemental indenture satisfactory to the trustee and deliver an opinion of counsel to the trustee within 10 business days of the date on which it was acquired or created. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES As of the date we sold the old notes all of the subsidiaries of Mail-Well I Corporation will be restricted subsidiaries. The board of directors may designate any subsidiary to be an unrestricted subsidiary if that designation would not cause a default under the indenture. If a subsidiary is designated as an unrestricted subsidiary, all outstanding Investments owned by Mail-Well I Corporation and its subsidiaries in the subsidiary so designated will be deemed to be an Investment made as of the time of such designation and will reduce the amount available for restricted payments under the first paragraph of the covenant described above under the caption "--Restricted Payments" or permitted Investments, as applicable. All such outstanding Investments will be valued at their fair market value at the time of such designation. In addition, such designation will only be permitted if such restricted payment would be permitted at that time and if such subsidiary otherwise meets the definition of an unrestricted subsidiary. The board of directors may redesignate any unrestricted subsidiary to be a restricted subsidiary if the redesignation would not cause a default under the indenture. LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS Mail-Well I Corporation will not permit any of its restricted subsidiaries that is not a guarantor of the new notes, directly or indirectly, to guarantee or pledge any assets to secure the payment of any other indebtedness of Mail-Well I Corporation or Mail-Well, Inc. unless such restricted subsidiary simultaneously executes and delivers a supplemental indenture providing for the guarantee of the payment of the new notes by such restricted subsidiary to the same extent as such guarantee of such other indebtedness, which guarantee shall be senior to or pari passu with such restricted subsidiary's guarantee of or pledge to secure such other indebtedness. Notwithstanding the provision described in the preceding paragraph, any guarantee of the new notes will provide by its terms that it will be automatically and unconditionally released and discharged under the circumstances described above under the caption "Note Guarantees; Restrictions on Mail-Well, Inc. and Subsidiaries." The form of the guarantee will be attached as an exhibit to the indenture. BUSINESS ACTIVITIES Mail-Well I Corporation will not, and will not permit any restricted subsidiary to, engage in any business other than permitted businesses under the indenture. ADVANCES TO SUBSIDIARIES All advances to restricted subsidiaries that are not guarantors made by Mail-Well I Corporation after the date of the indenture will be evidenced by intercompany notes in favor of Mail-Well I Corporation. Each intercompany note will be payable upon demand and will bear interest at the same rate as the new notes. A form of intercompany note will be attached as an exhibit to the indenture. 67 PAYMENTS FOR CONSENT Mail-Well I Corporation will not, and will not permit any of its subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of new notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the new notes unless such consideration is offered to be paid and is paid to all holders of the new notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. REPORTS Whether or not required by the Commission, so long as any new notes are outstanding, Mail-Well I Corporation will furnish to the holders of new notes, within the time periods specified in the Commission's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K, if Mail-Well I Corporation were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by Mail-Well I Corporation's certified independent accountants; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if Mail-Well I Corporation were required to file such reports. The quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, or in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of Mail-Well I Corporation and its subsidiary guarantors separate from the financial condition and results of operations of the other subsidiaries of Mail-Well I Corporation. In addition, whether or not required by the Commission, Mail-Well I Corporation will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The foregoing reporting obligation may be satisfied by reports prepared and filed by Mail-Well, Inc. on a consolidated basis under the requirements of the Exchange Act. REGISTRATION RIGHTS; LIQUIDATED DAMAGES We entered into a registration rights agreement with the initial purchasers of the old notes on March 13, 2002. In the registration rights agreement, we agreed, among other things, to file with the Commission the registration statement of which this prospectus is a part. If any of the following occurs: (1) because of any change in law or applicable interpretations of the staff of the Commission we are not permitted to effect this exchange offer; (2) for any other reason this exchange offer is not consummated within 210 days of the date on which we sold the old notes; (3) any initial purchaser so requests with respect to old notes not eligible to be exchanged for new notes in the exchange offer by it following consummation of the exchange offer; or (4) any holder (other than certain dealers) is not eligible to participate in the exchange offer or in the case of any holder (other than certain dealers) that participates in the exchange offer, such 68 holder does not receive freely tradeable new notes on the date of the exchange and any such holder so requests, then we will, at our cost: (1) promptly, but in no event later than 30 days after the date of the request or other event giving rise to the obligation, file a shelf registration statement covering resales of the old notes or the new notes, as the case may be, from time to time and use reasonable best efforts to cause the shelf registration statement to be declared effective under the Securities Act no later than 90 days after that date; and (2) subject to certain customary exceptions, use our reasonable best efforts to keep the shelf registration statement continuously effective until all the notes covered by the shelf registration statement (a) have been sold pursuant thereto or (b) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof). We will, in the event a shelf registration statement is filed, among other things, provide to each holder for whom such shelf registration statement was filed copies of the prospectus which is part of the shelf registration statement, notify each such holder when the shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the old notes or the new notes, as the case may be. A Holder selling such notes pursuant to the shelf registration statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the registration rights agreement which are applicable to such holder (including certain indemnification obligations). For the purposes of the registration rights agreement, "transfer restricted securities" means each note until the earliest on the date of which (1) such note is exchanged in the exchange offer and entitled to be resold to the public by the holder thereof without complying with the prospectus delivery requirements of the Securities Act, (2) such note has been disposed of in accordance with the shelf registration statement, (3) such note is disposed of by a broker-dealer pursuant to the "Plan of Distribution" herein, or (4) such note is distributed to the public pursuant to Rule 144 under the Securities Act. The registration rights agreement provides that (1) if the registration statement of which this prospectus is part is not declared effective by the Commission on or prior to the 180th day after the date that we sold the old notes, (2) if this exchange offer is not consummated on or before the 30th business day after such registration statement is declared effective, (3) if obligated to file the shelf registration statement with the Commission and we fail to do so on or prior to the 30th business day after such filing obligation arises, (4) if obligated to file the shelf registration statement and the shelf registration statement is not declared effective on or prior to the 90th day after the obligation to file the shelf registration statement arises (but no earlier than 180 days after the date on which we sold the old notes), or 69 (5) if the registration statement for the exchange offer or the shelf registration statement, as the case may be, is declared effective but thereafter ceases to be effective or useable in connection with resales of the notes, for such time of non-effectiveness or non-usability, we agree to pay to each holder of notes affected thereby liquidated damages in an amount equal to $0.05 per week per $1,000 in principal amount of affected notes held by such holder for each week or portion thereof that such registration default continues for the first 90-day period immediately following the occurrence of the registration default. The amount of the liquidated damages increases by an additional $0.05 per week per $1,000 in principal amount of notes at the beginning of and for each subsequent 90-day period until all registration defaults have been cured, up to a maximum amount of liquidated damages of $0.50 per week per $1,000 in principal amount of affected notes. We will not be required to pay liquidated damages for more than one registration default at any given time. No holder of affected notes will be entitled to receive liquidated damages pursuant to the registration rights agreement unless and until such holder has provided certain information to us for use in connection with the applicable registration statement. Following the cure of all registration defaults, the accrual of liquidated damages will cease. We will pay all accrued liquidated damages to holders entitled thereto in the same manner as interest payments on the notes on semi-annual damages payment dates which correspond to interest payment dates for the notes. This summary of provisions of the registration rights agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part, and we incorporate the registration rights agreement into this prospectus by this reference. A copy of the registration rights agreement is available from Mail-Well I Corporation or the Commission upon request. See "Where You Can Find More Information." EVENTS OF DEFAULT AND REMEDIES Each of the following is an event of default under the indenture: (1) default for 30 days in the payment when due of interest on, or liquidated damages with respect to, the new notes; (2) default in payment when due of the principal of or premium, if any, on the new notes; (3) failure by Mail-Well I Corporation or any of its restricted subsidiaries to comply with the provisions described under the captions "--Change of Control," "--Asset Sales," "--Restricted Payments" or "--Incurrence of Indebtedness"; (4) failure by Mail-Well I Corporation or any of its restricted subsidiaries to comply with any of the other agreements in the indenture for 60 days after notice to Mail-Well I Corporation by the trustee or the holders of at least 25% in aggregate principal amount of the new notes then outstanding; (5) default under any mortgage, indenture or instrument under which they may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by Mail-Well I Corporation or any of its restricted subsidiaries (or the payment of which is guaranteed by Mail-Well I Corporation or any of its restricted subsidiaries) whether such indebtedness or guarantee now exists, or is created after the date of the indenture, if that default: o is caused by a failure to pay principal of or premium, if any, or interest on such indebtedness prior to the expiration of the grace period provided in such indebtedness; or o results in the acceleration of such indebtedness prior to its express maturity, 70 o and, in each case, the principal amount of any such indebtedness, together with the principal amount of any other such indebtedness under which there has been a payment default or the maturity of which has been so accelerated, aggregates $25 million or more; (6) failure by Mail-Well I Corporation or any of its restricted subsidiaries to pay final judgments aggregating in excess of $25 million, which judgments are not paid, discharged or stayed within 60 days following entry of judgment; (7) except as permitted by the indenture, any guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any guarantor, or any person acting on behalf of any guarantor, shall deny or disaffirm its obligations under its guarantee; and (8) certain events of bankruptcy or insolvency with respect to Mail-Well I Corporation or any restricted subsidiary that is a significant subsidiary, or any group of restricted subsidiaries that, taken together, would constitute a significant subsidiary. In the case of an event of default arising from certain events of bankruptcy or insolvency, with respect to Mail-Well I Corporation, any restricted subsidiary that is a significant subsidiary or any group of restricted subsidiaries that, taken together, would constitute a significant subsidiary, all outstanding new notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding new notes may declare all the new notes to be due and payable immediately. Holders of the new notes may not enforce the indenture or the new notes except as provided in the indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding new notes may direct the trustee in its exercise of any trust or power. The holders of a majority in aggregate principal amount of the new notes then outstanding by notice to the trustee may on behalf of the holders of all of the new notes waive any existing default or event of default and its consequences under the indenture except a continuing default or event of default in the payment of interest on, or the principal of, the new notes. We are required to deliver to the trustee annually a statement regarding compliance with the indenture. Upon becoming aware of any default or event of default under the indenture, we are required to deliver to the trustee a statement specifying such default or event of default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS No director, officer, employee, incorporator or shareholder of Mail-Well I Corporation or any guarantor, as such, shall have any liability for any obligations of Mail-Well I Corporation or the guarantors under the new notes, the indenture, the note guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of new notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the new notes. The waiver may not be effective to waive liabilities under the federal securities laws. SATISFACTION AND DISCHARGE OF THE INDENTURE We may terminate the obligations of Mail-Well I Corporation and the guarantors under the new notes, the indenture, and the guarantees when (i) either (A) all outstanding new notes have been delivered to the trustee for cancellation or (B) all such new notes not theretofore delivered to the trustee for cancellation have become due and payable, will become due and payable within one year or are to be called for redemption within one year under irrevocable arrangements satisfactory to the trustee for the giving of notice of redemption by the trustee in our name and at our expense, and we have irrevocably deposited or caused to be deposited with the trustee funds in an amount sufficient to 71 pay and discharge the entire indebtedness on the new notes not theretofore delivered to the trustee for cancellation, for principal of (premium, if any, on) and interest to the date of deposit or stated maturity or date of redemption; (ii) we have paid or caused to be paid all sums then due and payable by us under the indenture; and (iii) we have delivered an officers' certificate and an opinion of counsel relating to compliance with the conditions set forth in the indenture. LEGAL DEFEASANCE AND COVENANT DEFEASANCE We may, at our option and at any time, elect to have all of our obligations discharged with respect to the outstanding new notes, which we refer to as "legal defeasance," except for: (1) the rights of holders of outstanding new notes to receive payments in respect of the principal of, premium, if any, and interest thereon, and the rights of the holders of old notes to receive any payments of liquidated damages on any old notes remaining outstanding when such payments are due from the trust referred to below; (2) our obligations with respect to the new notes concerning issuing temporary new notes, registration of new notes, mutilated, destroyed, lost or stolen new notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the trustee, and our obligations in connection therewith; and (4) the legal defeasance provisions of the indenture. In addition, we may, at our option and at any time, elect to have our obligations released with respect to certain covenants that are described in the indenture, which we refer to as "covenant defeasance," and thereafter any failure to comply with such obligations shall not constitute a default or event of default with respect to the new notes. In the event covenant defeasance occurs, certain events (other than nonpayment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default and Remedies" will no longer constitute an event of default with respect to the new notes. In order to exercise either legal defeasance or covenant defeasance, (1) We must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the new notes, cash in U.S. dollars, non-callable government securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on all outstanding notes, and liquidated damages on any outstanding old notes on the stated maturity or on the applicable redemption date, as the case may be, and we must specify whether notes are being defeased to maturity or to a particular redemption date; (2) in the case of legal defeasance, we must deliver to the trustee an opinion of counsel in the United States reasonably acceptable to the trustee confirming that (A) we have received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date we sold the old notes, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the outstanding new notes will not recognize income, gain or loss for federal income tax purposes as a result of such legal defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred; (3) in the case of covenant defeasance, we must deliver to the trustee an opinion of counsel in the United States reasonably acceptable to the trustee confirming that the holders of the outstanding new notes will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same 72 amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (4) no event of default or default under this indenture shall have occurred and be continuing on the date of such deposit (other than an event of default or default resulting from the borrowing of funds to be applied to such deposit); (5) such legal defeasance or covenant defeasance will not result in a breach or violation of, or constitute a default under, the credit agreement or any other material agreement or instrument (other than the indenture) to which Mail-Well I Corporation or any of its subsidiaries is a party or by which Mail-Well I Corporation or any of its subsidiaries is bound; (6) we must have delivered to the trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (7) we must deliver to the trustee an officers' certificate stating that we did not make the deposit with the intent of preferring the holders of new notes over our other creditors with the intent of defeating, hindering, delaying or defrauding such creditors or others; and (8) we must deliver to the trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for, in the case of the officers' certificate, (1) through (7) and, in the case of the opinion of counsel, clauses (2), (3), (5) and (6) of this paragraph relating to the legal defeasance or the covenant defeasance, as applicable, have been complied with. AMENDMENT, SUPPLEMENT AND WAIVER Without the consent of each holder affected, an amendment or waiver may not (with respect to any new notes held by a non-consenting holder): (1) reduce the principal amount of new notes whose holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption of the new notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders"); (3) reduce the rate of or change the time for payment of interest on any note; (4) waive a default or event of default in the payment of principal or premium, if any, or liquidated damages or interest on the new notes or any old notes remaining outstanding (except a rescission of acceleration of the new notes by the holders of at least a majority in aggregate principal amount of the new notes and a waiver of the payment default that resulted from such acceleration); (5) make any note payable in money other than that stated in the new notes; (6) make any change in the provisions of the indenture relating to waivers of past defaults or the rights of holders of new notes to receive payments of principal of or premium, if any, or liquidated damages or interest on the new notes or any old notes remaining outstanding; (7) waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders"); (8) release any guarantor from any of its obligations under its guarantee or the indenture, or amend the provisions of the indenture relating to the release of guarantors, except as set forth in the indenture; or 73 (9) make any change in the preceding amendment and waiver provisions. Notwithstanding the preceding, without the consent of any holder of new notes, Mail-Well I Corporation and the trustee may amend or supplement the indenture or the new notes: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated new notes in addition to or in place of certificated new notes; (3) to provide for the assumption of Mail-Well I Corporation's obligations to holders of new notes in the case of a merger or consolidation or sale of all or substantially all of Mail-Well I Corporation's assets; (4) to make any change that would provide any additional rights or benefits to the holders of new notes or that does not adversely affect the legal rights under the indenture of any such holder; or (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the Trust Indenture Act. BOOK-ENTRY; DELIVERY AND FORM The new notes initially will be in the form of one or more registered "global new notes" without interest coupons. The global notes will be deposited with, or on behalf of, the Depository Trust Company and registered in the name of DTC or its nominee, who will be the global notes holder. Except as set forth below, the global notes may be transferred, in whole and not in part, only to DTC or another nominee of DTC in limited circumstances. Investors may hold their beneficial interests in the global notes directly through DTC if they are participating organizations or "participants" in such system or indirectly through organizations that are participants in such system. Except in the limited circumstances described below, owners of beneficial interests in the global notes will not be entitled to receive physical delivery of certificated new notes. Such certificated notes may, unless the global note has previously been exchanged for certificated notes, be exchanged for an interest in the global note representing the principal amount of new notes being transferred. In addition, transfer of beneficial interests in global notes will be subject to the applicable rules and procedures of DTC and its direct participants or indirect participants, including, if applicable, those of Euroclear and CEDEL, which may change from time to time. The new notes may be presented from registration of transfer and exchanged at the offices of the registrar. DEPOSITORY PROCEDURES The following description of the operations and procedures of DTC are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them from time to time. We take no responsibility for these operations and procedures and urge investors to contact the system or their participants directly to discuss these matters. DTC has advised us that DTC is a limited-purpose trust company that was created to hold securities for its participants and to facilitate the clearance and settlement of transactions in such securities between participants through electronic book-entry changes in accounts of its participants. The participants include securities brokers and dealers (including the initial purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies, which we refer to as "indirect participants," that clear through or maintain a custodial relationship with a participant, either directly or indirectly, persons who are not participants may beneficially own securities held by or on behalf of DTC only through the participants or the indirect participants. 74 We expect that pursuant to procedures established by DTC (i) upon deposit of the global notes, DTC will credit the accounts of participants designated by the initial purchasers with portions of the principal amount of the global notes and (ii) ownership of the new notes evidenced by the global notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of the participants), the participants and the indirect participants. Investors in the global notes may hold their interests therein directly through DTC, if they are participants in such system, or indirectly through organizations which are participants in such system. Euroclear and Clearstream Banking will hold interests in the global notes on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositories, which are Morgan Guaranty Trust Mail-Well I Corporation of New York, Brussels office, as operator of Euroclear and Citibank, N.A., as operator of Clearstream Banking. These depositories, in turn, will hold the interests in the global notes in customer's securities accounts in the depositaries' names on the books of DTC. All interests in a Global note may be subject to the procedures and requirements of DTC. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global note to such persons will be limited to that extent. Because DTC can act only on behalf of participants, which in turn act on behalf of indirect participants and certain banks, the ability of a person having beneficial interests in a Global note to pledge such interests to persons or entities that do not participate in the DTC systems, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. Except as described below, owners of interest in the global notes will not have new notes registered in their names, will not receive physical delivery of new notes in certificated form and will not be considered the registered owners or "holders" thereof under the indenture for any purpose. Payments in respect of the principal of, premium, if any, and interest on a Global note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered holder under the indenture. Under the terms of the indenture, we and the trustee will treat the persons in whose names the new notes, including the global notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the trustee nor any agent of us or the trustee has or will have any responsibility or liability for (1) any aspect of DTC's records or any participant's or indirect participant's records relating to or payments made on account of beneficial ownership interests in the global notes, or for maintaining, supervising or reviewing any of DTC's records or any participant's or indirect participant's records relating to the beneficial ownership interests in the global notes or (2) any other matter relating to the actions and practices of DTC or any of its participants or indirect participants. DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the new notes (including principal and interest), is to credit the accounts of the relevant participants with the payment on the payment date, in amounts proportionate to their respective holdings in the principal amount of beneficial interest in the relevant security as shown on the records of DTC unless DTC has reason to believe it will not receive payment on such payment date. Payments by the participants and the indirect participants to the beneficial owners of new notes will be governed by standing instructions and customary practices and will be the responsibility of the participants or the indirect participants and will not be the responsibility of DTC, the trustee or us. Neither we nor the trustee will be liable for any delay by DTC or any of its participants in identifying the beneficial owners of the new notes, and we and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Interests in the global notes will trade in DTC's Same-Day Funds Settlement System and secondary market trading activity in such interests will, therefore, settle in immediately available funds, 75 subject in all cases to the rules and procedures of DTC and its participants. See "--Same-Day Settlement and Payment." Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same day funds. Cross-market transfers between direct participants in DTC, on the one hand, and indirect participants who hold interests in the new notes through Euroclear on CEDEL, on the other hand, will be effected by Euroclear's or CEDEL's respective nominee through DTC in accordance with DTC's rules on behalf of Euroclear or CEDEL; however, delivery of instructions relating to crossmarket transactions must be made directly to Euroclear or CEDEL, as the case may be, by the counterparty in accordance with the rules and procedures of Euroclear or CEDEL and within their established deadlines, using Brussels time for Euroclear and U.K. time for CEDEL. Indirect participants who hold interest in the new notes through Euroclear and CEDEL may not deliver instructions directly to Euroclear's or CEDEL's nominee. Euroclear or CEDEL will, if the transaction meets its settlement requirements, deliver instructions to its respective nominee to deliver or receive interests on Euroclear's or CEDEL's behalf in the relevant global note in DTC, and make or receive payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Because of time zone differences, the securities of accounts of an indirect participant who holds an interest in the new notes through Euroclear or CEDEL purchasing an interest in a global note from a direct participant in DTC will be credited, and any such crediting will be reported to Euroclear or CEDEL during the European business day immediately following the settlement date of DTC in New York. Although recorded in DTC's accounting records as of DTC's settlement date in New York, Euroclear and CEDEL customers will not have access to the cash amount credited to their accounts as a result of a sale of an interest in a global note to a DTC participant until the European business day for Euroclear or CEDEL immediately following DTC's settlement date. DTC has advised us that it will take any action permitted to be taken by a holder of new notes only at the direction of one or more participants to whose account DTC has credited the interests in the global notes and only in respect of such portion of the aggregate principal amount of the new notes as to which such participant or participants has or have given such direction. However, if there is an event of default under the new notes, DTC reserves the right to exchange the global notes for legended new notes in certificated form, and to distribute such new notes to its participants. Although DTC, Euroclear and Clearstream Banking have agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants in DTC, Euroclear and Clearstream Banking, they are under no obligation to perform or to continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream Banking or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED SECURITIES Subject to certain conditions, any person having a beneficial interest in a global note may, upon request to the trustee, exchange such beneficial interest for new notes in the form of certificated securities. Upon any such issuance, the trustee is required to register such certificated securities in the name of, and cause the same to be delivered to, such person or persons (or the nominee of any thereof). If: (a) we notify the trustee in writing that DTC is no longer willing or able to act as a depositary and we are unable to locate a qualified successor within 90 days, or (b) we, at our option, notify the trustee in writing that we elect to cause the issuance of new notes in the form of certificated securities under the indenture, then, upon surrender by the global 76 notes holder of its global notes, new notes in such form will be issued to each person that the global notes holder and DTC identify as being the beneficial owner of the related new notes. Neither we nor the trustee will be liable for any delay by the global notes holder or DTC in identifying the beneficial owners of new notes and we and the trustee may conclusively rely on, and will be protected in relying on, instructions from the global notes holder or DTC for all purposes. SAME-DAY SETTLEMENT AND PAYMENT The indenture will require that payments in respect of the new notes represented by the global notes (including principal, premium, if any, and interest) be made by wire transfer of immediately available funds to the accounts specified by the global notes holder. With respect to certificated securities, we will make all payments of principal, premium, if any, and interest by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. METHODS OF RECEIVING PAYMENTS ON THE NEW NOTES If a holder has given wire transfer instructions to us, we will make all principal, premium and interest payments on those new notes in accordance with those instructions. All other payments on these new notes will be made at the office or agency of the payment agent and registrar within the City and State of New York unless we elect to make interest payments by check mailed to the holders at their address set forth in the register of holders. PAYING AGENT AND REGISTRAR FOR THE NEW NOTES The trustee will initially act as paying agent and registrar for the new notes. We may change the paying agent or registrar without prior notice to the holders of the new notes, and we or any of our subsidiaries may act as paying agent or registrar. TRANSFER AND EXCHANGE A holder may transfer or exchange new 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 we may require a holder to pay any taxes and fees required by law or permitted by the indenture. We are not required to transfer or exchange any senior note selected for redemption. Also, we are not required to transfer or exchange any senior note for a period of 15 days before a selection of new notes to be redeemed. The registered holder of a senior note will be treated as the owner of it for all purposes. CONCERNING THE TRUSTEE If the trustee becomes a creditor of us, the indenture limits its right 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 90 days, apply to the Commission for permission to continue or resign. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. 77 "Acquired Debt" means, with respect to any specified person: (1) Indebtedness of any other person existing at the time such other person is merged with or into or became a subsidiary of such specified person, whether or not such indebtedness is incurred in connection with, or in contemplation of, such other person merging with or into, or becoming a subsidiary of, such specified person; and (2) Indebtedness secured by a lien encumbering any asset acquired by such specified person. "Additional Notes" has the meaning set forth above under the caption "--Principal, Maturity and Interest." "Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For purposes of this definition, "control," as used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting stock of a person shall be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" shall have correlative meanings. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights, including sales and leasebacks, but excluding sales of inventory and equipment in the ordinary course of business consistent with past practices; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of Mail-Well I Corporation and its restricted subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption "--Change of Control", and/or the provisions described above under the caption "--Merger, Consolidation or Sale of Assets" and not by the provisions of the asset sale covenant; and (2) the issuance of equity interests by any of Mail-Well I Corporation's restricted subsidiaries or the sale of equity interests in any of its subsidiaries, Notwithstanding the preceding, the following items shall not be deemed to be asset sales: o any single transaction or series of related transactions that: (a) involves assets having a fair market value of less than $5 million; or (b) results in net proceeds to Mail-Well I Corporation and its restricted subsidiaries of less than $5 million; o a transfer of assets between or among Mail-Well I Corporation and its wholly owned restricted subsidiaries; o an issuance of equity interests by a wholly owned restricted subsidiary to Mail-Well I Corporation or to another wholly owned restricted subsidiary; o a disposition of assets or stock of Mail-Well Label Company, MWL U.K. Limited, and Lancer Label Canada, Inc.; and o a restricted payment that is permitted by the covenant described above under the caption "--restricted payments." "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. 78 "Beneficial Owner" has the meaning assigned to such term in Rule l3d-3 and Rule l3d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as such term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing person. "Change of Control" means the occurrence of any of the following: (1) the sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of Mail-Well I Corporation and its subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than a principal or a related party of a principal; (2) the adoption of a plan relating to the liquidation or dissolution of Mail-Well I Corporation; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the principals and their related parties, becomes the beneficial owner, directly or indirectly, of more than 35% of the voting stock of Mail-Well I Corporation or Mail-Well, Inc., measured by voting power rather than number of shares; (4) the first day on which a majority of the members of the board of directors of Mail-Well I Corporation or Mail-Well, Inc. are not continuing directors; or (5) Mail-Well I Corporation or Mail-Well, Inc. consolidates with, or merges with or into, any person, or any person consolidates with, or merges with or into, Mail-Well I Corporation or Mail-Well, Inc., in any such event pursuant to a transaction in which any of the outstanding voting stock of Mail-Well I Corporation or Mail-Well, Inc. is converted into or exchanged for cash, securities or other property, other than any such transaction where the voting stock of Mail-Well I Corporation or Mail-Well, Inc. outstanding immediately prior to such transaction is converted into or exchanged for voting stock of the surviving or transferee person constituting a majority of the outstanding shares of such voting stock of such surviving or transferee person immediately after giving effect to such issuance. For the avoidance of doubt, the sales of the assets or stocks of subsidiaries that Mail-Well I Corporation is currently holding for sale as part of its strategic plan will not constitute a change of control. "Consolidated Cash Flow" means, with respect to any person for any period, the consolidated net income of such person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss realized in connection with an asset sale, to the extent such losses were deducted in computing such consolidated net income; plus (2) provision for taxes based on income or profits of such person and its subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such consolidated net income; plus 79 (3) consolidated interest expense of such person and its subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with capital lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments, if any, pursuant to hedging obligations), to the extent that any such expense was deducted in computing such consolidated net income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles) and other non-cash expenses of such person and its subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such consolidated net income; minus (5) non-cash items increasing such consolidated net income for such period, other than items that were accrued in the ordinary course of business, in each case on a consolidated basis. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash charges of, a subsidiary of Mail-Well I Corporation shall be added to consolidated net income to compute Consolidated Cash Flow of Mail-Well I Corporation only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to Mail-Well I Corporation by such subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that subsidiary or its shareholders. "Consolidated Net Income" means, with respect to any specified person for any period, the aggregate of the Net Income of such person and its restricted subsidiaries for such period, on a consolidated basis, provided that: (1) the net income (but not loss) of any person that is not a restricted subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified person or a wholly owned subsidiary thereof; (2) the net income of any non-guarantor restricted subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that non-guarantor restricted subsidiary of that net income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that non-guarantor restricted subsidiary or its shareholders; (3) the net income of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; (4) the net income (but not loss) of any unrestricted subsidiary shall be excluded, whether or not distributed to the specified person or one of its subsidiaries; and (5) any writedowns with respect to, or losses on dispositions of, subsidiaries and assets held for sale as of the date of the indenture, and all restructuring charges incurred by Mail-Well I Corporation, Mail-Well, Inc. and the subsidiaries, shall be excluded; and (6) the cumulative effect of a change in accounting principles shall be excluded. "Consolidated Net Worth" means, with respect to any person as of any date, the sum of: (1) the consolidated equity of the common shareholders of such person and its consolidated subsidiaries as of such date; plus 80 (2) the respective amounts reported on such person's balance sheet as of such date with respect to any series of preferred stock that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such person upon issuance of such preferred stock. "Continuing Directors" means, as of any date of determination, any member of the board of directors of Mail-Well I Corporation or Mail-Well, Inc. who: (1) was a member of such board of directors on the date we sold the old notes; or (2) was nominated for election or elected to such board of directors with the approval of a majority of the continuing directors who were members of the board of directors of Mail-Well, Inc. at the time of such nomination or election. "Credit Facilities" means, with respect to Mail-Well I Corporation or any restricted subsidiary, one or more debt facilities or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or other asset securitizations or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an event of default. "Equity Interests" mean capital stock and all warrants, options or other rights to acquire capital stock (but excluding any debt security that is convertible into, or exchangeable for, capital stock). "Equity Offering" means any private or underwritten public offering of common stock of Mail-Well I Corporation or Mail-Well, Inc. in which the gross proceeds to Mail-Well I Corporation or Mail-Well, Inc., as applicable, are at least $50 million and, in the case of an offering by Mail-Well, Inc., the net proceeds are contributed to Mail-Well I Corporation. "Exchange Offer Registration Statement" means that certain registration statement filed by Mail-Well I Corporation with the Commission to register the exchange offer. "Exchange Offer" means the offer made to the holders of the new notes to exchange their new notes for the new notes. "Exchange Notes" means the new notes. "Existing Indebtedness" means indebtedness of Mail-Well I Corporation and its restricted subsidiaries in existence on the date we sold the old notes. "Fixed Charges" means, with respect to any person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such person and its restricted subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with capital lease obligations, imputed interest with respect to attributable debt, commissions, discounts, and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments, if any, pursuant to hedging obligations; plus (2) the consolidated interest expense of such person and its restricted subsidiaries that was capitalized during such period; plus 81 (3) any interest expense on indebtedness of another person that is guaranteed by such person or one of its restricted subsidiaries or secured by a lien on assets of such person or one of its restricted subsidiaries, whether or not such guarantee or lien is called upon; plus (4) cash dividend payments on any series of preferred stock of such person or any of its restricted subsidiaries. "Fixed Charge Coverage Ratio" means, with respect to any specified person for any period, the ratio of the consolidated cash flow of such person and its restricted subsidiaries for such period to the fixed charges of such person for such period. In the event that the specified person or any of its restricted subsidiaries incurs, assumes, guarantees or redeems any indebtedness or issues or redeems preferred stock subsequent to the commencement of the period for which the fixed charge coverage ratio is being calculated but prior to the date on which the event for which the calculation of the fixed charge coverage ratio is made (the "calculation date"), then the fixed charge coverage ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period; provided, however, borrowings in the ordinary course of business under any revolving credit agreement shall not be given pro forma effect and shall be included in the calculation of the fixed charge coverage ratio only to the extent such borrowings were actually outstanding during the applicable four-quarter reference period. In addition, for purposes of calculating the fixed charge coverage ratio: (1) acquisitions that have been made by the specified person or any of its restricted subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the calculation date shall be deemed to have occurred on the first day of the four-quarter reference period and consolidated cash flow for such reference period shall be calculated without giving effect to clause (3) of the proviso set forth in the definition of consolidated net income; (2) the consolidated cash flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the calculation date, shall be excluded; and (3) the fixed charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the calculation date, shall be excluded, but only to the extent that the obligations giving rise to such fixed charges will not be obligations of the specified person or any of its restricted subsidiaries following the calculation date. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements, and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any indebtedness. 82 "Guarantors" means each of: (1) Mail-Well, Inc., (2) each subsidiary guarantor; and (3) any other subsidiary that executes a note guarantee in accordance with the provisions of the indenture; and their respective successors and assigns. "Hedging Obligations" means, with respect to any person, the obligations of such person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; (2) other agreements or arrangements designed to protect such person against fluctuations in interest rates or the value of foreign currencies purchased or received by such person in the ordinary course of business; and (3) any commodity futures or option contract or other similar commodity hedging contract designed to protect such person against fluctuations in commodity prices. "Holder" means the person in whose name a note is registered on the registrar's books. "Indebtedness" means, with respect to any specified person, any indebtedness of such person, whether or not contingent, in respect of: (1) borrowed money; (2) evidenced by bonds, new notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) banker's acceptances; (4) representing capital lease obligations; (5) the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any hedging obligations, if and to the extent any of the preceding items (other than letters of credit and hedging obligations) would appear as a liability upon a balance sheet of the specified person prepared in accordance with GAAP. In addition, the term "indebtedness" includes all indebtedness of others secured by a lien on any asset of the specified person (whether or not such indebtedness is assumed by the specified person) and, to the extent not otherwise included, the guarantee by such person of any indebtedness of any other person. The amount of any indebtedness outstanding as of any date shall be: (1) the accreted value thereof, in the case of any indebtedness issued with original issue discount; and (2) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other indebtedness. "Intercompany Notes" means the intercompany new notes issued by restricted subsidiaries of Mail-Well I Corporation that are not guarantors in favor of Mail-Well I Corporation or a guarantor to evidence advances by Mail-Well I Corporation or such guarantor, in each case, in the form attached as Exhibit F to the indenture. "Investments" means, with respect to any person, all investments by such person in other persons (including affiliates) in the forms of direct or indirect loans (including guarantees of indebtedness or 83 other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of indebtedness, equity interests or other securities, together with all items that would be classified as investments on a balance sheet prepared in accordance with GAAP excluding hedging obligations. If Mail-Well I Corporation or any restricted subsidiary of Mail-Well I Corporation sells or otherwise disposes of any equity interests of any direct or indirect restricted subsidiary of Mail-Well I Corporation such that, after giving effect to any such sale or disposition, such person is no longer a restricted subsidiary of Mail-Well I Corporation, Mail-Well I Corporation shall be deemed to have made an investment on the date of any such sale or disposition equal to the fair market value of the equity interests of such restricted subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Restricted Payments." "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Net Income" means, with respect to any person, the net income (loss) of such person and its restricted subsidiaries, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any asset sale; or (b) the disposition of any securities by such person or any of its restricted subsidiaries or the extinguishment of any indebtedness of such person or any of its restricted subsidiaries; and (2) any extraordinary or nonrecurring gain or loss, together with any related provision for taxes on such extraordinary or nonrecurring gain or loss. "Net Proceeds" means the aggregate cash proceeds received by Mail-Well I Corporation or any of its restricted subsidiaries in respect of any asset sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any asset sale), net of the direct costs relating to such asset sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case after taking into account any available tax credits or deductions and any tax sharing arrangements and amounts required to be applied to the repayment of indebtedness secured by a lien on the asset or assets that were the subject of such asset sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means indebtedness: (1) as to which neither Mail-Well I Corporation nor any of its restricted subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; and (2) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an unrestricted subsidiary) would permit upon notice, lapse of time or both any holder of any other indebtedness (other than the new notes) of Mail-Well I Corporation or any of its restricted subsidiaries to declare a default on such other indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. 84 "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any indebtedness. "Permitted Businesses" means the printing business generally including the business conducted by Mail-Well I Corporation and its subsidiaries as of the date we sold the old notes and any other business or businesses ancillary, complementary or related thereto. "Permitted Investments" means: (1) any investment in Mail-Well I Corporation or in a restricted subsidiary of Mail-Well I Corporation; (2) any investment in cash equivalents; (3) any investment by Mail-Well I Corporation or any restricted subsidiary of Mail-Well I Corporation in a person if as a result of such investment: o such person becomes a restricted subsidiary of Mail-Well I Corporation; or o such person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Mail-Well I Corporation or a restricted subsidiary of Mail-Well I Corporation; (4) any Investment made as a result of the receipt of non-cash consideration from an asset sale that was made pursuant to and in compliance with the covenant described above under the caption "--Repurchase at the Option of Holder--Asset Sales"; (5) investments existing as of the date we sold the old notes; (6) any acquisition of assets solely in exchange for the issuance of equity interests of Mail-Well I Corporation; (7) accounts receivable, endorsements for collection, deposits or similar investments arising in the ordinary course of business; (8) any investment by Mail-Well I Corporation or a restricted subsidiary in assets of a permitted business or assets to be used in a permitted business; (9) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to Mail-Well I Corporation or any subsidiary or in satisfaction of judgments; (10) the acceptance of new notes payable from employees of Mail-Well I Corporation or its subsidiaries in payment for the purchase of capital stock by such employees; and (11) any other investment in any person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (11) since the date of the date we sold the old notes and existing at the time such Investment was made, did not exceed $25 million. "Permitted Liens" means: (1) liens securing all indebtedness outstanding under credit facilities and all hedging obligations with respect thereto; (2) liens in favor of Mail-Well I Corporation or the guarantors; (3) liens when the new notes are secured by such lien on an equal and ratable basis unless the obligation secured by any such lien is subordinate or junior in right of payment to the new notes, in which case the lien securing such obligation must be subordinate and junior to the 85 lien securing the new notes with the same or lesser relative priority as such obligation shall have been with respect to the new notes; (4) liens on property of a person existing at the time such person becomes a restricted subsidiary or is merged with or into or consolidated with Mail-Well I Corporation or any restricted subsidiary of Mail-Well I Corporation, provided that such liens were in existence prior to the contemplation of such acquisition, merger or consolidation and do not extend to any assets other than those of the person acquired or merged into or consolidated with Mail-Well I Corporation or the restricted subsidiary; (5) liens on property existing at the time of acquisition thereof by Mail-Well I Corporation or any restricted subsidiary of Mail-Well I Corporation, provided that such liens were in existence prior to the contemplation of such acquisition; (6) liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (7) liens to secure indebtedness (including capital lease obligations) permitted by clause (4) of the second paragraph of the covenant described under the caption "Incurrence of Indebtedness" covering only the assets acquired with such indebtedness; (8) liens existing on the date of the indenture; (9) liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (10) liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, old age pension or public liability obligations or to secure the payment or performance of bids, tenders, statutory or regulatory obligations, surety, stay, or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (11) easements, rights-of-way, restrictions, defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the business of Mail-Well I Corporation or any of its subsidiaries; (12) purchase money liens (including extensions and renewals thereof); (13) liens securing reimbursement obligations with respect to letters of credit which encumber only documents and other property relating to such letters of credit and the products and proceeds thereof; (14) judgment and attachment liens not giving rise to an event of default; (15) liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements; (16) liens arising out of consignment or similar arrangements for the sale of goods; (17) any interest or title of a lessor in property subject to any capital lease obligation or operating lease; (18) statutory liens of landlords and liens of carriers, warehousemen, mechanics, suppliers, materialmen repairmen and other liens imposed by law incurred in the ordinary course of business for sums not, yet delinquent or being contested in good faith by appropriate proceeding, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; 86 (19) liens upon specific items of inventory or other goods and proceeds of any person securing such person's obligations in respect of bankers' acceptances issued or created for the account of such person to facilitate the purchase, shipment, or storage of such inventory or other goods; (20) liens securing hedging obligations that are otherwise permitted under the indenture; (21) leases or subleases granted to others that do not materially interfere with the ordinary course of business of Mail-Well I Corporation and its subsidiaries; (22) liens arising from filing Uniform Commercial Code financing statements regarding leases; (23) liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods; (24) liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of Mail-Well I Corporation or any subsidiary on deposit with or in possession of such bank; (25) liens to secure non-recourse debt; and (26) liens to secure any permitted refinancing indebtedness (or successive permitted refinancing indebtedness) which refinances as a whole, or in part, any indebtedness secured by any lien referred to in the foregoing clauses (1), (4), (5), (7), (8) and (12); provided, however, that: (A) such new lien shall be limited to all or part of the same property that secured the original lien (plus improvements to or on such property) and (B) the indebtedness secured by such lien at such time is not increased to any amount greater than the sum of: (i) the outstanding principal amount or, if greater, committed amount of the indebtedness secured by liens described under clauses (1), (4), (5), (7), (8) or (12) at the time the original lien became a permitted lien under the indenture and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such permitted refinancing indebtedness; and (27) liens not otherwise permitted by clauses (1) through (26) that are incurred in the ordinary course of business of Mail-Well I Corporation or any subsidiary of Mail-Well I Corporation with respect to obligations that do not exceed $10 million at any one time outstanding. "Permitted Payments to Parent Company" means: (1) payments to Mail-Well, Inc. in an amount sufficient to permit Mail-Well, Inc. to pay reasonable and necessary operating expenses and other general corporate expenses to the extent such expenses relate or are fairly allocable to Mail-Well I Corporation and its subsidiaries including any reasonable professional fees and expenses not in excess of $1 million in the aggregate during any consecutive 12-month period; (2) payment to Mail-Well, Inc. to enable Mail-Well, Inc. to pay foreign, federal, state or local tax liabilities ("tax payment"), not to exceed the amount of any tax liabilities that would be otherwise payable by Mail-Well I Corporation and its subsidiaries to the appropriate taxing authorities if they filed separate tax returns, to the extent that Mail-Well, Inc. has an obligation to pay such tax liabilities relating to the operations, assets or capital of Mail-Well I Corporation or its subsidiaries; provided, however that (a), notwithstanding the foregoing, in the case of determining the amount of a tax payment that is permitted to be paid by Mail-Well I Corporation and any of its U.S. subsidiaries in respect of their federal income tax liability, such payment shall be determined assuming that Mail-Well I Corporation is the parent company of an affiliated group filing a consolidated federal income tax return and that 87 Mail-Well, Inc. and each such U.S. subsidiary is a member of such affiliated group and (b) any tax payments shall either be used by Mail-Well, Inc. to pay such tax liabilities within 90 days of Mail-Well, Inc.'s receipt of such payment or refunded to the party from whom Mail-Well, Inc. received such payments. "Permitted Refinancing Indebtedness" means any indebtedness of Mail-Well I Corporation or any of its restricted subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other indebtedness of Mail-Well I Corporation or any of its restricted subsidiaries (other than intercompany indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such permitted refinancing indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on the indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount reasonable expenses incurred in connection therewith including premiums paid, if any, to the holder thereof); (2) such permitted refinancing indebtedness has a final maturity date either later than the final maturity date of the indebtedness being extended, refinanced, renewed, replaced, defeased or refunded or 91 days following the maturity of the new notes, and has a weighted average life to maturity equal to or greater than the weighted average life to maturity of, the indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) If the indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the new notes, such permitted refinancing indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the new notes on terms at least as favorable to the holders of new notes as those contained in the documentation governing the indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such indebtedness is incurred either by Mail-Well I Corporation or by the restricted subsidiary who is the obligor on the indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Principals" means the officers and directors of Mail-Well, Inc. at the date we sold the old notes, their affiliates (as such term is defined under the Exchange Act) and Mail-Well, Inc.'s and Mail-Well I Corporation's Employee Stock Ownership Plan and Trust. "Registration Rights Agreement" means that certain agreement among Mail-Well I Corporation, the guarantors and the initial purchasers requiring Mail-Well I Corporation to file the exchange offer registration statement and the shelf registration statement. "Related Party" with respect to any principal means: (1) any controlling shareholder, 80% or more owned subsidiary, or spouse or immediate family member (in the case of an individual) of such principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, shareholders, partners, owners or persons beneficially holding an 80% or more controlling interest of which consist of such principal and/or such other persons, referred to in the immediately preceding clause (1). "Restricted Investment" means an investment other than a permitted investment. "Restricted Subsidiary" of a person means any subsidiary of the referenced person that is not an unrestricted subsidiary. 88 "Shelf Registration Statement" means that certain shelf registration statement filed by Mail-Well I Corporation with the Commission to register resales of the old notes or the new notes. "Significant Subsidiary" means any subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act of 1933, as such Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such person or one or more of the other subsidiaries of that person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such person or a subsidiary of such person or (b) the only general partners of which are such person or of one or more subsidiaries of such person (or any combination thereof). "Unrestricted Subsidiary" means any subsidiary of Mail-Well I Corporation that is designated by the board of directors as an unrestricted subsidiary pursuant to a board resolution, but only to the extent that such subsidiary: (1) has no indebtedness other than non-recourse debt; (2) is not a party to any agreement, contract, arrangement or understanding with Mail-Well I Corporation or any restricted subsidiary of Mail-Well I Corporation unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Mail-Well I Corporation or such restricted subsidiary than those that might be obtained at the time from persons who are not affiliates of Mail-Well I Corporation; (3) is a person with respect to which neither Mail-Well I Corporation nor any of its restricted subsidiaries has any direct or indirect obligation (a) to subscribe for additional equity interests or (b) to maintain or preserve such person's financial condition or to cause such person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any indebtedness of Mail-Well I Corporation or any of its restricted subsidiaries; and (5) has at least one director on its board of directors that is not a director or executive officer of Mail-Well I Corporation or any of its restricted subsidiaries and has at least one executive officer that is not a director or executive officer of Mail-Well I Corporation or any of its restricted subsidiaries. Any designation of a subsidiary of Mail-Well I Corporation as an unrestricted subsidiary shall be evidenced to the trustee by filing with the trustee a certified copy of the board resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption "Certain Covenants--Restricted Payments." If, at any time, any unrestricted subsidiary would fail to meet the preceding requirements as an unrestricted subsidiary, it shall thereafter cease to be an unrestricted subsidiary for purposes of the indenture and any indebtedness of such subsidiary shall be deemed to be incurred by a restricted subsidiary of Mail-Well I Corporation as of such date and, if such indebtedness is not permitted to be incurred as of such date under the covenant described under the caption 89 "Incurrence of Indebtedness," Mail-Well I Corporation shall be in default of such covenant. The board of directors of Mail-Well I Corporation may at any time designate any unrestricted subsidiary to be a restricted subsidiary; provided that such designation shall be deemed to be an incurrence of indebtedness by a restricted subsidiary of Mail-Well I Corporation of any outstanding indebtedness of such unrestricted subsidiary and such designation shall only be permitted if (1) such indebtedness is permitted under the covenant described under the caption "Certain Covenants-- Incurrence of Indebtedness," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no default or event of default would be in existence following such designation. "Voting Stock" of any person as of any date means the capital stock of such person that is at the time entitled to vote in the election of the board of directors of such person. "Weighted Average Life to Maturity" means, when applied to any indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such indebtedness. "Wholly Owned Restricted Subsidiary" of any person means a restricted subsidiary of such person all of the outstanding capital stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such person and/or by one or more wholly owned restricted subsidiaries of such person. 90 DESCRIPTION OF CERTAIN INDEBTEDNESS The following descriptions of certain of our indebtedness do not purport to be complete and are qualified in their entirety by reference to the provisions of the various agreements and indentures related thereto, copies of which have been filed with the SEC and to which reference is hereby made. SENIOR CREDIT FACILITY In February 2000, we entered into a senior credit facility with Bank of America, N.A. acting as administrative agent for a syndicate of financial institutions. We have executed five amendments to the senior credit facility with our lenders, the most recent of which was completed on February 26, 2002. The senior credit facility originally established a $250 million revolving line of credit, a $300 million Tranche A term loan and a $250 million Tranche B term loan. The Tranche A and Tranche B term loan balances are currently $49.7 million and $50.9 million, respectively, and have been primarily reduced from proceeds from the sale of our former subsidiary Jen-Coat, Inc., from the sale of Curtis 1000 Inc., the sale of our label segment, and from the sale of the old notes. The most recent amendment permanently reduced the amount available under the revolving line of the senior credit facility to $150 million. Prior to the application of the proceeds of the sale of the old notes, we were required to repay $31.4 million in principal on the Tranche A term loan in 2002, increasing by $7.4 million in each year through 2005 with a final payment of $13.9 million in 2006. We were also required to pay $.46 million each quarter on the Tranche B term loan through the first quarter of 2006, with four quarterly balloon payments of $43.5 million thereafter. Any optional prepayments of principal must be applied proportionately between the Tranche A and B term loans, and the term loan repayment amounts will adjust to reflect optional principal prepayments. The senior credit facility also provides a letter of credit subfacility. The subfacility does not increase the maximum principal amount of the senior credit facility. All current and future debt outstanding under the senior credit facility will constitute secured indebtedness as defined in the indenture for the new notes. Interest on borrowings under the senior credit facility, which is payable quarterly, is based on London Interbank Offer Rate ("LIBOR") plus an applicable margin, as defined in the senior credit facility. The applicable margin varies based on our total leverage ratio, as defined in the senior credit facility. The obligations of Mail-Well I Corporation under the senior credit facility are guaranteed by Mail-Well, Inc. and by each of our existing or after-acquired U.S. subsidiaries, as defined in the senior credit facility. Pursuant to a security agreement, the obligations under the senior credit facility are further secured by substantially all of our assets and the assets of Mail-Well, Inc. and our U.S. subsidiaries, including the shares of capital stock of Mail-Well I Corporation and the U.S. subsidiaries. The senior credit facility contains covenants and provisions that restrict, among other things, our ability to: o incur liens; o dispose of assets outside the ordinary course of business; o effect certain mergers, consolidations or bulk asset sales; o make certain loans or investments, other than investments in similar businesses that do not otherwise cause a default under the senior credit facility; o incur additional secured indebtedness and certain contingent obligations; o engage in certain transactions with affiliates; o pay dividends and other distributions on, and make repurchases or redemptions of, capital stock; and 91 o modify or prepay certain debt. In addition, the senior credit facility requires us to satisfy certain financial requirements, including: o maintaining a certain minimum consolidated net worth of not less than $300 million plus 75% of our consolidated net income for each fiscal quarter ending after September 30, 1999, plus 100% of the net proceeds from the sale of equity securities since such date, less any pre-tax net losses recorded in the fiscal years ending December 31, 2001 and 2002 resulting from book losses on dispositions or restructuring charges, up to an aggregate of $265 million, and less up to $15 million in deferred financing costs in connection with new debt issuances; o not to exceed a total leverage ratio, as defined in the senior credit facility, of 5.75 to 1.00 for the first and second fiscal quarters of 2002, and declining on a quarterly or semi-annual basis to a maximum total leverage ratio of 4.00 to 1.00 for the third fiscal quarter of 2004 and thereafter; o maintaining a minimum senior leverage ratio, as defined in the senior credit facility, of 3.50 to 1.00 for the first, second and third fiscal quarters of 2002, and declining on a quarterly basis to a minimum senior leverage ratio of 2.50 to 1.00 for the third fiscal quarter of 2003 and thereafter; o maintaining a minimum fixed charge coverage ratio, as defined in the senior credit facility, of 1.40 to 1.00 for the first and second fiscal quarters of 2002 and 1.50 to 1.00 thereafter; and o maintaining a senior secured debt coverage ratio, as defined in the senior credit facility, of 1.25 to 1.00 commencing on September 30, 2002 and thereafter. The events of default under the senior credit facility include the following: o failure to pay interest within five days after it becomes due; o failure to pay the principal when due; o breach of any representation or warranty; o failure to perform any covenant or agreement in the senior credit facility (in some cases only if the failure continues for a certain period of time); o certain defaults under other agreements, debts and other obligations, including certain contingent obligations; o imposition of certain judgments or decrees against us; o certain events of bankruptcy, insolvency or reorganization; o certain violations of the Employee Retirement Income Security Act; o certain changes of control; and o other customary provisions. 8 3/4% SENIOR SUBORDINATED NOTES We have outstanding $300 million in 8 3/4% senior subordinated notes issued under an indenture among Mail-Well I Corporation, certain of its subsidiaries as guarantors, and State Street Bank and Trust Company as trustee, a copy of which has been filed with the registration statement of which this prospectus is a part. The $300 million outstanding principal amount of senior subordinated notes mature on December 15, 2008. Mail-Well, Inc. has unconditionally guaranteed the due and punctual payment of principal of (and premium, if any) and interest on the senior subordinated notes. At the present time, the capital stock of Mail-Well I Corporation is substantially the only asset of Mail-Well, Inc., and therefore Mail-Well, Inc.'s guarantee is effectively subordinated to all indebtedness and other liabilities and commitments of our subsidiaries, as well as to all senior indebtedness of the Mail-Well, Inc. Certain of our significant subsidiaries have also unconditionally guaranteed the due and punctual payment of principal of (and premium, if any) and interest on the senior subordinated notes. The 92 senior subordinated notes may also be guaranteed by one or more of our other subsidiaries from time to time under certain circumstances. The senior subordinated notes indenture is subject to and governed by the Trust Indenture Act of 1939. The senior subordinated notes are unsecured indebtedness ranking pari passu with all of our other existing and future senior subordinated indebtedness. The payment of the principal of, premium, if any, and interest on the senior subordinated notes is subordinated, as set forth in the senior subordinated notes indenture, in right of payment to the prior payment in full in cash and cash equivalents of all of our existing and future senior indebtedness, including borrowings under the bank credit agreement and the new notes. The senior subordinated notes indenture contains certain covenants which, subject to certain conditions, limitations and exceptions, (a) restrict our ability: o to incur additional indebtedness; o to declare or pay dividends or distributions on shares of our capital stock; to purchase, redeem, acquire or retire for value capital stock of Mail-Well I Corporation or a subsidiary; o to retire prior to scheduled maturity indebtedness that is pari passu with or subordinated to the senior subordinated notes; to make loans, advances or payments to Mail-Well, Inc. or our employee stock ownership plan; to guaranty indebtedness of affiliates; or to make investments; o to enter into transactions with affiliates; o to create liens on their property or assets; and o to effect asset sales; (b) restrict our ability to merge, consolidate or convey, transfer or lease its properties and assets substantially as an entirety; and (c) restrict the ability of our subsidiaries: o to issue preferred stock; and o to guaranty indebtedness without guaranteeing the senior subordinated notes. In addition, upon a change of control, we must offer to repurchase the senior subordinated notes at 101% of their principal amount, plus accrued interest. In connection with any such offer, we would comply with the applicable tender offer rules, including Rule 14e-1, under the Exchange Act. We are currently prohibited by the senior credit facility from making such an offer to purchase the senior subordinated notes, and failure to do so if required would constitute a default under the senior subordinated notes indenture. Other events of default under the senior subordinated notes indenture include default on the payment of principal on the senior subordinated notes when due; default on the payment of interest on the senior subordinated notes for a period of 30 days after it is due; default on the payment (or the acceleration) of certain other indebtedness; default in other covenants under the senior subordinated notes indenture (in certain cases after the passage of a period of time or the giving of notice by the holders or the trustee or both); failure to pay certain final judgments or orders; and certain events of bankruptcy or insolvency. The senior subordinated notes are redeemable at a premium to par value on or after December 15, 2003, which premiums decline annually. At any time on or after December 15, 2006, the senior subordinated notes are redeemable at par value. 