-----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, Kb4RvWFAU6Ptpse76dOfJ9d/Q9rrPzqN3ViKPUVe2/+Y5pW2lw1nUN7xgfDZFFld OoJUxeHTBbw1viTUVufofA== 0000912057-02-025000.txt : 20020621 0000912057-02-025000.hdr.sgml : 20020621 20020621171759 ACCESSION NUMBER: 0000912057-02-025000 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 20020621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VON HOFFMANN CORP CENTRAL INDEX KEY: 0001175474 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-90992 FILM NUMBER: 02684688 BUSINESS ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST LOUIS STATE: MI ZIP: 63126 BUSINESS PHONE: 3149660909 MAIL ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST LOUIS STATE: MI ZIP: 63126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISION OFFSET PRINTING CO CENTRAL INDEX KEY: 0001175827 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-90992-01 FILM NUMBER: 02684689 BUSINESS ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST LOUIS STATE: MI ZIP: 63126 BUSINESS PHONE: 3149660909 MAIL ADDRESS: STREET 1: P.O BOX 675 STREET 2: 133 MAIN STREET CITY: LEESPORT STATE: PA ZIP: 19533 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREFACE INC CENTRAL INDEX KEY: 0001175831 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-90992-02 FILM NUMBER: 02684690 BUSINESS ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST LOUIS STATE: MI ZIP: 63126 BUSINESS PHONE: 3149660909 MAIL ADDRESS: STREET 1: 1111 PLAZA DRIVE CITY: SCHAUMBURG STATE: IL ZIP: 60173 FILER: COMPANY DATA: COMPANY CONFORMED NAME: H&S GRAPHICS INC CENTRAL INDEX KEY: 0001175829 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-90992-03 FILM NUMBER: 02684691 BUSINESS ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST LOUIS STATE: MI ZIP: 63126 BUSINESS PHONE: 3149660909 MAIL ADDRESS: STREET 1: 3640 EDISON PLACE CITY: ROLLING MEADOWS STATE: IL ZIP: 60008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ONE THOUSAND REALTY & INVESTMENT CO CENTRAL INDEX KEY: 0001175823 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-90992-04 FILM NUMBER: 02684692 BUSINESS ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST LOUIS STATE: MI ZIP: 63126 BUSINESS PHONE: 3149660909 MAIL ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST. LOUIS STATE: MO ZIP: 63126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VON HOFFMANN HOLDINGS INC CENTRAL INDEX KEY: 0001175820 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-90992-05 FILM NUMBER: 02684693 BUSINESS ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST LOUIS STATE: MI ZIP: 63126 BUSINESS PHONE: 3149660909 MAIL ADDRESS: STREET 1: 1000 CAMERA AVENUE CITY: ST. LOUIS STATE: MO ZIP: 63126 S-1 1 a2082545zs-1.txt S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 2002 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ VON HOFFMANN HOLDINGS INC. VON HOFFMANN CORPORATION (Exact name of registrants as specified in their charters) DELAWARE 27323 22-1661746 DELAWARE 27323 43-0633003 (State or other jurisdiction (Primary Standard (I.R.S. Employer of Industrial Identification Number) incorporation or organization) Classification Code Number)
VON HOFFMANN HOLDINGS INC. PETER MITCHELL VON HOFFMANN CORPORATION VON HOFFMANN CORPORATION 1000 CAMERA AVENUE 1000 CAMERA AVENUE ST. LOUIS, MISSOURI 63126 ST. LOUIS, MISSOURI 63126 (314) 966-0909 (314) 966-0909 (Name, address, including zip code, and telephone (Name, address, including zip code, and telephone number, number, including area code, of registrants' principal executive including area code, of agent for service) offices)
------------------------------ SEE TABLE OF ADDITIONAL REGISTRANTS BELOW ------------------------------ WITH COPIES TO: TODD R. CHANDLER, ESQ. WEIL, GOTSHAL & MANGES LLP 767 FIFTH AVENUE NEW YORK, NEW YORK 10153-0119 (212) 310-8000 ------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please 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(c) 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. / / - ------------ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE 10 1/4% SENIOR NOTES DUE 2009......................... $215,000,000 100% $215,000,000 $19,780 GUARANTEES OF 10 1/4% SENIOR NOTES DUE 2009........... $215,000,000 N/A N/A N/A(2) 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007............ $100,000,000 100% $100,000,000 $ 9,200 GUARANTEES OF 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007................................................ $100,000,000 N/A N/A N/A(2) 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009..... $ 48,056,397 100% $ 48,056,397 $ 4,422 TOTAL................................................. $363,056,397 $33,402
(1) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(f)(2) under the Securities Act of 1933. (2) The Additional Registrants will guarantee the payment of the 10 1/4% Senior Notes Due 2009 and the 10 3/8% Senior Subordinated Notes Due 2007. Pursuant to Rule 457(n) under the Securities Act, no additional filing fee is required. ------------------------------ 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ADDITIONAL REGISTRANTS
PRIMARY ADDRESS, INCLUDING ZIP CODE STATE OR OTHER STANDARD AND TELEPHONE NUMBER, JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER INCLUDING AREA CODE, OF EXACT NAME OF REGISTRANT AS INCORPORATION CLASSIFICATION IDENTIFICATION REGISTRANT'S PRINCIPAL SPECIFIED IN ITS CHARTER OR ORGANIZATION CODE NUMBER NUMBER EXECUTIVE OFFICE* REGISTRATION NO. - --------------------------- --------------- -------------- --------------- --------------------------- ---------------- One Thousand Realty & Investment Company.... Delaware 6531 43-1432355 1000 Camera Avenue St. 333- Louis, MO 63126 (314) 966-0909 H & S Graphics, Inc..... Delaware 27962 36-4228578 3640 Edison Place Rolling 333- Meadows, IL 60008 (847) 506-9800 Preface, Inc............ Delaware 27962 36-4228574 1111 Plaza Drive 333- Schaumburg, IL 60173 (847) 995-8250 Precision Offset Printing Company............... Delaware 27323 23-1354890 133 Main Street Leesport, 333- PA 19533 (610) 926-3900
- ------------------------ * Name, address, including zip code and telephone number, including area code, for agent of service of process for each of the Additional Registrants is Peter Mitchell at 1000 Camera Avenue, St. Louis, MO 63126, (314) 966-0909. EXPLANATORY NOTE This Registration Statement covers the registration of (i) an aggregate principal amount of $215,000,000 of new 10 1/4% Senior Notes due 2009 of Von Hoffmann Corporation that may be exchanged for an equal principal amount of outstanding 10 1/4% Senior Notes due 2009 of Von Hoffmann Corporation, (ii) an aggregate principal amount of $100,000,000 of new 10 3/8% Senior Subordinated Notes due 2007 of Von Hoffmann Corporation that may be exchanged for an equal principal amount of outstanding 10 3/8% Senior Subordinated Notes of Von Hoffmann Corporation due 2007 and (iii) an aggregate principal amount of $48,056,397 of new 13 1/2% Subordinated Exchange Debentures due 2009 of Von Hoffmann Holdings Inc. that may be exchanged for an equal principal amount of outstanding 13 1/2% Subordinated Exchange Debentures of Von Hoffmann Holdings Inc. This Registration Statement also covers the registration of the registered securities for resale by Credit Suisse First Boston Corporation and its affiliates that are affiliates of registrants in market-making transactions. The complete prospectus to be used in the exchange offer follows immediately after this Explanatory Note. Following that are certain pages of the prospectus relating solely to market-making transactions, including alternate front and back cover pages, a section entitled "Risk Factors--There is no existing trading market for the Securities" to be used in lieu of the section entitled "Risk Factors--There may be no active trading market for the registered securities to be issued in the exchange offers," and an alternate "Plan of Distribution" section. In addition, the market-making prospectus will not include the following captions (or the information set forth under those captions) in the exchange offer prospectus: "Summary--The Exchange Offers," "Risk Factors--There may be no active trading market for the registered securities to be issued in the exchange offers," "The Exchange Offers" and "Material United States Federal Income Tax Consequences--Consequences of Tendering Notes." Also, clause (i) of the first paragraph of "Material United States Federal Income Tax Consequences" will not be included in the market-making prospectus. All other sections of the exchange offer prospectus will be included in the market-making prospectus. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL OR OFFER 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 WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JUNE , 2002 PROSPECTUS VON HOFFMANN CORPORATION OFFER TO EXCHANGE ALL OF THE OUTSTANDING $215,000,000 10 1/4% SENIOR NOTES DUE 2009 FOR $215,000,000 10 1/4% SENIOR NOTES DUE 2009 REGISTERED UNDER THE SECURITIES ACT OF 1933 AND OFFER TO EXCHANGE ALL OF THE OUTSTANDING $100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 FOR $100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 REGISTERED UNDER THE SECURITIES ACT OF 1933 AND VON HOFFMANN HOLDINGS INC. OFFER TO EXCHANGE ALL OF THE OUTSTANDING $48,056,397 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 FOR $48,056,397 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 REGISTERED UNDER THE SECURITIES ACT OF 1933 ------------------------ We are offering to exchange each series of the outstanding securities described above for the new, registered securities described above. The form and terms of the registered securities are substantially the same as the form and terms of the old securities, except that the registered securities to be issued in the exchange offers have been registered under the Securities Act and will not bear legends restricting their transfer. In this document we refer to the outstanding securities as the "old securities" and the new securities as the "registered securities" or "exchange securities." Each offer for a series of outstanding securities described above shall constitute a separate exchange offer. MATERIAL TERMS OF THE EXCHANGE OFFERS - - Each exchange offer expires at 5:00 p.m., New York City time, on , 2002, unless extended. - - The only conditions to completing an exchange offer are that the exchange offer not violate applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission and no injunction, order or decree has been issued that would prohibit, prevent or otherwise materially impair our ability to proceed with the exchange offer. - - All old securities that are validly tendered and not validly withdrawn will be exchanged. - - Tenders of old securities in an exchange offer may be withdrawn at any time prior to the expiration of the exchange offer. - - We will not receive any cash proceeds from the exchange offers. Each broker-dealer that receives exchange securities for its own account pursuant to the exchange offers must acknowledge that it will deliver a prospectus in connection with any resale of such exchange securities. The letters of transmittal state 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 exchange securities received in exchange for old securities where such old securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. For a period of 180 days after the expiration date (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." ------------------------ CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS. --------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS , 2002 TABLE OF CONTENTS
PAGE -------- Forward-Looking Statements............ i Prospectus Summary.................... 1 Risk Factors.......................... 12 The Exchange Offers................... 20 Capitalization........................ 28 Selected Consolidated Financial Data................................ 29 Management's Discussion And Analysis Of Financial Condition And Results Of Operations....................... 32 Business.............................. 41 Management............................ 52 Executive Compensation................ 54 Security Ownership Of Certain Beneficial Owners And Management.... 57
PAGE -------- Certain Relationships And Related Transactions........................ 58 Description Of Certain Indebtedness... 60 Description Of The Registered Securities.......................... 61 Material United States Federal Income Tax Consequences.................... 133 Plan Of Distribution.................. 139 Legal Matters......................... 139 Independent Accountants............... 139 Where You Can Find More Information... 140 Index To Consolidated Financial Statements.......................... F-1
Von Hoffmann Corporation is a wholly-owned subsidiary of Von Hoffmann Holdings Inc. Unless otherwise stated or the context otherwise requires, in this prospectus, "Von Hoffmann" and "Company" refer to Von Hoffmann Corporation and its subsidiaries. "Holdings" refers to Von Hoffmann Holdings Inc. Unless otherwise stated or the context otherwise requires, "we," "us" and "our" refer to Holdings and its subsidiaries. References to the "securities" means both the old securities and the registered securities, unless the context otherwise requires. Von Hoffmann formerly was named "Von Hoffmann Press, Inc.," and Holdings formerly was named "Von Hoffmann Corporation." Until , 2002, all dealers that effect transactions in these securities, whether or not participating in this offering, 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 an unsold allotment or subscription. FORWARD-LOOKING STATEMENTS This prospectus contains statements about future events and expectations, which are forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future results. When we use words in this document, such as "anticipates," "intends," "plans," "believes," "estimates," "expects," and similar expressions, we do so to identify forward-looking statements. Examples of forward-looking statements include statements we make regarding future prospects of growth in the educational textbook market, the level of future activity of the public school textbook adoption process, demographic and other trends in the instructional materials market, our ability to maintain or increase our market share and our future capital expenditure levels. You should keep in mind that any forward-looking statement made by us in this prospectus or elsewhere speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this prospectus after the date of this prospectus, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this prospectus or elsewhere might not occur. The forward-looking statements included in this prospectus or the relevant incorporated document are made only as of the date of this prospectus or the relevant incorporated document, as the case may be, and, except as required by law, we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. i PROSPECTUS SUMMARY THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION. OUR COMPANY We believe that we are the leading manufacturer of four-color case-bound and soft-cover educational textbooks in the United States. Our products are sold principally to educational publishers who, in turn, sell them into the elementary and high school, or ELHI, and college instructional materials markets. In addition to textbook manufacturing, we provide our customers with a full range of value-added printing and design services from early design to final distribution. We estimate that our market share in our core business, the manufacture of four-color case-bound ELHI textbooks, is approximately 40%. Since 1998, we have diversified our product offerings and added new services through selected strategic acquisitions in order to enhance our position within the instructional materials market. In addition to solidifying our position in the instructional materials market, our acquisitions have enabled us to expand our presence in the commercial book-manufacturing market. Over the past five years, we have also invested approximately $80 million in high-quality, high-throughput machinery and plant expansions (excluding equipment obtained in acquisitions), enhancing our competitive position and providing capacity for future growth. These investments include additional four-color web printing presses, additional one- and two-color presses, sheet-fed presses, new digital pre-press equipment and additional manufacturing space. We have also invested extensively in customized, high-efficiency book-binding production lines. INDUSTRY OVERVIEW We primarily serve the instructional materials market, from which we derived approximately 68% of our 2001 net sales. Within the overall instructional materials market, we focus principally on the ELHI and college and higher education areas, for which we manufacture textbooks, standardized test materials and other educational materials. The market for ELHI and college and higher education instructional materials is characterized by long-term growth prospects, an ELHI textbook adoption process, a recurring revenue stream, great emphasis on quality, service and delivery and barriers to entry. COMPETITIVE STRENGTHS We believe we are distinguished by the following competitive strengths: - a leading market share in the manufacture of four-color case-bound ELHI textbooks - a reputation for superior quality and customer service - a focus on instructional materials manufacture - the ability to be a single source supplier of a broad range of services to educational textbook manufacturers, from early design to manufacture to distribution - state-of-the-art manufacturing facilities - a skilled and experienced workforce and management team 1 BUSINESS STRATEGY The principal features of our business strategy include the following: - enhancing our position in the instructional materials market; - leveraging our existing manufacturing capabilities and reputation; and - considering selective acquisitions. DLJ MERCHANT BANKING PARTNERS II, L.P. In April 1997, DLJ Merchant Banking Partners II, L.P. and certain of its affiliates (collectively, "DLJ Merchant Banking"), along with certain other investors, acquired us. DLJ Merchant Banking owns approximately 96.3% of our equity. EXECUTIVE OFFICES Holdings and Von Hoffmann are Delaware corporations. Their principal executive offices are located at 1000 Camera Avenue, St. Louis, Missouri 63126, and their telephone number at that address is (314) 966-0909. 2 SUMMARY OF THE TERMS OF THE EXCHANGE OFFERS On March 15, 2002, Von Hoffmann issued $215.0 million aggregate principal amount of its 10 1/4% senior notes due 2009, referred to as the 2009 notes, in a transaction exempt from registration under the Securities Act of 1933, or the Securities Act. On October 16, 1998, Holdings (which at the time was named Von Hoffmann Corporation) issued $30.4 million aggregate principal amount of its 13 1/2% subordinated exchange debentures due 2009, referred to as the 2009 Holdings debentures, which have accreted in principal amount to $48.1 million, in exchange for its then outstanding 13 1/2% senior exchangeable preferred stock due 2009. On May 15, 1997, Von Hoffmann (which at the time was named Von Hoffmann Press, Inc.) issued $100.0 million in aggregate principal amount of its 10 3/8% senior subordinated notes due 2007, referred to as the 2007 notes, in a transaction exempt from registration under the Securities Act. We refer to each of the issuances of the old securities in this prospectus as an "original issuance." We entered into agreements at or prior to the time of the issuance of the old securities in which we agreed to register new securities with substantially the same form and terms of the old securities and exchange the registered securities for the old securities. These agreements are referred to in this prospectus as "registration rights agreements." You are entitled to exchange your old securities in the exchange offers for registered securities. Unless you are a broker-dealer and assuming you satisfy the conditions set forth below under "--Resales of the Registered Securities," we believe that the securities to be issued in the exchange offers may be resold by you without compliance with the registration and prospectus delivery requirements of the Securities Act. You should read the discussions under the headings "The Exchange Offers" and "Description of the Registered Securities" for further information regarding the registered securities. Registration Rights Agreements............ Under the registration rights agreements we are obligated to exchange the old securities for registered securities with terms identical in all material respects to the old securities. The exchange offers are intended to satisfy these rights. After the exchange offers are complete, except as set forth in the next paragraph, you will no longer be entitled to any exchange or registration rights with respect to your old securities. The registration rights agreements require us to file a registration statement for a continuous offering in accordance with Rule 415 under the Securities Act for your benefit if you would not receive freely tradeable registered securities in the exchange offers or you are ineligible to participate in the exchange offers and indicate that you wish to have your old securities registered under the Securities Act. See "The Exchange Offers--Procedures for Tendering." The Exchange Offers....................... Von Hoffmann is offering to exchange: - $1,000 principal amount of 10 1/4% senior notes due 2009, which have been registered under the Securities Act, for each $1,000 principal amount of its unregistered 10 1/4% senior notes due 2009 that were issued in the original issuance; and - $1,000 principal amount of 10 3/8% senior subordinated notes due 2007, which have been registered under the Securities Act, for each
3 - $1,000 principal amount of its unregistered 10 3/8% senior subordinated notes due 2007 that were issued in the original issuance. Holdings is offering to exchange: - a principal amount of 13 1/2% subordinated exchange debentures due 2009, which have been registered under the Securities Act, for an equal principal amount of its unregistered 13 1/2% subordinated exchange debentures due 2009 that were issued in the original issuance. In order to be exchanged, an old security must be validly tendered and accepted. All old securities that are validly tendered and not validly withdrawn will be exchanged. As of this date, there are $215.0 million aggregate principal amount of 10 1/4% senior notes due 2009 outstanding, $100.0 million aggregate principal amount of 10 3/8% senior subordinated notes due 2007 outstanding and $48.1 million aggregate principal amount of 13 1/2% subordinated exchange debentures due 2009 outstanding. We will issue the applicable registered securities promptly after the expiration of each exchange offer. Resales of the Registered Securities...... Except as described below, we believe that registered securities to be issued in the exchange offers may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act if you meet the following conditions: (1) the registered securities are acquired by you in the ordinary course of your business; (2) you are not engaging in and do not intend to engage in a distribution of the registered securities; (3) you do not have an arrangement or understanding with any person to participate in the distribution of the registered securities; and (4) you are not an affiliate of ours, as that term is defined in Rule 405 under the Securities Act. Our belief is based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties unrelated to us. The staff has not considered the exchange offers in the context of a no-action letter, and we cannot assure you that the staff would make a similar determination with respect to the exchange offers. If you do not meet the above conditions, you may incur liability under the Securities Act if you transfer any registered security without delivering a prospectus meeting the requirements of the Securities Act. We do not assume or indemnify you against that liability.
4 Each broker-dealer that is issued registered securities in an exchange offer for its own account in exchange for old securities which were acquired by that broker-dealer as a result of market-making activities or other trading activities must agree to deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the registered securities. A broker-dealer may use this prospectus for an offer to resell or to otherwise transfer registered securities. Expiration Date........................... Each exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless we decide to extend the exchange offer. We refer to this date, as it may be extended, as the "expiration date." We do not intend to extend any of the exchange offers, although we reserve the right to do so. Conditions to Each Exchange Offer......... The only conditions to completing an exchange offer are that the exchange offer not violate any applicable law or any applicable interpretation of the staff of the Commission and no injunction, order or decree has been issued by any court or any governmental agency that would prohibit, prevent or otherwise materially impair our ability to proceed with the exchange offers. See "The Exchange Offers--Conditions." Procedures for Tendering Old Securities Held in the Form of Book-Entry Interests............................... Held in The old securities were issued as global securities in fully registered form without interest coupons. Beneficial interests in the old securities, held by direct or indirect participants in The Depository Trust Company, or DTC, are shown on, and transfers of these interests are effected only through records maintained in book-entry form by DTC with respect to its participants. If you hold old securities in the form of book-entry interests and you wish to tender your old securities for exchange pursuant to an exchange offer, you must transmit to the exchange agent on or prior to the expiration date of the applicable exchange offer either: - a written or facsimile copy of a properly completed and duly executed letter of transmittal for your securities, including all other documents required by such letter of transmittal, to the exchange agent at the address set forth on the cover page of the letter of transmittal; or - a computer-generated message transmitted by means of DTC's Automated Tender Offer Program system and received by the exchange agent and forming a part of a confirmation of book-entry transfer, in which you acknowledge and agree to be bound by the terms of the letter of transmittal for your securities.
5 The exchange agent must also receive on or prior to the expiration of the applicable exchange offer either: - a timely confirmation of book-entry transfer of your old securities into the exchange agent's account at DTC pursuant to the procedure for book-entry transfers described in this prospectus under the heading "The Exchange Offers--Book-Entry Transfer," or - the documents necessary for compliance with the guaranteed delivery procedures described below. A letter of transmittal for your securities accompanies this prospectus. By executing the letter of transmittal for your securities or delivering a computer-generated message through DTC's Automated Tender Offer Program system, you will represent to us that, among other things: - the registered securities to be acquired by you in the applicable exchange offer are being acquired in the ordinary course of your business; - you are not engaging in and do not intend to engage in a distribution of the registered securities; - you do not have an arrangement or understanding with any person to participate in the distribution of the registered securities; and - you are not our affiliate. Procedures for Tendering Certificated Old Securities.............................. If you are a holder of book-entry interests in the old securities, you are entitled to receive, in limited circumstances, in exchange for your book-entry interests, certificated securities which are in equal principal amounts to your book-entry interests. See "Description of the Registered Securities--Forms of Registered Securities." If you acquire certificated old securities prior to the expiration of an Exchange Offer, you must tender your certificated old securities in accordance with the procedures described in this prospectus under the heading "The Exchange Offers--Procedures for Tendering--Certificated Old Securities." Special Procedures for Beneficial Owners.................................. If you are the beneficial owner of old securities and they are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your old securities, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal for your securities and delivering your old securities, either make appropriate arrangements to register ownership of the old securities in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. See "The Exchange Offers--Procedures for Tendering--Procedures Applicable to All Holders."
6 Guaranteed Delivery Procedures............ If you wish to tender your old securities in an exchange offer and: (1) they are not immediately available; (2) time will not permit your old securities or other required documents to reach the exchange agent before the expiration of the exchange offer; or (3) you cannot complete the procedure for book-entry transfer on a timely basis, you may tender your old securities in accordance with the guaranteed delivery procedures set forth in "The Exchange Offers--Procedures for Tendering--Guaranteed Delivery Procedures." Acceptance of Old Securities and Delivery of Registered Securities................ Except under the circumstances described above under "Conditions to Each Exchange Offer," we will accept for exchange any and all old securities which are properly tendered prior to 5:00 p.m., New York City time, on the expiration date. The registered securities to be issued to you in an exchange offer will be delivered promptly following the expiration date for that exchange offer. See "The Exchange Offers--Terms of the Exchange Offers." Withdrawal................................ You may withdraw the tender of your old securities at any time prior to 5:00 p.m., New York City time, on the expiration date. We will return to you any old securities not accepted for exchange for any reason without expense to you as promptly as we can after the expiration or termination of the applicable exchange offer. Exchange Agent............................ U.S. Bank National Association is serving as the exchange agent in connection with the exchange offers. Consequences of Failure to Exchange................................ If you do not participate in the exchange offers for your old securities, upon completion of the exchange offers, the liquidity of the market for your old securities could be adversely affected. See "The Exchange Offers--Consequences of Failure to Exchange." Material United States Federal Income Tax Consequences............................ The exchange of old securities for registered securities should not be a taxable event for federal income tax purposes. See "Material United States Federal Income Tax Consequences."
7 SUMMARY OF THE TERMS OF THE REGISTERED SECURITIES 2009 NOTES Issuer.................................... Von Hoffmann Corporation. Notes Offered............................. $215,000,000 aggregate principal amount of 10 1/4% senior notes due 2009 registered under the Securities Act. Maturity.................................. March 15, 2009. Interest Rate............................. 10.25% per year. Interest Payment Dates.................... February 15 and August 15 of each year, beginning August 15, 2002. Guarantees................................ The registered 2009 notes will be unconditionally guaranteed, jointly and severally, by all of Von Hoffmann's current and future domestic subsidiaries (other than some immaterial subsidiaries and its accounts receivable financing subsidiary), and so long as Holdings guarantees any of the Credit Facilities, by Holdings. Optional Redemption....................... Von Hoffmann may redeem the 2009 notes at any time prior to March 15, 2005, in whole or in part, upon notice to the holders, at a redemption price equal to the amount as calculated in accordance with the first paragraph under "Description of the Registered Securities--10 1/4% Senior Notes due 2009--Optional Redemption." Von Hoffmann may redeem the 2009 notes at any time on or after March 15, 2005, in whole or in part, in cash at the redemption prices described in this prospectus, plus accrued and unpaid interest to the date of redemption. In addition, on or before March 15, 2005, Von Hoffmann may redeem up to 35% of the aggregate principal amount of 2009 notes issued under the indenture governing the 2009 notes with the proceeds of certain equity offerings. Von Hoffmann may make that redemption only if, after the redemption, at least 65% of the aggregate principal amount of notes issued under the indenture governing the 2009 notes remains outstanding. Ranking................................... The registered 2009 notes and the related guarantees will rank: - equal in right of payment to all of Von Hoffmann's and the guarantors' existing and future senior indebtedness; - senior in right of payment to Von Hoffmann's and the guarantors' existing and future subordinated indebtedness; and - effectively junior to Von Hoffmann's and the guarantors' secured indebtedness, including any borrowings under our revolving credit facility.
8 Certain Covenants......................... The indenture governing the 2009 notes contains covenants limiting Von Hoffmann's and its restricted subsidiaries' ability to: - incur additional indebtedness; - create liens; - pay dividends or make other equity distributions; - purchase or redeem capital stock; - make investments; - sell assets; - incur restrictions on the ability of restricted subsidiaries to make dividends or distributions; - engage in transactions with affiliates; and - effect a consolidation or merger. These covenants are subject to important exceptions and qualifications described under "Description of the Registered Securities--10 1/4% Senior Notes due 2009--Certain Covenants." 2007 NOTES Issuer.................................... Von Hoffmann Corporation. Notes Offered............................. $100,000,000 aggregate principal amount of 10 3/8% senior subordinated notes due 2007 registered under the Securities Act. Maturity.................................. May 15, 2007. Interest Rate............................. 10.375% per year. Interest Payment Dates.................... May 15 and November 15 each year. Guarantees................................ The registered notes will be unconditionally guaranteed, jointly and severally, by all of Von Hoffmann's restricted subsidiaries and so long as Holdings guarantees any of the Credit Facilities, by Holdings. Optional Redemption....................... Von Hoffmann may redeem the 2007 notes at any time on or after May 15, 2002, in whole or in part, in cash at the redemption prices described in this prospectus, plus accrued and unpaid interest to the date of redemption.
9 Ranking................................... The registered 2007 notes and the related guarantees will rank: - junior in right of payment to all of Von Hoffmann's and the guarantors' existing and future senior indebtedness; and - equal in right of payment to Von Hoffmann's and the guarantors' existing and future senior subordinated indebtedness. Certain Covenants......................... The indenture governing the 2007 notes contains covenants limiting Von Hoffmann's and its restricted subsidiaries' ability to: - incur additional indebtedness; - create liens; - pay dividends or make other equity distributions; - purchase or redeem capital stock; - make investments; - sell assets; - incur restrictions on the ability of restricted subsidiaries to make dividends or distributions; - engage in transactions with affiliates; and - effect a consolidation or merger. These covenants are subject to important exceptions and qualifications described under "Description of the Registered Securities--10 3/8% Senior Subordinated Notes due 2007--Certain Covenants." 2009 HOLDINGS DEBENTURES Issuer.................................... Von Hoffmann Holdings Inc. Debentures Offered........................ $48,056,397 aggregate principal amount of 13 1/2% subordinated exchange debentures due 2009 registered under the Securities Act. Maturity.................................. May 15, 2009. Interest Rate............................. 13.5% per year. Interest is not payable in cash prior to the date on which interest would be permitted to be paid in cash pursuant to the terms of the then-outstanding indebtedness of Holdings and its subsidiaries and any other contractual provisions limiting their ability to declare or pay cash interest. Our revolving credit facility restricts such payments. Until interest is payable in cash, such interest will accrete to the principal amount of the debentures on each interest payment date. Interest Payment Dates.................... May 15 and November 15 each year.
10 Optional Redemption....................... Holdings may redeem the 2009 Holdings debentures at any time on or after May 15, 2002, in whole or in part, in cash at the redemption prices described in this prospectus, plus accrued and unpaid interest to the date of redemption. Ranking................................... The registered 2009 Holdings debentures will rank junior in right of payment to all of Holdings' existing and future senior indebtedness. Certain Covenants......................... The indenture governing the 2009 Holdings debentures contains covenants limiting Holdings' and its subsidiaries' ability to - pay dividends or make other equity distributions; and - purchase or redeem capital stock. These covenants are subject to important exceptions and qualifications described under "Description of the Registered Securities--13 1/2% Subordinated Exchange Debentures Due 2009--Certain Covenants." TERMS COMMON TO THE EXCHANGE OFFERS Use of Proceeds........................... We will not receive any cash proceeds upon the completion of the exchange offers. Form of Registered Securities............. The registered securities to be issued in the exchange offers will be represented by one or more global securities deposited with the trustees for the securities for the benefit of DTC. You will not receive registered securities in certificated form unless one of the events set forth under the heading "Description of the Registered Securities--Forms of Registered Securities" occurs. Instead, beneficial interests in the registered securities to be issued in the exchange offers will be shown on, and transfer of these interests will be effected only through, records maintained in book-entry form by DTC with respect to its participants. Risk Factors.............................. You should refer to the section entitled "Risk Factors" for an explanation of the material risks of participating in the exchange offers and investing in the securities.
11 RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING TO PARTICIPATE IN THE EXCHANGE OFFERS. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY RISKS FACING US. ADDITIONAL RISKS AND UNCERTAINTIES NOT CURRENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM TO BE IMMATERIAL MAY ALSO MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS OPERATIONS. ANY OF THE FOLLOWING RISKS COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS. THE FACTORS SET FORTH BELOW, HOWEVER, ARE GENERALLY APPLICABLE TO THE OLD SECURITIES AS WELL AS THE REGISTERED SECURITIES. RISKS RELATING TO THE SECURITIES IF YOU FAIL TO EXCHANGE YOUR OLD SECURITIES, THEY MAY CONTINUE TO BE RESTRICTED SECURITIES AND MAY BECOME LESS LIQUID. Old securities that you do not tender or we do not accept may, following the exchange offers, continue to be restricted securities. You may not offer or sell untendered old securities except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We will issue new securities in exchange for the old securities pursuant to the exchange offers only following the satisfaction of the procedures and conditions described elsewhere in this prospectus. These procedures and conditions include timely receipt by the exchange agent of the old securities and of a properly completed and duly executed letter of transmittal for your securities. Because we anticipate that most holders of old securities will elect to exchange their old securities, we expect that the liquidity of the market for any old securities remaining after the completion of the exchange offers may be substantially limited. Any old security tendered and exchanged in an exchange offer will reduce the aggregate principal amount of the old securities of that class outstanding. THERE MAY BE NO ACTIVE TRADING MARKET FOR THE REGISTERED SECURITIES TO BE ISSUED IN THE EXCHANGE OFFERS. There is no established market for the registered securities. We cannot assure you with respect to: - the liquidity of any market for the registered securities that may develop; - your ability to sell registered securities; or - the price at which you will be able to sell the registered securities. If a public market were to exist, the registered securities could trade at prices that may be higher or lower than their principal amount or purchase price, depending on many factors, including prevailing interest rates, the market for similar securities, and our financial performance. We do not intend to list the registered securities to be issued to you on any securities exchange or to seek approval for quotations through any automated quotation system. No active market for the registered securities is currently anticipated. OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE SECURITIES. We have now and, after the exchange offers, will continue to have, a significant amount of indebtedness. As of May 31, 2002, we had total indebtedness of $391.7 million and had $50.8 million of additional borrowings available under our revolving credit facility, after excluding $1.3 million of letters of credit outstanding under that facility. Our substantial indebtedness could have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to the securities; - increase our vulnerability to general adverse economic and industry conditions; 12 - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate needs; - limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; - result in higher interest expense in the event of increases in interest rates as some of our debt is, and will continue to be, at variable rates of interest; - place us at a competitive disadvantage compared to our competitors that have less debt; and - limit our ability to borrow additional funds. In addition, the indentures governing the 2009 senior notes and the 2007 senior subordinated notes and our revolving credit facility contain restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. These covenants limit or restrict our ability to: - incur additional indebtedness; - create liens; - pay dividends or make other equity distributions; - purchase or redeem capital stock; - make investments; - sell assets; - incur restrictions on the ability of subsidiaries to make dividends or distributions; - engage in transactions with affiliates; and - effect a consolidation or merger. These limitations and restrictions may adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our best interests. In addition, our revolving credit facility requires us to comply with certain financial ratios and our ability to borrow under it is subject to borrowing base requirements. Our ability to comply with these ratios may be affected by events beyond our control. If we breach any of the covenants in our revolving credit facility or our indentures, or if we are unable to comply with the required financial ratios, we may be in default under our revolving credit facility or our indentures. If we default, the holders of the securities or lenders under our revolving credit facility could declare all borrowings owed to them, including accrued interest and other fees, to be due and payable. If we were unable to repay the borrowings under our revolving credit facility when due, the lenders under the revolving credit facility could also proceed against the collateral granted to them, which could result in the holders of the securities receiving less, ratably, than those lenders. WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS. OUR ABILITY TO GENERATE CASH DEPENDS ON FACTORS BEYOND OUR CONTROL. Our ability to make payments on our indebtedness, including our revolving credit facility and the securities, and to fund our business initiatives will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our revolving credit facility in an amount sufficient to 13 enable us to service our indebtedness, including our revolving credit facility and the securities, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including our revolving credit facility and the securities, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our revolving credit facility or the securities, on commercially reasonable terms or at all. AS HOLDERS OF THE 2007 NOTES AND 2009 NOTES, YOUR RIGHT TO RECEIVE PAYMENTS ON THE SECURITIES IS EFFECTIVELY SUBORDINATED TO THE RIGHTS OF VON HOFFMANN'S EXISTING AND FUTURE SECURED CREDITORS. FURTHERMORE, THE GUARANTEES OF THE NOTES ARE EFFECTIVELY SUBORDINATED TO ALL OUR GUARANTORS' EXISTING AND FUTURE SECURED INDEBTEDNESS. Holders of our secured indebtedness will have claims that are prior to your claims as holders of the 2007 notes and 2009 notes to the extent of the value of the assets securing that other indebtedness. Holdings, Von Hoffmann and the guarantors of the notes are parties to our revolving credit facility, which is secured by liens on our outstanding capital stock and substantially all of our and our subsidiaries' property and assets. The securities, including our 2009 notes and our 2007 notes, are effectively subordinated to all that indebtedness to the extent of the related security. In the event of any distribution or payment of our assets in any foreclosure, dissolution, winding-up, liquidation, reorganization or other bankruptcy proceeding, holders of secured indebtedness will have a prior claim to those of our assets that constitute their collateral. Holders of the 2007 notes and 2009 notes will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as those securities or which is not expressly subordinated to those securities, and potentially with all of our other general creditors, based upon the respective amounts owed to each holder or creditor, in our remaining assets. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the securities. As a result, holders of the 2007 notes and 2009 notes may receive less, ratably, than holders of secured indebtedness. As of May 31, 2002, the aggregate amount of our secured indebtedness and the secured indebtedness of our subsidiaries would have been approximately $391.7 million, and approximately $50.8 million would have been available for additional borrowing under our revolving credit facility, after excluding $1.3 million of letters of credit outstanding under that facility. See "Description of Certain Indebtedness--Revolving credit facility." YOUR RIGHT TO RECEIVE PAYMENT AS A HOLDER OF THE 2009 HOLDINGS DEBENTURES IS EFFECTIVELY SUBORDINATED IN RIGHT OF PAYMENT TO ALL LIABILITIES OF THE SUBSIDIARIES OF HOLDINGS AND TO THE RIGHTS OF OUR EXISTING AND FUTURE SECURED CREDITORS. The only asset of Holdings is the capital stock of Von Hoffman. Generally claims of creditors of a subsidiary of Holdings including trade creditors, secured creditors and creditors holding indebtedness and guarantees issued by such subsidiary, and claims of preferred stockholders, if any, of such subsidiary will have priority with respect to the assets and earnings of such subsidiary over the claims of the creditors of Holdings. The 2009 Holdings debentures will be effectively subordinate in right of payment to all liabilities including trade payables of all subsidiaries of Holdings. THE ABILITY OF HOLDINGS TO PAY CASH INTEREST EXPENSE ON THE 2009 HOLDINGS DEBENTURES IS RESTRICTED BY OUR DEBT INSTRUMENTS. We conduct substantially all of our operations through the subsidiaries of Holdings. Our ability to pay cash interest expense on the 2009 Holdings debentures depends upon, other things, receipt of dividends or other distributions by Holdings from its subsidiaries. Holdings' obligation to make cash interest payments with respect to the 2009 Holdings debentures is subject to the terms of the then-outstanding indebtedness of Holdings and its subsidiaries and any other contractual provisions limiting the ability of Holdings and its subsidiaries to declare or pay cash interest. Our revolving credit 14 facility restricts such payments. Accordingly, Holdings does not currently make, and in the foreseeable future does not intend to make, cash interest payments on the 2009 Holdings debentures. Further, restrictions contained in the indenture future borrowings by our subsidiaries including Von Hoffmann could contain, restrictions or prohibitions on the payment of dividends and other distributions by our subsidiaries to Holdings. In addition, applicable law may limit the amount that our subsidiaries may pay us as dividends on their capital stock. WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE SECURITIES INDENTURES. Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all outstanding securities at 101% of the principal amount thereof plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of securities. Moreover, our revolving credit facility will prohibit our repurchase of the 2007 notes and the 2009 Holdings debentures upon a change of control and our 2009 notes will limit our ability to repurchase our 2007 notes upon a change of control. Additionally, the occurrence of a change of control may require us to repay our revolving credit facility. YOUR RIGHT TO REQUIRE US TO REDEEM THE SECURITIES IS LIMITED. The holders of securities have limited rights to require us to purchase or redeem the securities in the event of a takeover, recapitalization or similar restructuring, including an issuer recapitalization or similar transaction with management. Consequently, the change of control provisions of the indentures for the securities will not afford any protection in a highly leveraged transaction, including such a transaction initiated by us, if such transaction does not result in a change of control or otherwise result in an event of default under the securities indentures. Accordingly, these change of control provisions are likely to be of limited usefulness in such situations. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTE HOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be voided, or claims in respect of a guarantee could be subordinated to all other debts of the guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee: - received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee; and - was insolvent or rendered insolvent by reason of such incurrence; or - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. 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. 15 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: - the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; - 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 - it could not pay its debts as they become due. On the basis of historical financial information, we believe that each guarantor, at the time it guaranteed the 2009 notes or 2007 notes, was not insolvent, did not have unreasonably small capital for the business in which it was engaged and had not incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard. RISKS RELATING TO OUR BUSINESS WE HAVE A NARROW PRODUCT RANGE AND OUR BUSINESS WOULD SUFFER IF OUR PRODUCTS BECOME OBSOLETE OR CONSUMPTION OF THEM DECREASED. We derive a significant portion of our net sales from customers in the business of publishing textbooks intended for the ELHI and college markets. Therefore, we are dependent upon the sale of books to these markets. Our business would suffer if consumption of these products decreased or if these products became obsolete. Our business could be adversely affected by factors such as changes in the funding of large institutional users of books such as elementary and high schools and colleges and universities. OUR RESULTS OF OPERATIONS ARE DEPENDENT ON OUR PRINCIPAL PRODUCTION FACILITY FOR FOUR-COLOR EDUCATIONAL TEXTBOOKS. Approximately 50% of our net sales and 50% of our earnings before interest, taxes, depreciation and amortization for 2001 were generated from our Jefferson City, Missouri production facility where we manufacture, among other products, our four-color educational textbooks. Any disruption of our production capabilities at this facility for a significant term could adversely effect our operating results. While we maintain levels of insurance we believe to be adequate to protect against significant interruption in operations at our Jefferson City facility, there is no assurance that any proceeds from insurance would be sufficient to return such facility to operational status or that we could relocate our operations from such facility without incurring significant costs, including the possible loss of customers during any period during which production is interrupted. OUR BUSINESS IS SUBJECT TO SEASONAL AND CYCLICAL FLUCTUATIONS IN SALES. We experience seasonal fluctuations in our sales. The seasonality of the ELHI market is significantly influenced by state and local school book purchasing schedules, which commence in the spring and peak in the summer months preceding the start of the school year. The college textbook market is also seasonal with the majority of textbook sales occurring during June through August and November through January. Significant amounts of inventory are acquired by publishers prior to those periods in order to meet customer delivery requirements. This places significant pressure on publishers and textbook manufacturers to monitor production and distribution accurately to satisfy these delivery requirements. 16 We also experience cyclical fluctuations in our sales. The cyclicality of the ELHI market is primarily attributable to the textbook adoption cycle. Industry sales volume gains or losses in any year are principally due to shifts in adoption schedules and the availability of state and local government funding. To a lesser extent, the cyclicality of our business is also attributable to fluctuations in paper prices. Actual or perceived changes in paper prices will result in fluctuations in purchases by our customers and, accordingly, impact our sales in a given year. Lower than expected sales by us during the adoption period or a general economic downturn in our market or industry could have a material adverse effect on the timing of our cash flows and, therefore, on our ability to service our obligations with respect to the notes and our other indebtedness. ANY PROBLEM OR INTERRUPTION IN OUR SUPPLY OF PAPER OR OTHER RAW MATERIALS COULD DELAY PRODUCTION AND ADVERSELY AFFECT OUR SALES. We rely on independent suppliers for key raw materials, principally paper, ink, bindery materials and adhesives, which may be available only from limited sources. Although supplies of our raw materials currently are adequate, shortages could occur in the future due to interruption of supply or increased industry demand. In addition, we do not have long-term contracts with any of our suppliers. We cannot assure you that these suppliers will continue to provide raw materials to us at attractive prices, or at all, or that we will be able to obtain such raw materials in the future from these or other providers on the scale and within the time frames we require. Although we believe we can obtain paper and other raw materials from alternate suppliers, any failure to obtain such raw materials on a timely basis at an affordable cost, or any significant delays or interruptions of supply could have a material adverse effect on our business, financial condition and results of operations. A SIGNIFICANT AMOUNT OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF CUSTOMERS AND OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOSE ONE OR MORE OF THEM AS CUSTOMERS. Our business depends on a limited number of customers. Our customers include, among others, approximately 50 autonomous divisions of the four major educational textbook publishers. Each of these divisions maintains its own manufacturing relationships and generally makes textbook manufacturing decisions independently of other divisions. Combining division sales, these four publishers accounted for approximately 18.0%, 14.0%, 7.3% and 6.5%, respectively, of our net sales during 2001. We do not have long-term contracts with any of these customers. Accordingly, our ability to retain or increase our business often depends upon our relationships with each customer's divisional managers and senior executives. One or more of these customers may stop buying textbook manufacturing from us or may substantially reduce the amount of textbooks we manufacture for it. Any cancellation, deferral or significant reduction in manufacturing sold to these principal customers or a significant number of smaller customers could seriously harm our business, financial condition and results of operations. WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT. Competition in our industry is intense. In particular, the educational textbook manufacturing market is concentrated and is served by large national printers and smaller regional printers. Because of greater resources, some of our competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the promotion and sale of their products than we can. Since the textbook manufacturing process represents a small percentage of the total cost to publish a textbook, providers of textbook manufacturing have traditionally competed on the bases of quality of product, customer service, availability of printing time on appropriate equipment, timeliness of delivery and, to a lesser extent, price. We believe that maintaining a competitive advantage will require continued investment by us in product development, 17 manufacturing capabilities and sales and marketing. We cannot assure you that we will have sufficient resources to make the necessary investments to do so, and we cannot assure you that we will be able to compete successfully in our market or against our competitors. Accordingly, new competitors may emerge and rapidly acquire market share. IF WE DO NOT RETAIN OUR KEY PERSONNEL AND ATTRACT AND RETAIN OTHER HIGHLY SKILLED EMPLOYEES, OUR BUSINESS COULD SUFFER. If we fail to retain and recruit the necessary personnel, our business and our ability to obtain new customers, maintain the quality of our products and provide acceptable levels of customer service could suffer. The success of our business depends heavily on the leadership of our senior management personnel and certain other key employees. If any of these persons were to leave our company it could be difficult to replace them, and our business could be harmed. See "Management." Our success also depends on our ability to recruit, retain and motivate highly skilled personnel. We believe that our success is attributable largely to the experience and stability of our labor force and our experienced and relatively stable workforce is one of our most significant assets. Our salaried and hourly employees have an average tenure with us of approximately 20 and 11 years, respectively. As our workforce ages and retirements occur, we may need to replace a significant portion of our skilled labor. Competition for these persons is intense, and we may not be successful in recruiting, training or retaining qualified personnel. Our productivity and growth depends on our ability to attract and retain additional qualified employees, and our failure to replace or expand our existing employee base could have a material adverse effect on our ability to grow. OUR ULTIMATE PRINCIPAL SHAREHOLDER'S INTERESTS MAY CONFLICT WITH YOURS. DLJ Merchant Banking owns approximately 96.3% of Holdings' outstanding common stock. Holdings owns 100% of Von Hoffmann's common stock. As a result, DLJ Merchant Banking is in a position to control all matters affecting us, and may authorize actions or have interests that could conflict with your interests. WE COULD FACE CONSIDERABLE BUSINESS AND FINANCIAL RISK IN IMPLEMENTING OUR ACQUISITION STRATEGY. As part of our growth strategy, we intend to consider acquiring complementary businesses. We cannot assure you that future acquisition opportunities will exist or, if they do, that we will be able to finance those opportunities. Future acquisitions could result in us incurring debt and contingent liabilities or incurring impairment charges with respect to goodwill. Risks we could face with respect to acquisitions also include: - difficulties in the integration of the operations, technologies, products and personnel of the acquired company; - risks of entering markets in which we have no or limited prior experience; - potential loss of employees; - diversion of management's attention away from other business concerns; and - expenses of any undisclosed or potential legal liabilities of the acquired company. The risks associated with acquisitions could have a material adverse effect upon our business, financial condition and results of operations. We cannot assure you that we will be successful in consummating future acquisitions on favorable terms or at all. 18 WE MAY BE REQUIRED TO MAKE SIGNIFICANT CAPITAL EXPENDITURES IN ORDER TO REMAIN TECHNOLOGICALLY AND ECONOMICALLY COMPETITIVE. Production technology in the printing industry has evolved and continues to evolve. Although we have invested approximately $80.0 million in equipment and plant expansions (excluding equipment obtained in acquisitions) over the past five years and do not currently forecast any further major expenditure, the emergence of any significant technological advances utilized by competitors could require us to invest significant capital in additional production technology in order to remain competitive. We cannot assure you that we would be able to fund any such investments. Our failure to invest in new technologies could have a material adverse effect on our business, financial condition or results of operations. WE ARE SUBJECT TO SIGNIFICANT ENVIRONMENTAL REGULATION AND ENVIRONMENTAL COMPLIANCE EXPENDITURES AND LIABILITIES. Our businesses are subject to many environmental and health and safety laws and regulations, particularly with respect to the generation, storage, transportation, disposal, release and emission into the environment of various substances. We believe we are in substantial compliance with these laws. Compliance with these laws and regulations is a significant factor in our business. Some or all of the environmental laws and regulations to which we are subject could become more stringent or more stringently enforced in the future and more stringent laws or regulations could be enacted. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial actions. Some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. In addition, we occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities may trigger compliance requirements that are not applicable to operating facilities. Consequently, we cannot assure you that existing or future circumstances or developments with respect to contamination will not require significant expenditures by us. 19 THE EXCHANGE OFFERS PURPOSE AND EFFECT Von Hoffmann issued the 2009 notes and the 2007 notes on March 15, 2002 and May 15, 1997, respectively, in separate private placements to a limited number of qualified institutional buyers, as defined under the Securities Act, and to a limited number of persons outside the United States. The 2009 Holdings debentures were issued by Holdings in exchange for its senior exchangeable preferred stock on October 16, 1998. In connection with each of these issuances, we entered into an indenture and a registration rights agreement. These agreements require that we file a registration statement under the Securities Act with respect to the registered securities to be issued in the exchange offers and, upon the effectiveness of the registration statement, offer to you the opportunity to exchange your old securities for a like principal amount of the relevant registered securities. These registered securities will be issued without a restrictive legend and, except as set forth below, may be reoffered and resold by you without registration under the Securities Act. After we complete the exchange offers for a series of old securities, our obligations with respect to the registration of those old securities and the registered securities will terminate, except as provided in the last paragraph of this section. A copy of each indenture relating to the securities and each registration rights agreement have been filed as exhibits to the registration statement of which this prospectus is a part. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, if you are not our "affiliate" within the meaning of Rule 405 under the Securities Act or a broker-dealer referred to in the next paragraph, we believe that registered securities to be issued to you in the exchange offers may be offered for resale, resold and otherwise transferred by you, without compliance with the registration and prospectus delivery provisions of the Securities Act. This interpretation, however, is based on your representation to us that: (1) the registered securities to be issued to you in the exchange offers are acquired in the ordinary course of your business; (2) you are not engaging in and do not intend to engage in a distribution of the registered securities to be issued to you in the exchange offers; and (3) you have no arrangement or understanding with any person to participate in the distribution of the registered securities to be issued to you in the exchange offers. If you tender your old securities in an exchange offer for the purpose of participating in a distribution of the registered securities to be issued to you in the exchange offers, you cannot rely on this interpretation by the staff of the Commission. Under those circumstances, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives registered securities in the exchange offers for its own account in exchange for old securities that were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of those registered securities. See "Plan of Distribution." If you will not receive freely tradeable registered securities in an exchange offer or are not eligible to participate in the exchange offers, you can elect, by indicating on the letter of transmittal for your securities and providing certain additional necessary information, to have your old securities registered in a "shelf" registration statement on an appropriate form pursuant to Rule 415 under the Securities Act. If we are obligated to file a shelf registration statement, we will be required to keep the shelf registration statement effective until the earlier of (a) the time when the securities covered by the shelf registration statement may be sold pursuant to Rule 144, (b) two years from the date the securities were originally issued or (c) the date on which all the securities registered under the shelf registration statement are disposed in accordance with the shelf registration statement. Other than as set forth in 20 this paragraph, you will not have the right to require us to register your old securities under the Securities Act. See "--Procedures for Tendering." CONSEQUENCES OF FAILURE TO EXCHANGE After we complete the exchange offers, if you have not tendered your old securities, you will not have any further registration rights, except as set forth above. Your old securities may continue to be subject to certain restrictions on transfer. Therefore, the liquidity of the market for your old securities could be adversely affected upon completion of the exchange offers if you do not participate in the exchange offers. TERMS OF THE EXCHANGE OFFERS Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal for your securities, we will accept any and all old securities validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date. We will issue a principal amount of registered securities in exchange for each principal amount of old securities accepted in an exchange offer. You may tender some or all of your old securities pursuant to the exchange offers. However, old securities other than the 2009 debentures, may be tendered only in integral multiples of $1,000 principal amount. The form and terms of the registered securities are substantially the same as the form and terms of the old securities, except that the registered securities to be issued in the exchange offers have been registered under the Securities Act and will not bear legends restricting their transfer. The registered securities will be issued pursuant to, and entitled to the benefits of, the indenture. The indenture also governs the old securities. Each class of registered securities and related old securities will be deemed one issue of securities under the indenture under which they were issued. As of the date of this prospectus, $215.0 million in aggregate principal amount of 2009 senior notes were outstanding, $100.0 million in aggregate principal amount of 2007 notes and $48.1 million in aggregate principal amount of 2009 Holdings debentures were outstanding. This prospectus, together with the applicable letter of transmittal, is being sent to all registered holders and to others believed to have beneficial interests in the old securities. We intend to conduct the exchange offers in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission promulgated under the Exchange Act. We will be deemed to have accepted validly tendered outstanding securities when, as, and if we have given oral or written notice of our acceptance to the exchange agent. The exchange agent will act as our agent for the tendering holders for the purpose of receiving the registered securities from us. If we do not accept any tendered securities because of an invalid tender, the occurrence of certain other events set forth in this prospectus or otherwise, we will return certificates for any unaccepted old securities, without expense, to the tendering holder as promptly as practicable after the expiration date. You will not be required to pay brokerage commissions or fees or, except as set forth below under "--Transfer Taxes," transfer taxes with respect to the exchange of your old securities in the exchange offers. We will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offers. See "--Fees and Expenses" below. EXPIRATION DATE; AMENDMENTS Each exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless we determine, in our sole discretion, to extend an exchange offer, in which case, it will expire at the later date and time to which it is extended. We do not intend to extend any of the exchange offers, although we reserve the right to do so. If we extend an exchange offer, we will give oral or written notice of the extension to the exchange agent and give each registered holder of outstanding securities for which the 21 exchange offer is being made notice by means of a press release or other public announcement of any extension prior to 9:00 a.m., New York City time, on the next business day after the scheduled expiration date for the exchange offer. We also reserve the right, in our sole discretion, (1) to delay accepting any old securities or, if any of the conditions set forth below under "--Conditions" have not been satisfied or waived, to terminate an exchange offer by giving oral or written notice of such delay or termination to the exchange agent; or (2) to amend the terms of an exchange offer in any manner, by complying with Rule 14e-l(d) under the Exchange Act to the extent that rule applies. We acknowledge and undertake to comply with the provisions of Rule 14e-l(c) under the Exchange Act, which requires us to pay the consideration offered, or return the old securities surrendered for exchange, promptly after the termination or withdrawal of an exchange offer. We will notify you as promptly as we can of any extension, termination or amendment. PROCEDURES FOR TENDERING BOOK-ENTRY INTERESTS The old securities were issued as global securities in fully registered form without interest coupons. Beneficial interests in the global securities, held by direct or indirect participants in DTC, are shown on, and transfers of these interests are effected only through, records maintained in book-entry form by DTC with respect to its participants. If you hold old securities in the form of book-entry interests and you wish to tender your old securities for exchange pursuant to an exchange offer, you must transmit to the exchange agent on or prior to the expiration date either: (1) a written or facsimile copy of a properly completed and duly executed letter of transmittal for your securities, including all other documents required by such letter of transmittal, to the exchange agent at the address set forth on the cover page of the letter of transmittal; or (2) a computer-generated message transmitted by means of DTC's Automated Tender Offer Program system and received by the exchange agent and forming a part of a confirmation of book-entry transfer, in which you acknowledge and agree to be bound by the terms of the letter of transmittal for your securities. In addition, in order to deliver old securities held in the form of book-entry interests: (1) a timely confirmation of book-entry transfer of such securities into the exchange agent's account at DTC pursuant to the procedure for book-entry transfers described below under "--Book-Entry Transfer" must be received by the exchange agent prior to the expiration date; or (2) you must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD SECURITIES AND THE APPLICABLE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OLD SECURITIES TO US. YOU MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE TO EFFECT THE ABOVE TRANSACTIONS FOR YOU. 22 CERTIFICATED OLD SECURITIES Only registered holders of certificated old securities may tender those securities in the exchange offers. If your old securities are certificated notes and you wish to tender those securities for exchange pursuant to an exchange offer, you must transmit to the exchange agent on or prior to 5:00 p.m. on the expiration date, a written or facsimile copy of a properly completed and duly executed letter of transmittal, including all other required documents, to the address set forth below under "--Exchange Agent." In addition, in order to validly tender your certificated old securities: (1) the certificates representing your old securities must be received by the exchange agent prior to the expiration date; or (2) you must comply with the guaranteed delivery procedures described below. PROCEDURES APPLICABLE TO ALL HOLDERS If you tender an old security and you do not withdraw the tender prior to 5:00 p.m. on the expiration date, you will have made an agreement with us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal for your securities. If your old securities are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your securities, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal for your securities and delivering your old securities, either make appropriate arrangements to register ownership of the old securities in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal must be guaranteed by an eligible institution unless: (1) old notes tendered in an exchange offer are tendered either (A) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the holder's applicable letter of transmittal; or (B) for the account of an eligible institution; and (2) the box entitled "Special Registration Instructions" on the letter of transmittal has not been completed. If signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantee must be by a financial institution, which includes 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 Program or the Stock Exchanges Medallion Program. If the letter of transmittal for your securities is signed by a person other than you, your old securities must be endorsed or accompanied by a properly completed bond power and signed by you as your name appears on those old securities. If the letter of transmittal for your securities or any old securities 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, those persons should so indicate when signing. Unless we waive this requirement, in this instance you must submit with the letter of transmittal for your securities proper evidence satisfactory to us of their authority to act on your behalf. We will determine, in our sole discretion, all questions regarding the validity, form, eligibility, including time of receipt, acceptance and withdrawal of tendered old securities. This determination will 23 be final and binding. We reserve the absolute right to reject any and all old securities not properly tendered or any old securities our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular old securities. Our interpretation of the terms and conditions of the exchange offers, including the instructions in the respective letters of transmittal for your securities, will be final and binding on all parties. You must cure any defects or irregularities in connection with tenders of your old securities within the time period we determine unless we waive that defect or irregularity. Although we intend to notify you of defects or irregularities with respect to your tender of old securities, neither we, the exchange agent nor any other person will incur any liability for failure to give this notification. Your tender will not be deemed to have been made and your securities will be returned to you if: (1) you improperly tender your old securities; (2) you have not cured any defects or irregularities in your tender; and (3) we have not waived those defects, irregularities or improper tender. The exchange agent will return your securities, unless otherwise provided in the letter of transmittal for your securities, as soon as practicable following the expiration of the applicable exchange offer. In addition, we reserve the right in our sole discretion, with respect to an exchange offer, to: (1) purchase or make offers for, or offer registered securities for, any old securities that remain outstanding subsequent to the expiration of the exchange offer; (2) terminate the exchange offer; and (3) to the extent permitted by applicable law, purchase securities in the open market, in privately negotiated transactions or otherwise. The terms of any of these purchases or offers could differ from the terms of the exchange offer. By tendering in an exchange offer, you will represent to us that, among other things: (1) the registered securities to be acquired by you in the exchange offer are being acquired in the ordinary course of your business, (2) you are not engaging in and do not intend to engage in a distribution of the registered securities to be acquired by you in the exchange offer, (3) you do not have an arrangement or understanding with any person to participate in the distribution of the registered securities to be acquired by you in the exchange offer, and (4) you are not our "affiliate," as defined under Rule 405 of the Securities Act. In all cases, issuance of registered securities for old securities that are accepted for exchange in the exchange offers will be made only after timely receipt by the exchange agent of certificates for your old securities or a timely book-entry confirmation of your old securities into the exchange agent's account at DTC, a properly completed and duly executed letter of transmittal for your securities, or a computer-generated message instead of the letter of transmittal, and all other required documents. If any tendered old securities are not accepted for any reason set forth in the terms and conditions of the exchange offer or if old securities are submitted for a greater principal amount than you desire to exchange, the unaccepted or non-exchanged old securities, or old securities in substitution therefor, will be returned without expense to you. In addition, in the case of old securities, tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described below, the non-exchanged old securities will be credited to your account maintained with DTC, as promptly as practicable after the expiration or termination of the exchange offers. 24 GUARANTEED DELIVERY PROCEDURES If you desire to tender your old securities and your old securities are not immediately available or one of the situations described in the immediately preceding paragraph occurs, you may tender if: (1) you tender through an eligible financial institution; (2) on or prior to 5:00 p.m., New York City time, on the expiration date, the exchange agent receives from an eligible institution, a written or facsimile copy of a properly completed and duly executed letter of transmittal for your securities and notice of guaranteed delivery for your securities, substantially in the form provided by us; and (3) the certificates for all certificated old securities, in proper form for transfer, or a book-entry confirmation, and all other documents required by the letter of transmittal for your securities, are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery for your securities. The notice of guaranteed delivery for your securities may be sent by facsimile transmission, mail or hand delivery. The notice of guaranteed delivery must set forth: (1) your name and address; (2) the amount of old securities you are tendering; and (3) a statement that your tender is being made by the notice of guaranteed delivery for your securities and that you guarantee that within three New York Stock Exchange trading days after the execution of the notice of guaranteed delivery, the eligible institution will deliver the following documents to the exchange agent: (A) the certificates for all certificated old securities being tendered, in proper form for transfer or a book-entry confirmation of tender; (B) a written or facsimile copy of the letter of transmittal for your securities, or a book-entry confirmation instead of the letter of transmittal; and (C) any other documents required by the letter of transmittal for your securities. BOOK-ENTRY TRANSFER The exchange agent will establish accounts with respect to book-entry interests at DTC for purposes of the exchange offers promptly after the date of this prospectus. You must deliver your book-entry interest by book-entry transfer to the account maintained by the exchange agent at DTC for the applicable exchange offer. Any financial institution that is a participant in DTC's systems may make book-entry delivery of book-entry interests by causing DTC to transfer the book-entry interests into the relevant account of the exchange agent at DTC in accordance with DTC's procedures for transfer. If one of the following situations occur: (1) you cannot deliver a book-entry confirmation of book-entry delivery of your book-entry interests into the relevant account of the exchange agent at DTC; or (2) you cannot deliver all other documents required by the letter of transmittal to the exchange agent prior to the expiration date; then you must tender your book-entry interests according to the guaranteed delivery procedures discussed above. 25 WITHDRAWAL RIGHTS You may withdraw tenders of your old securities at any time prior to 5:00 p.m., New York City time, on the expiration date. For your withdrawal to be effective, the exchange agent must receive a written or facsimile transmission notice of withdrawal at its address set forth below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration date. The notice of withdrawal must: (1) state your name; (2) identify the specific old securities to be withdrawn, including the certificate number or numbers and the principal amount of securities to be withdrawn; (3) be signed by you in the same manner as you signed the letter of transmittal for your securities when you tendered your old securities, including any required signature guarantees, or be accompanied by documents of transfer sufficient for the exchange agent to register the transfer of the old securities into your name; and (4) specify the name in which the old securities are to be registered, if different from yours. We will determine all questions regarding the validity, form and eligibility, including time of receipt, of withdrawal notices. Our determination will be final and binding on all parties. Any old securities withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offers. Any old securities which have been tendered for exchange but which are not exchanged for any reason will be returned to you without cost as soon as practicable after withdrawal, rejection of tender or termination of the applicable exchange offer. Properly withdrawn old securities may be retendered by following one of the procedures described under "--Procedures for Tendering" above at any time on or prior to 5:00 p.m., New York City time, on the expiration date. CONDITIONS Notwithstanding any other provision of an exchange offer and subject to our obligations under the applicable registration rights agreement, we will not be required to accept for exchange, or to issue registered securities in exchange for, any old securities in any exchange offer and may terminate or amend an exchange offer, if at any time before the acceptance of any old securities for exchange in the exchange offer any of the following events occur: (1) any injunction, order or decree has been issued by any court or any governmental agency that would prohibit, prevent or otherwise materially impair our ability to proceed with the exchange offer; or (2) the exchange offer violates any applicable law or any applicable interpretation of the staff of the Commission. These conditions are for our sole benefit and we may assert them regardless of the circumstances giving rise to them, subject to applicable law. We also may waive in whole or in part at any time and from time to time any particular condition to an exchange offer in our sole discretion. If we waive a condition, we may be required in order to comply with applicable securities laws, to extend the expiration date of an exchange offer. Our failure at any time to exercise any of the foregoing rights will not be deemed a waiver of these rights and these rights will be deemed ongoing rights which may be asserted at any time and from time to time. In addition, we will not accept for exchange any old securities tendered, and no registered securities will be issued in exchange for any of those old securities, if at the time the securities are tendered any stop order is threatened by the Commission or in effect with respect to the registration 26 statement of which this prospectus is a part or the qualification of the indenture under the Trust Indenture Act of 1939, as amended. None of the exchange offers are conditioned on any minimum principal amount of old securities being tendered for exchange. EXCHANGE AGENT We have appointed U.S. Bank National Association as exchange agent for each of the exchange offers. Questions, requests for assistance and requests for additional copies of the prospectus, the letter of transmittal for your securities and other related documents should be directed to the exchange agent addressed as follows: BY REGISTERED OR CERTIFIED MAIL: U.S. Bank National Association Attention: Reorganization Department 180 East 5th Street St. Paul, MN 55101 BY HAND OR BY OVERNIGHT COURIER: U.S. Bank National Association Attention: Reorganization Department 180 East 5th Street St. Paul, MN 55101 Corporate Trust Services Window Ground Level By Facsimile: (651) 244-0711 By Telephone: (651) 244-0721 Attention: Reorganization Section
The exchange agent also acts as trustee under the indenture governing the 2009 notes. FEES AND EXPENSES We will not pay brokers, dealers, or others soliciting acceptances of the exchange offers. The principal solicitation is being made by mail. Additional solicitations, however, may be made in person or by telephone by our officers and employees. We will pay the cash expenses to be incurred in connection with the exchange offers. TRANSFER TAXES You will not be obligated to pay any transfer taxes in connection with a tender of your old securities for exchange unless you instruct us to register registered securities in the name of, or request that old securities not tendered or not accepted in the exchange offers be returned to, a person other than the registered tendering holder, in which event the registered tendering holder will be responsible for the payment of any applicable transfer tax. ACCOUNTING TREATMENT We will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offers. We will amortize the expense of the exchange offers over the term of the registered securities under generally accepted accounting principles. 27 CAPITALIZATION The following table sets forth the cash and cash equivalents and capitalization of Holdings as of March 31, 2002. The following table should be read in conjunction with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Certain Indebtedness" and the consolidated financial statements of Holdings, together with the related notes thereto, included elsewhere in this prospectus.
AS OF MARCH 31, 2002 -------------------- (UNAUDITED) (IN MILLIONS) Cash and cash equivalents................................... $ 28.8 ====== Debt: Revolving credit facility(1).............................. $ 27.0 10 1/4% Senior Notes Due 2009............................. 215.0 10 3/8% Senior Subordinated Notes due 2007................ 100.0 ------ Total operating company debt............................ 342.0 13 1/2% Subordinated Exchange Debentures due 2009(2)...... 44.6 ------ Total debt.............................................. 386.6 Stockholders' Equity........................................ 25.6 ------ Total capitalization...................................... $412.2 ------
- ------------------------ (1) The revolving credit facility provides for revolving loans of $90.0 million and may be increased to provide for borrowings of up to $100.0 million if we are able to find lenders willing to provide such increase. As of March 31, 2002 we had total indebtedness of $27.0 million and had $49.1 million of additional borrowings available under our revolving credit facility, after excluding $1.3 million of letters of credit outstanding under that facility. (2) Reflects redemption value of the 2009 Holdings debentures net of the fair value of the warrants issued concurrently with the debentures. The redemption value of the 2009 Holdings debentures at March 31, 2002 was $47.3 million. Until such time as cash interest is payable on the 2009 Holdings debentures, interest on the 2009 Holdings debentures accretes to principal at 13.5% per annum. Holdings' obligation to make cash interest payments with respect to the 2009 Holdings debentures is subject to the terms of the then-outstanding indebtedness of Holdings and its subsidiaries and any other contractual provisions limiting the ability of Holdings and its subsidiaries to declare or pay cash interest. Our revolving credit facility restricts such payments. Accordingly, Holdings does not currently make, and in the foreseeable future does not intend to make, cash interest payments on the debentures. See "Description of Certain Indebtedness--Subordinated Exchange Debentures." 28 SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data of Holdings' predecessor company for the period from January 1, 1997 to May 24, 1997 and Holdings for the period from May 25, 1997 to December 31, 1997 and for the four years ended December 31, 2001 are derived from the audited consolidated financial statements. The financial data for the three-month periods ended March 31, 2001 and 2002 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Holdings considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2002 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2002. The following table should be read in conjunction with "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of Holdings, including the related notes thereto, appearing elsewhere in this prospectus.
PREDECESSOR COMPANY HOLDINGS ------------- ------------------------------------------------------------------------------------ FOR THE FOR THE QUARTER ENDED PERIOD PERIOD ------------------------- OF JANUARY 1- OF MAY 25- FISCAL YEAR ENDED DECEMBER 31, MARCH 31, MARCH 31, MAY 24, DECEMBER 31, ----------------------------------------- 2001 2002 1997 1997 1998(1) 1999(1) 2000(1) 2001 (UNAUDITED) (UNAUDITED) ------------- ------------ -------- -------- -------- -------- ----------- ----------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales............ $77,794 $106,723 $310,608 $386,108 $443,423 $407,096 $112,852 $82,666 Cost of products and services........... 61,130 87,532 249,826 322,311 374,166 346,917 96,174 73,297 ------- -------- -------- -------- -------- -------- -------- ------- Gross profit......... 16,664 19,191 60,782 63,797 69,257 60,179 16,678 9,369 Operating expenses(2)........ 11,443 8,289 49,482 34,143 35,747 33,317 8,738 7,094 ------- -------- -------- -------- -------- -------- -------- ------- Operating income..... 5,221 10,902 11,300 29,654 33,510 26,862 7,940 2,275 Interest expense -- subsidiary......... 244 13,605 28,625 32,111 36,855 32,144 9,535 6,394 Interest expense -- subordinated exchange debentures(3)...... -- -- 541 4,694 5,296 5,983 1,427 1,613 Other income (expense).......... 224 648 (1,107) (89) (172) (247) 8 (446) ------- -------- -------- -------- -------- -------- -------- ------- Income (loss) before income taxes and extraordinary item............... 5,201 (2,055) (18,973) (7,240) (8,813) (11,512) (3,014) (6,178) Income tax provision (benefit).......... 3,981 663 (4,195) 855 (702) (1,268) (256) (2,354) ------- -------- -------- -------- -------- -------- -------- ------- Net income (loss) before extraordinary item............... 1,220 (2,718) (14,778) (8,095) (8,111) (10,244) (2,758) (3,824) Extraordinary item, net of taxes (4)... -- -- -- -- -- -- -- (1,969) ------- -------- -------- -------- -------- -------- -------- ------- Net Income (loss).... $ 1,220 $ (2,718) $(14,778) $ (8,095) $ (8,111) $(10,244) $ (2,758) $(5,793) ======= ======== ======== ======== ======== ======== ======== =======
29
PREDECESSOR COMPANY HOLDINGS ------------- ------------------------------------------------------------------------------------ FOR THE FOR THE QUARTER ENDED PERIOD PERIOD ------------------------- OF JANUARY 1- OF MAY 25- FISCAL YEAR ENDED DECEMBER 31, MARCH 31, MARCH 31, MAY 24, DECEMBER 31, ----------------------------------------- 2001 2002 1997 1997 1998(1) 1999(1) 2000(1) 2001 (UNAUDITED) (UNAUDITED) ------------- ------------ -------- -------- -------- -------- ----------- ----------- (DOLLARS IN THOUSANDS) OTHER DATA: EBITDA(5)............ $19,779 $ 25,854 $ 65,267 $ 73,611 $ 79,399 $ 76,493 $ 19,520 $13,164 Depreciation and amortization(6).... 5,687 14,982 34,792 40,327 43,459 47,319 11,459 9,647 LIFO pre-tax adjustment(7)...... -- (385) (808) 704 281 258 -- -- Non-compete and special consulting expenses(8)........ 167 355 1,483 2,926 2,149 578 121 1,242 Restructuring charge(9).......... -- -- -- -- -- 1,476 -- -- Impairment charge(10)......... -- -- 18,500 -- -- -- -- -- Recapitalization charge(11)......... 8,704 -- -- -- -- -- -- -- Ratio of earnings to fixed charges(12)........ 22.3x 0.9x 0.4x 0.8x 0.8x 0.7x 0.7x 0.2x Capital expenditures....... $ 1,017 $ 5,009 $ 14,860 $ 22,639 $ 28,132 $ 23,876 $ 12,068 $ 6,396 BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents........ $ 9,390 $ 1,109 $ 2,454 $ 5,686 $ 18,320 $ 5,576 $28,802 Accounts receivable......... 20,681 45,402 59,969 57,899 46,751 64,273 47,851 Inventories.......... 14,898 33,442 31,650 36,117 23,262 43,391 32,084 Working capital...... 32,631 34,614 40,351 67,266 36,950 27,437 78,393 Property, plant and equipment, net..... 97,847 176,526 164,514 163,316 148,476 166,121 144,694 Total assets......... 324,376 463,796 453,493 466,418 428,748 477,856 453,292 Operating company debt(13)........... 216,875 346,875 347,700 364,775 341,555 360,496 342,000 Total debt........... 216,875 373,919 379,437 401,808 384,571 398,956 386,629 Total stockholders' equity............. 52,110 35,836 27,629 19,395 8,972 16,604 25,625
- -------------------------- (1) We acquired Bawden Printing in January 1998, H&S Graphics and Preface in June 1998, Custom Printing in July 1998 and Precision in March 2000. The results of operations of these acquired businesses have been included in our consolidated financial statements since their respective dates of acquisition. Our results of operations for the periods prior to these acquisitions may not be comparable to our results of operations for subsequent periods. (2) Operating expenses include selling and administrative expenses, non-compete and special consulting expenses, restructuring charge, impairment charge and recapitalization charge. (3) Holdings' obligation to make cash interest payments with respect to the debentures is subject to its subsidiaries' ability to pay dividends under applicable law, the terms of their outstanding indebtedness and any other applicable contractual provisions limiting their ability to declare and pay cash dividends. Our revolving credit facility will restrict such payments. Accordingly, Holdings does not currently make, and in the foreseeable future does not intend to make, cash interest payments on the debentures. (4) On March 26, 2002, we entered into our revolving credit facility which resulted in the extinguishment of the previous credit agreement. We recognized an extraordinary loss of approximately $2.0 million, net of tax benefit of $1.2 million. The entire loss represented the write-off of deferred debt issuance costs associated with the previous credit agreement. 30 (5) EBITDA represents operating income plus depreciation and amortization, LIFO pre-tax adjustments, non-compete and special consulting expenses, restructuring charge, impairment charge and recapitalization charge. EBITDA is not a measure of performance under accounting principles generally accepted in the United States. EBITDA should not be considered a substitute for cash flow from operations, net earnings or other measures of performance as defined by accounting principles generally accepted in the United States or as a measure of our profitability or liquidity. EBITDA does not give effect to the cash we must use to service our debt, if any, or pay our income taxes and thus does not reflect the funds actually available for capital expenditures or other discretionary uses. Our presentation of EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the method of calculation. It is included herein to provide additional information with respect to the ability of us to meet our consolidated debt service, capital expenditure and working capital requirements. (6) Includes depreciation and amortization that is included within operating income and excludes amortization of deferred financing costs, which is classified in interest expense-subsidiary. (7) The LIFO pre-tax adjustment, which is reflected in cost of products and services, reflects an annual adjustment to record inventory on the last-in, first-out method. (8) Non-compete and special consulting expenses relate to the amortization of certain amounts allocated in respect of non-competition agreements made in connection with our acquisition of H&S Graphics as well as costs incurred for consulting services used in assisting in the acquisition integration process. The cash portion of these expenses amounted to $0.2 million, $0.4 million, $1.4 million, $2.7 million, $1.9 million, $0.4 million, $0.1 million and $1.2 million for the periods presented, respectively. (9) Restructuring charge represents the cost for employee severance and equipment relocation related to certain sheet-fed, plate-making and book-binding operations of our company. (10) Impairment charge relates to the goodwill impairment of the carrying value of the H&S Graphics acquisition as a result of a material and permanent reduction in forecasted cash flows for the operation. (11) Recapitalization charge represents the cost of compensation earned by management as a result of a recapitalization transaction in May 1997. In addition, the recapitalization charge includes costs such as legal, accounting and financial advisory services incurred by the predecessor company. (12) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as income or loss before income taxes and extraordinary items plus fixed charges. Fixed charges consist of interest expense (including amortization of deferred financing costs). For the period beginning May 25, 1997 through December 31, 1997, additional earnings of $2.1 million would have been required to cover fixed charges during the period. For the fiscal years ending December 31, 1998, 1999, 2000 and 2001, additional earnings of $19.0 million, $7.2 million, $8.8 million and $11.5 million would have been required to cover fixed charges during the years, respectively. For the quarterly periods ended March 31, 2001 and 2002, additional earnings of $3.0 million and $6.2 million would have been required to cover fixed charges during the periods, respectively. (13) Operating company debt reflects the debt of Von Hoffmann and excludes the 2009 Holdings debentures in the amount of $0, $0, $27.0 million, $31.7 million, $37.0 million, $43.0 million, $38.5 million and $44.6 million for the periods presented, respectively. 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, including the notes thereto, contained elsewhere in this prospectus. Certain statements in this section are forward-looking statements. See "Forward- Looking Statements." GENERAL We manufacture four-color case-bound and soft-cover educational textbooks in the United States. Our products are sold principally to educational publishers who, in turn, sell them into the ELHI and college instructional materials markets. In addition to instructional materials manufacturing, we provide our customers with a full range of value-added printing and design services from early design processes to final manufacture and distribution of our products. A small portion of our products is sold to the commercial market where we target business-to-business catalog manufacturers, the federal government printing office, trade publishers, health-care catalog manufacturers, the financial services industry and numerous other small niches. Our results of operations are affected by a number of factors, including demographic trends in ELHI and college enrollment, instructional materials spending, the ELHI textbook adoption process, general economic conditions and seasonality. We also believe our business has been positively affected by the heightened profile of education in the public and political arenas. We derive approximately 68% of our net sales from the sale of instructional materials, primarily the sale of textbooks to educational publishers. The primary factors affecting the instructional materials market are: (i) a continued high level of student enrollment at both the ELHI and college levels; (ii) a continued increase in the number of textbooks per student; (iii) increased state funding for public elementary and secondary schools; (iv) increased content per textbook; and (v) increased importance of supplemental materials. The textbook adoption process, around which ELHI book publishers schedule the timing of new textbook introductions, is typically limited to a small number of disciplines in any state in any given year. Adoptions in core disciplines such as reading, mathematics or science in larger states such as California, Texas or Florida, however, can lead to significant increases in net sales in a given year. Additionally, orders for reprints associated with a textbook awarded through the adoption process can generate significant revenues during the adoption cycle, which can range from four to eight years, depending on the subject matter and the state. Non-adoption, or open territory states, tend to follow the lead provided by adoption states as many new titles are brought to the market in specific response to the adoption schedule. Our net sales of products and services are also affected by general economic conditions. In particular, net sales to the instructional materials market are affected as the majority of public funding for education comes from state and local tax revenues, which have a direct correlation with prevailing economic activity levels. Product demand in the segments of the commercial market we also serve is sensitive to economic conditions. We experience seasonal fluctuations in our net sales and production for the educational textbook and commercial markets. State and local textbook purchasing and delivery schedules significantly influence the seasonality of the demand for our products in these areas. The purchasing schedule for the ELHI markets usually starts in the spring and peaks in the summer months preceding the start of the school year. The majority of college textbook sales occur from June through August and November through January. Our net sales to the commercial market tend to peak in the third and fourth quarters, with the fourth quarter representing the strongest quarter. Net sales of our digital pre-press and 32 composition businesses tend to precede the peak production periods for textbook manufacturing by a quarter with our business peaking in the first and second quarters of our calendar fiscal year. A significant portion of our growth over the past five years has been due to five acquisitions we made since 1998, which have increased our sources of revenue within the instructional materials market and provided us with a significant presence in the one- and two-color commercial book market. RECAPITALIZATION RESTATED TO A PURCHASE We treated DLJ Merchant Banking's 1997 acquisition of a controlling interest in Holdings as a recapitalization on the basis that ZS VH II L.P., or ZS, and certain of its affiliates, which collectively had owned a controlling interest in Holdings, retained an ownership interest of approximately 10.0% in Holdings after the acquisition transaction. As a result of treating the transaction as a recapitalization, Holdings did not give purchase accounting treatment to the transaction and did not record goodwill. On June 20, 2002, ZS sold their remaining interest in Holdings to us. The purchase price paid for ZS's interest came from cash on hand of Holdings, which cash was proceeds from DLJ Merchant Banking's equity contribution in March 2002. As a result of the sale, there is no longer continuity in the share ownership of Holdings pre- and post-acquisition. Accordingly, we have restated our financial statements on the basis that there has been a retroactive change in reporting entity as of May 25, 1997, the date of DLJ Merchant Banking's original acquisition, and given the transaction purchase accounting treatment from that date. As a result of the change, our gross profit for 1999, 2000 and 2001 decreased by $10.8 million, $12.3 million and $12.5 million, respectively, and our EBITDA for those periods remains consistent with previously reported amounts. The selected financial information and consolidated financial statements contained in this prospectus reflect the restatement of our financial statements to apply purchase accounting from the acquisition date. See "Note 2 to Notes to Consolidated Financial Statements." RESULTS OF OPERATIONS Our net sales represent our per-book charges for each book manufactured; fees for pre-press, composition and creative work; set-up charges for each print run; the sale of paper for use in the production of instructional materials; and charges for fulfillment and distribution of books. Our cost of products and services consists primarily of the cost of paper, ink and bindery materials, depreciation, manufacturing overhead and labor costs. Paper costs are incurred both through our paper management programs, which include special arrangements on payment, inventorying and billing among our company, the paper company and the customer, as well as direct purchases of paper by us for specific customer orders. In both cases, paper costs generally flow through to the customer. Ink and bindery materials are direct material inputs to our manufacturing process in the production of a book. We depreciate our plant and equipment using straight-line or accelerated methods over their estimated useful lives. This depreciation is included as a direct cost of products and services. Manufacturing overhead includes a range of costs such as electrical power, maintenance costs, supervisory salaries, insurance and real estate taxes. Labor costs are divided into direct and indirect components. Direct labor includes all crews working on the production of books and other materials along with associated fringe-benefit costs. Indirect labor includes all supervisory compensation and benefit costs along with the cost of other employees not directly involved in the production process. Our operating expenses represent selling and administrative expenses and non-compete and special consulting expenses and a restructuring charge incurred in 2001. Selling and administrative expenses consist primarily of the compensation of, and cost of benefits for, our administrative and sales personnel as well as amortization of goodwill. Additionally, our selling and administrative costs include corporate expenses such as legal, audit and other professional fees and telephone and travel costs. Our non-compete and special consulting expenses relate to the amortization of certain amounts allocated in respect of non-competition agreements made in connection with our acquisition of H&S Graphics, our 33 digital pre-press and composition business, as well as costs incurred for consulting services used in assisting in the acquisition integration process. Restructuring charge includes the costs associated with the closure of our Mid-Missouri Graphics bindery in Owensville, Missouri and our St. Louis sheet-fed operations. Interest expense--subsidiary represents the consolidated interest expense on the debt of Holdings, consisting of the bank debt facilities and senior subordinated notes. Interest expense--subordinated exchange debenture relates to interest on the 2009 Holdings debentures of Holdings, which Holdings issued in exchange for its then outstanding senior exchangeable preferred stock in 1998. The 2009 Holdings debentures bear interest at 13.5% per annum. While cash interest payments are prohibited, interest on the subordinated exchange debentures accretes to principal. Holdings' obligation to make cash interest payments with respect to the subordinated exchange debentures is subject to the terms of its and its subsidiaries' then-outstanding indebtedness and any other applicable contractual provisions limiting their ability to declare and pay cash interest. Our existing senior credit facility restricts, and our revolving credit facility will restrict, such payments. Accordingly, Holdings does not currently make, and in the foreseeable future does not intend to make, cash interest payments on the subordinated exchange debentures. YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 NET SALES. Net sales decreased by $36.3 million, or 8.2%, from $443.4 million in 2000 to $407.1 million in 2001. This decrease was attributable primarily to a decrease in sales to the instructional materials market due, in part, to a general decline in sales throughout the instructional materials manufacturing industry caused by a softening economy and smaller budgets at the state and local levels. Additionally, educational publishers were holding excess inventories at the end of 2000, which significantly impacted their order levels in 2001, particularly in the second half of the year as the economy continued to slow. As a result of the decrease in sales, we conducted a thorough review of our manufacturing capacity against our anticipated demand levels. This process resulted in the closure of our Mid-Missouri Graphics bindery operation in Owensville, Missouri in September, 2001, which was consolidated into our Jefferson City, Missouri operations. Other selective cost reductions were implemented throughout the last half of 2001, including manning reductions, overhead eliminations and hiring freezes. COST OF PRODUCTS AND SERVICES. Cost of products and services decreased by $27.3 million, or 7.3%, from $374.2 million in 2000 to $346.9 million in 2001. The primary reason for the decrease in our cost of products and services was the impact of the decline in sales volume on our variable costs. Also, sale of scrap items, including waste paper and consumed aluminum printing plates, which are offset against cost of products and services, decreased by 50% in dollar value due to lower prices in these markets and lower volumes generated in our plants due to lower sales levels. As a percentage of net sales, cost of products and services increased from 84.4% during 2000 to 85.2% during 2001. This increase was a result of lower sales volumes and the semi-fixed nature of the labor component in our cost structure. While initiatives were taken to address our cost position in 2001, they were not sufficient to fully offset the impact of the lower sales volumes on our operations. GROSS PROFIT. Gross profit for 2001 decreased by $9.1 million, or 13.1%, from $69.3 million in 2000 to $60.2 million for 2001. Gross profit, expressed as a percentage of net sales, was 15.6% for 2000, compared to 14.8% for 2000. This reduction in gross profit was attributable to higher headcount within our four-color textbook manufacturing operations in the first half of 2001 and lower scrap volume, price and lower activity levels in our operations in the second half of 2001. OPERATING EXPENSES. Operating expenses decreased by $2.4 million, or 6.8%, from $35.7 million for 2000 to $33.3 million in 2001. This decrease was primarily attributable to reductions in incentive compensation payouts in 2001 based on the deteriorated performance in comparison to 2000. 34 INTEREST EXPENSE--SUBSIDIARY. Interest expense--subsidiary decreased $4.8 million, or 12.8%, from $36.9 million in 2000 to $32.1 million in 2001. This decrease was a result of lower interest rates reducing our borrowing costs on the variable interest component of our debt, along with lower average borrowings under the revolving component of our existing senior credit facility. During 2001, the average annual interest rate, excluding amortization of debt issuance costs, was 8.45% for the senior and subordinated debt at the Von Hoffmann level, compared to a 9.39% rate for 2000. Our interest rate hedge of $63.0 million expired in December 2000 and has not been replaced, allowing us to benefit from the lower interest rates that prevailed in 2001. INTEREST EXPENSE--subordinated exchange debentures. Interest expense--subordinated exchange debentures increased $0.7 million, or 13.0%, from $5.3 million in 2000 to $6.0 million in 2001. This increase resulted from the interest compounding effect on the accretion of this debenture. INCOME TAX BENEFIT. Income tax benefit increased $0.6 million, from $0.7 million in 2000 to $1.3 million in 2001, due to a higher level of pre-tax losses in 2001, partially offset by the impact of non-deductible goodwill and taxable income allocations among the states in which we do business changing our effective tax rate. NET LOSS. Net loss increased $2.1 million, or 26.3%, from $8.1 million in 2000 to $10.2 million in 2001. The increased net loss in 2001 primarily resulted from the impact of lower sales described above. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 NET SALES. Net sales increased by $57.3 million, or 14.8%, from $386.1 million in 1999 to $443.4 million in 2000. This increase was primarily attributable to the inclusion of Precision from its acquisition date of March 30, 2000, which added $13.8 million in sales, and sales growth primarily related to volume increases aggregating $44.0 million in our other operations other than our one- and two-color textbook manufacturing business, which experienced a small sales decline. COST OF PRODUCTS AND SERVICES. Cost of products and services increased $51.9 million, or 16.1%, from $322.3 million in 1999 to $374.2 million in 2000. The primary reason for this increase was the higher sales volume that drove increases in direct materials, labor and manufacturing overheads. Additionally, cost of products and services increased in 2000 due to the acquisition of Precision, which added $9.5 million to cost of products and services from its March 30, 2000 acquisition date. As a percentage of net sales, cost of products and services increased from 83.5% during 1999 to 84.4% during 2000, due to profit erosion in the commercial side of the business, which underwent a significant turnaround in the second half of 2000. GROSS PROFIT. Gross profit increased $5.5 million, or 8.6%, from $63.8 million in 1999 to $69.3 million in 2000. Gross profit, expressed as a percentage of net sales, was 16.5% for 1999, compared to 15.6% for 2000. The reduction was primarily due to the impact of an increase in lower-margin one- and two-color book business and higher costs experienced in the four-color operation in 2000, as a result of the increased labor costs resulting from increased volume levels. OPERATING EXPENSES. Operating expenses increased $1.6 million, or 4.7%, from $34.1 million in 1999 to $35.7 million in 2000. This increase was primarily attributable to general cost increases and increased selling and administrative expenses, including $1.0 million associated with the Precision acquisition. INTEREST EXPENSE--SUBSIDIARY. Interest expense--subsidiary increased $4.8 million, or 14.8%, from $32.1 million in 1999 to $36.9 million in 2000. This increase was a result of increased debt levels required to effect the Precision acquisition in 2000 as well as higher prevailing interest rates impacting the floating rate component of our existing senior credit facility. During 2000 the average annual interest rate was 9.39% for the senior and subordinated debt at the Von Hoffmann level. This 35 compares to an 8.86% rate for 1999. Our interest rate hedge of $63.0 million expired in December 2000 and has not been replaced. INTEREST EXPENSE--SUBORDINATED EXCHANGE DEBENTURES. Interest expense--subordinated exchange debentures increased $0.6 million, or 12.8%, from $4.7 million in 1999 to $5.3 million in 2000, because of the compounding effects of the accretion of the debenture. INCOME TAX PROVISION (BENEFIT). Income tax provision decreased $1.6 million, from $0.9 million tax provision in 1999 to $0.7 million tax benefit in 2000. This decrease resulted from the impact of non-deductible goodwill and state income tax on the effective income tax rate. NET LOSS. Net loss of $8.1 million in 1999 was comparable to $8.1 million net loss in 2000. Higher operating performance in 2000 was offset by higher interest costs. QUARTER ENDED MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001 NET SALES. Net sales decreased by $30.2 million, or 26.7%, from $112.9 million for the quarter ended March 31, 2001 to $82.7 million for the quarter ended March 31, 2002. This decrease was primarily attributable to decreased volume in sales to the instructional materials market. The decrease in sales throughout the instructional materials industry was caused by a softening economy, reduced budgets at the state and local levels as well as a reduction in textbook adoption activity in major states in 2002. COST OF PRODUCTS AND SERVICES. Cost of products and services decreased by $22.9 million, or 23.8%, from $96.2 million for the quarter ended March 31, 2001 to $73.3 million for the quarter ended March 31, 2002. The primary reason for the decrease was the impact of the decline in sales volume on our variable costs. As a percentage of net sales, cost of products and services increased from 85.2% during the quarter ended March 31, 2001 to 88.7% during the quarter ended March 31, 2002. This increase was a result of lower sales volumes and the semi-fixed nature in the labor component of our cost structure. While initiatives continue to be taken to address our cost position in 2002, they were not sufficient to fully offset the impact of the lower sales volumes on our operations. GROSS PROFIT. Gross profit decreased by $7.3 million, or 43.8%, from $16.7 million for the quarter ended March 31, 2001 to $9.4 million for the quarter ended March 31, 2002. This corresponds to a 14.8% gross margin for the first quarter of 2001 as compared to 11.3% for the corresponding period in 2002. The decrease in gross profit is attributable to factors noted above within net sales and cost of products and services. OPERATING EXPENSES. Operating expenses decreased by $1.6 million, or 18.8%, from $8.7 million for the quarter ended March 31, 2001 to $7.1 million for the quarter ended March 31, 2002. The decrease was primarily attributable to the reduction of amortization expense by $2.3 million related to the adoption of SFAS No. 142, Goodwill and Other Intangibles in which goodwill related to business acquisitions is no longer being amortized. The decrease was offset by special consulting expenses paid to an affiliate of a stockholder associated with formulation of financial strategies, including securing our new debt in March 2002. INTEREST EXPENSE--SUBSIDIARY. Interest expense--subsidiary decreased $3.1 million, or 32.9%, from $9.5 million for the quarter ended March 31, 2001 to $6.4 million for the quarter ended March 31, 2002. The decrease was a result of decreased borrowing levels as well as lower interest rates on the floating rate component of our borrowings. INTEREST EXPENSE--SUBORDINATED EXCHANGE DEBENTURES. Interest expense--subordinated exchange debentures increased $0.2 million, or 13.0%, from $1.4 million for the quarter ended March 31, 2001 to $1.6 million for the quarter ended March 31, 2002. This increase resulted from the interest compounding effect on accretion of the debenture. 36 INCOME TAX BENEFIT. The income tax benefit for the three months ended March 31, 2002 was $2.4 million representing an effective tax rate of 38.1%. This compares to an income tax benefit of $0.3 million for the quarter ended March 31, 2001 and an effective rate of 8.5%. The effective tax rate difference in 2001 is due to certain amortization of goodwill related to the acquisitions which is non-deductible for tax purposes. With the adoption of SFAS No. 142, Goodwill and Other Intangibles in 2002, we no longer amortize goodwill for book purposes. EXTRAORDINARY ITEM. On March 26, 2002, Von Hoffmann entered into the revolving credit facility which provides for loans of up to $90.0 million. In addition, Von Hoffmann issued $215.0 million of the 2009 notes at an interest rate of 10.25%. The proceeds from these transactions were used to pay off all outstanding balances under our previous credit agreement. As a result of these debt transactions, we incurred an extraordinary loss from the write-off of deferred debt issuance costs of $3.1 million. Net of taxes, the impact was an extraordinary loss of $2.0 million. NET LOSS. Net loss for the quarter ended March 31, 2002 was $5.8 million as compared to net loss of $2.8 million for the quarter ended March 31, 2001. The increase in 2002 is the result of recognition of an extraordinary loss associated with the debt extinguishment and lower operating earnings in 2002 as compared to the 2001 period. LIQUIDITY AND CAPITAL RESOURCES OVERVIEW During the past three years, our principal sources of funds were cash generated from our operating activities and long-term borrowings. We used cash mainly for capital expenditures, working capital and debt service. In the future, we expect that we will use cash principally to fund working capital, our debt service and repayment obligations and capital expenditures. HISTORICAL CASH FLOWS CASH PROVIDED BY OPERATING ACTIVITIES Cash provided by operations for the quarter ended March 31, 2002 was $5.8 million, compared to $8.3 million for the quarter ended March 31, 2001, a decrease of 30.2%. The decrease in cash provided by operating activities primarily resulted from a weaker operating performance in the first quarter of 2002. Cash provided by operations for the year ended December 31, 2001 was $59.6 million, compared to $39.9 million for the year ended December 31, 2000, an increase of 49.3%. The increased level of cash provided by operating activities primarily resulted from $24.0 million in reductions of accounts receivable and inventory. These reductions were attributable to aggressive efforts to reduce investments in working capital and a reduction in business levels in the second half of the year. Cash provided by operations for the year ended December 31, 2000 was $39.9 million as compared to $20.6 million for the corresponding period in 1999. The increased level of cash provided by operating activities primarily resulted from reduction in various working capital items. CASH USED IN INVESTING ACTIVITIES Net cash used in investing activities for the quarter ended March 31, 2001 was $6.3 million, compared to $12.0 million for the first quarter of 2001. The reduction was primarily driven by reduced capital expenditures as expenditures focused on manufacturing efficiencies as opposed to any capital enhancement. Net cash used in investing activities for the year ended December 31, 2001 was $23.7 million, compared to $52.5 million for the year ended December 31, 2000, a decrease of 54.9%. The decrease 37 in cash used in investing activities was primarily due to the Precision acquisition for approximately $25.3 million, which occurred in 2000. In addition, we incurred $23.9 million in capital expenditures in 2001 as compared to $28.1 million in 2000 as discussed further below under Capital Expenditure Requirements. Net cash used in investing activities for the year ended December 31, 2000 was $52.5 million, compared to $20.1 million for the year ended December 31, 1999. The increased use was primarily due to the Precision acquisition as noted above. In addition, we incurred $28.1 million on capital expenditures in 2000 as compared to $22.6 million in 1999 as discussed further below under Capital Expenditure Requirements. CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES Cash provided by financing activities during the first quarter of 2002 resulted from debt and equity transactions. On March 26, 2002, we entered into our revolving credit facility, which includes a revolving loan commitment of $90.0 million. At our one-time option, the available borrowing base may be increased to provide borrowings of up to $100.0 million, subject to finding lenders to provide such increase. On March 26, 2002, we also issued the 2009 Notes for $215.0 million. The proceeds from the revolving credit facility and the 2009 Notes were used to pay off all outstanding balances under our previous credit facility. In addition, Holdings issued 20,000,000 shares of common stock to its majority stockholder for $20.0 million on March 26, 2002. Cash provided by financing activities during the first quarter of 2001 was $3.6 million as a result of limited financing activity. Net cash used in financing activities was $23.3 million for the year ended December 31, 2001, compared to net cash provided by financing activities of $15.8 million and $0.8 million for the year ended December 31, 2000 and 1999, respectively. The difference is primarily due to the repayment of $14.0 million of debt under our existing senior credit facility in 2001, compared with drawing $23.5 million and $6.0 million from our senior credit facility in 2000 and 1999, respectively. CAPITAL EXPENDITURE REQUIREMENTS Capital expenditures for the year ended December 31, 2001 were $23.9 million, compared to $28.1 million in 2000 and $22.6 million in 1999. These capital expenditures focused on manufacturing capacity increases as well as efficiency enhancements. The 2000 and 1999 capital expenditure programs focused on capacity-enhancement projects, specifically with respect to our press and bindery equipment. These programs also focused on maintenance projects for our manufacturing facilities and processing equipment. In 2001, capital expenditures were focused on completion of capacity enhancements with our new bindery line in our Jefferson City, Missouri facility and efficiency enhancements with respect to the material handling systems in our Jefferson City and Owensville, Missouri facilities. Capital expenditures for the quarter ended March 31, 2002 were $6.4 million, compared to $12.1 million for the quarter ended March 31, 2001. These capital expenditures focused on manufacturing efficiencies in order to improve operating performance. We expect our capital expenditures for 2002 to be approximately $19.0 million, based on a capital expenditure program directed at continued efficiency gains and will include material handling systems and equipment upgrades. We believe that current capacity is adequate in the near term based on anticipated utilization rates. Accordingly, our focus is directed at capital expenditures that will improve our cost position. DEBT SERVICE REQUIREMENTS Our revolving credit facility provides for revolving loans of $90.0 million. The facility is secured by accounts receivable, inventory and property, plant and equipment and at our option, may be increased to provide for borrowings of up to $100.0 million, subject to finding lenders to provide such increase. The facility is subject to borrowing base availability and includes covenants restricting the incurrence of 38 additional indebtedness, liens, certain payments (including pre-payment of the notes) and the sale of assets. As of May 31, 2002, we had total indebtedness of $391.7 million and had $50.8 million of additional borrowings available under our revolving credit facility, after excluding $1.3 million of letters of credit outstanding under that facility. See "Description of Certain Indebtedness--Revolving credit facility." Based on our current level of operations, we believe our cash flows from operations, available cash and available borrowings under our revolving credit facility will be adequate to meet our liquidity needs for the foreseeable future, including scheduled payments of interest on the securities and payments of interest on the borrowings under our revolving credit facility. Our ability to make payments on and to refinance our indebtedness, including our revolving credit facility, the securities, and to fund our business initiatives, however, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, and other factors that are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our revolving credit facility in an amount sufficient to enable us to pay our indebtedness, including our senior credit facility, the securities, or to fund our other liquidity needs. See "Risk Factors--We will require a significant amount of cash to service our indebtedness." MARKET AND CREDIT RISK We are exposed to market risk from changes in interest rates. At December 31, 2001, we had approximately $241.6 million outstanding borrowings against our senior secured credit agreement at variable rate. With the issuance of our Senior Notes in March 2002, all of our remaining long-term debt is at fixed interest rates. Therefore, exposure to interest rate fluctuations is immaterial. Two customers and their affiliates accounted approximately 32.0% of 2001 net sales, respectively, and approximately 28.1% of December 31, 2001 accounts receivable. The loss of either of these customers or a significant reduction in order volumes from them would have a material adverse effect on us. We manage credit risk by continually reviewing creditworthiness of our customer base as well as thoroughly analyzing new accounts to effectively manage our exposure. INFLATION The impact of inflation on our operations has not been significant to date. We cannot predict what effect future inflation rates will have on our operating results. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized, but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their useful lives. We will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. Application of the non-amortization of goodwill is expected to result in an increase in net income of approximately $8.9 million per year ($0.17 per diluted share). During 2002, we will perform the first of the required impairment tests and have not yet determined what the effect of these tests will be on our earnings and financial position. CRITICAL ACCOUNTING POLICIES Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and 39 accompanying notes. On an ongoing basis, management evaluates its estimates and judgments, including those related to the recovery of inventories, property, plant and equipment and goodwill. Management bases its estimates and judgments on historical experience, current and expected economic conditions and other factors believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results may differ from these estimates. The significant accounting policies which management believes are most critical to aid in fully understanding and evaluating our reported financial results include the following: INVENTORIES We value substantially all of the Company's inventory at the lower of cost, as determined using the last-in, first-out (LIFO) method, or market. The remainder of inventory is valued at the lower of cost, as determined using the first-in, first-out (FIFO) method, or market. Inventories include material, labor and manufacturing overhead. We record a reserve for excess and obsolete inventory based primarily upon historical and forecasted demand. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. REVENUE RECOGNITION We recognize revenue when the specific project is complete as determined by the contractual agreement. The Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition," provides guidance on the application of accounting principles generally accepted in the United States to selected revenue recognition issues. The policy is consistent with trade practice within the printing industry. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. We capitalize all repair and maintenance costs which result in significant increases in the useful life of the underlying asset. All other repair and maintenance costs are expensed. Depreciation is computed using straight-line or accelerated methods over various lives, dependent on the asset. Management assesses long-lived assets for impairment under Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." Changes in market conditions or poor operating results could result in a decline in value thereby potentially requiring an impairment charge in the future. GOODWILL Effective January 1, 2002, we adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under this new rule, goodwill will no longer be amortized, but will be subject to annual impairments. Other intangible assets will continue to be amortized over their useful lives. We will perform a transitional impairment test of our existing goodwill by June 30, 2002 and annual impairment tests thereafter. Changes in market conditions or poor operating results could result in a decline in value thereby potentially requiring an impairment charge in the future. 40 BUSINESS THE COMPANY We believe that we are the leading manufacturer of four-color case-bound and soft-cover educational textbooks in the United States. Our products are sold principally to educational publishers who, in turn, sell them into the elementary and high school, or ELHI, and college instructional materials markets. In addition to textbook manufacturing, we provide our customers with a full range of value-added printing and design services from early design to final distribution. We believe we have an established reputation for superior quality, reliability and customer service, allowing us to build strong relationships with our customers, which include the major publishers of educational textbooks in the United States, including Houghton Mifflin, Pearson, McGraw-Hill and Harcourt. We estimate that our market share in our core business, the manufacture of four-color case-bound ELHI textbooks, is approximately 40%. Since 1998, we have diversified our product offerings and added new services through selected strategic acquisitions in order to enhance our position within the instructional materials market. In 1998, we added services such as design, art procurement, color separation and image setting and expanded our product offerings with one- and two-color printing capabilities, workbooks and test kits. In 2000, we further diversified our product offerings with the addition of plastic inserts and overhead transparencies. We believe that these acquisitions position us to offer the broadest range of products and services available to the instructional materials market, from early design to manufacture to distribution. In addition to solidifying our position in the instructional materials market, our acquisitions have enabled us to expand our presence in the commercial book-manufacturing market. Over the past five years, we have also invested approximately $80 million in high-quality, high-throughput machinery and plant expansions (excluding equipment obtained in acquisitions), enhancing our competitive position and providing capacity for future growth. These investments include additional four-color web printing presses, additional one- and two-color presses, sheet-fed presses, new digital pre-press equipment and additional manufacturing space. We have also invested extensively in customized, high-efficiency bookbinding production lines. As a result of our capital investments, we believe we have created an opportunity to gain greater market share as well as a barrier to entry for potential competitors. COMPETITIVE STRENGTHS We believe we are distinguished by the following competitive strengths: - LEADING MARKET SHARE. We estimate that we have a market share of approximately 40% in our core business, the manufacture of four-color case-bound ELHI textbooks. We believe that our broad range of products and services positions us well to maintain our leading ELHI market share and to benefit from the expected growth in that market. In addition, we believe that we can leverage our leading position in the ELHI market and our range of products and services to expand our presence in the instructional materials market and other complementary printing markets. - REPUTATION FOR SUPERIOR QUALITY AND CUSTOMER SERVICE. We believe we are well regarded in the educational publishing market, where reliable service and product quality are important competitive attributes. We believe that our products are among the highest quality in the market. In addition, we believe that we have developed a reputation for solving complex production and distribution problems. - FOCUSED INSTRUCTIONAL MATERIALS MANUFACTURER. We believe that we are the only major book manufacturer principally focused on serving the ELHI and college instructional materials market. Because of our commitment to this market and our understanding of its key drivers and 41 the needs of our customers, we believe that we are better positioned than many of our competitors to satisfy the rigorous production and logistical requirements of the market. - SINGLE SOURCE SUPPLIER AND ABILITY TO EXPAND RELATIONSHIPS. We believe that we offer the broadest range of services among educational textbook manufacturers, from early design to manufacture to distribution. Our strategy of acquiring businesses that are complementary to our textbook manufacturing business has positioned us to increase our sales and enhance our relationships with our key customers by allowing us to offer a broader range of services. For example, our 1998 acquisitions of H&S Graphics and Preface added upstream services such as design, art procurement, color separation and image setting. These services allow us to collaborate with publishers in the early design phase of a book, thereby permitting us to establish a broader and deeper relationship with the educational publisher as well as providing an additional source of revenue. - STATE-OF-THE-ART MANUFACTURING FACILITIES. We have invested approximately $80 million in high-quality, high-throughput machinery and plant expansions (excluding equipment obtained in acquisitions) over the past five years, which has enhanced our competitive position and significantly increased our production capacity. We believe that our eight manufacturing facilities and our highly specialized and flexible printing equipment are well suited to efficiently accommodate both large and small print runs characteristic of the instructional materials industry and provide barriers to entry. We also believe our competitors' capital investments have lagged behind our own, thereby creating an opportunity for us to gain greater market share. - SKILLED AND EXPERIENCED WORKFORCE AND MANAGEMENT TEAM. We believe that our reputation for customer service can be attributed to the skill, experience and stability of our management and employees. We believe that our significant investment in training, equipment and technology has increased the productivity level of our workforce. We also have a highly-seasoned senior management team with an average of over 20 years experience in the instructional materials and book manufacturing industries. BUSINESS STRATEGY The principal features of our business strategy include the following: - ENHANCE OUR POSITION IN THE INSTRUCTIONAL MATERIALS MARKET. We will continue to leverage our capabilities and our long-standing customer relationships to maintain and enhance our position in the instructional materials market. In the last five years, we have invested approximately $80 million in high-quality, high-throughput machinery and plant expansions (excluding equipment obtained in acquisitions), enhancing our competitive position and providing capacity for future growth. In addition, we have made acquisitions to enhance our product and service offerings to the instructional materials market. As a result, we believe we have maintained our 40% market share in our core business, the manufacturing of four-color case-bound ELHI textbooks, while expanding our product offerings. - LEVERAGE OUR EXISTING MANUFACTURING CAPABILITIES AND CAPACITY. Our recent investments in our manufacturing facilities have enabled us to increase our manufacturing capabilities and capacity. We intend to leverage our facilities and our reputation in the overall instructional materials market to enter or increase our presence in certain niche markets within the instructional materials market. By doing so, we believe that we will be able to maximize the utilization of our capacity and capabilities and increase our market share. We also intend to take advantage of the seasonality in the instructional materials market by committing our resources and capacity to the manufacturing of more products for the commercial market. 42 - CONSIDER SELECTIVE ACQUISITIONS. Since 1998, we have pursued a focused acquisition strategy that has increased our sales and cash flow while broadening our product offerings to our educational customers. Our acquisition strategy is distinct in that we target smaller companies within the instructional materials manufacturing market. Historically, these markets have been highly fragmented, and there are a number of candidates that our management believes would be meaningful additions to our current business. In particular, we are exploring opportunities with respect to additional four-color manufacturing capacity, book covers and other textbook-related components, and other related products and services. THE INSTRUCTIONAL MATERIALS INDUSTRY We primarily serve the instructional materials market, from which we derived approximately 68% of our 2001 net sales. Within the overall instructional materials market, we focus principally on the ELHI and college and higher education areas, for which we manufacture textbooks, standardized test materials and other educational materials. Increased focus on education in the United States has been favorable for the instructional materials market, which remains one of the strongest segments of the book publishing industry. Education has become one of the most high-profile issues on the U.S. political landscape given today's highly competitive global market. This political climate has placed great civilian and government emphasis on the educated citizen, which has translated into strong sales growth for textbooks. Funding for instructional materials has been increased in response to the growing recognition of the importance of these materials to the learning process, as well as growing political pressure to improve the quality of public education. ELHI MARKET The ELHI instructional materials market is driven by the textbook adoption cycle, student enrollment, an increased focus on accountability and testing standards and state and federal funding for education. The textbook adoption process is a key factor affecting annual fluctuations in ELHI textbook sales. This process drives new content, and thus new product, into the textbook market. The ELHI textbook market is divided between states where publishers can market their books directly to school districts, known as "open territory" states, and states where districts must first get state approval to purchase textbooks, known as "adoption" states. In open territory states, textbooks are purchased independently by local school districts or by individual schools themselves. These states do not issue statewide schedules for purchasing or lists of state-selected instructional materials. By contrast, in an adoption state, a committee screens textbooks for approval for purchase within the state. Once they are on an approved list, these textbooks can be purchased by the individual districts within the state. These initial purchases tend to take place over a one- to three-year timeframe with reprints extending over an additional four to five years. Adoptions can represent a significant revenue stream for publishers and can be particularly lucrative when large adoption states such as California, Texas or Florida adopt materials in key subject areas such as reading, mathematics or science. The 21 adoption states typically represent 50% of the K-12 publishers' annual textbook sales, with the balance coming from the open territories. While the two groups are roughly equal in the number of schools that each represents, adoption states drive product development, which drives sales in non-adoption states as well. 43 ADOPTION AND NON-ADOPTION STATES IN 2001 [LOGO] According to U.S. Department of Education statistics, a record number of approximately 53 million students was expected to enter K-12 classrooms for the 2001-2002 school year. This number is expected to remain at historically high levels through 2005. Standards, accountability and testing have also impacted the ELHI market. The mounting importance of standardized test scores and, in many cases, performance-based pay for teachers, have given rise to strong sales of standardized tests in the past decade and publisher's acquisitions of testing companies. In January 2002, Congress re-authorized the Elementary and Secondary Education Act, which was initially enacted in 1965, to raise student achievement levels through a combination of higher standards, stronger accountability, improved teacher quality and increased resources. It also provided for a 20% increase in overall funding for federal elementary and secondary education programs. Funds allocated to instructional materials at the ELHI levels increased from 1996 to 2000 as a consequence of higher enrollments, more robust state tax revenues and increased state and local spending as a result of an increased emphasis on improving the quality of public education. The five largest textbook markets, ranked by total textbook spending--California, Florida, Texas, New York and Illinois, which account for approximately 27% of all spending--saw a combined state funding increase of 94.3% from 1996 to 2000, reaching $1.1 billion for the 2000-2001 school year. According to the 2001 Veronis Suhler Communications Industry Forecast, or the Veronis Forecast, projected total spending on ELHI instructional materials is expected to increase at a compound annual growth rate of 6.8% from 2000 to 2005, reaching an estimated $5.2 billion in 2005. Increased state funding, anticipated adoptions and moderate enrollment growth are expected to generate revenue growth in the ELHI market in the forecasted period. 44 GROWTH IN END-USER SPENDING--ELHI INSTRUCTIONAL MATERIALS MARKET ($ IN BILLIONS) GROWTH IN END-USER SPENDING--ELHI INSTRUCTIONAL MATERIALS MARKET ($ IN BILLIONS) [LOGO] COLLEGE MARKET The college instructional materials market is driven primarily by student enrollment. College enrollment is projected to rise to 18.2 million by the year 2010, an increase of 17% from 2000. The most important factor in the projected rise of college enrollment is the projected 18% increase in the traditional college-age population of 18- to 24-year-olds from 1998 to 2010. In addition, the slowing economy has triggered a "back-to-college" trend for laid-off workers and the young adult population in general, eager to retain and enhance their skill sets in a tighter job market. According to the Veronis Forecast, end-user spending on college instructional materials is projected to rise at a compound annual growth rate of 6.3% from 2000 to 2005, reaching an estimated $5.1 billion in 2005. 45 GROWTH IN END USER SPENDING--COLLEGE INSTRUCTIONAL MATERIALS MARKET ($ IN BILLIONS) GROWTH IN END-USER SPENDING--COLLEGE INSTRUCTIONAL MATERIALS MARKET ($ IN BILLIONS) [LOGO] THE COMMERCIAL PRINTING MARKET We compete in a $7 billion subset of the $100 billion commercial printing market, supplying a wide variety of end users with one-, two- and four-color soft-cover printing with varied binding styles. The areas in which we compete include business-to-business catalogs, trade, religious and self-help materials, healthcare manuals, computer hardware and software manuals and documentation and government (state and federal) manuals. This market does not experience the same seasonality as the instructional materials market, with increased volume occurring in the second half of the year. OPERATING DIVISIONS We provide our products and services to the instructional materials and commercial printing markets through our four operating divisions as follows:
OPERATING DIVISION PRODUCT AND SERVICE OFFERINGS - ------------------ -------------------------------------------------------- Von Hoffmann, or VH - Four-color hard- and soft-cover educational textbooks - One- and two-color educational textbooks - Standardized, secure educational testing materials - Commercial one- and two-color books - Fulfillment Precision - Plastic printing: overhead transparency products and plastic inserts for scholastic textbooks H&S Graphics - Digital pre-press - Composition Preface - Design and creative services - Editorial development - Composition
46 VH. VH is our largest operating division and includes the business of Von Hoffmann Graphics, which was merged into it in February 2002. VH produces four-color textbooks and testing materials for the instructional materials market and one- and two-color books for the commercial market. Its educational customers include virtually all of the major domestic publishers of ELHI and college textbooks, including the educational publishing divisions of Houghton Mifflin, Pearson, McGraw-Hill, and Harcourt. Its commercial customers include the U.S. Government Printing Office, General Motors Corporation, Microsoft Corporation, IBM Corporation, The Boeing Company and Texas Instruments Incorporated. VH's Jefferson City, Missouri facility focuses almost exclusively on the manufacture of four-color textbooks for the ELHI and college markets. We employ specially modified machinery to meet the demanding service, quality and delivery requirements of this market and believe that we are better able than our competitors to accommodate the relatively short lead-times and highly variable run lengths that typify the four-color textbook industry. These factors distinguish us from other book manufacturers who focus on multiple markets and for whom four-color textbooks represent only a small portion of overall product mix. VH also operates our Owensville, Missouri and Eldridge, Iowa facilities, which focus on the one- and two-color book manufacturing market. These facilities also feature binding operations, including adhesive and saddle-stitch styles, and provide fulfillment and distribution services. In addition, VH operates our Frederick, Maryland facility, which is strategically located near our customer base in the Northeast, and which produces products for the specialty trade and ancillary education workbook market. Over the past five years, we have invested in state-of-the-art, integrated digital pre-press equipment that streamlines and enhances the traditional pre-press process, which historically involved a publisher sending artwork out for color separation and the production of film, which is then sent to a printer to create printing plates. Through the purchase of this equipment and the acquisitions of H&S Graphics and Preface, we now have the ability to perform all the necessary pre-press work from digital media provided by our customers. This system gives us the capability to make plates in a computer-to-plate environment, saving time and reducing the opportunities for error. This is particularly significant in the textbook adoption process, which entails repeated changes to a book and multiple short-run print jobs. PRECISION. Founded in 1951, Precision is a sheet-fed printer and binder operation that sells primarily to the educational textbook market. We acquired Precision in March 2000 in order to provide our customers with a more complete and balanced product offering. Precision derives approximately 80% of its revenues from plastic printing, which consists of overhead transparency products and plastic inserts for educational textbooks, with the remaining 20% of revenues derived from paper printing. Management believes that Precision enjoys a strong market share in its core markets of plastic inserts and overhead transparencies. Precision's customer base includes the same major educational publishing houses with whom we have long-standing relationships, including McGraw-Hill, Houghton Mifflin, Pearson and Harcourt. The acquisition of Precision also strategically advanced our goal of providing our customers with more complete and balanced product offerings. Precision also has a presence in the commercial printing market and is implementing an extensive plan to significantly grow its presence further in the market. H&S GRAPHICS AND PREFACE. In June 1998, we acquired H&S Graphics and Preface, which added to our ability to serve publishers in the design, creative editorial development, digital pre-press and composition areas of book production. These stages, which represent the early production processes in the manufacturing of a book, position us to manage production more efficiently and more fully serve the needs of the educational publisher. SALES AND MARKETING INSTRUCTIONAL MATERIALS MARKET. Our educational textbook sales team, consisting of approximately 10 employees, works to develop, support and enhance our relationships with publishers in both the 47 college and ELHI markets, as well as with smaller independent publishers. The cost of printing a textbook typically represents a small percentage of a publisher's total cost for a textbook, but the failure to meet a production deadline could result in a significant loss to the publisher. As a result, competition in the textbook manufacturing industry is equally service- and quality-driven as price driven. Accordingly, a significant element of our marketing efforts consists of maintaining close relationships with our customers to insure proper production and scheduling and timely delivery. Our senior management team and sales support staff maintain close contact with key customers in order to identify relevant issues affecting these customers as well as to identify competitive threats. In addition, the sales force and planners are in daily contact with the manufacturing personnel of our customers with pending indications or firm orders in order to deal with changes or production issues that arise throughout the process. We have concentrated on maintaining long-standing relationships with the major publishers. These publishers have consolidated significantly over the past several years, reducing the major publishers to four. These publishers accounted for approximately 18.0%, 14.0%, 7.3% and 6.5%, respectively, of our net sales during 2001. COMMERCIAL PRINTING MARKET. Our sales and marketing organization has developed and is pursuing a focused sales strategy across the identified commercial market segments. With 25 dedicated sales people, we address this market on a national level. Customer needs are matched to one of our four manufacturing facilities and our array of production capabilities. OPERATIONS AND PRODUCTION As a contract textbook manufacturer, we principally manufacture textbooks pursuant to firm customer orders. Our key manufacturing and distribution functions include: - creating digital files and page designs; - producing printing plates from film or directly from digital files provided by the publishers or created from our extensive library; - purchasing paper and other book components supplied by other manufacturers; - printing and binding textbooks; - packaging, storing and shipping finished textbooks; - archiving, preserving and reformatting film and digital files for reprints; and - fulfillment of customer orders, inserting CDs and arranging course packs. Our typical production run size ranges from less than 10,000 units to over 100,000 units, with the capability to produce profitably runs under 5,000 units. We can cost-effectively produce these short runs due to our unique ability to change plates and shift work rapidly among printing presses. Each plate change entails press down-time, as the plates are physically changed, and press start-up time, as the press is brought into production and proper color and registration is achieved. Because each plate prints eight pages of one color, a 300-page four-color book requires 150 plate changes. Therefore, short runs significantly increase the production cost per book. As a result of competition in the textbook publishing industry, publishers generally seek to lower costs by maintaining low inventory levels and ordering small quantities for just-in-time delivery. Our management believes that our ability to produce short runs effectively is a significant competitive advantage. We have configured our physical plant and trained our workforce to print both short-run and long-run quantities. The length of run of a given title is highly variable over its life span. We believe our "make ready" time per changeover is significantly less than that of our major competitors. This capability lowers unit costs, making it economically feasible to print fewer copies. This is important as it allows our customers to minimize their inventory levels while maintaining the ability to adjust subsequent production orders in response to unforeseen sales patterns and unexpected stock shortages. 48 As the trend towards more customized products becomes more apparent, we believe we are well-positioned to produce shorter runs efficiently and thereby accommodate our customers' needs. PLANNING, SCHEDULING AND TRACKING EDUCATIONAL TEXTBOOKS. We centrally manage all of our four-color educational textbook production scheduling from our St. Louis headquarters. We have a team of planners who work with our chief scheduler. Due to the short lead-time and the just-in-time manufacturing requirements of textbook publishing, customers frequently change their production levels and timetables. We have developed a customized system to control our production planning. This process is supported by our fully integrated scheduling and tracking system, which enables salespersons, planners and employees at each of the manufacturing facilities to access information regarding company-wide scheduling and tracking. COMMERCIAL. In order to meet the demands of the highly competitive, time-sensitive commercial printing market we manage estimating and pricing centrally from our St. Louis headquarters, while scheduling is managed from our production plants. Work may move from plant to plant based on specific capabilities or capacity demands. We have dedicated customer service representatives at each facility in an effort to meet the needs of our commercial customers. We are in the process of implementing a master scheduling program for commercial business that will optimize plant utilization on a company-wide basis. PRE-PRESS. We have invested in state-of-the-art, integrated digital pre-press equipment that streamlines and enhances the traditional pre-press process. Rather than outsourcing this service, all of our printing facilities have the ability to perform the complete digital pre-press workflow directly from digital media provided by our customers. This system gives us the capability to make plates using the single-burn process, saving time and expense, while reducing the chance of error. This is particularly significant in the textbook adoption process, which entails repeated changes to a book and multiple short-run print jobs. We provide direct-to-plate capabilities, which eliminate the film-output step of the pre-press process. We now have complete redundancy in the digital pre-press process throughout our plants, which gives us increased flexibility in the manufacturing process. PRINTING AND BINDING. We have a variety of web printing presses configured to maximize our manufacturing flexibility. Although a certain number of our presses are dedicated to 9", 10" or 11" textbooks, these presses are highly specialized and have been modified to have the flexibility to print any of these sizes on the next-larger press size. Specifically, we have developed equipment adaptations and proprietary production methods for our textbook printing and binding operations that significantly reduce the make-ready time per changeover of plates as compared to that of our competitors. In addition, our state-of-the-art modified web presses are capable of running at speeds of up to 50,000 impressions per hour. Over the past five years, we have invested approximately $80 million in high-quality, high-throughput machinery and plant expansions (excluding equipment obtained in acquisitions), enhancing our competitive position and significantly expanding our production capacity for future growth. Our investments have been made in additional four-color web printing presses, additional sheet-fed presses, new digital pre-press equipment and additional manufacturing space. We have also invested extensively in customized, highly efficient bookbinding production lines. We currently maintain multiple binding lines in each of the manufacturing plants, providing several different binding methods to accommodate various customer preferences. We offer virtually all the textbook binding options used in the industry, including the proprietary "Von-Bind" Case, McCain, Smyth Case, Spiral Wire Hardbound, Spiral Wire, Adhesive Case, Side Wire, Saddle Stitch, Adhesive Paper, Plastic Comb, Wire-O-Hardback, Wire-O and Spiral Plastic. REPRINTS. Approximately 50% of ELHI textbooks are shipped to states that require publishers to keep a particular title in print and supply orders for reprints for periods generally ranging from five to 49 eight years. Other ELHI and college textbooks are kept in print for approximately four to six years. The reprint business is also necessitated by partial corrections or copyright edition changes that must be made in order to incorporate new information or to comply with editorial changes demanded by school committees in various states. In 2001, approximately 80% of our four-color ELHI net sales were generated from reprints, and we retained over 98% of our ELHI reprint business while losing less than 2% to competitors. When a textbook is first published, digital files or a set of film are created for producing reprints. It is both time-consuming and costly to move film or digital files from one printer to another with different presses, as the film or digital files would likely require reformatting. Therefore, publishers have a disincentive to switch manufacturers for the reprints of a title, which creates a backlog of future business for the original manufacturer. While the new digital workflows make this less of an obstacle to transfer work, reprints from films and digital files in our archives still generally account for an estimated 60% to 65% of our total annual revenues. FACILITIES. Our facilities consist of our corporate headquarters located in St. Louis, Missouri and eight separate production facilities located in Jefferson City and Owensville, Missouri; Eldridge, Iowa; Frederick, Maryland; Schaumburg and Rolling Meadows, Illinois; and Leesport and Dauberville, Pennsylvania. The Jefferson City facility is our principal production facility for our four-color web presses and building capabilities. Certain information regarding our facilities is set forth in the table below.
FACILITY LOCATION PRINCIPAL PURPOSE SQUARE FOOTAGE STATUS - ----------------- ---------------------------------- -------------- -------- St. Louis, Missouri............... Corporate headquarters 170,000 Owned Jefferson City, Missouri.......... Four-color book manufacturing 636,000 Owned Owensville, Missouri.............. One- and two-color book 450,000 Owned manufacturing, distribution and fulfillment Eldridge, Iowa.................... One- and two-color book 225,000 Owned manufacturing Frederick, Maryland............... One-and two-color book 200,000 Owned manufacturing Schaumburg, Illinois.............. Book design 9,100 Leased Rolling Meadows, Illinois......... Digital pre-press and book design 23,000 Owned Leesport, Pennsylvania............ Printing inserts and overheads 29,000 Owned Dauberville, Pennsylvania......... Precision bindery and 24,000 Owned manufacturing
RAW MATERIALS Paper costs represent approximately 40% of our net sales and over 80% of raw material costs in the manufacturing process. Paper costs generally flow through to the customer as we generally order paper for specific orders and do not take significant commodity risk on paper. We have implemented a paper management program with several customers, which is designed to allow us to: (i) standardize the type of paper we use on presses and greatly reduces production and start-up costs; and (ii) avoid the cost of additional storage space and production inefficiencies required by separating each publisher's consigned paper. Because the type and size of paper traditionally delivered to manufacturers by textbook publishers was not uniform across different publishing houses, we were forced to adjust press lines and incur significant warehousing, set-up costs and delays when changing between different orders. Under our paper management program, we provide paper for the publisher to use in printing our textbooks rather than the publisher supplying its own paper. The resulting standardization of utilized paper allows for significant savings in manufacturing and inventory management costs. In 2001, approximately 55% of our paper usage was procured through this program. 50 We operate our paper programs with three major paper suppliers, the largest and most significant of which is The Mead Corporation, now known as MeadWestvaco Corporation, which provides approximately 90% of the paper for this program. The benefits to us, our customers and paper producers have allowed our paper management program to grow consistently. EMPLOYEES As of May 31, 2002, we had 2,077 employees, approximately 336 of whom are represented by affiliates of the Graphic Communications International Union under collective bargaining agreements that expire between August and November of 2005. We believe that relations with our employees are good. COMPETITION The educational textbook market is highly competitive. The factors by which textbook manufacturers are chosen include the ability to maintain and adhere to a strict manufacturing schedule, the quality of product and service, competitive pricing and capability to provide "one-stop shopping" to the publisher. The commercial book manufacturing market is also very competitive. Competitive advantages include pricing, quality, service and rapid turnaround as well as other non-print, value-added services including fulfillment and distribution. We compete in the educational textbook market by leveraging our reputation for quality and full-service and by providing competitive pricing and rapid turnaround. By directing a highly-focused sales effort, opportunities for us are often identified in niches where value-added services are required and commodity-like price competition is less prevalent. Our major competitors in the one- and two-color educational and commercial book manufacturing markets are: R.R. Donnelley & Sons Company, Quebecor World Inc., D.B. Hess Group, Banta Corporation, and Phoenix Color Corp. R.R. Donnelley and Quebecor are also major competitors in the four-color educational textbook manufacturing market. We believe that there are significant barriers to entry in the instructional materials market due to the significant initial investment in people, equipment and facilities that is required to compete. In addition, we believe it would take several years for a new entrant to develop the reputation for quality, service and delivery necessary to develop the significant base of titles needed to establish the recurring reprint volume required to achieve sufficient capacity utilization. LEGAL AND ENVIRONMENTAL MATTERS We do not believe that there are any pending legal proceedings which, if adversely determined, would have a material adverse effect on our financial condition or results of operations. We are subject to regulations under various and changing federal, state and local laws relating to the environment and to employee safety and health. These environmental regulations include those relating to the generation, storage, transportation, disposal, release and emission into the environment of various substances. Permits are required for operation of our business (particularly air emission permits), and these permits are subject to renewal, modification and, in certain circumstances, revocation. We are also subject to regulation under various and changing federal, state and local laws that allow regulatory authorities to compel (or to seek reimbursement for) the clean-up of environmental contamination at our own sites and at facilities where our waste products are or have been disposed. We have internal controls dedicated to compliance with all applicable environmental laws. Management believes that our capital expenditures to comply with federal, state and local provisions for environmental controls, as well as expenditures for our share of costs for environmental clean-up, if any, will not be material and will not have a material effect upon our earnings or our competitive position. 51 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The names of our directors and executive officers and their respective ages and positions are as follows: VON HOFFMANN CORPORATION
NAME AGE POSITION - ---- -------- -------- Thompson Dean............................. 43 Chairman of the Board and Director Robert S. Mathews(1)*..................... 50 Chief Executive Officer, President, Chief Operating Officer and Director Peter C. Mitchell(+)...................... 46 Vice Chairman of the Board, Executive Vice President, Chief Financial Officer and Treasurer Ron M. Garrison........................... 51 Senior Vice President of Manufacturing Jack R. Field............................. 44 Senior Vice President of Sales and Marketing Craig Nelson.............................. 55 Vice President of Human Resources Jay Skilton............................... 52 President of Preface James D. Nallo............................ 49 President of Precision David F. Burgstahler...................... 33 Director James A. Quella(1)........................ 52 Director Robert S. Christie(1)..................... 48 Director
HOLDINGS
NAME AGE POSITION - ---- -------- -------- Robert A. Uhlenhop........................ 58 Chairman of the Board and Director Robert S. Mathews(2)(3)*.................. 50 Chief Executive Officer, President and Director Peter C. Mitchell(+)...................... 46 Executive Vice President, Chief Financial Officer and Treasurer David F. Burgstahler(2)(3)................ 33 Director Thompson Dean............................. 43 Director James A. Quella(3)........................ 52 Director Robert S. Christie(2)..................... 48 Director
- ------------------------ * Chairman, Chief Executive Officer and Director of One Thousand Realty & Investment Company, H&S Graphics, Inc., Preface, Inc. and Precision Offset Printing Company; Mr. Mathews is also President of One Thousand Realty & Investment Company. + Vice President, Chief Financial Officer, Treasurer and Director of One Thousand Realty & Investment Company, H&S Graphics, Inc., Preface, Inc. and Precision Offset Printing Company. (1) Member of the Operations Review Committee of Von Hoffmann. (2) Member of the Audit Committee of Holdings. (3) Member of the Compensation Committee of Holdings. 52 THOMPSON DEAN was appointed as the Chairman of the Board of Von Hoffmann in February 2002. He has been a director of Von Hoffmann and Holdings since 1997 and was Chairman of the Board of Holdings from May 1997 to February 2002. He is a Managing Director and the Head of Leveraged Corporate Private Equity for Credit Suisse First Boston Corporation, or CSFB. Mr. Dean joined CSFB in 2000 when it merged with Donaldson, Lufkin & Jenrette, Inc., or DLJ, where he has acted as Managing Partner of DLJ Merchant Banking Partners since 1995. Prior to becoming its Managing Partner, he served as Managing Director of DLJ Merchant Banking Partners from 1991 to 1995. Mr. Dean also serves as Chairman of the Board of Arcade Holding Corporation and DeCrane Aircraft Holdings, Inc. and as a director of Charles River Laboratories, Inc., Formica Corporation, Insilco Holding Company, Manufacturers' Services Ltd. and Mueller Holdings (N.A.), Inc. ROBERT S. MATHEWS was appointed as Chief Operating Officer of Von Hoffmann in January 2002 and as President, Chief Executive Officer and a director of Von Hoffmann in February 2002. Mr. Mathews also was appointed as Chief Executive Officer, President and a director of Holdings in February 2002. From 2000 to 2001, Mr. Mathews was President of our Von Hoffmann Graphics operating division, which was merged into Von Hoffmann in February 2002. From 1997 to 2000, he served as Senior Vice President of Quebecor World, which is a competitor of ours in the book manufacturing industry, and from 1996 to 1997, Mr. Mathews was Executive Vice President of Graphic Industries Inc. From 1994 to 1996, he was President of R.R. Donnelley, which is a competitor of ours in the book manufacturing industry. PETER C. MITCHELL has been Von Hoffmann's and Holdings' Chief Financial Officer and Treasurer since 1997. Mr. Mitchell has also served as Vice Chairman of the Board of Von Hoffmann since 2001 and as an Executive Vice President of Von Hoffmann and Holdings since 2000. From 1993 to 1997, he served as Senior Vice President and Chief Financial Officer of Crown Packaging Corporation, and from 1990 to 1993, served as Chief Financial Officer of Paperboard Industries Corporation, each of which was an integrated recycled-based paper packaging company. RON M. GARRISON was appointed as Senior Vice President of Manufacturing of Von Hoffmann in January 2002. From 2000 to 2001, Mr. Garrison served as Vice President of Manufacturing. From 1997 to 1999 he served as a Vice President and Division Director of R.R. Donnelley. JACK R. FIELD was appointed as Senior Vice President of Sales and Marketing of Von Hoffmann in January 2002. From 2000 to 2002, he was Senior Vice President of Sales for our Von Hoffmann Graphics division, which was merged into Von Hoffmann in February 2002. From 1998 to 2000, he was Vice President of Sales for Graphic Communications, Inc., which is a company that provides printing and binding services, and from 1980 to 1998 he was a Senior Account Executive for R.R. Donnelley. CRAIG NELSON has been Vice President of Human Resources of Von Hoffmann since 1990 and joined us in 1973. JAY SKILTON has been President of Preface since 1992, joining us in 1998 when we acquired Preface. JAMES D. NALLO has been the President of Precision since 1984, joining us in 2000 when we acquired Precision. Mr. Nallo also served as Chief Executive Officer of Precision from 1984 to 2000. DAVID F. BURGSTAHLER has been a director of Von Hoffmann since 2000 and Holdings since 1998. He is a Director of CSFB and Principal of DLJ Merchant Banking Partners. Mr. Burgstahler joined CSFB in 2000 when it merged with DLJ, where he was a Vice President of DLJ Merchant Banking Partners from 1999 to 2001 and an associate from 1997 to 1999. Mr. Burgstahler also serves as a director of Haights Cross Communications, Inc., WRC Media Inc., Focus Technologies Inc. and McCulloch Corporation. JAMES A. QUELLA has been a director of Von Hoffmann and Holdings since 2000. He holds the position of Managing Director of DLJ Merchant Banking Partners. Mr. Quella joined CSFB in 2000 53 when it merged with DLJ, where he was a Managing Director and Senior Operating Partner in DLJ Merchant Banking Partners. Mr. Quella was a Managing Director for GH Venture Partners LLC from January 2000 to July 2000. From 1997 to 2000, Mr. Quella served as Vice Chairman of Mercer Management Consulting, Inc. He was a senior consultant with Mercer from 1990 to 1997. Mr. Quella currently serves as a director of Advanstar Communications Inc., Arcade Holding Corporation, Formica Corporation and Merrill Corporation. ROBERT S. CHRISTIE was appointed as a director of Von Hoffmann and Holdings in February 2002. He was the President and Chief Executive Officer for Thomson Learning Corporation from 1998 to 2001, and from 1996 to 1998, he was President and Chief Executive Officer of Thomson Learnings' subsidiary Thomson & Thomson. ROBERT A. UHLENHOP was appointed as a Chairman of the Board of Holdings in February 2002 and has served as a director of Holdings since 1996. He served as Chairman of the Board, President and Chief Executive Officer of Von Hoffmann from 1995 to February 2002 and as the Chief Executive Officer and President of Holdings from 1996 to February 2002. From 1977 to 1997, he was Chief Financial Officer and Treasurer of Von Hoffmann. Each director serves for a term of one year. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth the cash and non-cash compensation for each of the last three fiscal years awarded to or earned by each person who served Chief Executive Officer of Von Hoffmann or Holdings in 2001 and the four other most highly compensated executive officers serving as executive officers at December 31, 2001.