93 5% CONVERTIBLE SUBORDINATED NOTES Mail-Well, Inc. has outstanding $139.1 million in aggregate principal amount of 5% convertible subordinated notes due November 1, 2002. The convertible notes are direct, unsecured obligations of Mail-Well, Inc. The convertible notes may be converted at the option of the holder into one share of Mail-Well, Inc. stock at a conversion price of $19.00 per share (equivalent to a conversion rate of 13.1579 shares per $1,000 principal amount of convertible notes), subject to certain adjustments. The convertible notes are traded on the New York Stock Exchange under the symbol "MWL 02." As of May 29, 2002, the closing price of Mail-Well, Inc.'s common stock was $5.33. Subject to certain exceptions, the convertible notes are subordinated to all of our current and future senior debt, which is defined as indebtedness of Mail-Well, Inc. that is not expressly made, by its governing instruments, subordinate to or pari passu with the convertible notes. The convertible notes are also effectively subordinated to all existing and future indebtedness and liabilities of subsidiaries of Mail-Well, Inc., including Mail-Well I Corporation. The convertible notes will be subordinated to the new notes. The proceeds of the convertible notes were loaned to Mail-Well I Corporation by Mail-Well, Inc. under a demand note that will be subordinated to the notes offered hereby. The convertible notes indenture does not restrict the amount of senior debt or other indebtedness that may be incurred in the future by Mail-Well, Inc. or any of its subsidiaries. In case of any merger or consolidation of Mail-Well, Inc. or the sale or conveyance by Mail-Well, Inc. of all or substantially all of its assets, the holder of each outstanding convertible note will have the right to convert such convertible note into the kind and amount of shares of stock and other securities and property (including cash) received in such transaction by a holder of the number of shares of Mail-Well, Inc. stock into which such convertible note was convertible immediately prior to the effective date of such transaction. Mail-Well, Inc. may from time to time reduce the conversion price of the convertible notes by any amount for any period of at least 20 days, if the board of directors of Mail-Well, Inc. has made a determination that such reduction would be in the best interests of Mail-Well, Inc. Mail-Well, Inc. must give at least 15 days' notice of such reduction. The events of default under the convertible notes indenture include the following: o failure to pay interest upon any convertible note when it becomes due and payable, and continuance of such default for a period of 30 days; o failure to pay the principal of (or premium, if any, on) any convertible note at its maturity; o failure to pay the redemption price or the repurchase price when and as due; o failure to perform any covenant or agreement in the convertible notes indenture which continues for 60 days after written notice; o certain defaults under any mortgage, indenture or instrument of indebtedness of Mail-Well, Inc. or any of its subsidiaries (or the payment of which is guaranteed by Mail-Well, Inc. or any of its subsidiaries); o imposition of certain judgments or decrees against Mail-Well, Inc. or any subsidiary; and o certain events of bankruptcy, insolvency or reorganization of Mail-Well, Inc. or certain subsidiaries. The convertible notes may be redeemed at the option of Mail-Well, Inc., in whole or in part, at any time on or after November 1, 2000, at specified redemption prices, together with accrued and unpaid interest, if any, to the date of redemption. The current redemption price is 101% of the principal amount. 94 Upon the occurrence of certain change of control events described in the convertible notes indenture, or a termination of trading in Mail-Well, Inc. stock on national securities exchanges, occurring prior to the maturity of the convertible notes, each holder of convertible notes will have the right, at such holder's option, to require Mail-Well, Inc. to purchase all or part of such holder's convertible notes at a redemption price equal to 101% of the principal amount thereof, together with accrued and unpaid interest thereon. The right to require Mail-Well, Inc. to repurchase convertible notes as a result of a change of control could have the effect of delaying or preventing a change of control or other attempts to acquire control of Mail-Well, Inc. unless arrangements have been made to enable Mail-Well, Inc. to repurchase all the convertible notes. DESCRIPTION OF CAPITAL STOCK The capital stock of Mail-Well I Corporation consists of 1,000 shares of common stock, par value $0.01 per share. Holders of the common stock are entitled to one vote per share at all meetings of stockholders. Dividends that may be declared on the common stock will be paid in an equal amount to the holder of each share. No pre-emptive rights are conferred upon the holders of such stock and there are no liquidation or conversion rights, nor are there any redemption or sinking fund provisions and there is no liability to further calls or to assessments by Mail-Well I Corporation. All of the shares of common stock are issued and outstanding and are held by Mail-Well, Inc. 95 MATERIAL FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of certain of the expected material United States federal income tax considerations with respect to the new notes relevant to each registered holder who, except as noted below, is a U.S. holder of the old notes, and who: (1) purchased the old notes from Mail-Well I Corporation for cash, (2) exchanges the old notes for new notes in this exchange offer, and (3) holds the old notes and the new notes as capital assets. The term "U.S. holder" means a beneficial owner of a new note that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States or of any U.S. state or the District of Columbia, (3) an estate the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source, or (4) a trust if a U.S. court is able to exercise primary supervision over the trust's administration and one or more U.S. persons have authority to control all substantial decisions of such trust. This discussion does not purport to deal with the tax consequences of owning the new notes to all categories of investors, some of which, such as insurance companies, tax-exempt organizations, financial institutions, dealers in securities, investors who own 5% or more of our shares, and investors whose functional currency is not the U.S. dollar, may be subject to special rules. We advise prospective holders of new notes to consult their own tax advisors concerning the overall tax consequences arising in their own particular situations under U.S. federal, state, local or foreign law of the ownership of the new notes. FEDERAL INCOME TAX CONSIDERATIONS This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended, existing, temporary and proposed Treasury regulations promulgated under the I.R.C., and administrative and judicial interpretations of the I.R.C. and the regulations under it, all as in effect or proposed on the date of this prospectus and all of which are subject to change, possibly with retroactive effect, or different interpretations. This discussion does not address the tax consequences to subsequent purchasers of new notes and is limited to purchasers who hold the new notes as capital assets within the meaning of section 1221 of the I.R.C. Moreover, this discussion is for general information only and does not address all of the tax consequences that may be relevant to particular registered holders in light of their personal circumstances, including, for example, persons subject to the alternative minimum tax provisions of the I.R.C., or to certain types of initial purchasers, such as certain financial institutions, insurance companies, tax-exempt entities, dealers in securities, persons holding new notes as part of a hedging or conversion transaction, straddle or other risk reduction transactions or U.S. expatriates or persons who have hedged the risk of owning a senior note, and purchasers whose functional currency is not U.S. dollars. This discussion also does not address any aspect of foreign, state or local tax law, or U.S. federal estate and gift tax law. Holders are urged to consult their own tax advisors as to the particular tax consequences to them of the exchange, ownership and disposition of the new notes, including the applicability of any U.S. federal tax laws or any foreign, state or local tax laws, and any changes or proposed changes in applicable tax laws or interpretations of them. 96 U.S. FEDERAL INCOME TAXATION OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES The federal income tax regulations provide that gain or loss is realized on the sale of property or on the "exchange of property for other property differing materially, either in kind or in extent." Treas. Reg. Section 1.1001-1(a). In 1991, the United State Supreme Court reviewed this regulation in Cottage Savings Association v. Commissioner, 499 U.S. 554 (1991). In Cottage, a savings and loan association engaged in a series of purchases and sales of mortgage participation interests. In each transaction, the taxpayer sold mortgage participation interests to another financial institution and purchased substantially identical mortgage participation interests from the other institution. Although cast as sales and purchases, the holders exchanged mortgage participation interests. The taxpayer treated the exchanges as realization events under section 1001 of the I.R.C. and claimed losses. The I.R.S. sought to disallow the losses on the ground that the exchanged properties were economically equivalent and thus did not differ materially within the meaning of Section 1.1001-1(a) of the regulations. The Court held that the taxpayer had realized a loss. After concluding that Section 1.001-1 of the regulations is a reasonable interpretation of section 1001(a) of the I.R.C., the Court determined that, because the participation interests exchanged by the taxpayer were derived from loans made to different obligors and secured by different homes, the exchanged interests embodied legally distinct entitlements and therefore were materially different. Thus, the transaction resulted in a taxable sale or disposition under section 1001 of the I.R.C. In response to the issues raised by the Cottage decision, and in an effort to provide certainty, the I.R.S. issued regulations under section 1001 of the I.R.C. to deal explicitly with the modification of debt instruments. The regulations define when a modification will be deemed to be an exchange of the original instrument or a modified instrument that differs materially either in kind or in extent. The new regulations are found in Treas. Reg. Section 1.1001-3. Under the general rule, a "significant modification" of a debt instrument is treated as an exchange of the original instrument for a modified instrument that differs materially either in kind or extent. Modifications that are not significant modifications are not exchanges. TAXATION OF INTEREST This discussion assumes that the new notes will be treated as debt, not equity, for U.S. federal income tax purposes. Interest paid or accrued on a new note will be taxable to a U.S. holder as ordinary interest income, generally at the time it is received or accrued, in accordance with such holder's regular method of accounting for U.S. federal income tax purposes. We intend to take the position, which generally will be binding on all U.S. holders, that the new notes are not issued with "OID," or original issue discount, for U.S. federal income tax purposes and that no amounts other than stated interest will be treated as interest. This position is based on the assumption that the price at which the new notes are sold to the public will equal their face amount, or will be within the de minimis exception for OID. This position also is based on the view that the likelihood of the payment of liquidated damages, as of the date the new notes are issued, is remote. In the unlikely event that liquidated damages are paid, then such liquidated damages may be treated as OID, includable by a U.S. holder in income as such interest accrues, in advance of receipt of any cash payment of such interest. SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES Upon the sale, redemption, retirement at maturity or other taxable disposition of a new note, a U.S. holder generally will recognize gain or loss equal to the difference, if any, between (1) the sum of cash plus the fair market value of all other property received on disposition, except to the extent such cash or property is attributable to accrued but unpaid interest not previously included in income, which will be taxable as ordinary income, and 97 (2) the U.S. holder's tax basis in the new note, which is generally its cost. Gain or loss recognized on the disposition of a new note generally will be capital gain or loss and will be long-term capital gain or loss if, at the time of disposition, the new note had been held for more than one year. In the case of a U.S. holder who is an individual, the maximum long-term capital gains rate is 20%. BACKUP WITHHOLDING AND INFORMATION REPORTING Information reporting requirements may apply to certain payments made by a U.S. paying agent or other U.S. intermediary of principal, premium, if any, and interest on a new note and to proceeds of the sale or other disposition of a new note. In addition, backup withholding at the rate of 31% may apply to these payments if a U.S. holder fails to furnish its taxpayer identification number, which is its social security or employer identification number, certify that the number is correct, certify that the U.S. holder is not subject to backup withholding or otherwise comply with the applicable requirements of the backup withholding rules. Certain U.S. holders, including corporations, generally are not subject to backup withholding and information reporting. Recently issued Treasury Regulations modify some of the certification requirements for backup withholding. These modifications generally will apply to payments made after December 31, 1998. Any amounts withheld under the backup withholding rules from a payment to a U.S. holder generally will be allowed as a credit against the U.S. holder's U.S. federal income tax and may entitle the U.S. holder to a refund, provided that the required information is furnished to the Internal Revenue Service. U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS The following discussion is limited to the U.S. federal income tax consequences relevant to a holder of a new note that is not a U.S. holder. We refer to these holders as "non-U.S. holders." PAYMENT OF INTEREST ON NEW NOTES Payment of interest on the new notes to a non-U.S. holder generally will be exempt from U.S. federal income and withholding tax if the interest is not effectively connected with the conduct of a trade or business within the United States by the non-U.S. holder and the non-U.S. holder: (1) does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of Mail-Well I Corporation; (2) is not a controlled foreign corporation with respect to which Mail-Well I Corporation is a "related person" within the meaning of the I.R.C.; and (3) certifies, under penalties of perjury, that the holder is not a U.S. person and provides the holder's name and address. SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES A non-U.S. holder generally will not be subject to U.S. federal income tax, and generally no tax will be withheld, with respect to gain realized on the sale, redemption, retirement at maturity or other disposition of a new note unless: (1) the non-U.S. holder is an individual who is present in the United States for 183 or more days in the taxable year of the sale, redemption, retirement at maturity or other disposition of the new note and certain other conditions are met; or (2) the gain is treated as effectively connected with a U.S. trade or business conducted by the non-U.S. holder. 98 WITHHOLDING, REPORTING AND CERTIFICATION REQUIREMENTS New regulations effective for payments made after December 31, 1999, do not alter the substantive withholding and incorporation reporting requirements, but unify current certification procedures regarding withholding, backup withholding and information reporting on certain amounts paid to persons other than "United States persons" within the meaning of the I.R.C. Prospective investors should consult their tax advisors concerning the effect, if any, of these new regulations on an investment in the new notes. THE FOREGOING SUMMARY OF UNITED STATES TAX CONSEQUENCES IS BASED ON THE APPLICABLE UNITED STATES LAW AND REGULATIONS, ADMINISTRATIVE RULINGS AND PRACTICES OF THE UNITED STATES, ALL AS THEY EXIST AS OF THE DATE OF THIS PROSPECTUS. THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS THAT MAY BE RELEVANT TO PROSPECTIVE INVESTORS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE LAWS. 99 PLAN OF DISTRIBUTION Each broker-dealer that receives new notes for its own account pursuant to this exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. A broker-dealer may use this prospectus, as it may be amended or supplemented from time to time, in connection with resales of new notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We have agreed to make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 2002, -------------- all dealers effecting transactions in the new notes may be required to deliver a prospectus. We will not receive any proceeds from any sale of new notes by any broker-dealer. New notes received by broker-dealers for their own account pursuant to this exchange offer may be sold from time to time in one or more transactions in the following manners: o in the over-the-counter market; o in negotiated transactions; o through the writing of options on the new notes; o through a combination of such methods of resale. The sales may be at any of the following prices: o market prices prevailing at the time of resale; o prices related to such prevailing market prices; o negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to this exchange offer and any broker or dealer that participates in a distribution of such new notes may be deemed to be an "underwriter" within the meaning of the Securities Act. Any profit on any such resale of new notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the registered holders of the old notes) other than commissions or concessions of any brokers or dealers, and will indemnify the holders, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act. We have not entered into any arrangements or understandings with any person to distribute the new notes to be received in this exchange offer. There is no existing market for the new notes and although the new notes will be traded in the over-the-counter market, there can be no assurance as to the liquidity of any market that may develop for the new notes, the ability of the holders of the new notes to sell their new notes or the price at which holders would be able to sell their new notes. Future trading prices of the new notes will depend on many factors, including, among other things: o prevailing interest rates; 100 o our operating results; o the market for similar securities. The initial purchasers of the old notes have advised us that they are making a market in the old notes, and intend to make a market in the new notes, subject to the limits imposed by the Securities Act and the Exchange Act; however, they are not obligated to do so, and may discontinue such market-making at any time without notice. Therefore, no assurance can be given as to the liquidity of the trading market for the new notes. In addition, such market-making activities may be limited during the exchange offer and the pendency of any shelf registration statement relating to the new notes. This prospectus does not constitute an offer to purchase or a solicitation of an offer to sell any of the new notes in any jurisdiction in which such an offer or a solicitation is unlawful. LEGAL MATTERS Faegre & Benson LLP, Denver, Colorado, will pass upon the validity of the new notes for us. EXPERTS The consolidated financial statements of Mail-Well, Inc. as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001 included in this prospectus, have been audited by Ernst & Young LLP, independent auditors, as stated in their report appearing herein. WHERE YOU CAN FIND MORE INFORMATION We are subject to the informational requirements of the Exchange Act, and in accordance with the requirements of the Exchange Act we file reports and other information with the SEC. You may read and, for a fee, copy any document that we file with the SEC at the public reference facility maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of these documents may also be obtained at prescribed rates from the Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may also obtain the documents that we file electronically from the SEC's web site at http://www.sec.gov. While any notes remain outstanding, we will make available, upon request, to any beneficial owner and any prospective purchaser of notes the information required pursuant to Rule 144A(d)(4) under the Securities Act during any period in which we are not subject to Section 13 or 15(d) of the Exchange Act. Any such request should be directed to our Secretary at Mail-Well, Inc., 8310 S. Valley Highway, #400, Englewood, Colorado 80112. Incorporated by reference in this prospectus are the sections captioned "Director Compensation," "Compensation Committee Interlocks and Insider Participation," "Executive Compensation," "Summary Compensation Table," "2001 Long-Term Equity Incentive Plan," "Option Grants in 2001," "Aggregated Option Exercises in 2001 and 2001 Year-End Option Values," "2001 Long-Term Incentive Plans Award in 2001," "Executive Agreements," "Compensation Committee Report on Executive Compensation" and "Stock Price Performance Graph" appearing in our Proxy Statement filed pursuant to Regulation 14A in connection with our 2002 Annual Meeting of Stockholders. 101 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors............................ F-2 Consolidated Balance Sheets as of March 31, 2002, December 31, 2001 and December 31, 2000................. F-3 Consolidated Statements of Operations for the three months ended March 31, 2002 and 2001 and the years ended December 31, 2001, 2000 and 1999.................. F-4 Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001 and the years ended December 31, 2001, 2000 and 1999.................. F-5 Consolidated Statements of Changes in Shareholders' Equity for the period ended March 31, 2002 and the years ended December 31, 2001, 2000 and 1999............ F-6 Notes to Consolidated Financial Statements................ F-7 F-1 REPORT OF INDEPENDENT AUDITORS The Shareholders and Board of Directors Mail-Well, Inc. We have audited the accompanying consolidated balance sheets of Mail-Well, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mail-Well, Inc. and subsidiaries at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Denver, Colorado January 23, 2002 F-2 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
MARCH 31, 2002 DECEMBER 31 -------------- -------------------------- (UNAUDITED) 2001 2000 ----------- ---------- ---------- Assets Current assets: Cash and cash equivalents.......................................... $ 121,331 $ 809 $ 94 Accounts receivable, net........................................... 203,308 207,750 203,968 Inventories, net................................................... 103,484 104,544 131,417 Net assets of discontinued operations.............................. 219,205 246,377 394,215 Net assets held for sale........................................... 61,022 54,073 -- Other current assets............................................... 57,195 67,001 58,026 ---------- ---------- ---------- Total current assets............................................. 765,545 680,554 787,720 Property, plant and equipment, net.................................... 361,555 375,415 431,025 Goodwill and other intangible assets, net............................. 348,010 347,061 389,148 Other assets, net..................................................... 51,335 46,094 45,064 ---------- ---------- ---------- Total assets.......................................................... $1,526,445 $1,449,124 $1,652,957 ========== ========== ========== Liabilities and shareholders' equity Current liabilities: Accounts payable................................................... $ 147,474 $142,521 $127,912 Accrued compensation and related liabilities....................... 45,491 44,310 48,444 Other current liabilities.......................................... 48,139 57,245 57,978 Current maturities of long-term debt............................... 310,372 302,822 40,040 ---------- ---------- ---------- Total current liabilities........................................ 551,476 546,898 274,374 Long-term debt........................................................ 658,881 550,177 879,753 Deferred income taxes................................................. 78,484 93,573 86,765 Other liabilities..................................................... 18,528 16,599 26,212 ---------- ---------- ---------- Total liabilities..................................................... 1,307,369 1,207,247 1,267,104 Commitments and contingencies Shareholders' equity: Preferred stock, $0.01 par value; 25,000 shares authorized, none issued.......................................... -- -- -- Common stock, $0.01 par value; 100,000,000 shares authorized, 48,336,031, 48,325,801 and 47,454,879 shares issued and outstanding as of March 31, 2002, December 31, 2001 and December 31, 2000, respectively.................................. 493 483 474 Paid-in capital.................................................... 214,138 214,138 210,067 Retained earnings.................................................. 25,015 46,623 182,840 Deferred compensation.............................................. (3,205) (3,359) -- Accumulated other comprehensive loss............................... (17,355) (16,008) (7,528) ---------- ---------- ---------- Total shareholders' equity....................................... 219,076 241,877 385,853 ---------- ---------- ---------- Total liabilities and shareholders' equity............................ $1,526,445 $1,449,124 $1,652,957 ========== ========== ========== See notes to consolidated financial statements.
F-3 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share amounts)
THREE MONTHS ENDED MARCH 31 ------------------------ (UNAUDITED) YEAR ENDED DECEMBER 31 ------------------------ -------------------------------------- 2002 2001 2001 2000 1999 -------- -------- ---------- ---------- ---------- Net sales....................................... $391,729 $432,976 $1,653,471 $1,823,583 $1,533,840 Cost of sales................................... 317,695 345,142 1,324,091 1,438,435 1,182,893 -------- -------- ---------- ---------- ---------- Gross profit.................................... 74,034 87,834 329,380 385,148 350,947 Operating expenses: Selling, general and administrative.......... 58,676 62,875 238,111 248,808 202,721 Amortization of intangibles.................. 463 3,275 12,663 12,657 9,409 Impairment of assets held for sale........... -- -- 2,945 -- -- Restructuring, asset impairments and other charges.............................. 13,647 -- 41,845 6,160 1,807 -------- -------- ---------- ---------- ---------- Operating income................................ 1,248 21,684 33,816 117,523 137,010 Other (income) expense: Interest expense............................. 12,008 14,751 52,751 62,127 40,208 Other (income) expense....................... 254 526 1,790 974 (1,228) -------- -------- ---------- ---------- ---------- Income (loss) from continuing operations, before income taxes.......................... (11,014) 6,407 (20,725) 54,422 98,030 Provision (benefit) for income taxes............ (2,749) 2,220 (7,684) 20,213 39,428 -------- -------- ---------- ---------- ---------- Income (loss) from continuing operations........ (8,265) 4,187 (13,041) 34,209 58,602 Income (loss) from discontinued operations...... -- (564) (2,176) (8,038) 5,880 Loss on disposal of discontinued operations..... (8,580) -- (121,000) -- -- -------- -------- ---------- ---------- ---------- Income (loss) before extraordinary items........ (16,845) 3,623 (136,217) 26,171 64,482 Extraordinary items............................. (4,763) -- -- 1,447 -- -------- -------- ---------- ---------- ---------- Net income (loss)............................... $(21,608) $ 3,623 $ (136,217) $ 27,618 $ 64,482 ======== ======== ========== ========== ========== Earnings (loss) per share--basic: Continuing operations........................ $ (0.17) $ 0.09 $ (0.27) $ 0.70 $ 1.20 Discontinued operations...................... (0.18) (0.01) (2.59) (0.16) 0.12 Extraordinary item........................... (0.10) -- -- 0.03 -- -------- -------- ---------- ---------- ---------- Earnings (loss) per share--basic............. $ (0.45) $ 0.08 $ (2.86) $ 0.57 $ 1.32 ======== ======== ========== ========== ========== Earnings (loss) per share--diluted: Continuing operations........................ $ (0.17) $ 0.09 $ (0.27) $ 0.69 $ 1.10 Discontinued operations...................... (0.18) (0.01) (2.59) (0.16) 0.10 Extraordinary item........................... (0.10) -- -- 0.03 -- -------- -------- ---------- ---------- ---------- Earnings (loss) per share--diluted........... $ (0.45) $ 0.08 $ (2.86) $ 0.56 $ 1.20 ======== ======== ========== ========== ========== Weighted average shares--basic............... 47,658 47,457 47,562 48,789 48,990 Weighted average shares--diluted............. 47,658 47,457 47,562 56,678 58,154 See notes to consolidated financial statements.
F-4 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
THREE MONTHS ENDED MARCH 31 ------------------------- (UNAUDITED) YEAR ENDED DECEMBER 31 ------------------------- ------------------------------------- 2002 2001 2001 2000 1999 --------- --------- --------- ---------- --------- Cash flows from operating activities: Income (loss) from continuing operations...... $ (8,265) $ 4,187 $ (13,041) $ 34,209 $ 58,602 Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: Depreciation.............................. 9,823 11,042 40,966 42,855 34,141 Amortization.............................. 1,928 4,776 18,669 17,367 11,653 Extraordinary gain on early retirement of debt...................... -- -- -- (2,355) -- Noncash portion of restructuring and impairment charges...................... 6,723 -- 14,022 4,657 -- Deferred income taxes..................... (420) 1,421 2,850 8,121 12,215 Loss (gain) on disposal of assets......... 229 (158) 582 (923) (1,172) Other noncash charges (credits), net...... 96 (980) 958 902 (1,203) Changes in operating assets and liabilities, excluding the effects of acquired businesses: Accounts receivable....................... 4,688 7,938 56,316 (12,472) (14,678) Inventories............................... 745 (6,544) 18,667 (991) (12,388) Accounts payable and accrued compensation............................ 1,637 34,355 16,269 24,272 19,019 Income tax payable........................ (4,712) 7,658 (6,094) 26,817 7,748 Other working capital changes............. (9,252) (649) 3,295 (2,672) (3,970) Other, net................................ 354 (4,988) (1,476) (8,387) (2,763) --------- --------- --------- ---------- --------- Net cash provided by operating activities............................ 3,574 58,058 151,983 131,400 107,204 Cash flows from investing activities: Acquisitions, net of cash acquired........ (1,003) (3,904) (3,838) (227,044) (130,910) Capital expenditures...................... (7,952) (4,932) (26,799) (57,772) (65,087) Proceeds from divestiture................. 31,622 -- -- 110,646 -- Proceeds from sales of property and equipment............................... 60 1,805 3,777 30,941 7,259 Purchase of investment.................... -- -- (100) (1,500) -- --------- --------- --------- ---------- --------- Net cash used in investing activities... 22,727 (7,031) (26,960) (144,729) (188,738) Cash flows from financing activities: Increase (decrease) in accounts receivable financing facility........... -- (50,000) (75,000) (73,500) 95,900 Proceeds from exercise of stock options................................. -- 6 413 335 2,029 Proceeds from issuance of long-term debt.. 569,000 85,367 634,404 1,131,069 386,116 Repayments of long-term debt.............. (459,360) (117,807) (699,188) (879,316) (314,289) Capitalized loan fees..................... (12,037) (1,841) (4,439) (15,002) (1,481) Repurchases of common stock............... -- -- -- (10,000) -- Redemption of a nonvoting common stock of a subsidiary................... -- -- -- (3,508) -- --------- --------- --------- ---------- --------- Net cash provided by (used in) financing activities.................. 97,603 (84,275) (143,810) 150,078 168,275 Effect of exchange rate changes on cash and cash equivalents............................... (322) (24) (60) -- 16 Cash flows from discontinued operations.......... (3,060) 33,707 19,562 (136,925) (86,487) --------- --------- --------- ---------- --------- Net increase (decrease) in cash and cash equivalents.................. 120,522 435 715 (176) 270 Cash and cash equivalents at beginning of year... 809 94 94 270 -- --------- --------- --------- ---------- --------- Cash and cash equivalents at end of year......... $ 121,331 $ 529 $ 809 $ 94 $ 270 ========= ========= ========= ========== ========= See notes to consolidated financial statements.
F-5 MAIL-WELL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands)
ACCUMULATED OTHER TOTAL COMMON PAID-IN RETAINED DEFERRED COMPREHENSIVE SHAREHOLDERS' STOCK CAPITAL EARNINGS COMPENSATION INCOME (LOSS) EQUITY ------ -------- --------- ------------ ------------- ------------- Balance at December 31, 1998............ $ 488 $217,218 $ 90,740 $ -- $ (9,071) $ 299,375 Comprehensive income: Net income............................ 64,482 64,482 Other comprehensive income (loss): Pension liability adjustment, net of tax of $76................ 122 122 Currency translation adjustment.... 8,768 8,768 Unrealized loss on investment, net of tax benefit of $11........ (18) (18) --------- Other comprehensive income............ 8,872 --------- Total comprehensive income......... 73,354 Exercise of stock options............... 4 2,025 2,029 Adjustment to deferred tax asset for: Pooled entities....................... (168) (168) Stock options......................... 757 757 Other................................... (37) (37) ----- -------- --------- ------- -------- --------- Balance at December 31, 1999............ 492 219,795 155,222 -- (199) 375,310 Comprehensive income: Net income............................ 27,618 27,618 Other comprehensive income (loss): Pension liability adjustment, net of tax benefit of $72........ (115) (115) Currency translation adjustment.... (6,555) (6,555) Unrealized loss on investments, net of tax benefit of $412....... (659) (659) --------- Other comprehensive loss.............. (7,329) --------- Total comprehensive income......... 20,289 Exercise of stock options............... 1 334 335 Purchase and retirement of common stock.......................... (18) (9,982) (10,000) Other................................... (1) (80) (81) ----- -------- --------- ------- -------- --------- Balance at December 31, 2000............ 474 210,067 182,840 -- (7,528) 385,853 Comprehensive income (loss): Net loss.............................. (136,217) (136,217) Other comprehensive income (loss): Pension liability adjustment, net of tax benefit of $581....... (928) (928) Currency translation adjustment.... (8,467) (8,467) Unrealized loss on investments, net of tax of $119............... 915 915 --------- Other comprehensive loss.............. (8,480) --------- Total comprehensive loss........... (144,697) Exercise of stock options............... 2 411 413 Deferred compensation................... 7 3,679 (3,686) -- Amortization of deferred compensation... 327 327 Other................................... (19) (19) ----- -------- --------- ------- -------- --------- Balance at December 31, 2001............ $ 483 $214,138 $ 46,623 $(3,359) $(16,008) $ 241,877 Net Loss (unaudited).................... (21,608) (21,608) Currency translation adjustment (unaudited)........................... (1,347) (1,347) --------- Total other comprehensive loss (unaudited)...................... $ (22,955) Amortization of deferred compensation (unaudited)........................... 154 154 ----- -------- --------- ------- -------- --------- Balance at March 31, 2002 (unaudited)... $ 483 $214,138 $ 25,015 $(3,205) $(17,355) $ 219,076 ===== ======== ========= ======= ======== ========= See notes to consolidated financial statements.
F-6 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Mail-Well, Inc. and subsidiaries (collectively, the "Company") prints and manufactures envelopes in the United States and Canada and is a leading commercial printer in the United States. The Company, headquartered in Englewood, Colorado, is organized under Colorado law, and its common stock is traded on the New York Stock Exchange. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Mail-Well, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Except as otherwise noted, all amounts and disclosures have been restated to reflect only the Company's continuing operations (see note 3). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The accompanying condensed consolidated financial statements for the periods ended March 31, 2002 and 2001 have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and are unaudited. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. REVENUE RECOGNITION Revenue is recognized at the time product is shipped or title passes pursuant to the terms of the agreement with the customer, the amount due from the customer is fixed, and collectibility of the related receivable is reasonably assured. SHIPPING AND HANDLING COSTS Shipping and handling costs are included in cost of sales in the consolidated statements of operations. Shipping and handling costs billed to customers are recognized in net sales. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on deposit and investments with original maturities of three months or less. Cash and cash equivalents are stated at cost, which approximates fair value. ACCOUNTS RECEIVABLE The Company maintains an allowance for doubtful accounts based upon the expected collectibility of accounts receivable. Allowances for doubtful accounts of $4.7 million and $4.4 million have been applied as reductions of accounts receivable at December 31, 2001 and 2000, respectively. F-7 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) INVENTORIES Inventory values include all costs directly associated with manufacturing products: materials, labor and manufacturing overhead. These values are presented at the lower of cost or market, with cost determined on a first-in, first-out basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. When assets are retired or otherwise disposed of, the related costs and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. Expenditures for repairs and maintenance are charged to expense as incurred, and expenditures that increase the capacity, efficiency or useful lives of existing assets are capitalized. For financial reporting purposes, depreciation is calculated using the straight-line method based on the estimated useful lives of 15 to 45 years for buildings and improvements, 10 to 15 years for machinery and equipment and three to 10 years for furniture and fixtures. For tax purposes, depreciation is computed using accelerated methods. GOODWILL AND OTHER INTANGIBLES Goodwill represents the excess of acquisition costs over the fair value of net assets of businesses acquired and was amortized on a straight-line basis over 40 years prior to January 1, 2002, when the Company adopted Statements of Financial Accounting Standards ("SFAS") No. 142 ("SFAS 142"). Other intangibles primarily arise from the purchase price allocations of businesses acquired and are based on independent appraisals or internal estimates and are amortized on a straight-line basis over appropriate periods. Accumulated amortization for goodwill and other intangibles was $47.3 million, $46.9 million and $33.4 million at March 31, 2002, December 31, 2001 and 2000, respectively. In accordance with the provisions of SFAS 142, the changes in the carrying amount of goodwill for the three months ended March 31, 2002 are as follows (in thousands):
COMMERCIAL ENVELOPE PRINTING TOTAL -------- ---------- -------- Balance as of January 1, 2002.......................... $107,334 $213,492 $320,826 Reclassification from other intangibles (1)............ 11,240 -- 11,240 -------- -------- -------- Balance as of March 31, 2002 (unaudited)............. $118,574 $213,492 $332,066 ======== ======== ======== (1) Customer relationships and trained workforce that is required to be included as part of goodwill under SFAS 142.
In accordance with the provisions of SFAS 142, the Company ceased amortizing goodwill. Had SFAS 142 been in effect in the first quarter of 2001, the Company would not have recorded goodwill amortization expense of $2.6 million. The following table summarizes reported net income (loss) for the three months ended March 31, 2002 and March 31, 2001, adjusted to exclude goodwill amortization F-8 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) expense, and the related tax effect, that is no longer subject to amortization (in thousands, except per share amounts):
THREE MONTHS ENDED ---------------------------------------- MARCH 31, 2002 MARCH 31, 2001 -------------- -------------- (UNAUDITED) (UNAUDITED) ----------- ----------- Reported net income (loss)......................................... $(21,608) $3,623 Goodwill amortization, net of tax.................................. -- 1,624 -------- ------ Adjusted net income (loss)......................................... $(21,608) $5,247 ======== ====== Basic earnings (loss) per share - as reported...................... $ (0.45) $ 0.08 Basic earnings (loss) per share - adjusted......................... $ (0.45) $ 0.11 Diluted earnings (loss) per share - as reported.................... $ (0.45) $ 0.08 Diluted earnings (loss) per share - adjusted....................... $ (0.45) $ 0.11
The following is a summary of other intangibles (in thousands):
COMMERCIAL ENVELOPE PRINTING TOTAL ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ----------- Trademarks........................ $ 8,314 $ -- $ 8,314 Patents........................... 2,054 -- 2,054 Non-compete agreements............ 1,188 1,905 3,093 Other intangibles................. 1,731 752 2,483 ------- ------ ------- Balance as of March 31, 2002... $13,287 $2,657 $15,944 ======= ====== =======
Other intangible assets are all subject to amortization and have original estimated useful lives as follows: Trademarks--43 years; Patents-- 12 years; Non-compete agreements--5 years; Other Intangibles--Various. The estimated amortization expense for each of the succeeding five years is as follows: $2.0 million, $2.0 million, $1.3 million, $1.2 million and $1.2 million. IMPAIRMENT OF LONG-LIVED ASSETS Impaired assets are written down to their estimated fair market value. At December 31, 2001, all long-lived assets, including goodwill and other intangibles, were evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable, as measured by comparing their net book value to the estimated future undiscounted cash flows generated by their use. FOREIGN CURRENCY TRANSLATION Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than the U.S. dollar are translated at current exchange rates. Income and expense items are translated at the average rates for the year. The effects of translation are included as a component of other comprehensive income. Foreign currency transaction gains and losses are recorded in income when realized. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Statement 141 also includes guidance on the initial F-9 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001. Statement 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. Statement 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. Additionally, Statement 142 requires that goodwill included in the carrying value of equity method investments no longer be amortized. Mail-Well began its application of Statement 142 beginning in the first quarter of 2002. The Company has completed the first step of the two-step process prescribed in Statement 142 to test goodwill for impairment and has concluded that a portion of the $213.5 million of goodwill related to our commercial printing business is impaired. The extent of this impairment will not be known until we have completed step two of the process. The Company will recognize the amount of the impairment as a cumulative effect of a change in accounting principle as of January 1, 2002 when it is determined. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. Statement 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Mail-Well will adopt Statement 143 in the first quarter of fiscal year 2003. The Company is evaluating the impact of the adoption of Statement 143 on the consolidated financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes one accounting model to be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. Statement 144 supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of ABP Opinion No. 30, Reporting the Results of Operations--Reporting the Effects Of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Mail-Well adopted Statement 144 as of January 1, 2002 and there was no impact from the adoption of this statement. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with the current year presentation. 2. ACQUISITIONS The acquisitions described below have been accounted for as purchases; accordingly, the assets and liabilities of the acquired companies have been recorded at their estimated fair values with the excess of the purchase price over the estimated fair values recorded as goodwill. Certain of the Company's acquisition agreements provide for deferred payments by the Company, contingent upon future revenues or profits of the companies acquired. Such payments are capitalized and recorded as goodwill. The financial statements reflect the operations of the acquired businesses, from their respective acquisition dates. ACQUISITIONS IN THE COMMERCIAL PRINTING SEGMENT In January 2000, the Company acquired the assets and assumed certain liabilities of Braceland Brothers, Inc., located in Philadelphia, Pennsylvania; Atlanta, Georgia; and Steubenville, Ohio, for $13.7 million. The Philadelphia location has been closed. Goodwill recorded as a result of this acquisition was $3.1 million. In May 2000, the Company purchased the stock of Craftsmen Litho, Inc., located in Waterbury, Connecticut, for $9.3 million. Goodwill recorded as a result of this acquisition was $5.5 million. F-10 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) In June 2000, the Company purchased the stock of Strathmore Press, Inc., located in Cherry Hill, New Jersey, for $9.3 million. This company has been consolidated with another operation in the Philadelphia area. Goodwill recorded as a result of this acquisition was $4.9 million. During 1999, the Company paid $103.6 million and assumed debt of $1.6 million to acquire seven commercial printing companies. The goodwill recorded in connection with these acquisitions was approximately $63.4 million. ACQUISITIONS IN THE ENVELOPE SEGMENT In February 2000, the Company acquired American Business Products, Inc. ("ABP") in a cash tender offer, in which the total value of the transaction, including the assumption of debt, was approximately $338.5 million. Goodwill recorded as a result of this acquisition was $154.6 million. In September 2000, the Company sold Jen-Coat, the extrusion and coating laminating business unit of ABP for $110.6 million. In June 2001, the Company announced its intent to divest Curtis 1000 and Discount Label, two other business units acquired in the ABP acquisition. Jen-Coat, Curtis 1000 and Discount Label have been included within the discontinued operations. International Envelope is the only ABP business unit included in continuing operations. The portion of the ABP purchase price allocated to International Envelope was $75.9 million including goodwill of $39.1 million. In July 2000, the Company purchased the stock of CML Industries Ltd., a supplier of envelopes and converted paper products located in Ontario and Quebec, Canada, for $20.9 million. Goodwill recorded as a result of this acquisition was $12.1 million. In October 1999, the Company purchased the stock of Northeastern Envelope, located in Braintree, Massachusetts, for $2.6 million. Goodwill recorded as a result of this acquisition was $1.3 million. 3. DISCONTINUED OPERATIONS In June 2001, the Company announced plans to sell its Label and Printed Office Products segments. Management expects to complete these dispositions by September 30, 2002. These segments have been segregated from continuing operations and reported as discontinued operations for all periods presented in the accompanying consolidated financial statements. The reported loss on disposition of the Label and Printed Office Products segments includes the write-down to net realizable value based on estimated proceeds, costs associated with the planned dispositions, the estimated earnings or losses from operations of the discontinued businesses through the expected date of these dispositions and the related income tax expense. Management has based its estimates of the sales proceeds expected from the divestitures of Label and Printed Office Products on data provided by its financial advisors and indications of value received from prospective buyers. The loss will be adjusted if management has information indicating that the actual sales proceeds are different than the estimates. The accrual for estimated earnings or losses from the measurement date to December 31, 2001 was not materially different than the actual results. On February 22, 2001, the Company sold Curtis 1000 Inc., an operation included in the Printed Office Products segment, for approximately $40 million. The estimated proceeds from the sale were not significantly different from the amount used to estimate the loss on disposal. In September 2000, the Company sold Jen-Coat, the extrusion coating and laminating business segment of ABP. The operating results of this business unit were recorded as discontinued operations in the 2000 consolidated statement of operations. F-11 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) Interest expense has been allocated to the operating results and the expected earnings included in the calculation of the loss on disposal of discontinued operations based upon the relative net assets of Jen-Coat, Label and Printed Office Products. This allocation of interest totaled $6.5 million and $6.8 million for the three months ended March 31, 2002 and 2001, respectively. This allocation of interest totaled $26.1 million, $30.0 million and $15.0 million for the years ended December 31, 2001, 2000 and 1999, respectively. Operating results of the discontinued operations for the years ended December 31, 2001, 2000 and 1999 are summarized as follows (in thousands):
2001 2000 1999 --------- -------- -------- Net sales: Label...................................................... $ 219,182 $223,994 $188,008 Printed Office Products.................................... 386,446 377,636 165,382 Jen-Coat................................................... -- 56,036 -- --------- -------- -------- $ 605,628 $657,666 $353,390 ========= ======== ======== Income (loss) from operations: Label...................................................... $ (1,028) $(15,005) $ 3,411 Printed Office Products.................................... (1,058) 3,721 6,389 Jen-Coat................................................... -- 1,721 -- --------- -------- -------- (2,086) (9,563) 9,800 Income tax expense (benefit)............................... 90 (1,525) 3,920 --------- -------- -------- $ (2,176) $ (8,038) $ 5,880 ========= ======== ======== Loss on disposal of discontinued operations: Label...................................................... $ (87,062) $ -- $ -- Printed Office Products.................................... (79,717) -- -- --------- -------- -------- (166,779) -- -- Income tax expense (benefit)............................... (45,779) -- -- --------- -------- -------- $(121,000) $ -- $ -- ========= ======== ========
F-12 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) Operating results of the discontinued operations for the three months ended March 31, 2002 and 2001 are summarized as follows (in thousands):
MARCH 31, ---------------------------- 2002 2001 ---------- ----------- (UNAUDITED) (UNAUDITED) ---------- ----------- Net sales: Label............................................. $ 53,276 $ 55,508 Printed Office Products........................... 74,540 100,739 -------- -------- $127,816 $156,247 ======== ======== Income (loss) from operations: Label............................................. $ (365) $ (413) Printed Office Products........................... (7) 356 -------- -------- (372) (57) Income tax expense................................ 605 508 -------- -------- (977) (565) Loss on disposal of discontinued operations: Label............................................. (3,184) -- Printed Office Products........................... (356) -- -------- -------- (3,540) -- Income tax expense................................ 4,063 -- -------- -------- $ (8,580) $ (565) ======== ========
The assets and liabilities of discontinued operations, which have been reflected as net assets of discontinued operations in the consolidated balance sheets, are summarized as follows (in thousands):
MARCH 31, DECEMBER 31, --------- ------------ 2002 2001 2000 -------- -------- -------- (UNAUDITED) ----------- Label segment: Current assets.................................. $ 54,409 $ 46,285 $ 59,569 Long-term assets................................ 90,778 97,109 146,969 -------- -------- -------- Total assets................................ 145,187 143,394 206,538 Current liabilities............................. 38,395 40,085 29,751 Long-term liabilities........................... 5,910 3,909 6,092 -------- -------- -------- Total liabilities........................... 44,305 43,994 35,843 -------- -------- -------- Net assets of the Label segment.................... 100,882 99,400 170,695 Printed Office Products segment: Current assets.................................. 33,989 56,227 65,961 Long-term assets................................ 123,320 158,875 222,313 -------- -------- -------- Total assets................................ 157,309 215,102 288,274 Current liabilities............................. 31,852 49,068 40,319 Long-term liabilities........................... 7,134 19,057 24,435 -------- -------- -------- Total liabilities........................... 38,986 68,125 64,754 -------- -------- -------- Net assets of the Printed Office Products segment.. 118,323 146,977 223,520 -------- -------- -------- Net assets of discontinued operations.......... $219,205 $246,377 $394,215 ======== ======== ========
F-13 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) Assets primarily consist of accounts receivable, inventories, property and equipment and deferred income taxes. Liabilities primarily consist of accounts payable, accrued expenses, deferred income taxes and other long-term liabilities. The net assets of discontinued operations presented in the 2001 consolidated balance sheet include the write-down of assets to estimated net realizable value, the accrual of obligations associated with the sale of the two segments and the accrual of estimated losses to the expected date of disposal. See Note 15, Subsequent Event, for discussion of the sale of the Label segment. 4. ASSETS HELD FOR SALE The Company's divestiture plans also include the sale of certain operations that are not strategic to its Envelope and Commercial Printing segments. The Company expects to complete the dispositions of these operations by September 30, 2002. The following table presents the sales and operating income of these operations for the three months ended March 31, 2002 and 2001 and the years ended December 31, 2001, 2000 and 1999 (in thousands):
MARCH 31, DECEMBER 31, --------- ------------ 2002 2001 2001 2000 1999 ------- ------- -------- -------- ------- (UNAUDITED) (UNAUDITED) ----------- ----------- Sales........................... $26,894 $29,504 $112,626 $120,045 $96,070 Operating income................ 1,434 2,455 9,999 13,189 11,584
Certain of these assets were written down to their fair market values based on estimated sales proceeds resulting in an impairment charge of $2.9 million in 2001. The assets of these operations at March 31, 2002 and December 31, 2001 totaled $67.4 million and $72.4 million, respectively, and are reported net of $11.4 million and $13.3 million of related liabilities, respectively, as "Net assets held for sale." 5. SUPPLEMENTAL BALANCE SHEET INFORMATION INVENTORIES The Company's inventories by major category are as follows (in thousands):
MARCH 31, DECEMBER 31, --------- ------------ 2002 2001 2000 -------- -------- -------- (UNAUDITED) ----------- Raw materials..................................... $ 29,816 $ 29,964 $ 44,083 Work in process................................... 20,314 21,868 27,955 Finished goods.................................... 56,935 56,768 63,695 -------- -------- -------- 107,065 108,600 135,733 Reserves.......................................... (3,581) (4,056) (4,316) -------- -------- -------- $103,484 $104,544 $131,417 ======== ======== ========
F-14 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) PROPERTY, PLANT AND EQUIPMENT The Company's investment in property, plant and equipment consists of the following (in thousands):
MARCH 31, DECEMBER 31, --------- ------------ 2002 2001 2000 -------- -------- -------- (UNAUDITED) ----------- Land and land improvements........................ $ 17,677 $ 11,818 $ 19,707 Buildings and improvements........................ 89,444 95,939 104,165 Machinery and equipment........................... 417,478 429,206 447,396 Furniture and fixtures............................ 13,163 13,091 13,259 Construction in progress.......................... 13,087 8,922 9,735 --------- --------- --------- 550,849 558,976 594,262 Accumulated depreciation.......................... (189,294) (183,561) (163,237) --------- --------- --------- $ 361,555 $ 375,415 $ 431,025 ========= ========= =========
ACCUMULATED OTHER COMPREHENSIVE LOSS The after-tax components comprising accumulated other comprehensive loss are as follows (in thousands):
THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, --------- ------------ 2002 2001 2001 2000 ------- -------- -------- ------- (UNAUDITED) (UNAUDITED) ----------- ----------- Currency translation adjustment................ $(1,347) $ (6,513) $(14,934) $(6,467) Pension liability adjustment................... -- -- (1,074) (146) Unrealized loss on investments................. -- (3,930) -- (915) ------- -------- -------- ------- $(1,347) $(10,443) $(16,008) $(7,528) ======= ======== ======== =======
F-15 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) 6. LONG-TERM DEBT At March 31, 2002, December 31, 2001 and December 31, 2000, long-term debt consists of the following (in thousands):
DECEMBER 31, MARCH 31, ------------ 2002 2001 2000 --------- --------- -------- (UNAUDITED) ----------- Secured Senior Credit Facility: Tranche A term loan, due 2006.............................. $ 83,448 $ 194,918 $237,586 Tranche B term loan, due 2007.............................. 85,370 192,749 209,603 Revolving loan facility, due 2006.......................... -- 6,000 -- Senior Notes, due 2012.......................................... 350,000 -- -- Senior Subordinated Notes, due 2008............................. 300,000 300,000 300,000 Convertible Subordinated Notes, due 2002........................ 139,063 139,063 139,063 Other........................................................... 11,372 20,269 33,541 --------- --------- -------- 969,253 852,999 919,793 Less current maturities......................................... (310,372) (302,822) (40,040) --------- --------- -------- Long-term debt.................................................. $ 658,881 $ 550,177 $879,753 ========= ========= ========
In February 2000, the Company entered into an $800,000,000 Senior Secured Credit Facility (the "Credit Facility"). The Credit Facility originally consisted of a $300 million Tranche A term loan, a $250 million Tranche B term loan and a $250 million revolving loan facility. The Company is required to repay $33.3 million in principal on the Tranche A term loan in 2002, increasing $7.8 million each year through 2005 with a final payment of $14.7 million in 2006. The Company is required to repay $490,000 each quarter on the Tranche B term loan through the first quarter of 2005, with four quarterly balloon payments of $46.1 million per quarter thereafter. Any optional or required prepayments of principal are applied proportionately between the Tranche A and B term loans. Interest under the Credit Facility, which is payable quarterly, is based on London Interbank Offered Rate ("LIBOR") plus a margin. At December 31, 2001, the interest rates on Tranche A and B term loans were 5.56% and 5.77%, respectively, and the interest rate on the revolving loan facility was 6.75%. The Credit Facility is secured by substantially all of the Company's domestic property. In November 1998, the Company issued $300,000,000 of 8.75% Senior Subordinated Notes (the "Senior Notes"), which are due November 2008. Interest is payable semi-annually. The Company may redeem the Senior Notes, in whole or in part, on or after December 15, 2003, at redemption prices which range from 100% to 104.375%, plus accrued and unpaid interest. In November 1997, the Company issued $152,050,000 of 5% Convertible Subordinated Notes due 2002 (the "Convertible Notes"). Interest is payable semi-annually. The Convertible Notes are convertible at the option of the holder into shares of the Company's common stock at a conversion price of $19.00 per share at any time prior to November 1, 2002. In March 2000, the Company repurchased $12,987,000 of the outstanding Convertible Notes at a discount and recorded a gain of $2,989,000, which was reported net of tax as an extraordinary item in the consolidated statements of operations. The Credit Facility provides for the funds needed for the mandatory retirement of the Convertible Notes on their due date, subject to meeting applicable borrowing conditions. Other long-term debt is primarily term debt with banks with interest rates which range from 6.0% to 12.0% at December 31, 2001. Other long-term debt also includes capital lease obligations. F-16 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) At December 31, 2001, the Company had $131.5 million available on its existing lines of credit. In February 2000, the Company wrote off deferred financing costs of $635,000 capitalized in connection with the bank borrowings, which were repaid in February 2000. The charge is reported net of tax as an extraordinary item in the consolidated statements of operations. The aggregate annual maturities for long-term debt at March 31, 2002 are as follows (in thousands): 2002............................................... $310,372 2003............................................... 21,236 2004............................................... 23,823 2005............................................... 27,019 2006............................................... 68,932 Thereafter......................................... 517,871 -------- $969,253 ========
Current maturities include the anticipated retirement of the Convertible Notes and also include the portion of bank borrowings that will be paid from the proceeds from planned divestitures pursuant to the terms of the Credit Facility, net of amounts that would become available as a result of such repayments under the revolving credit facility due in 2006. The Credit Facility, Senior Notes and Convertible Notes contain certain restrictive covenants that, among other things and with certain exceptions, limit the ability of the Company to incur additional indebtedness or issue capital stock, prepay subordinated debt, transfer assets outside of the Company, pay dividends or repurchase shares of common stock. In addition to these restrictions, the Company is required to satisfy certain financial covenants. As of December 31, 2001, the Company is in compliance with all of these covenants. Cash paid for interest (including interest allocated to discontinued operations) on long-term debt was $71,494,000, $89,923,000 and $51,849,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The estimated fair value of the Company's Credit Facility, Senior Notes, Convertible Notes and other long-term debt based on current rates available to the Company for debt of the same remaining maturity was $793.6 million and $794.2 million at December 31, 2001 and 2000, respectively. In March 2002, the Company issued $350,000,000 of 9 5/8% Senior Notes due 2012 ("Senior Notes"). Interest is payable semi-annually. The Company may redeem the Senior Notes, in whole or in part, on or after March 15, 2007, at a redemption prices from 100% to 104.813%, plus accrued and unpaid interest. In addition, before March 2005, the Company can redeem up to 35% of the Senior Notes at 109.625% of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds from certain common stock offerings. The Company used the proceeds from the sale of the Senior Notes to repay $197.0 million of its Tranche A and B term loans and $22.0 million of other debt. The remaining proceeds will be used to fund working capital needs and provide the liquidity needed for the repayment of our convertible debt due in November 2002. In addition, $20.5 million of the proceeds received from the sale of Curtis 1000, Inc. were used to repay the Tranche A and B term loans. Deferred financing costs of $8.2 million incurred in connection with the Secured Senior Credit Facility were written off as of March 31, 2002. This write-off represented the pro rata portion of the deferred financing fees related to the Tranche A and B term loans repaid with the proceeds from the F-17 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) sale of the Senior Notes and the sale of Curtis 1000, Inc. The write-off is reported net of tax as an extraordinary item in the condensed consolidated statements of operations. As of March 31, 2002, the Company was in compliance with all of the covenants of its various debt agreements. 7. ACCOUNTS RECEIVABLE FINANCING FACILITY In 2000 and until July 2001, the Company utilized an accounts receivable financing facility which entitled the Company to transfer, without recourse, certain trade accounts receivable to a special purpose entity and to receive up to $75 million from a group of unrelated third party purchasers at a cost of funds equal to commercial paper rates. The Company continued to service the receivables that were transferred to the special purpose entity under the facility for which it received a fee as specified by the facility and considered adequate compensation. At December 31, 2000, net accounts receivable of $151.1 million had been transferred to the special purpose entity under the facility. Of the total transferred, $75.0 million was sold to third party purchasers. The value of the Company's retained subordinated interest at December 31, 2000 was $75.4 million and is included in accounts receivable in the consolidated balance sheet. This value was determined by considering the average life of accounts receivables, which was 45 days, and the rate of expected credit losses, which was very low due to the collection experience of the Company. The facility was terminated in July 2001. 8. INCOME TAXES Because the March 31, 2002 information is not significantly different than the year-end information, this footnote has not been updated. Income (loss) from continuing operations for the years ended December 31, 2001, 2000 and 1999 was (in thousands):
2001 2000 1999 -------- ------- ------- Domestic......................................................... $(48,748) $31,721 $77,415 Foreign.......................................................... 28,023 22,701 20,615 -------- ------- ------- Income (loss) from continuing operations before income taxes..... $(20,725) $54,422 $98,030 ======== ======= =======
F-18 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) The provision for income taxes on income from continuing operations for the years ended December 31, 2001, 2000 and 1999 consisted of the following (in thousands):
2001 2000 1999 -------- ------- ------- Current tax provision (benefit): Federal..................................................... $(18,293) $ 3,338 $19,063 Foreign..................................................... 9,589 8,421 6,244 State....................................................... (1,830) 333 1,906 -------- ------- ------- (10,534) 12,092 27,213 Deferred provision: Federal..................................................... 2,234 6,218 9,537 Foreign..................................................... 392 1,281 1,725 State....................................................... 224 622 953 -------- ------- ------- 2,850 8,121 12,215 -------- ------- ------- Provision (benefit) for income taxes........................... $ (7,684) $20,213 $39,428 ======== ======= =======
A reconciliation of the federal statutory tax rate to the Company's effective income tax rate is summarized below:
2001 2000 1999 ----- ----- ----- Federal statutory tax rate............................................ 35.0% 35.0% 35.0% State tax, net of federal tax benefit................................. 3.5 3.5 3.5 Nondeductible goodwill amortization................................... (13.0) 4.9 2.2 Nontaxable investment benefit......................................... 10.4 (3.9) (2.0) Other................................................................. 1.2 (2.4) 1.5 ----- ----- ----- Effective income tax rate............................................. 37.1% 37.1% 40.2% ===== ===== =====
F-19 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) Deferred taxes are recorded to give recognition to temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements. The tax effects of these temporary differences are recorded as deferred tax assets or deferred tax liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years. Deferred tax liabilities generally represent items that have been deducted for tax purposes, but have not yet been recorded in the consolidated statements of operations. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2001 and 2000 are presented below (in thousands):
2001 2000 --------- --------- Deferred tax assets: Alternative minimum tax credit carryforwards........................... $ 5,563 $ 4,413 Net operating loss carryforwards....................................... 5,626 159 Compensation and benefit related accruals.............................. 15,910 13,326 Restructuring accruals................................................. 8,620 6,179 Accounts receivable.................................................... 1,718 2,986 Other.................................................................. 896 4,566 Valuation allowance.................................................... (254) (275) -------- -------- Total deferred tax assets................................................. 38,079 31,354 Deferred tax liabilities: Property, plant and equipment.......................................... 91,349 83,843 Goodwill and other intangibles......................................... 14,850 16,091 Other.................................................................. 3,006 3,173 -------- -------- Total deferred tax liabilities............................................ 109,205 103,107 -------- -------- Net deferred tax liability................................................ $ 71,126 $ 71,753 ======== ========
The net deferred income tax liability at December 31, 2001 and 2000 includes the following components (in thousands):
2001 2000 -------- -------- Current deferred tax asset......................................... $ 22,447 $ 15,012 Non-current deferred tax liability................................. (93,573) (86,765) -------- -------- Total.............................................................. $(71,126) $(71,753) ======== ========
Net operating losses of $14.6 million are being carried forward and are available to reduce future taxable income. These net operating losses will expire in 2020. The Company also has tax credit carryforwards of $5.6 million at December 31, 2001, which may be carried forward indefinitely. Cash payments for income taxes (including the amounts allocated to discontinued operations) were $2,385,000, $8,813,000 and $21,255,000 in 2001, 2000 and 1999, respectively. F-20 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) The Company does not provide U.S. income taxes on the unremitted earnings of its foreign subsidiaries since these earnings are deemed permanently invested. Unremitted earnings of the Company's foreign subsidiaries as of December 31, 2001 were $70.9 million. 9. RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES 2001 RESTRUCTURING FIRST QUARTER 2002. As announced in 2001, the Company is consolidating certain operations to eliminate excess internal capacity in order to reduce costs and improve its long-term competitive position. In addition, the Company is significantly reducing the size of certain of its facilities in response to current market conditions. The restructuring charge related to these plans totaled $11.7 million in first quarter of 2002. The following table and discussion present the details of this restructuring charge, as well as other related charges recorded during the quarter (unaudited):
COMMERCIAL ENVELOPE PRINTING CORPORATE TOTAL -------- ---------- --------- ----- (IN THOUSANDS) Employee separation and related employee expenses............................... $ -- $ 233 $ -- $ 233 Other exit costs................................... 3,498 -- -- 3,498 Asset impairment charges........................... 4,895 -- -- 4,895 Implementation expenses............................ 3,040 -- -- 3,040 ------- ------ ---- ------- Total restructuring costs..................... 11,433 233 -- 11,666 Other charges...................................... 580 774 627 1,981 ------- ------ ---- ------- Total restructure and other charges........... $12,013 $1,007 $627 $13,647 ======= ====== ==== =======
In addition to the three envelope manufacturing facilities consolidated in 2001, the envelope business consolidated four facilities in the first quarter of 2002 and will consolidate four additional operations during the remainder of 2002. When this consolidation plan is completed the Company will have closed 11 envelope plants and substantially reduced excess internal capacity and improved utilization of equipment and resources at the remaining 27 domestic plants and 12 plants in Canada. In 2001, the Company accrued the separation and related employee expenses covering the 923 employees expected to be terminated over the course of this project. As of March 31, 2002, 553 employees had been separated. Other exit costs of $3.5 million in the first quarter of 2002 are primarily training costs and other incremental expenses incurred in connection with those employees added at the plants that are absorbing the sales of the plants being closed. Incremental external implementation expenses were $3.0 million in the first quarter 2002. Equipment taken out of service during the first quarter of 2002 as a result of the consolidation program was written down $4.9 million to its fair market value. Commercial printing completed the consolidation of its operations in the Philadelphia, Pennsylvania area in 2001. Commercial printing is also fixed costs at certain of its commercial printing facilities in response to changes in market conditions. As a result, it reduced headcount in the first quarter of 2002 by 143 employees and incurred severance costs of $233,000. In 2001, the Company initiated several programs to significantly improve operations and marketing effectiveness. Both the envelope and commercial printing businesses have programs in place to institute best practices, install pricing disciplines and align equipment and services to better serve our customers and markets. We believe these initiatives will significantly improve the performance of F-21 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) our businesses; accordingly, we have expedited the implementation of these programs by investing in outside assistance. The external incremental cost incurred on these initiatives totaled $2.0 million during the first quarter of 2002. The Company expects to complete its restructuring and other strategic initiatives by the end of 2002 and anticipates further charges of approximately $35.0 million. Implementation expenses are expected to total $4 million and training and other exit costs are estimated to be $15 million. In addition, $16 million of equipment, which will not be sold or redeployed, will be written-off. A summary of the activity charged to the restructuring liability during the three months ended March 31, 2002 was as follows (in thousands):