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------------------- ---------------------------------- AWARDS PAYOUTS ----------------------- -------- OTHER SECURITIES ANNUAL RESTRICTED UNDERLYING ALL OTHER COMPEN- STOCK OPTIONS/ LTIP COMPEN- SALARY BONUS SATION(1) AWARDS SARS PAYOUTS SATION NAME AND PRINCIPAL POSITION(*) YEAR ($) ($) ($) ($) (#) ($) ($) - ------------------------------ -------- -------- -------- --------- ---------- ---------- -------- --------- Robert Uhlenhop,.................... 2001 $250,000 $322,335 -- -- -- -- $45,078 Chairman of the Board, 2000 $233,400 $766,942 -- -- -- -- $43,177 President and Chief Executive Officer(2) 1999 $233,400 $466,000 -- -- -- -- $40,626 Peter Mitchell,..................... 2001 $208,400 $ 75,000 -- -- -- -- $18,540 Vice-Chairman of the Board, 2000 $208,400 $182,553 -- -- -- -- $18,500 Executive Vice President, Chief 1999 $183,400 $100,000 -- -- -- -- $17,561 Financial Officer and Treasurer James D. Nallo,..................... 2001 $200,018 $ 50,000 -- -- -- -- $11,900 President of Precision 2000 $200,026 $100,000 -- -- 100,000 -- $ 4,000 1999 -- -- -- -- -- -- -- Robert Mathews,..................... 2001 $200,000 $ 70,635 -- -- -- -- $ 4,575 President of Von Hoffmann 2000 $123,750 $ 60,000 -- -- 100,000 -- $ 146 Graphics(3) 1999 -- -- -- -- -- -- -- Jack R. Field,...................... 2001 $171,000 $ 19,549 -- -- -- -- $ 248 Senior Vice President of Sales 2000 $ 44,292 $ 13,124 -- -- -- -- $ 20 for Von Hoffmann Graphics(4) 1999 -- -- -- -- -- -- -- * Reflects principal position at December 31, 2001
- ------------------------------ (1) Excludes perquisites where the aggregate amount of such compensation is the lesser of either $50,000 or 10% of the total annual salary and bonus reported for Messrs. Uhlenhop, Mitchell and Garrison. (2) Mr. Uhlenhop served as Chairman of the Board, President and Chief Executive Officer of Von Hoffmann from 1995 to February 2002. Mr. Uhlenhop was appointed as Chairman of the Board of Holdings in February 2002. 54 (3) Mr. Mathews served as President of our Von Hoffmann Graphics operating division, which was merged into Von Hoffmann in February 2002, from 2000 to 2001. Mr. Mathews was appointed as Chief Operating Officer of Von Hoffmann in January 2002 and as President, Chief Executive Officer and a director of Von Hoffmann and Holdings in February 2002. (4) Mr. Field served as Senior Vice President of Sales for our Von Hoffmann Graphics operating division, which was merged into Von Hoffmann in February 2002, from 2000 to 2002. Mr. Field was appointed as our Senior Vice President of Sales and Marketing in January 2002. OPTION/SAR GRANTS IN THE LAST FISCAL YEAR No stock options were granted to or exercised by the named executive officers during 2001. AGGREGATED OPTION/SAR EXERCISES DURING LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES The following table sets forth certain information with respect to the exercise of options to purchase our common stock during the twelve-month period ended December 31, 2001, and the unexercised options held and the value thereof at that date, for each of the named executive officers.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED SHARES OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTION ACQUIRED ON END (#) AT FISCAL YEAR END ($) EXERCISE VALUE --------------------------- --------------------------- NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ----------- ------------ ----------- ------------- ----------- ------------- Robert Uhlenhop................. -- -- 1,601,600 398,400 -- -- Peter Mitchell.................. -- -- 340,600 159,400 -- -- James D. Nallo.................. -- -- 29,080 70,920 -- -- Robert Mathews.................. -- -- 29,080 70,920 -- -- Jack R. Field................... -- -- -- -- -- --
LONG TERM INCENTIVE PLAN We have no Long Term Incentive Plan in place. EMPLOYMENT AGREEMENTS MATHEWS EMPLOYMENT AGREEMENT We have entered into an employment agreement with Mr. Mathews effective as of January 1, 2002. Pursuant to that agreement, Mr. Mathews will serve in an executive position for us until December 31, 2004. Currently, Mr. Mathews serves as President and Chief Executive Officer of both Von Hoffmann and Holdings. In exchange for his services, Mr. Mathews is compensated with a base salary of $225,000, an annual non-discretionary bonus in the amount of $75,000 and an additional annual bonus in an amount equal to 1.4% of EBITDA in excess of certain EBITDA targets for each calendar year. This additional bonus may not exceed $210,000 for any calendar year. In the event that Mr. Mathews is terminated for cause, he will be entitled to his base salary through the date of his termination, but will not be entitled to any additional compensation. If Mr. Mathews is terminated without cause he is entitled to receive an amount in cash equal to $337,500, but will not be entitled to any other compensation. The employment agreement also includes a non-competition provision prohibiting Mr. Mathews from competing with us for one year from the termination of his employment agreement. MITCHELL EMPLOYMENT AGREEMENT We have entered into an employment agreement with Mr. Mitchell, effective as of January 1, 2002. Pursuant to that agreement, Mr. Mitchell will serve in an executive position with us until December 31, 2004. Currently, Mr. Mitchell serves as Chief Financial Officer, Treasurer and Executive Vice President 55 of Holdings and as Vice Chairman, Chief Financial Officer, Treasurer and Executive Vice President of Von Hoffmann. In exchange for his services, Mr. Mitchell is compensated with a base salary of $225,000 subject to discretionary increases, an annual non-discretionary bonus in the amount of $75,000, and an additional bonus per calendar year in an amount equal to 1.4% of EBITDA in excess of certain EBITDA targets for each calendar year. This additional bonus may not exceed $210,000 for any calendar year. In the event that Mr. Mitchell is terminated for cause, he will be entitled to his base salary through the date of his termination, but will not be entitled to any additional compensation. If Mr. Mitchell is terminated without cause, he is entitled to receive an amount in cash equal to $337,500, but will not be entitled to any other compensation. In the event that Mr. Mitchell's employment is terminated without cause prior to December 31, 2002 after a change in control of our company, he is entitled to receive an amount in cash equal to $30,000. The employment agreement also includes a non-competition provision prohibiting Mr. Mitchell from competing with us for one year following the termination of his employment agreement. UHLENHOP EMPLOYMENT AGREEMENT Von Hoffmann and Holdings have entered into an employment agreement with Mr. Uhlenhop effective as of January 1, 2002 and amended and restated as of June 21, 2002. Pursuant to the amended and restated employment agreement, Mr. Uhlenhop will be employed as Chief Executive Emeritus and Special Advisor to the Chief Executive Officer of Von Hoffmann. In addition, Mr. Uhlenhop will serve as Chairman of Holdings' Board of Directors until January 21, 2004. Pursuant to the old employment agreement, Mr. Uhlenhop had served as the President and Chief Executive Officer of Holdings and the Chief Executive Officer of Von Hoffmann until Mr. Mathews' appointment to those positions in February 2002. To the extent requested by Holdings and Von Hoffmann, Mr. Uhlenhop will provide guidance and assistance to members of Von Hoffman's senior management and to Mr. Mathews in his capacity as Von Hoffman's new Chief Executive Officer and President. In exchange for his services, Mr. Uhlenhop is compensated with a base salary of $250,000 per year subject to discretionary increases and an annual non-discretionary bonus of $300,000. In the event that Mr. Uhlenhop is terminated for cause, he will be entitled to his base salary through the date of his termination but will not be entitled to any additional compensation from Von Hoffmann or Holdings. If Mr. Uhlenhop is terminated without cause prior to December 31, 2002, he would be entitled to receive $550,000 (I.E., his base salary and bonus for one calendar year) plus continuation of certain benefits. If Mr. Uhlenhop is terminated without cause on or after January 1, 2003 and prior to January 21, 2004, he would be entitled to receive his base salary for the remainder of such period following his termination and $300,000 (I.E., his bonus for one calendar year) plus continuation of certain benefits. Additionally, in recognition of Mr. Uhlenhop's past and continued service to Von Hoffmann Corporation, he received a cash payment equal to $1,000,000 on an after tax basis upon the execution of the amended and restated employment agreement. The amended and restated Von Hoffmann employment agreement also includes a non-competition provision prohibiting Mr. Uhlenhop from competing with Von Hoffmann for two years after the last severance payment is made to Mr. Uhlenhop. The amended and restated employment agreement also provides that so long as Mr. Uhlenhop holds at least 2% of the outstanding common stock of Holdings, he is entitled to serve as a director of Holdings. If, however, Mr. Uhlenhop is terminated for cause or violates the terms of the non-competition provision, he will no longer be entitled to serve as a director of Holdings. DIRECTOR'S ARRANGEMENTS In connection with Robert S. Christie serving as director of Von Hoffmann and Holdings, Mr. Christie is reimbursed for reasonable out-of-pocket expenses that he incurs in the performance of his duties. We also pay him an annual retainer fee equal to $50,000, payable in equal quarterly 56 installments. Additionally, we will grant him options to purchase 50,000 shares of Holdings' common stock at an exercise price of $1.00 per share. Mr. Christie is also the Chairman of the Operations Review Committee of the board of directors of Von Hoffmann and a member of Holdings' Audit Committee. Other than Mr. Christie, none of our other directors receive any fees or other compensation for serving as a director. All directors are entitled to reimbursement for travel expenses associated with board activities. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding beneficial ownership of Holdings' common stock as of June 20, 2002 by (i) each person we believe owns beneficially more than five percent of Holdings outstanding common stock; (ii) each of Holdings' directors and named executive officers and (iii) each of Holdings' directors and executive officers as a group.
NUMBER OF SHARES NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE - ------------------------------------ ------------------ ---------- DLJ Merchant Banking(1)..................................... 67,134,000 96.6 Robert A. Uhlenhop(2)....................................... 1,601,600 2.4 Robert S. Mathews(3)........................................ 29,080 * Peter C. Mitchell(4)........................................ 490,600 * David F. Burgstahler........................................ -- Thompson Dean............................................... -- James A. Quella............................................. -- Robert S. Christie.......................................... -- All directors and executive officers as a group (8 persons)(5)............................................... 2,121,280 3.9 * Indicates less than one percent.
- ------------------------ (1) Consists of (a) 62,134,000 shares and (b) warrants that are presently exercisable or exercisable within 60 days to purchase 5,000,000 shares held by the following entities: DLJ Merchant Banking Partners II, L.P., DLJ Offshore Partners II, C.V. (DLJOP), DLJMB Funding II, Inc. (DLJ Funding), DLJ Diversified Partners, L.P. (Diversified), DLJ Diversified Partners-A, L.P. (Diversified-A), DLJ EAB Partners, L.P. (EAB), DLJ First ESC L.P. (First ESC), DLJ Merchant Banking Partners II-A, L.P. (Partners II-A), DLJ Millennium Partners, L.P. (Millennium L.P.), DLJ Millennium Partners-A, L.P. (Millennium-A) and UK Investment Plan 1997 Partners (UK Investment). See "Certain Relationships and Related Transactions--Shareholders' Agreement" and "Plan of Distribution." The address of each of DLJ Merchant Banking Partners II, L.P., DLJ Funding, Diversified, Diversified-A, EAB, First ESC, Partners II-A, Millennium L.P. and Millennium-A is 11 Madison Avenue, 16th Floor, New York, New York, 10010. The address of DLJOP is John B. Gorsiraweg 14, Willenstad, Curacao, Netherlands Antilles. The address of UK Investment is 2121 Avenue of the Stars, Fox Plaza, Suite 3000, Los Angeles, California 90067. (2) Includes options that are presently exercisable or exercisable within 60 days to purchase 1,601,600 shares. (3) Consists of options that are presently exercisable or exercisable within 60 days to purchase 29,080 shares. (4) Includes options that are presently exercisable or exercisable within 60 days to purchase 340,600 shares. (5) Includes options and warrants that are presently exercisable or exercisable within 60 days to purchase 2,315,040 shares. 57 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS SHAREHOLDERS' AGREEMENT On May 22, 1997, Holdings, DLJ Merchant Banking, ZS VH II L.P., and management and other employees who own shares of Holdings entered into a shareholders' agreement that sets forth certain rights and restrictions relating to the ownership of Holdings' common stock and agreements among those parties as to the governance of Holdings and, indirectly, of Von Hoffmann. The agreement was amended on November 30, 2000, and subsequently amended on June 20, 2002. The shareholders' agreement contains provisions which, among other things and subject to certain exceptions: (i) restrict the ability of the management and employee stockholders to transfer their respective ownership interests, subject to certain rights of first refusal and tag-along rights held by the other stockholders; (ii) grant certain drag-along rights to DLJ Merchant Banking to require the remaining stockholders to sell their shares if DLJ Merchant Banking sells more than 50% of the then-outstanding shares of Holdings' common stock of Holdings and grant to the remaining stockholders, under certain circumstances, tag-along rights with respect to sales by DLJ Merchant Banking; (iii) grant to stockholders certain registration rights; and (iv) grant Mr. Uhlenhop the right to require Holdings to sell shares to him on the same basis and in a proportional amount as any sold by Holdings to DLJ Merchant Banking. Holdings or its designee has the right to repurchase all shares owned by any management stockholder upon the termination of such management stockholder's employment with us. Additionally, DLJ Merchant Banking was granted demand registration and piggyback registration rights. STOCK PURCHASE AGREEMENT WITH DLJ MERCHANT BANKING On March 26, 2002, Holdings and DLJ Merchant Banking Partners II, L.P. entered into a stock purchase agreement pursuant to which DLJ Merchant Banking purchased from Holdings 20,000,000 shares of Holdings' common stock for a purchase price of $1.00 per share. The stock purchase agreement further provides that DLJ Merchant Banking may, in its discretion, purchase up to an additional 5,000,000 shares of Holdings' Common Stock at any time prior to December 31, 2002. STOCK REPURCHASE AGREEMENT WITH ZS VH II L.P. On June 21, 2002, ZS VH II L.P., Holdings and DLJ Merchant Banking Partners II, L.P. entered into a stock purchase agreement pursuant to which ZS VH II L.P. sold 5,000,000 shares of common stock of Holdings for a purchase price of $1.00 per share to Holdings. The stock purchase agreement provides that each of the parties, along with ZS VH L.P., agree to release each other from any and all claims, liabilities and other legal actions which may have arisen or may later arise between the parties under: (i) the Agreement and Plan of Merger, dated as of May 22, 1997, by and among VH Acquisition Corp., Holdings, DLJ Merchant Banking Partners II, L.P. and certain of its affiliates, and certain shareholders, and the ancillary documents delivered in connection with the execution of the Agreement and Plan of Merger, (ii) the Shareholders' Agreement, (iii) and the stock purchase agreement. Robert Horne, the board designee of ZS, resigned concurrently with the sale of the shares. Under the agreement, Holdings releases Mr. Horne from any liability for any claims in connection with Mr. Horne serving as a director of Holdings. The purchase price paid for ZS VH II L.P.'s shares came from cash on hand of Holdings, which cash was proceeds from DLJ Merchant Banking's equity contribution in March, 2002. 58 STOCK REPURCHASE AGREEMENT WITH ROBERT UHLENHOP On June 21, 2002, Holdings and Von Hoffmann entered into a stock purchase agreement with Robert Uhlenhop, the Chairman of the Board of Directors of Holdings, and the Robert A. Uhlenhop 1998 Irrevocable Trust Dated January 27, 1998. Each of Mr. Uhlenhop and the trust sold 1,000,000 shares of Holdings' outstanding common stock to Holdings in exchange for $1,000,000. Of the $1,000,000 received by Mr. Uhlenhop, approximately $797,000 was paid to Von Hoffmann as settlement of the outstanding principal amount of, and the unpaid and accrued interest through June 19, 2002 on, the non-recourse secured promissory note, dated as of May 22, 1997, from Mr. Uhlenhop to Von Hoffmann. The payment from Mr. Uhlenhop to Von Hoffmann fully discharged and satisfied all of Mr. Uhlenhop's obligations to Von Hoffmann under the promissory note. The purchase price paid for Mr. Uhlenhop's shares came from cash on hand of Holdings, which cash was proceeds from DLJ Merchant Banking's equity contribution in March, 2002. FINANCIAL SERVICES AGREEMENT On March 26, 2002 we entered into a financial advisory agreement with CSFB. Pursuant to this agreement, CSFB has been retained to act as our financial advisor for a five-year period, unless terminated earlier. Under this agreement CSFB, among other things, assists us in analyzing our operations and performance and future prospects. In addition, CSFB advises us on our continued evaluation of our capital structure, potential acquisitions and strategic plan and alternatives. For its services, CSFB is entitled to receive up to $3.5 million, payable at certain times and in certain amounts, depending upon the services performed. As contemplated by the agreement, we have agreed to indemnify CSFB against specified losses or liability arising out of, or in connection with, advice and services rendered under the agreement. This agreement is terminable by either us or CSFB at any time upon written notice. MITCHELL LOAN On August 15, 1997, pursuant to a non-recourse secured promissory note, DLJ loaned Peter C. Mitchell, an executive officer of Holdings and of Von Hoffmann, $75,000 at an interest rate of 9.4% per annum for the purchase of 75,000 shares of Holdings' common stock. DLJ subsequently sold this promissory note to us. As of December 31, 2001, the balance was $112,177. NELSON LOAN On May 22, 1997, pursuant to a non-recourse secured promissory note, DLJ loaned Craig Nelson, the Vice President of Human Resources of Von Hoffmann, $100,000 at an interest rate of 9.4% per annum for the purchase of 100,000 shares of Holdings' common stock. DLJ subsequently sold this promissory note to us. As of December 31, 2001, the balance was $152,711. UHLENHOP LOAN On May 22, 1997, pursuant to a non-recourse secured promissory note, DLJ loaned Robert A. Uhlenhop, the Chairman of the Board and a director of Holdings, $500,000 at an interest rate of 9.4% per annum for the purchase of 500,000 shares of Holdings' common stock. DLJ subsequently sold this promissory note to us. As of December 31, 2001, the balance was $763,559. The loan was repaid on June 20, 2002, as described above under "--Stock Repurchase Agreement with Robert Uhlenhop." OTHER CSFB and certain of its affiliates have performed investment banking, financial advisory and/or lending services for us from time to time, for which they have received customary compensation and may do so in the future. CSFB was the syndication agent under our revolving credit facility and 59 received customary compensation in connection with acting in that role. Additionally, an affiliate of CSFB is a lender under our revolving credit facility. DESCRIPTION OF CERTAIN INDEBTEDNESS REVOLVING CREDIT FACILITY We entered into a revolving credit facility on March 26, 2002, which provides for revolving loans of $90.0 million, and which includes a $10.0 million sublimit for the issuance of stand by and commercial letters of credit and a $10.0 million sublimit for swingline loans. As of May 31, 2002, we had total indebtedness of $391.7 million and had $50.8 million of additional borrowings available under our revolving credit facility, after excluding $1.35 million of letters of credit outstanding under that facility. The facility will terminate November 15, 2006, although in certain circumstances it can be extended to March 26, 2007. At any time prior to that date, we have the right, subject to finding lenders willing to provide such increase, to effectuate an one-time increase to provide for borrowings of up to $100.0 million under the revolving credit facility. Von Hoffmann is the borrower under the facility and Holdings and all of Von Hoffmann subsidiaries unconditionally guarantee Von Hoffman'S obligations under the facility. All borrowings, except for swingline loans, bear interest, at our option, at either the administrative agent's alternate base rate plus 1.75% per annum or reserve-adjusted LIBOR plus 3.0% per annum. Swingline loans bear interest as base rate loans. The applicable margins may be adjusted beginning approximately two quarters after the closing of the facility based on our ratio of debt to EBITDA. We pay customary administration fees and expenses and pay commitment fees of 0.625% per annum on the unused portion of the revolving credit facility. We may prepay outstanding revolving loans without penalty, PROVIDED, HOWEVER, that LIBOR breakage costs, if any, will be for our account. Subject to certain exceptions, we are required to make certain mandatory prepayments (and concurrently to reduce the commitments under the facility), including with: (i) 100% of the net proceeds from certain asset sales; (ii) 100% of the net proceeds from the sale or issuance of certain debt securities other than the notes; (iii) 50% of the net proceeds from the sale or issuance of certain equity securities; and (iv) certain proceeds of casualty or condemnation events. We are also required to paydown our revolving facility from time to time with excess cash. Borrowings and letters of credit under the revolving credit facility are limited to an amount not in excess of a borrowing base equal to specified percentages of our eligible inventory and receivables and, subject to a limit, our eligible property, plant and equipment. Our obligations under the revolving credit facility are secured by a first-priority perfected lien on our outstanding capital stock and substantially all of our and our subsidiaries' property and assets. The revolving credit facility contains customary covenants and restrictions on our ability to engage in certain activities, including incurring debt or liens, paying dividends or repurchasing our equity securities, voluntarily prepaying certain indebtedness (including the 2009 notes and the 2007 notes), selling assets, making acquisitions, entering into mergers or similar transactions or engaging in transactions with affiliates. The revolving credit facility restricts us from repurchasing the 2009 notes and the 2007 notes prior to their maturity, except under certain circumstances. In addition, the revolving credit facility requires that we meet or exceed certain fixed charge coverage ratios and not exceed specified leverage ratios. It also includes customary events of default. 60 DESCRIPTION OF THE REGISTERED SECURITIES THE FOLLOWING DESCRIPTION IS ONLY A SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURES AND THE REGISTERED SECURITIES THAT WE CONSIDER MATERIAL. YOU CAN RECEIVE A COPY OF THE INDENTURES UPON REQUEST TO US AT THE ADDRESS SET FORTH UNDER "WHERE YOU CAN FIND MORE INFORMATION." 10 1/4% SENIOR NOTES DUE 2009 You can find the definitions of certain terms used in this description of the 2009 notes under the subheading "--Certain Definitions." In this description, the term "Von Hoffmann" refers only to Von Hoffmann Corporation and not to any of its subsidiaries. Von Hoffmann issued the old 2009 notes under an indenture among itself, the Guarantors and U.S. Bank National Association, as trustee, in a private transaction that is not subject to the registration requirements of the Securities Act. The terms of the 2009 notes include those stated in the indenture governing them and those made part of that indenture by reference to the Trust Indenture Act of 1939, as amended. The following description is a summary of the material provisions of the indenture governing the 2009 notes and the registration rights agreement relating to the 2009 notes. It does not restate those agreements in their entirety. We urge you to read the indenture and the registration rights agreement governing the 2009 notes because they, and not this description, define your rights as holders of the notes. Copies of the indenture and the registration rights agreement governing the 2009 notes are available as set forth below under "--Additional Information." BRIEF DESCRIPTION OF THE 2009 NOTES AND THE NOTE GUARANTEES The 2009 notes: - will be general unsecured obligations of Von Hoffmann; - will be PARI PASSU in right of payment with all existing and future senior indebtedness of Von Hoffmann; - will be senior in right of payment to all existing and future subordinated indebtedness of Von Hoffmann; and - will be unconditionally guaranteed by the Guarantors. However, the 2009 notes will be effectively subordinated to all borrowings under our revolving credit facility, which will be secured by substantially all of the assets of Von Hoffmann and the Guarantors. See "Risk Factors--Your right to receive payments on the securities is effectively subordinated to the rights of our existing and future secured creditors." THE NOTE GUARANTEES The 2009 notes will be guaranteed by all of Von Hoffmann's current and future Domestic Subsidiaries and, for so long as Holdings guarantees any of the Credit Facilities, by Holdings. Each guarantee of the 2009 notes: - will be a general unsecured obligation of the Guarantor; - will be PARI PASSU in right of payment to all existing and future unsecured senior indebtedness of that Guarantor; and - will be senior in right of payment to all existing and future subordinated indebtedness of that Guarantor. 61 As of the date of the exchange offers, all of Von Hoffmann's subsidiaries will be "Restricted Subsidiaries." However, under the circumstances described below under the subheading "--Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries," Von Hoffmann will be permitted to designate certain of its subsidiaries as "Unrestricted Subsidiaries." Von Hoffmann's Unrestricted Subsidiaries will generally not be subject to the restrictive covenants in the indenture governing the 2009 notes and will not guarantee the 2009 notes. PRINCIPAL, MATURITY AND INTEREST The indenture governing the 2009 notes does not limit the maximum aggregate principal amount of the 2009 notes that Von Hoffmann may issue thereunder. Von Hoffmann issued the old 2009 notes in an aggregate principal amount of $215 million. Von Hoffmann may issue additional 2009 notes from time to time, subject to the covenant described below under the caption "--Certain Covenants-- Incurrence of Indebtedness and Issuance of Preferred Stock." The 2009 notes and any additional notes subsequently issued under the indenture governing the 2009 notes will be treated as a single class for all purposes under the indenture governing the 2009 notes, including, without limitation, waivers, amendments, redemptions and offers to purchase. Von Hoffmann will issue the 2009 notes in denominations of $1,000 and integral multiples of $1,000. The 2009 notes will mature on March 15, 2009. Interest on the 2009 notes will accrue at the rate of 10 1/4% per annum and will be payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2002. Von Hoffmann will make each interest payment to the holders of record on the immediately preceding February 1 and August 1. Interest on the 2009 notes will accrue from the date of original issuance or, if interest has already been paid, 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. All payments on 2009 notes will be made at the office or agency of the paying agent unless Von Hoffmann elects 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 2009 NOTES The trustee currently acts as paying agent and registrar. Von Hoffmann may change the paying agent or registrar without prior notice to the holders of the 2009 notes, and Von Hoffmann or any of its subsidiaries may act as paying agent or registrar. NOTE GUARANTEES The 2009 notes will be guaranteed by all of Von Hoffmann's current and future Domestic Subsidiaries and, so long as Holdings guarantees any of the Credit Facilities, by Holdings. The note guarantees will be joint and several obligations of the Guarantors. The obligations of each Guarantor under its note guarantee will be limited as necessary to prevent that note guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors--Federal and State statutes allow courts, under specific circumstances, to void guarantees and require note holders to return payments received from guarantors." No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) or sell or otherwise dispose of all or substantially all of its assets to, another corporation, Person or entity, whether or not affiliated with such Guarantor, unless: (1) subject to the provisions below, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the trustee, under the indenture governing the 2009 notes; 62 (2) immediately after giving effect to that transaction, no Default or Event of Default exists; and (3) Von Hoffmann would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." Notwithstanding the provisions of this paragraph, the indenture governing the 2009 notes will not prohibit the merger of two of Von Hoffmann's Restricted Subsidiaries or the merger of a Restricted Subsidiary into Von Hoffmann. The note guarantee of a Guarantor will be released: (1) in connection with any sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise; or (2) in connection with any sale or other disposition of all of the Capital Stock of a Guarantor; or (3) the designation of a Guarantor as an Unrestricted Subsidiary; PROVIDED, that, in the case of a sale or other disposition of all of the assets or Capital Stock of a Guarantor or the designation of a Guarantor as an Unrestricted Subsidiary, the Net Proceeds of such sale or other disposition are applied, or such designation is made, in accordance with the applicable provisions of the indenture governing the 2009 notes. See "--Repurchase at the Option of Holders--Asset Sales" and "--Certain Covenants--Restricted Payments." The indenture governing the 2009 notes will also provide that if all of the Guarantees of Holdings issued pursuant to Credit Facilities are released, Holdings' note guarantee will also be released. Except as set forth above, the limitations and restrictions in the indenture governing the 2009 notes will not apply to, limit or restrict the operations of Holdings. OPTIONAL REDEMPTION The 2009 notes may be redeemed, in whole or in part, at any time prior to March 15, 2005 at the option of Von Hoffmann upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each holder's registered address, at a redemption price equal to, as determined by the Reference Treasury Dealer, the sum of the present values of the Remaining Scheduled Payments discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable date of redemption. At any time on or prior to March 15, 2005, Von Hoffmann may redeem up to 35% of the aggregate principal amount of the 2009 notes issued under the indenture governing the 2009 notes at a redemption price of 110.25% of the principal amount, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net proceeds of a sale of Equity Interests (other than Disqualified Stock) of Von Hoffmann or a capital contribution to Von Hoffmann's common equity from Holdings; PROVIDED that: (1) at least 65% of the aggregate principal amount of the 2009 notes issued under the indenture governing the 2009 notes remains outstanding immediately after the occurrence of such redemption (excluding the 2009 notes held by Von Hoffmann and its Subsidiaries); and (2) the redemption occurs within 90 days of the date of the closing of such sale or contribution. 63 The indenture governing the 2009 notes will not restrict Von Hoffmann's ability to separately make open market, privately negotiated or other purchases of the 2009 notes from time to time. Except pursuant to the first two paragraphs of this section, the 2009 notes will not be redeemable at Von Hoffmann's option prior to March 15, 2005. On or after March 15, 2005, Von Hoffmann may redeem all or a part of the 2009 notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, on the 2009 notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2005........................................................ 107.688% 2006........................................................ 105.125% 2007........................................................ 102.563% 2008 and thereafter......................................... 100.000%
Unless Von Hoffmann defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the 2009 notes or portions thereof called for redemption. MANDATORY REDEMPTION Except as set forth below under "--Repurchase at the Option of Holders," Von Hoffmann is not required to make mandatory redemption or sinking fund payments with respect to the 2009 notes. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL If a Change of Control occurs, each holder of the 2009 notes will have the right to require Von Hoffmann to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that holder's 2009 notes pursuant to a Change of Control Offer on the terms set forth in the indenture governing the 2009 notes. In the Change of Control Offer, Von Hoffmann will offer at an offer price in cash equal to 101% of the aggregate principal amount of the 2009 notes repurchased plus accrued and unpaid interest and Liquidated Damages, if any, on the 2009 notes repurchased, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, Von Hoffmann will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase the 2009 notes on the date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the indenture governing the 2009 notes and described in such notice. Von Hoffmann will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the 2009 notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the indenture governing the 2009 notes, Von Hoffmann will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the indenture governing the 2009 notes by virtue of such conflict. On the Change of Control Payment Date, Von Hoffmann will, to the extent lawful: (1) accept for payment all the 2009 notes or portions of the 2009 notes properly tendered pursuant to the Change of Control Offer; 64 (2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all the 2009 notes or portions of the 2009 notes properly tendered; and (3) deliver or cause to be delivered to the trustee the 2009 notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of the 2009 notes or portions of the 2009 notes being purchased by Von Hoffmann. The paying agent will promptly mail to each holder of the 2009 notes properly tendered the Change of Control Payment for such 2009 notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new 2009 note equal in principal amount to any unpurchased portion of the 2009 notes surrendered, if any; PROVIDED that each new 2009 note will be in a principal amount of $1,000 or an integral multiple of $1,000. Von Hoffmann 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 Von Hoffmann to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the indenture governing the 2009 notes are applicable. Except as described above with respect to a Change of Control, the indenture governing the 2009 notes does not contain provisions that permit the holders of the 2009 notes to require that Von Hoffmann repurchase or redeem the 2009 notes in the event of a takeover, recapitalization or similar transaction. The revolving credit facility limits Von Hoffmann from purchasing or redeeming any 2009 notes, and also provides that certain change of control events with respect to Von Hoffmann would constitute a default thereunder. Any future credit agreements or other agreements to which Von Hoffmann becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when Von Hoffmann is prohibited from purchasing or redeeming the 2009 notes, it could seek the consent of its lenders to the purchase of the 2009 notes or could attempt to refinance the borrowings that contain such prohibition. If Von Hoffmann does not obtain such a consent or repay such borrowings, it will remain prohibited from purchasing the 2009 notes. In such case, Von Hoffmann's failure to purchase tendered 2009 notes would constitute an Event of Default under the indenture governing the 2009 notes, which would, in turn, constitute a default under the revolving credit facility. In addition, Von Hoffmann's ability to pay cash to the holders of the 2009 notes upon a repurchase may be limited by its then existing financial resources. Von Hoffmann 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 governing the 2009 notes applicable to a Change of Control Offer made by Holdings and purchases all the 2009 notes validly tendered and not withdrawn under the 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 Von Hoffmann and its Subsidiaries taken as a whole. Although there is a developing 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 the 2009 notes to require Von Hoffmann to repurchase the 2009 notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of Von Hoffmann and its Subsidiaries taken as a whole to another Person or group may be uncertain. Von Hoffmann's ability to pay cash to the holders of the 2009 notes upon a repurchase may be limited by Von Hoffmann then existing financial resources. See "Risk Factors--We may not have the ability to raise the funds necessary to finance the change of control offer required by the securities indentures." 65 ASSET SALES Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) Von Hoffmann (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value (evidenced by a resolution of the board of directors of Von Hoffmann set forth in an Officers' Certificate delivered to the trustee) of the assets or Equity Interests issued or sold or otherwise disposed of; and (2) at least 75% of the consideration received in the Asset Sale by Von Hoffmann or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following will be deemed to be cash: (a) any liabilities, as shown on Von Hoffmann's or such Restricted Subsidiary's most recent consolidated balance sheet, of Von Hoffmann or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the 2009 notes or any note guarantee) that are assumed by the transferee of any such assets; and (b) any securities, notes or other obligations received by Von Hoffmann or any such Restricted Subsidiary from such transferee that are immediately converted by Von Hoffmann or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion). The 75% limitation referred to in clause (2) above will not apply to any Asset Sale in which the cash portion of the consideration received therefrom, determined in accordance with the foregoing proviso, is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, Von Hoffmann or any Restricted Subsidiary may apply those Net Proceeds at its option: (1) to repay Indebtedness (other than Indebtedness that by its terms is subordinated in right of payment to the 2009 notes or any note guarantee) and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (2) to acquire a controlling interest in another business; (3) to make a capital expenditure; or (4) to acquire other long-term assets, in each case in accordance with the terms of the indenture governing the 2009 notes. Pending the final application of any Net Proceeds, Von Hoffmann may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the indenture governing the 2009 notes. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million or, if no Senior Subordinated Notes are outstanding, $10.0 million, Von Hoffmann will make an offer (an "Asset Sale Offer") to all holders of the 2009 notes and, at its option, an offer to all holders of other Indebtedness that ranks equally with the 2009 notes containing similar provisions to those in the indenture governing the 2009 notes with respect to offers to purchase or redeem with the proceeds of asset sales to purchase the maximum principal amount of the 2009 notes that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer for the 2009 notes will be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after 66 consummation of an Asset Sale Offer and such offer for PARI PASSU Indebtedness, Von Hoffmann may use those Excess Proceeds for general corporate purposes, including to make a similar offer for the Senior Subordinated Notes pursuant to the indenture for such notes. If the aggregate principal amount of notes tendered into such Asset Sale Offer and such other offer exceeds the amount of Excess Proceeds, the trustee will select the 2009 notes to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. Notwithstanding the foregoing, Von Hoffmann and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with the preceding paragraphs if (i) Von Hoffmann or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of (as evidenced by a resolution of Von Hoffmann's board of directors set forth in an Officers' Certificate delivered to the trustee), and (ii) at least 75% of the consideration for such Asset Sale constitutes assets or other property of a kind usable by Von Hoffmann and its Restricted Subsidiaries in the business of Von Hoffmann and its Restricted Subsidiaries as conducted by Von Hoffmann and its Restricted Subsidiaries on the date of the indenture governing the 2009 notes; PROVIDED that any cash consideration received by Von Hoffmann or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Proceeds subject to the provisions of the two preceding paragraphs. Von Hoffmann will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of the 2009 notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of the indenture governing the 2009 notes, Von Hoffmann will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture governing the 2009 notes by virtue of such conflict. SELECTION AND NOTICE Except as otherwise provided in the indenture governing the 2009 notes, if less than all of the 2009 notes are to be redeemed at any time, the trustee will select notes for redemption as follows: (1) if the 2009 notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the 2009 notes are listed; or (2) if the 2009 notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate. No 2009 notes of $1,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of the 2009 notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the 2009 notes or a satisfaction and discharge of the indenture governing the 2009 notes. Notices of redemption may not be conditional. If any 2009 note is to be redeemed in part only, the notice of redemption that relates to that 2009 note will state the portion of the principal amount of that 2009 note that is to be redeemed. A new 2009 note in principal amount equal to the unredeemed portion of the original 2009 note will be issued in the name of the holder of the 2009 notes upon cancellation of the original 2009 note. The 2009 notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on the 2009 notes or portions of them called for redemption. 67 CERTAIN COVENANTS RESTRICTED PAYMENTS Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of Von Hoffmann's Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Von Hoffmann); (2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of Von Hoffmann; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to the 2009 notes ("subordinated Indebtedness"), except a payment of interest or a payment of principal at Stated Maturity; or (4) make any Restricted Investment (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (2) Von Hoffmann would, 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, have been 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 under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by Von Hoffmann and its Restricted Subsidiaries since May 22, 1997 (excluding Restricted Payments permitted by clause (2) of the next succeeding paragraph), is less than the sum of: (a) 50% of the Consolidated Net Income of Von Hoffmann for the period (taken as one accounting period) commencing July 1, 1997 to the end of Von Hoffmann's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), PLUS (b) 100% of the aggregate net cash proceeds received by Von Hoffmann from the issue or sale since May 22, 1997 of (A) Equity Interests of Von Hoffmann (other than Disqualified Stock), (B) any Restricted Subsidiaries or (C) Disqualified Stock or debt securities of Von Hoffmann that have been converted into Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of Von Hoffmann and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), PLUS (c) 100% of the aggregate amount of capital contributions to Von Hoffmann's common equity since May 22, 1997, PLUS 68 (d) 100% of the net proceeds received by Von Hoffmann or any of its Restricted Subsidiaries since May 22, 1997 from (A) the sale or other disposition of any Restricted Investment or (B) dividends on or the sale of stock of Unrestricted Subsidiaries. The foregoing 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 governing the 2009 notes; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of Von Hoffmann in exchange for, or out of the net proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of Von Hoffmann) of, other Equity Interests of Von Hoffmann (other than any Disqualified Stock) or from the net proceeds of a capital contribution by Holdings to Von Hoffmann; PROVIDED that the amount of any such net proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition since May 22, 1997 shall be excluded from clause (3)(b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness (a) with the net proceeds from an incurrence of Permitted Refinancing Indebtedness or (b) in an amount not to exceed the net proceeds received by Von Hoffmann since May 22, 1997 from Subordinated Shareholder Loans (other than Subordinated Shareholder Loans that have constituted Permitted Refinancing Indebtedness); (4) the repurchase, redemption or other acquisition or retirement for value of any Management Equity Interests or the repurchase, redemption or other acquisition or retirement for value of Indebtedness incurred pursuant to clause (12) of the second paragraph of the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" (including, in each case, any dividend or distribution to Holdings used for such purpose); PROVIDED that the aggregate price paid for all such repurchased, redeemed, acquired or retired Management Equity Interests shall not exceed the sum of (a) $3.0 million in any twelve-month period but not more than $15.0 million in the aggregate plus (b) cash proceeds from the sale of Management Equity Interests to management, directors or consultants of Von Hoffmann (or any of its Restricted Subsidiaries) since May 22, 1997; (5) repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (6) other Restricted Investments not to exceed $15.0 million; (7) Restricted Investments made or received by Von Hoffmann and its Restricted Subsidiaries as non-cash consideration from Asset Sales to the extent permitted by the covenant described under "--Repurchase at the Option of Holders--Asset Sales" or received by a person in exchange for trade or other claims against such person in connection with a financial reorganization or restructuring or such person; (8) any loans, advances, distributions or payments between Von Hoffmann and its Restricted Subsidiaries; (9) the payment of dividends or distributions to Holdings in an amount not to exceed $2.0 million per calendar year to allow Holdings to pay reasonable legal, accounting, investment banking, financial advisory, outside director or other professional and administrative fees and expenses incurred by it related to its business; 69 (10) payments pursuant to the Tax Sharing Agreement; (11) payments to CSFB or dividends to Holdings to allow Holdings to pay CSFB in respect of fees for advisory services in accordance with the Financial Advisory Agreement; (12) upon the occurrence of a Change of Control, during the 60-day period commencing after the completion of the offer to repurchase the notes pursuant to the covenant described under "--Repurchase at the Option of Holders--Change of Control" above (including the purchase of the 2009 notes tendered), any purchase or redemption of subordinated Indebtedness or any Capital Stock of Von Hoffmann required pursuant to the terms thereof as a result of such Change of Control at a purchase or redemption price not to exceed 101% of the outstanding principal amount or liquidation amount thereof, plus accrued and unpaid interest or dividends (if any); PROVIDED, HOWEVER, that at the time of such purchase or redemption no Default shall have occurred and be continuing (or would result therefrom); (13) upon the occurrence of an Asset Sale, during the 60-day period commencing after the completion of an Asset Sale Offer to repurchase the 2009 notes pursuant to the covenant described under "--Repurchase at the Option of Holders--Asset Sales" above (including the purchase of the 2009 notes tendered), any purchase or redemption of subordinated Indebtedness or any Capital Stock of Von Hoffmann required pursuant to the terms thereof as a result of such Asset Sale at a purchase or redemption price not to exceed 100% of the outstanding principal amount or liquidation amount thereof, plus accrued and unpaid interest or dividends (if any); PROVIDED, HOWEVER, that at the time of such purchase or redemption no Default shall have occurred and be continuing (or would result therefrom); and (14) dividends or distributions in an amount not to exceed the aggregate amount of capital contributions received by Von Hoffmann since the date of the indenture governing the 2009 notes, less any amount used from capital contributions to redeem, repurchase, retire, defease or acquire subordinated Indebtedness or Equity Interests of Von Hoffmann pursuant to clause (2) of this paragraph; PROVIDED that the amount of such capital contributions that are utilized for such dividends or distributions shall be excluded from clause (3)(c) of the preceding paragraph. 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 Von Hoffmann or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the board of directors whose resolution with respect thereto shall be delivered to the trustee. Not later than the date of making any Restricted Payment, Von Hoffmann shall deliver to the trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK Von Hoffmann 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 (collectively, "incur") any Indebtedness (including Acquired Debt) and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that Von Hoffmann or any Guarantor may incur Indebtedness (including Acquired Debt) and Von Hoffmann's Restricted Subsidiaries may issue shares of preferred stock if the Fixed Charge Coverage Ratio for Von Hoffmann'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 or such preferred stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the 70 additional Indebtedness had been incurred or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following: (1) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Indebtedness under the Credit Facilities pursuant to this clause (1) in an aggregate principal amount not to exceed $115.0 million at any one time outstanding; (2) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Existing Indebtedness; (3) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Indebtedness represented by the 2009 notes and the related note guarantees, the registered 2009 notes and any new notes issued in exchange for the 2007 notes or additional notes issued under the indenture governing the 2009 notes provided any new notes are issued pursuant to arrangements similar to those provided for in the exchange offer provisions of the registration rights agreement for the 2009 notes; (4) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations in an aggregate principal amount not to exceed $50.0 million at any time outstanding; (5) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries of Acquired Debt in an amount not to exceed $25.0 million; PROVIDED that such Indebtedness was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by Von Hoffmann or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by Von Hoffmann or one of its Restricted Subsidiaries; (6) the incurrence by Von Hoffmann 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 that was permitted by the indenture governing the 2009 notes to be incurred; (7) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries of intercompany Indebtedness between or among Von Hoffmann and any of its Restricted Subsidiaries; (8) the incurrence by Von Hoffmann and 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 the indenture governing the 2009 notes to be outstanding; (9) the guarantee by Von Hoffmann or any of the Guarantors of Indebtedness of Von Hoffmann or a Restricted Subsidiary of Von Hoffmann that was permitted to be incurred by the indenture governing the 2009 notes; (10) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Indebtedness arising from the issuance of Subordinated Shareholder Loans in an aggregate principal amount not to exceed $50.0 million outstanding at any one time; (11) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries of Indebtedness to repurchase, redeem or otherwise acquire or retire for value Management Equity Interests as permitted by clause (4) of the second paragraph of the covenant described above under the caption "--Restricted Payments"; PROVIDED that such Indebtedness is subordinated to the 2009 notes to at least the same extent as Von Hoffmann's Senior Subordinated Notes are subordinated to the 2009 notes; and 71 (12) the incurrence by Von Hoffmann and its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (12), not to exceed $30.0 million. For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" 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, Von Hoffmann will be permitted to classify such item of Indebtedness on the date of its incurrence under one or more of such clauses and such paragraph, or later reclassify all or a portion of such item of Indebtedness as having been incurred, in any manner that complies with this covenant. Indebtedness under the Credit Facilities outstanding on the date on which the 2009 notes are first issued and authenticated under the indenture governing the 2009 notes will be deemed to have been incurred on such date in reliance on the exception provided by clause (1) above. LIENS Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien (the "Initial Lien") securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens unless the 2009 notes are equally and ratably secured (except that Liens securing subordinated Indebtedness shall be expressly subordinate to Liens securing the notes to the same extent such subordinated Indebtedness is subordinate to the 2009 notes). Any Lien created for the benefit of the holders of the 2009 notes pursuant to the preceding sentence shall provide by its terms that such Lien shall automatically and unconditionally be released and discharged upon the release and discharge of the Initial Lien. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions to Von Hoffmann or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Von Hoffmann or any of its Restricted Subsidiaries; (2) make loans or advances to or guarantee any Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to Von Hoffmann or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness as in effect on the date of the indenture governing the 2009 notes; (2) the Credit Facilities as in effect as of the date of the indenture governing the 2009 notes, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more 72 restrictive with respect to such dividend and other payment restrictions than those contained in the Credit Facilities as in effect on the date of the indenture governing the 2009 notes; (3) the indenture governing the 2009 notes, the 2009 notes and the note guarantees; (4) applicable law; (5) any instrument governing Indebtedness or Capital Stock of a Person acquired by, merged into or consolidated with Von Hoffmann or any of its Restricted Subsidiaries as in effect at the time of such acquisition, merger or consolidation (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture governing the 2009 notes to be incurred; (6) customary non-assignment provisions in leases entered into in the ordinary course of business; (7) purchase money obligations for property acquired in the ordinary course of business or Indebtedness incurred pursuant to clause (4) of the second paragraph of the covenant entitled "--Incurrence of Indebtedness and Issuance of Preferred Stock" that impose restrictions of the nature described in clause (3) of the preceding paragraph on the property so acquired; (8) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive than those contained in the agreements governing the Indebtedness being refinanced; (9) restrictions with respect to sales of assets or dispositions of stock of Von Hoffmann or any Restricted Subsidiary imposed pursuant to agreements relating to the sale of such assets or stock; or (10) any instrument governing Acquired Debt, or any Lien in respect of Acquired Debt, assumed in connection with assets acquired by Von Hoffmann or any of its Restricted Subsidiaries, as in effect at the time of such acquisition, which encumbrance or restriction does not extend to any other assets of Von Hoffmann or any of its Restricted Subsidiaries, PROVIDED such Acquired Debt was permitted by the terms of the indenture governing the 2009 notes to be incurred. MERGER, CONSOLIDATION OR SALE OF ASSETS Von Hoffmann may not (1) consolidate or merge with or into (whether or not Von Hoffmann is the surviving corporation) or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless: (1) Von Hoffmann is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than Von Hoffmann) or to which such sale, assignment, transfer, lease, 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 entity or Person formed by or surviving any such consolidation or merger (if other than Von Hoffmann) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of Von 73 Hoffmann under the 2009 notes and the indenture governing the 2009 notes pursuant to a supplemental indenture in a form reasonably satisfactory to the trustee; (3) immediately after such transaction no Default or Event of Default exists; and (4) except in the case of a merger of Von Hoffmann with or into a Wholly Owned Subsidiary of Von Hoffmann, Von Hoffmann or the entity or Person formed by or surviving any such consolidation or merger (if other than Von Hoffmann), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction 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 and Issuance of Preferred Stock." TRANSACTIONS WITH AFFILIATES Von Hoffmann 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 (each of the foregoing, an "Affiliate Transaction"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to Von Hoffmann or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Von Hoffmann or such Restricted Subsidiary with an unrelated Person; and (2) Von Hoffmann delivers to the trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the board of directors of Von Hoffmann set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (1) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the board of directors of Von Hoffmann, if any; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, other than transactions between Von Hoffmann or any of its Restricted Subsidiaries on the one hand, and CSFB on the other hand, 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 will 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 Von Hoffmann or any of its Restricted Subsidiaries in the ordinary course of business of Von Hoffmann or such Restricted Subsidiary and ordinary course loans to employees; (2) transactions between or among Von Hoffmann and/or its Restricted Subsidiaries; (3) Restricted Payments or Permitted Investments that are not prohibited by the provisions of the indenture governing the 2009 notes described above under the caption "--Restricted Payments"; 74 (4) payments and transactions in connection with the Refinancing; and (5) any agreement as in effect on the date of the indenture governing the 2009 notes (including, without limitation, the revolving credit facility) or any amendment or replacement of such agreement or any transactions contemplated thereby (including pursuant to any amendment or replacement of such agreement) so long as any such amendment or replacement agreement is not more disadvantageous to the holders of the 2009 notes in any material respect than the original agreement as in effect on the date of the indenture governing the 2009 notes. ADDITIONAL SUBSIDIARY GUARANTEES If Von Hoffmann or any of its Restricted Subsidiaries shall acquire or create another Domestic Subsidiary after the date of the indenture governing the 2009 notes, then such newly acquired or created Domestic Subsidiary, except for a Domestic Subsidiary that has properly been designated as an Unrestricted Subsidiary in accordance with the indenture governing the 2009 notes for so long as it continues to constitute an Unrestricted Subsidiary, shall execute a note guarantee and deliver an opinion of counsel, in accordance with the terms of the indenture governing the 2009 notes. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The board of directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by Von Hoffmann and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph or clause (6) of the second paragraph of the covenant described above under the caption "--Restricted Payments" or Permitted Investments, as determined by Von Hoffmann. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. REPORTS So long as any 2009 notes are outstanding, Von Hoffmann will furnish to the holders of the 2009 notes 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 Von Hoffmann were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of Von Hoffmann and its Restricted Subsidiaries and, with respect to the annual information only, a report thereon by Von Hoffmann's certified independent accountants. In addition, following the consummation of the exchange offers for the 2009 notes, whether or not required by the Commission, Von Hoffmann will file a copy of all of the foregoing information with the Commission for public availability (unless the Commission will not accept such a filing) concurrently with furnishing such information to holders of the 2009 notes. Von Hoffmann and the Guarantors have also agreed that, for so long as any 2009 notes remain outstanding, they will furnish to the holders, upon their request, the information required to be delivered pursuant to Rule 144A(d) (4) under the Securities Act. However, to the extent not required by the Trust Indenture Act, the indenture governing the 2009 notes will not require Von Hoffmann to make any information available pursuant to the foregoing sentence or the first paragraph of this covenant to any holder of the 2009 notes that Von Hoffmann reasonably believes to be a competitor of Von Hoffmann. 75 EVENTS OF DEFAULT AND REMEDIES Each of the following is an Event of Default: (1) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the 2009 notes; (2) default in payment when due of the principal of, or premium, if any, on the 2009 notes; (3) failure by Von Hoffmann to comply with the provisions described under the captions "--Repurchase at the Option of Holders--Change of Control," "--Repurchase at the Option of Holders--Asset Sales," "--Certain Covenants--Restricted Payments," or "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"; (4) failure by Von Hoffmann or any of its Subsidiaries for 60 days after notice to comply with any of the other agreements in the indenture governing the 2009 notes or in the 2009 notes; (5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Von Hoffmann or any of its Subsidiaries (or the payment of which is guaranteed by Von Hoffmann or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the indenture governing the 2009 notes, if that default: (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default and the aggregate amount of such principal, premium and interest that has not been paid exceeds $5.0 million (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (6) failure by Von Hoffmann or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (7) any note guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its note guarantee; and (8) certain events of bankruptcy or insolvency with respect to Von Hoffmann or any of its Restricted Subsidiaries. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to Von Hoffmann, any Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding 2009 notes will become due and payable immediately without further action or notice. Holders of the 2009 notes may not enforce the indenture governing the 2009 notes or the 2009 notes except as provided in the indenture governing the 2009 notes. 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 2009 notes may declare all the 2009 notes to be due and payable immediately. In the event of a declaration of acceleration of the 2009 notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (5) of the preceding paragraph, the declaration of acceleration of the 2009 notes shall be automatically annulled if the holders of any Indebtedness described in clause (5) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if 76 (a) the annulment of the acceleration of the 2009 notes would not conflict with any judgment or decree of a court of competent jurisdiction, and (b) all existing Events of Default, except nonpayment of principal or interest on the 2009 notes that became due solely because of the acceleration of the 2009 notes, have been cured or waived. Subject to certain limitations, holders of a majority in principal amount of the then outstanding 2009 notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the 2009 notes notice of any continuing Default or Event of Default if it determines that withholding the 2009 notes is in their interest, except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages. The holders of a majority in aggregate principal amount of the 2009 notes then outstanding by notice to the trustee may on behalf of the holders of all of the 2009 notes waive any existing Default or Event of Default and its consequences under the indenture governing the 2009 notes except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal of, the 2009 notes. Von Hoffmann is required to deliver to the trustee annually a statement regarding compliance with the indenture governing the 2009 notes. Upon becoming aware of any Default or Event of Default, Von Hoffmann is required to deliver to the trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of Von Hoffmann or any Guarantor, as such, will have any liability for any obligations of Von Hoffmann or the Guarantors under the 2009 notes, the indenture governing the 2009 notes, the note guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of the 2009 notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the 2009 notes. The waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Von Hoffmann may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding 2009 notes and all obligations of the Guarantors discharged with respect to their note guarantees ("Legal Defeasance") except for: (1) the rights of holders of outstanding 2009 notes to receive payments in respect of the principal of, or interest or premium and Liquidated Damages, if any, on such notes when such payments are due from the trust referred to below; (2) Von Hoffmann's obligations with respect to the 2009 notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen 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 Von Hoffmann's and the Guarantor's obligations in connection therewith; and (4) the Legal Defeasance provisions of the indenture governing the 2009 notes. In addition, Von Hoffmann may, at its option and at any time, elect to have the obligations of Von Hoffmann and the Guarantors released with respect to certain covenants that are described in the indenture governing the 2009 notes ("Covenant Defeasance") and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the 2009 notes. 77 In the event Covenant Defeasance occurs, certain events (not including non-payment, 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 2009 notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) Von Hoffmann must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the 2009 notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Liquidated Damages, if any, on the outstanding 2009 notes on the stated maturity or on the applicable redemption date, as the case may be, and Von Hoffmann must specify whether the 2009 notes are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, Von Hoffmann has delivered to the trustee an opinion of counsel in the United States reasonably acceptable to the trustee confirming that (a) Von Hoffmann has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture governing the 2009 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 will confirm that, the holders of the outstanding 2009 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, Von Hoffmann has delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the holders of the outstanding 2009 notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of 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 any material agreement or instrument (other than the indenture governing the 2009 notes) to which Von Hoffmann or any of its Subsidiaries is a party or by which Von Hoffmann or any of its Subsidiaries is bound; (6) Von Hoffmann must deliver to the trustee an Officers' Certificate stating that the deposit was not made by Von Hoffmann with the intent of preferring the holders of notes over the other creditors of Von Hoffmann with the intent of defeating, hindering, delaying or defrauding creditors of Von Hoffmann or others; (7) Von Hoffmann must deliver to the trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (8) Von Hoffmann 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. 78 AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the indenture governing the 2009 notes, the 2009 notes or the note guarantees may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the 2009 notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the 2009 notes), and any existing default or compliance with any provision of the indenture governing the 2009 notes or the 2009 notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding 2009 notes (including consents obtained in connection with a tender offer or exchange offer for, the 2009 notes). Without the consent of each holder affected, an amendment or waiver may not (with respect to any 2009 notes held by a non-consenting holder): (1) reduce the principal amount of the 2009 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 2009 notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders") in a manner adverse to the holders of the 2009 notes; (3) reduce the rate of or change the time for payment of interest, or Liquidated Damages, if any, on any 2009 note; (4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the 2009 notes (except a rescission of acceleration of the 2009 notes by the holders of at least a majority in aggregate principal amount of the 2009 notes and a waiver of the payment default that resulted from such acceleration); (5) make any 2009 note payable in money other than that stated in the 2009 notes; (6) make any change in the provisions of the indenture governing the 2009 notes relating to waivers of past Defaults or the rights of holders of the 2009 notes to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the 2009 notes; (7) waive a redemption payment with respect to any 2009 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 note guarantee or the indenture governing the 2009 notes, except in accordance with the terms of the indenture governing the 2009 notes; or (9) make any change in the preceding amendment and waiver provisions. Notwithstanding the preceding, without the consent of any holder of the 2009 notes, Von Hoffmann, the Guarantors and the trustee may amend or supplement the indenture governing the 2009 notes or the 2009 notes: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated 2009 notes in addition to or in place of certificated 2009 notes; (3) to provide for the assumption of Von Hoffmann's or a Guarantor's obligations to holders of the 2009 notes in the case of a merger or consolidation; 79 (4) to make any change that would provide any additional rights or benefits to the holders of the 2009 notes or that does not adversely affect the legal rights under the indenture governing the 2009 notes of any such holder; or (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture governing the 2009 notes under the Trust Indenture Act or to allow any Guarantor to guarantee the 2009 notes. SATISFACTION AND DISCHARGE The indenture governing the 2009 notes will be discharged and will cease to be of further effect as to all 2009 notes issued thereunder, when: (1) either: (a) all 2009 notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and 2009 notes for whose payment money has been deposited in trust and thereafter repaid to Von Hoffmann, have been delivered to the trustee for cancellation; or (b) all 2009 notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and Von Hoffmann or any Guarantor has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the 2009 notes not delivered to the trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default has occurred and is continuing on the date of the deposit or will occur as a result of the deposit and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which Von Hoffmann or any Guarantor is a party or by which Von Hoffmann or any Guarantor is bound; (3) Von Hoffmann or any Guarantor has paid or caused to be paid all sums payable by it under the indenture governing the 2009 notes; and (4) Von Hoffmann has delivered irrevocable instructions to the trustee under the indenture governing the 2009 notes to apply the deposited money toward the payment of the 2009 notes at maturity or the redemption date, as the case may be. In addition, Von Hoffmann must deliver an Officers' Certificate and an opinion of counsel to the trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. CONCERNING THE TRUSTEE If the trustee becomes a creditor of Von Hoffmann or any Guarantor, the indenture governing the 2009 notes 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. 80 The holders of a majority in principal amount of the then outstanding 2009 notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture governing the 2009 notes provides that in case an Event of Default occurs and is continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture governing the 2009 notes at the request of any holder of the 2009 notes, unless such holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the indenture and registration rights agreement governing the 2009 notes without charge by writing to: Von Hoffmann Corporation, 1000 Camera Avenue, St. Louis, Missouri, 63126, Attention: Chief Financial Officer. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the indenture governing the 2009 notes. Reference is made to the indenture governing the 2009 notes for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "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, including, without limitation, Indebtedness 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. "ADJUSTED TREASURY RATE" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 50 basis points. "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" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), 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 securities of a Person shall be deemed to be control. "ASSET SALE" means: (1) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory or obsolete or unused equipment or assets in the ordinary course of business (PROVIDED that the sale, lease, conveyance or other disposition of all or substantially all of the assets of Von Hoffmann and its Subsidiaries taken as a whole will be governed by the provisions of the indenture governing the 2009 notes 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 81 (2) the issue or sale by Von Hoffmann or any of its Restricted Subsidiaries of Equity Interests of any of Von Hoffmann's Restricted Subsidiaries, in the case of either clause (1) or (2), whether in a single transaction or a series of related transactions for Net Proceeds in excess of $2.0 million. Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale: (1) a transfer of assets by Von Hoffmann to a Restricted Subsidiary or by a Restricted Subsidiary to Von Hoffmann or to another Restricted Subsidiary; (2) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to Von Hoffmann or to another Wholly Owned Restricted Subsidiary; and (3) a Restricted Payment or Permitted Investment 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 lessee, 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. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or other 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. "CASH EQUIVALENTS" means: (1) United States dollars; (2) any evidence of Indebtedness, maturing not more than one year after the date of their acquisition, issued directly by the United States of America or any agency thereof or guaranteed by the United States of America or any agency thereof; (3) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any obligor) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody's, or (ii) any lender party to the Credit Facilities (or its holding company); (4) any time deposit, certificate of deposit or bankers acceptance, maturing not more than one year after the date of their acquisition, maintained with or issued by either (i) a commercial banking institution (including U.S. branches of foreign banking institutions) that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or (ii) any lender party to the Credit Facilities; 82 (5) short-term tax-exempt securities rated not lower than MIG- 1/1+ by either Moody's or S&P with provisions for liquidity or maturity accommodations of 183 days or less; (6) repurchase agreements with respect to any securities referred to in clause (2) above entered into with any entity referred to in clause (3) or (4) above or any other financial institution whose unsecured long-term debt (or the unsecured long-term debt of whose holding company) is rated at least A- or better by S&P or Baal or better by Moody's and maturing not more than one year after the date of their acquisition; and (7) any money market or similar fund the assets of which are comprised exclusively of any of the items specified in clauses (1) through (5) above and as to which withdrawals are permitted at least every 90 days. "CHANGE OF CONTROL" means the occurrence of any of the following: (1) the sale, lease, 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 Von Hoffmann and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d) (3) of the Exchange Act) other than DLJMB; (2) the adoption of a plan relating to the liquidation or dissolution of Von Hoffmann; (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 Existing Shareholders and an entity that is the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a 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), directly or indirectly, of 100% of the common stock of Von Hoffmann, becomes the "beneficial owner" (as defined above) of more than 50% of the Voting Stock of Von Hoffmann or Holdings (measured by voting power rather than number of shares); or (4) the first day on which a majority of the members of the board of directors of Von Hoffmann are not Continuing Directors. "COMPARABLE TREASURY ISSUE" means the United States Treasury Security selected by the Reference Treasury Dealer as having a maturity comparable to the remaining term of the 2009 notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 2009 notes. "COMPARABLE TREASURY PRICE" means, with respect to any redemption date: (1) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities;" or (2) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations or (B) if the trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. 83 "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 included in computing such Consolidated Net Income; PLUS (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 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 but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) 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; PLUS (5) any non-capitalized transaction costs incurred in connection with actual or proposed financings, acquisitions or divestitures (including, but not limited to, financing and refinancing fees and costs incurred in connection with the Refinancing), in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, 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 a Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to Von Hoffmann by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED that: (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 referent Person or a Wholly Owned Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval 84 (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders (other than Credit Facilities, the indebtedness of which is permitted to be incurred under the indenture governing the 2009 notes); (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 cumulative effect of a change in accounting principles shall be excluded; and (5) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to Von Hoffmann or one of its Subsidiaries. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the board of directors of Von Hoffmann who: (1) was a member of such board of directors on the date of the indenture governing the 2009 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 such board at the time of such nomination or election. "CREDIT FACILITIES" means, one or more debt facilities or commercial paper facilities or other agreements, in each case with banks or other institutional lenders or agents providing for revolving credit loans, term loans, financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit, Hedging Obligations or the issuance of securities, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time whether with the same or different banks or lenders or agents and whether represented by one or more facilities or agreements. "CSFB" means Credit Suisse First Boston Corporation and its successors and their Affiliates. "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. "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. "DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates. "DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of Von Hoffmann that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support (other than through a Lien on its Capital Stock) for any Indebtedness of Von Hoffmann. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXISTING INDEBTEDNESS" means Indebtedness of Von Hoffmann and its Restricted Subsidiaries (other than Indebtedness under the Credit Facilities) in existence on the date of the indenture governing the 2009 notes, until such amounts are repaid. "EXISTING SHAREHOLDERS" means DLJMB, ZS and the Management Holders. 85 "FINANCIAL ADVISORY AGREEMENT" means the letter agreement dated the date of the indenture governing the 2009 notes between Von Hoffmann and CSFB. "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, 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); (2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; (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); and (4) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of Von Hoffmann and other than any dividend payment that may be deemed to have been made as a result of an increase in the liquidation preference of any preferred stock, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that Von Hoffmann or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings unless permanently reduced) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above: (1) acquisitions that have been made by Von Hoffmann 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 to include the Consolidated Cash Flow of the acquired entities (adjusted to exclude (a) the cost of any compensation, remuneration or other benefit paid or provided to any employee, consultant, Affiliate or equity owner of the acquired entities to the extent such costs are eliminated and not replaced and (b) the amount of any reduction in general, administrative or overhead costs or other non-recurring items of the acquired entities, in each case, as determined in good faith by an officer of Von Hoffmann) and without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income; 86 (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 referent 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 applicable as of the date of determination. "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, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTORS" means all Domestic Subsidiaries and, so long as it guarantees any Obligations under the Credit Facilities, Holdings. "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; and (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HOLDINGS" means Von Hoffmann Holdings Inc., a Delaware corporation, and its successors. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances; (3) representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property; or (4) representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such 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 will be: (1) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest; and 87 (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. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If Von Hoffmann or any Subsidiary of Von Hoffmann sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of Von Hoffmann such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of Von Hoffmann, Von Hoffmann 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 Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--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). "MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any employee of Von Hoffmann or Holdings (or any of their Restricted Subsidiaries). "MANAGEMENT HOLDERS" means holders of Management Equity Interests on the date of the indenture governing the 2009 notes. "MOODY'S" means Moody's Investors Service, Inc. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) 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 (including, without limitation, dispositions pursuant to sale and leaseback transactions) 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 (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by Von Hoffmann 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 (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the Credit Facilities) and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. 88 "NON-RECOURSE DEBT" means Indebtedness: (1) as to which neither Von Hoffmann 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 of Von Hoffmann or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of Von Hoffmann or any of its Restricted Subsidiaries. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness, including any Guarantees of such Indebtedness. "PERMITTED INVESTMENTS" means (1) any Investment in Von Hoffmann or in a Restricted Subsidiary of Von Hoffmann; (2) any Investment in Cash Equivalents; (3) any Investment by Von Hoffmann or any Restricted Subsidiary of Von Hoffmann in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of Von Hoffmann; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Von Hoffmann or a Restricted Subsidiary of Von Hoffmann; (4) any Restricted 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 Holders--Asset Sales;" (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Von Hoffmann; (6) any loan made to management in order to enable management to purchase equity in Holdings, or any refinancing of any loan made to management, which loan was made to enable management to purchase equity in Holdings; (7) other Investments 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 (7) that are at the time outstanding, not to exceed $2.0 million; and (8) Investments received solely in exchange for Equity Interests of Von Hoffmann. "PERMITTED LIENS" means (1) Liens securing Credit Facilities, other than Liens securing Indebtedness incurred under Credit Facilities that is issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace or refund, the principal of the Senior Subordinated Notes at its Stated Maturity; 89 (2) Liens in favor of Von Hoffmann or any of their Restricted Subsidiaries; (3) Liens on property of a Person existing at the time such Person is acquired by, merged into or consolidated with Von Hoffmann or any Subsidiary of Von Hoffmann; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Von Hoffmann; (4) Liens on property existing at the time of acquisition thereof by Von Hoffmann or any Subsidiary of Von Hoffmann, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (5) 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; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with, or the subject of the lease or mortgage pertaining to, such Indebtedness; (7) Liens existing on the date of the indenture governing the 2009 notes; (8) 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; (9) Liens to secure any Permitted Refinancing Indebtedness, PROVIDED that such Liens are not materially more restrictive than the Liens that secured the Indebtedness being refinanced; (10) statutory Liens of landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (11) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of Von Hoffmann and its Subsidiaries taken as a whole; and (12) Liens incurred in the ordinary course of business of Von Hoffmann or any Subsidiary of Von Hoffmann with respect to obligations that do not exceed $5.0 million at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by Von Hoffmann or such Subsidiary. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Von Hoffmann 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 Von Hoffmann or any of its Restricted Subsidiaries; 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, premium and prepayment penalties, if any, on, the Indebtedness so extended, 90 refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the 2009 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 2009 notes on terms at least as favorable to the holders of the 2009 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 Von Hoffmann or by the Restricted Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "REFERENCE TREASURY DEALER" means Credit Suisse First Boston Corporation and its successors; PROVIDED, HOWEVER, that if Credit Suisse First Boston Corporation shall cease to be a primary U.S. government securities dealer in New York City (a "Primary Treasury Dealer"), Von Hoffmann shall substitute therefor another primary U.S. government securities dealer to be the Primary Treasury Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to any redemption date, the average as determined by the trustee, of the bid and asked prices of the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the trustee by the Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "REMAINING SCHEDULED PAYMENTS" means, with respect to each 2009 note to be redeemed, (a) the redemption price of such note on March 15, 2005 and (b) the remaining scheduled payments of interest thereon that would be due on or prior to March 15, 2005 but after the related redemption date but for such redemption; PROVIDED, HOWEVER, that, if such redemption date is not an interest payment date on the 2009 notes, the amount of the next succeeding scheduled interest payment on the 2009 notes to be redeemed will be reduced by the amount of interest accrued on those 2009 notes to such redemption date. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the relevant Person that is not an Unrestricted Subsidiary. "S&P" means Standard & Poor's Ratings Group. "SENIOR SUBORDINATED NOTES" means the 10 3/8% Senior Subordinated Notes due 2007 of Von Hoffmann. "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, 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 91 to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBORDINATED SHAREHOLDER LOAN" means one or more loans from Holdings to Von Hoffmann, each of which shall: (1) have a Stated Maturity in respect of principal no earlier than 91 days following the maturity of the 2009 notes; (2) be subordinated in right of payment to the 2009 notes to the same or a greater extent than the Senior Subordinated Notes are subordinated to the 2009 notes; (3) have covenants no more restrictive to Von Hoffmann or its Restricted Subsidiaries than those relating to the 2009 notes; and (4) provide that the lender thereunder will not be entitled to any cash interest payments so long as any of the 2009 notes are outstanding. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "TAX SHARING AGREEMENT" means that certain tax sharing agreement between Holdings and Von Hoffmann, dated as of May 22, 1997, as amended from time to time; PROVIDED such amendment or amendments do not materially adversely effect Von Hoffmann. "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the board of directors of Von Hoffmann 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 party to any agreement, contract, arrangement or understanding with Von Hoffmann or any Restricted Subsidiary of Von Hoffmann unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Von Hoffmann or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Von Hoffmann; (3) is a Person with respect to which neither Von Hoffmann nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) 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 Von Hoffmann 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 Von Hoffmann or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Von Hoffmann or any of its Restricted Subsidiaries. Any such designation by the Board of Directors of Von Hoffmann 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 foregoing 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 foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture governing the 2009 notes and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Von Hoffmann as of such date 92 (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock," Von Hoffmann shall be in default of such covenant). The Board of Directors of Von Hoffmann 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 Von Hoffmann of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, (ii) such Subsidiary shall execute a note guarantee and deliver an opinion of counsel, in accordance with the terms of the indenture governing the 2009 notes and (iii) 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: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. "ZS" means ZS VH L.P., together with ZS VH II L.P., as the context requires. FORMS OF REGISTERED SECURITIES The certificates representing the registered securities will be issued in fully registered form, without coupons. Except as described in the next paragraph, the registered securities will be deposited with, or on behalf of, DTC, and registered in the name of Cede & Co., as DTC's nominee, in the form of a global security. Holders of the registered notes will own book-entry interests in the global note evidenced by records maintained by DTC. Book-entry interests may be exchanged for certificated securities of like tenor and equal aggregate principal amount, if (1) DTC notifies us that it is unwilling or unable to continue as depositary or we determine that DTC is unable to continue as depositary and we fail to appoint a successor depositary within 90 days, (2) we provide for the exchange pursuant to the terms of the indenture governing the 2009 notes, or (3) we determine that the book-entry interests will no longer be represented by global notes and we execute and deliver to the Trustee instructions to that effect. 93 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 You can find the definitions of certain terms used in this description of the 2007 notes under the subheading "--Certain Definitions." In this description, the term "Von Hoffmann" refers only to Von Hoffmann Corporation and not to any of its subsidiaries. Von Hoffmann issued the old 2007 notes under an indenture among itself, the Guarantors and Marine Midland Bank (now HSBC Bank USA), as trustee, in a private transaction that was not subject to the registration requirements of the Securities Act. The terms of the 2007 notes include those stated in the indenture governing the 2007 notes and those made part of that indenture by reference to the Trust Indenture Act of 1939, as amended. The following description is a summary of the material provisions of the indenture governing the 2007 notes and the registration rights agreement relating to the 2007 notes. It does not restate those agreements in their entirety. We urge you to read the indenture and the registration rights agreement governing the 2007 notes because they, and not this description, define your rights as holders of the notes. Copies of the indenture and the registration rights agreement governing the 2007 notes are available as set forth below under "--Additional Information." BRIEF DESCRIPTION OF THE 2007 NOTES AND THE NOTE GUARANTEES The 2007 notes: - will be general unsecured obligations of Von Hoffmann; - will be junior in right of payment with all existing and future senior indebtedness of Von Hoffmann; - will be PARI PASSU in right of payment with all existing and future senior subordinated indebtedness of Von Hoffmann; - will be senior in right of payment to all existing and future subordinated indebtedness of Von Hoffmann; and - will be unconditionally guaranteed by the Guarantors. THE NOTE GUARANTEES The 2007 notes will be guaranteed by all of Von Hoffmann's current and future Restricted Subsidiaries and for so long as it guarantees any obligations under the New Credit Agreement, Holdings. Each guarantee of the 2007 notes: - will be a general unsecured obligation of that Guarantor; - will be junior in right of payment with all existing and future senior indebtedness of that Guarantor; - will be PARI PASSU in right of payment to all existing and future senior indebtedness of that Guarantor; and - will be senior in right of payment to all existing and future subordinated indebtedness of that Guarantor. As of the date of the exchange offer, all of Von Hoffmann's subsidiaries will be "Restricted Subsidiaries." However, under the circumstances described below under the subheading "--Certain 94 Covenants--Designation of Restricted and Unrestricted Subsidiaries," Von Hoffmann will be permitted to designate certain of its subsidiaries as "Unrestricted Subsidiaries." Von Hoffmann's Unrestricted Subsidiaries will generally not be subject to the restrictive covenants in the indenture governing the 2007 notes and will not guarantee the 2007 notes. PRINCIPAL, MATURITY AND INTEREST The 2007 notes will be limited in aggregate principal amount to $100.0 million and mature on May 15, 2007. Interest on the 2007 notes accrues at the rate of 10.375% per annum and is payable semi-annually in arrears on May 15 and November 15 to holders of record on the immediately preceding May 1 and November 1. Interest on the 2007 notes accrues from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. Principal of and premium, if any, and interest and Liquidated Damages, if any, on the 2007 notes will be payable at the office or agency of Von Hoffmann maintained for such purpose or, at its option, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the 2007 notes at their respective addresses set forth in the register of Holders of the 2007 notes; PROVIDED that all payments of principal, premium, interest and Liquidated Damages, if any, with respect to the 2007 notes the Holders of which have given wire transfer instructions to Von Hoffmann will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by Von Hoffmann, its office for the payment of principal of and premium, if any, and interest on the 2007 notes will be the office of the Trustee maintained for such purpose. The 2007 notes will be issued in denominations of $1,000 and integral multiples thereof. Von Hoffmann is currently paying Liquidated Damages to holders of the 2007 notes. Upon consummation of the exchange offer for the 2007 notes, holders of the 2007 notes will no longer receive Liquidated Damages. SUBORDINATION The payment of Subordinated Note Obligations are subordinated in right of payment, as set forth in the indenture governing the 2007 notes, to the prior payment in full in cash or cash equivalents of all Senior Debt, whether outstanding on the date of the indenture governing the 2007 notes or thereafter incurred. Upon any distribution to creditors of Von Hoffmann in a liquidation or dissolution of it or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Von Hoffmann or its property, an assignment for the benefit of creditors or any marshalling of its assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full in cash or cash equivalents of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders of the 2007 notes will be entitled to receive any payment with respect to the Debenture Obligations, and until all Obligations with respect to Senior Debt are paid in full in cash or cash equivalents, any distribution to which the Holders of the 2007 notes would be entitled shall be made to the holders of Senior Debt (except that Holders of the 2007 notes may receive Permitted Junior Securities and payments made from the trust described under "--Legal Defeasance and Covenant Defeasance"). Von Hoffmann also may not make any payment upon or in respect of the Subordinated Note Obligations (except in Permitted Junior Securities or payments made from the trust described under "--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of or premium, if any, or interest on, or commitment fees relating to, any Designated Senior Debt occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to any Designated Senior Debt that permits holders of the Designated Senior 95 Debt as to which such default relates to accelerate its maturity and the Trustee receives a written notice of such default (a "Payment Blockage Notice") from Von Hoffmann or the holders of such Designated Senior Debt (or its representative). Payments on the 2007 notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 days. The indenture governing the 2007 notes further requires that Von Hoffmann promptly notifies holders of Senior Debt if payment of the 2007 notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of the 2007 notes may recover less ratably than creditors of Von Hoffmann who are holders of Senior Debt. The indenture limits, subject to certain conditions, the amount of additional Indebtedness, including Senior Debt, that Von Hoffmann and its subsidiaries can incur. See "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." PAYING AGENT AND REGISTRAR FOR THE 2007 NOTES The trustee currently acts as paying agent and registrar. Von Hoffmann may change the paying agent or registrar without prior notice to the holders of the 2007 notes, and Von Hoffmann or any of its Subsidiary may act as paying agent or registrar. NOTES GUARANTEES Von Hoffmann's payment obligations under the 2007 notes are jointly and severally guaranteed (the "Notes Guarantees") by the Guarantors. The Notes Guarantee of each Guarantor will be subordinated to the prior payment in full in cash or cash equivalents of all Senior Debt of such Guarantor, including such Guarantors Guarantee of Obligations under the New Credit Agreement, to the same extent as the 2007 notes are subordinated to Senior Debt of Von Hoffmann. The indenture governing the 2007 notes provides that if the Guarantee of Holdings issued pursuant to the New Credit Agreement is released, Holdings' Notes Guarantee will also be released. The indenture governing the 2007 notes provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) or sell all or substantially all of its assets to, another corporation, Person or entity whether or not affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the Obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the indenture governing the 2007 notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) Von Hoffmann would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." Notwithstanding the provisions of this paragraph, the indenture governing the 2007 notes will not prohibit the merger of two of Von Hoffmann's Restricted Subsidiaries or the merger of a Restricted Subsidiary into Von Hoffmann. 96 The indenture governing the 2007 notes provides that in the event of (i) a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, (ii) a sale or other disposition of all of the capital stock of any Guarantor or (iii) the designation of a Guarantor as an Unrestricted Subsidiary, then such Guarantor will be released and relieved of any obligations under its Notes Guarantee; PROVIDED that the Net Proceeds of such sale or other disposition are applied or such designation is made in accordance with the applicable provisions of the indenture governing the 2007 notes. See "--Redemption or Repurchase at Option of Holders--Asset Sales" and "--Certain Covenants--Restricted Payments." Except as set forth above, the limitations and restrictions in the indenture governing the 2007 notes will not apply to, limit or restrict the operations of Holdings. OPTIONAL REDEMPTION The 2007 notes will be subject to redemption at any time at Von Hoffmann's option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on May 15 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2002........................................................ 105.188% 2003........................................................ 103.458% 2004........................................................ 101.729% 2005 and thereafter......................................... 100.000%
MANDATORY REDEMPTION Except as set forth below under "--Repurchase at the Option of Holders," Von Hoffmann is not required to make mandatory redemption or sinking fund payments with respect to the notes. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder of the 2007 notes will have the right to require Von Hoffmann to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's 2007 notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, Von Hoffmann will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the indenture governing the 2007 notes and described in such notice. Von Hoffmann will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the 2007 notes as a result of a Change of Control. On the Change of Control Payment Date, Von Hoffmann will, to the extent lawful, (1) accept for payment all the 2007 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 the 2007 notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the 2007 notes so accepted together with an Officers' Certificate stating the aggregate principal 97 amount of 2007 notes or portions thereof being purchased by Von Hoffmann. The Paying Agent will promptly mail to each Holder of the 2007 notes so tendered the Change of Control Payment for such notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new 2007 note equal in principal amount to any unpurchased portion of the 2007 notes surrendered, if any, PROVIDED that each such new 2007 note will be in a principal amount of $1,000 or an integral multiple thereof. The indenture governing the 2007 notes provides that, prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control, Von Hoffmann will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of the 2007 notes required by this covenant. Von Hoffmann 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 Change of Control provisions described above will be applicable whether or not any other provisions of the indenture governing the 2007 notes are applicable. Except as described above with respect to a Change of Control, the indenture governing the 2007 notes does not contain provisions that permit the Holders of the 2007 notes to require that Von Hoffmann repurchase or redeem the 2007 notes in the event of a takeover, recapitalization or similar transaction. The provisions of the indenture governing the 2007 notes do not necessarily afford Holders of the 2007 notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving Von Hoffmann that may adversely affect Holders of the 2007 notes. The revolving credit facility currently prohibits Von Hoffmann from purchasing or redeeming any notes, and also provides that certain change of control events with respect to it would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which Von Hoffmann becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when Von Hoffmann is prohibited from purchasing or redeeming the 2007 notes, Von Hoffmann could seek the consent of its lenders to the purchase of the 2007 notes or could attempt to refinance the borrowings that contain such prohibition. If Von Hoffmann does not obtain such a consent or repay such borrowings, Von Hoffmann will remain prohibited from purchasing the 2007 notes. In such case, Von Hoffmann's failure to purchase tendered 2007 notes would constitute an Event of Default under the indenture governing the 2007 notes which would, in turn, constitute a default under the New Credit Agreement. In such circumstances, the subordination provisions in the indenture governing the 2007 notes would likely restrict payments to the Holders of the 2007 notes. In addition, Von Hoffmann's ability to pay cash to the Holders of the 2007 notes upon a repurchase may be limited by its then existing financial resources. Von Hoffmann 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 governing the 2007 notes applicable to a Change of Control Offer made by Von Hoffmann and purchases all the 2007 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 Von Hoffmann and its Subsidiaries taken as a whole. Although there is a developing 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 2007 Notes to require Von Hoffmann to repurchase such notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of its assets and its Subsidiaries taken as a whole to another Person or group may be uncertain. 98 ASSET SALES The indenture governing the 2007 notes provides that Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) Von Hoffmann (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by Von Hoffmann or such Restricted Subsidiary is in the form of cash; PROVIDED that the amount of (a) any liabilities (as shown on Von Hoffmann's or such Restricted Subsidiary's most recent balance sheet), of us or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the 2007 notes or any guarantee thereof) that are assumed by the transferee of any such assets and (b) any securities, notes or other obligations received by Von Hoffmann or any such Restricted Subsidiary from such transferee that are immediately converted by Von Hoffmann or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision and, PROVIDED FURTHER, that the 75% limitation referred to in clause (ii) will not apply to any Asset Sale in which the cash portion of the consideration received therefrom, determined in accordance with the foregoing proviso, is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, Von Hoffmann may apply such Net Proceeds, at its option, (a) to repay Senior Debt (and to correspondingly reduce commitments with respect thereto in the case of revolving borrowings) or (b) to the acquisition of a controlling interest in another business, the making of a capital expenditure or the acquisition of other long-term assets, in each case, by Von Hoffmann or any Restricted Subsidiary and in accordance with the terms of the indenture governing the 2007 notes. Pending the final application of any such Net Proceeds, Von Hoffmann may temporarily reduce Senior Debt or otherwise invest such Net Proceeds in any manner that is not prohibited by the indenture governing the 2007 notes. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, Von Hoffmann will be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of the 2007 notes that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon to the date of purchase, in accordance with the procedures set forth in the indenture governing the 2007 notes. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, Von Hoffmann may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of the 2007 notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the 2007 notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Notwithstanding the immediately preceding paragraph, Von Hoffmann and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraph if (i) Von Hoffmann or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of (as evidenced by a resolution of its Board of Directors set forth in an Officers' Certificate delivered to the Trustee), and (ii) at least 75% of the consideration for such Asset Sale constitutes assets or other property of a kind usable by Von Hoffmann and its Restricted Subsidiaries in its business and its Restricted Subsidiaries as conducted by Von Hoffmann and its Restricted Subsidiaries on the date of the indenture governing the 2007 notes; PROVIDED that any cash consideration received by Von Hoffmann or any of its Restricted Subsidiaries in connection with any 99 Asset Sale permitted to be consummated under this paragraph shall constitute Net Proceeds subject to the provisions of the two succeeding paragraphs. SELECTION AND NOTICE Except as otherwise provided in the indenture, if less than all of the 2007 notes are to be redeemed at any time, the trustee will select notes for redemption as follows: (1) if the 2007 notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the 2009 notes are listed; or (2) if the 2007 notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate. No 2007 notes of $1,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of the 2007 notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the 2007 notes or a satisfaction and discharge of the indenture. Notices of redemption may not be conditional. If any 2007 note is to be redeemed in part only, the notice of redemption that relates to that 2007 note will state the portion of the principal amount of that 2007 note that is to be redeemed. A new 2007 note in principal amount equal to the unredeemed portion of the original 2007 note will be issued in the name of the holder of the 2007 notes upon cancellation of the original 2007 note. The 2007 notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on the 2007 notes or portions of them called for redemption. CERTAIN COVENANTS RESTRICTED PAYMENTS Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of its Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Von Hoffmann); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of Von Hoffmann; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the 2007 notes, except a payment of interest or a payment of principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (b) Von Hoffmann would, 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, have been 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 under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by Von Hoffmann and its Restricted Subsidiaries after the date of the indenture governing the 2007 notes (excluding Restricted Payments permitted by clause (ii) of the next 100 succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of us for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the indenture governing the 2007 notes to the end of Von Hoffmann's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by us from the issue or sale since the date of the indenture governing the 2007 notes of (A) Equity Interests of Von Hoffmann (other than Disqualified Stock), (B) any Restricted Subsidiaries or (C) Disqualified Stock or debt securities of Von Hoffmann that have been convened into Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of Von Hoffmann and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) 100% of the aggregate amount of capital contributions to its common equity or repayments from Holdings of amounts in respect of the Intercompany Note, plus (iv) 100% of the net proceeds received by Von Hoffmann or any of its Restricted Subsidiaries from (A) the sale or other disposition since the date of the indenture governing the 2007 notes of any Restricted Investment or (B) dividends on or the sale of stock of Unrestricted Subsidiaries. The foregoing provisions will not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the indenture governing the 2007 notes; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of Von Hoffmann's company in exchange for, or out of the net proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of Von Hoffmann) of, other Equity Interests of Von Hoffmann (other than any Disqualified Stock) or from the net proceeds of a capital contribution by Holdings to us or repayments from Holdings of amounts in respect of the Intercompany Note; PROVIDED that the amount of any such net proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the repurchase, redemption or other acquisition or retirement for value of any Management Equity Interests or the repurchase, redemption or other acquisition or retirement for value of Indebtedness incurred pursuant to clause (xi) of the second paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" (including, in each case, any dividend or distribution to Holdings used for such purpose); PROVIDED that the aggregate price paid for all such repurchased, redeemed, acquired or retired Management Equity Interests shall not exceed the sum of (a) $2.0 million in any twelve-month period but not more than $10.0 million in the aggregate plus (b) cash proceeds from the sale of Management Equity Interests to management, directors or consultants of Von Hoffmann (or any of its Restricted Subsidiaries); (v) repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (vi) other Restricted Investments not to exceed $10.0 million; (vii) Restricted Investments made or received by Von Hoffmann and its Restricted Subsidiaries as non-cash consideration from Asset Sales to the extent permitted by the covenant described under "--Repurchase at the Option of Holders--Asset Sales" or received by a person in exchange for trade or other claims against such person in connection with a financial reorganization or restructuring or such person; (viii) the payment of dividends or distributions to Holdings which are used solely to repay any Indebtedness (including any accrued interest thereon) due from Holdings to Von Hoffmann pursuant to the Intercompany Note or any cancellation or forgiving of such Indebtedness (including any accrued interest thereon); (ix) any loans, advances, distributions or payments between Von Hoffmann and its Restricted Subsidiaries; (x) the payment of dividends or distributions to Holdings in an amount not to exceed $1.0 million per calendar year to allow Holdings to pay reasonable legal, accounting, 101 investment banking, financial advisory, outside director or other professional and administrative fees and expenses incurred by it related to its business; (xi) payments pursuant to the Tax Sharing Agreement; (xii) payments to DLJSC, or dividends to Holdings to allow Holdings to pay DLJSC, in respect of a retainer for advisory services in an amount not to exceed $250,000 per year; and (xiii) payments pursuant to the indemnity provisions of the Merger Agreement. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by Von Hoffmann and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. 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 us or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment, Von Hoffmann shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK Von Hoffmann 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 (collectively, "incur") any Indebtedness (including Acquired Debt) and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that Von Hoffmann and its Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) and its Restricted Subsidiaries may issue shares of preferred stock if the Fixed Charge Coverage Ratio for Von Hoffmann'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 or such preferred stock is issued would have been at least 2.0 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, or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following: (i) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Indebtedness under the New Credit Agreement in an aggregate principal amount not to exceed $200.0 million at any one time outstanding; (ii) the incurrence by Von Hoffmann and its Restricted Subsidiaries of the Existing Indebtedness; (iii) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Indebtedness represented by the 2007 notes and the notes Guarantees; 102 (iv) the incurrence by Von Hoffmann and its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations in an aggregate principal amount not to exceed $10.0 million at any time outstanding; (v) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries of Acquired Debt in an amount not to exceed $15.0 million; PROVIDED that such Indebtedness was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by Von Hoffmann or its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by Von Hoffmann or its Restricted Subsidiaries; (vi) the incurrence by Von Hoffmann 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 that was permitted by the indenture governing the 2007 notes to be incurred; (vii) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries of intercompany Indebtedness between or among Von Hoffmann and any of its Wholly Owned Restricted Subsidiaries; (viii) the incurrence by Von Hoffmann and 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 governing the 2007 notes to be outstanding; (ix) the guarantee by Von Hoffmann or any of the Guarantors of Indebtedness of Von Hoffmann or its Restricted Subsidiary that was permitted to be incurred by the indenture governing the 2007 notes; (x) the incurrence by Von Hoffmann or its Restricted Subsidiaries of Indebtedness to repurchase, redeem or otherwise acquire or retire for value Management Equity Interests as permitted by clause (iv) of the second paragraph of the covenant described above under the caption "--Restricted Payments"; PROVIDED that such Indebtedness is subordinated to the 2007 notes to at least the same extent as the 2007 notes are subordinated to Senior Debt; and (xi) the incurrence by Von Hoffmann and its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xi), not to exceed $20.0 million. LIENS Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. DIVIDEND AND OTHER PAYMENTS RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES Von Hoffmann will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to Von Hoffmann or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to Von Hoffmann or any of its Restricted Subsidiaries, (ii) make loans or advances to or 103 guarantee any Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to Von Hoffmann or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of the indenture governing the 2007 notes, (b) the New Credit Agreement as in effect as of the date of the indenture governing the 2007 notes, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive with respect to such dividend and other payment restrictions than those contained in the New Credit Agreement as in effect on the date of the indenture governing the 2007 notes, (c) the indenture governing the 2007 notes and the 2007 notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by Von Hoffmann or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture governing the 2007 notes to be incurred, (f) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, or (i) restrictions with respect to sales of assets or dispositions of stock of Von Hoffmann or any Restricted Subsidiary imposed pursuant to agreements relating to the sale of such assets or stock. MERGER, CONSOLIDATION, OR SALE OF ASSETS Von Hoffmann may not consolidate or merge with or into (whether or not it is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) Von Hoffmann is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than Von Hoffmann) or to which such sale, assignment, transfer, lease, 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; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than Von Hoffmann) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of us under the notes and the indenture governing the 2007 notes pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of Von Hoffmann with or into a Wholly Owned Subsidiary of it, Von Hoffmann or the entity or Person formed by or surviving any such consolidation or merger (if other than Von Hoffmann), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction 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 and Issuance of Preferred Stock." TRANSACTIONS WITH AFFILIATES Von Hoffmann 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 104 any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to Von Hoffmann or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by us or such Restricted Subsidiary with an unrelated Person and (ii) Von Hoffmann delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, other than transactions between Von Hoffmann and any of its Restricted Subsidiaries on the one hand, and DLJSC and its Affiliates on the other hand, 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; PROVIDED that (1) any employment agreement entered into by Von Hoffmann or any of its Restricted Subsidiaries in the ordinary course of business of Von Hoffmann or such Restricted Subsidiary and ordinary course loans to employees, (2) transactions between or among Von Hoffmann and/or its Restricted Subsidiaries, (3) Restricted Payments that are permitted by the provisions of the indenture governing the 2007 notes described above under the caption "--Restricted Payments," and (4) payments and transactions in connection with the Recapitalization and the application of the net proceeds from this Offering, including the payment of any fees and expenses with respect thereto, in each case, shall not be deemed Affiliate Transactions." ADDITIONAL NOTES GUARANTEES If Von Hoffmann or any of its Restricted Subsidiaries shall acquire or create another Subsidiary after the date of the indenture governing the 2007 notes, then such newly acquired or created Subsidiary, except for all Subsidiaries that have properly been designated as Unrestricted Subsidiaries in accordance with the indenture governing the 2007 notes for so long as they continue to constitute Unrestricted Subsidiaries, shall execute a Notes Guarantee and deliver an opinion of counsel, in accordance with the terms of the indenture governing the 2007 notes. NO SENIOR SUBORDINATED DEBT Von Hoffmann will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the 2007 notes. REPORTS So long as any 2007 notes are outstanding, Von Hoffmann will furnish to the Holders of the 2007 notes 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 Von Hoffmann were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of Von Hoffmann and its Restricted Subsidiaries and, with respect to the annual information only, a report thereon by its certified independent accountants. In addition, Von Hoffmann and the Guarantors have agreed that, for so long as any notes remain outstanding, they will furnish to the Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. However, to the extent not required by the Trust Indenture Act, the indenture governing the 2007 notes will not require Von Hoffmann to make any reports pursuant to the foregoing two sentences to any Holder of the 2007 notes that it reasonably believes to be a competitor of Von Hoffmann. 