COMMERCIAL ENVELOPE PRINTING TOTAL -------- ---------- ----- Balance, December 31, 2001.............................. $10,126 $ 604 $10,730 Payments for severance............................... (3,124) -- (3,124) Payments for lease termination costs................. (35) -- (35) Payments for other exit costs........................ -- (131) (131) ------- ----- ------- Balance, March 31, 2002 (unaudited)..................... $ 6,967 $ 473 $ 7,440 ======= ===== =======
2001. In June 2001, the Company announced a new strategic plan, which includes plans to further consolidate certain operations to eliminate excess internal capacity in order to reduce costs and improve its long-term competitive position. The restructuring charge related to these plans totaled $37.4 million in 2001. The following table presents the details of this restructuring charge, as well as other charges recorded in 2001 (in thousands):
COMMERCIAL ENVELOPE PRINTING CORPORATE TOTAL -------- ---------- --------- ------- Employee separation and related expenses................... $ 9,042 $ 385 $ -- $ 9,427 Lease termination costs.................................... 1,368 346 -- 1,714 Other exit costs........................................... 13,174 1,632 -- 14,806 Asset impairment charges................................... 8,178 601 -- 8,779 Strategic assessment costs................................. -- -- 2,677 2,677 ------- ------ ------ ------- Total restructuring costs............................... 31,762 2,964 2,677 37,403 Other charges.............................................. 1,360 1,482 1,600 4,442 ------- ------ ------ ------- Restructuring, asset impairments and other charges...... $33,122 $4,446 $4,277 $41,845 ======= ====== ====== =======
The Envelope segment implemented a plan to consolidate nine (the decision to close two additional plants was made in the first quarter 2002) of its manufacturing facilities over an 18-month period. This plan will substantially reduce excess internal capacity and improve utilization of equipment and resources at the remaining 41 plants. The employee separation and related expenses cover 923 employees to be terminated over the course of this project, of which 359 employees have been terminated as of December 31, 2001. Other exit costs include training expenses for those employees at the plants that are absorbing the sales of the plants being closed and external assistance in implementing the plant closures. As of December 31, 2001, plants in Omaha, Nebraska; Allentown, Pennsylvania; and Santa Fe Springs, California were closed. Equipment taken out of service as a result of these plant closures was written down $8.2 million to its fair market value. F-22 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) Commercial Printing consolidated three of its printing operations in the Philadelphia, Pennsylvania area into one existing facility. This consolidation was done to improve the cost effectiveness of these operations and their competitive position in the Philadelphia market. The costs associated with this consolidation included severance and related expenses covering the termination of 25 employees all of whom have been terminated. Other exit costs included expenses incurred to move and reinstall equipment. Equipment taken out of service was written down $0.6 million to its fair market value. In developing the Company's new strategic plan, outside advisors were engaged to research and evaluate markets, survey customers and assess existing strategies. Financial advisors were also engaged to evaluate options for improving the Company's capital structure. The cost of these advisors was $2.7 million. The following table is an analysis of the reserve recorded for the 2001 restructuring (in thousands):
COMMERCIAL ENVELOPE PRINTING TOTAL -------- ---------- ----- Initial accrual............................................ $13,449 $1,952 $15,401 Payments for severance..................................... (2,962) (381) (3,343) Payments for lease termination costs....................... (219) (608) (827) Payments for other exit costs.............................. (142) (45) (187) Reversal of unused portion................................. -- (314) (314) ------- ------ ------- Balance, December 31, 2001................................. $10,126 $ 604 $10,730 ======= ====== =======
The Company launched several initiatives during 2001 to significantly improve operations and marketing. Both Envelope and Commercial Printing have programs in place to institute best practices, install pricing disciplines and align equipment and services to better serve customers and markets. The Company has invested in outside assistance to expedite the implementation of these programs. The external incremental cost incurred totaled $2.1 million in 2001 and is included in other charges. Other charges also include a $1.6 million write-off of an investment in a company developing a service to enable online management of the creative process of a printing job and a $0.7 million write-off in the envelope segment for the cost of a human resource information system that will not be implemented. F-23 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) 2000 RESTRUCTURING In 2000, the Company began the comprehensive review of its operations, which ultimately led to the new strategy announced in 2001, and identified certain actions that could be taken at that time. The following table presents the details of the restructuring and asset impairment charges recorded in 2000 (in thousands):
COMMERCIAL ENVELOPE PRINTING TOTAL -------- ---------- ------ Employee separation and related expenses.............. $ 86 $ 188 $ 274 Lease termination costs............................... -- 428 428 Other exit costs...................................... -- 45 45 Asset impairment charges.............................. -- 749 749 ------ ------ ------ Total restructuring costs......................... 86 1,410 1,496 Other asset impairments............................... 1,872 2,036 3,908 ------ ------ ------ Restructuring, asset impairments and other charges.... $1,958 $3,446 $5,404 ====== ====== ======
Envelope closed a resale operation in Vancouver, Washington. The employee separation costs covered the severance expenses of 19 employees. Commercial Printing consolidated two operations in St. Louis, Missouri into an existing facility and closed its bindery operation in Mexico. Approximately 165 employees of commercial printing were terminated as a result of these actions. The Company also incurred asset impairment charges in 2000 totaling $3.9 million that were unrelated to the restructuring. These assets were not in use and could not be redeployed or sold, and therefore were written-off. Charges from the 1998 restructuring plan recorded in 2000 and 1999 were $0.8 million and $1.8 million, respectively. This plan was completed in 2000. The following table is an analysis of the reserve recorded for the 2000 restructuring (in thousands):
COMMERCIAL ENVELOPE PRINTING TOTAL -------- ---------- ------ Balance, December 31, 2000............................ $ 86 $1,485 $1,571 Payments for severance............................ (86) (461) (547) Payments for property exit costs.................. -- (452) (452) Payments for other exit activities................ -- (572) (572) ---- ------ ------ Balance, December 31, 2001............................ $ -- $ -- $ -- ==== ====== ======
10. STOCK OPTION PLANS As of March 31, 2002, the Company's stock option plans were not significantly different than the year-end information, as such, this footnote has not been updated. In May 2001, the Company adopted a Long-Term Equity Incentive Plan (the "Incentive Plan"), which replaced all prior stock option plans (the "Option Plans"). The Incentive Plan allows the compensation committee of the Board of Directors to grant stock options, stock appreciation rights ("SARs"), restricted common stock, performance awards and any other stock-based awards to officers, F-24 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) directors and employees of the Company. Under the Incentive Plan, the Board granted 669,000 Performance-Based Restricted Shares ("PARS") and 3,113,420 stock options in 2001. The stock options vest over 4 1/2 years, at a vesting rate of 20% annually with the final 20% vesting in December 2005. Fifty percent of the PARS will vest in June 2006 and the other fifty percent will vest in June 2007. The Incentive Plan provides for an acceleration of the vesting of both the stock options and the PARS if the Company's stock price closes at certain levels for 20 consecutive trading days as set forth in the following schedule:
STOCK PRICE AT WHICH AMOUNT OF ACCELERATED VESTING OCCURS VESTING OPTIONS PARS --------------------- ------- ------ First one-third.......................... $ 7.50 $ 8.00 Second one-third......................... $10.00 $11.00 Final one-third.......................... $12.50 $14.00
The Company recorded fixed deferred compensation in the amount of $3,686,000 equal to the value of the PARS on the date of grant. This deferred compensation is being amortized over the vesting period of six years; however, the expense will be prorated to the applicable vesting period if acceleration terms expedite the vesting period. The Company recorded compensation expense in the amount of $327,000 for the year ended December 31, 2001. At December 31, 2001, 217,783 stock options were available for issuance under the Incentive Plan. Stock options which were granted under the Option Plans, of which 3,015,127 shares are outstanding at December 31, 2001, generally vest over four or five years and expire ten years from the date granted. Options were granted at a price equal to the fair market value of the Company's common stock on the date of grant. At December 31, 2001, no stock options were available for issuance under the Option Plans. The following table summarizes the activity and terms of outstanding options at December 31, 2001, 2000 and 1999:
2001 2000 1999 ----------------------- ----------------------- ----------------------- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE --------- -------- --------- -------- --------- -------- Options outstanding at beginning of year........................ 3,670,867 $8.71 2,598,119 $8.76 2,619,759 $ 7.37 Granted.......................... 3,265,036 5.45 1,362,659 8.65 466,300 13.54 Exercised........................ (201,922) 2.05 (61,856) 4.99 (388,555) 5.53 Expired/cancelled................ (605,344) 9.83 (228,055) 9.04 (99,385) 6.59 --------- ----- --------- ----- --------- ------ Options outstanding at end of year........................... 6,128,637 $7.08 3,670,867 $8.75 2,598,119 $ 8.76 ========= ===== ========= ===== ========= ====== Options exercisable at end of year........................... 1,679,137 $8.60 1,289,717 $7.48 820,740 $ 6.35 ========= ===== ========= ===== ========= ======
F-25 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) Summary information about the Company's stock options outstanding at December 31, 2001 is as follows:
WEIGHTED WEIGHTED WEIGHTED OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE DECEMBER 31, REMAINING LIFE EXERCISE DECEMBER 31, EXERCISE RANGE OF EXERCISE PRICES 2001 (IN YEARS) PRICE 2001 PRICE - ---------------------------- -------------- -------------- -------- -------------- -------- $1.32-$1.42................ 79,411 3.2 $ 1.33 79,411 $ 1.33 $2.19-$4.37................ 243,505 6.5 $ 3.86 155,505 $ 3.71 $4.38-$6.56................ 3,311,500 4.8 $ 5.45 58,000 $ 5.43 $6.57-$8.74................ 1,338,019 5.7 $ 7.52 720,506 $ 7.04 $8.75-$10.93............... 237,200 7.8 $ 9.71 103,734 $ 9.62 $10.94-$13.10............... 581,600 6.4 $12.28 328,154 $12.20 $13.20-$15.30............... 319,402 6.3 $13.82 215,827 $13.76 $21.86...................... 18,000 6.3 $21.86 18,000 $21.86 --------- --- ------ --------- ------ $1.32-$21.86............... 6,128,637 5.4 $ 7.08 1,679,137 $ 8.60 ========= === ====== ========= ======
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the Company accounts for the plans under Accounting Principles Board Opinion No. 25; however, the Company has computed for pro forma disclosure purposes the value of all options granted during 2001, 2000 and 1999 using the Black-Scholes option pricing model as prescribed by SFAS No. 123 and using the following average assumptions:
2001 2000 1999 --------- --------- --------- Risk-free interest rate....................... 3.5%-7.2% 5.8%-7.2% 5.8%-7.2% Expected dividend yield....................... 0% 0% 0% Expected option lives......................... 4-6 years 4-6 years 4-6 years Expected volatility........................... 33%-68% 33%-68% 33%-68%
The weighted average fair value of options granted in 2001, 2000 and 1999 was $5.45, $5.47 and $8.43, respectively, per option. Had compensation expense for the plans been determined consistent with the fair value provisions of SFAS No. 123, the Company's reported and pro forma net income and earnings per share for the years ended December 31, 2001, 2000 and 1999 would have been as follows (in thousands, except per share data):
2001 2000 1999 --------- ------- ------- Net income (loss): As reported..................................... $(136,217) $27,618 $64,482 Pro forma....................................... $(140,709) $23,467 $61,481 Earnings per (loss) share--basic: As reported..................................... $ (2.86) $ 0.57 $ 1.32 Pro forma....................................... $ (2.96) $ 0.48 $ 1.25 Earnings per (loss) share--diluted: As reported..................................... $ (2.86) $ 0.56 $ 1.20 Pro forma....................................... $ (2.96) $ 0.48 $ 1.15
The effect on 2001, 2000 and 1999 pro forma net income, earnings per share--basic and earnings per share--diluted of expensing the estimated fair value of stock options is not necessarily representative of the effect on reported earnings for future years due to the vesting period of the stock options and the potential for issuance of additional stock options in future years. F-26 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) 11. RETIREMENT PLANS SAVINGS PLANS The Company sponsors a defined contribution plan to provide substantially all U.S. salaried and certain hourly employees an opportunity to accumulate personal funds for their retirement. As determined by the provisions of the plan, the Company matches a certain percentage of each employee's voluntary contribution. The plan provides for a minimum contribution by the Company to the plan for all eligible employees of 1% of their salary. This contribution can be increased at the Company's discretion. All contributions made by the Company are made in cash and allocated to the funds selected by the employee. Company contributions to the plan were approximately $8,979,000, $5,899,000 and $3,970,000 for the years ending in 2001, 2000 and 1999, respectively. PENSION PLANS The Company maintains pension plans for certain of its employees in the U.S. and Canada under collective bargaining agreements with unions representing these employees. The Company expects to continue to fund these plans based on governmental requirements, amounts deductible for income tax purposes and as needed to ensure that plan assets are sufficient to satisfy plan liabilities. As of December 31, 2001, plan assets consist primarily of government bonds, corporate bonds, equity and fixed income funds. SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS As a result of the acquisition of ABP, the Company assumed responsibility for the ABP supplemental executive retirement plans ("SERP") which provides benefits to certain former directors and executives of ABP. For accounting purposes, these plans are unfunded; however, ABP had purchased annuities to cover the benefits for certain participants. In 2001, the Company accelerated the benefit payments to all participants for whom there was no annuity. F-27 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) The following table sets forth the financial status of the pension plans and the SERP and the amounts recognized in the Company's consolidated balance sheets as of December 31, 2001 and 2000 (in thousands):
PENSION PLANS SERP -------------------- --------------------- 2001 2000 2001 2000 ------- ------- ------- -------- Change in benefit obligation: Benefit obligation at beginning of year........ $29,613 $28,693 $17,844 $ 18,077 Service cost................................... 1,424 2,000 -- -- Interest cost.................................. 2,137 1,569 853 1,557 Actuarial gains and loss....................... 1,418 3 -- -- Foreign currency exchange rate changes......... (1,056) (733) -- -- Benefits paid.................................. (1,987) (1,919) (9,655) (1,790) ------- ------- ------- -------- Benefit obligation at end of year............ 31,549 29,613 9,042 17,844 ------- ------- ------- -------- Change in plan assets: Fair value of plan assets at beginning of year......................................... 34,662 34,423 -- -- Foreign currency exchange rate changes......... (1,197) 1,574 -- -- Actual return on plan assets................... (286) (707) -- -- Employer contributions......................... 1,744 1,291 -- -- Benefits paid.................................. (2,208) (1,919) -- -- ------- ------- ------- -------- Fair value of plan assets at end of year..... 32,715 34,662 -- -- ------- ------- ------- -------- Funded status.................................... 1,166 5,049 (9,042) 17,844 Unrecognized actuarial loss...................... 7,260 3,124 -- -- Unrecognized prior service cost.................. 249 368 -- -- Unrecognized transition asset.................... (4,021) (4,711) -- -- ------- ------- ------- -------- Net amount recognized............................ $ 4,654 $ 3,830 $(9,042) $(17,844) ======= ======= ======= ======== Amounts recognized in the consolidated balance sheets: Prepaid benefit cost......................... $ 4,283 $ 3,997 $ -- $ -- Accrued benefit liability.................... (1,450) (446) (9,042) (17,844) Intangible asset............................. 75 42 -- -- Deferred tax asset........................... 672 91 -- -- Accumulated other comprehensive loss......... 1,074 146 -- -- ------- ------- ------- -------- Net amount recognized............................ $ 4,654 $ 3,830 $(9,042) $(17,844) ======= ======= ======= ========
The components of the net periodic pension cost for the pension plans and the SERP were as follows (in thousands):
2001 2000 1999 ------- ------- ------- Service cost........................................... $ 1,075 $ 2,000 $ 1,435 Interest cost on projected benefit obligation.......... 2,991 2,789 2,037 Expected return on plan assets......................... (3,017) (2,963) (2,958) Net amortization and deferral.......................... (396) (400) (423) Recognized actuarial loss.............................. 36 31 37 Curtailment loss....................................... 129 38 -- ------- ------- ------- Net periodic pension expense............................ $ 818 $ 1,495 $ 128 ======= ======= =======
F-28 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) The assumptions used in computing the net pension cost and the funded status were as follows:
2001 2000 1999 ------- ------- ------- Weighted average discount rate... 7.25% 7.50% 7.50% Expected long-term rate of return on assets............... 8.75-9% 8.75-9% 8.75-9% Rate of compensation increase....................... 2-4% 2-4% 2-4%
The aggregate accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $9.0 million and $7.6 million, respectively, as of December 31, 2001. The aggregate accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $3.1 million and $2.9 million, respectively, as of December 31, 2000. Certain other U.S. employees are included in multi-employer pension plans to which the Company makes contributions in accordance with the contractual union agreements. Such contributions are made on a monthly basis in accordance with the requirements of the plans and the actuarial computations and assumptions of the administrators of the plans. Contributions to multi-employer plans were $2.7 million, $2.6 million, and $3.6 million for 2001, 2000 and 1999, respectively. EMPLOYEE STOCK OWNERSHIP PLAN The Company maintains an Employee Stock Ownership Plan, which was frozen in December 2000. The Company has not made contributions to this plan since 1998. At December 31, 2001 and 2000, the Employee Stock Ownership Plan held 3,896,544 shares of the Company's common stock, all of which have been allocated to participant accounts. 12. COMMITMENTS AND CONTINGENCIES As of March 31, 2002, the Company had not entered into any new significant commitments, as such, this footnote has not been updated. LEASES The Company leases buildings and equipment under operating lease agreements expiring at various dates through 2011. Certain leases include renewal and purchase options. At December 31, 2001, future minimum annual payments under non-cancelable lease agreements with original terms in excess of one year are as follows (in thousands): 2002................................. $ 33,844 2003................................. 29,864 2004................................. 27,049 2005................................. 24,106 2006................................. 18,439 Thereafter........................... 32,066 -------- Total............................ $165,368 ======== Aggregate future minimum rentals to be received under noncancelable subleases as of December 31, 2001 are approximately $4.5 million. Rent expense for the years ended December 31, 2001, 2000 and 1999 was $32.7 million, $33.9 million and $24.8 million, respectively. F-29 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONCENTRATIONS OF CREDIT RISK The Company has limited concentrations of credit risk with respect to financial instruments. Temporary cash investments and other investments are placed with high credit quality institutions, and concentrations within accounts receivable are limited due to the Company's customer base and its dispersion across different industries and geographic areas. LITIGATION The Company is party to various legal actions that are ordinary and incidental to its business. While the outcome of legal actions cannot be predicted with certainty, management believes the outcome of these various proceedings will not have a material adverse effect on the Company's financial condition or results of operations. F-30 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) 13. EARNINGS PER SHARE Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the amounts included in the computation of basic earnings per share and diluted earnings per share is as follows (in thousands, except per share amounts):
MARCH 31, DECEMBER 31, ----------------------------- ------------------------------------ 2002 2001 2001 2000 1999 ----------- ----------- -------- ------- ------- (UNAUDITED) (UNAUDITED) ----------- ----------- Numerator: Numerator for basic earnings per share--income (loss) from continuing operations........... $(8,265) $ 4,187 $(13,041) $34,209 $58,602 Interest on Convertible Notes..... -- -- -- 4,951 5,254 ------- ------- -------- ------- ------- Numerator for diluted earnings per share--income (loss) from continuing operations after assumed conversions............. $(8,265) $ 4,187 $(13,041) $39,160 $63,856 ======= ======= ======== ======= ======= Denominator: Denominator for basic earnings per share--weighted average shares.......................... 47,658 47,457 47,562 48,789 48,990 Effects of dilutive securities: Conversion of Convertible Notes....................... -- -- -- 7,461 8,003 Stock options................. -- 295 -- 404 940 Other......................... -- -- -- 24 221 ------- ------- -------- ------- ------- Denominator for diluted earnings per share--adjusted weighted average shares and assumed conversions..................... 47,658 47,752 47,562 56,678 58,154 ======= ======= ======== ======= ======= Earnings (loss) per share: Basic......................... $ (0.17) $ 0.09 $ (0.27) $ 0.70 $ 1.20 ======= ======= ======== ======= ======= Diluted....................... $ (0.17) $ 0.09 $ (0.27) $ 0.69 $ 1.10 ======= ======= ======== ======= =======
During the year ended December 31, 2001, interest, net of tax, on the Convertible Notes in the amount of $4,854,000 and shares of 7,319,000 that would be issued upon assumed conversion of the Convertible Notes were excluded from the calculation of diluted loss per share due to the antidilutive effect on loss per share. In 2001, 2000 and 1999, outstanding options to purchase 6,798,000, 3,266,000 and 1,658,000 common shares, respectively, were excluded from the calculation of diluted earnings per share because the effect would be antidilutive. During the three months ended March 31, 2002 and 2001, interest on the Convertible Notes in the amount of $1,214,000 and shares of 7,319,000 issued upon assumed conversion were excluded from the calculation of diluted earnings (loss) per share due to their antidilutive effect on earnings (loss) per share. In addition, outstanding options to purchase approximately 6,995,000 and 5,675,000 common shares were excluded from the calculation of diluted earnings (loss) per share because the effect would be antidilutive for the quarters ended March 31, 2002 and March 31, 2001, respectively. F-31 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) 14. SEGMENT INFORMATION The Company operates in two principal business segments. The Commercial Printing segment specializes in printing annual reports, brand marketing collateral, catalogs, brochures, maps and guidebooks, calendars, financial communications and CD packaging. The envelope segment manufactures customized and stock envelopes for billing and remittance, direct mail advertising, filing systems, photo processing, medical records and catalog orders. The Envelope segment is also a producer of specialty packaging products and a manufacturer of stock products for the resale market. Intersegment sales, which were at market prices, totaled $5.7 million and $4.1 million in 2001 and 2000, respectively. Intersegment sales in 1999 were not significant. The following tables present certain business segment information for the periods ended March 31, 2002 and 2001, and the years ended December 31, 2001, 2000 and 1999 (in thousands):
THREE MONTHS ENDED MARCH 31 ----------------------------- 2002 2001 ----------- ----------- (UNAUDITED) (UNAUDITED) ----------- ----------- (IN THOUSANDS) Net external sales: Commercial Printing......................... $190,754 $211,360 Envelope.................................... 200,975 221,616 -------- -------- Total....................................... $391,729 $432,976 ======== ======== Operating income:(a) Commercial Printing......................... $ (3,463) $ 6,361 Envelope.................................... 7,738 22,975 Corporate................................... (3,027) (7,652) -------- -------- Total....................................... $ 1,248 $ 21,684 ======== ========
F-32 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED)
2001 2000 1999 ---------- ---------- ---------- Net sales: Commercial Printing........................ $ 817,937 $ 961,780 $ 795,552 Envelope................................... 835,534 861,803 738,288 ---------- ---------- ---------- Total...................................... $1,653,471 $1,823,583 $1,533,840 ========== ========== ========== Operating income: Commercial Printing........................ $ 14,763 $ 54,758 $ 65,108 Envelope................................... 54,168 90,202 90,996 Corporate(a)............................... (35,115) (27,437) (19,094) ---------- ---------- ---------- Total...................................... $ 33,816 $ 117,523 $ 137,010 ========== ========== ========== Restructuring, asset impairments and other charges: Commercial Printing........................ $ 4,446 $ 3,658 $ -- Envelope................................... 33,122 2,502 1,807 Corporate.................................. 4,277 -- -- ---------- ---------- ---------- Total...................................... $ 41,845 $ 6,160 $ 1,807 ========== ========== ========== Significant other noncash charges:(b) Commercial Printing........................ $ 3,547 $ 2,785 $ -- Envelope................................... 8,875 1,872 -- Corporate.................................. 1,600 -- -- ---------- ---------- ---------- Total...................................... $ 14,022 $ 4,657 $ -- ========== ========== ========== Depreciation and amortization: Commercial Printing........................ $ 25,396 $ 27,153 $ 22,768 Envelope................................... 20,682 20,633 15,263 Corporate.................................. 7,551 18,047 8,998 ---------- ---------- ---------- Total...................................... $ 53,629 $ 65,833 $ 47,029 ========== ========== ========== Capital expenditures: Commercial Printing........................ $ 13,613 $ 34,902 $ 34,580 Envelope................................... 12,078 20,955 30,133 Corporate.................................. 1,108 1,915 374 ---------- ---------- ---------- Total...................................... $ 26,799 $ 57,772 $ 65,087 ========== ========== ==========
F-33 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED)
MARCH 31, DECEMBER 31, ----------- --------------------------- 2002 2001 2000 ----------- ---------- ---------- (UNAUDITED) ----------- Identifiable assets:(c) Commercial Printing........................ $ 615,538 $ 620,421 $ 685,871 Envelope................................... 518,842 537,747 635,508 Corporate.................................. 111,838 (9,494) (62,637) ---------- ---------- ---------- 1,246,218 1,148,674 1,258,742 Net assets of discontinued operations...... 219,205 246,377 394,215 Net assets held for sale................... 61,022 54,073 -- ---------- ---------- ---------- Total...................................... $1,526,445 $1,449,124 $1,652,957 ========== ========== ========== - -------- (a) Operating income is net of all costs and expenses directly related to the segment involved. Corporate expenses include corporate general and administrative expenses, lease expense, amortization expense of other intangible assets and goodwill, gains or losses on disposal of assets and other miscellaneous expenses. (b) Represents the noncash portion of restructuring and other asset impairment charges. (c) Identifiable assets are accumulated by facility within each business segment. Certain operating assets, which are under lease, are reported as business segment assets for evaluation purposes. The net book value of these assets has been eliminated by contra assets included with corporate assets in order to reconcile identifiable assets with the total assets of the Company. Corporate assets consist primarily of cash and cash equivalents, other receivables, other assets and deferred tax assets.
Geographic information at December 31, 2001 and 2000 and for the years ended December 31, 2001, 2000 and 1999, is presented below (in thousands):
2001 2000 1999 ---------- ---------- ---------- Net sales: U.S........................................ $1,490,886 $1,668,948 $1,381,338 Canada..................................... 162,585 154,438 151,908 Other foreign.............................. -- 197 594 ---------- ---------- ---------- Total...................................... $1,653,471 $1,823,583 $1,533,840 ========== ========== ========== Identifiable assets: U.S........................................ $1,010,574 $1,106,733 Canada..................................... 138,100 151,582 Other foreign.............................. -- 427 ---------- ---------- Total...................................... $1,148,674 $1,258,742 ========== ==========
15. SUBSEQUENT EVENT (UNAUDITED) On May 21, 2002, we consummated the sale of our Label segment to MWL Acquisition Corp., for approximately $75 million. The Label segment generated $219 million of sales for the year ended F-34 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) December 31, 2001, $53 million of sales for the three months ended March 31, 2002 and $56 million of sales for the three months ended March 31, 2001. 16. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table sets forth certain quarterly financial data for the periods indicated (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH QUARTER(a) QUARTER QUARTER QUARTER ---------- --------- --------- --------- 2001 Net sales..................................... $432,976 $418,278 $411,773 $390,444 Gross profit.................................. 87,834 86,015 77,571 77,960 Income (loss) from continuing operations(b)... $ 4,187 $(14,950) $ (1,668) $ (610) Discontinued operations....................... (565) (77,575) 105 (45,141) -------- -------- -------- -------- Net income (loss)............................. $ 3,622 $(92,525) $ (1,563) $(45,751) ======== ======== ======== ======== Earnings (loss) per share--basic: Income (loss) from continuing operations.............................. $ 0.08 $ (0.31) $ (0.04) $ (0.01) Discontinued operations................... -- (1.64) 0.01 (0.95) -------- -------- -------- -------- Net income (loss) per share--basic........ $ 0.08 $ (1.95) $ (0.03) $ (0.96) ======== ======== ======== ======== Earnings (loss) per share--diluted: Income (loss) from continuing operations.............................. $ 0.08 $ (0.31) $ (0.04) $ (0.01) Discontinued operations................... -- (1.64) 0.01 (0.95) -------- -------- -------- -------- Net income (loss) per share--diluted...... $ 0.08 $ (1.95) $ (0.03) $ (0.96) ======== ======== ======== ======== FIRST SECOND THIRD FOURTH QUARTER(a) QUARTER(a) QUARTER(a) QUARTER(a) ---------- ---------- ---------- ---------- 2000 Net sales..................................... $434,678 $442,148 $476,300 $470,457 Gross profit.................................. 94,865 92,750 97,316 100,217 Income from continuing operations(c).......... $ 13,877 $ 8,657 $ 10,345 $ 1,330 Discontinued operations....................... 2,459 2,587 (3,622) (9,462) Extraordinary item............................ 1,447 -- -- -- -------- -------- -------- -------- Net income (loss)............................. $ 17,783 $ 11,244 $ 6,723 $ (8,132) ======== ======== ======== ======== Earnings (loss) per share--basic: Income from continuing operations......... $ 0.28 $ 0.18 $ 0.21 $ 0.03 Discontinued operations................... 0.05 0.05 (0.07) (0.20) Extraordinary item........................ 0.03 -- -- -- -------- -------- -------- -------- Net income (loss) per share--basic........ $ 0.36 $ 0.23 $ 0.14 $ (0.17) ======== ======== ======== ======== Earnings (loss) per share--diluted: Income from continuing operations......... $ 0.26 $ 0.17 $ 0.20 $ 0.03 Discontinued operations................... 0.04 0.05 (0.06) (0.20) Extraordinary item........................ 0.03 -- -- -- -------- -------- -------- -------- Net income (loss) per share--diluted...... $ 0.33 $ 0.22 $ 0.14 $ (0.17) ======== ======== ======== ======== - -------- (a) These results have been restated from those previously reported to reflect discontinued operations. F-35 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) (b) Includes an impairment loss on assets held for sale of $2.9 million and restructuring, asset impairments and other charges of $41.8 million, of which $26.5 million occurred in the second quarter, $5.4 million in the third quarter and $9.9 million in the fourth quarter. (c) Includes restructuring and impairment charges of $6.2 million that primarily occurred in the fourth quarter.
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION In March 2002, Mail-Well I Corporation ("Issuer" or "MWI"), the Company's wholly owned subsidiary, and the only direct subsidiary of the Company, issued $350 million aggregate principal amount of 9 5/8% Senior Notes ("Senior Notes") due in 2012. The Senior Notes are guaranteed by all of the U.S. subsidiaries (the "Guarantor Subsidiaries") of MWI, all of which are wholly owned, and by Mail-Well, Inc. ("Parent Guarantor"). The guarantees are joint and several, full, complete and unconditional. There are no material restrictions on the ability of the Guarantor Subsidiaries to transfer funds to MWI in the form of cash dividends, loans or advances, other than ordinary legal restrictions under corporate law, fraudulent transfer and bankruptcy laws. The following condensed consolidating financial information illustrates the composition of the Parent Guarantor, Issuer, Guarantor Subsidiaries and non-guarantor subsidiaries. The Issuer, the Guarantor Subsidiaries and the non-guarantor subsidiaries comprise all of the direct and indirect subsidiaries of the Parent Guarantor. Management has determined that separate complete financial statements would not provide additional material information that would be useful in assessing the financial composition of the Guarantor Subsidiaries. Investments in subsidiaries are accounted for under the equity method, wherein the investor company's share of earnings and income taxes applicable to the assumed distribution of such earnings are included in net income. In addition, investments increase in the amount of permanent contributions to subsidiaries and decrease in the amount of distributions from subsidiaries. The elimination entries eliminate the equity method investment in subsidiaries and the equity in earnings of subsidiaries, intercompany payables and receivables and other transactions between subsidiaries. F-36 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION March 31, 2002 (unaudited) (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- ---------- ------------ ------------ ----------- ------------ Current assets: Cash and cash equivalents.............. $ -- $ 119,948 $ 1,383 $ -- $ -- $ 121,331 Accounts receivable, net...................... -- 52,375 127,829 23,104 -- 203,308 Inventories, net.......... -- 50,043 40,877 12,564 -- 103,484 Net assets of discontinued operations............... -- -- 159,193 60,012 -- 219,205 Net assets held for sale..................... -- 33,575 27,447 -- -- 61,022 Note receivable from Issuer................... 147,436 -- -- -- (147,436) -- Other current assets...... 197 40,169 13,709 3,120 -- 57,195 -------- ---------- -------- -------- ----------- ---------- Total current assets.... 147,633 296,110 370,438 98,800 (147,436) 765,545 Investment in subsidiaries............... 217,920 245,694 58,910 -- (522,524) -- Property, plant and equipment, net............. -- 135,465 173,560 52,530 -- 361,555 Goodwill and other intangible assets, net..... -- 85,645 216,751 45,614 -- 348,010 Note receivable from subsidiaries............... -- 722,400 -- -- (722,400) -- Other assets, net........... 783 44,034 21,297 2,992 (17,771) 51,335 -------- ---------- -------- -------- ----------- ---------- Total assets................ $366,336 $1,529,348 $840,956 $199,936 $(1,410,131) $1,526,445 ======== ========== ======== ======== =========== ========== Current liabilities: Accounts payable.......... $ -- $ 66,482 $ 71,261 $ 9,731 $ -- $ 147,474 Other current liabilities.............. 6,029 67,032 12,125 8,444 -- 93,630 Intercompany payable (receivable)............. 2,168 132,960 (184,348) 49,220 -- -- Note payable to Parent.... -- 147,436 -- -- (147,436) -- Current portion of long-term debt........... 139,063 163,729 7,408 172 -- 310,372 -------- ---------- -------- -------- ----------- ---------- Total current liabilities............ 147,260 577,639 (93,554) 67,567 (147,436) 551,476 Long-term debt.............. -- 658,881 -- -- -- 658,881 Note payable to Issuer...... -- -- 722,400 -- (722,400) -- Deferred income taxes....... -- 28,287 39,021 11,176 -- 78,484 Other long-term liabilities................ -- 14,582 21,171 546 (17,771) 18,528 -------- ---------- -------- -------- ----------- ---------- Total liabilities....... 147,260 1,279,389 689,038 79,289 (887,607) 1,307,369 Shareholders' equity........ 219,076 249,959 151,918 120,647 (522,524) 219,076 -------- ---------- -------- -------- ----------- ---------- Total liabilities and shareholders' equity....... $366,336 $1,529,348 $840,956 $199,936 $(1,410,131) $1,526,445 ======== ========== ======== ======== =========== ==========
F-37 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION December 31, 2001 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- ---------- ------------ ------------ ----------- ------------ Current assets: Cash and cash equivalents.............. $ -- $ (1,589) $ 1,613 $ 785 $ -- $ 809 Accounts receivable....... -- 60,039 123,333 24,378 -- 207,750 Inventories, net.......... -- 51,032 41,319 12,193 -- 104,544 Net assets of discontinued operations............... -- -- 176,879 69,498 -- 246,377 Net assets held for sale..................... -- 25,852 28,221 -- -- 54,073 Note receivable from Issuer................... 147,436 -- -- -- (147,436) -- Other current assets...... 295 41,988 21,977 2,741 -- 67,001 -------- ---------- -------- -------- ----------- ---------- Total current assets.... 147,731 177,322 393,342 109,595 (147,436) 680,554 Investment in subsidiaries............... 240,954 192,164 159,725 -- (592,843) -- Property, plant and equipment, net............. -- 151,735 170,112 53,568 -- 375,415 Goodwill and other intangible assets.......... -- 84,881 216,446 45,734 -- 347,061 Note receivable from subsidiaries............... -- 749,400 -- -- (749,400) -- Other assets, net........... 1,023 42,096 17,754 2,992 (17,771) 46,094 -------- ---------- -------- -------- ----------- ---------- Total assets................ $389,708 $1,397,598 $957,379 $211,889 $(1,507,450) $1,449,124 ======== ========== ======== ======== =========== ========== Current liabilities: Accounts payable.......... $ -- $ 63,491 $ 70,537 $ 8,493 $ -- $ 142,521 Other current liabilities.............. 4,291 71,611 11,749 13,904 -- 101,555 Intercompany payable (receivable)............. 4,477 136,068 (69,090) (71,455) -- -- Note payable to Parent.... -- 147,436 -- -- (147,436) -- Current maturities of long-term debt........... 139,063 161,850 1,737 172 -- 302,822 -------- ---------- -------- -------- ----------- ---------- Total current liabilities............ 147,831 580,456 14,933 (48,886) (147,436) 546,898 Long-term debt.............. -- 523,247 17,834 9,096 -- 550,177 Note payable to Issuer...... -- -- 749,400 -- (749,400) -- Deferred income taxes....... -- 28,287 54,062 11,224 -- 93,573 Other liabilities........... -- 24,655 9,167 549 (17,772) 16,599 -------- ---------- -------- -------- ----------- ---------- Total liabilities....... 147,831 1,156,645 845,396 (28,017) (914,608) 1,207,247 Shareholders' equity........ 241,877 240,953 111,983 239,906 (592,842) 241,877 -------- ---------- -------- -------- ----------- ---------- Total liabilities and shareholders' equity....... $389,708 $1,397,598 $957,379 $211,889 $(1,507,450) $1,449,124 ======== ========== ======== ======== =========== ==========
F-38 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION December 31, 2000 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- ---------- ------------ ------------ ----------- ------------ Current assets: Cash and cash equivalents.............. $ -- $ 9,596 $ (9,566) $ 64 $ -- $ 94 Accounts receivable....... -- 22,168 55,844 125,956 -- 203,968 Inventories, net.......... -- 51,359 65,231 14,827 -- 131,417 Net assets of discontinued operations............... -- -- 321,424 72,791 -- 394,215 Note receivable from Issuer................... 147,436 -- -- -- (147,436) -- Other current assets...... 262 25,741 31,934 89 -- 58,026 -------- ---------- ---------- -------- ----------- ---------- Total current assets.... 147,698 108,864 464,867 213,727 (147,436) 787,720 Investment in subsidiaries............... 385,505 357,592 148,620 -- (891,717) -- Property, plant and equipment, net............. -- 132,522 237,436 61,067 -- 431,025 Goodwill and other intangible assets, net..... -- 49,455 289,718 49,975 -- 389,148 Notes receivable from subsidiaries............... -- 784,400 -- -- (784,400) -- Other assets, net........... 3,481 55,580 845 5,150 (19,992) 45,064 -------- ---------- ---------- -------- ----------- ---------- Total assets................ $536,684 $1,488,413 $1,141,486 $329,919 $(1,843,545) $1,652,957 ======== ========== ========== ======== =========== ========== Current liabilities: Accounts payable.......... $ -- $ 32,446 $ 87,063 $ 8,403 $ -- $ 127,912 Other current liabilities.............. 11,768 24,556 54,329 15,769 -- 106,422 Intercompany payable (receivable)............. -- 100,773 (228,567) 127,794 -- -- Note payable to Parent.... -- 147,436 -- -- (147,436) -- Current maturities of long-term debt........... -- 30,767 8,121 1,152 -- 40,040 -------- ---------- ---------- -------- ----------- ---------- Total current liabilities............ 11,768 335,978 (79,054) 153,118 (147,436) 274,374 Long-term debt.............. 139,063 718,147 6,984 15,559 -- 879,753 Notes payable to issuer..... -- -- 784,400 -- (784,400) -- Deferred income taxes....... -- 28,288 46,598 11,879 -- 86,765 Other liabilities........... -- 20,495 24,966 743 (19,992) 26,212 -------- ---------- ---------- -------- ----------- ---------- Total liabilities....... 150,831 1,102,908 783,894 181,299 (951,828) 1,267,104 Shareholders' equity........ 385,853 385,505 357,592 148,620 (891,717) 385,853 -------- ---------- ---------- -------- ----------- ---------- Total liabilities and shareholders' equity....... $536,684 $1,488,413 $1,141,486 $329,919 $(1,843,545) $1,652,957 ======== ========== ========== ======== =========== ==========
F-39 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Quarter Ended March 31, 2002 (unaudited) (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- -------- ------------ ------------ -------- ------------ Net sales....................... $ -- $140,874 $209,403 $41,452 $ -- $391,729 Cost of sales................... -- 113,495 174,914 29,286 -- 317,695 -------- -------- -------- ------- -------- -------- Gross profit.................... -- 27,379 34,489 12,166 -- 74,034 Other operating costs........... 5 19,526 35,298 4,310 -- 59,139 Restructuring and other charges........................ -- 13,414 233 -- -- 13,647 -------- -------- -------- ------- -------- -------- Operating income (loss)......... (5) (5,561) (1,042) 7,856 -- 1,248 Other expense (income): Interest expense.............. 1,738 17,662 11,325 -- (18,717) 12,008 Other expense (income)........ (1,977) (16,486) 48 (48) 18,717 254 -------- -------- -------- ------- -------- -------- Income (loss) before income taxes and equity in undistributed earnings of subsidiaries................... 234 (6,737) (12,415) 7,904 -- (11,014) Provision (benefit) for income taxes.......................... -- (2,690) (3,335) 3,276 -- (2,749) -------- -------- -------- ------- -------- -------- Income (loss) before equity in undistributed earnings of subsidiaries................... 234 (4,047) (9,080) 4,628 -- (8,265) Equity in undistributed earnings of subsidiaries................ (21,842) (12,798) 6,419 -- 28,221 -- -------- -------- -------- ------- -------- -------- Income (loss) before discontinued operations and extraordinary items............ (21,608) (16,845) (2,661) 4,628 28,221 (8,265) Loss on disposal, including income tax expense............. -- -- (6,144) (2,436) -- (8,580) Extraordinary item, net of tax............................ -- (4,763) -- -- -- (4,763) -------- -------- -------- ------- -------- -------- Net income (loss)............... $(21,608) $(21,608) $ (8,805) $ 2,192 $ 28,221 $(21,608) ======== ======== ======== ======= ======== ========
F-40 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Quarter Ended March 31, 2001 (unaudited) (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- -------- ------------ ------------ -------- ------------ Net sales....................... $ -- $112,823 $271,521 $48,632 $ -- $432,976 Cost of sales................... -- 90,161 219,106 35,875 -- 345,142 ------- -------- -------- ------- -------- -------- Gross profit.................... -- 22,662 52,415 12,757 -- 87,834 Other operating costs........... 91 18,102 42,937 5,020 -- 66,150 ------- -------- -------- ------- -------- -------- Operating income (loss)......... (91) 4,560 9,478 7,737 -- 21,684 Other expense (income): Interest expense.............. 1,738 18,768 13,174 1,051 (19,980) 14,751 Other expense (income)........ (1,976) (17,282) (187) (9) 19,980 526 ------- -------- -------- ------- -------- -------- Income (loss) before income taxes and equity in undistributed earnings of subsidiaries................... 147 3,074 (3,509) 6,695 -- 6,407 Provision (benefit) for income taxes.......................... -- 1,346 (1,914) 2,788 -- 2,220 ------- -------- -------- ------- -------- -------- Income (loss) before equity in undistributed earnings of subsidiaries................... 147 1,728 (1,595) 3,907 -- 4,187 Equity in undistributed earnings of subsidiaries................ 3,476 1,748 7,960 -- (13,184) -- ------- -------- -------- ------- -------- -------- Income before discontinued operations..................... 3,623 3,476 6,365 3,907 (13,184) 4,187 Loss from discontinued operations, net of tax......... -- -- (133) (431) -- (564) ------- -------- -------- ------- -------- -------- Net income...................... $ 3,623 $ 3,476 $ 6,232 $ 3,476 $(13,184) $ 3,623 ======= ======== ======== ======= ======== ========
F-41 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Year Ended December 31, 2001 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- --------- ------------ ------------ -------- ------------ Net sales...................... $ -- $ 590,082 $886,458 $176,931 $ -- $1,653,471 Cost of sales.................. -- 477,170 721,045 125,876 -- 1,324,091 --------- --------- -------- -------- -------- ---------- Gross profit................... -- 112,912 165,413 51,055 -- 329,380 Operating expenses: Selling, administrative and other....................... 378 87,621 144,398 18,377 -- 250,774 Restructuring, asset impairments and other charges..................... -- 38,878 6,065 (153) -- 44,790 --------- --------- -------- -------- -------- ---------- Total operating expenses... 378 126,499 150,463 18,224 -- 295,564 Operating income (loss)........ (378) (13,587) 14,950 32,831 -- 33,816 Other (income) expense: Interest expense............. 7,970 73,260 42,142 5,885 (76,506) 52,751 Other expense (income)....... (8,923) (66,925) 771 361 76,506 1,790 --------- --------- -------- -------- -------- ---------- Income (loss) from continuing operations, before income taxes and undistributed earnings of subsidiaries...... 575 (19,922) (27,963) 26,585 -- (20,725) Provision for income taxes..... -- (7,670) (9,890) 9,876 -- (7,684) --------- --------- -------- -------- -------- ---------- Income (loss) from continuing operations, before undistributed earnings of subsidiaries.................. 575 (12,252) (18,073) 16,709 -- (13,041) Equity in undistributed earnings of subsidiaries...... (136,792) (113,717) 23,699 -- 226,810 -- --------- --------- -------- -------- -------- ---------- Income from continuing operations.................... (136,217) (125,969) 5,626 16,709 226,810 (13,041) Loss from discontinued operations.................... -- -- (83,186) (39,990) -- (123,176) --------- --------- -------- -------- -------- ---------- Net income..................... $(136,217) $(125,969) $(77,560) $(23,281) $226,810 $ (136,217) ========= ========= ======== ======== ======== ==========
F-42 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Year Ended December 31, 2000 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- -------- ------------ ------------ -------- ------------ Net sales....................... $ -- $458,560 $1,191,904 $173,119 $ -- $1,823,583 Cost of sales................... -- 363,416 948,192 126,827 -- 1,438,435 ------- -------- ---------- -------- -------- ---------- Gross profit.................... -- 95,144 243,712 46,292 -- 385,148 Operating expenses: Selling, administrative and other........................ 294 75,804 167,043 18,324 -- 261,465 Restructuring, asset impairments and other charges...................... -- 1,146 3,912 1,102 -- 6,160 ------- -------- ---------- -------- -------- ---------- Total operating expenses.... 294 76,950 170,955 19,426 -- 267,625 Operating income (loss)......... (294) 18,194 72,757 26,866 -- 117,523 Other (income) expense: Interest expense.............. 8,035 78,672 49,040 3,908 (77,528) 62,127 Other (income) expense........ (8,846) (66,991) (717) -- 77,528 974 ------- -------- ---------- -------- -------- ---------- Income (loss) from continuing operations, before income taxes and undistributed earnings of subsidiaries................... 517 6,513 24,434 22,958 -- 54,422 Provision for income taxes...... -- 2,435 8,075 9,703 -- 20,213 ------- -------- ---------- -------- -------- ---------- Income (loss) from continuing operations, before undistributed earnings of subsidiaries................... 517 4,078 16,359 13,255 -- 34,209 Equity in undistributed earnings of subsidiaries................ 25,263 23,885 17,203 -- (66,351) -- ------- -------- ---------- -------- -------- ---------- Income from continuing operations..................... 25,780 27,963 33,562 13,255 (66,351) 34,209 Loss from discontinued operations..................... -- -- (7,941) (97) -- (8,038) ------- -------- ---------- -------- -------- ---------- Income before extraordinary items.......................... 25,780 27,963 25,621 13,158 (66,351) 26,171 Extraordinary items............. 1,838 (391) -- -- -- 1,447 ------- -------- ---------- -------- -------- ---------- Net income...................... $27,618 $ 27,572 $ 25,621 $ 13,158 $(66,351) $ 27,618 ======= ======== ========== ======== ======== ==========
F-43 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Year Ended December 31, 1999 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- -------- ------------ ------------ --------- ------------ Net sales...................... $ -- $366,782 $1,013,401 $153,657 $ -- $1,533,840 Cost of sales.................. -- 284,246 787,411 111,236 -- 1,182,893 ------- -------- ---------- -------- --------- ---------- Gross profit................... -- 82,536 225,990 42,421 -- 350,947 Operating expenses: Selling, administrative and other....................... 200 61,342 134,297 16,291 -- 212,130 Restructuring, asset impairments and other charges..................... -- 1,923 (116) -- -- 1,807 ------- -------- ---------- -------- --------- ---------- Total operating expenses... 200 63,265 134,181 16,291 -- 213,937 Operating income (loss)........ (200) 19,271 91,809 26,130 -- 137,010 Other (income) expense: Interest expense............. 8,543 47,431 7,128 4,679 (27,573) 40,208 Other (income) expense....... (8,846) (19,007) (944) (4) 27,573 (1,228) ------- -------- ---------- -------- --------- ---------- Income (loss) from continuing operations, before income taxes and undistributed earnings of subsidiaries...... 103 (9,153) 85,625 21,455 -- 98,030 Provision for income taxes..... 39 (3,737) 34,883 8,243 -- 39,428 ------- -------- ---------- -------- --------- ---------- Income (loss) from continuing operations, before undistributed earnings of subsidiaries.................. 64 (5,416) 50,742 13,212 -- 58,602 Equity in undistributed earnings of subsidiaries...... 64,418 69,834 18,742 -- (152,994) -- ------- -------- ---------- -------- --------- ---------- Income from continuing operations.................... 64,482 64,418 69,484 13,212 (152,994) 58,602 Income (loss) from discontinued operations.................... -- -- (3,222) 9,102 -- 5,880 ------- -------- ---------- -------- --------- ---------- Net income..................... $64,482 $ 64,418 $ 66,262 $ 22,314 $(152,994) $ 64,482 ======= ======== ========== ======== ========= ==========
F-44 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Three Months Ended March 31, 2002 (unaudited) (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- --------- ------------ ------------ -------- ------------ Cash flows from operating activities..................... $ 2,309 $ (4,658) $ 644 $ 438 $ 4,841 $ 3,574 Cash flows from investing activities: Acquisitions.................. -- (1,003) -- -- -- (1,003) Capital expenditures.......... -- (391) (7,259) (302) -- (7,952) Proceeds from divestiture..... -- 31,622 -- -- -- 31,622 Proceeds from the sale of property and equipment....... -- 34 26 -- -- 60 Investment in subsidiaries.... (2,309) -- -- -- 2,309 -- ------- --------- -------- -------- -------- --------- Net cash provided by (used in) investing activities......... (2,309) 30,262 (7,233) (302) 2,309 22,727 Cash flows from financing activities: Proceeds from issuance of long-term debt............... -- 569,000 -- -- -- 569,000 Repayments of long-term debt......................... -- (444,615) (5,745) (94,039) 85,039 (459,360) Capitalized loan fees......... -- (12,037) -- -- -- (12,037) Investment by parent.......... -- -- -- 92,189 (92,189) -- ------- --------- -------- -------- -------- --------- Net cash provided by (used in) financing activities......... -- 112,348 (5,745) (1,850) (7,150) 97,603 Effect of exchange rate changes on cash........................ -- -- 17 (339) -- (322) Cash flows from discontinued operations..................... -- -- (3,240) 180 -- (3,060) ------- --------- -------- -------- -------- --------- Net change in cash and cash equivalents.................... -- 137,952 (15,557) (1,873) -- 120,522 Balance at beginning of year.... -- (18,004) 17,568 1,245 -- 809 ------- --------- -------- -------- -------- --------- Balance at end of year.......... $ -- $ 119,948 $ 2,011 $ (628) $ -- $ 121,331 ======= ========= ======== ======== ======== =========
F-45 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS Three Months Ended March 31, 2001 (unaudited) (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- --------- ------------ ------------ -------- ------------ Cash flows from operating activities..................... $ 5,194 $ (39,444) $ 44,667 $ 47,641 $ -- $ 58,058 Cash flows from investing activities: Acquisitions.................. -- (3,904) -- -- -- (3,904) Capital expenditures.......... -- (1,161) (3,300) (471) -- (4,932) Investment in subsidiaries.... (5) 10,416 -- -- (10,411) -- Other investing activities.... (5,195) (873) 54,548 3,325 (50,000) 1,805 ------- --------- --------- -------- -------- --------- Net cash provided by (used in) investing activities......... (5,200) 4,478 51,248 2,854 (60,411) (7,031) Cash flows from financing activities: Changes due to accounts receivable securitization, net.......................... -- (3,487) (46,513) (50,000) 50,000 (50,000) Proceeds from exercise of stock options................ 6 -- -- -- -- 6 Proceeds from long-term debt......................... -- 82,006 -- 3,361 -- 85,367 Repayments of long-term debt......................... -- (114,609) (570) (2,628) -- (117,807) Capitalized loan fees......... -- (1,841) -- -- -- (1,841) Proceeds from parent guarantor.................... -- 63,419 (63,419) -- -- -- Investment by parent.......... -- 5 (10,416) -- 10,411 -- Other financing activities.... -- -- 1,047 (1,047) -- -- ------- --------- --------- -------- -------- --------- Net cash provided by financing activities................... 6 25,493 (119,871) (50,314) 60,411 (84,275) Effect of exchange rate changes on cash........................ -- -- 13 (37) -- (24) Cash flows from discontinued operations..................... -- -- 33,701 6 -- 33,707 ------- --------- --------- -------- -------- --------- Net change in cash and cash equivalents.................... -- (9,473) 9,758 150 -- 435 Balance at beginning of year.... -- 9,596 (9,756) 254 -- 94 ------- --------- --------- -------- -------- --------- Balance at end of year.......... $ -- $ 123 $ 2 $ 404 $ -- $ 529 ======= ========= ========= ======== ======== =========
F-46 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS December 31, 2001 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- --------- ------------ ------------ --------- ------------ Cash flows from operating activities.................... $ -- $ 17,692 $(196,738) $ 76,337 $ 254,692 $ 151,983 Cash flows from investing activities: Acquisition costs, net of cash acquired............... -- (3,838) -- -- -- (3,838) Capital expenditures......... -- (13,187) (11,633) (1,979) -- (26,799) Purchase of investments...... -- (100) -- -- -- (100) Investment in subsidiaries... (413) (12,940) 13,353 -- -- -- Other, net................... -- -- (429) 4,206 -- 3,777 ----- --------- --------- -------- --------- --------- Net cash provided by (used in) investing activities.... (413) (30,065) 1,291 2,227 -- (26,960) Cash flows from financing activities: Decrease in accounts receivable financing facility.................... -- -- -- (75,000) -- (75,000) Proceeds from exercise of stock options............... 413 -- -- -- -- 413 Proceeds from issuance of long-term debt.............. -- 628,013 -- 6,391 -- 634,404 Repayments of long-term debt........................ -- (682,612) (7,400) (9,176) -- (699,188) Capitalized loan fees........ -- (4,439) -- -- -- (4,439) Investment by parent......... -- 68,233 69,883 116,576 (254,692) -- ----- --------- --------- -------- --------- --------- Net cash provided by (used in) financing activities.... 413 9,195 62,483 38,791 (254,692) (143,810) Effect of exchange rate changes on cash and cash equivalents................... -- -- -- (60) -- (60) Cash flows from discontinued operations.................... -- -- 43,026 (23,464) -- 19,562 ----- --------- --------- -------- --------- --------- Net increase (decrease) in cash and cash equivalents.......... -- (3,178) (89,938) 93,831 -- 715 Cash and cash equivalents at beginning of year............. -- 1,589 (2,233) 738 -- 94 ----- --------- --------- -------- --------- --------- Cash and cash equivalents at end of year................... $ -- $ (1,589) $ (92,171) $ 94,569 $ -- $ 809 ===== ========= ========= ======== ========= =========
F-47 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS December 31, 2000 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- ---------- ------------ ------------ --------- ------------ Cash flows from operating activities................... $ (3,101) $ (46,036) $ 183,495 $ (2,958) $ -- $ 131,400 Cash flows from investing activities: Acquisitions, net of cash acquired................... -- (2,978) (224,066) -- -- (227,044) Proceeds from divestitures............... -- 110,646 -- -- -- 110,646 Capital expenditures........ -- (12,555) (38,823) (6,394) -- (57,772) Purchase of investments..... (1,500) 1,389 10,756 (12,145) -- (1,500) Investment in subsidiaries............... 9,665 (362,584) -- -- 352,919 -- Other, net.................. 14,599 48,004 196,752 84,215 (312,629) 30,941 -------- ---------- --------- -------- --------- ---------- Net cash provided by (used in) investing activities... 22,764 (218,078) (55,381) 65,676 40,290 (144,729) Cash flows from financing activities: Decrease in accounts receivable financing facility................... -- -- -- (73,500) -- (73,500) Proceeds from exercise of stock options.............. 335 -- -- -- -- 335 Proceeds from issuance of long-term debt............. -- 1,121,000 -- 10,069 -- 1,131,069 Repayments of long-term debt....................... (9,998) (846,782) (4,337) (18,199) -- (879,316) Repurchase of common stock.. (10,000) -- -- -- -- (10,000) Capitalized loan fees....... -- (15,002) -- -- -- (15,002) Other....................... -- (3,508) -- -- -- (3,508) Investment by parent........ -- (9,665) 31,955 18,000 (40,290) -- -------- ---------- --------- -------- --------- ---------- Net cash provided by (used in) financing activities... (19,663) 246,043 27,618 (63,630) (40,290) 150,078 Effect of exchange rate changes on cash and cash equivalents.................. -- -- -- -- -- -- Cash flows from discontinued operations................... -- -- (134,602) (2,323) -- (136,925) -------- ---------- --------- -------- --------- ---------- Net increase (decrease) in cash and cash equivalents.... -- (18,071) 21,130 (3,235) -- (176) Cash and cash equivalents at beginning of year............ -- 27,667 (31,365) 3,968 -- 270 -------- ---------- --------- -------- --------- ---------- Cash and cash equivalents at end of year.................. $ -- $ 9,596 $ (10,235) $ 733 $ -- $ 94 ======== ========== ========= ======== ========= ==========
F-48 MAIL-WELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 ARE UNAUDITED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS December 31, 1999 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- --------- ------------ ------------ --------- ------------ Cash flows from operating activities.................... $ 4,595 $ (1,707) $ 100,776 $ 3,540 $ -- $ 107,204 Cash flows from investing activities: Acquisitions, net of cash acquired.................... -- (2,628) (128,282) -- -- (130,910) Capital expenditures......... -- (12,944) (47,339) (4,804) -- (65,087) Investment in subsidiaries... (2,029) (236,080) 47,574 -- 190,535 -- Loan to subsidiaries......... -- (245,000) -- -- 245,000 -- Other activity with subsidiary, net............. -- 390,226 (411,749) (95,377) 116,900 -- Other, net................... (4,595) (656) 11,466 1,044 -- 7,259 ------- --------- --------- -------- --------- --------- Net cash used in investing activities.................. (6,624) (107,082) (528,330) (99,137) 552,435 (188,738) Cash flows from financing activities: Increase in accounts receivable financing facility.................... -- 49,519 67,381 95,900 (116,900) 95,900 Proceeds from exercise of stock options............... 2,029 -- -- -- -- 2,029 Proceeds from issuance long- term debt................... -- 374,235 -- 11,881 -- 386,116 Repayments of long-term debt........................ -- (294,798) (7,919) (11,572) -- (314,289) Capitalized loan............. -- (1,481) -- -- -- (1,481) Loan from Issuer............. -- -- 245,000 -- (245,000) -- Investment by parent......... -- 2,029 188,506 -- (190,535) -- ------- --------- --------- -------- --------- --------- Net cash provided by financing activities........ 2,029 129,504 492,968 96,209 (552,435) 168,275 Effect of exchange rate changes on cash and cash equivalents................... -- -- -- 16 -- 16 Cash flows from discontinued operations.................... -- -- (88,079) 1,592 -- (86,487) ------- --------- --------- -------- --------- --------- Net increase (decrease) in cash and cash equivalents.......... -- 20,715 (22,665) 2,220 -- 270 Cash and cash equivalents at beginning of year............. -- 6,952 (8,686) 1,734 -- -- ------- --------- --------- -------- --------- --------- Cash and cash equivalents at end of year................... $ -- $ 27,667 $ (31,351) $ 3,954 $ -- $ 270 ======= ========= ========= ======== ========= =========
F-49 [Mail-Well I Corporation Logo] DEALER PROSPECTUS DELIVERY OBLIGATION Until , 2002, all dealers that effect transactions in the -------------- new notes, whether or not participating in the exchange offer, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS, MANAGERS AND OFFICERS Section 145 of the Delaware General Corporation Law ("DGCL") empowers a Delaware corporation to indemnify any person who was or is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Section 145 of the DGCL also provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification is permitted without judicial approval if the person is adjudged to be liable to the corporation. Where a person is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify such person against the expenses which such person actually and reasonably incurred. Mail-Well I Corporation's Certificate of Incorporation provides that Mail-Well I Corporation shall indemnify its officers and directors, and may indemnify its employees and agents, to the fullest extent permitted by the DGCL. Section 102(b)(7) of the DGCL permits a corporation's certificate of incorporation to include a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director for: (i) any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) transactions under Section 174 of the DGCL (unlawful payment of dividends or unlawful stock purchases or redemptions) or (iv) any transaction from which the director derived an improper personal benefit. Mail-Well I Corporation's Certificate of Incorporation provides that a director shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption is not permitted under the DGCL. II-1 ITEM 21. EXHIBITS
EXHIBIT NO. DESCRIPTION - ------- ----------- 3.1 Certificate of Incorporation of Mail-Well Corporation--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.2 Certificate of Amendment of Certificate of Incorporation of Mail-Well Corporation-- incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.3 Certificate of Correction Filed to Correct Certain Error in the Certificate of Amendment of Mail-Well I Corporation Filed in the Office of the Secretary of State of Delaware on September 11, 1995--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.4 Certificate of Change of Registered Agent and Registered Office--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.5 Bylaws of Mail-Well I Corporation--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 4.1 Form of Indenture between Mail-Well, Inc. and The Bank of New York, as Trustee, dated November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002--incorporated by reference from Exhibit 4.2 to Mail-Well, Inc.'s Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.2 Form of Supplemental Indenture between Mail-Well, Inc. and The Bank of New York, as Trustee, dated November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002 and Form of Convertible Note--incorporated by reference from Exhibit 4.5 to Mail-Well, Inc.'s Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.3 Indenture dated as of December 16, 1998 between Mail-Well I Corporation and State Street Bank and Trust Company, as Trustee, relating to Mail-Well I Corporation's $300,000,000 aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2008--incorporated by reference from Exhibit 4.4 to Mail-Well, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-12551. 4.4 Form of Senior Subordinated Note--incorporated by reference from Exhibit 4.5 to Mail- Well, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-12551. 4.6 Indenture dated as of March 13, 2002 between Mail-Well I Corporation and State Street Bank and Trust Company, as Trustee relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012--incorporated by reference to Exhibit 10.30 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 4.7 Form of Senior Note and Guarantee relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount 9 5/8% due 2012--incorporated by reference to Exhibit 10.31 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 5* Opinion of Faegre & Benson LLP re: legality of Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012. II-2 EXHIBIT NO. DESCRIPTION - ------- ----------- 10.1 Form of Indemnity Agreement between Mail-Well, Inc. and each of its officers and directors--incorporated by reference from Exhibit 10.17 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.2 Form of Indemnity Agreement between Mail-Well I Corporation and each of its officers and directors--incorporated by reference from Exhibit 10.18 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of February 23, 1994 and related Employee Stock Ownership Plan Trust Agreement--incorporated by reference from Exhibit 10.19 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--incorporated by reference from Exhibit 10.20 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7, 1997--incorporated by reference from Exhibit 10.56 of Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.6 Form of Mail-Well, Inc. Incentive Stock Option Agreement--incorporated by reference from Exhibit 10.22 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.7 Form of Mail-Well, Inc. Nonqualified Stock Option Agreement--incorporated by reference from Exhibit 10.23 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.8 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--incorporated by reference from Exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997. 10.9 1997 Non-Qualified Stock Option Agreement--incorporated by reference from Exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997. 10.10 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by reference from Exhibit 10.58 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.11 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive Stock Option Agreement-- incorporated by reference from Exhibit 10.59 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.12 Participation Agreement dated as of December 15, 1997, among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.62 to Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1998. 10.13 Equipment Lease dated as of December 15, 1997 among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.63 to Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1998. 10.14 Guaranty Agreement dated as of December 15, 1997, among Mail-Well, Inc., Graphic Arts Center, Inc., Griffin Envelope Inc., Murray Envelope Corporation, Shepard Poorman Communications Corporation, Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.64 to Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1998. II-3 EXHIBIT NO. DESCRIPTION - ------- ----------- 10.15 Merger Agreement and Plan of Merger by and among American Business Products, Inc., Mail-Well, Inc., and Sherman Acquisition Corporation dated January 13, 2000-- incorporated by reference from the Annual Report on Form 10-K for Mail-Well, Inc. 10.16 Change of Control Agreement dated November 15, 1999, between the Company and Paul V. Reilly--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.17 Change of Control Agreement dated November 15, 1999, between the Company and Robert Meyer--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.18 Change of Control Agreement dated November 15, 1999, between the Company and Michael A. Zawalski--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.19 Credit Agreement dated as of February 18, 2000 among Mail-Well I Corporation, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. 10.20 Security Agreement dated as of February 18, 2000, by and among Mail-Well I Corporation, Mail-Well, Inc., certain other affiliates of the Company and Bank of America, N.A., as agent--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. 10.21 Second Amendment to Credit Agreement dated as of March 28, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. 10.22 Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.23 Form of Non-Qualified Stock Option Agreement under 2001 Long-Term Equity Incentive Plan--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.24 Form of Incentive Stock Option Agreement under 2001 Long-Term Equity Incentive Plan-- incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.25 Form of Restricted Stock Award Agreement under 2001 Long-Term Equity Incentive Plan-- incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.26 First Amendment to Credit Agreement dated as of July 28, 2000 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's First Amendment to Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. II-4 EXHIBIT NO. DESCRIPTION - ------- ----------- 10.27 Third Amendment to Credit Agreement dated as of June 29, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's First Amendment to Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.28 Fourth Amendment to Credit Agreement dated as of August 7, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's Current Report on Form 8-K filed August 10, 2001. 10.29 Fifth Amendment to Credit Agreement dated as of February 26, 2002 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference to Exhibit 10.33 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 10.30* Purchase Agreement dated March 8, 2002, between Mail-Well I Corporation, and Credit Suisse First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S. Bancorp Piper Jaffray Inc., First Union Securities, Inc., and Scotia Capital (USA) Inc., as Initial Purchasers, relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012. 10.31 Registration Rights Agreement dated March 13, 2002, between Mail-Well I Corporation, and Credit Suisse First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S. Bancorp Piper Jaffray Inc., First Union Securities, Inc., and Scotia Capital (USA) Inc., as Initial Purchasers, relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012--incorporated by reference to Exhibit 10.32 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 10.32* Stock Purchase Agreement, dated May 6, 2002, among MWL Acquisition Corp., Mail-Well I Corporation and Mail-Well, Inc. 10.33* Amendment No. 1 to Stock Purchase Agreement, dated May 21, 2002, among MWL Acquisition Corp., Mail-Well I Corporation and Mail-Well, Inc. 12* Calculation of ratio of earnings to fixed charges. 21* Subsidiaries of the Registrant. 23.1* Consent of Ernst & Young LLP. 23.2* Consent of Faegre & Benson LLP (included in Exhibit 5). 24* Powers of Attorney--included with signature pages. 25* Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939 of State Street Bank and Trust Company, as trustee under the indenture, relating to the old notes and the new notes (separately bound). 99.1* Form of Letter of Transmittal. 99.2* Form of Notice of Guaranteed Delivery. 99.3* Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. 99.4* Form of Letter to Clients. - -------- * Filed herewith
II-5 ITEM 22. UNDERTAKINGS (A) The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement, or the most recent post-effective amendment thereof, which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered, if the total dollar value of securities offered would not exceed that which was registered, and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act, if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act, 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 be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (B) Insofar as indemnification for liabilities arising under the Securities Act 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 Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (C) The undersigned registrants hereby undertake: (1) 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 S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (2) To supply by means of a post-effective amendment all information concerning the merger, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. MAIL-WELL I CORPORATION By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr.
II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. ABP BOOKS, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. DISCOUNT LABELS, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board & Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board & ------------------------------------------- Executive Vice President Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director & Senior Vice President ------------------------------------------- (Principal Financial Officer) Michel P. Salbaing /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. HILL GRAPHICS, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board & Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ MICHEL P. SALBAING Director, Senior Vice President-- ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ PAUL V. REILLY Chairman of the Board & ------------------------------------------- Executive Vice President Paul V. Reilly (Principal Executive Officer) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. MAIL-WELL, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ FRANK P. DIASSI Director ------------------------------------------- Frank P. Diassi /s/ Frank J. Hevrdejs Director ------------------------------------------- Frank J. Hevrdeis /s/ JANICE C. PETERS Director ------------------------------------------- Janice C. Peters /s/ JEROME W. PICKHOLZ Director ------------------------------------------- Jerome W. Pickholz /s/ W. THOMAS STEPHENS Director ------------------------------------------- W. Thomas Stephens /s/ ALISTER W. REYNOLDS Director ------------------------------------------- Alister W. Reynolds
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. MAIL-WELL COMMERCIAL PRINTING, INC. By /s/ PAUL V. REILLY -------------------------------- Paul V. Reilly Chairman of the Board & Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board & ------------------------------------------- Executive Vice President Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director and Senior Vice President ------------------------------------------- (Principal Financial Officer) Michel P. Salbaing /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. MAIL-WELL MEXICO HOLDINGS, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. MAIL-WELL TEXAS FINANCE, L.P. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer, Mail-Well I Corporation, General Partner POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer of the general partner) /s/ MICHEL P. SALBAING Director, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer of the general partner) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer of the William W. Huffman, Jr. general partner) /s/ ROGER WERTHEIMER Director of the general partner ------------------------------------------- Roger Wertheimer
II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. MAIL-WELL SERVICES, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. MAIL-WELL WEST, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. NATIONAL GRAPHICS COMPANY By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board, President & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board, President & ------------------------------------------- Chief Executive Officer Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Director, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ WILLIAM W. HUFFMAN, JR Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. POSER BUSINESS FORMS, INC. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Chairman of the Board & Executive Vice President POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Chairman of the Board & ------------------------------------------- Executive Vice President Paul V. Reilly (Principal Executive Officer) /s/ MICHEL P. SALBAING Senior Vice President ------------------------------------------- (Principal Financial Officer) Michel P. Salbaing /s WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Director ------------------------------------------- Roger Wertheimer
II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Englewood, State of Colorado, on the 7th day of June, 2002. WISCO III, L.L.C. By /s/ PAUL V. REILLY ------------------------------ Paul V. Reilly Manager & Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign this registration statement and any amendments thereto and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on the 7th day of June, 2002, by the following persons in the capacities indicated: /s/ PAUL V. REILLY Manager & Chief Executive Officer ------------------------------------------- (Principal Executive Officer) Paul V. Reilly /s/ MICHEL P. SALBAING Manager, Senior Vice President & ------------------------------------------- Chief Financial Officer Michel P. Salbaing (Principal Financial Officer) /s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller ------------------------------------------- (Principal Accounting Officer) William W. Huffman, Jr. /s/ ROGER WERTHEIMER Manager ------------------------------------------- Roger Wertheimer
II-19 INDEX OF EXHIBITS
EXHIBIT NO. DESCRIPTION - ------ ----------- 3.1 Certificate of Incorporation of Mail-Well Corporation--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.2 Certificate of Amendment of Certificate of Incorporation of Mail-Well Corporation-- incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.3 Certificate of Correction Filed to Correct Certain Error in the Certificate of Amendment of Mail-Well I Corporation Filed in the Office of the Secretary of State of Delaware on September 11, 1995--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.4 Certificate of Change of Registered Agent and Registered Office--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 3.5 Bylaws of Mail-Well I Corporation--incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409). 4.1 Form of Indenture between Mail-Well, Inc. and The Bank of New York, as Trustee, dated November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002--incorporated by reference from Exhibit 4.2 to Mail-Well, Inc.'s Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.2 Form of Supplemental Indenture between Mail-Well, Inc. and The Bank of New York, as Trustee, dated November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002 and Form of Convertible Note--incorporated by reference from Exhibit 4.5 to Mail-Well, Inc.'s Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.3 Indenture dated as of December 16, 1998 between Mail-Well I Corporation and State Street Bank and Trust Company, as Trustee, relating to Mail-Well I Corporation's $300,000,000 aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2008--incorporated by reference from Exhibit 4.4 to Mail-Well, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-12551. 4.4 Form of Senior Subordinated Note--incorporated by reference from Exhibit 4.5 to Mail-Well, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-12551. 4.6 Indenture dated as of March 13, 2002 between Mail-Well I Corporation and State Street Bank and Trust Company, as Trustee relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012--incorporated by reference to Exhibit 10.30 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 4.7 Form of Senior Note and Guarantee relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount 9 5/8% due 2012--incorporated by reference to Exhibit 10.31 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 5* Opinion of Faegre & Benson LLP re: legality of Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012. II-20 EXHIBIT NO. DESCRIPTION - ------- ----------- 10.1 Form of Indemnity Agreement between Mail-Well, Inc. and each of its officers and directors--incorporated by reference from Exhibit 10.17 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.2 Form of Indemnity Agreement between Mail-Well I Corporation and each of its officers and directors--incorporated by reference from Exhibit 10.18 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of February 23, 1994 and related Employee Stock Ownership Plan Trust Agreement--incorporated by reference from Exhibit 10.19 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--incorporated by reference from Exhibit 10.20 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7, 1997--incorporated by reference from Exhibit 10.56 of Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.6 Form of Mail-Well, Inc. Incentive Stock Option Agreement--incorporated by reference from Exhibit 10.22 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.7 Form of Mail-Well, Inc. Nonqualified Stock Option Agreement--incorporated by reference from Exhibit 10.23 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994. 10.8 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--incorporated by reference from Exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997. 10.9 1997 Non-Qualified Stock Option Agreement--incorporated by reference from Exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997. 10.10 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by reference from Exhibit 10.58 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.11 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive Stock Option Agreement-- incorporated by reference from Exhibit 10.59 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.12 Participation Agreement dated as of December 15, 1997, among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto-- incorporated by reference from Exhibit 10.62 to Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1998. 10.13 Equipment Lease dated as of December 15, 1997 among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto-- incorporated by reference from Exhibit 10.63 to Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1998. 10.14 Guaranty Agreement dated as of December 15, 1997, among Mail-Well, Inc., Graphic Arts Center, Inc., Griffin Envelope Inc., Murray Envelope Corporation, Shepard Poorman Communications Corporation, Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.64 to Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1998. 10.15 Merger Agreement and Plan of Merger by and among American Business Products, Inc., Mail-Well, Inc., and Sherman Acquisition Corporation dated January 13, 2000--incorporated by reference from the Annual Report on Form 10-K for Mail-Well, Inc. II-21 EXHIBIT NO. DESCRIPTION - ------- ----------- 10.16 Change of Control Agreement dated November 15, 1999, between the Company and Paul V. Reilly--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.17 Change of Control Agreement dated November 15, 1999, between the Company and Robert Meyer--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.18 Change of Control Agreement dated November 15, 1999, between the Company and Michael A. Zawalski--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.19 Credit Agreement dated as of February 18, 2000 among Mail-Well I Corporation, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. 10.20 Security Agreement dated as of February 18, 2000, by and among Mail-Well I Corporation, Mail-Well, Inc., certain other affiliates of the Company and Bank of America, N.A., as agent--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000. 10.21 Second Amendment to Credit Agreement dated as of March 28, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. 10.22 Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.23 Form of Non-Qualified Stock Option Agreement under 2001 Long-Term Equity Incentive Plan--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.24 Form of Incentive Stock Option Agreement under 2001 Long-Term Equity Incentive Plan-- incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.25 Form of Restricted Stock Award Agreement under 2001 Long-Term Equity Incentive Plan-- incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.26 First Amendment to Credit Agreement dated as of July 28, 2000 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's First Amendment to Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. 10.27 Third Amendment to Credit Agreement dated as of June 29, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's First Amendment to Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. II-22 EXHIBIT NO. DESCRIPTION - ------- ----------- 10.28 Fourth Amendment to Credit Agreement dated as of August 7, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference from the Company's Current Report on Form 8-K filed August 10, 2001. 10.29 Fifth Amendment to Credit Agreement dated as of February 26, 2002 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto--incorporated by reference to Exhibit 10.33 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 10.30* Purchase Agreement dated March 8, 2002, between Mail-Well I Corporation, and Credit Suisse First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S. Bancorp Piper Jaffray Inc., First Union Securities, Inc., and Scotia Capital (USA) Inc., as Initial Purchasers, relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012. 10.31 Registration Rights Agreement dated March 13, 2002, between Mail-Well I Corporation, and Credit Suisse First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S. Bancorp Piper Jaffray Inc., First Union Securities, Inc., and Scotia Capital (USA) Inc., as Initial Purchasers, relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8% Senior Notes due 2012--incorporated by reference to Exhibit 10.32 to Mail-Well Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. 10.32* Stock Purchase Agreement, dated May 6, 2002, among MWL Acquisition Corp., Mail-Well I Corporation and Mail-Well, Inc. 10.33* Amendment No. 1 to Stock Purchase Agreement, dated May 21, 2002, among MWL Acquisition Corp., Mail-Well I Corporation and Mail-Well, Inc. 12* Calculation of ratio of earnings to fixed charges. 21* Subsidiaries of the Registrant. 23.1* Consent of Ernst & Young LLP. 23.2* Consent of Faegre & Benson LLP (included in Exhibit 5). 24* Powers of Attorney--included with signature pages. 25* Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939 of State Street Bank and Trust Company, as trustee under the indenture, relating to the old notes and the new notes (separately bound). 99.1* Form of Letter of Transmittal. 99.2* Form of Notice of Guaranteed Delivery. 99.3* Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. 99.4* Form of Letter to Clients. - -------- * Filed herewith
II-23 EX-5 3 exh5.txt OPINION RE LEGALITY EXHIBIT 5 FAEGRE & BENSON LLP ----------------------------------------------------- 2500 REPUBLIC PLAZA, 370 SEVENTEENTH STREET DENVER, COLORADO 80202-4004 TELEPHONE 303.592.9000 FACSIMILE 303.820.0600 www.faegre.com June 10, 2002 Mail-Well I Corporation 8310 S. Valley Highway, #400 Englewood, Colorado 80112 Re: Mail-Well I Corporation Registration Statement on Form S-4 ---------------------------------- Ladies and Gentlemen: At your request, we have examined the Registration Statement on Form S-4 (the "Registration Statement") of Mail-Well I Corporation, a Delaware corporation (the "Company"), and certain of its subsidiaries (the "Subsidiary Guarantors") listed therein, in connection with the exchange of $350,000,000 principal amount of the Company's 9 5/8% Senior Notes due 2012 (the "Notes") for $350,000,000 principal amount of its outstanding 9 5/8% Senior Notes due 2012 (the "Old Notes"). The Notes will be issued pursuant to an Indenture (the "Indenture") dated as of March 13, 2002 among the Company, each Subsidiary Guarantor and the Trustee named therein, and will be guaranteed by such Subsidiary Guarantors pursuant to guarantees set forth therein (the "Guarantees"). We have examined such matters of fact and questions of law as we have considered appropriate for purposes of this opinion. We have examined, among other things, the terms of the Notes and the Indenture, including the Guarantees. Based on the foregoing and subject to the qualifications and assumptions stated herein, we are of the opinion that: 1. Assuming that the Notes have been duly authorized by the Company, when duly executed and authenticated as contemplated by the Indenture and delivered to the holders of the Old Notes in exchange for the Old Notes as contemplated by the Registration Statement, the Notes will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms and will be entitled to the benefits of the Indenture. 2. Assuming that the Guarantees have been duly authorized by each of the Subsidiary Guarantors, when the Notes are executed and authenticated as contemplated by the Indenture and delivered to the holders of the Old Notes in exchange for the Old Notes as contemplated by the Registration Statement, the Guarantees endorsed thereon will be entitled to June 10, 2002 Page 2 the benefits of the Indenture and will be valid and binding obligations of the Subsidiary Guarantors, enforceable in accordance with their terms. The opinions expressed herein are subject to the following qualifications, assumptions and limitations: (a) In connection with rendering the opinions set forth herein, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies thereof, and the authenticity of the originals of such latter documents. (b) The opinions set forth herein may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally. (c) Enforcement of the rights and remedies granted under the Notes and the Indenture may be limited by general principles of equity (including, without limitation, unconscionability), regardless of whether such enforcement is considered in a proceeding in equity or at law, and in this regard we have assumed that the holders of such rights and remedies will exercise them only in good faith and under circumstances and in a manner which are commercially reasonable. (d) We express no opinion as to the enforceability of any provisions in the Notes or the Indenture regarding indemnification or contribution or liquidated damages or requiring the payment of interest at a higher rate than the rate ordinarily borne by the Notes upon default. We express no opinion with respect to (i) the enforceability of any severability provision contained in the Notes or the Indenture or (ii) any provision in the Notes or the Indenture requiring that waivers be in writing or providing that a party's failure to exercise any right, remedy or option under such documents shall not operate as a waiver. (e) We express no opinion as to whether waivers of statutory or common law rights contained in either the Notes or the Indenture are enforceable. (f) We have assumed that each party to the Notes and the Indenture (other than the Company and the Subsidiary Guarantors) has complied with all legal requirements pertaining to its status as such status relates to its rights to enforce such documents against the Company and the Subsidiary Guarantors. (g) We express no opinion as to the governing law or the choice of law provisions of any of the Notes and the Indenture. (h) We express no opinion as to the enforceability of provisions by which the parties submit to the jurisdiction of particular courts or waive objections to venue or waive a jury trial. (i) In rendering the opinions set forth herein, we have assumed that (i) the Notes and the Indenture have been duly authorized, executed and delivered by all parties thereto and that all June 10, 2002 Page 3 such persons have the power and authority to enter into and perform the Notes and the Indenture and (ii) the Notes and the Indenture are valid and binding upon all parties thereto other than the Company and the Subsidiary Guarantors. (j) This opinion is limited to the laws of the State of Colorado and the federal laws of the United States of America. We note that the Notes and the Indenture are governed by the laws of the State of New York. For purposes of rendering the opinions set forth herein, we have assumed, without independent inquiry, that the laws of the State of Colorado are identical to the laws of the State of New York in all respects material to this opinion. (k) Our opinions set forth in this letter are based upon the facts in existence and laws in effect on the date hereof and we expressly disclaim any obligation to update our opinions herein, regardless of whether changes in such facts or laws come to our attention after the delivery hereof. (l) This opinion is solely for your benefit, and may not be relied upon in any manner by any other person and may not be disclosed, quoted, filed with a governmental agency or otherwise referred to without our prior written consent; provided, however, we consent to your filing this opinion as an exhibit to the Registration Statement. We consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the prospectus which is part of the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act, the rules and regulations of the Securities and Exchange Commission promulgated thereunder, or Item 509 of Regulation S-K. Very truly yours, /s/ Faegre & Benson LLP Faegre & Benson LLP EX-10.30 4 exh10p30.txt PURCHASE AGREEMENT EXHIBIT 10.30 $350,000,000 MAIL-WELL I CORPORATION 9 5/8% SENIOR NOTES DUE 2012 PURCHASE AGREEMENT ------------------ March 8, 2002 CREDIT SUISSE FIRST BOSTON CORPORATION UBS WARBURG LLC BANC OF AMERICA SECURITIES LLC U.S. BANCORP PIPER JAFFRAY INC. FIRST UNION SECURITIES, INC. SCOTIA CAPITAL (USA) INC. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Ladies and Gentleman: 1. Introductory. Mail-Well I Corporation, a Delaware corporation (the "COMPANY"), proposes, subject to the terms and conditions stated herein, to issue and sell to the several initial purchasers named in Schedule A hereto (the "PURCHASERS") U.S.$350,000,000 principal amount of its 9 5/8% Senior Notes due 2012 (the "Notes") to be issued under an indenture, dated as of March 13, 2002 (the "INDENTURE"), among the Company, the guarantors named therein and State Street Bank and Trust Company, as Trustee, and guaranteed (the "Guarantees") by the Company's parent company, Mail-Well, Inc. (the "PARENT COMPANY") and the Company's domestic subsidiaries set forth on the signature pages hereof (the Parent Company and such subsidiaries are collectively referred to as the "GUARANTORS"). The Notes and the Guarantees are referred to collectively as the "OFFERED SECURITIES." The Company and the Guarantors are collectively referred to as the "ISSUERS." The United States Securities Act of 1933 is herein referred to as the "SECURITIES ACT." Holders (including subsequent transferees) of the Offered Securities will have the registration rights set forth in the registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date (as defined below), in substantially the form of Exhibit I hereto, -2- for so long as such Offered Securities constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Issuers will agree to file with the Securities and Exchange Commission (the "COMMISSION") under the circumstances set forth therein, (i) a registration statement under the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the Offered Securities in a like aggregate principal amount as the Issuers issued under the Indenture, identical in all material respects to the Offered Securities and registered under the Securities Act (the "EXCHANGE SECURITIES"), to be offered in exchange for the Offered Securities (such offer to exchange being referred to as the "EXCHANGE OFFER") and (ii) a shelf registration statement pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by certain holders of the Offered Securities and to use their reasonable best efforts to cause such Registration Statements to be declared and remain effective and usable for the periods specified in the Registration Rights Agreement and to consummate the Exchange Offer. The Offered Securities and the Exchange Securities are referred to collectively as the "SECURITIES." The Issuers hereby agree with the several Purchasers as follows: 2. Representations and Warranties of the Issuers. Each of the Issuers, jointly and severally, represents and warrants to, and agrees with, the several Purchasers that: (a) A preliminary offering circular and an offering circular relating to the Offered Securities to be offered by the Purchasers have been prepared by the Issuers. Such preliminary offering circular (the "PRELIMINARY OFFERING CIRCULAR") and offering circular (the "OFFERING CIRCULAR"), as supplemented as of the date of this Agreement, together with any other document approved by the Issuers for use in connection with the contemplated resale of the Offered Securities are hereinafter collectively referred to as the "OFFERING DOCUMENT." On the date of this Agreement, the Offering Document does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Offering Document based upon written information furnished to the Issuers by any Purchaser through Credit Suisse First Boston Corporation ("CSFBC") specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(b) hereof. (b) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Document; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification. (c) Each subsidiary of the Company and the Parent Company has been duly formed and is an existing corporation, limited partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its incorporation, with power -3- and authority (corporate and other) to own its properties and conduct its business as described in the Offering Document; and each subsidiary of the Company and the Parent Company is duly qualified to do business as a foreign corporation, partnership or limited liability company, as the case may be, in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification except where the failure to be so qualified does not or would not individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole ("MATERIAL ADVERSE EFFECT"); all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and except as described in the Offering Document the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects. (d) The Indenture has been duly authorized; the Offered Securities have been duly authorized; and when the Offered Securities are delivered and paid for pursuant to this Agreement on the Closing Date (as defined below), the Indenture will have been duly executed and delivered, such Offered Securities will have been duly executed, authenticated, issued and delivered and will conform to the description thereof contained in the Offering Document and the Indenture and such Offered Securities will constitute valid and legally binding obligations of the Issuers, 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. (e) Except as disclosed in the Offering Document, there are no contracts, agreements or understandings between any of the Issuers and any person that would give rise to a valid claim against any of the Issuers or any Purchaser for a brokerage commission, finder's fee or other like payment in connection with the transactions contemplated by this Agreement. (f) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement, the Registration Rights Agreement and the Offering Document in connection with the issuance and sale of the Offered Securities by the Issuers except such as may be required under state securities laws, the filing of the Exchange Offer Registration Statement or the Shelf Registration Statement with the Commission and the order of the Commission declaring the Exchange Offer Registration Statement or the Shelf Registration Statement (each as defined in the Registration Rights Agreement) effective. (g) The execution, delivery and performance of the Indenture, this Agreement and the Registration Rights Agreement, and the issuance and sale of the Offered Securities and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Parent Company, the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Parent Company, the Company or any such subsidiary is a party or by which the Parent Company, the Company or any such subsidiary is bound or to which any of the properties of the Parent Company, the Com- -4- pany or any such subsidiary is subject, or the charter or by-laws of the Parent Company, the Company or any such subsidiary, and the Company has full power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement. (h) This Agreement has been duly authorized, executed and delivered by the Issuers. (i) Except as disclosed in the Offering Document, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially interfere with the use made or to be made thereof by them; and except as disclosed in the Offering Document, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them. (j) The Company and its subsidiaries possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (k) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Issuers, is imminent that might have a Material Adverse Effect. (l) The Company and its subsidiaries own, possess or can acquire on reasonable terms, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (m) Except as disclosed in the Offering Document, neither the Parent Company, the Company nor any of its subsidiaries is in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any envi- -5- ronmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim. (n) Except as disclosed in the Offering Document, there are no pending actions, suits or proceedings against or affecting the Parent Company, the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Parent Company, the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of the Issuers to perform their obligations under the Indenture, this Agreement or the Registration Rights Agreement or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are threatened or, to the Issuers' knowledge, contemplated. (o) The financial statements included in the Offering Document present fairly the financial position of the Parent Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and, except as otherwise disclosed in the Offering Document, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis; and the assumptions used in preparing the pro forma financial statements included in the Offering Document provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. (p) Except as disclosed in the Offering Document, since the date of the latest audited financial statements included in the Offering Document there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Offering Document, there has been no dividend or distribution of any kind declared, paid or made by the Parent Company on any class of its capital stock or by the Company, except for distributions totaling not more than $2.5 million from the Company to the Parent Company in the ordinary course of business, on any class of its capital stock. (q) The Company is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940 (the "INVESTMENT COMPANY ACT"); and the Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Offering Document, will not be an "investment company" as defined in the Investment Company Act. (r) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed on any national securities exchange -6- registered under Section 6 of the United States Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or quoted in a U.S. automated inter-dealer quotation system. (s) The offer and sale of the Offered Securities in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and Regulation S and Rule 144A thereunder; and it is not necessary to qualify an indenture in respect of the Offered Securities under the United States Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT"). (t) Neither the Parent Company, nor any of its affiliates, nor any person acting on its or their behalf (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S under the Securities Act) the Offered Securities or any security of the same class or series as the Offered Securities or (ii) has offered or will offer or sell the Offered Securities (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S ("REGULATION S") under the Securities Act, by means of any directed selling efforts within the meaning of Rule 902(c) of Regulation S. The Parent Company, its affiliates and any person acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S. The Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for this Agreement. (u) There is no "substantial U.S. market interest" as defined in Rule 902(j) of Regulation S in the debt securities of any of the Issuers. (v) On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act, and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (w) On the Closing Date, the Exchange Securities will have been duly authorized by the Issuers; and when the Exchange Securities are issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Securities will be entitled to the benefits of the Indenture and will be the valid and legally binding obligations of the Issuers, 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. (x) On the Closing Date, the Guarantee to be endorsed on the Offered Securities by each Guarantor will have been duly authorized by such Guarantor, and will have been duly executed and delivered by each such Guarantor and will conform to the description thereof contained in the Offering Document. When the Offered Securities have been issued, executed and authenticated in accordance with the Indenture and delivered to and paid for by the Purchasers in accordance with the terms of this Agreement, the Guarantee of each Guarantor endorsed thereon will constitute valid and legally binding obligations of such Guaran- -7- tor, enforceable in accordance with its 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. (y) On the Closing Date, the Guarantee to be endorsed on the Exchange Securities by each Guarantor will have been duly authorized by such Guarantor; and, when issued, will have been duly executed and delivered by each such Guarantor and will conform to the description thereof contained in the Offering Document. When the Exchange Securities have been issued, executed and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Guarantee of each Guarantor endorsed thereon will constitute valid and legally binding obligations of such Guarantor, enforceable in accordance with its 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. (z) On the Closing Date, the Registration Rights Agreement will have been duly authorized, executed and delivered by the Issuers. When the Registration Rights Agreement has been duly executed and delivered, the Registration Rights Agreement will be a valid and binding agreement of the Issuers, enforceable against each Issuer in accordance with its terms, (x) except as to rights of indemnity or contribution, or both, that may be limited by state and Federal laws or public policy underlying such laws and (y) 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. On the Closing Date, the Registration Rights Agreement will conform to the description thereof in the Offering Circular. (aa) Except as set forth in the Offering Document, there are no contracts, agreements or understandings between any Issuer and any person granting such person the right to require such Issuer to file a registration statement under the Securities Act with respect to any securities of such Issuer or to require such Issuer to include such securities with the Exchange Securities registered pursuant to any Registration Statement. (bb) Neither the Company nor any of its subsidiaries nor any agent thereof acting on behalf of them has taken, and none of them will take, any action that might cause this Agreement or the issuance or sale of the Offered Securities to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, as of the Closing Date, the Issuers agree to sell to the Purchasers, and the Purchasers agree, severally and not jointly, to purchase from the Issuers, the Offered Securities at a purchase price of 97.50% of the principal amount thereof. The Issuers will deliver against payment of the purchase price the Offered Securities to be offered and sold by the Purchasers in reliance on Regulation S (the "REGULATION S SECURITIES") in the form of one or more permanent global Securities in registered form without interest coupons -8- (the "OFFERED REGULATION S GLOBAL SECURITIES") which will be deposited with the Trustee as custodian for The Depository Trust Company ("DTC") for the respective accounts of the DTC participants for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("EUROCLEAR"), and Clearstream Banking, societe anonyme ("CLEARSTREAM") and registered in the name of Cede & Co., as nominee for DTC. The Issuers will deliver against payment of the purchase price the Offered Securities to be purchased by each Purchaser hereunder and to be offered and sold by each Purchaser in reliance on Rule 144A under the Securities Act (the "144A SECURITIES") in the form of one permanent global security in definitive form without interest coupons (the "RESTRICTED GLOBAL SECURITIES") deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC. The Regulation S Global Securities and the Restricted Global Securities shall be assigned separate CUSIP numbers. The Restricted Global Securities shall include the legend regarding restrictions on transfer set forth under "Transfer Restrictions" in the Offering Document. Until the termination of the restricted period (as defined in Regulation S) with respect to the offering of the Offered Securities, interests in the Regulation S Global Securities may only be held by the DTC participants for Euroclear and Clearstream. Interests in any permanent global Securities will be held only in book-entry form through Euroclear, Clearstream or DTC, as the case may be, except in the limited circumstances described in the Offering Document. Payment for the Regulation S Securities and the 144A Securities shall be made by the Purchasers in Federal (same day) funds by wire transfer to an account at a bank acceptable to CSFBC and delivery of the Offered Securities will take place at the office of Cahill Gordon & Reindel at 9:00 A.M. (New York time), on March, 2002, or at such other time not later than seven full business days thereafter as CSFBC and the Company determine, such time being herein referred to as the "CLOSING DATE", against delivery to the Trustee as custodian for DTC of (i) the Regulation S Global Securities representing all of the Regulation S Securities for the respective accounts of the DTC participants for Euroclear and Clearstream and (ii) the Restricted Global Securities representing all of the 144A Securities. The Regulation S Global Securities and the Restricted Global Securities will be made available for checking at the office of Cahill Gordon & Reindel at least 24 hours prior to the Closing Date. 4. Representations by Purchasers; Resale by Purchasers. (a) Each Purchaser severally represents and warrants to the Company that it is an "accredited investor" within the meaning of Regulation D under the Securities Act. (b) Each Purchaser severally acknowledges that the Offered Securities have not been registered under the Securities Act and may not be offered or sold within the United States except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has not offered or sold and will not offer or sell, any Offered Securities constituting part of its allotment within the United States, except in accordance with Rule 903 or Rule 144A under the Securities Act. Accordingly, neither such Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will engage in any directed selling efforts with respect to the Offered Securities. Terms used in this subsection (b) have the meanings given to them by Regulation S. -9- (c) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities except for any such arrangements with the other Purchasers or affiliates of the other Purchasers or with the prior written consent of the Issuers. (d) Each Purchaser severally agrees that it and each of its affiliates will not offer or sell the Offered Securities in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or other electronic medium, including the Internet, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Offered Securities, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Offered Securities has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (e) Each of the Purchasers severally represents and agrees that (i) it has not offered or sold and prior to the date six months after the date of issue of the Offered Securities will not offer or sell any Offered Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Offered Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. 5. Certain Agreements of the Issuers. The Issuers agree with the several Purchasers that: (a) The Issuers will advise CSFBC promptly of any proposal to amend or supplement the Offering Document and will not effect such amendment or supplementation without CSFBC's consent. If, at any time prior to the completion of the resale of the Offered Securities by the Purchasers, any event occurs as a result of which the Offering Document as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any such time to amend or supplement the Offering Document to comply with any applicable law, the Issuers promptly will notify CSFBC of such event and promptly will prepare, at their own expense, an amendment or supplement which will correct such statement or omission or effect such compliance. Neither CSFBC's consent to, nor the Purchasers' delivery to offerees or in- -10- vestors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (b) The Issuers will furnish to CSFBC copies of any preliminary offering circular, the Offering Document and all amendments and supplements to such documents, in each case as soon as available and in such quantities as CSFBC requests, and the Issuers will furnish to CSFBC on the date hereof three copies of the Offering Document, one of which will include the independent accountants' reports therein manually signed by such independent accountants. At any time when the Issuers are not subject to Section 13 or 15(d) of the Exchange Act, the Issuers will promptly furnish or cause to be furnished to CSFBC (and, upon request, to each of the other Purchasers) and, upon request of holders and prospective purchasers of the Offered Securities, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Offered Securities. The Issuers will pay the expenses of printing and distributing to the Purchasers all such documents. (c) The Issuers will arrange for the qualification of the Offered Securities for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as CSFBC designates and will continue such qualifications in effect so long as required for the resale of the Offered Securities by the Purchasers, provided that the Issuers will not be required to qualify as a foreign corporation or to file a general consent to service of process in any such state. (d) During the period of five years hereafter, the Issuers will furnish to CSFBC and, upon request, to each of the other Purchasers, as soon as practicable after the end of each fiscal year, a copy of the Parent Company's annual report to shareholders for such year; and the Issuers will furnish to CSFBC and, upon request, to each of the other Purchasers (i) as soon as available, a copy of each report and any definitive proxy statement Issuers filed with the Commission under the Exchange Act or mailed to shareholders, and (ii) from time to time, such other information concerning the Issuers as CSFBC may reasonably request. (e) During the period of two years after the Closing Date, the Issuers will, upon request, furnish to CSFBC each of the other Purchasers and any holder of Offered Securities a copy of the restrictions on transfer applicable to the Offered Securities. (f) During the period of two years after the Closing Date, the Issuers will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Securities that have been reacquired by any of them. (g) During the period of two years after the Closing Date, the Issuers will not be or become, an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act. -11- (h) The Issuers will pay all expenses incidental to the performance of its obligations under this Agreement, the Indenture, and the Registration Rights Agreement, including (i) the fees and expenses of the Trustee and its professional advisers; (ii) all expenses in connection with the execution, issue, authentication, packaging and initial delivery of the Offered Securities and, as applicable, the Exchange Securities, the preparation and printing of this Agreement, the Registration Rights Agreement, the Offered Securities, the Indenture, the Offering Document and amendments and supplements thereto, and any other document relating to the issuance, offer, sale and delivery of the Offered Securities and as applicable, the Exchange Securities; (iii) the cost of qualifying the Offered Securities for trading in The Portal(SM) Market ("PORTAL") and any expenses incidental thereto; (iv) the cost of any advertising approved by the Issuers in connection with the issue of the Offered Securities; (v) for any expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Offered Securities or the Exchange Securities for sale under the laws of such jurisdictions in the United States and Canada as CSFBC designates and the printing of memoranda relating thereto; (vi) for any fees charged by investment rating agencies for the rating of the Securities or the Exchange Securities; and (vii) for expenses incurred in distributing preliminary offering circulars and the Offering Document (including any amendments and supplements thereto) to the Purchasers. The Issuers will also pay or reimburse the Purchasers (to the extent incurred by them) for all travel expenses of the Purchasers (to the extent reasonable) and the Issuers officers and employees and any other expenses of the Purchasers (to the extent reasonable) and the Issuers in connection with attending or hosting meetings with prospective purchasers of the Offered Securities from the Purchasers. (i) In connection with the offering, until CSFBC shall have notified the Issuers and the other Purchasers of the completion of the resale of the Offered Securities, none of the Issuers nor any of their respective affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest any Offered Securities or attempt to induce any person to purchase any Offered Securities; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Securities. (j) For a period of 180 days after the date of the initial offering of the Offered Securities by the Purchasers, none of the Issuers will offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any United States dollar-denominated debt securities issued or guaranteed by any of the Issuers and having a maturity of more than one year from the date of issue or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing. None of the Issuers will at any time offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Offered Securities. 6. Conditions of the Obligations of the Purchasers. The obligations of the several Purchasers to purchase and pay for the Offered Securities will be subject to the accuracy of the representations and warranties on the part of the Issuers herein, to the accuracy of the statements of officers of -12- the Issuers made pursuant to the provisions hereof, to the performance by the Issuers of their respective obligations hereunder and to the following additional conditions precedent: (a) The Purchasers shall have received a letter, dated the date of this Agreement, of Ernst & Young LLP in form and substance satisfactory to the Purchasers concerning the financial information with respect to the Issuers set forth in the Offering Document. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) a change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would, in the judgment of CSFBC, be likely to prejudice materially the success of the proposed issue, sale or distribution of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market, or (ii) (A) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company or its subsidiaries which, in the judgment of a majority in interest of the Purchasers including CSFBC, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (B) any downgrading in the rating of any debt securities of any Issuer by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of any Issuer (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating) or any announcement that any Issuer has been placed on negative outlook; (C) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Issuers on any exchange or in the over-the-counter market; (D) any banking moratorium declared by U.S. Federal or New York authorities; (E) any major disruption of settlements of securities; or (F) any attack on, outbreak or escalation of major hostilities or act of terrorism in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers including CSFBC, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or sale of and payment for the Offered Securities. (c) The Purchasers shall have received an opinion, dated the Closing Date, of Faegre & Benson LLP, special counsel for the Company, that: (i) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Offering Document; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where failure to be so qualified would not have a Material Adverse Effect; -13- (ii) The Indenture has been duly authorized, executed and delivered by the Company and each Guarantor and, assuming due authorization, execution and delivery thereof by the Trustee, the Indenture constitutes a legally valid and binding agreement of each of the Issuers, enforceable against each of the Issuers in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and general equity principles; the Notes have been duly authorized by the Company and, when executed, authenticated and issued in accordance with the terms of the Indenture and delivered to and paid for by the Purchasers in accordance with this Agreement, the Notes will be legally valid and binding obligations of the Company enforceable against the Company 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; (iii) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required for the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement in connection with the issuance or sale of the Offered Securities by the Issuers, except (y) such as may be required under state securities laws and (z) the filing of the Exchange Offer Registration Statement with the Commission and the order of the Commission declaring the Exchange Offer Registration Statement or the Shelf Registration Statement effective; (iv) There are no pending actions, suits or proceedings against the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect the ability of any Issuer to perform its obligations under the Indenture, this Agreement or the Registration Rights Agreement, and no such actions, suits or proceedings are, to such counsel's knowledge, threatened or contemplated; (v) The execution, delivery and performance by the Company and the Guarantors of the Indenture, this Agreement and the Registration Rights Agreement, and the issuance and sale of the Offered Securities and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any Guarantor or any of their properties, or any agreement or instrument to which the Company or any such Guarantor is a party or by which the Company or any such Guarantor is bound or to which any of the properties of the Company or any such Guarantor is subject, or the charter or by-laws of the Company or any such Guarantor, and the Issuers have the corporate power and authority to authorize, issue and sell the Offered Securities as contemplated by this Agreement; -14- (vi) The descriptions in the Offering Circular of statutes, certain U.S. federal income tax considerations, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown; (vii) This Agreement and the Registration Rights Agreement have each been duly authorized, executed and delivered by the Issuers; (viii) It is not necessary in connection with (i) the offer, sale and delivery of the Offered Securities by the Issuers to the several Purchasers pursuant to this Agreement or (ii) the resales of the Offered Securities by the several Purchasers in the manner contemplated by this Agreement, to register the Offered Securities under the Securities Act or to qualify an indenture in respect thereof under the Trust Indenture Act of 1939, as amended (the "TIA"); (ix) The Indenture meets the requirements for qualification under the TIA and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder; (x) The Exchange Securities have been duly authorized by the Company; and when the Exchange Securities are executed, issued and authenticated in accordance with the terms of the Exchange Offer and the Indenture, the Exchange Securities will be entitled to the benefits of the Indenture and will be the legally valid and binding obligations of the Company, enforceable against the Company 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; (xi) The Guarantees to be endorsed on the Notes have been duly authorized by each Guarantor, and when executed and delivered in accordance with the terms of the Indenture will, upon due execution and delivery of the Notes by the Company and due authentication of the Notes by the Trustee against payment therefor in accordance with the terms of the Indenture and this Agreement, be the legally valid and binding obligations of each of the Guarantors, enforceable against the Guarantors 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; (xii) The Guarantees to be endorsed on the Exchange Securities have been duly authorized by each Guarantor, and when executed and delivered in accordance with the Indenture will, upon due execution and delivery of the Exchange Securities by the Company and due authentication of the Exchange Securities by the Trustee against exchange therefor in accordance with the Indenture and this Agreement, be the legally valid and binding obligations of each Guarantor, enforceable against each Guarantor in accordance with their terms, subject to bankruptcy, insol- -15- vency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (xiii) To such counsel's knowledge, there are no contracts, agreements or understandings between any Issuer and any person granting such person the right to require such Issuer to file a registration statement under the Securities Act with respect to any securities of such Issuer or to require such Issuer to include such securities with the Securities and Guarantees registered pursuant to any Registration Statement. In addition, such letter shall contain a paragraph stating that such counsel has participated in reviews and discussions in connection with the preparation of the Offering Circular, and in the course of such reviews and discussions and such other investigations as such counsel has deemed necessary, no facts came to such counsel's attention that lead such counsel to believe that the Offering Circular (except as to the financial statements and other related financial and other related statistical data contained therein, as to all of which such counsel does not need to express a belief), as of the date hereof and as of the Closing Date, contained any untrue statement of a material fact required to be stated therein or omitted 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. (d) The Purchasers shall have received from Cahill Gordon & Reindel, counsel for the Purchasers, an opinion, dated the Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities, the Offering Circular, the exemption from registration for the offer and sale of the Offered Securities by the Issuers to the several Purchasers and the resales by the several Purchasers as contemplated hereby and other related matters as CSFBC may require, and the Issuers shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (e) The Purchasers shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer of each Issuer in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Issuers in this Agreement are true and correct, that such Issuer has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and that, subsequent to the dates of the most recent financial statements in the Offering Document there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole except as set forth in or contemplated by the Offering Document or as described in such certificate. (f) The Purchasers shall have received a letter, dated the Closing Date, of Ernst & Young LLP which meets the requirements of subsection (a) of this Section. -16- (g) The repayment of indebtedness under the Company's senior credit facility, and the amendment of the Company's existing senior credit facility shall have been or shall be consummated on or prior to the Closing Date as described in the Offering Document. (h) No "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436(g)(2) under the Securities Act (i) has imposed (or has informed any Issuer that it is considering imposing) any condition (financial or otherwise) on an Issuer retaining any rating assigned to any debt securities of such Issuer or (ii) has indicated to any Issuer that it is considering (a) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned or (b) any change in the outlook for any rating on the debt securities of such Issuer. The Issuers will furnish the Purchasers with such conformed copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. CSFBC may in its sole discretion waive on behalf of the Purchasers compliance with any conditions to the obligations of the Purchasers hereunder, whether in respect of an Optional Closing Date or otherwise. 7. Indemnification and Contribution. (a) Each of the Issuers will indemnify and hold harmless each Purchaser, its partners, directors and officers and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any breach of any of the representations and warranties of the Company contained herein or any untrue statement or alleged untrue statement of any material fact contained in the Offering Document, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon any Issuer's failure to perform its obligations under Section 5(a) of this Agreement, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Issuers will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Issuers by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below. (b) Each Purchaser will severally and not jointly indemnify and hold harmless the Issuers, their respective directors and officers and each person, if any, who controls the Issuers within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Issuers may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Of- -17- fering Document, or any amendment or supplement thereto, or any related preliminary offering circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Issuers by such Purchaser through CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Issuers in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchaser consists of the following information in the Offering Document furnished on behalf of each Purchaser: under the caption "Plan of Distribution", the final three paragraphs thereof; provided, however, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Issuers' failure to perform its obligations under Section 5(a) of this Agreement. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above unless the indemnifying party is materially prejudiced thereby. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers on the one hand and the Purchasers on the other from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuers on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or -18- liabilities as well as any other relevant equitable considerations. The relative benefits received by the Issuers on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Issuers bear to the total discounts and commissions received by the Purchasers from the Issuers under this Agreement. The relative fault 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 Issuers or the Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and not joint. (e) The obligations of the Issuers under this Section shall be in addition to any liability which the Issuers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Issuers within the meaning of the Securities Act or the Exchange Act. 8. Default of Purchasers. If any Purchaser or Purchasers default in their obligations to purchase Offered Securities hereunder and the aggregate principal amount of Offered Securities that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of Offered Securities, CSFBC may make arrangements satisfactory to the Issuers for the purchase of such Offered Securities by other persons, including any of the Purchasers, but if no such arrangements are made by the Closing Date, the non-defaulting Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal amount of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total principal amount of Offered Securities and arrangements satisfactory to CSFBC and the Issuers for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser or the Issuers, except as provided in Section 9. As used in this Agreement, the term "Purchaser" includes any person substituted for a Purchaser under this Section. Nothing herein will relieve a defaulting Purchaser from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Issuers or its officers and of the several Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Pur- -19- chaser, the Issuers or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Purchasers is not consummated, the Issuers shall remain responsible for the expenses to be paid or reimbursed by it to non-defaulting Purchasers pursuant to Section 5 and the respective obligations of the Issuers to non-defaulting Purchasers and the Purchasers to the Issuers pursuant to Section 7 shall remain in effect. If the purchase of the Offered Securities by the Purchasers is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (C), (D), (E) or (F) of Section 6(b)(ii), the Issuers will reimburse the non-defaulting Purchasers for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking Department--Transactions Advisory Group, or, if sent to the Issuers, will be mailed, delivered or telegraphed and confirmed to it at Mail-Well, Inc., 8310 S. Valley Highway, Englewood, Colorado 80112, Attention: General Counsel provided, however, that any notice to a Purchaser pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Purchaser. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder, except that holders of Offered Securities shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 5(b) hereof against the Issuers as if such holders were parties thereto. 12. Representation of Purchasers. CSFBC will act for the several Purchasers in connection with this purchase, and any action under this Agreement taken by the Purchasers jointly or by CSFBC will be binding upon all the Purchasers. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Each Issuer hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. (Signature Pages Follow) -20- If the foregoing is in accordance with the Purchasers' understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Issuers and the several Purchasers in accordance with its terms. Very truly yours, MAIL-WELL I CORPORATION By: --------------------------------- Name: Title: MAIL-WELL, INC. By: --------------------------------- Name: Title: ABP BOOKS, INC. DISCOUNT LABELS, INC. HILL GRAPHICS, INC. MAIL-WELL COMMERCIAL PRINTING, INC. MAIL-WELL LABEL USA, INC. MAIL-WELL MEXICO HOLDINGS, INC. MAIL-WELL SERVICES, INC. MAIL-WELL TEXAS FINANCE LP MAIL-WELL WEST, INC. NATIONAL GRAPHICS COMPANY POSER BUSINESS FORMS, INC. WISCO III, L.L.C. By: --------------------------------- Name: Title: The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION UBS WARBURG LLC BANC OF AMERICA SECURITIES LLC U.S. BANCORP PIPER JAFFRAY INC. FIRST UNION SECURITIES, INC. SCOTIA CAPITAL (USA) INC. By CREDIT SUISSE FIRST BOSTON CORPORATION By --------------------------------- Name: Title: EX-10.32 5 exh10p32.txt STOCK PURCHASE AGREEMENT EXHIBIT 10.32 ============================================================================ STOCK PURCHASE AGREEMENT DATED MAY 6, 2002 AMONG MWL ACQUISITION CORP. AS PURCHASER AND MAIL-WELL I CORPORATION AS SELLER AND MAIL-WELL, INC. AS PARENT OF SELLER ============================================================================ TABLE OF CONTENTS -----------------
PAGE ARTICLE 1 DEFINITIONS.................................................................................1 1.1. Certain Defined Terms...............................................................1 1.2. Accounting Terms...................................................................12 1.3. Other Definitional Provisions......................................................13 ARTICLE 2 PURCHASE AND SALE OF THE SHARES............................................................13 2.1. Purchase and Sale of the Shares....................................................13 2.2. Purchase Price.....................................................................13 2.3. Payment of Initial Purchase Price..................................................14 2.4. Adjustment of Purchase Price.......................................................14 2.5. Closing............................................................................16 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER................................................16 3.1. Organization and Qualification.....................................................16 3.2. Authority..........................................................................16 3.3. Investment.........................................................................16 3.4. Litigation.........................................................................16 3.5. Brokerage Commission...............................................................17 3.6. Financing..........................................................................17 3.7. Competition Act (Canada)...........................................................17 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER...............................................17 4.1. Capitalization; Legal Status; Qualification; Title to Shares.......................17 4.2. Subsidiaries.......................................................................18 4.3. No Violation.......................................................................18 4.4. Power and Authority................................................................19 4.5. Due Authorization; Validity; Enforceability........................................19 4.6. Ownership of Assets................................................................19 4.7. Financial Statements; Other Information............................................19 4.8. Absence of Undisclosed Liabilities.................................................20 4.9. Leased Personal Property...........................................................20 4.10. Real Property; Leased Real Property................................................21 4.11. Contracts..........................................................................23 4.12. Intellectual Property..............................................................25 4.13. Insurance..........................................................................26 4.14. Environmental Matters and OSHA.....................................................26 4.15. Litigation.........................................................................27 4.16. Absence of Changes.................................................................28 4.17. Brokers and Finders................................................................30 4.18. Labor Matters......................................................................30 4.19. Tax Matters........................................................................31 4.20. Employee Benefit Plans.............................................................36 (i) 4.21. Compliance with Laws...............................................................39 4.22. Inventory..........................................................................39 4.23. Receivables........................................................................39 4.24. Suppliers..........................................................................39 4.25. Company Products...................................................................40 4.26. Potential Conflicts of Interest....................................................40 4.27. Banks, Brokers and Proxies.........................................................40 4.28. Full Disclosure....................................................................40 4.29. Competition Act (Canada)...........................................................41 4.30. [Intentionally Omitted]............................................................41 4.31. UK Real Property...................................................................41 4.32. UK Environmental Matters...........................................................43 4.33. UK Pension Matters.................................................................44 ARTICLE 5 COVENANTS..................................................................................47 5.1. Conduct of Business Prior to Closing...............................................47 5.2. Access and Information.............................................................48 5.3. Notification of Changes............................................................48 5.4. Certain Acts Prohibited............................................................48 5.5. Consents...........................................................................48 5.6. Supplemental Disclosure............................................................48 5.7. Conditions Precedent...............................................................49 5.8. Capital Expenditures...............................................................49 5.9. Governmental Filings...............................................................49 5.10. Certain Tax Matters................................................................49 5.11. Employee Benefit Plans.............................................................52 5.12. Seller and Parent Guarantee Releases...............................................53 5.13. Assignment of Contracts and Other Properties.......................................53 5.14. Name Change........................................................................54 5.15. Related Parties....................................................................54 5.16. Parent.............................................................................54 5.17. Intercompany Accounts..............................................................54 5.18. Transition Services Agreement......................................................54 5.19. Further Assurances.................................................................55 ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER...........................................55 6.1. Representations and Warranties.....................................................55 6.2. Compliance by Seller...............................................................55 6.3. Certified Resolutions..............................................................55 6.4. No Injunction; Etc.................................................................56 6.5. Incumbency.........................................................................56 6.6. Consents; Authorizations; Legal Matters............................................56 6.7. Proceedings........................................................................56 6.8. Opinion of Seller's Counsel........................................................56 6.9. Certified Documents, Good Standing.................................................56 6.10. Release from Security Interests....................................................56 (ii) 6.11. Release from Senior Subordinated Notes Guarantee and Senior Notes Guarantee........57 6.12. KEDFA Bond.........................................................................57 6.13. Tax Deed...........................................................................57 6.14. Non-Compete Agreement..............................................................57 6.15. 116 Clearance Certificate..........................................................57 6.16. U.S. Person Affidavit..............................................................58 6.17. Transition Services Agreement......................................................58 6.18. UK Label Shares Transfer...........................................................58 6.19. UK Additional Deliveries...........................................................58 6.20. Seller as Registered Holder........................................................59 ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER..........................................59 7.1. Certificate Regarding Representations and Warranties...............................60 7.2. Compliance by Purchaser............................................................60 7.3. Certified Resolutions..............................................................60 7.4. No Injunction; Etc.................................................................60 7.5. Incumbency.........................................................................60 7.6. Legal Matters......................................................................60 7.7. Proceedings........................................................................60 7.8. Opinion of Purchaser's Counsel.....................................................60 7.9. Good Standing......................................................................61 7.10. Non-Compete Agreement..............................................................61 7.11. Release Under BofA Security Documents..............................................61 ARTICLE 8 TERMINATION................................................................................61 8.1. Termination........................................................................61 8.2. Effect of Termination..............................................................61 ARTICLE 9 INDEMNIFICATION............................................................................62 9.1. Agreement of the Indemnitors to Indemnify..........................................62 9.2. Procedures for Indemnification.....................................................63 9.3. Third Party Claims.................................................................64 9.4. Other Rights and Remedies..........................................................65 9.5. Duration...........................................................................66 9.6. Limitations........................................................................66 9.7. Cooperation........................................................................67 9.8. Survival of Representations and Warranties.........................................67 9.9. Treatment..........................................................................67 9.10. Foreign Currency...................................................................67 ARTICLE 10 GENERAL PROVISIONS........................................................................67 10.1. Fees and Expenses..................................................................67 10.2. Notices............................................................................67 10.3. Assignment; Binding Effect.........................................................69 10.4. No Benefit to Others...............................................................69 10.5. Headings, Gender, and "Person" and Successor Laws..................................69 (iii) 10.6. Counterparts.......................................................................69 10.7. Integration of Agreement...........................................................69 10.8. Time of Essence....................................................................70 10.9. Governing Law......................................................................70 10.10. Partial Invalidity.................................................................70 10.11. Publicity and Confidentiality......................................................70