105 EVENTS OF DEFAULT AND REMEDIES The indenture governing the 2007 notes provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the 2007 notes (whether or not prohibited by the subordination provisions of the indenture governing the 2007 notes); (ii) default in payment when due of the principal of or premium, if any, on the 2007 Notes (whether or not prohibited by the subordination provisions of the indenture governing the 2007 notes); (iii) failure by Von Hoffmann to comply with the provisions described under the captions "--Change of Control," "--Asset Sales," "--Restricted Payments" or "--Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure by Von Hoffmann for 60 days after notice to comply with any of its other agreements in the indenture governing the 2007 notes or the 2007 notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Von Hoffmann or any of its Subsidiaries (or the payment of which is guaranteed by Von Hoffmann or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the indenture governing the 2007 notes, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default and the aggregate amount of such principal, premium and interest that has not been paid exceeds $5.0 million (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by Von Hoffmann or any of its Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to Von Hoffmann or any of its Restricted Subsidiaries; or (viii) any Notes 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 Notes Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding 2007 notes may declare all the 2007 notes to be due and payable immediately; PROVIDED, HOWEVER, that, so long as any Indebtedness permitted to be incurred pursuant to the New Credit Agreement shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Indebtedness under the New Credit Agreement or (ii) five business days after the giving of written notice to Von Hoffmann and the representative under the New Credit Agreement of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to Von Hoffmann, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding 2007 notes will become due and payable without further action or notice. Holders of the 2007 notes may not enforce the indenture governing the 2007 notes or the 2007 notes except as provided in the indenture governing the 2007 notes. In the event of a declaration of acceleration of the 2007 notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (v) of the preceding paragraph, the declaration of acceleration of the 2007 notes shall be automatically annulled if the holders of any Indebtedness described in clause (v) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (a) the annulment of the acceleration of the 2007 notes would not conflict with any judgment or decree of a court of competent jurisdiction, and (b) all existing Events of Default, except nonpayment of principal or interest on the 2007 notes that became due solely because of the acceleration of the 2007 notes, have been cured or waived. 106 Subject to certain limitations, Holders of a majority in principal amount of the then outstanding 2007 notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the 2007 notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the 2007 notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the 2007 notes waive any existing Default or Event of Default and its consequences under the indenture governing the 2007 notes except a continuing Default or Event of Default in the payment of interest on, or the principal of, the 2007 notes. Von Hoffmann is required to deliver to the Trustee annually a statement regarding compliance with the indenture governing the 2007 notes, and Von Hoffmann is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of Von Hoffmann, as such, shall have any liability for any of its obligations under the 2007 notes, the indenture governing the 2007 notes or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the 2007 notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the 2007 notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Von Hoffmann may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding 2007 notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding 2007 notes to receive payments in respect of the principal of, premium, if any, and interest on such 2007 notes when such payments are due from the trust referred to below, (ii) its obligations with respect to the 2007 notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and its obligations in connection therewith and (iv) the Legal Defeasance provisions of the indenture governing the 2007 notes. In addition, Von Hoffmann may, at its option and at any time, elect to have its obligations released with respect to certain covenants that are described in the indenture governing the 2007 notes ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the 2007 notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the 2007 notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) Von Hoffmann must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the 2007 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 the outstanding 2007 notes on the Stated Maturity or on the applicable redemption date, as the case may be, and it must specify whether the 2007 notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, Von Hoffmann shall have delivered to the Trustee an opinion of counsel in the United States 107 reasonably acceptable to the Trustee confirming that (A) it has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the indenture governing the 2007 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 2007 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; (iii) in the case of Covenant Defeasance, Von Hoffmann shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding 2007 notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the indenture governing the 2007 notes) to which Von Hoffmann or any of its Subsidiaries is a party or by which Von Hoffmann or any of its Subsidiaries is bound; (vi) Von Hoffmann 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; (vii) Von Hoffmann must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by Von Hoffmann with the intent of preferring the Holders of 2007 notes over the other creditors of Von Hoffmann with the intent of defeating, hindering, delaying or defrauding creditors of Von Hoffmann or others; and (viii) Von Hoffmann must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange the 2007 notes in accordance with the indenture governing the 2007 notes. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and Von Hoffmann may require a Holder to pay any taxes and fees required by law or permitted by the indenture governing the 2007 notes. Von Hoffmann is not required to transfer or exchange any 2007 note selected for redemption. Also, Von Hoffmann is not required to transfer or exchange any 2007 note for a period of 15 days before a selection of the 2007 notes to be redeemed. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the indenture governing the 2007 notes, the 2007 notes or the notes Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the 2007 notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the 2007 notes), and any existing default or compliance with any provision of the indenture governing the 2007 notes or the 2007 notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding 2007 notes (including consents obtained in connection with a tender offer or exchange offer for the 2007 notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any notes held by a non-consenting Holder): (i) reduce the principal amount of the 2007 notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change 108 the fixed maturity of any 2007 note or alter the provisions with respect to the redemption of the 2007 notes (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders") in a manner adverse to the Holders of the 2007 notes, (iii) reduce the rate of or change the time for payment of interest or Liquidated Damages, if any, on any 2007 note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest or Liquidated Damages, if any, on the 2007 notes (except a rescission of acceleration of the 2007 notes by the Holders of at least a majority in aggregate principal amount of the 2007 notes and a waiver of the payment default that resulted from such acceleration), (v) make any 2007 note payable in money other than that stated in the 2007 notes, (vi) make any change in the provisions of the indenture governing the 2007 notes relating to waivers of past Defaults or the rights of Holders of the 2007 notes to receive payments of principal of or premium, if any, or interest on the 2007 notes, (vii) waive a redemption payment with respect to any 2007 note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. In addition, any amendment to the provisions of the indenture governing the 2007 notes (which relate to subordination) will require the consent of the Holders of at least 75% in aggregate principal amount of the 2007 notes then outstanding if such amendment would adversely affect the rights of Holders of the 2007 notes. Notwithstanding the foregoing, without the consent of any Holder of the 2007 notes, Von Hoffmann and the Trustee may amend or supplement the indenture governing the 2007 notes or the 2007 notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated notes in addition to or in place of certificated notes, to provide for the assumption of Von Hoffmann's or a Guarantor's obligations to Holders of the 2007 notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the 2007 notes or that does not adversely affect the legal rights under the indenture governing the 2007 notes of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture governing the 2007 notes under the Trust Indenture Act or to allow any Guarantor to Guarantee the 2007 notes. CONCERNING THE TRUSTEE The indenture governing the 2007 notes contains certain limitations on the rights of the Trustee, should it become a creditor of us, 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. The Holders of a majority in principal amount of the then outstanding 2007 notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The indenture governing the 2007 notes provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the indenture governing the 2007 notes at the request of any Holder of the 2007 notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the indenture and registration rights governing the 2007 notes without charge by writing to: Von Hoffmann Corporation, 1000 Camera Avenue, St. Louis, Missouri, 63126, Attention: Chief Financial Officer. 109 CERTAIN DEFINITIONS Set forth below are certain defined terms used in the indenture governing the 2007 notes. Reference is made to the indenture governing the 2007 notes for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "ACQUIRED DEBT" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), 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 securities of a Person shall be deemed to be control. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory or obsolete or unused equipment or assets in the ordinary course of business (PROVIDED that the sale, lease, conveyance or other disposition of all or substantially all of the assets of Von Hoffmann and its Subsidiaries taken as a whole will be governed by the provisions of the indenture governing the 2007 notes 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 (ii) the issue or sale by Von Hoffmann or any of its Restricted Subsidiaries of Equity Interests of its Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions for Net Proceeds in excess of $2.0 million. Notwithstanding the foregoing: (i) a transfer of assets by Von Hoffmann to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to Von Hoffmann or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to Von Hoffmann or to another Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that is permitted by the covenant described above under the caption "--Restricted Payments," (iv) the sale of its aircraft, (v) the sale of its owned apartments and (vi) the sale of its real property in Arizona will not be deemed to be Asset Sales. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENT INVESTMENT" means, at any time: (a) any evidence of Indebtedness, maturing not more than one year after such time, issued directly by the United States of America or any agency thereof or guaranteed by the United States of America or any agency thereof; 110 (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody's, or (ii) any lender party to the New Credit Agreement (or its holding company); (c) any time deposit, certificate of deposit or bankers acceptance, maturing not more than one year after such time, maintained with or issued by either (i) a commercial banking institution (including U.S. branches of foreign banking institutions) that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or (ii) any lender party to the New Credit Agreement; (d) short-term tax-exempt securities rated not lower than MIG-1/1 + by either Moody's or S&P with provisions for liquidity or maturity accommodations of 183 days or less; (e) repurchase agreements with respect to any securities referred to in clause (a) above entered into with any entity referred to in clause (b) or (c) above or any other financial institution whose unsecured long-term debt (or the unsecured long-term debt of whose holding company) is rated at least A- or better by S&P or Baa1 or better by Moody's and maturing not more than one year after such time; or (f) any money market or similar fund the assets of which are comprised exclusively of any of the items specified in clauses (a) through (d) above and as to which withdrawals are permitted at least every 90 days. "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, 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 Von Hoffmann's assets and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than DLJMB, (ii) the adoption of a plan relating to the liquidation or dissolution of Von Hoffmann, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Existing Shareholders and an entity that is the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a 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), directly or indirectly, of 100% of its common stock, becomes the "beneficial owner" (as defined above) of more than 50% of the Voting Stock of us or Holdings (measured by voting power rather than number of shares), or (iv) the first day on which a majority of the members of the Board of Directors of Von Hoffmann are not Continuing Directors. "COMMISSION" means the Securities and Exchange Commission. "CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and 111 other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) 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, plus (v) any non-capitalized transaction costs incurred in connection with actual or proposed financings, acquisitions or divestitures (including, but not limited to, financing and refinancing fees and costs incurred in connection with the Recapitalization), in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, 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 a Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to us by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to Von Hoffmann or one of its Subsidiaries. "CONTINUING DIRECTORS" means, as of any date of determination, any member of Von Hoffmann's Board of Directors who (i) was a member of such Board of Directors on the date of the indenture governing the 2007 notes or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "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. "DESIGNATED SENIOR DEBT," with respect to any Person, means (i) any Indebtedness of such Person outstanding under the New Credit Agreement and (ii) in the event no Indebtedness is outstanding under the New Credit Agreement, any other Senior Debt of such Person permitted under the indenture governing the 2007 notes the principal amount of which is $25.0 million or more and that has been designated by such Person as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or 112 redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. "DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates. "DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXISTING INDEBTEDNESS" means Indebtedness of Von Hoffmann and its Restricted Subsidiaries (other than Indebtedness under the New Credit Agreement) in existence on the date of the indenture governing the 2007 notes, until such amounts are repaid. "EXISTING SHAREHOLDERS" means DLJMB, ZS and the Management Holders. "FIXED CHARGES" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, 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) and (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of Von Hoffmann and other than any dividend payment that may be deemed to have been made as a result of an increase in the liquidation preference of any preferred stock, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person and its Restricted Subsidiaries 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 Von Hoffmann or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by Von Hoffmann 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 to include the Consolidated Cash Flow of the acquired entities (adjusted to exclude (a) the cost of any compensation, remuneration or other benefit paid or provided to any employee, consultant, Affiliate or equity owner of the acquired entities to the extent such costs are eliminated and not replaced and (b) the amount of any reduction in general, 113 administrative or overhead costs or other non-recurring items of the acquired entities, in each case, as determined in good faith by an officer of us) and without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent 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 applicable as of the date of determination. "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, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTORS" means all Restricted Subsidiaries and, so long as it Guarantees any Obligations under the New Credit Agreement, Holdings. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such 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 (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "INTERCOMPANY NOTE" means the note issued on the date of the indenture governing the 2007 notes by Holdings in favor of Von Hoffmann in an initial principal amount of $288.8 million. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If Von Hoffmann or any Subsidiary of it sells or otherwise disposes of any Equity Interests of any direct or 114 indirect Subsidiary of Von Hoffmann such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of Von Hoffmann, it 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 Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Certain Covenants--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). "MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any employee of Von Hoffmann (or any of its Restricted Subsidiaries'). "MANAGEMENT HOLDERS" means holders of Management Equity Interests on the date of the indenture governing the 2007 notes. "MERGER AGREEMENT" means that certain agreement and plan of merger among the DLJ Entities, VH Acquisition Corp., ZS and Robert A. Uhlenhop, dated April 3, 1997. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by Von Hoffmann 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 (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the New Credit Agreement) and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NEW CREDIT AGREEMENT" means that certain credit agreement, dated as of May 22, 1997, by and among Von Hoffmann and DLJ Capital Funding, Inc., including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any agreement (i) extending or shortening the maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii) adding or deleting borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder, PROVIDED that on the date such Indebtedness is incurred it would not be prohibited by clause (i) of the covenant set forth under "--Incurrence of Indebtedness and Issuance of Preferred Stock" or (iv) otherwise altering the terms and conditions thereof. "NON-RECOURSE DEBT" means Indebtedness (i) as to which neither Von Hoffmann 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 115 otherwise), or (c) constitutes the lender, and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of Von Hoffmann or any of its Restricted Subsidiaries. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness, including any Guarantees of such Indebtedness. "PERMITTED INVESTMENTS" means (a) any Investment in Von Hoffmann or in a Restricted Subsidiary of Von Hoffmann; (b) any Investment in Cash Equivalents; (c) any Investment by Von Hoffmann or any Restricted Subsidiary of Von Hoffmann in a Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of Von Hoffmann and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Von Hoffmann or a Wholly Owned Restricted Subsidiary of Von Hoffmann that is a Guarantor; (d) any Restricted 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 Holders--Asset Sales"; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Von Hoffmann; (f) any Investment represented by the Intercompany Note; (g) any loan made to management in order to enable management to purchase equity in Holdings, or any refinancing of any loan made to management, which loan was made to enable management to purchase equity in Holdings; and (h) other Investments 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 (h) that are at the time outstanding, not to exceed $2.0 million. "PERMITTED JUNIOR SECURITIES" means Equity Interests in us or a Guarantor or debt securities of us or a Guarantor that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the 2007 notes are subordinated to Senior Debt. "PERMITTED LIENS" means (i) Liens securing Senior Debt that was permitted by the terms of the indenture governing the 2007 notes to be incurred; (ii) Liens in favor of Von Hoffmann or any of its Restricted Subsidiaries; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with Von Hoffmann or any of its Subsidiaries; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Von Hoffmann; (iv) Liens on property existing at the time of acquisition thereof by Von Hoffmann or any Subsidiary, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (v) 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; (v) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of the second paragraph of the covenant entitled "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with such Indebtedness; (vi) Liens existing on the date of the indenture governing the 2007 notes; (vii) 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, (viii) Liens in connection with any Permitted Refinancing Indebtedness, PROVIDED that such Liens do not exceed the Liens replaced in connection with the 116 Permitted Refinancing Indebtedness; (ix) statutory Liens of landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, (x) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of Von Hoffmann and its Subsidiaries taken as a whole; and (xi) Liens incurred in the ordinary course of business of Von Hoffmann or any Subsidiary of Von Hoffmann with respect to obligations that do not exceed $5.0 million at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by Von Hoffmann or such Subsidiary. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Von Hoffmann 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 Von Hoffmann or any of its Restricted Subsidiaries; PROVIDED that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest, premium and prepayment penalties, if any, on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the 2007 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 2007 notes on terms at least as favorable to the Holders of the 2007 notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by Von Hoffmann or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the relevant Person that is not an Unrestricted Subsidiary. "SENIOR DEBT," with respect to any Person, means (i) all Obligations of such Person outstanding under the New Credit Agreement and all Hedging Obligations payable to a lender under the New Credit Agreement or any of its affiliates, including, without limitation, interest accruing subsequent to the filing of, or which would have accrued but for the filing of, a petition for bankruptcy, whether or not such interest is an allowable claim in such bankruptcy proceeding, (ii) any other Indebtedness of such Person unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to any other Senior Debt of such Person and (iii) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (a) any liability for federal, state, local or other taxes, (b) any Indebtedness of such Person to any of its Subsidiaries, (c) any trade payables or (d) any Indebtedness that is incurred in violation of the indenture governing the 2007 notes. 117 "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 Act, 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. "SUBORDINATED NOTE OBLIGATIONS" means all Obligations with respect to the Notes, including, without limitation, principal, premium, if any, interest and Liquidated Damages, if any, payable pursuant to the terms of the Notes (including upon acceleration or redemption thereof), together with and including any amounts received or receivable upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "TAX SHARING AGREEMENT" means that certain tax sharing agreement between Holdings and Von Hoffmann, dated as of the Closing Date, as amended from time to time; PROVIDED such amendment or amendments do not materially adversely effect us. "UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary 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: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with Von Hoffmann or any of its Restricted Subsidiaries unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Von Hoffmann or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Von Hoffmann, (c) is a Person with respect to which neither Von Hoffmann nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of Von Hoffmann or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Von Hoffmann or any of its Restricted Subsidiaries. Any such designation by the Board of Directors 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 foregoing 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 foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture governing the 2007 notes and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Von Hoffmann 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 "Incurrence of Indebtedness and Issuance of Preferred Stock," Von Hoffmann shall be in default of such covenant). 118 Von Hoffmann's Board of Directors 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 Von Hoffmann of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, (ii) such Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the terms of the indenture governing the 2007 notes and (iii) 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 (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. "ZS" means ZS VH L.P., together with ZS VH II L.P., as the context requires. FORMS OF REGISTERED SECURITIES The certificates representing the registered securities will be issued in fully registered form, without coupons. Except as described in the next paragraph, the registered securities will be deposited with, or on behalf of, DTC, and registered in the name of Cede & Co., as DTC's nominee, in the form of a global security. Holders of the registered notes will own book-entry interests in the global note evidenced by records maintained by DTC. Book-entry interests may be exchanged for certificated securities of like tenor and equal aggregate principal amount, if (1) DTC notifies us that it is unwilling or unable to continue as depositary or we determine that DTC is unable to continue as depositary and we fail to appoint a successor depositary within 90 days, (2) we provide for the exchange pursuant to the terms of the indenture governing the 2009 notes, or (3) we determine that the book-entry interests will no longer be represented by global notes and we execute and deliver to the Trustee instructions to that effect. 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 You can find the definitions of certain terms used in this description of the 2009 Holdings debentures under the subheading "--Certain Definitions." In this description, the term "Holdings" refers only to Von Hoffmann Holdings Inc. and not to any of its subsidiaries. 119 Holdings issued the old 2009 Holdings debentures under an indenture among itself, and Marine Midland Bank (now HSBC Bank USA), as trustee. The terms of the 2009 Holdings debentures include those stated in the indenture governing them and those made part of that indenture by reference to the Trust Indenture Act of 1939, as amended. The following description is a summary of the material provisions of the indenture and the registration rights agreement governing the 2009 Holdings debentures. It does not restate those agreements in their entirety. We urge you to read the indenture and the registration rights agreement governing the 2009 Holdings debentures because they, and not this description, define your rights as holders of the notes. Copies of the indenture and the registration rights agreement governing the 2009 Holdings debentures are available as set forth below under "--Additional Information." BRIEF DESCRIPTION OF THE 2009 HOLDINGS DEBENTURES The 2009 Holdings debentures: - will be general unsecured obligations of Holdings; and - will be expressly subordinate in right of payment with all existing and future senior indebtedness of Holdings. PRINCIPAL, MATURITY AND INTEREST Holdings issued the old 2009 Holdings debentures in an aggregate principal amount of $30.4 million, which has accreted to $48.1 million in principal amount. The 2009 Holdings debentures will mature on May 15, 2009. Interest on the 2009 Holdings debentures accrues at the rate of 13.5% per annum and is payable semi-annually in arrears on May 15 and November 15. Interest shall be payable in cash PROVIDED, HOWEVER, that prior to the first date on which interest would be permitted to be paid in cash pursuant to the terms of the then-outstanding indebtedness of Holdings and its Subsidiaries and any other contractual provisions limiting the ability of Holdings and its Subsidiaries to declare or pay cash interest, interest shall not be paid in cash but shall accrete to, and increase, the principal amount of each Debenture. Interest on the Debentures shall accrue from the most recent date to which interest has been paid or accreted to principal amount or, if no interest has been so paid or accreted, from the date of issuance. Holdings will make each interest payment to the holders of record on the immediately preceding May 1 and November 1. All payments on the 2009 Holdings debentures will be made at the office or agency of the paying agent unless Holdings elects to make interest payments by check mailed to holders at their address set forth in the register of holders. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. PAYING AGENT AND REGISTRAR FOR THE 2009 HOLDINGS DEBENTURES The trustee currently acts as paying agent and registrar. Holdings may change the paying agent or registrar without prior notice to the holders of the 2009 Holdings Debentures, and Holdings or any of its subsidiaries may act as paying agent or registrar. SUBORDINATION The payment of the Debenture Obligations is subordinated in right of payment to the prior payment in full in cash or cash equivalents of all Senior Debt, whether outstanding on the date of the indenture governing the 2009 Holdings debentures. Upon any distribution to creditors of Holdings in a liquidation or dissolution of it or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Holdings or its 120 property, an assignment for the benefit of creditors or any marshalling of its assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full in cash or cash equivalents of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the holders of the 2009 Holdings debentures will be entitled to receive any payment with respect to the Debenture Obligations, and until all Obligations with respect to Senior Debt are paid in full in cash or cash equivalents, any distribution to which the holders of the 2009 debentures would be entitled shall be made to the holders of Senior Debt (except that holders of the 2009 Holdings debentures may receive Permitted Junior Securities and payments made from the trust described under "--Legal Defeasance and Covenant Defeasance"). Holdings also may not make any payment upon or in respect of the Subordinated Note Obligations (except in Permitted Junior Securities or payments made from the trust described under "--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of or premium, if any, or interest on, or commitment fees relating to, any Designated Senior Debt occurs and is continuing beyond any applicable period of grace or (ii) any other default occurs and is continuing with respect to any Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a written notice of such default (a "Payment Blockage Notice") from Holdings or the holders of such Designated Senior Debt (or its representative). Payments on the 2009 Holdings debentures may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 days. The indenture governing the 2009 Holdings debentures further requires that Holdings promptly notifies holders of Senior Debt if payment of the 2009 Holdings debentures is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of the 2009 Holdings debentures may recover less ratably than creditors of Holdings who are holders of Senior Debt. OPTIONAL REDEMPTION The 2009 Holdings debentures shall be subject to redemption at any time at the option of Holdings, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below, PLUS any accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on May 15 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2002........................................................ 106.75% 2003........................................................ 105.40% 2004........................................................ 104.05% 2005........................................................ 102.70% 2006........................................................ 101.35% 2007 and thereafter......................................... 100.00%
121 MANDATORY REDEMPTION Except as set forth below under "--Repurchase at the Option of Holders," Holdings is not required to make mandatory redemption or sinking fund payments with respect to the 2009 Holdings debentures. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL If a Change of Control occurs, each holder of the 2009 Holdings debentures will have the right to require Holdings to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that holder's 2009 Holdings debentures pursuant to a Change of Control Offer on the terms set forth in the indenture governing the 2009 Holdings debentures. In the Change of Control Offer, Holdings will offer at an offer price in cash equal to 101% of the aggregate principal amount of the 2009 Holdings debentures repurchased plus accrued and unpaid interest and Liquidated Damages, if any, on the 2009 Holdings debentures repurchased, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, Holdings will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase the 2009 Holdings debentures on the date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the indenture governing the 2009 Holdings debentures and described in such notice. Holdings will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the 2009 Holdings debentures as a result of a Change of Control. On the Change of Control Payment Date, Holdings will, to the extent lawful: (1) accept for payment all the 2009 Holdings debentures or portions of the 2009 Holdings debentures 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 the 2009 Holdings debentures or portions of the 2009 Holdings debentures properly tendered; and (3) deliver or cause to be delivered to the trustee the 2009 Holdings debentures properly accepted together with an Officers' Certificate stating the aggregate principal amount of the 2009 Holdings debentures or portions of the 2009 Holdings debentures being purchased by Holdings. The paying agent will promptly mail to each holder of the 2009 Holdings debentures properly tendered the Change of Control Payment for such 2009 Holdings debentures, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new 2009 debenture equal in principal amount to any unpurchased portion of the 2009 Holdings debentures surrendered, if any; PROVIDED that each new 2009 debenture will be in a principal amount of $1,000 or an integral multiple of $1,000. Holdings 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 Holdings to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the indenture governing the 2009 Holdings debentures are applicable. Except as described above with respect to a Change of Control, the indenture governing the 2009 Holdings debentures does not contain provisions that permit the holders of the 2009 Holdings debentures to require that Holdings repurchase or redeem the 2009 Holdings debentures in the event of a takeover, recapitalization or similar transaction. 122 The revolving credit facility limits Holdings from purchasing or redeeming any 2009 Holdings debentures, and also provides that certain change of control events with respect to Holdings would constitute a default thereunder. Any future credit agreements or other agreements to which Holdings becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when Holdings is prohibited from purchasing or redeeming the 2009 Holdings debentures, it could seek the consent of its lenders to the purchase of the 2009 Holdings debentures or could attempt to refinance the borrowings that contain such prohibition. If Holdings does not obtain such a consent or repay such borrowings, it will remain prohibited from purchasing the 2009 Holdings debentures. In such case, Holdings' failure to purchase tendered 2009 Holdings debentures would constitute an Event of Default under the indenture governing the 2009 Holdings debentures, which would, in turn, constitute a default under the revolving credit facility. In addition, Holdings' ability to pay cash to the holders of the 2009 Holdings debentures upon a repurchase may be limited by its then existing financial resources. Holdings 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 governing the 2009 Holdings debentures applicable to a Change of Control Offer made by Holdings and purchases all the 2009 Holdings debentures validly tendered and not withdrawn under the 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 Holdings and its Subsidiaries taken as a whole. Although there is a developing 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 the 2009 Holdings debentures to require Holdings to repurchase the 2009 Holdings debentures as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of Holdings and its Subsidiaries taken as a whole to another Person or group may be uncertain. Holdings' ability to pay cash to the holders of the 2009 Holdings debentures upon a repurchase may be limited by Holdings' then existing financial resources. See "Risk Factors--We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture governing the 2009 Holdings debentures." SELECTION AND NOTICE Except as otherwise provided in the indenture governing the 2009 Holdings debentures, if less than all of the 2009 Holdings debentures are to be redeemed at any time, the trustee will select debentures for redemption as follows: (1) if the 2009 Holdings debentures are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the 2009 Holdings debentures are listed; or (2) if the 2009 Holdings debentures are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate. No 2009 Holdings debentures of $1,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of the 2009 Holdings debentures to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the 2009 Holdings debentures or a satisfaction and discharge of the indenture governing the 2009 Holdings debentures. Notices of redemption may not be conditional. 123 If any 2009 debenture is to be redeemed in part only, the notice of redemption that relates to that 2009 debenture will state the portion of the principal amount of that 2009 debenture that is to be redeemed. A new 2009 debenture in principal amount equal to the unredeemed portion of the original 2009 debenture will be issued in the name of the holder of the 2009 Holdings debentures upon cancellation of the original 2009 debenture. The 2009 Holdings debentures called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on the 2009 Holdings debentures or portions of them called for redemption. CERTAIN COVENANTS RESTRICTED PAYMENTS Holdings will not, and will not permit any of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make any other payment or distribution on account of Holdings' Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Holdings); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of Holdings; or (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Debentures, except a payment of interest or a payment of principal at Stated Maturity (all such payments and other actions set forth in clauses (i) through (iii) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof. MERGER, CONSOLIDATION OR SALE OF ASSETS MERGER, CONSOLIDATION OR SALE OF ASSETS. Holdings may not consolidate or merge with or into (whether or not Holdings is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) Holdings is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than Holdings) or to which such sale, assignment, transfer, lease, 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; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than Holdings) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of Holdings under the 2009 Holdings debentures and the indenture governing the 2009 Holdings debentures pursuant to a supplemental indenture in a form reasonably satisfactory to the trustee; and (iii) immediately after such transaction no Default or Event of Default exists. REPORTS So long as any 2009 Holdings debentures are outstanding, Holdings will furnish to the holders of the 2009 Holdings debentures 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 Holdings were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of Holdings and its Subsidiaries and, with respect to the annual information only, a report thereon by Holdings' certified independent accountants. The financial information to be distributed to holders of 2009 Holdings debentures shall be filed with the trustee and mailed to the holders at their addresses appearing in the register of 2009 Holdings debentures maintained by the Registrar within 120 days after the end of Holdings' fiscal years and within 60 days after the end of each of the first three quarters of each such fiscal year. 124 EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on the 2009 Holdings debentures (whether or not prohibited by the subordination provisions of the indenture governing the 2009 Holdings debentures); (ii) default in payment when due of principal of or premium, if any, on the 2009 Holdings debentures (whether or not prohibited by Subordination of the indenture governing the 2009 Holdings debentures); (iii) failure by Holdings or any Subsidiary to comply with the provisions described under the captions "Change of Control Offer" and "Restricted Payments" of the indenture governing the 2009 Holdings debentures; (iv) failure by Holdings for 60 days after notice to comply with its other agreements in the indenture governing the 2009 Holdings debentures or the 2009 Holdings debentures; or (v) certain events of bankruptcy or insolvency with respect to Holdings or any of its Subsidiaries. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to Holdings, any Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding 2009 Holdings debentures will become due and payable immediately without further action or notice. Holders of the 2009 Holdings debentures may not enforce the indenture governing the 2009 Holdings debentures or the 2009 Holdings debentures except as provided in the indenture governing the 2009 Holdings debentures. 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 2009 Holdings debentures may declare all the 2009 Holdings debentures to be due and payable immediately provided, however, that, so long as any Indebtedness permitted to be incurred pursuant to the New Credit Agreement shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Indebtedness under the New Credit Agreement or (ii) five business days after the giving of written notice to Holdings and the representative under the New Credit Agreement of such acceleration. Subject to certain limitations, holders of a majority in principal amount of the then outstanding 2009 Holdings debentures may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the 2009 Holdings debentures notice of any continuing Default or Event of Default if it determines that withholding the 2009 Holdings debentures is in their interest, except a Default or Event of Default relating to the payment of principal or interest or Liquidated Damages. The holders of a majority in aggregate principal amount of the 2009 Holdings debentures then outstanding by notice to the trustee may on behalf of the holders of all of the 2009 Holdings debentures waive any existing Default or Event of Default and its consequences under the indenture governing the 2009 Holdings debentures except a continuing Default or Event of Default in the payment of interest or Liquidated Damages on, or the principal of, the 2009 Holdings debentures. Holdings is required to deliver to the trustee annually a statement regarding compliance with the indenture governing the 2009 Holdings debentures. Upon becoming aware of any Default or Event of Default, Holdings is required to deliver to the trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of Holdings or any Guarantor, as such, will have any liability for any obligations of Holdings or the Guarantors under the 2009 Holdings debentures, the indenture governing the 2009 Holdings debentures, the note guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of the 2009 Holdings debentures by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the 2009 Holdings debentures. The waiver may not 125 be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Holdings may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding 2009 Holdings debentures ("Legal Defeasance") except for: (1) the rights of holders of outstanding 2009 Holdings debentures to receive payments in respect of the principal of, or interest or premium on such notes when such payments are due from the trust referred to below; (2) Holdings' obligations with respect to the 2009 Holdings debentures concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen 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 Holdings' obligations in connection therewith; and (4) the Legal Defeasance provisions of the indenture governing the 2009 Holdings debentures. In addition, Holdings may, at its option and at any time, elect to have the obligations of Holdings released with respect to certain covenants that are described in the indenture governing the 2009 Holdings debentures ("Covenant Defeasance") and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the 2009 Holdings debentures. In the event Covenant Defeasance occurs, certain events (not including non-payment, 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 2009 Holdings debentures. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) Holdings must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the 2009 Holdings debentures, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Liquidated Damages, if any, on the outstanding 2009 Holdings debentures on the stated maturity or on the applicable redemption date, as the case may be, and Holdings must specify whether the 2009 Holdings debentures are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, Holdings has delivered to the trustee an opinion of counsel in the United States reasonably acceptable to the trustee confirming that (a) Holdings has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture governing the 2009 Holdings debentures, 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 will confirm that, the holders of the outstanding 2009 Holdings debentures 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, Holdings has delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the holders of the outstanding 2009 Holdings debentures 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 126 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 Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of 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 any material agreement or instrument (other than the indenture governing the 2009 Holdings debentures) to which Holdings or any of its Subsidiaries is a party or by which Holdings or any of its Subsidiaries is bound; (6) Holdings must deliver to the trustee an Officers' Certificate stating that the deposit was not made by Holdings with the intent of preferring the holders of notes over the other creditors of Holdings with the intent of defeating, hindering, delaying or defrauding creditors of Holdings or others; (7) Holdings must deliver to the trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (8) Holdings 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. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the indenture governing the 2009 Holdings debentures, the 2009 Holdings debentures or the note guarantees may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the 2009 Holdings debentures then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, the 2009 Holdings debentures), and any existing default or compliance with any provision of the indenture governing the 2009 Holdings debentures or the 2009 Holdings debentures may be waived with the consent of the holders of a majority in principal amount of the then outstanding 2009 Holdings debentures (including consents obtained in connection with a tender offer or exchange offer for, the 2009 Holdings debentures). Without the consent of each holder affected, an amendment or waiver may not (with respect to any 2009 Holdings debentures held by a non-consenting holder): (1) reduce the principal amount of the 2009 Holdings debentures 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 2009 Holdings debentures (other than provisions relating to the covenants described above under the caption "--Repurchase at the Option of Holders") in a manner adverse to the holders of the 2009 Holdings debentures; (3) reduce the rate of or change the time for payment of interest, or Liquidated Damages, if any, on any 2009 debenture; (4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Liquidated Damages, if any, on the 2009 Holdings debentures (except a rescission of acceleration of the 2009 Holdings debentures by the holders of at least a majority in aggregate principal amount of the 2009 Holdings debentures and a waiver of the payment default that resulted from such acceleration); 127 (5) make any 2009 debenture payable in money other than that stated in the 2009 Holdings debentures; (6) make any change in the provisions of the indenture governing the 2009 Holdings debentures relating to waivers of past Defaults or the rights of holders of the 2009 Holdings debentures to receive payments of principal of, or interest or premium or Liquidated Damages, if any, on the 2009 Holdings debentures; (7) waive a redemption payment with respect to any 2009 debenture (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders"); (8) make any change in the preceding amendment and waiver provisions. In addition, any amendment to the provision relating to Subordination shall require the consent of the holders of at least 75% in aggregate amount of the 2009 Holdings debentures then outstanding (including consents obtained in connection with a tender offer or exchange offer) if such amendment would adversely affect the rights of holders of the 2009 Holdings debentures. Notwithstanding the preceding, without the consent of any holder of the 2009 Holdings debentures, Holdings and the trustee may amend or supplement the indenture governing the 2009 Holdings debentures or the 2009 Holdings debentures: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated 2009 Holdings debentures in addition to or in place of certificated 2009 Holdings debentures; (3) to provide for the assumption of Holdings' obligations to holders of the 2009 Holdings debentures in the case of a merger or consolidation; (4) to make any change that would provide any additional rights or benefits to the holders of the 2009 Holdings debentures or that does not adversely affect the legal rights under the indenture governing the 2009 Holdings debentures of any such holder; or (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture governing the 2009 Holdings debentures under the Trust Indenture Act. CONCERNING THE TRUSTEE If the trustee becomes a creditor of Holdings, the indenture governing the 2009 Holdings debentures 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. The holders of a majority in principal amount of the then outstanding 2009 notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture governing the 2009 Holdings debentures provides that in case an Event of Default occurs and is continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture governing the 2009 Holdings debentures at the request of any holder of the 2009 notes, unless such holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. 128 ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the indenture and registration rights agreement governing the 2009 Holdings debentures without charge by writing to: Von Hoffmann Corporation, 1000 Camera Avenue, St. Louis, Missouri, 63126, Attention: Chief Financial Officer. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the indenture governing the 2009 Holdings debentures. Reference is made to the indenture governing the 2009 Holdings debentures for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "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" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), 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 securities of a Person shall be deemed to be control. "AGENT" means any Registrar, Paying Agent or co-registrar. "BOARD OF DIRECTORS" means the board of directors of Holdings or (except in the case of the definition of Change of Control) any authorized committee of such board of directors. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CERTIFICATE OF DESIGNATIONS" means the Amended and Restated Certificate of Designations, Preferences and Rights relating to the Preferred Stock. "CHANGE OF CONTROL" means the occurrence of any of the following: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than any person or group comprised solely of the Initial Investors, becomes the "beneficial owner" (as such term is defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a 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), by way of merger, consolidation or otherwise, of 50% or more of the voting power of all classes of voting securities of the Holdings and such person or group beneficially owns a greater percentage of the voting power of all classes of voting securities of Holdings than that beneficially owned by the Initial Investors; (ii) the consummation of a sale or transfer of all or substantially all of the assets of the Holdings or the Company to any person or group (as defined above), other than any person or group comprised solely of the Initial Investors or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Holdings, together with any new directors whose election was approved by a vote of a majority of directors then still in office who either were directors at the beginning of such period or whose election or nomination for the election was previously so approved, cease for any reason to constitute a majority of the directors of Holdings 129 then in office, other than as a result of election of removal of directors, or a reduction of the number of directors comprising the Board of Directors of Holdings, pursuant to the provisions governing the election and removal of directors of the Certificate of Designations or the Shareholders Agreement. "COMMISSION" means the Securities and Exchange Commission. "COMPANY" means Von Hoffmann Corporation, a Delaware corporation. "DEBENTURE OBLIGATIONS" means all Obligations with respect to the Debentures, including, without limitation, principal, premium, if any, and interest payable pursuant to the terms of the Debentures (including upon acceleration or redemption thereof), together with and including any amounts received or receivable upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise. "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. "DESIGNATED SENIOR DEBT," means (i) any Obligations of Holdings under the New Credit Agreement and (ii) in the event no Indebtedness is outstanding under the New Credit Agreement, any other Senior Debt the principal amount of which is $25.0 million or more and that has been designated by Holdings as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Debentures mature. "DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates. "DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "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 applicable as of the date of determination. "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, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HOLDINGS" means Von Hoffmann Holdings, Inc. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness 130 (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any Indebtedness of any other Person. "INITIAL INVESTORS" means DLJMB, ZS and the Management Holders and, in each case, their respective permitted assigns under the Shareholders Agreement. "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). "MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any employee of the Company or any of its Subsidiaries. "MANAGEMENT HOLDERS" means holders of Management Equity Interests on the date that the Preferred Stock was originally issued by Holdings. "MERGER AGREEMENT" means that certain agreement and plan of merger, dated April 3, 1997, among DLJMB, VH Acquisition, Inc., ZS and Robert A. Uhlenhop. "MOODY'S" means Moody's Investors Service, Inc. "NEW CREDIT AGREEMENT" means that certain credit agreement, dated as of May 22, 1997, by and among Holdings, DLJ Capital Funding, Inc. and the lenders party thereto, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any agreement (i) extending or shortening the maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii) adding or deleting borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder or (iv) otherwise altering the terms and conditions thereof. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness, including any guarantees of such Indebtedness. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "PERMITTED JUNIOR SECURITIES" means Equity Interests in Holdings or debt securities of Holdings that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Debentures are subordinated to Senior Debt. "PERSON" means any individual, corporation, partnership, joint venture, association, limited liability company, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PREFERRED STOCK" means the Holdings 13.5% Senior Exchangeable Preferred Stock due 2009 and the Holdings' Series B 13.5% Senior Exchangeable Preferred Stock due 2009. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR DEBT" means (i) all Obligations of the Company under the New Credit Agreement and under all Hedging Obligations payable to a lender under the New Credit Agreement or any of its 131 affiliates, including, without limitation, interest accruing subsequent to the filing of, or which would have accrued but for the filing of, a petition for bankruptcy, whether or not such interest is an allowable claim in such bankruptcy proceeding, (ii) all Obligations of the Company in respect of the 2007 notes and the indenture related thereto, (iii) any other Indebtedness of the Company unless the instrument under which such Indebtedness is incurred expressly provides that it is PARI PASSU or subordinated in right of payment to the Debentures and (iv) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (a) any liability for federal, state, local or other taxes, (b) any Indebtedness of the Company to any of its Subsidiaries or (c) any trade payables. "SHAREHOLDERS AGREEMENT" means the Shareholders Agreement, dated as of May 22, 1997, among the Company and the shareholders of the Company named therein. "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 Act, as such Regulation is in effect on the date hereof. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "2007 NOTES" means the 10 3/8% Senior Subordinated Notes due 2007 of the Company. "VHP" means Von Hoffmann Press, Inc., a Delaware corporation. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. "ZS" means ZS VH, L.P. together with ZS VH II L.P., as the context requires. FORMS OF REGISTERED SECURITIES The certificates representing the registered securities will be issued in fully registered form, without coupons. Except as described in the next paragraph, the registered securities will be deposited with, or on behalf of, DTC, and registered in the name of Cede & Co., as DTC's nominee, in the form of a global security. Holders of the registered notes will own book-entry interests in the global note evidenced by records maintained by DTC. Book-entry interests may be exchanged for certificated securities of like tenor and equal aggregate principal amount, if (1) DTC notifies us that it is unwilling or unable to continue as depositary or we determine that DTC is unable to continue as depositary and we fail to appoint a successor depositary within 90 days, (2) we provide for the exchange pursuant to the terms of the indenture governing the 2009 Holdings debentures, or (3) we determine that the book-entry interests will no longer be represented by global notes and we execute and deliver to the Trustee instructions to that effect. As of the date of this prospectus, no certificated securities are issued and outstanding. 