(iv) EXHIBITS -------- Exhibit A Statement of Accounting Principles Exhibit B [Intentionally Omitted] Exhibit C Opinion of Seller's Counsel Exhibit D Non-Compete Agreement Exhibit E Section 116 Escrow Agreement Exhibit F [Intentionally Omitted] Exhibit G Tax Deed Exhibit H Transition Services Agreement SCHEDULES --------- Schedule 1.1 Officers of Targets Schedule 2.5 Excluded Assets Schedule 3.6 Purchaser's Financing Commitments Schedule 4.1 Ownership of Shares Schedule 4.2 Subsidiaries Schedule 4.3 Required Consents and Notices Schedule 4.6 Ownership of Assets Schedule 4.7 Financial Statements Schedule 4.8 Liabilities Schedule 4.9 Leased Personal Property Schedule 4.10(a) Owned Real Property Schedule 4.10(g) Real Property Leases Schedule 4.11(a) Contracts Schedule 4.11(b) Commitments for Capital Expenditures Schedule 4.11(d) Threatened Cancellations Schedule 4.11(e) Related Party Indebtedness Schedule 4.12 Intellectual Property Schedule 4.13 Insurance Schedule 4.14(b) Environmental Compliance Issues and Permits Schedule 4.14(c) Underground Tanks and Disposals Schedule 4.15 Litigation Schedule 4.16 Absence of Changes Schedule 4.17 Brokers and Finders Schedule 4.18(a) Labor Matters Schedule 4.18(b) Employees Schedule 4.18(d) Employment Contracts Schedule 4.19 Tax Matters Schedule 4.20(a) Employee Benefit Plans Schedule 4.20(e) Employee Benefit Plans Liabilities Schedule 4.20(h) COBRA and ERISA Compliance Schedule 4.20(k) Multi-employer Plans Schedule 4.20(l) Severance Arrangements Schedule 4.24 Suppliers Schedule 4.26 Conflicts of Interest (i) Schedule 4.27 Bank Accounts Schedule 4.31 UK Real Property Schedule 4.32 UK Environmental Matters Schedule 5.13(a) Assignment of Contracts Schedule 5.13(b) Assignment of Incentive Agreements (ii) STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT is entered into on this 6th day of May, 2002, by and among MWL Acquisition Corp., a Delaware corporation ("Purchaser"), Mail-Well I Corporation, a Delaware corporation ("Seller"), --------- ------ and Mail-Well, Inc. a Colorado corporation ("Parent"). ------ BACKGROUND WHEREAS, Seller owns directly or indirectly (i) all 1,000 of the issued and outstanding shares of common stock, $0.01 par value per share, of US Label ("US Label Shares"), (ii) the one (1) issued and outstanding share, --------------- no par value, of Canada Label ("Canada Label Shares"), and (iii) all 500 of ------------------- the issued and outstanding shares, par value 0.10 pound per share, of UK Label ("UK Label Shares," and together with US Label Shares and Canada Label --------------- Shares, the "Shares"); ------ WHEREAS, Purchaser desires, upon the terms and conditions hereinafter set forth, to purchase from Seller all of the Shares; and WHEREAS, Seller desires, upon the terms and conditions hereinafter set forth, to sell all of the Shares to Purchaser. AGREEMENT NOW, THEREFORE, in consideration of the promises and obligations provided herein, Purchaser and Seller, intending to be legally bound, agree as follows: ARTICLE 1 DEFINITIONS 1.1. Certain Defined Terms. --------------------- The following terms used in this Agreement have the following meanings: "Accounting Arbitrator" has the meaning set forth in --------------------- Section 2.4(b). - -------------- "Act" means the Securities Act of 1933, as amended from --- time to time, or any successor statute. "Additional Canada Label Shares" has the meaning set forth ------------------------------ in Section 4.19(jj). "Adjustment Date" has the meaning set forth in Section --------------- ------- 2.4(f). - ------ "Affiliate" means, as to any Person, any other Person that --------- directly or indirectly, through one or more intermediaries, controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or otherwise), provided that, in any event any Person that owns directly or indirectly 1 securities or ownership interests for the election of a majority of the directors or other members of the governing body of any other Person will be deemed to control such other Person. "Affiliated Group" means any affiliated, combined, ---------------- consolidated, unitary or other tax group within the meaning of Section 1504(a) of the Code or any similar provision of any jurisdiction applicable to Taxes. "Agreement" means this Stock Purchase Agreement, as it may --------- be amended from time to time. "Assets" has the meaning set forth in Section 4.6. ------ ----------- "Board of Directors" means collectively the board of ------------------ directors of the Targets or the board of directors of a particular Target, as the context may require. "BofA Credit Agreement" means that certain Credit --------------------- Agreement dated as of February 18, 2000 (as amended, restated, supplemented and modified from time to time), by and among Seller, Mail-Well, Inc. and certain of its U.S. direct and indirect subsidiaries, the lenders from time to time party thereto, the co-agents party thereto, and Bank of America, N.A. as Agent. "BofA Security Agreement" means that certain Security ----------------------- Agreement dated as of February 18, 2000 (as amended, restated, supplemented and modified from time to time), by and among Seller, Mail-Well, Inc. and certain of its U.S. direct and indirect subsidiaries, the lenders from time to time party thereto, the co-agents party thereto, and Bank of America, N.A. as Agent. "BofA Security Documents" means (i) the BofA Security ----------------------- Agreement; and (ii) any deeds of trust, pledges and other security instruments executed pursuant to or in furtherance of the BofA Security Agreement. "Business" means the collective business of all of the -------- Targets as presently conducted or as reflected in the Financial Statements. "Business Day" means any day that is not a Saturday, a ------------ Sunday or a day on which commercial banks in Denver, Colorado, or New York, New York, are required or permitted to be closed for business. "Canada Label" means Mail-Well Label Company, a Nova ------------ Scotia unlimited liability company. "Canada Label Shares" has the meaning set forth in the ------------------- first recital of this Agreement, and shall include the Additional Canada Label Shares, if issued. "Canada Target" means Canada Label. ------------- "CERCLA" means the Comprehensive Environmental Response ------ Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., as amended. 2 "Closing" has the meaning set forth in Section 2.5. ------- ----------- "Closing Balance Sheet" has the meaning set forth in --------------------- Section 2.4(a). - -------------- "Closing Date" has the meaning set forth in Section 2.5. ------------ ----------- "Closing Schedule" has the meaning set forth in Section ---------------- ------- 2.4(a). - ------ "Code" means the Internal Revenue Code of 1986, as amended ---- from time to time, or any successor statute. "Consolidated Preclosing Returns" has the meaning set ------------------------------- forth in Section 5.10(b). --------------- "Contract" or "Contracts" means all of the contracts, -------- --------- leases, agreements, instruments, and purchase and sales orders, whether oral or written, to which a Target is a party, pursuant to which a Target enjoys any right or benefit, or by which a Target or any of its assets or properties is bound. "Determination Materials" has the meaning set forth in ----------------------- Section 2.4(b). - -------------- "Dollars" and "$" mean the lawful money of the United ------- - States of America. "Employee Benefit Plan" means: --------------------- (a) with respect to US Label, any employee benefit plan as defined in Section 3(3) of ERISA or under which the relevant employer, with respect to the relevant employees, retirees, dependents, spouses, directors, independent contractors or other beneficiaries, has any outstanding, present, or future obligation or liability, or under which any relevant employee, retiree, dependent, spouse, director, independent contractor or other beneficiary has any present or future right to benefits which are covered by ERISA; (b) with respect to all Targets, other pension; profit sharing; retirement; deferred compensation; stock purchase, stock option, stock appreciation, phantom stock or other equity based; incentive; bonus; performance; vacation; termination; retention; change of control; severance; "golden parachute;" disability; hospitalization; medical; life ---------------- insurance; cafeteria; flexible spending account; or other employee benefit plan, program, policy, or arrangement, which the relevant employer maintains or to which the relevant employer has any outstanding, present, or future obligations to contribute or make payments under, whether or not they are or are intended to be (1) covered or qualified under the Code, ERISA or any other applicable law of any jurisdiction, (2) written or oral, (3) funded or unfunded, (4) absolute or contingent, or (5) generally available to any or all employees (including former employees) of the relevant employer, or their beneficiaries or dependents; and (c) with respect to Canada Label and UK Label, shall also include, to the extent not included in the preceding clauses (a) or (b), collectively all plans, arrangements, agreements, programs, incentive compensation, hospitalization, health, dental, disability, unemployment insurance, vacation pay, severance pay or other benefits with respect to any or all of the Employees or former Employees of the Targets and all statutory plans which the Targets 3 are required to comply with relating to Employees or former Employees of the Targets, including plans administered pursuant to applicable health tax, workers' compensation and unemployment insurance legislation. "Employees" means the employees of the Targets as of the --------- date hereof. "Employer's Due Contributions" has the meaning set forth ---------------------------- in Section 5.11(g). "Environmental Laws" means any Law, as amended or in ------------------ effect prior to, or on the Closing Date, concerning public health and safety, pollution of the environment or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any material, substance, waste, chemical, mixture, pesticide, pollutant, contaminant, toxic chemical, petroleum product or byproduct, asbestos, polychlorinated biphenyl or radiation. "Environmental Permits" means all permits, licenses, --------------------- approvals, franchises, certificates, consents, orders and authorizations required under or pursuant to any Environmental Laws. "Equipment" means all machinery, equipment, tools, --------- Vehicles, computers, terminals, computer equipment, office equipment, business machines, telephones and telephone systems, parts, accessories, and the like, wherever located, and any and all warranties of third parties with respect thereto. "ERISA" means the Employee Retirement Income Security Act ----- of 1974, as amended from time to time, or any successor statute. "ERISA Affiliate" means any company which, as of a given --------------- moment, is a member of a "controlled group of corporations" or a group of -------------------------------- "trades or businesses (whether or not incorporated) which are under common - -------------------------------------------------------------------------- control" (as defined in Sections 414(b) and (c) of the Code, respectively) - ------- of which Target is a member or any entity or person aggregated with Target under the Code Section 414(m) or (o). "Estimated Working Capital" has the meaning set forth in ------------------------- Section 2.2(b). - -------------- "Excluded Assets" means the assets of Target listed in --------------- Schedule 2.5. - ------------ "FA" followed by a year means the Finance Act of that -- year. "Final Working Capital" has the meaning set forth in --------------------- Section 2.4(b). - -------------- "Financial Statements" has the meaning set forth in -------------------- Section 4.7. - ----------- "Fiscal Year" means the fiscal year of Targets, which ----------- shall be the twelve-month period ending on December 31. 4 "Furniture and Fixtures" means all furniture, fixtures, ---------------------- and leasehold improvements wherever located, and any and all warranties covering such furniture, fixtures, and leasehold improvements owned by any Target or in which any Target has an interest. "GAAP" means generally accepted accounting principles, as ---- promulgated in the official publications of the American Institute of Certified Public Accountants consistently applied to all relevant periods. "Governmental Authority" means any bureau, department, ---------------------- agency, commission, board, tribunal, crown corporation, or court or other entity or body having or purporting to have jurisdiction to make, administer, interpret, apply or enforce any Law on behalf of any country, state, province, municipality or other political subdivision thereof. "Grossed-Up Basis" means, when used to describe the basis ---------------- on which the payment of a specified sum is to be made, a basis such that the amount of the payment, after being reduced by the amount of all Taxes imposed on the recipient of the payment as a result of the receipt of accrual of the payment, will equal the specified sum. "Guaranteed Indebtedness" of any Person means all ----------------------- Indebtedness of any other Person that is either (i) guaranteed directly or indirectly in any manner by such Person, or (ii) secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including without limitation accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. "Hazardous Materials" means any substance, material or ------------------- waste, including without limitation, equipment or fixtures, with respect to which liability or standards are imposed under any Environmental Law. "Health and Safety Laws" means any Law including, without ---------------------- limitation, the Occupational Safety and Health Act (U.S.), as amended or in effect prior to or on the Closing Date, concerning worker health and safety. "ITA" means the Income Tax Act (Canada). --- "Indebtedness" means, for any Person, without duplication, ------------ (a) all indebtedness or other obligations of such Person for borrowed money or for purchase money indebtedness, (b) any other indebtedness of such Person which is evidenced by a note, mortgage, bond, indenture or similar instrument, (c) all obligations under leases that are or should be, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable as lessee, (d) all obligations owed pursuant to any interest rate hedging arrangement, (e) all Guaranteed Indebtedness and (f) all other indebtedness secured by any Lien (other than Permitted Encumbrances) on any property or asset owned or held by such Person. "Indemnification Claim" means a claim for indemnification --------------------- hereunder. "Indemnitee" means the party or parties seeking ---------- indemnification hereunder. 5 "Indemnitor" means the party or parties against whom ---------- indemnification hereunder is sought. "Indemnitor Representative" means Seller in the case of an ------------------------- Indemnification Claim asserted by any of Purchaser Indemnitees, and Purchaser in the case of an Indemnification Claim asserted by any of Seller Indemnitees. "Initial Purchase Price" has the meaning set forth in ---------------------- Section 2.2(a). - -------------- "Initial Purchase Price Adjustment" has the meaning set --------------------------------- forth in Section 2.2(a). -------------- "Intellectual Property" means all of the following as they --------------------- exist in all jurisdictions: (i) patents and patent disclosures; (ii) designs, art work, specifications, designs-in-progress, formulations, know-how, prototypes, inventions, Internet addresses, domain names, websites and web pages; (iii) trademarks, trade names, trade dress, service marks, brand names, logos, slogans, and corporate names (and all translations, adaptations, derivations and combinations of the foregoing); (iv) mask works and copyrights; (v) all registrations and applications for (i), (ii) and (iii), both registered and unregistered, foreign and domestic; (vi) all trade secrets, technology and processes; (vii) all computer software (including but not limited to documentation, data, databases and related object and, if applicable, source codes); and (viii) all confidential or proprietary information; and (ix) all licenses, sublicenses and other agreements or permissions, including all income, the right to receive royalties, damages and payments due or payable on the Closing Date or thereafter (including, without limitation, damages and payments for past or future infringements or misappropriations thereof), the right to sue and recover for past infringements or misappropriations thereof, or any other consideration related to the foregoing property. "Intercompany Accounts" means amounts owed by and between --------------------- any Targets or by and between any Target and Seller or any of its Affiliates. "IRS" means the Internal Revenue Service of the United --- States. "KEDFA" has the meaning set forth in Section 6.12. ----- ------------ "KEDFA Program" means the tax credit program for rural ------------- economic development in Kentucky under which Seller owns the KEDFA Bond issued by KEDFA that were used to finance the acquisition and construction of US Label's Bowling Green, Kentucky facility. "KEDFA Bond" means the Kentucky Economic Development ---------- Finance Authority's Taxable Economic Development Project Revenue Bond, 1992 series (International Paper Company Project), dated November 3, 1992, maturing October 15, 2017 in the face value of $39,000,000, issued pursuant to the provisions of Kentucky Revised Statutes Chapter 154. "Knowledge" and the phrases "to the knowledge of," "to --------- -------------------- -- Seller's knowledge," "Seller has not been notified" and other similar - ------------------- ---------------------------- phrases used in this Agreement refer to the actual knowledge of and knowledge that should have been learned through diligent inquiry by the executive officers of the Seller, which officers are listed on the attached Schedule 1.1. - ------------ 6 "Law" means any code, statute, ordinance, regulation, --- by-law, rule, guideline, policy, notice, direction, judgment, Order, common law rule or other requirement having the force or effect of law. "Leased Real Property" means the real property subject to -------------------- Real Property Leases. "Liabilities" means liabilities or obligations of any ----------- nature, whether absolute, accrued, contingent or otherwise, whether due or to become due, whether asserted or unasserted and whether or not required to be reflected or reserved against on a balance sheet under GAAP, including any liability for Taxes. "Lien" means: ---- (a) with respect to any Target, any mortgage, pledge, security interest, encumbrance, deed of trust, claim, lease, license, option, right of first offer or refusal, easement, servitude, voting or transfer restriction, lien, charge of any kind, whether voluntary or involuntary, including any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or any other applicable Law providing for the encumbrance of personal property; and (b) with respect to Canada Label and UK Label shall also include to the extent not included in clause (a) hereinabove, any title defect, hypothec, indenture, deemed trust, security agreement, title retention agreement, adverse claim, proxy, shareholder agreement, voting trust, warrant or right or claim of others of any kind whatsoever, voluntary or involuntary and whether or not perfected or required to be perfected pursuant to any public registration regime. "Loan Relationship" shall have the same meaning as in ----------------- Section 81(1) of the Finance Act 1996. "Losses" means any and all demands, claims, actions or ------ causes of action, assessments, losses, fines, judgments, costs, damages (including special and consequential damages), liabilities, costs, Taxes (including damages attributable to Taxes), removal and remediation requirements and expenses, including without limitation, interest, penalties, cost of investigation and defense, and reasonable attorneys' and other professional fees and expenses. "Material Adverse Effect" means any circumstances, change ----------------------- in, or effect on the Targets or their business that, when taken together with all other related circumstances, changes in or effects on the Targets or the business taken as a whole, is materially adverse to the condition (financial or otherwise), business, results of operations, or assets of the Targets, taken as a whole. "Objection" has the meaning set forth in Section 2.4(b). --------- -------------- "Order" means any order, judgment, injunction, award, ----- decree, or writ of any Governmental Authority. 7 "Organizational Documents" means the relevant certificate ------------------------ or articles of incorporation, bylaws, memoranda, constitutional, organizational or other corporate governance documents. "Parent" has the meaning set forth in the preamble to this ------ Agreement. "PBGC" means the Pension Benefit Guaranty Corporation or ---- any successor to its functions. "Pension Plan" has the meaning set forth in Section ------------ ------- 4.21(f). - ------- "Permits" means licenses, franchises, permits, exemptions, ------- certificates, consents, and other authorizations issued or administered by a Governmental Authority. "Permitted Encumbrances" means (i) liens for taxes not yet ---------------------- due and payable (other than taxes arising out of the transactions contemplated by the Agreement) for which adequate provision has been made in accordance with GAAP; (ii) minor imperfections of title that do not adversely interfere with the present or future ownership or use of any of the assets of the Targets; (iii) other non-monetary liens, claims, and non-monetary encumbrances relating to the assets of the Targets that (A) secure the liabilities of the Targets and (B) have been properly disclosed to Purchaser on Schedule 4.6 to this Agreement; (iv) other statutory liens ------------ which are not yet due and payable for which adequate provision has been made in accordance with GAAP; and (v) with respect to the Real Property of Canada Label and UK Label, Permitted Encumbrances shall also include, to the extent not included in clauses (i) to (iv) hereinabove: (a) all reservations, limitations, provisos and conditions expressed in the original grant from the Crown, provided that same do not constitute a Material Adverse Effect; (b) any encroachments or defects, if any, which are or would be disclosed by any survey of the Real Property; (c) any subdivision, development, site plan or any other agreement with any Governmental Authority having jurisdiction over the Real Property which plans or agreements are registered on title or copies of which have been delivered to Purchaser, provided same have been complied with; (d) any registered or unregistered licenses, easements, rights-of-way, rights in the nature of easements and agreements with respect thereto which relate to the provision of utilities or services to the Real Property or any other lands (including, without limitation, agreements, easements, licenses, rights-of-way and interests in the nature of easements for access, sewers, drains, gas, steam, watermains, electrical light and power, telephone or telegraphic conduits, poles, wires, cables and other similar utilities or services); (e) all restrictions and restrictive covenants that run with the land, provided same have been complied with and do not constitute a Material Adverse Effect; (f) defects or irregularities in title which are of a minor nature and in the aggregate will not materially affect the use or marketability of the parcel of Real Property in question, taken as a whole; (g) any notices of lease or leases and notices of security interest against leasehold interests which are registered against title to the Real Property, provided the tenant is in possession; and (h) the qualifications contained in the Land Titles Act (Ontario), if applicable. "Person" means and includes natural persons, corporations, ------ limited liability companies, unlimited liability companies, limited partnerships, general partnerships, joint stock 8 companies, joint ventures, associations, companies, business trusts and other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. "Post-Closing Period" means any taxable period or portion ------------------- thereof beginning after the Closing Date or, as the context may require, all such periods and portions. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period. "Pre-Closing Period" means any taxable period or portion ------------------ thereof ending on or before the Closing Date or, as the context may require, all such periods and portions. If a taxable period begins on or before the Closing Date and ends after the Closing Date, then the portion of the taxable period through the end of the Closing Date shall constitute a Pre-Closing Period. "Purchase Documents" means this Agreement and any other ------------------ agreements, documents, certificates, assignments or instruments to be executed and delivered pursuant to this Agreement. "Purchase Price" has the meaning set forth in Section -------------- ------- 2.4(c). - ------ "Purchase Price Allocation" has the meaning set forth in ------------------------- Section 2.2(a). - -------------- "Purchaser" has the meaning set forth in the preamble to --------- this Agreement. "Purchaser Indemnitees" means Purchaser, Target and their --------------------- respective agents, representatives, employees, officers, directors, shareholders and Affiliates. "Purchaser Tax Indemnitee(s)" means Purchaser and its --------------------------- Subsidiaries and Affiliates (including, after the Closing, each Target). "Purchaser's Estimated Final Working Capital" has the ------------------------------------------- meaning set forth in Section 2.4(a). -------------- "Real Property" has the meaning set forth in Section ------------- ------- 4.10(a). - ------- "Real Property Leases" has the meaning set forth in -------------------- Section 4.10(g). - --------------- "Related Party" means any director, officer, shareholder, ------------- Affiliate or any immediate family member of such Person. "Release" shall have the same meaning ascribed thereto ------- under CERCLA Section 101(22), except that it shall apply to any and all Hazardous Materials, not just CERCLA hazardous substances. "Rights" means all arrangements, calls, commitments, ------ contracts, options, rights to subscribe to, scrip, understandings, warrants, or other binding obligations of any kind relating to, or securities or rights convertible into or exchangeable or exercisable for, shares of the capital 9 stock of a Person or by which a Person is or may be bound to issue additional shares of its capital stock. "Scheme Actuary" means the actuary appointed to the Porter -------------- Chadburn plc Pension Scheme in pursuance of Section 47(1)(b) Pensions Act 1995. "Seller" has the meaning set forth in the preamble to this ------ Agreement. "Seller Indemnitees" means Seller and its agents, ------------------ representatives, employees, officers, directors, shareholders and Affiliates. "Selling Party" means Seller and any Subsidiary or ------------- Affiliate of Seller, other than Target. "Senior Subordinated Notes Guarantee" means the guarantee ----------------------------------- of US Label with respect to Seller's 8 3/4 percent Senior Subordinated Notes due 2008, as described in that certain Indenture dated as of December 16, 1998, by and between Seller and State Street Bank and Trust Company as Trustee (as amended, restated, supplemented and modified from time to time). "Senior Notes Guarantee" means the guarantee of US Label ---------------------- with respect to Seller's 9 5/8 percent Senior Notes due 2012, as described in that certain Indenture dated as of March 13, 2002, by and between Seller and State Street Bank and Trust Company as Trustee (as amended, restated, supplemented and modified from time to time). "Shares" has the meaning set forth in the first recital of ------ this Agreement and shall include any dividends, distributions and securities issued in respect of such Shares between the date hereof and the Closing Date. "Sterling" and "pound" means the lawful money of the -------- ----- United Kingdom. "Subsidiary" of any Person means (i) a corporation of ---------- which more than fifty percent (50%) of the outstanding shares of capital stock of each class having ordinary voting power is owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more of its Subsidiaries; or (ii) any other person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof directly or indirectly has more than fifty percent (50%) of the voting power thereof. "Targets" means, collectively, US Label, Canada Label and ------- UK Label and their respective subsidiaries and "Target" means any of the ------ Targets. "Target Benefit Plan" means any Employee Benefit Plan ------------------- maintained or contributed to by a Target or the Seller for the benefit of Employees of the Targets or with respect to which any Target has any Liability. "Target Intellectual Property" shall have the meaning set ---------------------------- forth in Section 4.12. ------------ 10 "Tax" (and, with correlative meaning, "Taxes," "Taxable" --- ------ ------- and "Taxing") means (i) any net or gross income, receipts, franchise, ------ estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, consumption, capital, large corporations, goods and services, workers compensation, ad valorem, withholding, production, health, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profits, assets, environmental (including under Section 59A of the Code), customs duty, real property, real property gains, personal property, capital stock, social security, unemployment, pension, disability, payroll, license, employee or other withholding or other tax, assessment, fee, levy or other governmental charge of any kind whatever, whether disputed or not, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; (ii) any liability for or in respect of the payment of any amount of a type described in clause (i) of this definition arising as a result of being or having been a member of any Affiliated Group; (iii) any liability for or in respect of the payment of any amount of a type described in clause (i) or (ii) of this definition as a transferee or successor, by contract or otherwise; and (iv) any charge imposed, in the case of any of clauses (i), (ii) and (iii) above, under the Laws of any jurisdiction, applicable to the Targets or their assets. "Taxing Authority" means any Governmental Authority having ---------------- or purporting to exercise jurisdiction with respect to any Tax. "Tax Deed" means the Deed of Covenant to be entered into -------- at Closing between Seller and Purchaser in substantially the form as set forth on Exhibit G attached hereto. "Tax Return" means any return, declaration, report, claim ---------- for refund, information return or other document (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of Tax or the administration of any legal requirement relating to any Tax. "Third Party Claim" means any claim, suit or proceeding ----------------- (including, without limitation, a binding arbitration or an audit by any Taxing Authority) that is instituted against the Indemnitee which, if prosecuted successfully, would result in a Loss for which the Indemnitee is entitled to indemnification hereunder. "Threshold Amount" has the meaning set forth in Section ---------------- ------- 9.6(a). - ------ "Transfer Tax" means sales, use, transfer, real property ------------ transfer, filing, recording, stock transfer, stamp, stamp duty reserve, value added, documentary and other similar Tax. "Treasury regulations" means the regulations promulgated -------------------- or proposed by the U.S. Treasury Department under the Code. "UK" means the United Kingdom. -- "UK Charges" means the charges, mortgages and/or ---------- guarantees of which are set out in Schedule 4.6. ------------ "UK Entities" means the UK Targets incorporated in the ----------- United Kingdom. 11 "UK Environmental Law" has the meaning given in Section -------------------- ------- 4.32. - ---- "UK Label" means MWL UK Limited, a private limited -------- liability company incorporated in England and Wales, or such other UK Entity as Purchaser and Seller shall mutually agree. "UK Label Shares" has the meaning set forth in the first --------------- recital of this Agreement. "UK Pension Plans" has the meaning set forth in Section ---------------- ------- 4.20(p). - ------- "UK Pension Provision" means the reserve in respect of the -------------------- obligations of the UK Entities to contribute to the Porter Chadburn plc Pension Scheme, which shall be included as a current liability in the determination of Working Capital. "UK Schemes" means each of the following: the Norwich ---------- Union Executive Pension Plan insured with Norwich Union under Policy Number 20935204-3; the Stampiton Limited Group Personal Pension Plan insured with Scottish Mutual; the Porter Chadburn Personal Pension Fund established by an interim trust deed dated 18 August 1991; the Stampiton Limited Group Life Assurance Scheme; and the Group Life Assurance Scheme insured with Sun Life Financial of Canada (together "the Current UK Schemes") and the Porter ---------------------- Chadburn plc Pension Scheme established by an interim trust deed dated 1 October 1959; the Porter Chadburn Discretionary Pension Scheme; the Treasures Old & New Pension Scheme; and the Porter Chadburn Group Staff Register Plan. "UK Target" means UK Label and any of its Subsidiaries. --------- "UK Title Documents List" the list in the approved form of ----------------------- title deeds relating to the UK Property. "US Label" means Mail-Well Label USA, Inc., a Colorado -------- corporation. "US Label Shares" has the meaning set forth in the first --------------- recital of this Agreement. "US Target" means US Label. --------- "Vehicles" means all motor vehicles, trucks, and forklifts -------- owned by the Targets or in which any Target has an interest, and all warranties of third parties related thereto. "Working Capital" has the meaning set forth in Section --------------- ------- 2.2(b). - ------ "Working Capital Objective" has the meaning set forth in ------------------------- Section 2.2(a). - -------------- "Working Capital Statement" has the meaning set forth in ------------------------- Section 2.4(a). - -------------- 1.2. Accounting Terms. For purposes of this Agreement, ---------------- all accounting terms not otherwise defined herein have the meanings assigned to them in conformity with GAAP. 12 1.3. Other Definitional Provisions. ----------------------------- (a) Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and vice versa. The term "including" is not limiting, and the words "hereof," "herein," "hereunder," and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. References to "Sections," "Appendices," "Exhibits" and "Schedules" are to Sections, Appendices, Exhibits and Schedules, respectively, of this Agreement, unless otherwise specifically provided. Terms defined herein may be used in the singular or the plural. (b) Accounting principles and practices under GAAP shall be considered to be "consistently applied" when the accounting -------------------- principles and practices observed in a current period are comparable in all material respects to the accounting principles and practices applied in the preceding period. ARTICLE 2 PURCHASE AND SALE OF THE SHARES 2.1. Purchase and Sale of the Shares. Upon the terms and ------------------------------- subject to the conditions contained herein, Purchaser agrees to purchase from Seller at the Closing, and Seller agrees to sell to Purchaser at that time (and, solely with regard to the UK Label Shares, with full title guarantee), all of the Shares. Seller shall convey, and Purchaser shall purchase, the Shares at the Closing, free and clear of any and all Liens. 2.2. Purchase Price. -------------- (a) The Purchaser shall pay at Closing an aggregate amount for the Shares ("Initial Purchase Price") equal to (i) $75,000,000 which shall be allocated to US Label Shares in the amount of $45.3 million; Canada Label Shares in the amount of $20.3 million; and UK Label Shares in the amount of $9.4 million ("Purchase Price Allocation") minus (ii) the ------------------------- ----- Initial Purchase Price Adjustment. The "Initial Purchase Price Adjustment" shall be --------------------------------- an amount equal to the sum of (i) all Indebtedness (excluding indebtedness ------ under the KEDFA Bond) of the Targets as of the Closing Date and (ii) (x) if the Working Capital Objective exceeds the Estimated Working Capital, plus the amount of such excess or, (y) if the Estimated Working Capital exceeds the Working Capital Objective, minus the amount of such excess. "Working ----- ------- Capital Objective" means the sum of $19,500,000. Any portion of Initial - ----------------- Purchase Price Adjustment which relates to a particular Target shall be allocated to such Target, and if the adjustment cannot be specifically allocated to a particular Target, it shall then be allocated pro rata among the US Label Shares, Canada Label Shares and UK Label Shares based on the Purchase Price Allocation. (b) Not later than three Business Days prior to the Closing Date, Seller shall deliver to Purchaser a Certificate of the chief financial officer of the Seller setting forth Seller's best estimate of a consolidated balance sheet of the Targets as of the Closing Date and the Working Capital of the Targets as of the Closing Date (the "Estimated --------- Working Capital"), each determined in accordance with GAAP consistently - --------------- applied in accordance with the Statement of 13 Accounting Principles set forth as Exhibit A hereto. "Working Capital" shall --------- --------------- equal (i) the sum of all current assets, including all accounts receivable, inventory, prepaid expenses, cash and cash equivalents, and minus (ii) the ----- sum of all current liabilities, including all accounts payable, advance billings, accrued payroll, accrued expenses and the Employer's Due Contributions relating to the Porter Chadburn plc Pension Scheme, all determined in accordance with GAAP and the Statement of Accounting Principles. 2.3. Payment of Initial Purchase Price. At Closing, the --------------------------------- Purchaser shall deliver the Initial Purchase Price to Seller in cash by wire transfer of immediately available funds to an account designated by Seller, and against delivery by Seller to Purchaser of the Shares. 2.4. Adjustment of Purchase Price. ---------------------------- (a) Within ninety (90) days after the Closing Date, Purchaser shall prepare and deliver to Seller (i) an audited consolidated balance sheet (the "Closing Balance Sheet") of Targets as of the Closing --------------------- Date, and (ii) a statement (the "Working Capital Statement") derived from ------------------------- the Closing Balance Sheet of the Working Capital of Targets as of the Closing Date ("Purchaser's Estimated Final Working Capital"). The Closing ------------------------------------------- Balance Sheet and the Working Capital Statement shall be prepared in accordance with GAAP consistently applied in accordance with the Statement of Accounting Principles. In connection with the Closing Balance Sheet and Working Capital Statement, Purchaser shall prepare and furnish to Seller a schedule (the "Closing Schedule") showing the difference, if any, between ---------------- the Estimated Working Capital and the Purchaser's Estimated Final Working Capital. Any Indebtedness of the Targets as of the Closing Date (excluding indebtedness under the KEDFA Bond) that was not included in the Estimated Working Capital or did not otherwise reduce the Initial Purchase Price shall be treated, without duplication, as a current liability for purposes of calculating the Final Working Capital. The Inventory shall be valued in accordance with GAAP consistent with past practice based on a physical count taken by Purchaser and observed by Seller immediately following the Closing Date. (b) Seller shall have 60 days from the date of receipt of the Closing Balance Sheet, the Working Capital Statement and the Closing Schedule to review the Closing Balance Sheet, the Working Capital Statement and the Closing Schedule and to agree or disagree as to the Purchaser's Estimated Final Working Capital reflected thereon. The Purchaser's Estimated Final Working Capital shall be conclusive and binding upon the parties unless and to the extent Seller shall, within such 60 day period, deliver a written objection to Purchaser which shall specify in reasonable detail the nature of the objection and the basis therefor, and a computation of the Working Capital of Targets as of the Closing Date asserted by Seller (collectively, the "Objection"). Upon Purchaser's receipt of the Objection, --------- Purchaser and Seller shall negotiate in good faith to resolve the Objection, in which event the Closing Balance Sheet and the computation of the Working Capital, as amended to the extent necessary to reflect the resolution of the Objection, shall be conclusive and binding upon the parties. If the Objection cannot be resolved by such negotiation within 20 days after Purchaser's receipt of the Objection, Purchaser may cause the Closing Balance Sheet, the Working Capital Statement, the Closing Schedule, the Objection and all accounting work papers related thereto (collectively, the "Determination Materials"), to be submitted to a nationally recognized ----------------------- accounting firm (the "Accounting Arbitrator") selected by the Purchaser and --------------------- reasonably acceptable to the Seller, provided that the 14 Accounting Arbitrator shall not be engaged in providing services to the Seller, the Purchaser or any of their Affiliates. The Accounting Arbitrator shall review the Determination Materials and shall determine any disputed items, which may not be outside the range of the Working Capital reflected on the Closing Balance Sheet and the Working Capital Statement asserted in the Objection, and notify the parties of its determination within 30 days following the receipt of the Determination Materials, which determination shall be final and conclusive. The fees and expenses of the Accounting Arbitrator shall be shared equally by Seller and Purchaser. All determinations pursuant to this Section 2.4(b) shall be in writing and shall -------------- be delivered to the parties hereto. The Working Capital of the Targets as of the Closing Date as agreed or determined pursuant to this Section 2.4(b) -------------- shall be the "Final Working Capital". --------------------- (c) The Initial Purchase Price, as adjusted pursuant to this Section 2.4(c), shall be the "Purchase Price," which shall be -------------- -------------- allocated pro rata to the US Label Shares, Canada Label Shares and UK Label Shares based on the Purchase Price Allocation. If the Estimated Working Capital exceeds the Final Working Capital, the Seller shall pay the amount of such excess to the Purchaser as a reduction to the Initial Purchase Price, in the manner and with interest as provided in Sections 2.4(d) and --------------- 2.4(f) below. If the Final Working Capital exceeds the Estimated Working - ------ Capital, the Purchaser shall pay the amount of such excess to the Seller as an increase to the Initial Purchase Price, in the manner and with interest as provided in Sections 2.4(e) and 2.4(f) below. --------------- ------ (d) Any payment to be made to Purchaser pursuant to Section 2.4(c) shall be made by wire transfer of immediately available funds - -------------- by Seller to an account designated by the Purchaser in an amount equal to the payment due to Purchaser. (e) Any payment to be made to Seller pursuant to Section 2.4(c) shall be made by wire transfer of immediately available funds - -------------- by Purchaser to an account designated by Seller in an amount equal to the payment due to Seller. (f) Purchaser or Seller, as the case may be, shall make any deliveries or payment required by Sections 2.4(d) or 2.4(e) within --------------- ------ five (5) days after the earlier to occur of the date (i) the parties agree as to the Final Working Capital or (ii) the Accounting Arbitrator notifies the parties of its determination of the Final Working Capital according to the provisions of Section 2.4(b) hereof (in either case, the "Adjustment -------------- ---------- Date"). Any amount due to Seller or refund due to Purchaser pursuant to this - ---- Section 2.4 shall be paid together with interest on each payment amount from - ----------- the Closing Date until the date of payment at an annual interest rate (calculated on the basis of a 365-day year) equal to the prime rate published by The Wall Street Journal on the Closing Date. (g) For purposes of Seller's preparation of any Objection, Purchaser shall afford, and shall cause each Target to afford to Seller and Seller's accountants, reasonable access to the offices, properties, books and records of each Target reasonably related to the preparation of the Objection, and shall furnish such persons with all information (including financial and operating data) concerning the Objection and the calculation of Final Working Capital as they may reasonably request. In such cases, "reasonable" access means access during ordinary business hours upon at least three (3) Business Days' notice, and without undue interruption of personnel. 15 2.5. Closing. The transactions provided for herein shall be ------- consummated at a closing (the "Closing") to be held at the offices of ------- Rothgerber Johnson & Lyons LLP in Denver, Colorado, commencing at 10:00 a.m. local time on the next business day following the satisfaction or waiver of all the conditions set forth in Article 6 and Article 7 to consummate the transactions contemplated hereby, or such later date as may be mutually agreed upon by the parties (the "Closing Date"). ------------ ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller that the statements contained in this Article 3 are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date, except as set forth and identified in the Schedules to this Agreement: 3.1. Organization and Qualification. Purchaser is a corporation ------------------------------ duly organized, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to conduct its business, and to own, lease or operate its properties in the places where such business is conducted and such properties are owned, leased or operated. 3.2. Authority. Purchaser has full power and authority to --------- execute, deliver and perform its obligations under this Agreement and each of the Purchase Documents to which it is a party, and consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Purchaser of this Agreement and each of the Purchase Documents to which it is a party, has been duly and validly authorized and approved by all necessary action on the part of Purchaser. This Agreement and each of the Purchase Documents to which Purchaser is a party is the legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms. Neither the execution and delivery by Purchaser of this Agreement and each other Purchase Document to which it is a party nor the consummation by Purchaser of the transactions contemplated hereby and thereby will (a) violate Purchaser's Certificate of Incorporation, Bylaws or other Organizational Documents, (b) violate any Law of any Governmental Authority to which Purchaser is subject, or by which its assets are bound, or (c) conflict with, result in a breach of, or constitute a default under any indenture, mortgage, lease, agreement or other instrument to which Purchaser is a party or by which any of its assets or properties are bound. 3.3. Investment. The Shares are being and will be acquired for ---------- investment purposes only for Purchaser's own account and not with a view to the resale or distribution of any part thereof in violation of applicable securities laws. 3.4. Litigation. No action, suit, proceeding or governmental ---------- investigation is pending or, to Purchaser's knowledge, threatened against Purchaser, at law or in equity, which seeks to question, delay or prevent the consummation of all or any portion of the transactions contemplated hereby. 16 3.5. Brokerage Commission. The Purchaser has not taken any -------------------- action which would entitle any person or entity to any brokerage commission, finder's fee or like payment from Seller or any of its Affiliates in connection with the transactions contemplated in this Agreement. 3.6. Financing. Purchaser has commitments from third parties to --------- provide funds for the transactions contemplated by this Agreement, copies of which are attached hereto as Schedule 3.6. ------------ 3.7. Competition Act (Canada) ------------------------ The Purchaser together with its affiliates (as that term is defined in the Competition Act (Canada), had: (a) no assets in Canada, determined as of December 31, 2001 and in such manner as is prescribed for purposes of the Competition Act (Canada); and (b) no gross revenues from sales in, from or into Canada, determined for the year ended December 31, 2001 and in such manner as is prescribed for purposes of the Competition Act (Canada). ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER Seller hereby represents and warrants to Purchaser that the statements contained in this Article 4 are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date, except to the extent as set forth and identified in the Schedules to this Agreement corresponding to the lettered and numbered sections contained in this Article 4. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document, agreement or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself), except to the extent the exception is reasonably apparent on the face of the document or agreement. The only representations, warranties or covenants given in relation to Taxes of the UK Entities are those specified in the Tax Deed. 4.1. Capitalization; Legal Status; Qualification; Title to ----------------------------------------------------- Shares. - ------ (a) Each Target is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all necessary corporate power, authority and capacity to own all of its property and assets presently owned and to carry on its business as presently conducted. Each Target is duly qualified or licensed to do business and is in good standing as a foreign corporation in all jurisdictions where the nature or conduct of its business as now conducted requires such qualification. Seller has furnished to Purchaser for each Target a complete and correct copy of the Organizational Documents, each as amended or restated, as currently in effect and as in effect as of the Closing. None of the Targets is in violation of any of the provisions of its Organizational Documents. The minute books of each Target contain in all material respects complete and accurate records of all actions taken 17 and resolutions adopted by it's Board of Directors (and any committees thereof) and shareholders since its organization. The stock transfer ledger of each Target accurately reflects the ownership of its capital stock. Complete and accurate copies of all the minute books of each Target and the stock transfer ledger of each Target have been furnished to Purchaser. Except as set forth on Schedule 4.1, statutory records and public filings of ------------ documents as required by law in respect of each UK Entity have been completed correctly and filed on time. (b) The authorized, allotted and issued capital stock of each Target is set forth in Schedule 4.1 hereof. All of the shares of ------------ capital stock of each Target are fully paid and non-assessable and were issued pursuant to a valid exemption from registration under applicable securities laws, including under the Act where it is applicable. No shares of the capital stock of any class or series of the Targets are reserved for issuance. The Targets have no obligation to issue any additional shares of their capital stock of any class or series, or securities convertible into or exchangeable for shares of the capital stock of any class or series of the Targets. There are no outstanding rights to either demand registration of any shares of the capital stock of any class or series of the Targets under applicable securities law or to sell any shares of the capital stock of any class or series of the Targets in connection with such a registration. No other class of capital stock or other ownership interests of the Targets is authorized or outstanding. None of the outstanding shares of capital stock of any class or series of the Targets on the date hereof has been issued in violation of any preemptive rights of the current or past shareholders of the Targets. No Rights relating to the capital stock of any class or series of the Targets are issued or outstanding nor are there any agreements, written or oral, providing for the issuance of any Rights relating to the capital stock of any class or series of the Targets. (c) Except as set forth on Schedule 4.1, Seller is the ------------ owner of all right, title and interest (legal and beneficial) in and to the Shares, free and clear of all Liens and all shares of capital stock of each Target which are not included in the definition of "Shares" are owned free and clear of all Liens by Target or a direct or indirect Subsidiary of Target. Upon delivery of certificates representing the Shares to be sold by Seller hereunder and payment therefor pursuant to this Agreement, good, valid and marketable title to such Shares, free and clear of all Liens or equities will be transferred to Purchaser. 4.2. Subsidiaries. Except as set forth on Schedule 4.2, no ------------ ------------ Target has any Subsidiaries, nor does any Target, directly or indirectly, own or have any interest in the capital stock of, or any other interest in, any Person. 4.3. No Violation. Except as set forth in Schedule 4.3 ------------ ------------ (collectively, the "Required Consents and Notices"), the execution and ----------------------------- delivery by Seller of this Agreement or any other Purchase Document to which it is a party, the consummation of the transactions contemplated hereby and thereby, and the performance by Seller of this Agreement and each other Purchase Document to which it is party in accordance with their respective terms and conditions will not: (a) conflict with the Organizational Documents of Seller or any of the Targets; 18 (b) require Seller or any of the Targets to obtain any consents, approvals, Permits, authorizations or actions of, or make any filings with or give any notices to, any Governmental Authority or any other Person; (c) violate any Law of any Governmental Authority applicable to Seller or to any of the Targets; (d) violate any Orders of any court or Governmental Authority applicable to Seller or any of the Targets or their respective properties, assets or businesses; (e) violate, conflict with or result in a breach of any of the terms and conditions of, result in a material modification of the effect of, otherwise cause the termination of or give any other contracting party the right to terminate, accelerate, cancel, impose any fees or penalties, or constitute (or with notice or lapse of time or both constitute) a default under any contract, agreement, debt, note, lease, bond, mortgage, indenture or other similar instrument or license or result in the creation of any Lien upon the Shares or on any of the properties or assets of the Seller or any of the Targets, except as set forth on Schedule -------- 4.3; or - --- (f) violate or result in the loss of any right under, termination, revocation or suspension of any Permit. 4.4. Power and Authority. The Seller has the full power, ------------------- capacity and authority necessary to (i) enter into and perform its obligations under this Agreement and the other Purchase Documents to which Seller is a party and (ii) to consummate the transactions contemplated hereby and thereby. 4.5. Due Authorization; Validity; Enforceability. The Purchase ------------------------------------------- Documents and all other instruments or documents executed by the Seller in connection with the Purchase Documents have been duly executed and delivered, and constitute legal, valid and binding obligations of the Seller, enforceable in accordance with their respective terms. The execution, delivery and performance of this Agreement and each other Purchase Document have been duly authorized by the Seller and each Target, as applicable. 4.6. Ownership of Assets. Except as set forth on Schedule 4.6, ------------------- ------------ the Targets have good and indefeasible or marketable, as appropriate, title to, or a valid leasehold interest in, or valid license to use, the properties and assets shown on the Most Recent Financial Statements or acquired thereafter and all other properties and assets they use in and which are necessary for the conduct of the Business (the "Assets"), except ------ for properties and assets disposed of in the ordinary course of business since the date of the Most Recent Financial Statements, and subject to no Liens except for Permitted Encumbrances. The buildings, Equipment and other tangible and intangible assets of the Targets are sufficient to operate the Business as presently conducted as an independent going concern from and after the Closing Date, and all such tangible assets are in good operating condition, subject to ordinary wear and tear, and are fit for use in the ordinary course of business. 4.7. Financial Statements; Other Information. Attached to --------------------------------------- Schedule 4.7 are the following financial statements (collectively, the - ------------ "Financial Statements"): the unaudited consolidated balance sheets and -------------------- statement of income for the Targets and their Subsidiaries as of 19 and for the years ending December 31, 2000 and December 31, 2001 and as of and the period from January 1, 2002 through March 31, 2002 (the "Most Recent ----------- Financial Statements"). The Financial Statements (including the notes - -------------------- thereto) are correct and complete, consistent with the books and records of the Targets, have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered thereby, and present fairly the financial condition as of the dates indicated and the results of operations and the cash flows of the Targets and their Subsidiaries for the periods then ended, except in the case of the unaudited financial statements for (i) the absence of notes, (ii) the absence of a statement of cash flows, and (iii) typical year-end adjustments. None of the Targets has used any improper accounting practice that would have the effect of reflecting in the Financial Statements or the books and records of the Targets any properties, assets, liabilities, revenues or expenses, not in accordance with GAAP. The books, records and accounts of the Targets maintained with respect to the Business accurately and fairly reflect in reasonable detail the transactions and the assets and liabilities of the Targets with respect to the Business. None of the Targets has engaged in any transaction with respect to the Business, maintained any bank account for the Business, or used any of its funds in the conduct of the Business, except for transactions, bank accounts, and funds which have been and are reflected in the normally maintained books and records of the Targets. 4.8. Absence of Undisclosed Liabilities. ---------------------------------- (a) None of the Targets has any Liabilities, whether contingent, liquidated or otherwise, nor any unrealized or anticipated losses, except (i) Liabilities that are fully reflected or reserved against in the Most Recent Financial Statements (including any notes thereto), which reserves are in accordance with GAAP, and (ii) Liabilities incurred by the Targets which (a) have arisen after the date of the Most Recent Financial Statements in the ordinary course of business (none of which is a result of any breach of contract, tort, breach of warranty or infringement or violation of law by a Target) consistent with past practices or (b) are not required by GAAP to be reflected or reserved against on a balance sheet. Except as set forth on Schedule 4.8, none of the Targets is directly or ------------ indirectly liable, by guarantee, indemnity or otherwise, upon or with respect to, or obligated, by discount or repurchase agreement or in any other way, to provide funds with respect to, or obligated to guarantee or assume, any Liability for any Person. Except as set forth on Schedule 4.8, ------------ none of the Targets has any Indebtedness. Schedule 4.8 further sets forth ------------ the outstanding principal amount, interest rate, maturity date, name of lender and party with respect to all Indebtedness of the Targets. (b) Since the date of the Most Recent Financial Statements, (i) the Business of the Targets has been conducted in the ordinary course consistent with past custom and practice including with respect to the timely payment of accounts payable and collection of accounts receivable, (ii) there has not occurred any event, change or development which has had or is reasonably expected to have, individually or in the aggregate, a Material Adverse Effect and (iii) there has not been any action or transaction that, if it were taken or occurred after the date hereof, would constitute a breach of Section 5.1 hereof. ----------- 4.9. Leased Personal Property. Schedule 4.9 contains a true and ------------------------ ------------ correct list of each lease by a Target of any Vehicle, Equipment or Furniture and Fixtures that requires payment by Target of $100,000 or more during any Fiscal Year and is not terminable within 180 days of the date hereof. Seller has delivered true, complete and correct copies of each lease listed on 20 Schedule 4.9, and any amendments, extensions, and renewals thereof, to - ------------ Purchaser. Each of the leases described on Schedule 4.9 is in full force and ------------ effect, and there are no existing defaults or events or default, real or claimed, under any of such leases by a Target or, to the Seller's knowledge, any other party to such leases or any event which, with notice or the lapse of time, or both, will create a default thereunder by a Target or, to the Seller's knowledge, any other party to such leases. No rights of a Target under such leases have been assigned or otherwise transferred as security for any obligation of the Target. Except as described on Schedule 4.9, the ------------ consummation of the transactions provided for herein will not create or constitute a default or event of default under any such lease or require the consent of any other party to any such lease in order to avoid a default or event of default. 4.10. Real Property; Leased Real Property. ----------------------------------- The representations and warranties set forth in this Section 4.10 shall not apply to the UK Entities. (a) Schedule 4.10(a) contains a true and correct list ---------------- of each parcel of real property owned by a Target (the "Real Property") and ------------- a summary description of all plants and structures located thereon. Each Target owns good and marketable fee simple title to its Real Property free and clear of any Liens except for Permitted Encumbrances. Except as set forth on Schedule 4.10(a), no Target has granted, and no party has, any right or option to acquire or occupy the Real Property or any portion thereof other than Purchaser. (b) The Real Property is in compliance with all laws, rules, regulations, and ordinances, including, without limitation, zoning and building codes. (c) Each Target, as applicable, and the Real Property are in material compliance with all Liens, encumbrances, easements, restrictions, and other matters of record affecting the Real Property, and no Target has received any notice alleging any default under any of such Liens, encumbrances, easements, restrictions, or other matters. (d) Each Target has obtained all Permits necessary to operate the business currently being conducted on its respective Real Property. All such Permits are valid and in full force and effect and each Target has paid any fees that are currently due in connection therewith. Seller has not received any notice alleging a violation under any of such Permits. The consummation of the transactions provided for herein will not violate the terms of, or create a default or event of default under, any such Permit or require the consent of any other party in order to avoid a violation or default. (e) The Targets have not received any written notice of any pending or threatened condemnation, eminent domain, expropriation or other similar proceedings affecting any of the Real Property. (f) The Real Property abuts public rights-of-way and has direct access thereto or, if access is provided across adjoining property, such access is provided by means of valid, existing and insurable easement benefiting the Real Property. 21 (g) Attached hereto as Schedule 4.10(g) is a complete ---------------- and accurate list of the leases (including any and all modifications thereof) of a Target related to real property (the "Real Property Leases"). -------------------- Each Real Property Lease is legal, valid, binding and enforceable by the respective Target and is in full force and effect, except as such enforceability against a third party may be limited by the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights and remedies of creditors, and the effects of general principles of equity, whether applied by a court of law or equity. Seller has delivered true, correct and complete copies of all Real Property Leases, together with any and all modifications thereto, to Purchaser. Except as set forth in Schedule 4.10(g), the respective Target owns all of the lessee's or ---------------- tenant's interest under the Real Property Leases and has not assigned, pledged or otherwise hypothecated any such interest. There are no defaults under the Real Property Leases by a Target or, to the Seller's knowledge, the lessor or landlord thereunder, and there are no events which with the passage of time or notice, or both, will create a default thereunder by a Target or, to the Seller's knowledge, any other party to such Real Property Leases. The Targets have not received any notice alleging any default under any of the Real Property Leases, and there are no brokerage or leasing commissions, or any similar charges or commissions, due in connection with any of the Real Property Leases which will be binding on Purchaser after Closing. Except as described on Schedule 4.10(g), the consummation of the ---------------- transactions provided for herein will not create or constitute a default or event of default under any such lease or require the consent of any other party to any such lease to avoid a default or event of default. (h) Each property which comprises a portion of the Real Property complies with all applicable subdivision and/or platting requirements, and there are no material structural or other defects, latent or otherwise, in any of the improvements. The Targets have not received any notice alleging any defect or deficiencies therein. (i) All contractors, subcontractors and other persons or entities furnishing work, labor, materials or supplies to the Real Property have been paid in full and, other than routine ongoing charges, there are no claims against the Real Property or the Targets in connection therewith. (j) Neither Seller nor Target have received any notice of the expropriation of all or any of the Real Property, and such parties are not aware of any expropriation proceeding pending or threatened against or affecting the Real Property or any part thereof nor of any discussions or negotiations which could lead to any such expropriation. (k) There are no agreements, undertakings or other documents which affect or relate to the title to, or ownership of the Real Property other than those registered on title against the Real Property. (l) Target has not entered into any agreement to sell, transfer, encumber, or otherwise dispose of or impair its right, title and interest in and to the Real Property or the air, density and easement rights relating to the Real Property. (m) All accounts for work and services performed or materials placed or furnished upon or in respect of the construction and completion of any of the buildings, improvements or other structures constructed on the Real Property have been fully paid and no 22 one is entitled to claim a lien under the Construction Lien Act (Ontario), or similar U.S. or UK laws, or other similar legislation for such work performed by or on behalf of Canada Label, Mail-Well Label USA, Inc., or Mail-Well Holdings Limited and subsidiaries thereof. (n) Canada Target has not made application for a rezoning of any of the Real Property and Canada Label has no actual knowledge of any pending change without obligation to inquire of any owners or users or neighboring real properties of any Governmental Authority, to any zoning affecting the Real Property. (o) Canada Target's Real Property located in the Province of Quebec does not form part of an immovable complex within the meaning of the "Act respecting the Regie du Logement" (Quebec). (p) No part of Canada Target's Real Property located in the Province of Quebec is located within a designated agricultural region under the "Act to Preserve Agricultural Land" (Quebec). (q) No part of Canada Target's Real Property located in the Province of Quebec is subject to any restriction under the "Cultural Property Act" (Quebec). 4.11. Contracts. --------- (a) Schedule 4.11(a) contains a true and correct list ---------------- of each Contract to which a Target is a party (other than purchase orders) not otherwise listed on Schedules 4.8, 4.9, 4.10(g), 4.12, 4.13, 4.18, 4.20 ------------- --- ------- ---- ---- ---- ---- or 4.31, that requires or could require any party thereto to pay $100,000 or ---- more in any Fiscal Year or is otherwise material to the Business of the Targets when taken as a whole, and, without limiting the generality of the foregoing, that: (i) is with any present or former employee, officer, director, shareholder, agent, consultant, or any entity in which any of the foregoing is a controlling person; (ii) is for the future purchase of, or payment for, supplies, materials, goods, products or other personal property, or for the furnishing or receipt of services by a third party the performance of which will extend over a period of more than one year; (iii) requires a Target to sell, distribute, supply, or otherwise market products or to perform maintenance, services or similar duties; (iv) is a distribution, dealer, representative, or sales agency contract; (v) is a note, debenture, bond, equipment trust agreement, letter of credit agreement, loan agreement, or other contract or commitment for the borrowing or lending of money or agreement or arrangement for a line of credit or guarantee, pledge, or undertaking of the indebtedness of any other person; (vi) is for any charitable or political contribution; 23 (vii) limits or restrains a Target or any successor thereto from engaging or competing in any manner or in any business or imposes confidentiality on a Target; (viii) is between Target and any Affiliate thereof; (ix) relates to a joint venture, partnership, shareholder arrangement or voting trust involving a Target; (x) provides for a material indemnification obligation of the Targets; (xi) is a settlement, conciliation or similar agreement; or (xii) is with Seller and its Affiliates (other than the Targets). (b) Schedule 4.11(b) contains a true and correct list ---------------- of all commitments for capital expenditures by the Targets that have been approved or made prior to the date of this Agreement in excess of $100,000 and that remain outstanding as of the date hereof. (c) Each of the Contracts listed or described in Schedule 4.11(a) (or Schedules 4.8, 4.9, 4.10(g), 4.12, 4.13, 4.18, or 4.20) - ---------------- ------------- --- ------- ---- ---- ---- ---- (i) was entered into by a Target in the ordinary course of business consistent with past practice, (ii) is legal, valid, binding and enforceable by a Target, and is in full force and effect, except as such enforceability against a third party may be limited by the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights and remedies of creditors, and the effects of general principles of equity, whether applied by a court of law or equity; (iii) except as provided in the above referenced Schedules or in Schedule 4.3, the ------------ consummation of the transactions contemplated hereby will not conflict with or result in a breach of any of the terms and conditions of, result in a modification of, or otherwise cause the termination of any such Contract; (iv) there exists no breach, violation of, or default under any of such Contracts by a Target or, to the Seller's knowledge, any other party to such Contracts or any event which, with notice or the lapse of time, or both, will create a breach or violation thereof or default thereunder by Target or, to the Seller's knowledge, any other party to such Contracts. (d) Except as set forth on Schedule 4.11(d), there ---------------- exists no actual or, to the Seller's knowledge, threatened termination, cancellation, or limitation of, or any amendment, modification, or change to any Contract listed in Schedule 4.11(a) (or Schedules 4.8, 4.9, 4.10(g), ---------------- ------------- --- ------- 4.12, 4.13, 4.18 or 4.20). - ---- ---- ---- ---- (e) No Related Party owns or has an interest in, directly or indirectly, in whole or in part, any tangible or intangible property used in the conduct of the Business. Except as described on Schedule 4.11(e), Target does not currently, directly or indirectly, - ---------------- guarantee or assume any indebtedness for borrowed money or otherwise to the benefit of any Related Party. Except as described in Schedule 4.11(e), the ---------------- Targets do not have an agreement to make any loans, payments or transfers of Target's assets to any Related Party. 24 4.12. Intellectual Property. --------------------- (a) Schedule 4.12 contains a true and correct list of ------------- the material Intellectual Property used or contemplated by Seller for use by the Targets in the conduct of their business which a Target owns or has the right to use. Except as set forth in Schedule 4.12, each Target owns or has ------------- the right to use all Intellectual Property necessary for the conduct of its Business as presently conducted, free and clear of any Liens other than Permitted Encumbrances (the "Target Intellectual Property"). Except as set ---------------------------- forth in Schedule 4.12, all of the Target Intellectual Property rights are ------------- valid and enforceable. No Related Party (other than any of the other Targets) owns or has an interest in, directly or indirectly, in whole or in part, any Target Intellectual Property. (b) The use by Targets of the Target Intellectual Property does not infringe upon or conflict with any rights claimed in any Intellectual Property by any third party. No use by a Target of any Intellectual Property licensed to it violates the terms of any agreement pursuant to which it is licensed. No claim is pending or, to the Seller's knowledge, threatened that alleges that any Intellectual Property owned or licensed by a Target or that the Target otherwise has the right to use is invalid or unenforceable by the Target. To the Seller's knowledge and except as set forth on Schedule 4.12, no Person is infringing upon or otherwise ------------- violating the Intellectual Property rights of a Target. (c) Except for commercially available licenses with an annual cost of $100,000 or less, true, correct, and complete copies of all Contracts pursuant to which a Target is a licensor, licensee, reseller or distributor of Intellectual Property, have been provided to Purchaser (the "IP Licenses"). All such Contracts are in full force and effect and there ----------- are no existing defaults under any of such Contracts by a Target or, to the Seller's knowledge, any other party to such Contracts or any event which, with notice or the lapse of time, or both, will create a breach or violation thereof or default thereunder by the Target or, to the Seller's knowledge, any other party to such Contracts that would give the non-defaulting party a right to terminate any such Contract or a right to receive any payment pursuant to such Contract. Except as set forth in Schedule 4.12, the ------------- transactions contemplated by this Agreement will not result in the termination of, or otherwise require the consent of any party to, any IP License. (d) Each UK Entity complies in full with, and has in place all necessary registrations and procedures under, the Data Protection Act 1984 of the United Kingdom. (e) Each UK Entity has put all necessary procedures in place in order to comply with the Data Protection Act 1998 of the United Kingdom. (f) No UK Entity has received a notice from or been subject to enquiries by the Data Protection Registrar or Commissioner regarding non-compliance or alleged non-compliance by the Company with any provision of the Data Protection Acts 1984 and 1998 (including, without limitation, the data protection principles). (g) No individual has alleged that any UK Entity has failed to comply with the provisions of the Data Protection Acts 1984 and 1998 or claimed compensation from the Company under that Act including for unauthorised disclosure of personal data. 25 (h) The data utilised by the UK Entity in its business and/or transferred to the Company's customers and/or business partners (including transfers to other companies within the group of companies of which the UK Entity is part) has been lawfully obtained and each UK Entity is entitled to use the same, transfer the same and grant such rights therein as it grants to its customers and/or business partners in respect of the use of such data. 4.13. Insurance. Schedule 4.13 lists all of the insurance --------- ------------- policies held by or on behalf of the Targets, with the effective date and coverage amounts indicated thereon and also indicates any self-insurance plans or policies. Such policies and binders are valid and enforceable in accordance with their terms and are in full force and effect. Schedule 4.13 ------------- further sets forth all obligations of the Targets to third parties with respect to insurance (including such obligations under leases and service agreements) and identifies the policies under which such coverage is provided. 4.14. Environmental Matters and OSHA. ------------------------------ The representations and warranties set forth in this Section 4.14 ------------ shall not apply to the UK Entities. (a) Seller has provided Purchaser true and complete copies of, all environmental site assessments, test results, analytical data, boring logs, and other environmental reports, studies or material documents in the possession, custody or control of the Targets or Seller, concerning any of the Real Property or the current or former facilities or operations of the Targets. (b) Except as set forth in Schedule 4.14(b) hereto, ---------------- each Target: (i) has been and is in compliance with all Environmental Laws and Health and Safety Laws, and has not (A) been notified that it is potentially liable under or (B) received any requests for information or other correspondence concerning its current or former operation or facilities, under Environmental Law, including without limitation CERCLA, the Environmental Protection Act (Ontario), Ontario Water Resources Act (Ontario), Pesticides Act (Ontario) and Gasoline Handling Act (Ontario); (ii) has accurately prepared and timely filed with the appropriate jurisdictions all reports and filings required pursuant to any Environmental Laws applicable to the Target and its Business; (iii) has not entered into or received any consent decree, compliance order, or administrative order, or settlement, indemnification, or release agreement or proposed agreement from any Governmental Authority or other third party relating to environmental protection or any Liability under Environmental Laws or Health and Safety Laws; (iv) has not entered into or received, nor is the Target in default under any judgment, order, writ, injunction or decree of any federal, state, provincial, foreign, or municipal court or other governmental authority relating to environmental protection or any Liability under any Environmental Laws; 26 (v) has obtained all Environmental Permits necessary in connection with the operations or the ownership, use, or lease of any assets of the Target or its Business. The Target and its Business is and has been in compliance with each such Environmental Permit (including any information provided on the applications therefor) and no such Environmental Permit restricts the Target from operating any Equipment covered by such Environmental Permit as currently being conducted. (c) With respect to each Target, its predecessors and Affiliates of the Business: (i) neither Seller nor the Target has received any oral or written notice of nor are there any actions, suits, claims, arbitration proceedings, or complaints pending or, to the Seller's knowledge, threatened by any Governmental Authority or any other Person against Target relating to compliance with or any Liabilities under Environmental Laws or Health and Safety Laws; (ii) except as set forth on Schedule 4.14(c), ---------------- there has been no disposal, spillage, burial, placement, or other Release of Hazardous Materials by Target or any of its predecessors or any other party on, in, at, about, or from any of the Real Property or Leased Real Property or any other facility or property owned or operated by a Target or any of its predecessors; (iii) none of the Targets, its predecessors or affiliates has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled or released any Hazardous Materials in a manner that does not comply with all applicable Environmental Laws or which has or would result in a Liability or corrective, remedial or investigatory obligation to a Target; (iv) except as disclosed on Schedule 4.14(c), all ---------------- above-ground and underground storage tanks, oil/water separators, sumps, septic systems, asbestos containing materials, landfills, surface impoundments or disposal areas located at the Real Property or the Leased Real Property are in compliance with Environmental Laws; and (v) There are no events, conditions or circumstances with respect to the past or present facilities or operations of Targets, their predecessors or Affiliates or the Business which have resulted or would result in liability or investigation, corrective or remedial obligation under Environmental Laws. (d) Each Target is in compliance with Health and Safety Laws and none of the Targets has received any notice that past or present conditions of its properties or assets violate any applicable Health and Safety Laws or otherwise can be made the basis of any claim, citation, proceeding, or investigation, based on or related to violations of Health and Safety Laws. 4.15. Litigation. Except as set out in Schedule 4.15, and, in ---------- ------------- respect of labor claims, Schedule 4.18, (i) none of the Targets is subject ------------- to any outstanding injunctions, judgments, orders, decrees or rulings; and (ii) there are no claims, charges, arbitrations, grievances, actions, suits, proceedings, or investigations pending, or to the Seller's knowledge, threatened against any 27 of the properties or assets of any Target or it business operations, at law or in equity, before or by arbitrator, court or Governmental Authority, including without limitation, any claims opposing or attempting to cancel any Target Intellectual Property rights, nor to the Seller's knowledge, is there any basis for the foregoing. 4.16. Absence of Changes. Except as set forth on the face of ------------------ the Most Recent Financial Statements or on Schedule 4.16, each Target has ------------- conducted its Business in the ordinary course, and since March 31, 2002, there has not been any transaction or occurrence in which a Target has: (a) suffered any change, effect or circumstance (except for changes, effects and circumstances in the ordinary course of business), in the business, operations, condition (financial or otherwise), liabilities, assets, or earnings; (b) incurred any obligations or liabilities of any nature other than items incurred in the ordinary course of business or increased (or experienced any change in the methods of calculating) any bad debt, contingency, or other reserve, other than in the ordinary course of business and consistent with GAAP; (c) paid, discharged, or satisfied any claim, Lien or Liability (whether absolute, accrued, contingent, and whether due or to become due), other than the payment, discharge, or satisfaction in the ordinary course of business of claims, Liens, or Liabilities of the type reflected or reserved against in the Financial Statements or which were incurred in the ordinary course of business; (d) permitted, allowed, or suffered any of its properties or assets (real, personal or mixed, tangible, or intangible) to be subjected to any Lien, other than Permitted Encumbrances and purchase money security interests in acquired assets (all of which purchase money security interests are identified on Schedule 4.16); ------------- (e) written down or written up the value of any Inventory (including write-downs by reason of shrinkage or markdowns), determined as collectible any Accounts Receivable or any portion thereof which were previously considered uncollectable, or written off as uncollectable any Accounts Receivable or any portion thereof except in the ordinary course of business and consistent with GAAP; (f) cancelled any debts or waived any claims or rights other than in the ordinary course of business; (g) incurred any Indebtedness other than in the ordinary course of business; (h) paid, loaned, distributed, or advanced any amounts to, sold, transferred, or leased any properties or assets (real, personal or mixed, tangible or intangible) to, purchased, leased, licensed, or otherwise acquired any such properties or assets from, or entered into any other agreement or arrangement with any Related Party (other than any of the Targets or subsidiaries thereof) other than in the ordinary course of business; 28 (i) entered into, terminated or materially modified any collective bargaining or labor agreement (oral and legally binding or written), made any material change to any Target Benefit Plan (including the establishment of any new such plans or any amendment that extends the extension of coverage under any such plans to new groups of employees or other individuals not previously covered), or experienced any organized slowdown, work interruption, strike, or work stoppage; (j) sold, transferred, or otherwise disposed of any of its material properties and assets except in the ordinary course of business consistent with past practice, or made any acquisition of all or any part of the properties, capital stock or business or any other Person; (k) granted or incurred any obligation for any increase in the compensation or benefits of any officer of Target or, except in the ordinary course of business, any Employee (including, without limitation, any increase pursuant to any bonus, pension, profit-sharing, retirement, or other plan or commitment); (l) made any material change in any method of accounting or accounting principle, practice, or policy; (m) suffered any casualty loss or damage in excess of $100,000 in the aggregate (whether or not insured against); (n) made or agreed to make any charitable contributions, illegal payments, bribes or kickbacks or incurred or agreed to incur any non-business expenses; (o) amended any provision of its Organizational Documents or changed any of its authorized or issued capital stock or any rights with respect thereto; (p) engaged in any material transaction other than in the ordinary course of business; (q) materially changed any of its business policies, including advertising, investments, marketing, pricing, purchasing, production, personnel, sales, returns, budget or product acquisition policies, except in the ordinary course of business; (r) terminated or failed to renew, or received any written threat to terminate or fail to renew, any Contract or other agreement material to the Business, except in the ordinary course of business; (s) Since December 31, 2001, no Target has made any Tax election, adopted or changed any accounting method for Tax purposes, filed any amended Tax Return, consented to or entered into any closing agreement or similar agreement with any Taxing Authority, consented to or settled or compromised any Tax claim or assessment or taken any position inconsistent with any past practice on any Tax Return; or (t) agreed, so as to legally bind Target whether in writing or otherwise, to take any of the actions set forth in this Section ------- 4.16 and not otherwise permitted by this Agreement. - ---- 29 4.17. Brokers and Finders. Except as set forth on Schedule ------------------- -------- 4.17, neither the Seller nor any of their Related Parties has employed any - ---- investment banker, financial advisor, broker or finder in connection with the transactions contemplated by this Agreement, and none of the Targets has incurred any obligation or liability to any party for any brokerage fees, agent's commissions, or finder's fees in connection with the transactions contemplated by this Agreement. 4.18. Labor Matters. ------------- (a) Except to the extent set forth in Schedule -------- 4.18(a), (i) there is no labor strike, dispute, slowdown, stoppage or - ------- lockout actually pending, or to the Knowledge of Seller, threatened against or affecting any Target, (ii) no union claims to represent the employees of any Target, (iii) no Target is a party to or is bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of the Targets, (iv) to the Knowledge of Seller, there are no current union organizing activities among the employees of a Target, (v) true and correct copies of all personnel policies, rules or procedures applicable to employees of each Target have heretofore been delivered to Purchaser, (vi) each Target is, and has at all times been, in compliance in all material respects with all applicable Laws with respect to employment and employment practices, terms and conditions of employment, wages, hours of work, employment standards, human rights, labor relations, pay equity, employment equity, workers' compensation, workplace safety and insurance and occupational safety and health, and are not engaged in any unfair labor practices as defined under applicable Law, including without limitation the National Labor Relations Act, (vii) there is no unfair labor practice charge or complaint against any Target pending or, to the Knowledge of Seller, threatened before or any Government Authority, including without limitation the National Labor Relations Board, (viii) there is no grievance arising out of any collective bargaining agreement or other grievance procedure, (ix) no charges with respect to or relating to any Target are pending before any Governmental Authority responsible for the prevention of unlawful employment practices, including without limitation before the Equal Opportunity Commission, (x) no Target has received notice of the intent of any Governmental Authority responsible for the enforcement of labor or employment Laws to conduct an investigation with respect to or relating to the Target and no such investigation is in progress, (xi) there are no complaints, lawsuits or other proceeding pending or to the Knowledge of Seller threatened in any forum by or on behalf of any present or former employee of a Target, any applicant for employment or classes of the foregoing, alleging breach of any express or implied contract or employment, any Law governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship, (xii) with respect to UK Target there is not a material number of persons employed (or previously employed) by a Target who are on secondment, maternity leave, absent on grounds of disability or other leave of absent and have, or may have, a statutory or contractual right to return to work, (xiii) UK Target has not within the period of two years preceding the date of this Agreement been a party to any "relevant transfer" (as defined in the Transfer of Undertakings (Protection of Employment) Regulations 1981 (as amended)) or agreement for a relevant transfer nor been a party to or been obliged to be a party to any consultation in relation to any collective redundancies made pursuant to section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. Except as set forth in Schedule 4.18(a), there are no severance agreements with any employees of a - ---------------- Target. 30 (b) Schedule 4.18(b) sets forth the approximate number ---------------- of employees in the aggregate, the approximate number of full-time personnel and the approximate number of contract workers of each Target as of March 31, 2002. (c) With respect to the transactions contemplated by this Agreement, any notice required under any law or collective bargaining agreement has been given, and all bargaining obligations with any employee representative have been, or prior to the Closing will be, satisfied. Within the past three years, no Target has implemented any plant closing or mass layoff of employees as those terms are defined in the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar foreign, state or local Law (collectively, "WARN"), and no such action will be implemented without advance written notification to Purchaser. (d) Except as disclosed on Schedule 4.18(d), no ---------------- employee is employed under a written contract providing annual compensation in excess of $100,000 which cannot be terminated by a Target without payment or penalty. Attached to Schedule 4.18(d) is a form of employment offer ---------------- letter generally provided to Target employees. (e) All fees payable and assessments imposed by the << Commission de la sante et securite du travail, Commission des Normes du travail, employment insurance, la Regie des rentes du Quebec >>, or any other governmental authority with respect to Quebec employees have been paid without subrogation. 4.19. Tax Matters ----------- The representations and warranties set forth in this Section 4.19 ------------ shall not apply to the UK Entities. (a) Each Target and each Affiliated Group of which each Target is a member has duly and timely filed all Tax Returns required to be filed on or before the Closing Date and all such Tax Returns were true, correct and complete, in all material respects, as filed. All Taxes owed by of any of Target and any Affiliated Group of any Target (whether or not shown on any Tax Return) and all installments thereof have been paid (or if due between the date hereof and the Closing Date, will be duly and timely paid). Seller has made available to Purchaser complete and correct copies of all Tax Returns filed by the Targets during the last three years and all notices of assessment and reassessment and the portions of all Tax Returns relating to the Targets filed by any Affiliated Group of which a Target is a member. (b) Each Target, and each Affiliated Group of which the Target is a member, has duly and timely withheld all employment, withholding and other Taxes required to be withheld, and such withheld taxes together with the related employer portion thereof have been duly and timely paid to the proper Governmental Authorities or, if not yet due, properly set aside in accounts for such purpose. Each Target, and each Affiliated Group of which the Target is a member, has timely filed all information returns or reports, including Forms 1099, that are required to be filed and has accurately reported in all material respects all information required to be included on such returns or reports. 31 (c) Schedule 4.19 lists all countries, states, cities ------------- or other jurisdictions in which each Target, and each Affiliated Group of which the Target is a member, has filed Tax Returns or paid Taxes within the last three years. No claim has been asserted, raised, or to the Selling Parties' knowledge, threatened by a Governmental Authority in a jurisdiction in which the Target does not file Tax Returns or pay or collect Taxes. (d) Except as set forth on Schedule 4.19, no Tax ------------- Return filed by a Target or by any Affiliated Group of which the Target is a member during the period that Target has been a member, is currently under audit by any Governmental Authority. No Taxes that may become payable by a Target have been asserted by any Governmental Authority to be due, and no report or assessment for any Taxes that may be payable by a Target has been issued by any Governmental Authority in the course of any audit. To the Sellers' knowledge, except as set forth on Schedule 4.19, neither the ------------- Internal Revenue Service nor any other Governmental Authority is now asserting, raising or threatening against a Target or, with respect to the period during which a Target has been a member, against any Affiliated Group of which a Target is a member, any deficiency or claim for additional Taxes or any adjustment of Taxes. (e) Except as set forth on Schedule 4.19, none of the ------------- Targets, and any Affiliated Group of which the Targets are a member, (i) is the beneficiary of an extension of time within which to file any Tax Return, or (ii) have (x) waived any statute of limitations, (y) agreed to any extension of the period for assessment or collection of any Taxes, or (z) executed or filed any power of attorney with respect to any Taxes, which waiver, agreement or power of attorney is currently in force. (f) No Target has filed a consent under Section 341(f) of the Code concerning collapsible corporations. (g) No Target is a party to, bound by or has any obligation under any Tax allocation, sharing, indemnity or similar agreement or arrangement. (h) Purchaser will not be required, upon the transfer of the Shares to Purchaser, to deduct and withhold any amount pursuant to Sections 1445(a) or 3406 of the Code, or any other provision of Law. (i) No Target has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. (j) Each Target (a) has not been a member of an Affiliated Group and (b) has no liability for the Taxes of any person other than itself under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or non-U.S. law), as a transferee or successor, by contract or otherwise. Each Target does not own (directly or indirectly) an interest in an entity that is treated as a corporation or partnership, or an entity the separate existence of which is disregarded, for U.S. federal income tax purposes. (k) There are no Liens for Taxes upon the assets of properties of any Target, except for statutory Liens for current Taxes not yet due. 32 (l) No Target will be required: (A) as a result of a change in method of accounting for a Pre-Closing Period, to include any adjustment under Section 481 of the Code or other similar adjustment in income for any Post-Closing Period, (B) as a result of any closing agreement under Section 7121 of the Code (or other comparable agreement), to include any item of income in, or to exclude any item of deduction from, any Post-Closing Period, (C) as a result of any sale occurring during the Pre-Closing Period and reported on the installment method, to include any item of income in any Post-Closing Period or (D) as a result of any prepaid amount received on or prior to the Closing Date (other than amounts prepaid in the ordinary course of business consistent with past custom and practice), to include any item of income in, or exclude any item of deduction from, taxable income for any Post-Closing Period. (m) No Target is subject to any private letter ruling of the U.S. Internal Revenue Service or comparable ruling of any other Taxing authority. (n) No Target has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments, that will not be fully deductible under Section 280G of the Code or under Section 162(m) of the Code (or any similar provision of state, local or non-U.S. law). (o) Target has proper receipts, within the meaning of Treasury regulation Section 1.905-2, for any non-U.S. Tax that has been or in the future may be claimed as a foreign tax credit for U.S. federal income tax purposes. No non-U.S. Target has an investment in "United States property" within the meaning of Section 956(c) of the Code. No non-U.S. Target is, or at any time has been, engaged in the conduct of a trade or business within the U.S. within the meaning of Section 864(b) or Section 882(a) of the Code, or treated as or considered to be so engaged under Section 882(d) or Section 897 of the Code or otherwise. No non-U.S. Target holds a U.S. real property interest within the meaning of Section 897(c)(1) of the Code. (p) No Target has any "excess loss accounts" within the meaning of Sections 1.1502-19 of the Treasury regulations and does not have any limitations (including limitations under Section 382 of the Code) on its use of net operating losses or other carryovers. No Target is subject to the dual consolidated loss provisions of Section 1503(d) of the Code. (q) No Target has constituted a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in an distribution of shares qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution that could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with this acquisition. (r) The unpaid Taxes of each Target, being current Taxes not yet due and payable, (a) as of December 31, 2000, did not exceed the amount of the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set out on the face of balance sheet of the 2001 Financial Statements (rather than in any notes thereto) and (b) as of the Closing Date, will not exceed the amount of that reserve, as adjusted for the passage of time through the Closing Date in accordance with the 33 past custom (including customary accrual methods) and practice of each Target in filing its Tax Returns. (s) For purposes of the ITA or any applicable provincial, municipal or foreign taxing statute, no Person or group of Persons has ever acquired or had the right to acquire "control" within the meaning of the ITA of Canada Target or the Seller. (t) Except as disclosed in Schedule 4.19, there are no ------------- Notices of Reassessment and related explanatory forms or correspondence (whether or not the issue thereof may have been resolved and any related additional or incremental Taxes paid by Canada Target) which have been issued to or received by Canada Target or the Seller pursuant to the ITA with respect to any taxation years ending on or prior to the Closing Date. (u) Canada Target has been assessed and notices of assessment have been issued by the relevant Governmental Authorities under the ITA for all taxation years prior to and including the taxation year ended 2000. (v) Except as disclosed in Schedule 4.19, or as may be ------------- required in connection with any arrangements made by the parties in connection with the Closing regarding ITA Section 116, Canada Target has not requested, or entered into any agreement or other arrangement or executed any waiver providing for, any extension of time within which (i) to file any Tax Return covering any Taxes for which Canada Target may be liable; (ii) to file any elections, designations or similar things relating to Taxes for which Canada Target may be liable; (iii) Canada Target is required to pay or remit any Taxes or amounts on account of Taxes; or (iv) any Governmental Authority may assess or collect Taxes for which Canada Target is or may be liable. (w) The Business is the only business conducted by Canada Target. The "non-capital losses" (as defined in the ITA), if any, were incurred by Canada Target only in carrying on the Business. (x) Copies of all material elections filed by Canada Target in relation to Taxes are listed in Schedule 4.19 hereto. For such ------------- purpose, "election" does not include a choice of treatment which does not entail the filing of a prescribed form with a Governmental Authority signed by Canada Target. (y) For all transactions between Canada Target and any non-resident person with whom Canada Target was not dealing at arm's length (as that term is defined in the ITA) during a taxation year commencing after 1998 and ending on or before the Closing Date, Target has made or obtained records or documents that meet the requirements of paragraph 247(iv)(a) to (c) of the ITA or any equivalent provision of the taxation legislation of any province. (z) There are no circumstances existing which could result in the application to Canada Target of either section 160 of the ITA or section 325 of the Excise Tax Act (Canada) or any equivalent section in any other similar legislation relating to taxes. (aa) Canada Label is duly registered under Part IX of the Excise Tax Act (Canada) with respect to GST and harmonized sales tax. Canada Label has collected and 34 remitted to the appropriate Governmental Authorities when required by applicable Law to do so, all amounts required under applicable Law collected and remitted by them on account of all taxes under Part IX of the Excise Tax Act (Canada), and under the applicable retail sales tax legislation in any province in Canada, and any other sales tax Law. (bb) Canada Label has not filed any returns or paid any Taxes imposed by the applicable provincial retail sales tax legislation on the acquisition of its tangible personal property and none of its tangible personal property has been transferred at any time on a Tax exempt basis. (cc) Canada Label has not acquired, or had the use of, property or services from, or disposed of, or allowed the use of, property or provided services to a non-arm's length person, within the meaning of the ITA for consideration or value less than the fair market for such property or services or have been deemed to have done so for the purposes of the ITA or any equivalent provision of the taxation legislation of any province or any other jurisdiction. (dd) Canada Label is not required to include in income (i) items in respect of any change in accounting principles, or (ii) any installment sale gain, where the inclusion in income would result in a tax liability in excess of the reserves therefor. (ee) Canada Label has not claimed and it will not claim any reserve under any one or more of subparagraph 40(1)(a)(iii) or paragraphs 20(1)(m) or 20(1)(n) of the ITA or any equivalent provincial provision with the result that such amount could be included in Canada Label's income for any taxation year ending on or after the Closing Date. (ff) None of Sections 79, 80, 80.01, 80.02, 80.03 or 80.04 of the ITA, or any equivalent provisions of the taxation legislation of any province, have applied or will apply to Canada Label at any time up to and including the Closing Date. Canada Label has not deducted any amounts in computing its income in a taxation year which may be included in a subsequent year under Section 78 of the ITA, or any equivalent provision of the taxation legislation of any province. (gg) Canada Label has not requested or received a ruling from any Governmental Authority. (hh) Canada Label has not filed any returns or paid any Taxes imposed by the Retail Sales Tax Act (Ontario) on the acquisition of their tangible personal property as defined in the Retail Sales Tax Act (Ontario), and none of their tangible personal property has been transferred at any time on a tax-exempt basis under the provisions of section 13 of Regulation 1013 to the Retail Sales Tax Act (Ontario) or any predecessor thereof. (ii) Within the meaning of the ITA, the paid-up capital of the Canada Label Share and the Additional Canada Label Share at the time of Closing shall be in an amount that is not less than $30,000,000. (jj) Prior to the time of Closing, (i) the Seller shall subscribe for additional common shares in the capital of Canada Label (the "Additional Canada Label Shares") the purchase price for which shall ------------------------------ equal an amount not less than the amount of any debts or other 35 liabilities of Canada Label to any Related Party and which purchase price shall be in cash by wire transfer of immediately available funds (ii) or if more mutually beneficial to both Seller and Purchaser as reasonably determined, Seller shall cause another transaction to occur that results in Canada Label having no Intercompany Amounts. 4.20. Employee Benefit Plans. ---------------------- (a) Schedule 4.20(a) contains a true and complete list ---------------- of all Target Benefit Plans which are presently in effect or which have previously been in effect and which cover Employees, including, without limitation, incentive, bonus, vacation and severance programs. Schedule 4.20(a) indicates which Target Benefit Plans, if any, are sponsored by a Target. (b) True and complete copies of all Target Benefit Plans have been furnished to Purchaser for review, including correct and complete copies of: (i) all current determination letters and, if any, rulings, opinion letters, information letters, or advisory opinions issued by any Governmental Authority, including without limitation, the IRS, the United States Department of Labor, or the PBGC; (ii) annual reports or returns, audited or unaudited financial statements, actuarial valuations and reports, and summary annual reports prepared for any Target Benefit Plan with respect to the most recent plan year; (iii) the most recent summary plan descriptions and any modifications thereto; and (iv) any filing or compliance action taken under Revenue Procedures 98-22, 99-13, 99-31, or 2000-16. (c) All Target Benefit Plans and the related trusts materially comply with and have been administered in compliance with, (i) the applicable provisions of all applicable Laws, including, without limitation, in relation to US Target only, ERISA, (ii) all applicable provisions of the Code, (iii) all applicable securities laws, and (iv) all other applicable Laws and collective bargaining agreements, and none of Targets nor Seller has received any notice from any Governmental Authority questioning or challenging such compliance. Each Target Benefit Plan intended to be qualified under Code Section 401(a) has been determined by the IRS to be so qualified and no event has occurred which will or could adversely affect the qualified status of any such plan or the tax-exempt status of any trust. No event has occurred which will or could result in the loss of intended tax consequences under the Code for any Target Benefit Plan of US Target. No event has occurred which will or could give rise to any Tax payable by US Target under Section 511 of the Code. (d) None of Targets, Seller, or any administrator or fiduciary of any Target Benefit Plan (or any agent of any of the foregoing) has engaged in any transaction, or acted in any manner that could subject any Target to any material direct or indirect liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary or other duty under any Law, including without limitation, in relation to US Target only, ERISA. There are no material unresolved claims or disputes under the terms of, or in connection with, the Target Benefit Plans other than claims for benefits which are payable in the ordinary course and no litigation exists with respect to any Target Benefit Plans. (e) All Target Benefit Plan documents and annual reports or returns, audited or unaudited financial statements, actuarial valuations, summary annual reports, and summary plan descriptions issued with respect to the Target Benefit Plans are correct and complete in all 36 material respects, have been timely filed with the relevant Governmental Authority, including without limitation, in relation to US Target only, the IRS and the United States Department of Labor (if applicable), and have been timely distributed to participants in the Target Benefit Plans. Except as set forth in Schedule 4.20(e), all amounts properly accrued as liabilities ---------------- to or expenses of any Benefit Plan have been properly reflected on each Target's most recent financial statements to the extent required by GAAP. Since March 31, 2002, there has been no amendment or change in interpretation by a Target relating to any Target Benefit Plan which would materially increase the cost thereof. (f) In relation to US Target only, no "party in interest" (as defined in Section 3(14) of ERISA) or "disqualified person" (as defined in Code Section 4975) of any Target Benefit Plan has engaged in any nonexempt "prohibited transaction" (described in Code Section 4975 or ERISA Section 406). With respect to any Target Benefit Plan that is subject to Title IV of ERISA ("Pension Plans"), there has been no (i) "reportable ------------- event" (as defined in Section 4043 of ERISA), or event described in Sections 4041, 4042, 4062 (including ERISA Section 4062(e)), 4064, 4069 or 4063 of ERISA; or (ii) with the exception of the American Business Products Profit Sharing Plan, termination or partial termination, withdrawal or partial withdrawal. The actions with respect to the American Business Products Profit Sharing Plan were taken and completed in full material compliance with all applicable Law. None of US Target, Seller or any ERISA Affiliate has incurred any liability under Title IV of ERISA with respect to a pension plan (as such term is defined under ERISA Section 3(2)). (g) For any Pension Plan the fair market value of such Pension Plan's assets equals or exceeds the present value of all benefits (whether vested or not) accrued to date by all present or former participants in such Pension Plan. For this purpose the term "benefits" shall include the value of all benefits, rights and features protected under Code Section 411(d)(6) or its successors and any ancillary benefits (including disability, shutdown, early retirement and welfare benefits) provided under any such Pension Plan and all "benefit liabilities" as defined in ERISA Section 4001(a)(16). All contributions with respect to any Target Benefit Plan that are subject to Code Section 412 or ERISA Section 302 have been, or will be, timely made and there is no lien under Code Section 412(n) or ERISA Section 302(f) or tax under Code Section 4971. No Target Benefit Plan of US Target has a "liquidity shortfall" as defined in Code Section 412(m)(5). No event described in Code Section 401(a)(29) has occurred or can reasonably be expected to occur with respect to such Target Benefit Plans of US Target. All premiums required to be paid under ERISA Section 4006 for the Pension Plan have been paid by Target, Seller or any ERISA Affiliate (as appropriate). (h) Except as set forth on Schedule 4.20(h), US Target ---------------- has complied in all material respects with the continuation coverage requirements of Code Section 4980B, as amended, and ERISA Sections 601 through 608. (i) To the Seller's knowledge, no Target Benefit Plan is under audit or investigation by any Governmental Authority, including without limitation the IRS, the U.S. Department of Labor, or the PBGC. 37 (j) All contributions and other payments required to be made as of the date of this Agreement to, or pursuant to, the Target Benefit Plans have been made or accrued for in the Financial Statements. (k) Except as set forth on Schedule 4.20(k), US Target ---------------- has not contributed to, or been required to contribute to, a "multi-employer plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA). No withdrawal liability exists with respect to any multiemployer plan (as defined in Section 3(37) of ERISA) to which the Seller or any ERISA Affiliate contributes, including without limitation, any potential liability which would exist if the Seller and its ERISA Affiliates withdrew from all multiemployer plans to which contributions are made on behalf of Employees as of the Closing Date. (l) Except as set forth on Schedule 4.20(l), the ---------------- consummation of the acquisition contemplated in this Agreement will not constitute an event under any Target Benefit Plan, employment or severance agreement, trust, loan or other compensation or benefits agreement or arrangement that will (a) result in any payment by or Liability to Targets or Purchaser (whether of severance pay, unemployment compensation, golden parachute or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any current or former employee, officer, director, agent or consultant of a Target; (b) entitle any current or former employee of a Target to severance pay, unemployment compensation or any similar payment; (c) accelerate the time of the payment or vesting of, or increase the amount of, any compensation due to any current or former employee of a Target. No such payment, acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits will cause a loss of tax deductions to US Label under Code Section 280G. No such payment, acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits will constitute or involve a prohibited transaction (as defined in ERISA Section 406 or Code Section 4975) or a breach of fiduciary responsibility within the meaning of ERISA Section 502(1) as to which Target has or reasonably could be expected to have any direct or indirect actual material liability (m) No Target has Liability, whether absolute or contingent, including any material obligations under any Target Benefit Plan, with respect to any misclassification of any person as an independent contractor rather than as an employee, or with respect to any employee leased from another employer. (n) Each Target Benefit Plan of US Label which is a "group health plan" (as defined in ERISA Section 607(1)) is in compliance with the provisions of ERISA Section 601 et seq., the Health Insurance Portability and Accountability Act and any other applicable, federal, state, provincial, foreign or local law. (o) There are no Target Benefit Plans maintained by US Label pursuant to which welfare benefits are provided to current or former employees beyond their retirement or other termination of service, other than coverage mandated by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. 38 (p) In relation to Canada Target, Canada Target does not have any Target Benefit Plan that is a "Registered Pension Fund or Plan" as those terms are defined in subsection 248(1) of the ITA. Canada Target does not have any formal plan or commitment, whether legally binding or not, to create any additional Target Benefit Plan or to modify or change any existing Target Benefit Plan that would affect any Employee or former Employee of Canada Target, except such modification or amendment as may be required to be made to secure the continued registration of any existing Target Benefit Plan with each applicable Governmental Authority. With respect to each Target Benefit Plan that is funded wholly or partially through an insurance policy, there will be no liability of Canada Target as of the Closing Date, under any such insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of the events occurring prior to the Closing Date. With respect to each Target Benefit Plan not funded through an insurance policy, Canada Target has either fully funded such Target Benefit Plan through a trust or has made appropriate provision for all of Canada Target's liability thereunder in the Most Recent Financial Statements. 4.21. Compliance with Laws. Except as set forth on Schedule -------------------- -------- 4.21, no Target is engaging in any activity or omitting to take any action - ---- so as to create a violation of any Law. No Target is subject to any judgment, order, writ, injunction, or decree issued by any Governmental Authority. No investigation by and Governmental Authority with respect to a Target is pending or, to the knowledge of Seller, threatened. Except for expenditures made in the ordinary course of business, no expenditure is presently required for any Target to comply with any existing requirement of Law or any Order. No Target has at any time during the last five (5) years (a) made any unlawful contribution to any political candidate, or failed to disclose fully any contribution in violation of law, or (b) made any payment to any federal, state, provincial, foreign or local governmental, regulatory or administrative officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted under applicable Laws. Neither Seller nor any of Targets has made any illegal payment or given any other illegal consideration to any Person including purchasing agents or other representatives of customers in respect of sales made or to be made by a Target. 4.22. Inventory. Except as reserved for in the Final Working --------- Capital, the inventory of the Targets is in good and merchantable condition, and suitable and useable or salable in the ordinary course of business for the purposes for which intended, and none of which is obsolete, damaged, or defective. There is no material adverse condition affecting the supply of materials available to the Targets. 4.23. Receivables. All accounts and notes receivable reflected ----------- on the Final Working Capital, and all accounts and notes receivable arising subsequent to the date of the Most Recent Financial Statements have arisen in the ordinary course of business of the Targets from valid business transactions. 4.24. Suppliers. Schedule 4.24 lists, by dollar volume paid for --------- ------------- the three (3) months ended on the most recent balance sheet date the 10 largest suppliers of the Targets. The relationships of the Targets with such suppliers are good commercial working relationships and, except as set forth in Schedule 4.24, (i) no person listed on Schedule 4.24 within the last 12 ------------- ------------- months has threatened to cancel or otherwise terminate, or to the knowledge of the Seller, 39 intends to cancel or otherwise terminate, the relationship with such Person with the Targets, (ii) no such Person has during the last 12 months decreased materially or threatened to decrease or limit materially or to the knowledge of the Seller, intends to modify materially its relationship with the Targets or intends to decrease or limit materially its services or supplies to the Targets and (iii) to the knowledge of the Seller, the acquisition of the Shares by the Purchaser and the consummation of the transactions contemplated by this Agreement will not materially adversely affect the relationship of the Targets with any supplier listed on Schedule -------- 4.24. - ---- 4.25. Company Products. There are no statements, citations or ---------------- decisions by any Governmental Authority specifically stating that any product produced or sold by or on behalf of the Targets is defective or unsafe or fails to meet any standards promulgated by any such Governmental Authority. There have been no recalls ordered by any such Governmental Authority with respect to any such product. There is no (i) fact relating to any such product that may impose upon the Target a duty to recall any such product or a duty to warn customers of a defect or of any hazardous substance in any such product, (ii) latent or overdesign, manufacturing or other defect in any such product, (iii) reasonably foreseeable use of any such product which may expose any person to any hazardous substance or (iv) material liability for warranty claims or returns with respect to any such product not fully reflected in the Most Recent Financial Statements. 4.26. Potential Conflicts of Interest. Except as set forth on ------------------------------- Schedule 4.26, neither Seller nor any Related Party (other than a Target): - ------------- (i) owns, directly or indirectly, any interest in (excepting less than 5% stockholdings for investment purposes in securities of publicly held and traded companies) or is an officer, director, employee or consultant of, any Person which is, or is engaged in a business as, a competitor, lessor, lessee, supplier, distributor, sales agent or customer of the Targets; (ii) owns, directly or indirectly, in whole or in part, any property that the Targets use in the conduct of the Business; or (iii) has any claim whatsoever, or owes any amount to, the Targets, except for claims in the ordinary course of business such as for accrued vacation pay, accrued benefits under Target Benefit Plans, and similar matters and agreements existing on the date hereof. 4.27. Banks, Brokers and Proxies. Schedule 4.27 sets forth (i) -------------------------- ------------- the name of each bank, trust company, securities or other broker or financial institution with which a Target has an account, credit line or safe deposit box or vault, or otherwise maintains relations; (ii) the name of each Person authorized by the Target to draw thereon or to have access to any safe deposit box or vault; (iii) the purpose of each such account, safe deposit box or vault; and (iv) the names of all persons authorized by proxies or powers of attorney to act on behalf of the Target in matters concerning its business or affairs. 4.28. Full Disclosure. The Purchase Documents and the schedules --------------- thereto do not contain any untrue statement of a material fact and do not omit to state any material fact necessary to make the statements made, in the context in which made, not false or misleading. There is no fact which Seller has not disclosed to Purchaser in this Agreement or the schedules hereto which would or could reasonably be expected, individually or in the aggregate, to cause a Material Adverse Effect. 40 4.29. Competition Act (Canada). The Seller together with its ------------------------ affiliates (as that term is defined in the Competition Act (Canada)) did not have, as the case may be: (a) assets in Canada that exceeded C$400 million in aggregate value, determined as of December 31, 2001 and in such manner as is prescribed for purposes of the Competition Act (Canada); and (b) gross revenues from sales in, from or into Canada, determined for the year ended December 31, 2001 and in such manner as is prescribed for purposes of the Competition Act (Canada), that exceeded C$40 million in aggregate value. 4.30. [Intentionally Omitted] ----------------------- 4.31. UK Real Property. ---------------- (a) The properties described in Schedule 4.31 ("the UK ------------- ------ Properties") comprise: - ---------- (i) all the land and premises owned, occupied or otherwise used by a UK Entity in England and Wales; and (ii) all the estate interest right and title whatsoever (including for the avoidance of doubt interests in the nature of options) of a UK Entity in respect of any land or premises in England and Wales. (b) The UK Entities are the legal and beneficial owner of the UK Properties and has good and marketable title to the UK Properties and all information relating to the UK Properties in Schedule 4.31 is true ------------- and accurate in all respects. (c) No UK Entity has at any time assigned or otherwise disposed of any freehold or leasehold property in respect of which any UK Entity has any continuing liability either as original contracting party or by virtue of any direct covenant or under an authorised guarantee agreement given on a sale or assignment to or from any UK Entity or as a surety for the obligations of any other person in relation to any real property and no unsatisfied claim has been made against any UK Entity in respect of any leasehold property formerly held by it or in respect of which it acted as a guarantor. (d) The UK Properties are free from any mortgage, debenture or charge (whether specific or floating legal or equitable) securing the payment of monies or other obligation or liability whether of any UK Entity or any other party and from any agreement to create such security interests. (e) The UK Properties are not subject to any agreement or right to acquire the same nor to any option. (f) There is no person who is in occupation (other than pursuant to any of the tenancies referred to in Schedule 4.31) or so ------------- far as the Seller is aware who has or claims any rights or easements of any kind in respect of the UK Properties adversely to the estate interest right or title of the Company therein. 41 (g) For the purposes of this paragraph: (i) "Planning Acts" means (A) The Town and Country Planning Act 1990 (B) The Planning (Listed Buildings and Conservation Areas) Act 1990 (C) The Planning (Hazardous Substances) Act 1990 (D) The Planning (Consequential Provisions) Act 1990 (E) The Planning and Compensation Act 1991 as the same have been from time to time varied or amended and any other statute or subordinate legislation relating to planning matters; (ii) "Building Regulations" means the regulations defined in section 122 of the Building Act 1984. (h) No UK Entity has received notice of breach of any Planning Acts and Building Regulations and bylaw consents for the time being in force in relation to the UK Properties. (i) No UK Entity has received notice of breach of any applicable statutory or bye-law requirement in respect of the UK Properties and in particular (but without limitation) with requirements as to fire precautions and means of escape in case of fire and with requirements under the Public Health Acts, the Housing Acts, the Highways Acts, the Offices Shops and Railway Premises Act 1963, the Health and Safety at Work etc Act 1974, the Factory Acts and the London Building Acts. (j) No UK Entity has received notice of any material breach of any of the covenants on the part of the lessee contained in any leases (which expression includes underleases) under which the UK Properties are held and the last demands for rent (or receipts if issued) were unqualified and all such leases are valid and in full force. (k) Each UK Entity is in actual occupation of all parts of the UK Properties (except those subject to any of the Tenancies referred to in Schedule 4.31). ------------- (l) The UK Properties are held subject to and with the benefit of the tenancies (which expression includes subtenancies) full details of which are set out in Schedule 4.31 and there is no agreement to ------------- grant any tenancy affecting any of the UK Properties. (m) No UK Entity has received notice of any breach of covenant by the tenant of any of the UK Properties and the Seller is not aware of any material or outstanding breaches of covenant by a tenant of any of the UK Properties including the covenants to pay. 42 4.32. UK Environmental Matters. ------------------------ (a) The following terms used in this Section 4.32 have ------------ the following meanings: "Environment" any air (including air within natural structures below ground), water (including ground water and water in drains and sewers) and land (including surface land, sub-surface land, river bed under any water); "UK Environmental all or any UK Laws from time to Law" time with regard to Environmental Matters having effect and capable of enforcement in the UK prior to or on the Closing Date; "Environmental Matters" all or any matters relating to the pollution or protection of the Environment or harm to or the protection of human health and safety or the result of contact with or exposure to Hazardous Substances; "UK Environmental all or any permits, consents, Permits" licences, approvals, certificates, and other authorisations required under UK Environmental Law for the operation of the UK Target's business in the UK; "Hazardous Substance" any matter, whether alone or in combination with any other matter, capable of causing harm to man or any other living organism or damage to the Environment; "UK Laws" all or any applicable law (whether criminal, civil or administrative), common law, judgment, court order, statute, statutory instrument, statutory guidance, regulation, directive, European Community decision (insofar as legally binding), or decision of any competent regulatory body (insofar as the same has the force of law); (b) Seller hereby represents and warrants to Purchaser that the statements contained in this Section 4.32 are true and correct as of the date of this Agreement and will be true and correct as of the Closing Date, except as set forth and identified in the Schedule 4.32 to this ------------- Agreement: (i) There is no requirement for an UK Environmental Permit in connection with the operation of the UK Entities' business; (ii) In relation to the carrying on by each UK Entity of its business in the UK: 43 (A) each UK Entity has at all times up until the Closing Date complied with UK Environmental Law; (B) no UK Entity has received prior to the date hereof any communication in any form from any statutory body having authority under UK Environmental Laws relating to any alleged breach of or liability under UK Environmental Laws. (iii) In relation to the carrying on by each UK Entity of its business in the UK: (A) there are no facts or circumstances which may give rise to any actual or potential liability (whether civil or criminal) on the part of any UK Entity in relation to Environmental Matters or in relation to the health and safety of those who work for and UK Entity or who visit the UK Properties in any capacity; (B) no UK Entity has received any notice or intimation of any complaint or claim from any regulatory body or owner or occupier of property which adjoins or is a neighbour of any of the UK Properties in respect of Environmental Matters; (C) UK Entities are not and have not been engaged in any action, litigation, arbitration or dispute resolution proceedings or subject to any investigation under UK Environmental Law or otherwise in relation to Environmental Matters and no UK Entity is aware of any such matters pending or being threatened or of any circumstances or facts likely to give rise to any such matters. (iv) In relation to the carrying on of the business by UK Entities in the UK, each UK Entity has at all times properly supplied to the competent authorities such information required by UK Environmental Law to be supplied, all such information given (whether under a legal obligation or otherwise) was so far as each UK Entity is aware correct at the time the information was supplied. (v) Copies of all material environmental audits or assessments carried out by or on behalf of UK Entities in relation to UK Property or UK Entities' business in the UK and in the possession of the Seller have been made available to the Purchaser. 