132 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following generally summarizes certain material U.S. federal income tax aspects of (i) the exchange of old notes for registered notes and (ii) the ownership and disposition of registered notes. This discussion is a summary for general information purposes only and does not consider all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of such holder's personal circumstances. This discussion is limited to the U.S. federal income tax consequences to persons who are beneficial owners of the old notes or registered notes and who hold such notes as "capital assets" within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"). This discussion does not address special situations, such as the following: - tax consequences to holders who may be subject to special tax treatment, such as tax-exempt entities, dealers in securities or currencies, banks, other financial institutions or "financial services entities," insurance companies, regulated investment companies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, certain expatriates or long-term residents of the United States or corporations that accumulate earnings to avoid U.S. federal income tax; - tax consequences to persons holding notes as part of a hedging, integrated, constructive sale or conversion transaction or a straddle or other risk reduction transaction; - tax consequences to holders whose "functional currency" is not the U.S. dollar; - tax consequences to partnerships or similar pass-through entities or to persons who hold notes through a partnership or similar pass-through entity; - U.S. federal gift or estate tax (except as to Non-U.S. Holders (as defined below)) or alternative minimum tax consequences, if any; or - any state, local or foreign tax consequences. This summary is based upon current provisions of the Code, existing and proposed regulations thereunder and current administrative rulings and court decisions, all as in effect on the date hereof. All of the foregoing are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of this discussion. EACH HOLDER SHOULD CONSULT WITH SUCH HOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF PARTICIPATION IN THE EXCHANGE OFFER AND THE OWNERSHIP AND DISPOSITION OF REGISTERED NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. CONSEQUENCES OF TENDERING NOTES The exchange of your old notes for registered notes in the exchange offers should not constitute a sale or exchange for federal income tax purposes. Accordingly, the exchange offers should have no federal income tax consequences to you if you exchange your old notes for registered notes. For example, there should be no change in your tax basis, and your holding period in your registered notes should include the period for which you have held the old notes exchanged therefor. In addition, the federal income tax consequences of holding and disposing of your registered notes should be the same as those applicable to your old notes. 133 CONSEQUENCES OF HOLDING REGISTERED NOTES U.S. HOLDERS For purposes of the following discussion, a U.S. Holder is a beneficial owner of a registered note that is, for U.S. federal income tax purposes: - a citizen or resident of the United States, including an alien resident who is a lawful permanent resident of the United States or meets the "substantial presence" test under Section 7701(b) of the Code; - a corporation created or organized in the United States or under the laws of the United States or any political subdivision thereof; - an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or - a trust, if a U.S. court is able to exercise primary supervision over administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust. STATED INTEREST. Except with respect to the 13 1/2% Subordinated Exchange Debentures not acquired at a "bond premium" (as described below in "Original Issue Discount"), interest on a registered note (including a payment made pursuant to a guarantee) will be taxable to a U.S. Holder as ordinary interest income at the time it accrues or is received in accordance with such U.S. Holder's method of accounting for U.S. federal income tax purposes. ORIGINAL ISSUE DISCOUNT. Because we are not unconditionally required to pay interest on the 13 1/2% Subordinated Exchange Debentures in cash or other property at least annually at a single fixed rate, such notes were issued with original issue discount, referred to as "OID," in an amount equal to the excess of the "stated redemption price at maturity" over the "issue price" of such notes. The "issue price" of each such note was $1,000. The "stated redemption price at maturity" is the sum of all payments to be made on the debentures, other than "qualified stated interest." The term "qualified stated interest" means, generally, stated interest that is unconditionally payable at least annually at a qualifying rate, including a single fixed rate, during the entire term of the debt instrument. None of the interest on the 13 1/2% Subordinated Exchange Debentures should be qualified stated interest. A U.S. Holder of a 13 1/2% Subordinated Exchange Debenture, in general, must include in ordinary income OID calculated on a constant-yield to maturity method as prescribed by Treasury regulations in advance of the receipt of the related cash payments. Except as described below, the amount of OID included in gross income as interest by a U.S. Holder of a 13 1/2% Subordinated Exchange Debenture is the sum of the "daily portions" of OID with respect to that note for each day during the taxable year or portion thereof in which the U.S. Holder holds the note. This amount is referred to as "accrued OID." The daily portion is determined by allocating to each day in any accrual period a pro rata portion of the OID allocable to that accrual period. The amount of OID allocable to any accrual period is equal to the difference between: - the product of the debenture's adjusted issue price at the beginning of the accrual period and the debenture's yield to maturity; and - the qualified stated interest allocable to the accrual period. OID allocable to the final accrual period is the difference between the amount payable at maturity of the debenture and the debenture's "adjusted issue price" at the beginning of the final accrual period. The "adjusted issue price" of a debenture at the beginning of any accrual period is equal to its issue price increased by the accrued OID for each prior accrual period. 134 A U.S. Holder who acquires a 13 1/2% Subordinated Exchange Debenture at a "bond premium" (discussed below) will not be subject to the OID rules described herein. MARKET DISCOUNT. If a registered note is acquired at a "market discount," some or all of any gain realized upon a subsequent sale, other disposition, or full or partial principal payment, of such registered note may be treated as ordinary income, and not capital gain, as described below. For this purpose, "market discount" is the excess (if any) of the "stated redemption price at maturity" (or, in the case of the 13 1/2% Subordinated Exchange Debentures, the "revised issue price") of a debt obligation over the basis of such debt obligation immediately after its acquisition by the taxpayer, subject to a statutory de minimis exception. The "revised issue price" of the 13 1/2% Subordinated Exchange Debentures is $1,000 plus the aggregate amount of OID includible in the gross income of all holders for all periods before the acquisition of the note by the taxpayer (determined without offset for "acquisition premium" (discussed below), if any). Unless a U.S. Holder has elected to include the market discount in income as it accrues, gain, if any, realized on any subsequent disposition (other than in connection with certain nonrecognition transactions) or full or partial principal payment of such registered note will be treated as ordinary income to the extent of the market discount that is treated as having accrued during the period such U.S. Holder held such registered note. The amount of market discount treated as having accrued will be determined either (i) on a straight-line basis by multiplying the market discount times a fraction, the numerator of which is the number of days the registered note was held by the U.S. Holder and the denominator of which is the total number of days after the date such U.S. Holder acquired the registered note up to and including the date of its maturity or (ii) if the U.S. Holder so elects, on a constant interest rate method. A U.S. Holder may make that election with respect to any registered note but, once made, such election is irrevocable. A U.S. Holder of a registered note acquired at a market discount may elect to include market discount in income currently, through the use of either the straight-line inclusion method or the elective constant interest method in lieu of recharacterizing gain upon disposition or principal repayment as ordinary income to the extent of accrued market discount at the time of such disposition or repayment. Once made, this election will apply to all notes and other obligations acquired by the electing U.S. Holder at a market discount during the taxable year for which the election is made, and all subsequent taxable years, unless the Internal Revenue Service (the "IRS") consents to a revocation of the election. If an election is made to include market discount in income currently, the basis of the registered note in the hands of the U.S. Holder will be increased by the market discount thereon as it is included in income. Unless a U.S. Holder who acquires a registered note at a market discount elects to include market discount in income currently, such U.S. Holder may be required to defer deductions for any interest paid on indebtedness allocable to such registered note in an amount not exceeding the deferred income, until such income is realized. BOND PREMIUM. If a U.S. Holder purchases a registered note and immediately after the purchase the adjusted basis of the registered note exceeds the sum of all amounts payable on the instrument after the purchase date (other than qualified stated interest), the registered note will be treated as having been acquired with "bond premium." A U.S. Holder may elect to amortize such bond premium over the remaining term of such registered note (or, if it results in a smaller amount of amortizable bond premium, until an earlier call date). If bond premium is amortized, the amount of interest that must be included in the U.S. Holder's income for each period ending on an interest payment date or at the stated maturity, as the case may be, except as Treasury Regulations may otherwise provide, will be reduced by the portion of premium allocable to such period based on the registered note's yield to maturity. If such an election to amortize bond premium is not made, a U.S. Holder must include the full amount of each interest payment in 135 income in accordance with its regular method of accounting and will receive a tax benefit from the premium only in computing such U.S. Holder's gain or loss upon the sale or other disposition or full or partial principal payment of the registered note. An election to amortize bond premium will apply to amortizable bond premium on all registered notes and other bonds, the interest on which is includible in the U.S. Holder's gross income, held at the beginning of the U.S. Holder's first taxable year to which the election applies or that are thereafter acquired, and may be revoked only with the consent of the Internal Revenue Service. A U.S. Holder who elects to amortize bond premium must reduce its adjusted basis in the registered notes by the amount of such allowable amortization. ACQUISITION PREMIUM. A complementary concept to bond premium is acquisition premium, which is applicable only to the 13 1/2% Subordinated Exchange Debentures. A 13 1/2% Subordinated Exchange Debenture is acquired at an "acquisition premium" if the U.S. Holder's adjusted tax basis in the note exceeds the adjusted issue price of the note but is less than or equal to all amounts payable on the note after the purchase date (exclusive of qualified stated interest). If a U.S. Holder acquires a 13 1/2% Subordinated Exchange Debenture at an acquisition premium, the amount of OID includible in the U.S. Holder's gross income generally is reduced in each period in proportion to the percentage of the unamortized OID at the date of acquisition represented by the acquisition premium. Alternatively, a U.S. Holder may elect to treat its purchase as a purchase at original issuance and accrue the discount on such purchase on a constant yield basis. SALE, EXCHANGE OR REDEMPTION OF REGISTERED NOTES. Unless a non-recognition provision applies, upon the disposition of a registered note by sale, exchange or redemption, a U.S. Holder generally will recognize gain or loss equal to the difference between (i) the amount realized on such disposition (other than amounts attributable to accrued market discount or accrued interest not yet taken into income, which will be treated as interest for U.S. federal income tax purposes) and (ii) the U.S. Holder's adjusted tax basis in a registered note. A U.S. Holder's adjusted tax basis in a registered note generally will equal the amount such holder paid for the note, net of accrued interest, if any, increased by accrued OID and by any accrued but unpaid stated interest and/or any accrued market discount, in each case, to the extent that the holder previously included such amount(s) in income, and decreased by the amount of bond premium, if any, amortized with respect to such note. Gain or loss from the disposition of a registered note generally will constitute capital gain or loss and will be long-term capital gain or loss if the U.S. Holder has held the registered note for longer than one year. The deductibility of capital losses is subject to limitations. BACKUP WITHHOLDING AND INFORMATION REPORTING. A U.S. Holder of a registered note may be subject, under certain circumstances, to backup withholding at a rate of 30% (which rate is scheduled to be reduced periodically through 2010 and increased to 31% for 2011 and thereafter) with respect to payments of interest on, and gross proceeds from a sale or other disposition of, a registered note. These backup withholding rules apply if the U.S. Holder, among other things: - fails to furnish a social security number or other taxpayer identification number, or TIN, certified under penalties of perjury within a reasonable time after the request therefor; - furnishes an incorrect TIN; - fails to properly report interest; or - under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN furnished is the correct number and that such U.S. Holder is not subject to backup withholding. 136 A U.S. Holder of a registered note who does not provide his, her or its correct taxpayer identification number may be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. Any amount paid as backup withholding is creditable against the U.S. Holder's federal income tax liability, provided the requisite information is provided to the IRS. Certain persons are exempt from backup withholding, including corporations and tax-exempt entities, provided their exemption from backup withholding is properly established. U.S. Holders of registered notes should consult their tax advisors as to their qualifications for exemption from backup withholding and the procedure for obtaining such exemption. We, or our designated paying agent, will report to the holder of a registered note and the IRS the amount of any "reportable payments" made by us and any amount withheld with respect to the registered notes during the calendar year. NON-U.S. HOLDERS The following discussion is limited to the U.S. federal income and estate tax consequences to a beneficial owner of a registered note other than a U.S. Holder (a "Non-U.S. Holder"). For purposes of the following discussion, interest (including OID) and gain on the sale, exchange or other disposition of a registered note will be considered to be "U.S. trade or business income" if such income or gain is: - effectively connected with the conduct of a trade or business in the United States; or - in the case of a treaty resident, attributable to a permanent establishment (or, in the case of an individual, a fixed base) in the United States. INTEREST. Generally, interest (including OID) paid to a Non-U.S. Holder of a registered note will not be subject to U.S. federal income or withholding tax if such interest (including OID) is not U.S. trade or business income and is "portfolio interest." Generally, interest (including OID) on the registered notes will qualify as portfolio interest if the Non-U.S. Holder: - does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock; - is not a "controlled foreign corporation" with respect to which we are a "related person" within the meaning of the Code; and - certifies, under penalties of perjury, that such holder is not a U.S. person and provides such holder's name and address. The gross amount of payments of interest (including OID) that do not qualify for the portfolio interest exception and that are not U.S. trade or business income will be subject to U.S. withholding tax at a rate of 30% unless a treaty applies to reduce or eliminate withholding. U.S. trade or business income will be taxed at regular graduated U.S. rates rather than the 30% gross rate. Any U.S. trade or business income received by a Non-U.S. Holder that is a corporation may, under specific circumstances, be subject to an additional "branch profits tax." To claim an exemption from withholding, or to claim the benefits of a treaty, a Non-U.S. Holder must provide a properly executed IRS Form W-8BEN or W-8ECI, as applicable, prior to the payment of interest. These forms must be periodically updated. A Non-U.S. Holder who is claiming the benefits of a treaty may be required, in certain instances, to obtain a TIN and to provide certain documentary evidence issued by foreign governmental authorities to prove residence in the foreign country. Also, special procedures are provided under applicable regulations for payments through qualified intermediaries. SALE, EXCHANGE OR REDEMPTION OF REGISTERED NOTES. Except as described below and subject to the discussion concerning backup withholding, any gain realized by a Non-U.S. Holder on the sale, 137 exchange or redemption of a registered note generally will not be subject to U.S. federal income tax, unless: - such gain is U.S. trade or business income; - subject to certain exceptions, the Non-U.S. Holder is an individual who holds the registered note as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition; or - the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S. tax law applicable to certain U.S. expatriates (including certain former citizens or residents of the United States). FEDERAL ESTATE TAX. A registered note held (or treated as held) by an individual who is a Non-U.S. Holder at the time of his or her death will not be subject to U.S. federal estate tax, provided that the individual does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock and income on such note was not U.S. trade or business income. BACKUP WITHHOLDING AND INFORMATION REPORTING. We must report annually to the IRS and to each Non-U.S. Holder any interest that is paid or accrued to the Non-U.S. Holder. Copies of these information returns also may be made available under the provisions of a specific treaty or other agreement to the tax authorities of the country in which the Non-U.S. Holder resides. Treasury regulations provide that the backup withholding tax at a current rate of 30% (which rate is scheduled to be reduced periodically through 2010 and increased to 31% for 2011 and thereafter) and certain information reporting will not apply to such payments of interest with respect to which either the requisite certification, as described above, has been received or an exemption otherwise has been established, provided that neither we nor our paying agent have actual knowledge that the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied. The payment of the proceeds from the disposition of a registered note to or through the U.S. office of any broker, U.S. or foreign, will be subject to information reporting and possible backup withholding unless the owner certifies as to its non-U.S. status under penalties of perjury or otherwise establishes an exemption, provided that the broker does not have actual knowledge or reason to know that the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied. The payment of the proceeds from the disposition of a registered note to or through a non-U.S. office of a non-U.S. broker will not be subject to information reporting or backup withholding unless the non-U.S. broker has certain types of relationships with the United States (a U.S. related person). In the case of the payment of the proceeds from the disposition of a registered note to or through a non-U.S. office of a broker that is either a U.S. person or a U.S. related person, the Treasury regulations require information reporting (but not backup withholding) on the payment unless the broker has documentary evidence in its files that the owner is a Non-U.S. Holder and the broker does not have actual knowledge or reason to know to the contrary. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the Non-U.S. Holder's U.S. federal income tax liability, provided that the required information is provided to the IRS. THE PRECEDING DISCUSSION OF MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF REGISTERED NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW. 138 PLAN OF DISTRIBUTION Each broker-dealer that receives registered securities in the exchange offers for its own account must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such securities. We reserve the right in our sole discretion to purchase or make offers for, or to offer registered securities for, any old securities that remain outstanding subsequent to the expiration of the exchange offers pursuant to this prospectus or otherwise and, to the extent permitted by applicable law, purchase old securities in the open market, in privately negotiated transactions or otherwise. This prospectus, as it may be amended or supplemented from time to time, may be used by all persons subject to the prospectus delivery requirements of the Securities Act, including broker-dealers in connection with resales of registered securities received in the exchange offers, where such securities were acquired as a result of market-making activities or other trading activities and may be used by us to purchase any securities outstanding after expiration of the exchange offers. We have agreed that, for a period of 180 days after the expiration of the exchange offers, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. We will not receive any proceeds from any sale of registered securities by broker-dealers. Securities received by broker-dealers in the exchange offers for their own account may be sold from time to time in one or more transactions in the over-the counter market, in negotiated transactions, through the writing of options on the registered securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such registered securities. Any broker-dealer that resells registered securities that were received by it in the exchange offers for its own account and any broker or dealer that participates in a distribution of such securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of such securities 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 for your securities states that, by acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act, 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 of the exchange offers, 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 for your securities. We have agreed to pay all expenses incident to the exchange offers, other than commissions or concessions of any brokers or dealers, and will indemnify holders of the securities, including any broker-dealers, against certain liabilities under the Securities Act. LEGAL MATTERS Certain legal matters with respect to the exchange offers will be passed upon for us by Weil, Gotshal & Manges LLP, New York, New York. INDEPENDENT ACCOUNTANTS The consolidated financial statements of Von Hoffmann Holdings Inc. at December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and audting. 139 WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the registered securities. This prospectus, which is a part of the registration statement, omits certain information included in the registration statement and the exhibits thereto. For further information with respect to us and the securities, we refer you to the registration statement and its exhibits. The descriptions of each contract and document contained in this prospectus are summaries and qualified in their entirety by reference to the copy of each such contract or document filed as an exhibit to the registration statement. You may read and copy the registration statement, including exhibits thereto, at the Commission's Public Reading Room located at 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information on the operation of the Public Reading Room by calling the Commission at 1-800-SEC-0300. The Commission also maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants such as us who file electronically with the Commission. Upon completion of the exchange offers, we will be subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, will file reports, proxy and information statements with the Commission. You may inspect and copy these reports, proxy and information statements and other information at the addresses set forth above. You may request copies of these documents by contacting us at: Von Hoffmann Corporation, 1000 Camera Avenue, St. Louis, Missouri 63126, Attn: Chief Financial Officer. 140 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- AUDITED CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors............................ F-2 Consolidated Balance Sheets as of December 31, 2000 and F-3 2001.................................................... Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001................................................ F-5 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1999, 2000 and 2001........................ F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001................................................ F-7 Notes to Consolidated Financial Statements................ F-8 INTERIM CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets as of December 31, 2001 and F-21 March 31, 2002 (unaudited).............................. Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2002 and 2001.............. F-23 Statements of Cash Flows (unaudited) for the three months F-24 ended March 31, 2002 and 2001........................... Notes to Unaudited Financial Statements................... F-25
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors Von Hoffmann Holdings Inc. We have audited the accompanying consolidated balance sheets of Von Hoffmann Holdings Inc. and Subsidiaries at December 31, 2001 and 2000, and the related consolidated statements of operations, changes in stockholders' 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Von Hoffmann Holdings 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. /s/ Ernst & Young LLP St. Louis, Missouri June 20, 2002 F-2 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------------- 2000 2001 ------------- ------------- ASSETS Current assets: Cash and cash equivalents................................. $ 5,685,655 $ 18,319,923 Trade accounts receivable, less allowance for doubtful accounts of $532,128 in 2000 and $563,957 in 2001....... 57,899,234 46,750,791 Inventories............................................... 36,117,119 23,261,846 Income taxes refundable................................... 2,205,755 2,456,573 Prepaid expenses.......................................... 1,044,266 595,951 ------------- ------------- Total current assets........................................ 102,952,029 91,385,084 Deferred debt issuance cost, net of accumulated amortization of $5,454,267 in 2000 and $7,441,351 in 2001.............. 7,440,626 5,467,105 Property, plant, and equipment: Buildings and improvements................................ 43,958,818 46,467,711 Machinery and equipment................................... 196,759,662 221,004,588 Transportation equipment.................................. 2,832,974 2,815,781 Furniture and fixtures.................................... 8,627,176 9,853,461 ------------- ------------- 252,178,630 280,141,541 Allowance for depreciation and amortization............... (101,434,846) (138,471,747) ------------- ------------- 150,743,784 141,669,794 Installation in process................................... 7,678,315 1,912,618 Land...................................................... 4,894,397 4,894,397 ------------- ------------- 163,316,496 148,476,809 Goodwill, net of accumulated amortization of $29,734,050 in 2000 and $38,805,103 in 2001.............................. 192,272,037 183,200,984 Covenant not to compete, net of accumulated amortization of $563,637 in 2000 and $781,819 in 2001..................... 436,363 218,181 ------------- ------------- $ 466,417,551 $ 428,748,163 ============= =============
F-3 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, ----------------------------- 2000 2001 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable and estimated expenses............. $ 17,978,439 $ 14,099,591 Salaries and wages........................................ 8,528,602 9,257,062 Taxes, other than income taxes............................ 838,575 681,215 Current portion of long-term debt......................... 7,675,000 29,235,592 Deferred income taxes..................................... 665,752 1,161,582 ------------- ------------- Total current liabilities................................... 35,686,368 54,435,042 Long-term liabilities and reserves: Reserve for product warranty.............................. 350,000 350,000 Deferred income taxes..................................... 16,853,228 9,656,093 Senior secured credit agreement--revolving loan........... 33,000,000 23,000,000 Senior secured credit agreement--term loans............... 199,100,000 189,319,331 Senior secured credit agreement--acquisition loan......... 25,000,000 -- Senior subordinated notes................................. 100,000,000 100,000,000 Subordinated exchange debentures.......................... 37,033,331 43,016,132 ------------- ------------- 411,336,559 365,341,556 Stockholders' equity: Common stock; $0.01 par value per share; 100,000,000 shares authorized....................................... 515,944 515,944 Additional paid-in capital................................ 59,980,698 59,980,698 Accumulated deficit....................................... (39,699,932) (49,943,911) Treasury stock; at cost, 60,000 shares.................... -- (90,000) Notes receivable from the sale of stock and accrued interest................................................ (1,402,086) (1,491,166) ------------- ------------- Total stockholders' equity.................................. 19,394,624 8,971,565 ------------- ------------- $ 466,417,551 $ 428,748,163 ============= =============
See accompanying notes. F-4 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ------------------------------------------ 1999 2000 2001 ------------ ------------ ------------ Net sales.......................................... $386,107,763 $443,422,931 $407,096,402 Cost of products and services...................... 322,311,099 374,165,599 346,917,560 ------------ ------------ ------------ Gross profit....................................... 63,796,664 69,257,332 60,178,842 Operating expenses: Selling and administrative expenses.............. 31,216,360 33,597,323 31,263,254 Noncompete and special consulting expenses....... 2,926,030 2,149,239 577,959 Restructuring charge............................. -- -- 1,475,579 ------------ ------------ ------------ 34,142,390 35,746,562 33,316,792 ------------ ------------ ------------ Income from operations............................. 29,654,274 33,510,770 26,862,050 Interest income.................................... 310,605 471,070 264,849 Loss on disposal of depreciable assets............. (399,542) (642,880) (512,467) Interest expense--subsidiary....................... (32,111,156) (36,855,491) (32,143,823) Interest expense--subordinate exchange debentures....................................... (4,693,823) (5,295,989) (5,982,802) ------------ ------------ ------------ (36,893,916) (42,323,291) (38,374,243) ------------ ------------ ------------ Loss before income taxes........................... (7,239,642) (8,812,520) (11,512,193) Income tax provision (benefit): Current.......................................... 7,056,398 6,550,710 5,433,088 Deferred......................................... (6,200,964) (7,252,096) (6,701,302) ------------ ------------ ------------ 855,434 (701,386) (1,268,214) ------------ ------------ ------------ Net loss........................................... $ (8,095,076) $ (8,111,134) $(10,243,979) ============ ============ ============ Basic and diluted loss per common share............ $ (0.16) $ (0.16) $ (0.20) ============ ============ ============
See accompanying notes. F-5 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NUMBER OF SHARES AMOUNTS --------------------- ------------------------------------------------------------------------------- NOTES RECEIVABLE FROM THE SALE ADDITIONAL OF STOCK AND COMMON TREASURY COMMON PAID-IN ACCUMULATED TREASURY ACCRUED STOCK STOCK STOCK CAPITAL DEFICIT STOCK INTEREST TOTAL ---------- -------- -------- ----------- ------------ -------- ------------- ------------ Balance at December 31, 1998.................... 51,594,444 -- $515,944 $59,980,698 $(23,493,722) $ -- $(1,166,777) $ 35,836,142 Net loss.................. -- -- -- -- (8,095,076) -- -- (8,095,076) Accrued interest.......... -- -- -- -- -- -- (112,254) (112,254) ---------- ------ -------- ----------- ------------ -------- ----------- ------------ Balance at December 31, 1999.................... 51,594,444 -- 515,944 59,980,698 (31,588,798) -- (1,279,031) 27,628,813 Net loss.................. -- -- -- -- (8,111,134) -- -- (8,111,134) Accrued interest.......... -- -- -- -- -- -- (123,055) (123,055) ---------- ------ -------- ----------- ------------ -------- ----------- ------------ Balance at December 31, 2000.................... 51,594,444 -- 515,944 59,980,698 (39,699,932) -- (1,402,086) 19,394,624 Net loss.................. -- -- -- -- (10,243,979) -- -- (10,243,979) Accrued interest.......... -- -- -- -- -- -- (133,517) (133,517) Purchase of treasury stock................... -- 60,000 -- -- -- (90,000) 44,437 (45,563) ---------- ------ -------- ----------- ------------ -------- ----------- ------------ Balance at December 31, 2001.................... 51,594,444 60,000 $515,944 $59,980,698 $(49,943,911) $(90,000) $(1,491,166) $ 8,971,565 ========== ====== ======== =========== ============ ======== =========== ============
See accompanying notes. F-6 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------------------ 1999 2000 2001 ------------ ------------ ------------ OPERATING ACTIVITIES Net loss............................................ $ (8,095,076) $ (8,111,134) $(10,243,979) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation.................................... 31,721,869 34,339,578 38,030,255 Amortization of intangibles..................... 8,605,242 9,118,237 9,289,234 Accretion of discount on subordinated exchange debentures.................................... 374,583 374,583 374,583 Amortization of debt issuance costs............... 1,573,542 1,783,674 1,987,084 Loss on sale of equipment......................... 399,542 642,880 512,467 Provision for deferred income taxes............... (6,200,964) (7,252,096) (6,701,302) Accrued interest on subordinated exchange debentures...................................... 4,319,240 4,921,406 5,608,218 Accrued interest on notes from the sale of stock........................................... (112,254) (123,055) (133,517) Changes in operating assets and liabilities: Trade accounts receivable....................... (14,566,948) 6,500,147 11,148,443 Inventories..................................... 1,792,157 (3,475,863) 12,855,273 Income taxes refundable......................... 2,223,074 (2,341,278) (250,818) Prepaid expenses................................ 7,272 858,358 448,315 Trade accounts payable and estimated expenses... (1,481,811) 1,579,155 (3,878,848) Salaries and wages.............................. 109,445 1,185,337 728,460 Taxes, other than income taxes.................. (40,761) (58,467) (157,360) ------------ ------------ ------------ Net cash provided by operating activities........... 20,628,152 39,941,462 59,616,508 INVESTING ACTIVITIES Purchases of property, plant, and equipment......... (22,638,826) (28,131,550) (23,875,500) Proceeds from sale of equipment..................... 2,529,810 930,851 172,463 Purchases of subsidiaries, net of acquired cash: Precision Offset Printing Company, Inc............ -- (25,326,992) -- ------------ ------------ ------------ Net cash used in investing activities............... (20,109,016) (52,527,691) (23,703,037) FINANCING ACTIVITIES Payments of debt issuance costs..................... -- (1,256,705) (13,563) Net (payments) borrowings--revolving loan........... 6,000,000 7,000,000 (10,000,000) Net (payments) borrowings--acquisition loan......... -- 16,500,000 (4,000,000) Payments on senior secured debt--term loans......... (5,175,000) (6,425,000) (9,220,077) Receipt on notes receivable from sale of stock...... -- -- 44,437 Purchase of treasury stock.......................... -- -- (90,000) ------------ ------------ ------------ Net cash (used in) provided by financing activities........................................ 825,000 15,818,295 (23,279,203) ------------ ------------ ------------ Net increase in cash and cash equivalents........... 1,344,136 3,232,066 12,634,268 Cash and cash equivalents at beginning of year...... 1,109,453 2,453,589 5,685,655 ------------ ------------ ------------ Cash and cash equivalents at end of year............ $ 2,453,589 $ 5,685,655 $ 18,319,923 ============ ============ ============
See accompanying notes. F-7 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Von Hoffmann Holdings Inc. (formerly known as Von Hoffmann Corporation) (the Company) and its wholly owned subsidiary, Von Hoffmann Corporation (formerly known as Von Hoffmann Press, Inc.) (the Subsidiary), and its wholly owned subsidiaries: Mid-Missouri Graphics, Inc., Von Hoffmann Graphics, Inc., H&S Graphics, Inc., Preface, Inc., One Thousand Realty and Investment Company, and Precision Offset Printing Company, Inc. Effective January 1, 2000, the Subsidiary's former subsidiaries of Custom Printing Company, Inc. and Bawden Printing, Inc. were merged together to create Von Hoffmann Graphics, Inc. Effective July 1, 2001, Mid-Missouri Graphics, Inc. was merged into the Subsidiary. Intercompany accounts and transactions have been eliminated. Refer to Note 11 for further discussion. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results will differ from these estimates. BUSINESS SEGMENT AND CONCENTRATION OF CREDIT RISK Substantially all of the Company's assets, sales, and operating earnings are derived from the performance of book manufacturing services to educational publishers, commercial entities, and governmental institutions throughout the United States. At December 31, 2001, approximately 16 percent of the Company's workforce is subject to collective bargaining agreements. Two customers and their affiliates accounted for 13.5 percent and 11.8 percent of 1999 net sales, respectively, 16.7 percent and 12.1 percent of 2000 net sales, respectively, and 18.0 percent and 14.0 percent of 2001 net sales, respectively. Additionally, these two customers and their affiliates accounted for 15.2 percent and 12.9 percent of accounts receivable, respectively, at December 31, 2001. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. REVENUE RECOGNITION In accordance with trade practice, revenues are recognized when the project is complete as determined by the contractual arrangement. CASH AND CASH EQUIVALENTS The Company considers cash and cash equivalents to include demand deposits and repurchase agreements with maturities of three months or less when purchased. Cash and cash equivalents are carried at cost which approximates market value. F-8 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED) INVENTORIES The Company values substantially all of its inventory at the lower of cost, as determined using the last-in, first-out (LIFO) method, or market. The remainder of inventory is valued at the lower of cost, as determined using the first-in, first-out (FIFO) method, or market. Effective January 1, 2000, the Company made changes in its LIFO calculations consisting of consolidation of LIFO pools, applying LIFO to additional portions of inventory, and changing certain computational techniques. The impact of these changes in methods was not material, individually or in the aggregate, to the operating results in 2000. Inventories are comprised of the following amounts at December 31:
2000 2001 ----------- ----------- Raw materials...................................... $25,654,240 $18,504,261 Work-in-process.................................... 11,997,025 6,549,530 ----------- ----------- 37,651,265 25,053,791 Less LIFO reserve.................................. 1,534,146 1,791,945 ----------- ----------- $36,117,119 $23,261,846 =========== ===========
PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are stated at cost. The Company capitalizes all repair and maintenance costs which result in significant increases in the useful life of the underlying asset. All other repair and maintenance costs are expensed. Depreciation is computed using straight-line or accelerated methods over the following estimated useful lives:
DESCRIPTION YEARS - ----------------------------------------------------------- --------- Buildings and improvements................................. 11-40 Machinery and equipment.................................... 5-12 Transportation equipment................................... 4-10 Furniture and fixtures..................................... 4-7
GOODWILL The excess of cost over the fair value of net assets acquired (or goodwill) generally is amortized on a straight-line basis over periods ranging between 7 and 25 years. The carrying amount of goodwill is reviewed if facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the estimated undiscounted cash flows of the entity acquired over the remaining amortization period, the carrying amount of the goodwill is reduced by the estimated shortfall of cash flows. In addition, the Company assesses long-lived assets for impairment under Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Under those rules, goodwill associated with assets acquired in a purchase business combination is included in impairment evaluations when events or circumstances exist that indicate the carrying amount of those assets may F-9 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED) not be recoverable. In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill will no longer be amortized, but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on accounting for goodwill and other intangible assets beginning the first quarter of 2002. Application of the non-amortization provisions of the statement is expected to result in a decrease in net loss of approximately $8.9 million per year ($0.17 per diluted share). During 2002, the Company will perform the first of the required impairment tests of goodwill and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the financial and tax basis of assets and liabilities. Deferred income taxes are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. EMPLOYEE STOCK OPTIONS As permitted by SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company follows Accounting Principles Board (APB) Opinion No. 25 and related interpretations in accounting for its stock compensation awards. SHIPPING AND HANDLING COSTS The Company records all revenues related to shipping and handling fees in net sales and the related costs in cost of products and services. RECLASSIFICATIONS Certain reclassifications have been made to prior years' balances to conform with the current year presentation. 2. RECAPITALIZATION RESTATED TO A PURCHASE Effective May 22, 1997, a leveraged recapitalization of the Company took place (Recapitalization) pursuant to which: (1) The Company executed a credit agreement with a syndicate of financial institutions representing the senior secured credit facility (the Credit Agreement) in an aggregate amount of $200 million. Initial proceeds under the senior secured credit facility were $125 million. The terms of the senior secured credit facility is described in Note 5. (2) The Company issued $100 million of senior subordinated notes (Note 5). F-10 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED) (3) In exchange for $67.1 million, DLJ Merchant Banking Partners II acquired approximately 84% of the new common stock of the Company, redeemable preferred stock, and warrants to purchase additional shares of new common stock in the Company. On November 16, 1998, the preferred stock was converted into 13.5 percent subordinated exchange debentures at the then accreted value of $30.4 million. The terms of the 13.5 percent subordinated exchange debentures are described in Note 5. (4) The Company redeemed/exchanged the former common stock of the Company owned by ZS VH L.P. (ZS) for (a) cash of $288.8 million and (b) 10% of the new common stock of the Company. (5) The Company exchanged the former common stock of the Company owned by Robert A. Uhlenhop (Uhlenhop), the Company's former president and chief executive officer, for approximately 2.5% of the new common stock of the Company. In exchange for $0.3 million in cash and $0.5 million of notes receivable, Uhlenhop acquired an additional 1.5% of the new common stock in the Company. (6) In exchange for $0.4 million in cash and $0.4 million of notes receivable, certain other management personnel acquired the remaining 2.0% of the new common stock in the Company. (7) Costs incurred by the Company related to the recapitalization were approximately $5.9 million and were expensed in the predecessor financial statements. Through June 19, 2002, the Company accounted for the May 22, 1997 Recapitalization transaction using the historical basis of the Company's existing assets and liabilities (i.e., "recapitalization accounting") because there was substantive continuing voting ownership by ZS. Because of the events described below and the rules in SEC Staff Accounting Bulletin 54 ("SAB 54"), the Company was required to retroactively pushdown the new owners' basis to the Company's separate financial statements--as if it were a new entity as of May 22, 1997. During 2002, the Company had the following equity transactions: - On March 26, 2002, the Company issued 20 million shares of its common stock to its majority shareholder for $20 million in cash. - On June 20, 2002, the Company purchased all of the 5 million common shares owned by ZS for $5.0 million in cash. - On June 20, 2002, the Company purchased all of the 2 million common shares owned by Uhlenhop for $2.0 million, consisting of approximately $1.2 million in cash and settlement of a note receivable of approximately $0.8 million. As a result of these transactions, the majority owner of the Company and affiliates owned approximately 96% of the Company's common stock. In accordance with SAB 54, recapitalization accounting could no longer be used and the new owners' "purchase accounting" basis had to be pushed-down to the Company's financial statements as if it had occurred May 22, 1997. The accompanying financial statements reflect this retroactive application and, accordingly, the 2001 and F-11 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED) prior balances have been restated from their recapitalization accounting presentation in past financial statements issued by the Company. Pushing-down the purchase accounting for the May 22, 1997 partial purchase by the new owners' resulted in the following adjustments as of December 31, 2000 and 2001 and for the years ended December 31, 1999, 2000 and 2001:
DECEMBER 31, 2000 DECEMBER 31, 2001 ---------------------------- ---------------------------- PREVIOUSLY RESTATED PREVIOUSLY RESTATED REPORTED BALANCE REPORTED BALANCE ------------- ------------ ------------- ------------ BALANCE SHEETS: Inventories.......................... $ 28,648,925 $ 36,117,119 $ 15,789,157 $ 23,261,846 Property, plant and equipment, net... 139,072,232 163,316,496 137,709,574 148,476,809 Goodwill, net........................ 41,288,680 192,272,037 39,267,433 183,200,984 Net deferred income tax liability.... 5,883,016 17,518,980 4,116,548 10,817,675 Total stockholders' equity (deficit).......................... (151,665,227) 19,394,624 (146,550,783) 8,971,565
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------------------- 1999 2000 2001 --------------------------- --------------------------- --------------------------- PREVIOUSLY RESTATED PREVIOUSLY RESTATED PREVIOUSLY RESTATED REPORTED BALANCE REPORTED BALANCE REPORTED BALANCE ------------ ------------ ------------ ------------ ------------ ------------ STATEMENTS OF OPERATIONS: Cost of products and services........... $311,482,777 $322,311,099 $361,911,162 $374,165,599 $334,372,403 $346,917,560 Selling and administrative expenses........... 23,498,614 31,216,360 25,776,350 33,597,323 23,404,166 31,263,254 Loss on disposal of depreciable assets............. (48,520) (399,542) (704,875) (642,880) (394,375) (512,467) Income tax provision (benefit).......... 5,238,929 855,434 4,095,143 (701,386) 3,716,620 (1,268,214) Net income (loss).... 6,418,519 (8,095,076) 7,105,751 (8,111,134) 5,293,524 (10,243,979) Earnings (loss) per share: Basic.............. $ 0.12 $ (0.16) $ 0.14 $ (0.16) $ 0.10 $ (0.20) Diluted............ $ 0.11 $ (0.16) $ 0.12 $ (0.16) $ 0.09 $ (0.20)
The March 26, 2002 acquisition by the majority owner of the newly issued shares and the June 20, 2002 acquisitions by the Company of all common shares held by ZS and Uhlenhop resulted in additional purchase accounting basis being pushed-down to the Company. Such pushdown resulted in additional goodwill of approximately $6.0 million being recorded by the Company in 2002. F-12 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 3. BUSINESS COMBINATIONS PRECISION OFFSET PRINTING COMPANY, INC. On March 30, 2000, the Company completed the acquisition of all of the outstanding shares of Precision Offset Printing Company, Inc. and Precision Ollan Seal, Inc. (collectively, Precision). The acquisition price, net of cash received and including capitalized transaction costs, was approximately $25.3 million and was principally financed with a $25 million increase in the Senior Secured Credit Agreement (the Credit Agreement). The acquisition was accounted for as a purchase, and the consolidated financial statements include the results of operations of Precision from the acquisition date. The excess purchase price over estimated fair value of net assets acquired was approximately $17.1 million and is being amortized using the straight-line method over 25 years. Precision operates plants in Leesport, Pennsylvania, and Dauberville, Pennsylvania. Precision manufactures overhead transparencies and plastic inserts for use primarily in the education market. The 2000 and 1999 pro forma results of operations as if the Precision acquisition had occurred at the beginning of each respective period would not have been materially different from the reported results. 4. RESTRUCTURING CHARGE During 2001, the Company closed the sheet-fed printing, stripping, and platemaking operations of its St. Louis, Missouri, manufacturing location. The majority of these operations were transferred to the Owensville, Missouri, manufacturing location of Von Hoffmann Graphics, Inc. Additionally, the Company reduced the workforce within the St. Louis, Missouri, manufacturing location of the Subsidiary. Lastly, the Company closed the Owensville, Missouri, manufacturing location of the Subsidiary. These operations and certain related assets were consolidated into the Jefferson City, Missouri, manufacturing locations of the Subsidiary. As a result of these restructurings, the Company recorded total restructuring expenses of approximately $1,476,000 consisting mainly of employee severance and equipment relocation costs. At December 31, 2001, the Company had remaining accrued reserves of approximately $106,000, which it anticipates utilizing in the first quarter of 2002. F-13 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 5. LONG-TERM DEBT Long-term debt consisted of the following at December 31:
2000 2001 ------------ ------------ Von Hoffmann Corporation: Senior secured credit agreement--revolving loan......................................... $ 33,000,000 $ 23,000,000 Senior secured credit agreement--term loans.... 206,775,000 197,554,923 Senior subordinated notes...................... 100,000,000 100,000,000 Senior secured credit agreement--acquisition loan......................................... 25,000,000 21,000,000 ------------ ------------ 364,775,000 341,554,923 Von Hoffmann Holdings Inc.: Subordinated exchange debentures............... 37,033,331 43,016,132 ------------ ------------ 37,033,331 43,016,132 ------------ ------------ 401,808,331 384,571,055 Less current portion............................. 7,675,000 29,235,592 ------------ ------------ $394,133,331 $355,335,463 ============ ============
SENIOR SECURED CREDIT AGREEMENT On July 15, 1998, the Subsidiary amended and restated its existing Credit Agreement dated May 22, 1997 to increase the available credit from $200 million to $305 million. On March 31, 2000 and May 2, 2000, the Subsidiary amended and restated the Credit Agreement to increase the available credit an additional $10 million and $15 million, respectively. At December 31, 2001, the available credit under the Credit Agreement is $330 million. The Credit Agreement is comprised of three term loan tranches with maturities of six, seven, and eight years. Amortization of these term loans commenced on September 30, 1997. The aggregate annual principal amounts, adjusted for prepayments, to be amortized on the Tranche A term loan of $25 million range from $1.25 million to $6.36 million, the Tranche B term loan of $50 million will be amortized in aggregate annual principal amounts of $0.5 million during each of the first six years and $44 million in the seventh year, and the Tranche C term loan of $155 million, as amended, will be amortized in aggregate annual principal amounts ranging from $0.5 million to $1.55 million during each of the first seven years and $141.6 million during the eighth year. In addition, the Credit Agreement includes a revolving loan and an acquisition loan commitment of $75 million and $25 million, respectively. Amounts outstanding at December 31, 2000 under the revolving loan and acquisition loan were $33 million and $25 million, respectively, and outstanding borrowings at December 31, 2001 were $23 million and $21 million, respectively. All remaining outstanding borrowings under the acquisition loan and the revolving loan are due on May 22, 2002 and May 22, 2003, respectively. F-14 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 5. LONG-TERM DEBT (CONTINUED) Borrowings under the revolving loan commitment are subject to a borrowing-base calculation based on the Subsidiary's accounts receivable and inventory levels. At December 31, 2001, $29 million was available for additional borrowings under the revolving loan commitment, net of $1.35 million in an outstanding letter of credit. Borrowings under the Credit Agreement bear interest at variable rates tied to, at the Subsidiary's option, LIBOR or base rates of interest (weighted average interest rate at December 31, 2001 is 5.03 percent), and such interest is payable quarterly. Additionally, performance-based reductions of interest are available on the three term loan tranches, the acquisition loan, and the revolving loan subject to measures of leverage. The indebtedness outstanding on the Credit Agreement is guaranteed by the Company and the Subsidiary's subsidiaries and is secured by the capital stock of the Subsidiary. Since the Company has no independent operations and no subsidiaries other than the Subsidiary, these financial statements do not include condensed consolidating financial information. Additionally, the indebtedness is secured by substantially all existing and after-acquired personal property and assets of the Subsidiary, including the capital stock of its subsidiaries. The Credit Agreement contains financial and other restrictive covenants, including fixed charge and interest coverage ratios, a minimum level of earnings before interest, taxes, depreciation, and amortization (EBITDA), limits on the amount of dividends that can be paid, maximum capital expenditure levels, and maximum leverage ratios. In addition, the Subsidiary is subject to mandatory prepayments of the term portion of the Credit Agreement to the extent that EBITDA exceeds certain threshold amounts measured on an annual basis. SENIOR SUBORDINATED NOTES On May 22, 1997, the Subsidiary issued $100 million of 10.375 percent senior subordinated notes due at maturity in 2007. The notes pay interest semiannually in arrears on May 15 and November 15 and are a general unsecured obligation of the Subsidiary, guaranteed by the Company and the subsidiaries of the Subsidiary, and subordinated to all current and future senior debt, including borrowings under the Credit Agreement. Under the senior subordinated notes indenture, the Subsidiary is subject to certain covenants that, among other things, limit the ability of the Subsidiary to pay dividends, incur additional indebtedness, and sell assets. The subordinated notes indenture required the Company to file a registration statement with the Securities and Exchange Commission within 365 days of the issuance date or pay liquidated damages. The Company did not file a registration statement and as a result has been paying liquidated damages at an annual rate of 0.5 percent since May 22, 1998. The effective interest rate is 10.875 percent including this liquidated damages component. F-15 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 5. LONG-TERM DEBT (CONTINUED) SUBORDINATED EXCHANGE DEBENTURES/REDEEMABLE PREFERRED STOCK/WARRANTS On May 22, 1997, the Company issued redeemable preferred stock due in 2009 and detachable warrants for $25 million. The total proceeds received were allocated between the preferred stock and the warrants based on an estimate of each security's fair value at the date of issuance. The preferred stock accreted dividends at an annual rate of 13.5 percent until it was exchanged on November 16, 1998 for subordinated exchange debentures due in 2009. The subordinated exchange debentures accrue interest at a rate of 13.5 percent. Interest is currently not paid in cash but accretes to and increases the principal amount of each debenture. Beginning on May 22, 2002, interest will be required to be paid in cash, subject to restrictions defined in the Credit Agreement and conditions provided in the subordinated exchange debentures indenture. The debentures cannot be redeemed by the Company until May 15, 2002 unless they are redeemed in conjunction with an initial public offering of the Company's stock or redemption is requested by the debenture holders upon the occurrence of a change in control of the ownership of the Company. A total of 5,000,000 detachable warrants was issued in conjunction with the issuance of the preferred shares. The warrants entitle the holder to purchase common shares of the Company at a price of $0.01 per share. The warrants expire after ten years and can be exercised at any time. The fair value assigned to warrants of $4,495,000 is reflected in the stockholders' equity section of the consolidated balance sheets. Principal maturities of long-term debt for the next four years are: 2002........................................................ $29,236,000 2003........................................................ 49,815,000 2004........................................................ 93,295,000 2005........................................................ 69,209,000
At December 31, 2001, the fair value of the senior subordinated notes and senior secured credit agreement--term loans was approximately $94.0 million and $192.0 million, respectively, based on quoted market prices. The redemption value of the subordinated exchange debentures at December 31, 2001 was $45.8 million. The fair value of the Company's remaining debt approximates its carrying value, based upon the Company's current incremental borrowing rates for similar types of borrowing arrangements. Total interest paid on all debt was $30,522,175 in 1999, $35,089,553 in 2000, and $30,346,820 in 2001. F-16 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 6. INCOME TAXES The reconciliation of income tax expense at the U.S. federal statutory tax rates to the effective income tax rates is as follows:
YEAR ENDED DECEMBER 31, ------------------------------------ 1999 2000 2001 -------- -------- -------- Expected statutory rate........................... 35.00 % 35.00 % 35.00 % Nondeductible goodwill............................ (41.04)% (35.87)% (28.00)% Accretion on subordinated exchange debentures..... (1.91)% (1.57)% (1.20)% State income tax and other........................ (3.87)% 10.40 % 5.22 % ------ ------ ------ Effective tax rate................................ (11.82)% 7.96 % 11.02 % ====== ====== ======
The components of the income tax provision charged to operations follow:
1999 2000 2001 ----------- ----------- ----------- Current: U.S. federal......................... $ 6,375,465 $ 6,050,239 $ 4,878,105 State and other...................... 680,933 500,471 554,983 ----------- ----------- ----------- $ 7,056,398 $ 6,550,710 $ 5,433,088 =========== =========== =========== Deferred: U.S. federal......................... $(5,602,579) $(6,698,040) $(6,016,771) State and other...................... (598,385) (554,056) (684,531) ----------- ----------- ----------- $(6,200,964) $(7,252,096) $(6,701,302) =========== =========== ===========
Significant components of the Company's deferred tax assets and liabilities are as follows:
DECEMBER 31, --------------------------- 2000 2001 ------------ ------------ Deferred tax assets: Goodwill/impairment charge................................ $ 5,902,349 $ 5,491,560 Interest on subordinated exchange debentures.............. 3,609,048 5,684,407 Vacation accrual.......................................... 1,285,732 1,149,718 Other..................................................... 811,748 805,674 ------------ ------------ Total deferred tax assets................................... 11,608,877 13,131,359 Deferred tax liabilities: Property, plant, and equipment............................ 26,325,600 20,774,125 Inventory................................................. 2,763,232 3,116,974 Other..................................................... 39,026 57,935 ------------ ------------ Total deferred tax liabilities............................ 29,127,857 23,949,034 ------------ ------------ Net deferred tax liabilities................................ $(17,518,980) $(10,817,675) ============ ============
F-17 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 6. INCOME TAXES (CONTINUED) Income taxes of, $7,991,832, $8,489,766, and $9,433,947 were paid in 1999, 2000, and 2001, respectively. 7. PENSION AND PROFIT SHARING PLANS Effective January 1, 1999, the Company merged six defined contribution pension and profit sharing plans which it had sponsored into one defined contribution pension and profit sharing plan. The Company contributed a total of, $4,175,213 in 1999, $4,385,292 in 2000, and $4,343,222 in 2001 to all defined contribution pension and profit sharing plans. 8. EMPLOYEE STOCK OPTION PLAN During 1997, the Company authorized a stock option plan to grant options to management personnel for up to 6,000,000 shares of the Company's common stock. Certain options granted under the plan vest ratably over a five-year period, while other options have an accelerated vesting feature in which vesting occurs ratably over a five-year period only if certain performance targets are met. If performance targets are not met, those options automatically vest nine years and 11 months from the date of grant. Vested options may be exercised up to ten years from the date of grant. Information related to the Company's stock option plan is presented below.