4.33. UK Pension Matters. ------------------ (a) Except for the UK Schemes there are no agreements, arrangements customs or practices (whether legally enforceable or not) in operation in the United Kingdom for the payment of or contribution towards any pensions, allowances, lump sums or other like 44 benefits on retirement or on death or during periods of sickness or disablement for the benefit of any of the employees or directors or former employees or former directors of any UK Entities or for the benefit of the dependents of such individuals nor has any proposal to establish any such agreement or arrangement been announced. (b) All material details of the UK Schemes have been given to the Purchaser including full details of the membership of the Schemes as at the Closing Date. (c) In relation to the Current UK Schemes: (i) the current rates of all contributions and premiums have been disclosed in writing to the Purchaser and there are not at the date hereof any contributions thereto from or in respect of Employees or other payments which have fallen due but are unpaid; (ii) employer and employee contributions have been made promptly at the time that they were due and all liabilities in respect of any costs and expenses in relation to the Current UK Schemes will have been met by the Closing Date; and (iii) there has been no agreement with any member to increase the current rate of contributions paid by any UK Entity for or in respect of any member. (d) The Norwich Union Executive Pension Plan and the Porter Chadburn Personal Pension Fund are money purchase schemes (as defined in section 181(1) Pension Schemes Act 1993) and the benefits payable under the Schemes whether immediate, prospective or contingent, are solely the benefits which can be provided by the funds available for each member under the Schemes. (e) The Porter Chadburn Personal Pension Fund is a contracted-out scheme for the purposes of the Pension Schemes Act 1993 and has been administered in accordance with the contracting-out requirements of Part III of that Act. UK Entities or, if members of the scheme are employees of one of its subsidiaries, that subsidiary, holds or is named upon a current contracting-out certificate relating to the relevant scheme issued since 5 April 1997. (f) The Porter Chadburn plc Pension Scheme was previously a contracted-out scheme for the purposes of the Pension Schemes Act 1993 and it was, for the period during which it was a contracted-out scheme, administered in accordance with the contracting-out requirements of Part III of that Act. (g) All benefits (other than refunds of contributions) payable under the Norwich Union Executive Pension Plan and the Porter Chadburn Personal Pension Fund on the death of a member who is employed by UK Entities or during periods of sickness or disability of such a member are fully insured under a policy effected with an insurance company of good repute and each such member has been covered for such insurance by such insurance company at its normal rates and on its normal terms for persons in good health and all insurance premiums payable have been paid. 45 (h) The Stampiton Limited Group Life Assurance Scheme and the Group Life Assurance Scheme insured with Sun Life Financial of Canada provide no benefits other than benefits on the death of a member who is employed by UK Entities and all such benefits are fully insured under a policy effected with an insurance company of good repute and each such member has been covered for such insurance by such insurance company at its normal rates and on its normal terms for persons in good health. (i) The Norwich Union Executive Pension Plan, the Porter Chadburn Personal Pension Fund, the Porter Chadburn plc Pension Scheme, the Stampiton Limited Group Life Assurance Scheme and the Group Life Assurance Scheme insured with Sun Life Financial of Canada are approved by the Commissioners of Inland Revenue as exempt approved schemes under Chapter I Part XIV of ICTA 1988. (j) The Stampiton Limited Group Personal Pension is a personal pension scheme as defined in and approved under Chapter IV Part XIV of ICTA 1988. (k) The Porter Chadburn plc Pension Scheme does not distinguish between male and female members (except in relation to maternity and Guaranteed Minimum Pensions) in the provision of benefits relating to periods of pensionable service after 17th May 1990 and no adverse alteration has been made to benefits already accrued at the date of announcing changes designed to equalise benefits. (l) Except as disclosed in Schedule 4.33 the Current ------------- UK Schemes and the Porter Chadburn plc Pension Scheme have not at any time excluded employees from eligibility for membership on the grounds of specified hours of work. (m) The Current UK Schemes and the Porter Chadburn plc Pension Scheme have been administered in accordance with: (i) the preservation requirements within the meaning of section 69 Pension Schemes Act 1993; (ii) the equal access requirements of section 62 Pensions Act 1995; and (iii) subject thereto in accordance with their trusts powers and provisions and all legislation. (n) Save as disclosed in Schedule 4.20 no payment or repayment of any of the assets of the Porter Chadburn plc Pension Scheme has been made to any employer participating in that scheme. (o) No UK Entity has any "relevant employees" for the purposes of Section 3 Welfare Reform and Pensions Act 1999. (p) No UK Entity is liable to make any further payment whatsoever to either the Porter Chadburn Discretionary Pension Scheme or the Treasures Old & New Pension Scheme or the Porter Chadburn Group Staff Register Plan. 46 (q) There are no circumstances which could result in any penalty under the Pensions Act 1995 becoming payable by any UK Entity. (r) There are no actions, proceedings, costs, claims, damages and expenses brought or made against or incurred by the Purchaser or any UK Entity insofaras the same arise from an indirect sex discrimination claim brought by any employee, director, former employee or former director of any UK Entity on the grounds that the claimant was, at any time after April 8, 1996, unlawfully prevented from becoming a member of the Porter Chadburn plc Pension Scheme by reason of the number of hours that he or she worked. ARTICLE 5 COVENANTS The parties hereto covenant and agree as follows: 5.1. Conduct of Business Prior to Closing. On and after the ------------------------------------ date hereof to the Closing Date, except as expressly permitted or required by this Agreement or as otherwise expressly consented to by Purchaser in writing, Seller will cause each Target to: (a) operate its business substantially as previously operated and only in the regular and ordinary course; (b) not purchase or acquire any assets or properties, whether real or personal, tangible or intangible, and not sell or otherwise dispose of any real or personal property or asset, except in the ordinary course of business; (c) not enter into, terminate or materially modify any material Contract; (d) maintain its assets in their present order and condition, reasonable wear and use excepted, and maintain all policies of insurance in amounts and on terms substantially equivalent to those in effect on the date hereof; (e) take all steps reasonably necessary to maintain its Intellectual Property and other intangible assets, including without limitation, prosecuting all pending applications for patents or registration of trademarks and copyrights and maintaining, to the extent permitted by law, each patent or registration owned by the Target; (f) pay all accounts payable materially in accordance with past practice and collect all accounts receivable materially in accordance with past practice, but not less than in accordance with prudent business practices; (g) comply with all Laws in all material respects; (h) maintain its books and records on a basis consistent with past practices; and (i) use reasonable efforts to preserve the goodwill and patronage of its customers, employees, suppliers and others having a business relationship with Target. 47 5.2. Access and Information. From the date hereof to the ---------------------- Closing Date and at such times and places as the parties shall agree, Seller shall afford, and shall cause each Target to afford to Purchaser, its lenders, counsel, accountants, and other representatives, reasonable access to the offices, properties, books, contracts, commitments, records, vendors, and customers of each Target, and shall furnish such persons with all information (including financial and operating data) concerning Target as they reasonably may request. From the Closing Date until the third anniversary of the Closing Date, Purchaser shall afford, and shall cause each Target to afford to Seller and Seller's accountants, reasonable access to the offices, properties, books, contracts, commitments, records, vendors, and customers of each Target, and shall furnish such persons with all information (including financial and operating data) concerning Target as they reasonably may request. For those records which relate to both Poser Business Forms, Inc. and Lord Label that were formerly maintained in US Label's Omaha, Nebraska plant prior to Seller's separation of the Omaha plant's operations, Purchaser will and will cause Target to maintain such records for a period of three (3) years after the Closing Date and shall provide Seller (or any successor in interest to its Poser Business Forms Division) reasonable access to such records. In such cases, "reasonable" access means access during ordinary business hours upon at least three (3) Business Days' notice, and without undue interruption of personnel. No investigation by Purchaser or its representatives or lenders shall diminish or obviate any of the representations, warranties, covenants or agreements of the Seller contained in this Agreement. The provisions of this Section 5.2 shall not apply to any Objection to the Purchaser's Estimated Final Working Capital set forth in Section 2.4 or in respect of indemnification claims under Article 9, which access shall be covered in such respective provisions. 5.3. Notification of Changes. Between the date hereof and the ----------------------- Closing Date, Seller shall, subject to the Knowledge of Seller, promptly notify Purchaser in writing of any change in the Business, affairs or financial condition of each Target, any damage to or loss of any of its assets, or the institution of or the threat of institution of legal, administrative, or other proceedings against each Target, which, in each case, may reasonably be expected to have a Material Adverse Effect on the Targets, or any breach of a representation or warranty in this Agreement. 5.4. Certain Acts Prohibited. From the date hereof to the ----------------------- Closing Date, Seller will not cause or permit Targets to take, without the prior written consent of Purchaser, any of the actions described in Section ------- 4.16 hereof. - ---- 5.5. Consents. Seller and Purchaser (each at its sole expense) -------- shall use commercially reasonable efforts to obtain, prior to the Closing, all consents of third parties which, in the reasonable judgment of Purchaser, are necessary or appropriate for the consummation of the transactions contemplated by this Agreement. In any case where a necessary consent or approval has not been obtained at or prior to the Closing, Seller shall assist Purchaser, at Purchaser's request, after Closing in every reasonable effort to obtain such consent or approval. 5.6. Supplemental Disclosure. ----------------------- (a) Seller shall have the continuing obligation up to and including the Closing Date to supplement promptly or amend the Schedules with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or listed in the Schedule; provided, however, that for the purpose of the rights and obligations of the parties hereunder, any such supplemental disclosure 48 shall not be deemed to have been disclosed as of the date of this Agreement or have any effect for the purpose of determining the accuracy of any representation or warranty when made. (b) Seller shall deliver to Purchaser on or prior to May 10, 2002 Schedules setting forth and identifying any exceptions to the representations and warranties set forth and corresponding to the lettered and numbered sections contained in Article 4 with respect to the UK Entities (the "UK Disclosures"). Within four days of receipt by Purchaser of the UK Disclosures, Purchaser shall provide Seller with any comments on the UK Disclosures and promptly thereafter Purchaser and Seller shall negotiate in good faith and finalize the UK Disclosures in substantially the same manner that disclosed matters have been accepted by Purchaser on the date hereof with respect to US Targets and Canada Target. (c) Seller shall as soon as reasonably practicable following the signing of this Agreement but prior to Closing, deliver to Purchaser (i) the audited consolidated balance sheets and statements of income and cash flow of Targets and their Subsidiaries as of and for the years ending December 31, 2000 and December 31, 2001 and (ii) the unaudited consolidated balance sheets and statements of income and cash flow for Targets and their Subsidiaries as of and for the period from January 1, 2002 through April 30, 2002. Upon delivery of such financial statements, the representations and warranties set forth in Section 4.7 shall be read as if such financial statements were referred to therein. 5.7. Conditions Precedent. The Parties hereto shall use their -------------------- respective commercially reasonable efforts to satisfy the conditions enumerated in Article 6 and Article 7 hereof. 5.8. Capital Expenditures. Seller shall cause the management of -------------------- each Target to discuss with Purchaser any proposed material capital expenditure to be made by each Target prior to the Closing Date prior to entering into any contract or commitment for such capital expenditure, other than emergency capital expenditures. No material capital expenditure (other than emergency capital expenditures) shall be made by Target prior to the Closing Date without the prior written consent of Purchaser, which consent shall not be unreasonably withheld or delayed. Seller shall promptly notify Purchaser of the nature and extent of emergency capital expenditures made by a Target without the prior written consent of Purchaser. 5.9. Governmental Filings. Purchaser and Seller, to the extent -------------------- legally required, shall promptly prepare, file, and diligently prosecute at the earliest practicable time after the date hereof, all applications and filings required by Law in order to effect the transactions contemplated by this Agreement. 5.10. Certain Tax Matters. ------------------- The covenants set forth in this Section 5.10 shall not apply to any ------------ UK Entity. (a) Seller shall timely pay or cause to be paid to the relevant Governmental Authorities, or shall timely reimburse or indemnify on a Grossed-Up Basis, on a joint and several basis, Purchaser and its Affiliates for, and shall hold Purchaser and its Affiliates harmless from and against, all Losses arising in respect of (A) any Liability for Taxes of a Target or any Affiliated Group of which a Target is a member, or chargeable as a Lien upon the assets of a 49 Target, that is attributable to any period or a portion thereof ending on or prior to the Closing Date, but only to the extent that any such Liability has not been paid for prior to the Closing Date by Seller or the Target; and (B) any obligation of a Target under any tax allocation, sharing, indemnity or similar agreement or arrangement but only to the extent that any such Liability has not been paid for prior to the Closing Date by Seller or Target. For purposes of this Section 5.10, any Liability attributable to a ------------ taxable period which begins before and ends after the Closing Date shall be apportioned between the portion of such period ending on the Closing Date and the portion beginning on the day after the Closing Date (x) in the case of (i) real and personal property Taxes, (ii) franchise Taxes based on capitalization, debt or shares of stock authorized, issued or outstanding, and (iii) ad valorem taxes, by apportioning such Taxes on a per diem basis and (y) in the case of all other Taxes on the basis of the actual activities of a Target, as the case may be, as determined from the books and records of the Target for such partial period (i.e., based on a closing of the books at the end of the Closing Date). (b) For periods ending on or prior to the Closing Date, Seller shall prepare and timely file at Seller's expense, or cause to be prepared and timely filed, consistently with past practices all consolidated, unitary or combined income Tax Returns for periods ending on or prior to the Closing Date which are filed after the Closing Date on which Seller will include the operations of each Target (the "Consolidated ------------ Preclosing Returns"). In connection therewith, Purchaser and Parent shall, - ------------------ and shall cause each Target to, (i) provide to Seller and its accountants and other Tax-related consultants reasonable access to any books and records that Seller may need for preparing of the Consolidated Preclosing Returns, (ii) cooperate with Seller and its accountants and other Tax-related consultants as Seller may reasonably need in preparing the Consolidated Preclosing Returns, and (iii) if necessary, cause a duly elected and authorized officer of each Target (or its successor) to sign such Consolidated Preclosing Returns as may require the signature of such an officer. Also in connection therewith, neither any Target nor any Affiliated Group of which Target is a member shall make any elections for Tax purposes or any changes in the current accounting method with respect to a Target to which the Target may be bound following the Closing Date. Seller will cause the parent of the Affiliated Group that includes US Label (i) not to elect to retain any net operating loss carryovers or capital loss carryovers of a Target under Section 1.1502-20(g) of the Treasury Regulations or any successor regulation and (ii) to include the applicable income of Target (including any deferred income triggered into income by Sections 1.1502-13 and 1.1502-19 of the Treasury Regulations) on the applicable Consolidated Preclosing Returns. In addition to the Consolidated Preclosing Returns, Seller shall cause each Target to prepare consistently with past practices and timely file any other Tax Return that is required to be filed prior to the Closing Date, and pay any Tax due prior to the Closing Date with respect to such Tax Returns. Seller will allow Purchaser the opportunity to review and comment upon all Tax Returns discussed in this Section 5.10(b) to the --------------- extent they relate to a Target. (c) Purchaser shall prepare and timely file, or cause to be prepared and timely filed, with the relevant taxing authorities all Tax Returns relating to the business or non-Excluded Assets of each Target other than those Tax Returns described in Section 5.10(b). --------------- (d) Any premium or franchise Tax Returns that must be filed by Purchaser pursuant to Section 5.10(d) for Tax periods (or portions --------------- thereof) ending on or before the Closing Date shall be prepared by Purchaser, with respect to such portion ending on or before the Closing 50 Date, in a manner that is, to the extent permitted by Law, consistent with the last Tax Return filed prior to the Closing Date in each relevant jurisdiction. (e) Any Tax allocation or sharing agreement or arrangement which, prior to the Closing Date, may have been entered into between a Target on the one hand, and any one of Seller or any of its Affiliates on the other hand, shall terminate with respect to the Target as of the Closing Date. (f) Notwithstanding Section 5.10(g), any refunds of Taxes paid with respect to Tax periods or portions thereof ending on or before the Closing Date that are received by Purchaser or a Target, and any such amounts credited against Tax to which Purchaser or a Target become entitled, shall be for the account of Seller, and Purchaser shall pay over to Seller any such refund or the amount of any such credit within ten (10) Business Days after receipt of any such refund or the filing of a Tax Return reflecting any such credit but net of any Taxes imposed on Purchaser or a Target with respect to such refund or credit. Notwithstanding the foregoing, any refunds of sales or use Taxes recovered by a Target as a result of a filing made after the Closing Date by Purchaser or a Target with respect to taxes paid related to periods prior to the Closing Date shall be for the benefit of Target or Purchaser and remain the sole property of Target or Purchaser. Purchaser shall indemnify, defend and hold harmless Seller Indemnitees from any Losses arising directly or indirectly from any filings made by Purchaser or a Target after the Closing Date seeking refund of any sales or use tax paid related to periods prior to the Closing Date. (g) Subject to Section 5.10(f), any refund of Taxes, or reduction in Tax Liability, (including any interest thereon) that relates to Target shall be the property of Target. If any such refund or interest thereon) is received, or reduction in Tax Liability is realized, by Seller, Seller shall promptly pay such amount to Purchaser. Seller will cooperate with Target in obtaining such refunds (or reduction in Tax Liability), including through the filing of amended Tax Returns or refund claims. Purchaser agrees to indemnity Seller for any Taxes resulting from the disallowance of such post-acquisition Tax attribute on audit or otherwise. (h) Each party hereto shall, and shall cause its Subsidiaries and Affiliates to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which any such party may possess. Each party will retain all Tax Returns, schedules and work papers, and all material records and other documents relating to Tax matters, of Target for its Tax period first ending after the Closing Date and for all prior Tax periods until the later of (i) the expiration of the statute of limitations for the Tax periods to which the Tax Returns and other documents relate and (ii) eight years following the due date (without extension) for such Tax Returns. Thereafter, the party holding such Tax Returns or other documents may dispose of them; provided that such party shall give to the other party notice and an opportunity to take custody thereof prior to doing so. Each party shall make its employees reasonably available on a 51 mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Tax Returns pursuant to this Section 5.10 shall ------------ bear all costs of filing such Tax Returns. (i) Seller and Purchaser shall share equally all Transfer Taxes arising out of or in connection with the transactions effected pursuant to this Agreement, and Seller shall indemnify, defend and hold harmless each Purchaser Tax Indemnitee with respect to such Transfer Taxes. Seller shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes. 5.11. Employee Benefit Plans. ---------------------- (a) The employees of each Target (and their covered dependents) shall continue to participate under the medical, dental, vision, employee assistance, life and long-term disability benefit coverages under the Target Benefit Plans through May 31, 2002. Effective June 1, 2002, the employees of each Target (and their covered dependents) shall cease active participation under the Target Benefit Plans maintained by Seller. Neither the Purchaser nor any Target will be liable for any costs relating to coverage described in the first sentence of this paragraph. Seller will retain obligations for medical continuation coverage under Code Section 4980B with respect to employees of Target (and their covered dependents) who experience qualifying events (as such term is defined under Code Section 4980B(f)(3)) prior to June 1, 2002. Seller's long-term disability plan will retain obligations for providing disability benefits, in accordance with its terms, to eligible employees of each Target who become disabled prior to June 1, 2002. (b) From and after the Closing, Seller shall (i) assume and remain solely responsible for, and shall reimburse and indemnify Purchaser Indemnitees for, any and all Liabilities arising prior to the Closing Date under each benefit plan maintained by or for the benefit of the current or former employees of Seller or its ERISA Affiliates; and (ii) promptly pay, when due, and cause the administrators of each Target Benefit Plan maintained by Seller to promptly pay, when due, all benefits and compensation payable or to be provided to all retired, current or former employees of each Target and such individual's beneficiaries and dependents in accordance with the terms of the applicable Target Benefit Plan to the extent of such employee's participation therein prior to Closing. (c) Following the Closing Date, Purchaser shall recognize Target's employees' years of service through the Closing Date for purposes of eligibility and vesting under the benefit plans provided to Target's employees following the Closing Date and waive any pre-existing medical condition to the extent allowable under Target's plans. (d) Seller shall take such actions as are necessary to (i) fully vest Employees in their account balances under the defined contribution plans in which such Employees participate (ii) avoid placing any Employee's plan loan into default as long as such Employee rolls over their account balance (including, without limitation, the note relating to the plan loan) to a defined contribution plan maintained by Purchaser within 90 days of the Closing Date. 52 (e) Seller shall transfer the medical-care and dependent-care reimbursement account balances (including the related assets and liabilities) to US Label. After such transfer takes place, US Label's flexible spending account plan shall be liable for reimbursement of eligible medical-care and dependent-care expenses incurred in 2002 on behalf of eligible Employees and their covered dependents. (f) Seller shall contribute (i) matching contributions to the Mail-Well Corporation 401(k) Savings and Retirement Plan and the Mail-Well I Corp. 401(k) Savings & Retirement Plan for Union Employees on behalf of each participant in accordance with the terms of such plans and (ii) non-discretionary profit sharing contributions to the Mail-Well Corporation 401(k) Savings and Retirement Plan on behalf of each non-union participant in accordance with the terms of such plan. (g) The Seller shall use commercially reasonable efforts to cause the trustees of the Porter Chadburn plc Pension Scheme (for the purposes of this Section 5.11(g), the "Scheme") to meet and resolve: ------ (i) to instruct the Scheme Actuary in compliance with the requirements of the Occupational Pension Schemes (Deficiency on Winding Up etc.) Regulations 1996, to value the Scheme's assets and the amount of its liabilities and certify the same, such certificate to be issued within eighty (80) days of Closing; (ii) to regard the effective date of the valuation in (i) above as the "applicable time" for purposes of Section 75 Pensions Act; (iii) to regard the difference between the value of the Scheme's assets and the amount of its liabilities as certified by the Scheme Actuary under (i) above as the debt due from the employer to the trustees under Section 75(1) Pensions Act 1995 (the "Employer's Due Contributions"); and ---------------------------- (iv) to formally request the payment of the Employer's Due Contributions from Purchaser within eighty-five (85) days of Closing. If Seller does not satisfy all Liabilities arising under the Scheme in the manner set forth in this Section 5.11(g) as provided herein, such Liabilities shall be subject to the indemnification provisions set forth in Section 9.1(a)(ix). 5.12. Seller and Parent Guarantee Releases. Purchaser shall use ------------------------------------ commercially reasonable efforts to cooperate with Seller and Parent to obtain the release of Seller and Parent from any guarantees of obligations of any Target under any leases related to real or personal property. 5.13. Assignment of Contracts and Other Properties. -------------------------------------------- (a) On or prior to the Closing Date, the Seller shall assign from Seller to a Target or Purchaser the contracts and other properties listed in Schedule 5.13(a), in whole or in part, to the extent ---------------- necessary to allow the Targets to continue to operate under such contracts, and 53 to the extent of such assignment, a Target or Purchaser, as the case may be, shall assume all Liability under such contracts arising after the Closing Date. (b) Parent shall assign to Purchaser all rights with respect to the severance agreements listed in Schedule 5.13(b), copies of ---------------- which have been made available to Purchaser, and Purchaser shall assume all obligations under such agreements. Purchaser shall pay the compensation due to John Sullivan and Susan Broski caused by the occurrence of the transactions described in this Agreement. Seller shall remain solely responsible for, or shall reimburse and indemnify Purchaser Indemnitees for, any and all severance payments, stay bonuses and other incentive payments under such employment agreements caused to be due and payable by the occurrence of the transactions described in this Agreement. 5.14. Name Change. Within 365 days after the Closing Date, ----------- Purchaser shall cause each Target to cease using any mark, name, d/b/a or other manner of identifying the Target or any product, service or unit thereof, that includes the "Mail-Well" name or logo, or any permutation thereof or marks or words that may be deceptively similar thereto (collectively, the "Mail-Well Name"). Further, within 365 days after the Closing Date, Purchaser shall cause each Target to legally change its name and any registrations thereof (including mark, name and d/b/a registrations) to a name that does not include the Mail-Well Name. Upon and after the Closing Date, Target shall have no right or power to license, sell, gift, assign, distribute or otherwise transfer any right to or interest in the Mail-Well Name. All of the Target's rights to and interests in the Mail-Well Name shall terminate 365 days after the Closing Date, or on such earlier date as Purchaser and each Target achieves compliance with the first two sentences of this Section 5.14. 5.15. Related Parties. Except as provided in Section 5.13, the --------------- Seller shall, prior to the Closing, pay or cause to be paid to each Target all amounts owed to the Target by any Related Party (other than any of the other Targets). At and as of the Closing, any debts or other Liabilities of any Target owed to any Related Party (other than any of the other Targets) shall be canceled. The Seller shall, prior to the Closing, terminate or cause to be terminated all Contracts between each Target, on the one hand, and any Related Party (other than any of the other Targets), on the other hand, and the Targets shall retain no obligations under such Contracts. Seller shall indemnify and hold Purchaser and Targets harmless from and against any Liabilities arising from the termination of such Contracts. 5.16. Parent. The Parent shall cause the Seller to perform all ------ of its obligations under this Agreement. 5.17. Intercompany Accounts. All Intercompany Accounts between --------------------- Seller or its Affiliates (other the Targets) and the Targets shall be cancelled and extinguished as of the Closing Date except for accounts receivable and accounts payable arising in the ordinary course of business related to purchases or sales of products and services between Seller or its Affiliates (other than Targets) and Targets, and Seller shall indemnify and hold Purchaser and Targets harmless from and against any Liabilities arising from the termination of any Intercompany Accounts. 5.18. Transition Services Agreement. Between signing of this ----------------------------- Agreement and Closing, Seller and Purchaser shall use their reasonable efforts to mutually agree the nature and terms of 54 the transition services to be provided by Seller to Purchaser to enable the Purchaser to operate the Business as an independent going concern from and after the Closing Date to be set forth on Appendix A to the Transition Services Agreement. 5.19. Further Assurances. Seller and Purchaser each agree (at ------------------ each party's sole expense) to use their reasonable best efforts to take all reasonable actions and to execute, acknowledge, affirm and deliver any and all documents and instruments, prior to and after the Closing, to effect and complete the transactions contemplated by this Agreement. If either Seller or Purchaser desires to implement a reorganization (for tax or other reasons) at any time prior to Closing with respect to the Targets, Seller and Purchaser agree to reasonably assist the other party to structure and implement any such reorganization in a mutually beneficial manner. ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligation of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions all or any of which may be waived in writing, in whole or in part, by Purchaser: 6.1. Representations and Warranties. All information required ------------------------------ to be furnished or delivered by Seller or Target pursuant to this Agreement or the Tax Deed shall have been furnished or delivered as of the date hereof and as of the Closing Date, as required hereunder; the representations and warranties made by Seller in Article 4 and in the Tax Deed shall be true and correct in all material respects on and as of the Closing Date. For purposes of this Section 6.1, (x) all representations and warranties shall be interpreted without giving effect to the words "materiality" or "material" or to any qualification based on such terms or based on the defined term "Material Adverse Effect"; and (y) with the same force and effect as though such representations and warranties had been made on and as of the Closing Date except that the representations and warranties contained in Sections 4.1(b) and 4.1(c) shall be true and correct in all respects. Purchaser shall have received a certificate dated as of the Closing Date, executed by an authorized officer of Seller, to such effect. 6.2. Compliance by Seller. The Seller shall have duly performed -------------------- in all material respects all of the covenants, agreements, and conditions contained in this Agreement and each other Purchase Document to which it is a party to be performed by the Seller on or prior to the Closing Date, and Purchaser shall have received a certificate, dated as of the Closing Date, executed by an authorized officer of Seller, to such effect. 6.3. Certified Resolutions. Purchaser shall have received from --------------------- Seller a certificate executed by the Secretary or Assistant Secretary thereof containing true and correct copies of resolutions duly adopted by Seller's board of directors approving and authorizing this Agreement and each of the other Purchase Documents to which it is a party and each of the transactions contemplated hereby and thereby. The Secretary or Assistant Secretary of Seller shall also certify that such resolutions have not been rescinded, revoked, modified, or otherwise affected and remain in full force and effect. 55 6.4. No Injunction; Etc. No action, proceeding, investigation, ------------------ regulation, or legislation shall be pending or threatened which seeks to enjoin, restrain, or prohibit Purchaser, or to obtain damages from Purchaser, in respect of the consummation of the transactions contemplated hereby, or which seeks to enjoin the operation of any portion of any Target's business. 6.5. Incumbency. Purchaser shall have received certificates of ---------- incumbency of Seller executed by the officers of Seller executing this Agreement, and attested by the Secretary or Assistant Secretary of Seller listing the officers of Seller authorized to execute this Agreement and the other Purchase Documents to which Seller is a party and all instruments on behalf of Seller and certifying the authority of each such officer to execute the agreements, documents, and instruments on behalf of Seller in connection with the consummation of the transactions contemplated herein. 6.6. Consents; Authorizations; Legal Matters. Purchaser shall --------------------------------------- have received a true and correct copy of each consent and waiver identified on any Schedule hereto that is (a) required for the transfer of the Shares; (b) required for the operation of the Business of the Targets after Closing; and (c) otherwise required for the execution, delivery, and performance of this Agreement and the other Purchase Documents by Seller. All required consents, notices, authorizations, orders, or approvals of any governmental commission, board, or other regulatory body, shall have been obtained or made. Purchaser shall have received a certificate dated as of the Closing Date, executed by an authorized officer of Seller, to the foregoing effect. 6.7. Proceedings. The form and substance of all certificates, ----------- assignments, orders and other documents and instruments hereunder shall be satisfactory in all reasonable respects to Purchaser and its counsel. 6.8. Opinion of Seller's Counsel. Purchaser shall have received --------------------------- the Opinion of Seller's Counsel dated the Closing Date and substantially in the form attached hereto as Exhibit C. 6.9. Certified Documents, Good Standing. Purchaser shall have ---------------------------------- received (a) the Articles of Incorporation or memoranda and articles of association, as applicable, of each Target (other than UK Label) as amended, certified as of a recent date by a Governmental Authority (if such certification is customarily available) and a copy of the Bylaws of each Target, as amended, certified as of the Closing Date by the Secretary or an Assistant Secretary of each Target; (b) a certificate of status, good standing or existence with respect to each Target (other than UK Label) applicable Governmental Authority under the laws of which the Target is incorporated, organized or registered, and of each other jurisdiction in which the Target is qualified or registered to do business, dated as of a recent date acceptable to Purchaser's counsel; (c) a certificate of status, good standing or existence from the Delaware Secretary of State with respect to Seller; and (d) a Certificate of Attestation under "An Act Respecting the Legal Publicity of Sole Proprietorships, Partnerships and Legal Persons" (Quebec). 6.10. Release from Security Interests. ------------------------------- (a) Any and all Liens on the Shares and on the assets, properties and businesses of any Target pursuant to the BofA Security Documents or otherwise shall have been released and discharged; and 56 (b) US Target shall have been released and discharged from any and all obligations and liabilities as a guarantor under the BofA Credit Agreement or otherwise on terms and conditions satisfactory to Purchaser. 6.11. Release from Senior Subordinated Notes Guarantee and ----------------------------------------------------- Senior Notes Guarantee. US Target shall have been released from any and all - ---------------------- obligations under the Senior Subordinated Notes Guarantee and the Senior Notes Guarantee on terms and conditions satisfactory to Purchaser. 6.12. KEDFA Bond. Seller shall have irrevocably assigned to ---------- Purchaser all of its rights to and interest in the KEDFA Program, including, without limitation, the endorsement and assignment to Purchaser of the KEDFA Bond in the form of endorsement and assignment reasonably acceptable to Purchaser and in the manner provided in the Trust Indenture dated October 15, 1992 between Kentucky Economic Development Finance Authority ("KEDFA") ----- and the Bank of New York as Trustee ("Trustee"), as amended in the First ------- Supplemental Trust Indenture dated May 11, 1998 between KEDFA and the Trustee, as well as all rights to receive all payments arising under the KEDFA Bonds. Purchaser and Seller shall cooperate to obtain, as promptly as possible thereafter, the ratification and approval of KEDFA and the Trustee with respect to the assignment of the KEDFA Bonds and other rights to Purchaser as provided herein. Seller shall be responsible for all costs and expenses associated with such assignment. 6.13. Tax Deed. The Seller shall have executed and delivered the -------- Tax Deed in the form of Exhibit G hereto and the Tax Deed shall be in full force and effect. 6.14. Non-Compete Agreement. Seller shall have executed and --------------------- delivered a non-compete agreement in a form to be mutually agreed upon prior to the Closing by Purchaser and Seller. 6.15. 116 Clearance Certificate. ------------------------- (a) Seller shall deliver to the Purchaser on or before the Closing Date a certificate issued by the Minister of National Revenue (Canada) under subsection 116 of the Income Tax Act (Canada) (the "ITA"), in respect of those of the Shares constituting "taxable Canadian property" as such term is defined in the ITA, and the Parties hereby acknowledge and agree that the only Shares which constitute "taxable Canadian property" for such purpose are the Canada Label Shares, which certificate shall identify as the purchaser for purposes of the certificate "MWL Acquisition Corp." and, for greater certainty, need not identify as the purchaser for purposes of the certificate any other Person regardless of any change made on or prior to Closing by the Purchaser in or to the Person who is to take or does take legal and/or beneficial title to the Canada Label Shares at Closing, for an amount equal to or greater than the portion of the Purchase Price (the "Allocated Purchase Price") allocable to the Subject Property under this Agreement. (b) If Seller fails to deliver to Purchaser on or before the time of Closing a certificate in accordance with the immediately preceding sentence hereof, the parties shall at the time of Closing enter into the Escrow Agreement annexed hereto as Schedule 6.17 and the Purchaser will, at the time of Closing, withhold from the Purchase Price otherwise payable at 57 Closing to the Seller an amount (the "Escrowed Amount") equal to the lesser of (i) 25% of the Allocated Purchase Price and (ii) 25% of the difference between the Allocated Purchase Price and the certificate limit fixed by any certificate which has been obtained by the Seller in accordance with the immediately preceding sentence hereof and in either case deliver the Escrowed Amount to the Escrow Agent (as defined in the Section 116 Escrow Agreement) to be dealt with in the manner set forth in the Escrow Agreement. 6.16. U.S. Person Affidavit. Seller shall deliver to Purchaser --------------------- on the Closing Date an affidavit dated as of the Closing Date stating that the Seller is not a foreign person pursuant to Section 1.1445-2(b) of the Treasury regulations. 6.17. Transition Services Agreement. Seller shall have executed ----------------------------- and delivered the Transition Services Agreement substantially in the form of Exhibit H hereto, and the Transition Services Agreement shall be in full force and effect. 6.18. UK Label Shares Transfer. Seller shall deliver to ------------------------ Purchaser on the Closing Date a pre-stamped stock transfer form in respect of the UK Label Shares, and any associated stamp duty shall be shared equally by Seller and Purchaser. 6.19. UK Additional Deliveries. Seller shall: ------------------------ (a) Deliver to the Purchaser: (i) a duly executed transfer in favour of the Purchaser (or as it may direct) in respect of all the UK Label Shares and the relevant share certificate(s); and (ii) the documents listed in the UK Title Documents List. (b) Deliver to the Purchaser as agent for UK Target: (i) the duly signed minutes of the board meetings at which the matters set out in Section 6.19 (c) are dealt with; ---------------- (ii) the resignations referred to in Sections -------- 6.19 (c)(iv) and (v); ------------ --- (iii) all the statutory books, share certificate books and minute books (each duly written up to date) of each UK Entity and their respective certificates of incorporation, certificates of incorporation on change of name or registration and common seals (if any); (iv) a letter from the auditors by which they resign as auditors to the UK Label and the UK Subsidiaries and confirm that there are no circumstances which ought to be brought to the attention of the shareholders of any UK Target; and 58 (v) in respect of each of the UK Charges Form 53 or (as the case may be) the relevant form of discharge each duly completed and executed by the beneficiary of the relevant UK Charge. (c) Procure: (i) the registration (subject to being duly stamped) of the transfers referred to in Sections 6.19(a)(i) and (ii) notwithstanding any provision to the contrary in the articles of association of UK Entities; (ii) the valid appointment as additional directors of each UK Target such persons as may be directed by Purchaser upon one day's notice prior to the Closing Date; (iii) the valid appointment as chairman of each UK Entity such persons as may be directed by Purchaser upon one day's notice prior to the Closing Date; (iv) that the existing directors each cease to be a director of each UK Entity and deliver to the Purchaser a duly executed and delivered resignation letter; (v) that each existing secretary ceases to be secretary of each UK Entity and delivers to Purchaser a duly executed and delivered resignation letter; (vi) the appointment as the Secretary of each UK Target such persons as may be directed by Purchaser upon one day's notice prior to the Closing Date; and (vii) so far as required by the Purchaser the revocation of all authorities to the bankers of each UK Target relating to bank accounts and authorise such persons as the Purchaser may nominate to operate the same. 6.20. Seller as Registered Holder. The Seller declares that --------------------------- with effect from Closing and for so long as it remains the registered holder of any of the UK Label Shares it shall: (a) stand and be possessed of the UK Label Shares and the dividends and other distributions of profits or surplus or other assets in respect of the UK Label Shares and all rights arising out of or in connection with them in trust for the Purchaser and its successors in title; and (b) at all times deal with and dispose of the UK Label Shares and all such dividends distributions and rights as the Purchaser or any such successor may direct. ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER The obligation of Seller to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date hereunder, of each of the following conditions, all or any of which may be waived, in whole or in part, by Seller: 59 7.1. Certificate Regarding Representations and Warranties. All ---------------------------------------------------- information required to be furnished or delivered by Purchaser pursuant to this Agreement shall have been furnished or delivered as of the date hereof and the Closing Date as required hereunder; the representations and warranties made by Purchaser in Article 3 hereof shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though such representations and warranties had been made on and as of the Closing Date; and Seller shall have received a certificate dated the Closing Date, executed by authorized officers of Purchaser, to such effect. 7.2. Compliance by Purchaser. Purchaser shall have duly ----------------------- performed in all material respects all of the covenants, agreements, and conditions contained in this Agreement and each other Purchase Document to which it is a party to be performed by Purchaser on or before the Closing Date (except that payment of the Purchase Price shall be performed in all respects), and Seller shall have received certificates dated the Closing Date, executed by authorized officers of Purchaser to such effect. 7.3. Certified Resolutions. Seller shall have received from --------------------- Purchaser certificates executed by the Secretary or Assistant Secretary thereof containing true and correct copies of resolutions duly adopted by Purchaser's board of directors approving and authorizing this Agreement and each of the other Purchase Documents to which it is a party and each of the transactions contemplated hereby and thereby. The Secretary or Assistant Secretary of Purchaser shall also certify that such resolutions have not been rescinded, revoked, modified, or otherwise affected and remain in full force and effect. 7.4. No Injunction; Etc. No action, proceeding, investigation, ------------------ regulation, or legislation shall be pending, which seeks to enjoin, restrain, or prohibit Seller, or to obtain damages from Seller, in respect of the consummation of the transactions contemplated hereby. 7.5. Incumbency. Seller shall have received certificates of ---------- incumbency of Purchaser executed by the officers of Purchaser executing this Agreement, and attested by the Secretary or Assistant Secretary of Purchaser listing the officers of Purchaser authorized to execute this Agreement and the other Purchase Documents to which Purchaser is a party and all instruments on behalf of Purchaser and certifying the authority of each such officer to execute the agreements, documents, and instruments on behalf of Purchaser in connection with the consummation of the transactions contemplated herein. 7.6. Legal Matters. All authorizations, orders, or approvals of ------------- any Governmental Authority required to consummate the transactions described in this Agreement shall have been obtained. 7.7. Proceedings. The form and substance of all certificates, ----------- assignments, orders and other documents and instruments hereunder shall be satisfactory in all reasonable respects to Seller and its counsel. 7.8. Opinion of Purchaser's Counsel. Seller shall have received ------------------------------ a customary opinion of Purchaser's counsel dated the Closing Date in form and substance reasonably acceptable to Seller. 60 7.9. Good Standing. Seller shall have received certificates of ------------- status, good standing or existence from the Delaware Secretary of State with respect to Purchaser. 7.10. Non-Compete Agreement. Purchaser shall have executed and --------------------- delivered a non-compete agreement in a form to be mutually agreed upon prior to the Closing by Purchaser and Seller. 7.11. Release Under BofA Security Documents. Seller shall have ------------------------------------- received for the benefit of Targets full releases in respect of the BofA Security Documents. ARTICLE 8 TERMINATION 8.1. Termination. This Agreement may be terminated: ----------- (a) by the mutual consent of Purchaser and Seller; (b) by Purchaser, so long as Purchaser is not then in material breach of its obligations hereunder, upon a breach of any representation, warranty, covenant or agreement set forth herein on the part of Seller, and in each such case, where the breach would result in the failure to satisfy the conditions set forth in Article 6, and such breach is incapable of being cured or if capable of being cured, has not been cured within 30 days of the date on which Seller receives written notice thereof from Purchaser; (c) by Seller, so long as Seller is not then in material breach of its obligations hereunder, upon a breach of any representation, warranty, covenant or agreement set forth herein on the part of Purchaser, and in each such case, where the breach would result in the failure to satisfy the conditions set forth in Article 7, and such breach is incapable of being cured or, if capable of being cured, has not been cured within 30 days of the date on which Purchaser receives written notice thereof from Seller; or (d) by either Purchaser or Seller (unless such party is in material breach of its obligations under this Agreement) if the Closing shall not have occurred on or before May 24, 2002, unless the failure to consummate the Closing by such date shall be primarily due to the failure of the party seeking to terminate the Agreement to have fulfilled any of its obligations under this Agreement. 8.2. Effect of Termination. As to any damages of any party --------------------- arising from the effect of wrongful termination or abandonment of this Agreement by any other party, such party shall be entitled to pursue its rights or remedies against the other party or parties to the extent such rights or remedies may be available at law or in equity, and shall also be entitled to reimbursement of all reasonable costs and fees, including attorneys' fees, related to enforcement of this Agreement and/or seeking remedies for breach. 61 ARTICLE 9 INDEMNIFICATION 9.1. Agreement of the Indemnitors to Indemnify. ----------------------------------------- (a) Subject to the terms and conditions of this Article 9, Seller agrees to indemnify, defend and hold harmless Purchaser Indemnitees from, against, for and in respect of the Losses asserted against, or paid, suffered or incurred by Purchaser Indemnitees, or any of them in any action or proceeding between the Indemnitor and the Indemnitee or between the Indemnitor and any third party or otherwise, and resulting from, based upon, or arising out of: (i) the breach or inaccuracy of any representation or warranty of Seller contained in this Agreement or any other Purchase Document other than the Tax Deed; (ii) a breach of or failure to perform any covenant or agreement of Seller or Target made pursuant to this Agreement or any other Purchase Document other than the Tax Deed; (iii) (a) the Environmental Protection Agency claim against US Label with respect to the Tremont City Landfill Site, described on Schedule 4.14(b), and (b) any violations of, or ---------------- any Liabilities (including without limitation any investigatory, corrective or remedial obligations) arising under or relating to, Environmental Laws or UK Environmental Laws with respect to the past or current properties, facilities or operations of Seller, a Target or the Business, and any of their respective predecessors or Affiliates (in each case, whether or not constituting a breach of any representation or warranty hereunder and whether or not listed on a Schedule to this Agreement or otherwise disclosed to Purchaser prior to the Closing Date or identified by Purchaser or its agents or representatives through their due diligence investigations prior to the Closing Date) except to the extent the facts or circumstances underlying any such violations or Liabilities are caused by the operation of a Target after the Closing Date; (iv) any liability, cost, claim or expense relating to the termination of the American Business Products Profit Sharing Plan; (v) any claims described on Schedule 9.1(a)(v); ------------------ (vi) any claims arising under any Benefit Plan maintained by Seller or any Target prior to the Closing Date or out of a violation of Law relating to COBRA or ERISA compliance prior to the Closing Date, including but not limited to, those matter described on Schedule 4.21(h); ---------------- (vii) except as provided on Schedule 9.1(vii), any claims for stay bonuses, incentive payments or severance payments under agreements with employees resulting from the occurrence of the transactions contemplated by this Agreement; (viii) any claims in respect of royalties, taxes, interest and other liabilities relating to the Dunsirn Patent License Agreement dated April 1992 made 62 between Mid American Division of Menasha Corporation and Porter Chadburn Inc. with respect to U.S. Patent No 4,479,838 issued on October 30, 1984 for the period prior to Closing; and (ix) unless all obligations relating to or arising under the Porter Chadburn plc Pension Scheme have been satisfied in the manner set forth in Section 5.11(g)(i) to (iv), Seller shall indemnify Purchaser (for itself and as agent and trustee for the UK Entities) in respect of any Liability payable by Purchaser to the trustees of the Porter Chadburn plc Pension Scheme pursuant to Section 75(1) Pensions Act 1995 or otherwise, less an amount equal to the UK Pension Provision. (b) Subject to the terms and conditions of this Article 9, Purchaser agrees to indemnify, defend and hold harmless, Seller Indemnitees or any of them from, against, for and in respect of the Losses asserted against, or paid, suffered or incurred by Seller Indemnitees and resulting from, based upon, or arising out of: (i) the breach or inaccuracy of any representation or warranty of Purchaser contained in this Agreement or any other Purchase Document; (ii) a breach of or failure to perform any covenant or agreement of Purchaser made pursuant to this Agreement or any other Purchase Document; (iii) any Liability arising after the Closing Date incurred in connection with any guarantee by Seller or Parent in connection with the obligations of any Target under any lease related to real or personal property or other obligations; and (iv) any violations of, or any Liabilities (including without limitation any investigatory, corrective or remedial obligations) arising under, or relating to, Environmental Laws or UK Environmental Laws, in each case, in existence as of or after the Closing Date to the extent caused by the operation of a Target after the Closing Date, except to the extent the facts or circumstances underlying any such violations or Liabilities are caused by the operation of a Target prior to the Closing Date. 9.2. Procedures for Indemnification. ------------------------------ (a) An Indemnification Claim shall be made by the Indemnitee by delivery of a written notice to the Indemnitor Representative requesting indemnification and specifying the basis on which indemnification is sought and the amount of asserted Losses and, in the case of a Third Party Claim, containing (by attachment or otherwise) such other information as the Indemnitee shall have concerning such Third Party Claim. No Indemnification Claim or series of related claims shall be made for an amount less than $10,000. (b) If the Indemnification Claim involves a Third Party Claim, the procedures set forth in Section 9.3 hereof shall be ----------- observed by the Indemnitee and the Indemnitor Representative. (c) If the Indemnification Claim involves a matter other than a Third Party Claim, the Indemnitor Representative shall have sixty (60) days to investigate such claim and, if 63 applicable, to object to such Indemnification Claim by delivery of a written notice of such objection to the Indemnitee specifying in reasonable detail the basis for such objection. Failure to timely so object shall constitute a final and binding acceptance of the Indemnification Claim by the Indemnitor Representative, and the Indemnification Claim shall be paid in accordance with Section 9.2(d) hereof. If an objection is timely interposed by the -------------- Indemnitor Representative, the Indemnitee and the Indemnitor Representative shall use their reasonable commercial efforts to resolve such dispute within thirty (30) days from the date the Indemnitee receives such objection. (d) Upon determination of the amount of an Indemnification Claim whether by agreement between the Indemnitor Representative and the Indemnitee or by settlement or final adjudication, the amount of such Indemnification Claim shall be paid within ten (10) days of the date such amount is determined. If the Indemnitor responsible for payment of such Indemnification Claim is Purchaser, such payment shall be made by wire transfer to Seller. If the Indemnitor responsible for payment of such indemnification is Seller, such payment shall be made by wire transfer to Purchaser. (e) If the Indemnification Claim involves a clean-up or remediation of Owned Real Property or the Leased Real Property pursuant to applicable requirements of Law, the Purchaser shall have sole control and management authority over the resolution of any such claim (including hiring, at reasonable expense, legal counsel and environmental consultants, conducting environmental investigations and cleanups), provided; however, that Purchaser shall reasonably consult with Indemnitor Representative concerning the status of such claim. Notwithstanding anything herein to the contrary, no settlement of any such claim or action shall be made by Purchaser without the prior written consent by or on behalf of the Indemnitor Representative, which consent shall not be unreasonably withheld or delayed. 9.3. Third Party Claims. The obligations and liabilities of the ------------------ Indemnitee and Indemnitor hereunder with respect to a Third Party Claim shall be subject to the following terms and conditions: (a) The Indemnitee seeking indemnification for such Third Party Claim shall give the Indemnitor Representative written notice of the Third Party Claim promptly after receipt by the Indemnitee of notice thereof, and the Indemnitor Representative may undertake, at Indemnitor's expense, the defense, compromise and settlement thereof by representatives of its own choosing, reasonably acceptable to the Indemnitee. The failure of the Indemnitee to promptly notify the Indemnitor Representative of such claim shall not relieve the Indemnitor of any liability that the Indemnitor may have with respect to such claim except to the extent that the defense of such claim is actually and materially prejudiced by such failure. In addition, in any Third Party Claim in which both the Indemnitor, on the one hand, and an Indemnitee, on the other hand, are, or are reasonably likely to become, a party, such Indemnitee shall have the right to employ separate counsel and to control its own defense of such Third Party Claim if, in the reasonable opinion of counsel to such Indemnitee, either (x) one or more defenses are available to the Indemnitee that are not available to the Indemnitor or (y) a conflict or potential conflict exists between the Indemnitor, on the one hand, and such Indemnitee, on the other hand, that would make such separate representation advisable; provided, however, that the Indemnitor shall reimburse the Indemnitee for all of such fees and expenses of such counsel incurred in any action 64 between the Indemnitor and the Indemnitee or between the Indemnitor and any third party so long as the Indemnitor's obligation to indemnify hereunder is mutually agreed or established by a court of competent jurisdiction. If the Indemnitee desires to participate in, but not control, any such defense, compromise and settlement, it may do so at its sole cost and expense. If the Indemnitor undertakes the defense of any Third Party Claim, the Indemnitor is liable to indemnify the Indemnitee for the Third Party Claim. If the Indemnitor Representative fails or refuses to undertake the defense of such Third Party Claim within ninety (90) days after written notice of such claim has been given to the Indemnitor Representative by the Indemnitee or the Indemnitor fails to conduct the defense of such Third Party Claim actively and diligently, the Indemnitee shall have the right to undertake the defense, compromise and settlement of such claim with reasonably competent counsel of its own choosing. Either party, if and to the extent necessary to meet statutes of limitations, or procedural deadlines, or otherwise to preserve any defense or counterclaim, may file an answer or otherwise make an appearance in a relevant proceeding, without electing or waiving its rights hereunder. If the Indemnitee undertakes the defense of a Third Party Claim, the Indemnitee shall, promptly upon its assumption of the defense of such claim, make an Indemnification Claim as specified in Section 9.2 which ----------- shall be deemed an Indemnification Claim that is not a Third Party Claim for the purposes of the procedures set forth in this Section 9.3. With respect ----------- to any Third Party Claim in respect of Taxes pertaining to a Straddle Period, Purchaser shall control and undertake the defense, compromise and settlement thereof by reasonably competent representatives of its own choosing. (b) No settlement of a Third Party Claim involving the asserted Liability of the Indemnitor under this Article 9 shall be made without the prior written consent by or on behalf of the Indemnitor Representative, which consent shall not be unreasonably withheld or delayed. If the Indemnitor Representative assumes the defense of such a Third Party Claim, no compromise or settlement thereof may be effected by the Indemnitor Representative without the Indemnitees' consent, which shall not be unreasonably withheld or delayed, unless (A) there is no finding or admission of any violation of law or any violation of the rights of any person and no effect on any other claim that may be made against the Indemnitee, (B) the sole relief provided is monetary damages that are paid in full by the Indemnitor, and (C) the compromise or settlement includes, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnitee of a release, in form and substance satisfactory to the Indemnitee, from all liability in respect of such Third Party Claim. (c) In connection with the defense, compromise or settlement of any Third Party Claim, the Indemnitee and the Indemnitor Representative shall execute such powers of attorney as may reasonably be necessary or appropriate to permit participation of counsel selected by such Indemnitee or Indemnitor Representative. As may reasonably be related to any such Third Party Claim or other claim between Indemnitee and Indemnitor under this Section 9, the Indemnitee and the Indemnitor Representative shall provide access to the counsel, accountants and other representatives of such Indemnitee or Indemnitor during normal business hours to all properties, personnel, books, tax records, contracts, commitments and all other business records of such Indemnitee or Indemnitor and will furnish to such Indemnitee or Indemnitor copies of all such documents as may reasonably be requested. 9.4. Other Rights and Remedies. The rights of Indemnitees under ------------------------- this Article 9 and the Tax Deed are the sole and exclusive remedies of Indemnitees for any Losses incurred in 65 connection with the Purchase Documents and the transactions contemplated thereby, except for Losses resulting from fraud or intentional misrepresentations of Seller or Purchaser under this Agreement. 9.5. Duration. Notwithstanding any right of the Purchaser to -------- investigate fully the affairs of the Targets and notwithstanding any knowledge of facts determined or determinable by the Purchaser pursuant to such investigation or right of investigation, the Purchaser has the right to rely fully upon the representations, warranties, covenants and agreements of the Seller contained in this Agreement or in any Purchase Document. The indemnification rights of the parties under Section 9.1(a) or Section 9.1(b) -------------- -------------- for Losses is subject to the condition that the Indemnitor Representative shall have received written notice of the Losses for which indemnity is sought within eighteen (18) months of the Closing Date, except (i) the indemnification rights of the parties hereto for Losses related to Tax matters arising from a breach of the covenants or representations or warranties set forth in Section 5.10 or Section 4.19, respectively, is subject to the condition that the Indemnitor Representative shall have received written notice of the Losses for which indemnity is sought within ninety (90) days after the expiration of the applicable period for the assessment of deficiencies (including all periods of extension, whether automatic or permissive); (ii) the indemnification rights for Losses arising from or related to environmental matters arising from a breach of the representations or warranties set forth in Section 4.14 or for which indemnity is sought under Sections 9.1(a)(iii) and 9.1(b)(iv) is subject to the condition that the Indemnitor Representative shall have received written notice of the Losses within five (5) years of the Closing Date; and (iii) this paragraph shall not apply to Losses arising from a breach of the representations and warranties contained in Section 4.1 (Capitalization; ----------- Legal Status; Qualification; Title to Shares), Section 4.5 (Due ----------- Authorization; Validity; Enforceability) or are indemnifiable under Sections -------- 9.1(a)(ii), 9.1(a)(iv) through (ix) or Sections 9.1(b)(ii) and 9.1(b)(iii), - ---------- ----------------------- ----------------------------------- and claims for such Losses may be brought at any time after the Closing, without limitation. 9.6. Limitations. ----------- (a) The Indemnitor shall be obligated to indemnify the Indemnitee under Section 9.1(a) or Section 9.1(b), as applicable, only when -------------- -------------- the aggregate of all Losses suffered or incurred by the Indemnitee as to which a right of indemnification is provided under this Article 9 exceeds $500,000 (the "Threshold Amount"). After the aggregate of all indemnifiable ---------------- Losses suffered or incurred by the Indemnitee exceeds the Threshold Amount, the Indemnitor shall be obligated to indemnify the Indemnitee for all Losses in excess of the Threshold Amount. In no event shall the aggregate liability of Seller under this Article 9 exceed $50,000,000. The limitations set forth in this Section 9.6 shall not apply to Losses that are indemnifiable under ----------- Sections 9.1(a)(ii) through (ix) or Section 9.1(b)(ii) through (iv) or under - -------------------------------- ------------------------------- the Tax Deed or result from the fraud or intentional misrepresentation of Seller or Purchaser under this Agreement or arise under Sections 4.14, 4.19, -------------------- 4.20 and 4.32 and such Losses shall not be considered in determining whether - ------------- the Threshold Amount has been reached. (b) The Indemnitor shall not be liable for Losses in excess of the actual out-of-pocket Losses suffered by the Indemnitee as a result of the act, circumstance, or condition for which indemnification is sought net of any insurance proceeds actually received by the Indemnitee as a result of the Losses for which indemnification is claimed. Seller shall not be 66 liable for any Losses if and to the extent such Losses were set forth or otherwise reflected in the Final Working Capital, and such Losses should not be considered in determining whether the Threshold Amount has been reached. (c) Seller shall have no right of contribution from Target with respect to any Losses paid or payable by Seller as a Indemnitor under the provisions of Article 9. (d) Where any Purchaser Indemnitee has a claim under this Section 9 or the Tax Deed and in addition, any other Purchaser Indemnitee has a claim in respect of the same matter under Section 9 or under the Tax Deed, the Seller shall not be obligated to pay any amount to the extent such payment would cause the Purchaser Indemnitees to receive an aggregate amount which is in excess of the losses suffered by all Purchaser Indemnitees with respect to such claim. 9.7. Cooperation. Seller and Purchaser shall cooperate with ----------- each other in all reasonable respects in connection with the defense of any claim; provided, however, that the foregoing right to cooperation shall not be exercisable by one party in such a manner as to interfere unreasonably with the normal operations and business of the other party. 9.8. Survival of Representations and Warranties. All of the ------------------------------------------ representations, covenants, warranties and agreements of the parties set forth in this Agreement shall survive the consummation of the transactions provided for herein for such period of time as a claim for indemnification for breach of any such representation and warranty may be made as provided in Section 9.5 above. ----------- 9.9. Treatment. The parties agree to treat any indemnity --------- payment made under this Agreement as an adjustment to the Purchase Price for all purposes. 9.10. Foreign Currency. For purposes of applying any dollar ---------------- limitations, thresholds or other amounts related to any Losses or claims made hereunder in a foreign currency, such Losses incurred or claims made in foreign currency shall be converted into United States dollars at the most recent applicable rate of exchange as set forth in the "Exchange Rate" section of the Wall Street Journal (National Edition) on the date of incurrence, as related to any Losses, or as related to claims made under this Section 9, the earlier of the date (a) any payment is required to be made under the terms of this Agreement; or (b) a judgment is entered by a court or competent jurisdiction concerning any such payment. ARTICLE 10 GENERAL PROVISIONS 10.1. Fees and Expenses. Except as specifically provided in ----------------- this Agreement, Purchaser and Seller each shall pay their respective fees and expenses, and Seller shall also pay all fees and expenses which Target incurred prior to the Closing Date, in connection with the transactions contemplated by this Agreement. 10.2. Notices. All notices, request, demands, and other ------- communications hereunder shall be in writing and shall be delivered (a) in person or by courier or nationally recognized 67 overnight courier service, (b) mailed by first class registered or certified mail, postage prepaid, return receipt requested, or (c) by facsimile transmission, as follows: (a) If to Seller or Parent: c/o Mail-Well, Inc. 8310 South Valley Highway, Suite 400 Englewood, CO 80112 Attention: President and CEO Telephone: (303) 790-8023 Facsimile: (303) 397-7400 with a copy (which shall not constitute notice) to: Mail-Well, Inc. 8310 South Valley Highway, Suite 400 Englewood, CO 808112 Attention: Roger Wertheimer, Vice President and General Counsel Telephone: (303) 790-8023 Facsimile: (303) 566-7461 (b) If to Purchaser: MWL Acquisition Corp. One DTC 5251 DTC Parkway, Suite 825 Greenwood Village, Colorado 80111 Attention: Greg C. Mosher Telephone: (303) 846-8600 Facsimile: (303) 846-8601 Arsenal Capital Management LP 1350 Avenue of the Americas New York, NY 10019 Attn: Terrence Mullen Telephone: (212) 771-1717 Facsimile: (212) 771-1718 with a copy (which shall not constitute notice) to: Kirkland & Ellis Citigroup Center 153 East 53rd Street New York, New York 10022 Attn: Daniel J. Eisner, Esq. Telephone: (212) 446-4765 Facsimile: (212) 446-4900 68 Moye, Giles, O'Keefe, Vermeire & Gorrell LLP 1225 Seventeenth Street, Suite 2900 Denver, Colorado 80202 Attn: John E. Moye, Esq. Telephone: (303) 292-2900 Facsimile: (303) 292-4510 Any party may change the address to which notices are to be sent by giving written notice of such change of address to the other parties in the manner above provided for giving notice. If delivered personally or by courier, the date on which the notice, request, instruction or document is delivered shall be the date of deemed receipt; if delivered by nationally recognized overnight courier service, the Business Day after the date such notice, request, instruction or document is delivered shall be the date of deemed receipt; if delivered by facsimile transmission there shall be no deemed receipt unless a confirming copy is sent by another permissible means, and the date of deemed receipt shall occur in accordance with such other permissible means; and if delivered by mail as aforesaid, three Business Days after the date on which such notice, request, instruction or document is delivered shall be the date of deemed receipt. 10.3. Assignment; Binding Effect. This Agreement shall not be -------------------------- assignable by any of the parties hereto without the written consent of the other parties; provided, however, that Purchaser may assign any or all of its rights and interests hereunder to one or more of its Affiliates. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. 10.4. No Benefit to Others. The representations, warranties, -------------------- covenants, and agreements contained in this Agreement are for the sole benefit of the parties hereto and their successors and permitted assigns, and in the case of Article 9 hereof, Indemnitees, and they shall not be construed as conferring any rights on any other persons. 10.5. Headings, Gender, and "Person" and Successor Laws. All ------------------------------------------------- section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine, or neuter, as the context requires. References to a statute, regulation or other law are also references to such statute, regulation or other law as are, from time to time until the Closing Date, amended, modified or supplemented, unless otherwise noted. 10.6. Counterparts. This Agreement may be executed in two (2) ------------ or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one counterpart has been signed by each party and delivered to the other party hereto. 10.7. Integration of Agreement. This Agreement supersedes all ------------------------ prior agreements, oral and written, between the parties hereto with respect to the subject matter hereof. Neither this Agreement, nor any provision hereof, may be changed, waived, discharged, supplemented, or terminated orally, but only by an agreement in writing signed by the party against which the enforcement of such change, waiver, discharge, or termination is sought. 69 10.8. Time of Essence. Time is of the essence in this --------------- Agreement. 10.9. Governing Law. This Agreement shall be construed under ------------- the laws of the State of Colorado, United States of America and the federal laws of the United States of America applicable therein, in each case without regard to principles of conflicts of laws. The parties hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in Denver, Colorado over any suit, action or proceeding arising out of or relating to this letter. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Each of the parties agrees that a final judgment that has not been timely appealed by a party in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon it and may be enforced in any other courts to whose jurisdiction such party is or may be subject, by suit upon such judgment. 10.10. Partial Invalidity. Whenever possible, each provision ------------------ hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision or provisions had never been contained herein unless the deletion of such provision or provisions would result in such a material change as to cause completion of the transactions contemplated hereby to be unreasonable. 10.11. Publicity and Confidentiality. ----------------------------- (a) Except as may be required by Law, no public release, announcement or other form of publicity concerning this Agreement or the transaction contemplated herein shall be issued by any party without the prior written consent of all other parties hereto; provided, however, that after Closing, any party may in its discretion announce completion of the transaction. Each party will reasonably cooperate in approving any statement required by Laws applicable to the other party. (b) For a period of five (5) years from the Closing Date, the Seller, on one hand, and Purchaser, on the other hand (in each case, in their roles as parties disclosing confidential information, the "disclosing parties," and in their roles as parties receiving confidential information, the "receiving parties"), agree to maintain the confidentiality and privacy of, and agree not to use for their own benefit or to the detriment of the disclosing parties, the disclosing parties' "confidential information." The term "confidential information" includes any information that is non-public, confidential or proprietary in nature, regardless of the form in which it is communicated or maintained, that contains or otherwise reflects information concerning the disclosing parties that the receiving parties or their agents, advisors or representatives may be or may have been provided by or on behalf of the disclosing parties in connection with the evaluation and negotiation of this Agreement and the other Purchase Documents and the transactions contemplated hereby and thereby. The term "confidential information" also includes all information relating to Target that is being transferred to Purchaser in the transactions described in this Agreement (and Purchaser shall be regarded as the 70 "disclosing party" for any such information). The term "confidential information" also includes all reports, analyses, notes or other information that are based on, contain or reflect any confidential information. The receiving parties shall not be required to maintain the confidentiality of those portions of the disclosing parties' confidential information that: (i) become generally available to the public other than as result of a disclosure by the receiving parties or any of their agents, advisors or representatives; (ii) were available to the receiving parties on a non-confidential basis prior to the disclosure of such confidential information by or on behalf of the disclosing parties; (iii) become available to the receiving parties on a non-confidential basis from a source other than the disclosing parties or their agents, advisors or representatives; or (iv) were independently developed by the receiving parties prior to the disclosure of such confidential information by or on behalf of the disclosing parties. Notwithstanding any provision to the contrary in this Section 10.11, from and after the Closing, Purchaser shall ------------- have no obligation to Seller to maintain confidential any information regarding the Targets, so long as such information relates exclusively to Target. [SIGNATURE PAGES FOLLOW] 71 IN WITNESS WHEREOF, each party hereto has caused this Agreement to be executed on its behalf by its duly authorized officer, all as of the day and year first above written. PURCHASER: MWL ACQUISITION CORP. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- SELLER: MAIL-WELL I CORPORATION By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- PARENT: MAIL-WELL, INC. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- EX-10.33 6 exh10p33.txt AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT EXHIBIT 10.33 AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (this "Amendment") is made and entered into this day of May, 2002 ("Effective Date"), by and -- among MWL Acquisition Corp., a Delaware corporation ("Purchaser"), Mail-Well --------- I Corporation, a Delaware corporation ("Seller"), and Mail-Well, Inc., a ------ Colorado corporation ("Parent"). ------ WITNESSETH: WHEREAS, Purchaser, Seller and Parent have entered into that certain Stock Purchase Agreement dated May 6, 2002 (the "Agreement"); and WHEREAS, Purchaser, Seller and Parent desire to amend the Stock Purchase Agreement pursuant to this Amendment. NOW, THEREFORE, in consideration of the mutual covenants, representations and warranties made in the Agreement and herein and of the mutual benefits to be derived herefrom, Purchaser, Seller and Parent agree as follows: 1. The first "WHEREAS" clause of the Agreement shall be amended by changing "500" to "20". 2. Section 1.1 of the Agreement shall be amended by deleting the definition of "Grossed-Up Basis" in its entirety and adding the following new definition: ""Note" has the meaning set forth in Section 4.19(jj)." ---- 3. Section 2.2 of the Agreement shall be amended by replacing the first sentence of clause (a) in its entirety with the following: "(a) The Purchaser shall pay at Closing an aggregate amount for the Shares ("Initial Purchase Price") equal to (i) $75,000,000 which shall be allocated to US Label Shares in the amount of $48.1 million; Canada Label Shares in the amount of $17.5 million; and UK Label Shares in the amount of $9.4 million ("Purchase Price -------------- Allocation") minus (ii) the Initial Purchase Price Adjustment." ---------- 4. Section 2.2 of the Agreement shall be amended by adding the following immediately prior to "excluding" inside the first parentheses in clause (i) of the definition of "Initial Purchase Price Adjustment": --------------------------------- "including indebtedness under the Note but . . ." 5. Section 2.2(a) of the Agreement shall be amended by replacing the definition of "Working Capital Objective" in its entirety with the following: 1 "means the sum of $20,500,000." 6. Section 2.4(b) of the Agreement shall be amended by removing the last sentence in its entirety and replacing it with the following: "The Inventory shall be valued in accordance with GAAP consistent with past practice based on a physical count taken by Seller and observed by Purchaser immediately prior to the Closing Date." 7. Section 4.19(j) of the Agreement shall be amended by removing the existing first sentence of such section in its entirety. 8. Section 4.19(l) of the Agreement shall be amended by replacing the existing clause (A) of such section in its entirety with the following: "(A) as a result of a change in method of accounting for a Pre-Closing Period, to include any adverse adjustment under Section 481 of the Code or other similar adverse adjustment in income for any Post-Closing Period, . . ." 9. Section 4.19(ii) of the Agreement shall be amended by replacing such Section in its entirety with the following: "(ii) A resolution of the board of directors of Canada Label dated May 15, 2002 has been passed adding $16,125,111 to stated capital (also known as paid-up capital) account maintained by Canada Label pursuant to the Companies Act (Nova Scotia) in respect of the issuance of the Additional Canada Label Shares and during the period from and after May 15, 2002 to Closing Canada Label shall not have reduced its stated capital or paid up capital or returned any paid up capital to its shareholders and shall not have authorized any such reduction or return." 10. Section 4.19(jj) of the Agreement shall be amended by replacing such Section in its entirety with the following: "(jj) Prior to the time of Closing (i) Seller shall (A) subscribe for 99 additional common shares in the capital of Canada Label (the "Additional Canada Label Shares") the purchase price of $16,125,111, and in the resolution issuing the Additional Canada Label Shares, the board of directors of Canada Label will add the entire amount to paid-up capital and (B) advance $15,500,000 to Canada Label as intercompany debt due on the earlier of demand or May 1, 2005 bearing simple interest at the rate of 3.21% per annum, which debt shall be evidenced by a promissory note ("Note") issued by Canada Label to Seller; and (ii) the aggregate proceeds of such subscription and such advance shall be 2 used by Canada Label, prior to the Closing, to repay its other obligations owing to Related Parties, such that at Closing Canada Label shall have no Intercompany Accounts to any Related Party other than the Note." 11. A new Section 4.19(kk) shall be added as follows: "(kk) Lancer Label. As a result of or in connection with the ------------ pre-closing transactions relating to Lancer Label Canada, Inc. described at Section 5.4 hereof, no Target will incur any Taxes or Losses." 12. Section 4.29(b) of the Agreement shall be amended by replacing the reference to "C$40 million . . ." with "C$400 million. . .". 13. Section 5.4 of the Agreement shall be amended by adding the following sentence immediately after the existing sentence: "The parties acknowledge and agree that prior to the Closing, Seller will (a) cause Lancer Label Canada, Inc. to pay off all Intercompany Accounts to any Target, and (b) will cause the Targets to convey all of the outstanding shares of capital stock of Lancer Label Canada, Inc. to Supremex, Inc. or another Affiliate of Seller (other than a Target). 14. Section 5.10(a) of the Agreement shall be amended by deleting the phrase "on a Grossed-Up Basis" and by adding the following immediately after the word "Target" at the end of clause (A) of such section: "or was not included as a Tax Liability in Final Working Capital . . ." 15. Section 5.11(a) of the Agreement shall be amended by adding the following immediately prior to the existing fourth sentence: "Except as set forth in Section 5.11(c), . . . ." 16. Section 5.11(b) of the Agreement shall be amended by replacing the existing clause (i) in its entirety with the following: "(i) assume and remain solely responsible for, and shall reimburse and indemnify Purchaser Indemnitees for, any and all Liabilities under each benefit plan maintained prior to the Closing Date by or for the benefit of the current or former employees of Seller or its ERISA Affiliates . . ." 17. Section 5.11(c) of the Agreement shall be replaced in its entirety with the following: "(c) Following the Closing Date, Purchaser shall recognize Target's employees' years 3 of service through the Closing Date for purposes of eligibility and vesting under the benefit plans provided to Target's employees following the Closing Date. Purchaser shall, and shall cause Target to, enroll all of Target's employees in medical, dental, vision, employee assistance, life and long-term disability benefit coverages commencing June 1, 2002, and such coverages shall not impose any limits on or denials of coverage based on pre-existing medical conditions of such employees except to the extent that any such employee was limited from or denied coverage for a pre-existing medical condition immediately prior to June 1, 2002. Prior to June 1, 2002, Purchaser shall not, and shall cause Target to not, terminate the employment of any employees of Target covered under any Target Benefit Plan as described in Section 5.11(a) above, and shall reimburse and indemnify Seller Indemnitees for any and all Liabilities resulting from any termination in violation of this covenant, including those arising under obligations for medical continuation coverage under Code Section 4980B." 18. Section 5.11(g) of the Agreement shall be amended by adding the following at the end of the existing last paragraph of such section: "Purchaser will and will cause its representatives, including the directors of Porter Chadburn Pension Trustees Limited, to use their best commercial efforts to effect the provisions of this Section 5.11(g)." 19. Section 5.14 of the Agreement shall be amended by adding the following new sentence to the end of the paragraph: "At the Closing, Purchaser and Seller shall enter into a License Agreement concerning the "Mail-Well" name and marks in substantially the form attached hereto as Exhibit I." --------- 20. A new Section 5.20 shall be added as follows: "5.20. UK Statutory Accounts. Purchaser shall and shall cause UK --------------------- Label to retain Deloitte & Touche as statutory auditors of the UK Entities for purposes of finalizing and filing the statutory accounts of the UK Entities for fiscal year 2000 and shall cause such accounts to be filed for all subsequent periods on a timely basis." 21. A new Section 5.21 shall be added as follows: "5.21. Repayment of Note. Purchaser shall cause Canada Label to pay ----------------- to Seller at the Closing all principal and accrued interest outstanding on the Note from funds provided or arranged by Purchaser and not by Seller or Canada Label." 22. Section 6.12 of the Agreement shall be amended by adding the following at the end of such Section: 4 "Seller hereby irrevocably assigns to Purchaser, effective immediately upon the Closing, the right to all proceeds under the KEDFA Bond, including all unpaid interest up to the Closing Date." 23. The following shall be added as a new Section 9.6(f) to the Agreement: "(f) Seller shall not be liable for any Losses suffered by a Purchaser Indemnitee related to Taxes that arise as a result of Purchaser or its Affiliates, except as required by applicable law, taking a position on its Tax Returns which is contrary to the manner in which Seller or Targets treated an item or transaction giving rise to Taxes prior to the Closing, including, but not limited to, with respect to the Additional Canada Label Shares." 24. Words, terms or phrases that begin with initial capital letters used, but not defined specifically, in this Amendment, shall have the meanings ascribed to such words, terms or phrases in the Agreement. 25. Except as otherwise specifically amended pursuant to the provisions of this Amendment, all terms and provisions of the Agreement shall remain in full force and effect in accordance with its terms. 26. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Colorado. 27. This Agreement may be executed in two (2) or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one counterpart has been signed by each party and delivered to the other party hereto. [The remainder of this page is intentionally left blank.] 5 IN WITNESS WHEREOF, each party hereto has caused this Amendment to be executed on its behalf by its duly authorized officer, all as of the day and year first above written. PURCHASER: MWL ACQUISITION CORP. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- SELLER: MAIL-WELL I CORPORATION By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- PARENT: MAIL-WELL, INC. By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- 6 EX-12 7 ex12.txt COMPUTATION OF RATIO OF EARNINGS EXHIBIT 12 - STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
ACTUAL ------------------------------------------------------------- MARCH 31, DECEMBER 31, 2002 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- FIXED CHARGES: Interest 17,017 72,886 83,661 53,100 36,573 33,070 Amortization of debt discount and premium and issuance expense 1,465 6,006 4,708 2,147 1,554 2,913 Capitalized interest 9 259 496 -- -- -- Interest portion of rental expense 611 3,376 3,678 2,664 3,061 1,179 -------- -------- ------- ------- ------ ------ Fixed Charges 19,102 82,527 92,543 57,911 41,188 37,162 EARNINGS: Consolidated pre-tax income from continuing operations (11,014) (20,725) 54,422 98,030 45,071 57,454 Fixed charges 19,102 82,527 92,543 57,911 41,188 37,162 Capitalized interest (9) (259) (496) -------- -------- ------- ------- ------ ------ Earnings 8,079 61,543 146,469 155,941 86,259 94,616 -------- -------- ------- ------- ------ ------ RATIO OF EARNINGS TO FIXED CHARGES 0.42 0.75 1.58 2.69 2.09 2.55 ======== ======== ======= ======= ====== ====== AMOUNT DEFICIENT $(11,023) $(20,984) N/A N/A N/A N/A PRO-FORMA ----------------------- MARCH 31, DECEMBER 31, 2002 2001 ---- ---- FIXED CHARGES: Interest 21,521 87,164 Amortization of debt discount and premium and issuance expense 1,474 5,614 Capitalized interest 9 259 Interest portion of rental expense 611 3,376 -------- -------- Fixed Charges 23,615 96,413 EARNINGS: Consolidated pre-tax income from continuing operations (15,518) (35,307) Fixed charges 23,615 96,413 Capitalized interest (9) (259) -------- -------- Earnings 8,088 60,847 -------- -------- RATIO OF EARNINGS TO FIXED CHARGES 0.34 0.63 ======== ======== AMOUNT DEFICIENT $(15,527) $(35,566)
EX-21 8 exh21.txt SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF REGISTRANT ABP Books, Inc. (Michigan) Classic Envelope Plus, Ltd. (Canada) CML Industries Ltd. (Canada) Discount Labels, Inc. (Indiana) Graphics Arts Center de Mexico (Mexico) Hill Graphics, Inc. (Texas) Innova Envelope Inc. (Canada) Mail-Well Alberta Finance LP (Canada) Mail-Well Canada Leasing Company (Canada) Mail-Well Commercial Printing, Inc. (Delaware) Mail-Well Government Printing, Inc. (Colorado) Mail-Well Mexico Holdings, Inc. (Colorado) Mail-Well Services, Inc. (Colorado) Mail-Well Texas Finance, LP (Texas) Mail-Well West, Inc. (Delaware) McLaren Morris & Todd Company (Canada) National Graphics Company (Colorado) PNG Inc. (Canada) Poser Business Forms, Inc. (Delaware) Supremex, Inc. (Canada) Wisco III, LLC (Delaware) EX-23 9 exh23p1.txt CONSENT EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated January 23, 2002, in the Registration Statement and related Prospectus of Mail-Well I Corporation for the registration of $350,000,000 of 9 5/8% Senior Notes due 2012. /s/ Ernst & Young LLP Denver, Colorado June 10, 2002 EX-25 10 exh25.txt STATEMENT OF ELIGIBILITY EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdication of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) MAIL-WELL I CORPORATION (Exact name of obligor as specified in its charter) - --------------------------------- --------------------- (Delaware) 84-1250533 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) - --------------------------------- --------------------- 8310 S. VALLEY HIGHWAY #400, ENGLEWOOD, CO 80112 (Address of principal executive offices) (Zip Code) 9 5/8% SENIOR NOTES DUE 2012 (Title of indenture securities) 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, DC (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of the Senior Housing Properties Trust (File No. 333-60392) and is incorporated herein by reference thereto. 1 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 4th of June, 2002. STATE STREET BANK AND TRUST COMPANY BY: /s/ Kenneth R. Ring ------------------------------------- NAME: Kenneth R. Ring TITLE: Assistant Vice President 2 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by MAIL-WELL I CORPORATION of its 9 5/8% SENIOR NOTES DUE 2012, 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/ Kenneth R. Ring ------------------------------------- NAME: Kenneth R. Ring TITLE: Assistant Vice President DATED: JUNE 4, 2002 3 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business September 30, 2001 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).
THOUSANDS OF DOLLARS ASSETS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin............................... $2,078,210.00 Interest-bearing balances........................................................ $20,877,735.00 Securities............................................................................ $17,960,077.00 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary.............................................. $15,596,333.00 Loans and lease financing receivables: Loans and leases, net of unearned income........................ $6,658,140.00 Allowance for loan and lease losses............................. $55,243.00.00 Allocated transfer risk reserve................................. $0.00 Loans and leases, net of unearned income and allowances.......................... $6,602,897.00 Assets held in trading accounts....................................................... $1,893,178.00 Premises and fixed assets............................................................. $583,130.00 Other real estate owned............................................................... $0.00 Investments in unconsolidated subsidiaries............................................ $34,144.00 Customers' liability to this bank on acceptances outstanding.......................... $103,216.00 Intangible assets..................................................................... $487,816.00 Other assets.......................................................................... $1,860,949.00 Total assets.......................................................................... $68,077,685.00 -------------- LIABILITIES Deposits: In domestic offices.............................................................. $17,285,276.00 Noninterest-bearing........................................ $12,321,416.00 Interest-bearing .......................................... $4,963,860.00 In foreign offices and Edge subsidiary........................................... $26,950,782.00 Noninterest-bearing ....................................... $46,386.00 Interest-bearing .......................................... $26,904,396.00 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary.............................................. $14,765,194.00 Demand notes issued to the U.S. Treasury.............................................. $0.00 Trading liabilities................................................................... $1,216,739.00 Other borrowed money.................................................................. $911,701.00 Subordinated Notes and Debentures..................................................... $0.00 Bank's liability on acceptances executed and outstanding.............................. $103,216.00 Other liabilities..................................................................... $2,605,447.00 Total liabilities..................................................................... $63,838,355.00 -------------- Minority interest in consolidated subsidiaries........................................ $48,495.00 ============== EQUITY CAPITAL Perpetual preferred stock and related surplus......................................... $0.00 Common stock.......................................................................... $29,931.00 Surplus............................................................................... $577,219.00 Retained Earnings..................................................................... $3,490,205.00 Accumulated other comprehensive income........................................... $93,480.00 Other equity capital components....................................................... $0.00 Undivided profits and capital reserves/Net unrealized holding gains (losses).......... $0.00 Net unrealized holding gains (losses) on available-for-sale securities........... $0.00 Cumulative foreign currency translation adjustments................................... $0.00 Total equity capital.................................................................. $4,190,835.00 TOTAL LIABILITIES, MINORITY INTEREST AND EQUITY CAPITAL............................... $68,077,685.00 ==============
4 I, Frederick P. Baughman, 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. Frederick P. Baughman 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. Ronald E. Logue David A. Spina Truman S. Casner EX-99.1 11 exh99p1.txt FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL MAIL-WELL I CORPORATION OFFER FOR ALL OUTSTANDING 9 5/8% SENIOR NOTES DUE 2012 IN EXCHANGE FOR 9 5/8% SENIOR NOTES DUE 2012 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO THE PROSPECTUS DATED JUNE , 2002 -- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON ----------- (THE "EXPIRATION DATE"), UNLESS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. The Exchange Agent for the Exchange Offer: STATE STREET BANK AND TRUST COMPANY
BY OVERNIGHT COURIER OR REGISTERED/ CERTIFIED MAIL: BY HAND: BY FACSIMILE: ----------------------------------- ----------------------------------- ----------------------------------- State Street Bank and Trust Company State Street Bank and Trust Company State Street Bank and Trust Company Corporate Actions Corporate Actions (617) 662-1452 2 Avenue de Lafayette, Sixth Floor 2 Avenue de Lafayette, Sixth Floor Boston, MA 02111 Boston, MA 02111 Confirm Receipt of Facsimile Attention: Mr. MacKenzie Elijah Attention: Mr. MacKenzie Elijah by Telephone: (617) 662-1525
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL. IF THE HOLDER OF AN OLD NOTE WISHES TO DELIVER SUCH OLD NOTE AND THIS INSTRUMENT IN THE CITY OF NEW YORK, THE HOLDER SHOULD CONTACT THE EXCHANGE AGENT FOR DIRECTIONS. The undersigned acknowledges that he or she has received and reviewed the prospectus dated June , 2002 (the "Prospectus"), of Mail-Well -- I Corporation, a Colorado corporation (the "Issuer"), and this Letter of Transmittal (the "Letter"), which together constitute the Issuer's offer (the "Exchange Offer"), to exchange an aggregate principal amount of up to $350,000,000 of the Issuer's 9 5/8% Senior Notes due 2012, (individually a "Note" and collectively, the "Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount at maturity of the Issuer's issued and outstanding 9 5/8% Senior Notes due 2012 (individually an "Old Note" and collectively, the "Old Notes") from the registered holders thereof. For each Old Note accepted for exchange, the holder of such Old Note will receive a New Note having a principal amount equal to the principal amount at maturity of the surrendered Old Note. The New Notes will bear interest from the most recent date to which interest has been paid or for provided for on the Old Notes, or if no interest has been paid or for provided for on the Old Notes, from March , 2002. Accordingly, registered -- holders of New Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid or for provided for on the Old Notes, or if no interest has been paid or for provided for on the Old Notes, from March , 2002. The Old Notes accepted -- for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Old Notes otherwise payable on any interest payment date the record date for which occurs on or after the consummation of the Exchange Offer. This Letter is to be completed by a holder of Old Notes either if certificates for such Old Notes are to be forwarded herewith or if a tender is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer-Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. HOLDERS OF OLD NOTES WHO HAVE PREVIOUSLY VALIDLY DELIVERED A LETTER OF TRANSMITTAL IN CONJUNCTION WITH A VALID TENDER OF OLD NOTES FOR EXCHANGE PURSUANT TO THE PROCEDURES DESCRIBED IN THE PROSPECTUS UNDER THE HEADING "THE EXCHANGE OFFER" ARE NOT REQUIRED TO TAKE ANY FURTHER ACTION TO RECEIVE NEW NOTES. HOLDERS OF OLD NOTES WHO HAVE PREVIOUSLY VALIDLY TENDERED OLD NOTES FOR EXCHANGE OR WHO VALIDLY TENDER OLD NOTES FOR EXCHANGE IN ACCORDANCE WITH THIS LETTER MAY WITHDRAW ANY OLD NOTES SO TENDERED AT ANY TIME PRIOR TO THE EXPIRATION DATE. SEE THE PROSPECTUS UNDER THE HEADING "THE EXCHANGE OFFER" FOR A MORE COMPLETE DESCRIPTION OF THE TENDER AND WITHDRAWAL PROVISIONS. Tenders by book-entry transfer also may be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter and that the Issuer may enforce this Letter against such participant. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Notes into the Exchange Agent's account at DTC (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 Old 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 DTC does not constitute delivery to the Exchange Agent. The method of delivery of Old Notes, Letters of Transmittal and all other required documents are at the election and risk of the holders. If such delivery is by mail it is recommended that registered mail properly insured, with return receipt requested, be used. In all cases, sufficient time should be allowed to assure timely delivery. No letters of transmittal or Old Notes should be sent to the Issuer. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Old Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount at maturity of Old Notes should be listed on a separate signed schedule affixed hereto. - ---------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES - ----------------------------------------------------------------------------------------------------------------------
1 2 3 Aggregate Principal Principal Name(s) and Address(es) of Registered Holder(s) Certificate Amount Amount Type (Please fill in, if blank) Number(s)* Represented Tendered** - ---------------------------------------------------------------------------------------------------------------------- 9 5/8% SENIOR NOTES - ---------------------------------------------------------------------------------------------------------------------- * Need not be completed if Old Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1.
2 / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ----------------------------------------------- Account Number: -------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------- By crediting the Old Notes to the Exchange Agent's account at DTC using the Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent an Agent's Message in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter, the participant in DTC confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent. / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): --------------------------------------------- Window Ticket Number (if any): ----------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: -------------------------- Name of Institution Which Guaranteed Delivery: ------------------------------- If Delivered by Book-Entry Transfer, Complete the Following: Account Number: -------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------- Name of Tendering Institution: ----------------------------------------------- / / CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH. / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ------------------------------------------------------------------------ Address: --------------------------------------------------------------------- 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 New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so acknowledging and by delivering such a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a broker-dealer that will receive New Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired as a result of market-making activities or other trading activities. 3 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the aggregate principal amount at maturity of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Old Notes as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact with respect to such tendered Old Notes, with full power of substitution, among other things, to cause the Old Notes to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes, and to acquire New Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuer. The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the holder of such Old Notes nor any such other person is participating in, intends to participate in or has an arrangement or understanding with any person to participate in the distribution of such New Notes and that neither the holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Issuer. The undersigned 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 New Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New 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 New Notes. However, 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. 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 New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any holder is an affiliate of the Issuer, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New 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 New Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter 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 Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Old Notes, please credit the account indicated above maintained at DTC. Similarly, unless otherwise indicated under the box entitled "Special Delivery 4 Instructions" below, please send the New Notes (and, if applicable, substitute certificates representing Old Notes for any Old Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Notes." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX ABOVE. 5 - ----------------------------------------------------- ---------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Old Notes To be completed ONLY if certificates for Old Notes not exchanged and or New Notes are to be issued in not exchanged and/or New Notes are to be sent to the name of and sent to someone other than the person someone other than the person or persons whose or persons whose signature(s) appear(s) on this signature(s) appear(s) on this Letter above or to Letter above, or if Old Notes delivered by book-entry such person or persons at an address other than transfer which are not accepted for exchange are to shown in the box entitled "Description of Old be returned by credit to an account maintained at DTC Notes" on this Letter above. other than the account indicated above. Mail: New Notes and/or Old Notes to: Issue: New Notes and/or Old Notes to: Name(s): Name(s): -------------------------------------------- --------------------------------------------- (PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT) ---------------------------------------------------- - ----------------------------------------------------- (PLEASE TYPE OR PRINT) (PLEASE TYPE OR PRINT) Address: Address: -------------------------------------------- --------------------------------------------- ---------------------------------------------------- - ----------------------------------------------------- (ZIP CODE) (ZIP CODE) (COMPLETE SUBSTITUTE FORM W-9) / / Credit unexchanged Old Notes delivered by book- entry transfer to DTC account set forth below. - ----------------------------------------------------- (BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER, IF APPLICABLE) - ----------------------------------------------------- ----------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. IN ORDER TO VALIDLY TENDER OLD NOTES FOR EXCHANGE, HOLDERS OF OLD NOTES MUST COMPLETE, EXECUTE AND DELIVER THIS LETTER OF TRANSMITTAL. Except as stated in the Prospectus, all authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. See Instruction 10. 6 - ------------------------------------------------------------------------------ PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW) X Date: , 2002 ------------------------------------------- --------------------- X Date: , 2002 ------------------------------------------- --------------------- (Signature(s) of Owner) Area Code and Telephone Number ( ) ----- ---------------- This Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes hereby tendered or on a security position listing or by any person(s) authorized to become registered 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. Name(s): ---------------------------------------------------------------------- - ------------------------------------------------------------------------------ (PLEASE TYPE OR PRINT) Capacity: --------------------------------------------------------------------- Address: ---------------------------------------------------------------------- - ------------------------------------------------------------------------------ (INCLUDING ZIP CODE) Principal place of business (if different from address listed above): --------- - ------------------------------------------------------------------------------ (INCLUDING ZIP CODE) Area Code and Telephone No.: ( ) ----- ---------------- Tax Identification or Social Security Nos.: ----------------------------------- SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3) Signature(s) Guaranteed by An Eligible Institution: ------------------------------------------------------ (AUTHORIZED SIGNATURE) - ------------------------------------------------------------------------------ (TITLE) - ------------------------------------------------------------------------------ (NAME OF FIRM) Dated: , 2002 ------------------------ - ------------------------------------------------------------------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE 9 5/8% SENIOR NOTES DUE 2011 IN EXCHANGE FOR THE 9 5/8% SENIOR NOTES DUE 2011 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO THE PROSPECTUS DATED , 2002 -- 1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter is to be completed by holders of Old 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 Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer also may be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by, and makes the representations and warranties contained in, the Letter and that the Issuer may enforce the Letter against such participant. Certificates for all physically tendered Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof or Agent's Message in lieu thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Notes tendered hereby must be in denominations of principal amount at maturity of $1,000 and any integral multiple thereof. Holders whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent before the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old 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, (ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Issuer (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter, are received by the Exchange Agent within three NYSE trading days after the Expiration Date. The method of delivery of this Letter, the Old 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. If Old Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer" section of the Prospectus. 8 2. PARTIAL TENDERS (NOT APPLICABLE TO NOTE HOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount at maturity of Old Notes to be tendered in the box above entitled "Description of Old Notes--Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. 3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on DTC's security position listing as the holder of such Old Notes without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by a participant in a securities transfer association recognized signature program. If this Letter 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 signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter 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 Issuer, proper evidence satisfactory to the Issuer of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a firm which is a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program (each an "Eligible Institution"). Signatures on this letter need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of Old Notes (which term, for purposes of the exchange offer, includes any participant in DTC's system whose name appears on a security position listing as the holder of such Old 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 Old Notes should indicate in the applicable box the name and address to which New Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Old Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named also must be indicated. 9 Note holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at DTC as such note holder may designate hereon. If no such instructions are given, such Old Notes not exchanged will be returned to the name and address of the person signing this Letter. 5. TAXPAYER IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for exchange must provide the Exchange Agent (as payer) with such holder's correct Taxpayer Identification Number (a "TIN"), which, in the case of a holder who is an individual, is such holder's social security number. If the Exchange Agent is not provided with the correct TIN or an adequate basis for an exemption, such holder may be subject to a $50 penalty imposed by the Internal Revenue Service and backup withholding in an amount equal to 30% of the amount of any reportable payments made in 2002 after the exchange to such tendering holder (this 30% rate will gradually decrease to 28% for reportable payments made in 2006). If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding, each tendering holder must provide such holder's correct TIN by completing the "Substitute Form W-9" set forth herein, 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 holder does not have a TIN, such holder should consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write "Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification Number set forth herein. If the holder does not provide such holder's TIN to the Exchange Agent within 60 days, backup withholding will begin and continue until such holder furnishes such holder's TIN to the Exchange Agent. NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT THE HOLDER HAS ALREADY APPLIED FOR A TIN OR THAT SUCH HOLDER INTENDS TO APPLY FOR ONE IN THE NEAR FUTURE. If the Old Notes are held in more than one name or are not in the name of the actual owner, consult the W-9 Guidelines for information on which TIN to report. Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt holder should write "Exempt" in Part 2 of Substitute Form W-9. See the W-9 Guidelines for additional instructions. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8 BEN, "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding," signed under penalty of perjury attesting to such exempt status. Such form may be obtained from the Exchange Agent. 6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any, applicable to the transfer of Old Notes to them or their order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Issuer or their order pursuant to the Exchange Offer, 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 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 OLD NOTES SPECIFIED IN THIS LETTER. 10 7. WAIVER OF CONDITIONS. The Issuer reserves the right (in its reasonable discretion) to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. NO CONDITIONAL TENDERS; DEFECTS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter or an Agent's Message in lieu thereof, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Issuer, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. WITHDRAWAL RIGHTS. Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal of a tender of Old Notes to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including certificate number or numbers and the principal amount at maturity of such Old Notes), (iii) contain a statement that such holder is withdrawing such holder's election to have such Old Notes exchanged, (iv) be signed by the holder in the same manner as the original signature on the Letter by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer to have the Trustee with respect to the Old Notes register the transfer of such Old Notes in the name of the person withdrawing the tender and (v) specify the name in which such Old Notes are registered, if different from that of the Depositor. If Old Notes have been tendered pursuant to the procedure for book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuer (which power may be delegated to the Exchange Agent), whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at DTC pursuant to the book-entry transfer procedures set forth in "The Exchange Offer--Book-Entry Transfers" section of the Prospectus, such Old Notes will be credited to an account maintained with DTC for the Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following the procedures described above at any time prior to 5:00 p.m., New York City time, on the Expiration Date. 11. 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, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. 11 TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES (SEE INSTRUCTION 5) PAYER'S NAME: STATE STREET BANK AND TRUST COMPANY - ----------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 TIN: FORM W-9 Department of the Treasury --------------------------------- Internal Revenue Service PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW OR --------------------------------- Employer Identification Number ------------------------------------------------------------------------ PART 2 - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING, PLEASE WRITE "EXEMPT" HERE (SEE INSTRUCTIONS): --------------------------------------- ------------------------------------------------------------------------ Payer's Request for Taxpayer PART 3 - CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT: Identification Number ("TIN") and Certification (1) The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding. The IRS does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. SIGNATURE: DATE: ---------------------------------- ---------------------- NAME: ------------------------------------------------------------------- (PLEASE PRINT)
- ----------------------------------------------------------------------------------------------------------------- You must cross out item (2) in Part 3 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. - -----------------------------------------------------------------------------------------------------------------
12 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART 1 OF THE 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 that I mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office (or I intend to mail or deliver an application in the near future). I understand that if I do not provide a taxpayer identification number to the Payer within 60 days, the Payer is required to withhold at the applicable backup withholding rate for all cash payments made to me thereafter until I provide a number. SIGNATURE: DATE: ------------------------------------------ -------------------- - ----------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING AT THE APPLICABLE RATE FOR ALL CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. Manually signed copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and any other required documents should be sent or delivered by each holder or such holder's broker, dealer commercial bank or other nominee to the Exchange Agent as set forth below. The Exchange Agent for the Exchange Offer is: STATE STREET BANK AND TRUST COMPANY
BY OVERNIGHT COURIER OR REGISTERED/ CERTIFIED MAIL: BY HAND: BY FACSIMILE: ----------------------------------- ----------------------------------- ----------------------------------- State Street Bank and Trust Company State Street Bank and Trust Company State Street Bank and Trust Company Corporate Actions Corporate Actions (617) 662-1452 2 Avenue de Lafayette, Sixth Floor 2 Avenue de Lafayette, Sixth Floor Boston, MA 02111 Boston, MA 02111 Confirm Receipt of Facsimile Attention: Mr. MacKenzie Elijah Attention: Mr. MacKenzie Elijah by Telephone: (617) 662-1525
13 GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you do not have a taxpayer identification number, apply for one immediately. To apply, obtain Form SS-5, Application for a Social Security Card (for individuals), from your local office of the Social Security Administration, or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), from your local office of the Internal Revenue Service. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees that are specifically exempted from backup withholding tax on ALL payments include the following: 1. A corporation. 2. A financial institution. 3. An organization exempt from tax under section 501(a), or an individual retirement account or a custodial account under section 403(b)(7). 4. The United States or any agency or instrumentality thereof. 5. A state, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. 6. A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. 7. An international organization or any agency or instrumentality thereof. 8. A dealer in securities or commodities required to register in the United States or a possession of the United States. 9. A real estate investment trust. 10. A common trust fund operated by a bank under section 584(a). 11. An entity registered at all times under the Investment Company Act of 1940. 12. A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: 1. Payments of dividends to nonresident aliens subject to withholding under section 1441. 2. Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. 3. Payments of patronage dividends where the amount received is not paid in money. 4. Payments made by certain foreign organizations. 14 Payments of interest not generally subject to backup withholding including the following: 1. Payments of interest on obligations issued by individuals. Note: A payee may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and such payee has not provided its correct taxpayer identification number to the payer. 2. Payments of tax-exempt interest (including exempt-interest dividends under section 852). 3. Payments described in section 6049(b)(5) to nonresident aliens. 4. Payments on tax-free covenant bonds under section 1451. 5. Payments made by certain foreign organizations. 6. Payments made to a nominee. EXEMPT PAYEES DESCRIBED ABOVE SHOULD STILL COMPLETE THE SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING TAX. IF YOU ARE EXEMPT, FILE SUBSTITUTE FORM W-9 WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER (IF YOU HAVE ONE), WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050(A). PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividends, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold a portion of taxable interest, dividends and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. For payments made in 2002, this withholding rate is 30.0%, with the rate gradually decreasing to 28% for payments made in 2006. Certain penalties may also apply. PENALTIES (1) Penalty for Failure To Furnish Taxpayer Identification Number.--If you fail to furnish your correct taxpayer identification number to a payer, you may be subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Information With Respect To Withholding.--If you make a false statement with no reasonable basis that results in no backup withholding tax, you are subject to a penalty of $500. (3) Criminal Penalty for Falsifying Information.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. 15 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
WHAT NAME AND NUMBER TO PROVIDE: - --------------------------------------------------------------- ----------------------------------------------------- Give the Give the SOCIAL EMPLOYER For this type of account: SECURITY For this type of account: IDENTIFICATION Number of-- Number of-- - ----------------------------------- --------------------------- ----------------------------- ----------------------- 1. An individual's account The individual 6. A valid trust, estate Legal entity (4) or pension trust 2. Two or more individuals The actual owner of the 7. Corporate account The corporation (joint account) account or, if combined, funds, the first individual on the account (1) 3. Custodian account of a minor The minor (2) 8. Association, club, The corporation (Uniform Gift to Minors Act) religious, charitable, educational or other tax-exempt organization 4. (a) The usual revocable The grantor-trustee (1) 9. Partnership The partnership savings trust account (grantor is also a trustee) (b) So-called trust account The actual owner (3) 10. A broker or registered The broker or nominee that is not a legal or valid nominee trust under state law 5. Sole proprietorship The owner (3) 11. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school, district or prison) that receives agricultural program payments (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Provide the name of the owner. (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)
NOTES: o If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. o If you are an individual, you must generally provide the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage, without informing the Social Security Administration of the name change, please enter your first name, the last name shown on your social security card, and your new last name. o For a joint account, only the person whose taxpayer identification number is shown on the Substitute Form W-9 should sign the form. 16 EX-99.2 12 exh99p2.txt FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR MAIL-WELL I CORPORATION This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Mail-Well I Corporation (the "Issuer") made pursuant to the prospectus dated June , 2002 (the "Prospectus"), if -- certificates for the outstanding 9 5/8% Notes due 2011 of the Issuer (the "Old 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, as exchange agent (the "Exchange Agent"), prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Old Notes pursuant to the Exchange Offer, a completed, signed and dated letter of transmittal (or facsimile thereof) must be received by the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Holders of Old Notes who have previously validly delivered a notice of guaranteed delivery pursuant to the procedures outlined above and as further described in the Prospectus are not required to use this form. Holders of Old Notes who have previously validly tendered Old Notes for exchange or who validly tender Old Notes for exchange in accordance with this Notice may withdraw any Old Notes so tendered at any time prior to the Expiration Date. See the Prospectus under the heading "The Exchange Offer" for a more complete description of the tender and withdrawal provisions. Capitalized terms not defined herein shall have the respective meanings ascribed to them in the Prospectus. The Exchange Agent for the Exchange Offer: STATE STREET BANK AND TRUST COMPANY
BY OVERNIGHT COURIER OR REGISTERED/CERTIFIED MAIL: BY HAND: BY FACSIMILE: ----------------------------------- ----------------------------------- ----------------------------------- State Street Bank and Trust Company State Street Bank and Trust Company State Street Bank and Trust Company Corporate Actions Corporate Actions (617) 662-1452 2 Avenue de Lafayette, Sixth Floor 2 Avenue de Lafayette, Sixth Floor Boston, MA 02111 Boston, MA 02111 Confirm Receipt of Facsimile Attention: Mr. MacKenzie Elijah Attention: Mr. MacKenzie Elijah by Telephone: (617) 662-1525
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Issuer the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer-Guaranteed Delivery Procedures" section of the Prospectus. Principal Amount of Old Notes Tendered:* $ ------------------------------------------ Certificate Nos. (if available): - ------------------------------------------- Total Principal Amount Represented by Old Note Certificate(s): $ ------------------------------------------ If Old Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number. Account Number: ---------------------------- All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. - ------ *Must be in denominations of principal amount of $1,000 and any integral multiple thereof. ============================== PLEASE SIGN HERE X ------------------------------------------------ ---------------------------- X ------------------------------------------------ ---------------------------- Signature(s) of Owner(s) or Authorized Signatory Date Area Code and Telephone Number: ------------------------------------------------ Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on certificates for Old Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement 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 set forth his or her full title below. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- Capacity: --------------------------------------------------- Address(es): --------------------------------------------------- --------------------------------------------------- --------------------------------------------------- ============================== ============================== GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEES) The undersigned, a financial institution that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the certificates representing the principal amount of Old Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer-Guaranteed Delivery Procedures" section of the Prospectus, together with one or more properly completed and duly executed Letters of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. - -------------------------------------- -------------------------------------- Name of Firm Authorized Signature - -------------------------------------- -------------------------------------- Address Title Name: - -------------------------------------- --------------------------------- Zip Code (Please Type or Print) Area Code and Phone No.: Dated: -------------- -------------------------------- ============================== NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. EX-99.3 13 exh99p3.txt FORM OF LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES EXHIBIT 99.3 MAIL-WELL I CORPORATION OFFER FOR ALL OUTSTANDING 9 5/8% SENIOR NOTES DUE 2012 IN EXCHANGE FOR 9 5/8% SENIOR NOTES DUE 2012 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED , 2002 - ---------- To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Mail-Well I Corporation (the "Issuer") is offering, upon and subject to the terms and conditions set forth in the prospectus dated , 2002 (the "Prospectus"), and the enclosed letter of transmittal - ---------- (the "Letter of Transmittal"), to exchange (the "Exchange Offer") an aggregate principal amount of up to $350,000,000 of its 9 5/8% Senior Notes due 2012 which have been registered under the Securities Act of 1933, as amended, for a like principal amount at maturity of their issued and outstanding 9 5/8% Senior Notes due 2012 (the "Old Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Issuer contained in the Registration Rights Agreement dated March 13, 2002, by and among the Issuer, the Subsidiary Guarantors and the Initial Purchasers referred to therein. We are requesting that you contact your clients for whom you hold Old Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Notes registered in your name or in the name of your nominee, or who hold Old Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated June , 2002; -- 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent referred to below prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to State Street Bank and Trust Company, the Exchange Agent for the Exchange Offer. YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002 UNLESS EXTENDED BY THE ISSUER ---------- (THE "EXPIRATION DATE"). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Notes, or a timely book-entry confirmation of such Old Notes into the Exchange Agent's account at The Depository Trust Company, should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If a registered holder of Old Notes desires to tender, but such Old Notes are not immediately available, or time will not permit such holder's Old Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer-Guaranteed Delivery Procedures." The Issuer will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Notes held by them as nominee or in a fiduciary capacity. The Issuer will pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer, except as set forth in the Instructions in the Letter of Transmittal. Any requests for additional copies of the enclosed materials, should be directed to State Street Bank and Trust Company, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, MAIL-WELL I CORPORATION NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures 2 EX-99.4 14 exh99p4.txt FORM OF LETTER TO CLIENTS EXHIBIT 99.4 MAIL-WELL I CORPORATION OFFER FOR ALL OUTSTANDING 9 5/8% SENIOR NOTES DUE 2012 IN EXCHANGE FOR 9 5/8% SENIOR NOTES DUE 2012 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED , 2002 - ---------- To Our Clients: Enclosed for your consideration is a prospectus dated , ---------- 2002 (the "Prospectus"), and the related letter of transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Mail-Well I Corporation (the "Issuer") to exchange their 9 5/8% Senior Notes due 2012 which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for their outstanding 9 5/8% Senior Notes due 2012 (the "Old Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Issuer contained in the Registration Rights Agreement dated March , 2002, by and among the Issuer, -- the Subsidiary Guarantors and the Initial Purchasers referred to therein. This material is being forwarded to you as the beneficial owner of the Old Notes held by us for your account but not registered in your name. A TENDER OF SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 2002 unless extended by the ---------- Issuer. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer-Conditions to the Exchange Offer." 3. Any transfer taxes incident to the transfer of Old Notes from the holder to the Issuer will be paid by the Issuer, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on , 2002 unless extended by the Issuer. ----------- If you wish to have us tender your Old Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Mail-Well I Corporation with respect to its Old Notes. This will instruct you to tender the Old Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. / / Please tender the Old Notes held by you for my account as indicated below: AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF OLD NOTES ------------------------ 9 5/8% Senior Notes due 2012: $ ------------- / / Please do not tender any Old Notes held by you for my account. Dated: , 2002 -------------------- Signature(s): ------------------------------------------------------ Print Name(s) here: ------------------------------------------------ (Print Address(es)): ----------------------------------------------- (Area Code and Telephone Number(s)): ------------------------------- (Tax Identification or Social Security Number (s)): ---------------- ========================= None of the Old Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all Old Notes held by us for your account. -----END PRIVACY-ENHANCED MESSAGE-----