1999 2000 2001 -------------------- -------------------- -------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE --------- -------- --------- -------- --------- -------- Outstanding at beginning of year......... 5,525,000 $ 1.17 5,600,000 $1.18 5,525,000 $1.19 Forfeited................................ -- -- 375,000 2.12 400,000 1.27 Granted.................................. 75,000 2.25 300,000 2.25 150,000 2.25 --------- ------- --------- ----- --------- ----- Outstanding at end of year............... 5,600,000 $ 1.18 5,525,000 $1.19 5,275,000 $1.20 ========= ======= ========= ===== ========= ===== Exercisable at end of year............... 2,218,030 $ 1.11 3,378,815 $1.10 3,887,685 $1.12 ========= ======= ========= ===== ========= ===== Reserved for future option grants........ 400,000 475,000 725,000 ========= ========= =========
Pro forma information regarding net income and earnings per share is required by SFAS No. 123 and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using the minimum value method. Under this method, the expected volatility of the Company's common stock is not estimated, as there is no market for the Company's common stock in which to monitor stock price volatility. The calculation of the fair value of the options granted in 1999, 2000, and 2001 assumes a risk-free interest rate of 5.25, 5.50, and 5.00 percent, respectively, an assumed dividend yield of zero, and an expected life of the options of five years. The weighted average fair value of options granted during 1999, 2000, and 2001 was $0.52, $0.54, and $0.50 per share, respectively. The weighted average remaining contractual life of options is 5.75 years. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' estimated vesting period. F-18 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 8. EMPLOYEE STOCK OPTION PLAN (CONTINUED) Option valuation models require the input of highly subjective assumptions. Because the Company's employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Based on the above assumptions, the Company's pro forma net income and earnings per share incorporating this amortization would not have been materially different from reported amounts during 1999, 2000, and 2001. In 2001, the Company modified certain terms under option agreements with one of its officers. Under APB No. 25, as modified by FASB Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION, the Company would be required to remeasure the intrinsic value of these modified option agreements should it become probable that the related employee will benefit from the modified terms for vested options as of that date. This remeasurement, if required, could result in a significant noncash compensation expense in the future. 9. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted loss per share:
YEAR ENDED DECEMBER 31, ---------------------------------------- 1999 2000 2001 ----------- ----------- ------------ Numerator for basic and diluted earnings per share--loss allocable to common stockholders........ $(8,095,076) $(8,111,134) $(10,243,979) =========== =========== ============ Denominator for basic and diluted loss per share--weighted average shares...................... 51,594,444 51,594,444 51,579,444 =========== =========== ============ Basic and diluted loss per share...................... $ (0.16) $ (0.16) $ (0.20) =========== =========== ============
10. RELATED PARTY TRANSACTIONS The Company paid consulting fees to Credit Suisse First Boston Corporation (Credit Suisse) (or its predecessor), an affiliate of a stockholder in the Company, of approximately $0.25 million in 1999, 2000, and 2001. As part of the financing activity disclosed in Note 11, the Company paid consulting fees associated with formulation of financial strategies to Credit Suisse, of approximately $1,000,000. In addition, the Company paid underwriting fees associated with the 2009 Senior Notes and New Credit Agreement to Credit Suisse of approximately $8,200,000. 11. SUBSEQUENT EVENT On February 25, 2002, the Company merged Von Hoffmann Graphics, Inc. into Von Hoffmann Press, Inc. and renamed the entity Von Hoffmann Corporation. Prior to this merger, the former Von Hoffmann Corporation changed its name to Von Hoffmann Holdings, Inc. In March 26, 2002, the Subsidiary entered into a Senior Secured Credit Agreement (New Credit Agreement), which provides $90.0 million on a revolving basis. The facility is secured by accounts receivable, inventory, and property, plant, and equipment. At the Company's one-time option, the F-19 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2001 11. SUBSEQUENT EVENT (CONTINUED) available borrowing base may be increased to provide for borrowings of up to $100.0 million, subject to finding lenders to provide such increase. The New Credit Agreement expires November 15, 2006. In addition, on March 26, 2002, the Subsidiary completed financing arrangements on $215.0 million Senior Notes, due March 15, 2009 (March 15, 2009 Senior Notes) at an interest rate of 10.25 percent. The proceeds from the March 15, 2009 Senior Notes and the New Credit Agreement were used to pay off all outstanding balances under the Credit Agreement. The extinguishment of the Credit Agreement will result in the Company recording an extraordinary loss, consisting of unamortized deferred debt issuance costs, of approximately $2.0 million, net of taxes, in the first quarter of 2002. On June 20, 2002, the Company and Uhlenhop amended his employment agreement and at which time the Company paid Uhlenhop a one-time cash payment on an after tax basis of $1.0 million, which resulted in the Company recording an expense in June 2002 of approximately $1.8 million. 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
QUARTER ----------------------------------------------------------------------- 2000 FIRST SECOND THIRD FOURTH YEAR - ---- ------------ ------------ ------------ ----------- ------------ Net sales................. $101,785,173 $120,263,666 $125,698,775 $95,675,317 $443,422,931 Gross profit.............. 16,493,232 20,426,184 20,486,933 11,850,983 69,257,332 Net loss.................. (2,439,959) (992,932) (77,089) (4,601,154) (8,111,134) Basic and diluted loss per share................... (0.05) (0.02) -- (0.09) (0.16)
QUARTER ----------------------------------------------------------------------- 2001 FIRST SECOND THIRD FOURTH YEAR - ---- ------------ ------------ ------------ ----------- ------------ Net sales................. $112,852,034 $113,889,206 $107,451,937 $72,903,225 $407,096,402 Gross profit.............. 16,677,865 20,496,269 15,844,935 7,159,773 60,178,842 Net loss.................. (2,757,608) (63,354) (2,099,744) (5,323,273) (10,243,979) Basic and diluted loss per share................... (0.05) -- (0.04) (0.10) (0.20)
F-20 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 MARCH 31, 2002 ------------- -------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 18,319,923 $ 28,801,959 Trade accounts receivable, less allowance for doubtful accounts of $563,957 at December 31, 2001 and $475,084 at March 31, 2002....................................... 46,750,791 47,851,227 Inventories............................................... 23,261,846 32,083,846 Income taxes refundable................................... 2,456,573 2,056,632 Prepaid expenses.......................................... 595,951 688,488 ------------- ------------- Total current assets........................................ 91,385,084 111,482,152 Deferred debt issuance cost, net of accumulated amortization of $7,441,351 at December 31, 2001 and $1,726,611 at March 31, 2002.................................................. 5,467,105 11,269,877 Property, plant, and equipment: Buildings and improvements................................ 46,467,711 46,841,215 Machinery and equipment................................... 221,004,588 221,220,217 Transportation equipment.................................. 2,815,781 3,141,347 Furniture and fixtures.................................... 9,853,461 9,842,840 ------------- ------------- 280,141,541 281,045,619 Allowance for depreciation and amortization............... (138,471,747) (146,869,964) ------------- ------------- 141,669,794 134,175,655 Installation in process................................... 1,912,618 5,623,512 Land...................................................... 4,894,397 4,894,397 ------------- ------------- 148,476,809 144,693,564 Goodwill, net of accumulated amortization of $38,805,103 at December 31, 2001 and March 31, 2002...................... 183,200,984 185,682,750 Covenant not to compete, net of accumulated amortization of $781,819 at December 31, 2001 and $836,364 at March 31, 2002...................................................... 218,181 163,636 ------------- ------------- $ 428,748,163 $ 453,291,979 ============= =============
F-21 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 2001 MARCH 31, 2002 ------------- -------------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable and estimated expenses............. $ 14,099,591 $ 23,789,466 Salaries and wages........................................ 9,257,062 6,989,463 Taxes, other than income taxes............................ 681,215 878,813 Current portion of long-term debt......................... 29,235,592 -- Deferred income taxes..................................... 1,161,582 1,431,884 ------------- ------------- Total current liabilities................................... 54,435,042 33,089,626 Long-term liabilities and reserves: Reserve for product warranty.............................. 350,000 350,000 Deferred income taxes..................................... 9,656,093 7,597,892 Senior secured credit agreement--revolving loan........... 23,000,000 27,000,000 Senior secured credit agreement--term loans............... 189,319,331 -- Senior notes.............................................. -- 215,000,000 Senior subordinated notes................................. 100,000,000 100,000,000 Subordinated exchange debentures.......................... 43,016,132 44,629,127 ------------- ------------- 365,341,556 394,577,019 Stockholders' equity: Common stock; $0.01 par value per share; shares authorized are 100,000,000 at December 31, 2001 and 150,000,000 at March 31, 2002.......................................... 515,944 715,944 Additional paid-in capital................................ 59,980,698 82,262,464 Accumulated deficit....................................... (49,943,911) (55,737,138) Treasury stock; at cost, 60,000 shares.................... (90,000) (90,000) Notes receivable from the sale of stock and accrued interest................................................ (1,491,166) (1,525,936) ------------- ------------- Total stockholders' equity.................................. 8,971,565 25,625,334 ------------- ------------- $ 428,748,163 $ 453,291,979 ============= =============
See notes to consolidated financial statements. F-22 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------------- 2001 2002 ------------- ------------ Net sales................................................... $112,852,034 $82,666,127 Cost of products and services............................... 96,174,169 73,297,540 ------------ ----------- Gross profit................................................ 16,677,865 9,368,587 Operating expenses: Selling and administrative expenses....................... 8,616,302 5,852,006 Noncompete and special consulting expenses................ 121,328 1,241,675 ------------ ----------- 8,737,630 7,093,681 ------------ ----------- Income from operations...................................... 7,940,235 2,274,906 Interest income............................................. 71,701 50,246 Loss on disposal of depreciable assets...................... (64,212) (495,837) Interest expense--subsidiary................................ (9,535,273) (6,394,281) Interest expense--subordinate exchange debentures........... (1,426,927) (1,612,995) ------------ ----------- (10,954,711) (8,452,867) ------------ ----------- Loss before extraordinary item and income taxes............. (3,014,476) (6,177,961) Income tax (benefit) provision: Current................................................... 1,352,986 (565,363) Deferred.................................................. (1,609,854) (1,787,899) ------------ ----------- (256,838) (2,353,262) ------------ ----------- Loss before extraordinary item.............................. (2,757,608) (3,824,699) Extraordinary item--loss on extinguishment of debt, net of tax benefit of $1,156,120................................. - (1,968,528) ------------ ----------- Net loss.................................................... $ (2,757,608) $(5,793,227) ============ =========== Basic and diluted loss per common share: Loss before extraordinary item............................ $ (0.05) $ (0.07) Extraordinary item........................................ - $ (0.04) ------------ ----------- Net loss.................................................. $ (0.05) $ (0.11) ============ =========== Average number of shares outstanding--basic and diluted..... 51,594,444 52,633,245 ============ ===========
See notes to consolidated financial statements. F-23 \ VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ----------------------------- 2001 2002 ------------ -------------- OPERATING ACTIVITIES Net loss.................................................... $(2,757,608) $ (5,793,227) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation............................................ 9,135,700 9,592,329 Amortization of intangibles............................. 2,322,308 54,545 Amortization of debt issuance costs..................... 496,771 3,621,419 Loss on sale of equipment............................... 64,212 495,837 Provision for deferred income taxes..................... (1,609,854) (1,787,899) Accrued interest on subordinated exchange debentures.... 1,426,927 1,612,995 Accrued interest on notes from the sale of stock........ (32,693) (34,770) Changes in operating assets and liabilities: Trade accounts receivable............................. (6,373,763) (1,100,436) Inventories........................................... (7,274,295) (8,822,000) Income taxes refundable............................... 4,551,092 399,941 Prepaid expenses...................................... (106,350) (92,537) Trade accounts payable and estimated expenses......... 7,885,589 9,689,875 Salaries and wages.................................... 484,362 (2,267,599) Taxes, other than income taxes........................ 49,351 197,598 ----------- ------------- Net cash provided by operating activities................... 8,261,749 5,766,071 INVESTING ACTIVITIES Purchases of property, plant, and equipment................. (12,067,853) (6,395,881) Proceeds from sale of equipment............................. 63,265 90,960 ----------- ------------- Net cash used in investing activities....................... (12,004,588) (6,304,921) FINANCING ACTIVITIES Payments of debt issuance costs............................. (13,563) (9,424,191) Net (payments) borrowings--revolving loan................... 7,000,000 4,000,000 Net (payments) borrowings--acquisition loan................. -- (21,000,000) Payments on senior secured debt--term loans................. (3,353,458) (197,554,923) Proceeds from issuance of senior notes...................... -- 215,000,000 Issuance of common stock.................................... -- 20,000,000 ----------- ------------- Net cash provided by financing activities................... 3,632,979 11,020,886 ----------- ------------- Net increase (decrease) in cash and cash equivalents........ (109,860) 10,482,036 Cash and cash equivalents at beginning of period............ 5,685,655 18,319,923 ----------- ------------- Cash and cash equivalents at end of period.................. $ 5,575,795 $ 28,801,959 =========== =============
See notes to consolidated financial statements. F-24 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements of Von Hoffmann Holdings Inc. (formerly known as Von Hoffmann Corporation) (the Company) have been prepared in accordance with instructions to Form 10-Q and reflect all adjustments which management believes necessary (which include only normal recurring accruals and the effect on LIFO inventory valuations of estimated inflationary cost increases and year-end inventory levels) to present fairly the results of operations. These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company's financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. Diluted earnings per share for the three months ended March 31, 2002 does not include 4,950,000 common stock equivalents because they were anti-dilutive. The Company's business is subject to seasonal influences, therefore, interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Von Hoffmann Corporation (formerly known as Von Hoffmann Press, Inc.) (the Subsidiary), and its wholly owned subsidiaries: Von Hoffmann Graphics, Inc., H&S Graphics, Inc., Preface, Inc., One Thousand Realty and Investment Company, and Precision Offset Printing Company, Inc. Effective February 25, 2002, Von Hoffmann Graphics, Inc. was merged into the Subsidiary. Intercompany accounts and transactions have been eliminated. 2. RECAPITALIZATION RESTATED TO A PURCHASE Effective May 22, 1997, a leveraged recapitalization of the Company took place (Recapitalization) pursuant to which: (1) The Company executed a credit agreement with a syndicate of financial institutions representing the senior secured credit facility (the Credit Agreement) in an aggregate amount of $200 million. Initial proceeds under the senior secured credit facility were $125 million. (2) The Company issued $100 million of senior subordinated notes. (3) In exchange for $67.1 million, DLJ Merchant Banking Partners II acquired approximately 84% of the new common stock of the Company, redeemable preferred stock, and warrants to purchase additional shares of new common stock in the Company. On November 16, 1998, the preferred stock was converted into 13.5 percent subordinated exchange debentures at the then accreted value of $30.4 million. (4) The Company redeemed/exchanged the former common stock of the Company owned by ZS VH L.P. (ZS) for (a) cash of $288.8 million and (b) 10% of the new common stock of the Company. (5) The Company exchanged the former common stock of the Company owned by Robert A. Uhlenhop (Uhlenhop), the Company's former president and chief executive officer, for F-25 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED) approximately 2.5% of the new common stock of the Company. In exchange for $0.3 million in cash and $0.5 million of notes receivable, Uhlenhop acquired an additional 1.5% of the new common stock in the Company. (6) In exchange for $0.4 million in cash and $0.4 million of notes receivable, certain other management personnel acquired the remaining 2.0% of the new common stock in the Company. (7) Costs incurred by the Company related to the recapitalization were approximately $5.9 million and were expensed in the predecessor financial statements. Through June 19, 2002, the Company accounted for the May 22, 1997 Recapitalization transaction using the historical basis of the Company's existing assets and liabilities (i.e., "recapitalization accounting") because there was substantive continuing voting ownership by ZS. Because of the events described below and the rules in SEC Staff Accounting Bulletin 54 ("SAB 54"), the Company was required to retroactively pushdown the new owners' basis to the Company's separate financial statements--as if it were a new entity as of May 22, 1997. During 2002, the Company had the following equity transactions: - On March 26, 2002, the Company issued 20 million shares of its common stock to its majority shareholder for $20 million in cash. - On June 20, 2002, the Company purchased all of the 5 million common shares owned by ZS for $5.0 million in cash. - On June 20, 2002, the Company purchased all of the 2 million common shares owned by Uhlenhop for $2.0 million, consisting of approximately $1.2 million in cash and settlement of a note receivable of approximately $0.8 million. As a result of these transactions, the majority owner of the Company and affiliates owned approximately 96% of the Company's common stock. In accordance with SAB 54, recapitalization accounting could no longer be used and the new owners' "purchase accounting" basis had to be pushed-down to the Company's financial statements as if it had occurred May 22, 1997. The accompanying financial statements reflect this retroactive application and, accordingly, the 2002 and 2001 balances have been restated from their recapitalization accounting presentation in past financial statements issued by the Company. F-26 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED) Pushing-down the purchase accounting for the May 22, 1997 partial purchase by the new owners' and the March 26, 2002 purchase by the majority owner resulted in the following adjustments as of December 31, 2001 and March 31, 2002 and for the three months ended March 31, 2001 and 2002:
DECEMBER 31, 2001 MARCH 31, 2002 ---------------------------- ---------------------------- PREVIOUSLY RESTATED PREVIOUSLY RESTATED REPORTED BALANCE REPORTED BALANCE ------------- ------------ ------------- ------------ BALANCE SHEETS: Inventories..................................... $ 15,789,157 $ 23,261,846 $ 24,611,157 $ 32,083,846 Property, plant and equipment, net.............. 137,709,574 148,476,809 137,355,114 144,693,564 Goodwill, net................................... 39,267,433 183,200,984 39,267,433 185,682,750 Net deferred income tax liablity................ 5,904,945 10,817,675 5,332,388 9,029,776 Total stockholders' equity (deficit)............ (146,550,783) 8,971,565 (130,218,644) 25,625,334
THREE MONTHS ENDED MARCH 31, ----------------------------------------------------- 2001 2002 ------------------------- ------------------------- PREVIOUSLY RESTATED PREVIOUSLY RESTATED REPORTED BALANCE REPORTED BALANCE ----------- ----------- ----------- ----------- STATEMENTS OF OPERATIONS: Cost of products and services................... $92,799,452 $96,174,169 $70,083,439 $73,297,540 Selling and administrative expenses............. 6,639,215 8,616,302 5,665,233 5,852,006 Loss on disposal of depreciable assets.......... (64,212) (64,212) (467,924) (495,837) Income tax provision (benefit).................. 1,002,763 (256,838) (1,084,611) (2,353,262) Net income (loss) before extraordinary item..... 1,149,620 (2,757,608) (1,664,563) (3,824,699) Net income (loss)............................... 1,149,620 (2,757,608) (3,633,091) (5,793,227) Basic and diluted earnings (loss) per share: Earnings (loss) before extraordinary item..... $ 0.02 $ (0.05) $ (0.03) $ (0.07) Extraordinary item............................ - - (0.04) (0.04) Net income (loss)............................. $ 0.02 $ (0.05) $ (0.07) $ (0.11)
The March 26, 2002 acquisition by the majority owner of the newly issued shares and the June 20, 2002 acquisitions by the Company of all common shares held by ZS and Uhlenhop resulted in additional purchase accounting basis being pushed-down to the Company. Such pushdown resulted in an additional goodwill of approximately $6.0 million being recorded by the Company in 2002, of which approximately $2.5 million was recorded in March 2002. 3. INVENTORIES Inventories are priced at cost using the last-in, first-out (LIFO) method that does not exceed market, for the year-end period reported. The Company does not anticipate a material adjustment to the year-end LIFO reserve and thus, no quarterly LIFO adjustment has been made. F-27 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 3. INVENTORIES (CONTINUED) Inventories are comprised of the following amounts:
DECEMBER 31, 2001 MARCH 31, 2002 ----------------- -------------- Raw materials.................................. $18,504,261 $21,439,952 Work in process................................ 6,549,530 12,435,839 ----------- ----------- 25,053,791 33,875,791 Less LIFO reserve.............................. 1,791,945 1,791,945 ----------- ----------- $23,261,846 $32,083,846 =========== ===========
4. RESTRUCTURING CHARGE During the second and third quarters of 2001, the Company closed the sheet-fed printing, stripping, and platemaking operations of its St. Louis, Missouri manufacturing location. The majority of these operations were transferred to the Owensville, Missouri manufacturing location of Von Hoffmann Graphics, Inc. Additionally, the Company reduced the workforce within the St. Louis, Missouri manufacturing location of the Subsidiary. Lastly, the Company closed the Owensville, Missouri manufacturing location of the Subsidiary. These operations and certain related assets were consolidated into the Jefferson City, Missouri manufacturing locations of the Subsidiary. As a result of these restructurings, the Company recorded total restructuring expenses of approximately $1,476,000 consisting mainly of employee severance and equipment relocation costs in 2001. The Company utilized approximately $1,370,000 in 2001 and $106,000 in the first quarter of 2002. The Company has no remaining liability associated with the restructuring. 5. LONG TERM DEBT On March 26, 2002, the Subsidiary entered into a Senior Secured Credit Agreement (New Credit Agreement) that includes a revolving loan commitment of $90 million. The New Credit Agreement is secured by accounts receivable, inventory as well as property, plant and equipment. At the Company's one-time option, the available borrowing base may be increased to provide borrowings of up to $100 million, subject to finding lenders to provide such increase. The New Credit Agreement expires November 15, 2006. In addition, on March 26, 2002, the Subsidiary issued $215 million Senior Notes, due March 15, 2009 (2009 Senior Notes) at an interest rate of 10.25 percent. The proceeds from the New Credit Agreement and the 2009 Senior Notes were used to pay off all outstanding balances under the previous credit agreement. As a result of the extinguishment of the previous credit agreement, the Company recognized an extraordinary loss of approximately $1,968,528, net of tax benefit of $1,156,120. The entire loss represents the write-off of deferred debt issuance costs associated with the previous credit agreement. 6. ACCOUNTING CHANGES Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires business combinations initiated after June 20, 2001, to be accounted for F-28 VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED) 6. ACCOUNTING CHANGES (CONTINUED) using the purchase method. SFAS No. 141 also further clarifies the criteria for recognition of intangible assets separately from goodwill. The adoption of this standard did not have any effect on the Company's accounting for prior business acquisitions. Under SFAS No. 142 goodwill is no longer amortized, but is subject to annual impairment tests. Accordingly, as of January 1, 2002, the Company no longer amortizes goodwill and will perform a transitional impairment test of its existing goodwill by June 30, 2002 and annual impairment tests thereafter. The Company does not expect any impairment of goodwill in connection with the initial transitional impairment test. If goodwill amortization was not recorded in the first quarter of fiscal 2001, first quarter fiscal 2001 adjusted net loss and basic and diluted adjusted loss per share would have been approximately $522,932 and $0.01 per share, respectively. 7. RELATED PARTY TRANSACTION As part of the financing activity in 2002 discussed in Note 5, the Company paid consulting fees associated with formulation of financial strategies, as recorded in non-compete and special consulting expenses for the period ended March 31, 2002, to Credit Suisse First Boston Corporation (Credit Suisse), an affiliate of the majority stockholder of the Company, of approximately $1,000,000. In addition, the Company paid underwriting fees associated with the 2009 Senior Notes and New Credit Agreement, as reflected in deferred debt issuance cost at March 31, 2002, to Credit Suisse of approximately $8,200,000. 8. SUBSEQUENT EVENT On June 20, 2002, the Company and Uhlenhop amended his employment agreement and at which time the Company paid Uhlenhop a one-time cash payment on an after tax basis of $1.0 million, which resulted in the Company recording an expense in June 2002 of approximately $1.8 million. F-29 [LOGO] 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 AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. [ALTERNATE FRONT COVER FOR MARKET-MAKING PROSPECTUS] SUBJECT TO COMPLETION, DATED JUNE 21, 2002 PROSPECTUS VON HOFFMANN CORPORATION $215,000,000 10 1/4% SENIOR NOTES DUE 2009 AND $100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007 AND VON HOFFMANN HOLDINGS INC. $48,056,397 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 ------------------------ The Company: - We believe that we are the leading manufacturer of four-color case-bound and soft-cover educational textbooks in the United States. The 2009 notes and related guarantees: - Maturity: March 15, 2009. - Interest Payment: February 15 and August 15 of each year, beginning August 15, 2002. - Optional Redemption: Von Hoffmann may redeem the 2009 notes at any time prior to March 15, 2005, in whole or in part, upon notice to the holders, at a redemption price equal to the amount as calculated in accordance with the first paragraph under "Description of the Registered Securities--10 1/4% Senior Notes due 2009--Optional Redemption." Von Hoffmann may redeem the 2009 notes at any time on or after March 15, 2005, in whole or in part, in cash at the redemption prices described in this prospectus, plus accrued and unpaid interest to the date of redemption. In addition, on or before March 15, 2005, Von Hoffmann may redeem up to 35% of the aggregate principal amount of 2009 notes issued under the 2009 notes indenture with the proceeds of certain equity offerings. Von Hoffmann may make that redemption only if, after the redemption, at least 65% of the aggregate principal amount of notes issued under the 2009 notes indenture remains outstanding. - Ranking: The registered 2009 notes and the related guarantees will rank: - equal in right of payment to all of Von Hoffmann's and the guarantors' existing and future senior indebtedness; - senior in right of payment to Von Hoffmann's and the guarantors' existing and future subordinated indebtedness; and - effectively junior to Von Hoffmann's and the guarantors' secured indebtedness, including any borrowings under our revolving credit facility. The 2007 notes and related guarantees: - Maturity: May 15, 2007. - Interest Payment: May 15 and November 15 each year. - Optional Redemption: Von Hoffmann may redeem the 2007 notes at any time on or after May 15, 2002, in whole or in part, in cash at the redemption prices described in this prospectus, plus accrued and unpaid interest to the date of redemption. - Ranking: The registered 2007 notes and the related guarantees will rank: - junior in right of payment to all of Von Hoffmann's and the guarantors' existing and future senior indebtedness; and - equal in right of payment to Von Hoffmann's and the guarantors' existing and future senior subordinated indebtedness. The 2009 Holdings debentures: - Maturity: May 15, 2009. - Interest Payment: May 15 and November 15 each year. - Optional Redemption: Holdings may redeem the 2009 Holdings debentures at any time on or after May 15, 2002, in whole or in part, in cash at the redemption prices described in this prospectus, plus accrued and unpaid interest to the date of redemption. - Ranking: The registered 2009 Holdings debentures will rank junior in right of payment to all of Holdings' existing and future senior indebtedness. ------------------------ CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE OF THIS PROSPECTUS. --------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ This prospectus will be used by Credit Suisse First Boston Corporation in connection with offers and sales in market-making transactions at negotiated prices related to prevailing market prices. There is currently no public market for the securities. We do not intend to list the securities on any securities exchange. Credit Suisse First Boston Corporation has advised us that it is currently making a market in the securities; however, it is not obligated to do so and may stop at any time. Credit Suisse First Boston Corporation may act as principal or agent in any such transaction. We will not receive the proceeds of the sale of the securities but will bear the expenses of registration. ------------------------ Credit Suisse First Boston Corporation ------------------------ THE DATE OF THIS PROSPECTUS IS , 2002 2 [ALTERNATE SECTIONS FOR CREDIT SUISSE FIRST BOSTON CORPORATION] THERE IS NO EXISTING TRADING MARKET FOR THE SECURITIES. There is no established market for the registered securities. We cannot assure you with respect to: - the liquidity of any market for the registered securities that may develop; - your ability to sell registered securities; or - the price at which you will be able to sell the registered securities. If a public market were to exist, the registered securities could trade at prices that may be higher or lower than their principal amount or purchase price, depending on many factors, including prevailing interest rates, the market for similar securities, and our financial performance. Although it is not obligated to do so, Credit Suisse First Boston Corporation has advised us that it intends to make a market in the registered securities. Any such market-making activity may be discontinued at any time, for any reason, without notice at the sole discretion of Credit Suisse First Boston Corporation. No assurance can be given as to the liquidity of or the trading market for the registered securities. PLAN OF DISTRIBUTION This prospectus is to be used by Credit Suisse First Boston Corporation in connection with the offers and sales of the new securities in market-making transactions effected from time to time. Credit Suisse First Boston Corporation may act as a principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties when it acts as agent for both. Such sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. DLJ Merchant Banking Partners, an affiliate of Credit Suisse First Boston Corporation, beneficially own approximately 96.3% of the common stock of Holdings. Thompson Dean, James A. Quella and David F. Burgstahler, who are the Managing Partner, a Managing Director and a principal of DLJ Merchant Banking, respectively, are members of the boards of directors of Holdings and Von Hoffman. Further, Credit Suisse First Boston Corporation acted as syndication agent in connection with the revolving credit facility for which it received certain customary fees and expenses. Credit Suisse First Boston Corporation has, from time to time, provided investment banking and other financial advisory services to Holdings in the past for which it has received customary compensation, and will provide such services and financial advisory services to Holdings in the future. In addition, Credit Suisse First Boston Corporation acted as purchaser in connection with the initial sale of the 2009 notes and the 2007 notes. See "Certain Relationships and Related Transactions." Credit Suisse First Boston Corporation has informed us that it does not intend to confirm sales of the new securities to any accounts over which it exercises discretionary authority without the prior specific written approval of such transactions by the customer. We have been advised by Credit Suisse First Boston Corporation that, subject to applicable laws and regulations, Credit Suisse First Boston Corporation currently intends to make a market in the new securities following completion of the exchange offer. However, Credit Suisse First Boston Corporation is not obligated to do so and any such market-making may be interrupted or discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. There can be no assurance that an active trading market will develop or be sustained. See "Risk Factors--There may be no active trading market for the registered securities." 3 [BACK COVER FOR MARKET-MAKING PROSPECTUS] ------------------------ TABLE OF CONTENTS
PAGE ---- Forward-Looking Statements.................................. Prospectus Summary.......................................... Risk Factors................................................ Capitalization.............................................. Selected Consolidated Financial Data........................ Management's Discussion and Analysis of Financial Condition and Results of Operations................................. Business.................................................... Management.................................................. Executive Compensation...................................... Security Ownership of Certain Beneficial Owners and Management................................................ Certain Relationships and Related Transactions.............. Description of Certain Indebtedness......................... Description of the Registered Securities.................... Plan of Distribution........................................ Legal Matters............................................... Independent Accountants..................................... Where You Can Find More Information......................... Index to Consolidated Financial Statements..................
[LOGO] 4 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following is an itemization of all estimated expenses incurred or expected to be incurred by the Registrant in connection with the issuance and distribution of the securities being registered hereby, other than underwriting discounts and commissions.
ITEM AMOUNT - ---- -------- SEC Registration Fee........................................ $ 33,402 Printing and Engraving Costs................................ 35,000 Trustee Fees................................................ 45,000 Legal Fees and Expenses..................................... 100,000 Accounting Fees and Expenses................................ 100,000 Miscellaneous............................................... 30,000 -------- TOTAL....................................................... $343,402 ========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Certificate of Incorporation of each of Von Hoffmann and Holdings contains a provision eliminating the personal liability for monetary damages of its directors to the full extent permitted under the Delaware General Corporation Law ("DGCL"). The Certificate of Incorporation of each of Von Hoffmann and Holdings provides that a director or officer who is a party to any action, suit or proceeding shall be entitled to be indemnified by us to the extent permitted by the DGCL against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred by such director or officer in connection with such action, suit or proceeding. Section 145 of the DGCL provides that a corporation may indemnify a director, officer, employee or agent made a party to an action by reason of the fact that he was a director, officer, employee or agent of the corporation or was serving at the request of the corporation, against liabilities, costs and expenses actually and reasonably incurred by him in his capacity as a director or officer or arising out of such action, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action, had no reasonable cause to believe his conduct was unlawful. No indemnification may be provided where the director, officer, employee or agent has been adjudged by a court, after exhaustion of all appeals, to be liable to the corporation, unless a court determines that the person is entitled to such indemnity. Section 102(b)(7) of the DGCL permits a corporation to relieve its directors from personal liability for monetary damages to the corporation or its stockholders for breaches of their fiduciary duty as directors except for (i) a breach of the duty of loyalty, (ii) failure to act in good faith, (iii) intentional misconduct or knowing violation of law, (iv) willful or negligent violations of certain provisions of the DGCL (Sections 174, 160 and 173) imposing certain requirements with respect to stock purchases, redemptions and dividends or (v) any transaction from which the director derived an improper personal benefit. The above provisions of the DGCL are non-exclusive. Von Hoffmann and Holdings have entered into indemnification agreements with each of their respective directors and intends to enter into indemnification agreements with each of its future directors. Pursuant to such indemnification agreements, we have agreed to indemnify these directors II-1 against certain liabilities, including any liabilities arising out of this Registration Statement. We maintain a standard form of officers' and directors' liability insurance policy which provides coverage to our officers and directors for certain liabilities. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. On March 15, 2002 the Registrant sold $215,000,000 in aggregate principal amount of its 10 1/4% Senior Notes due 2009 (the old notes), to Credit Suisse First Boston and Scotia Capital (the "initial purchasers") in a private placement in reliance on Section 4(2) under the Securities Act, at an offering price of $1,000 per $1,000 principal amount at maturity. The old notes were immediately resold by the initial purchasers in transactions not involving a public offering. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
EXHIBIT NO. EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 3.1* Certificate of Incorporation of Von Hoffmann Corporation and Certificate of Ownership and Merger of Von Hoffmann Graphics, Inc. with and into Von Hoffmann Press, Inc. 3.2* By-Laws of Von Hoffmann Corporation. 3.3* Certificate of Incorporation of Von Hoffmann Holdings Inc. and Certificate of Amendment to the Certificate of Incorporation of Von Hoffmann Corporation. 3.4* By-Laws of Von Hoffmann Holdings Inc. 3.5* Certificate of Incorporation of One Thousand Realty & Investment Company. 3.6* By-Laws of One Thousand Realty & Investment Company. 3.7* Certificate of Incorporation of H&S Graphics, Inc. 3.8* By-Laws of H&S Graphics, Inc. 3.9* Certificate of Incorporation of Preface, Inc. 3.10* By-Laws of Preface, Inc. 3.11* Certificate of Incorporation of Precision Offset Printing Company, Inc. 3.12* By-Laws of Precision Offset Printing Company, Inc. 4.1* Indenture, dated March 26, 2002 among Von Hoffmann Corporation, the Guarantors party thereto and U.S. Bank National Association, as trustee, with respect to the 10 1/4% Senior Notes due 2009. 4.2** Indenture, dated May 22, 1997 among Von Hoffmann Corporation, the Guarantors party thereto and Marine Midland Bank, as trustee, with respect to the 10 3/8% Senior Subordinated Notes due 2007. 4.3* Indenture, dated October 16, 1998 between Holdings and Marine Midland Bank, as Trustee, with respect to the 13.5% Subordinated Exchange Debentures due 2009. 4.4* Form of 2009 Notes (included in Exhibit 4.1 hereto). 4.5** Form of 2007 Notes (included in Exhibit 4.2 hereto). 4.6* Form of Global Exchange Debenture (included in Exhibit 4.3 hereto). 4.7* Registration Rights Agreement, dated March 26, 2002 among Von Hoffmann Corporation, the Guarantors party thereto, Credit Suisse First Boston Corporation and Scotia Capital (USA) Inc. 4.8** Registration Rights Agreement, dated May 22, 1997 among Von Hoffmann Corporation, the Guarantors party thereto and Donaldson, Lufkin & Jenrette Securities Corporation. 4.9** Registration Rights Agreement, dated June 13, 1997 between Von Hoffman Corporation and Donaldson, Lufkin & Jenrette Securities Corporation.
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EXHIBIT NO. EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 4.10** Shareholders Agreement, dated May 22, 1997, among Von Hoffmann Holdings Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P. and the other shareholders party thereto. 4.11** Amendment No. 1, dated November 30, 2000, to the Shareholders Agreement, dated May 22, 1997, among Von Hoffmann Holdings Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P. and the other shareholders party thereto. 4.12** Amendment No. 2, dated June 20, 2002, to the Shareholders Agreement, dated May 22, 1997, among Von Hoffmann Holdings Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P. and the other shareholders party thereto. 4.13** Stock Purchase Agreement, dated June 21, 2002, among Von Hoffmann Holdings Inc., Von Hoffmann Corporation, Robert Uhlenhop and the Robert A. Uhlenhop 1998 Irrevocable Trust Dated 1/27/98. 4.14** Stock Purchase Agreement, dated March 26, 2002, among Von Hoffmann Holdings, DLJ Merchant Banking Partners II, L.P. and certain of its affiliates. 4.15** Stock Purchase Agreement, dated June 21, 2002, among Von Hoffmann Holdings Inc., ZS VH II L.P. and DLJ Merchant Banking Partners II, L.P. 5.1** Opinion of Weil, Gotshal & Manges LLP. 10.1* Employment Agreement, dated January 31, 2002, between Von Hoffmann Press, Inc. and Robert Mathews. 10.2* Employment Agreement, dated January 31, 2002, between Von Hoffmann Press, Inc. and Peter Mitchell. 10.3* Amended and Restated Employment Agreement, dated June 21, 2002, among Von Hoffmann, Holdings and Robert Uhlenhop. 10.4* Credit Agreement, dated March 26, 2002, among Von Hoffmann Holdings Inc., Von Hoffmann Corporation, H&S Graphics, Inc., Precision Offset Printing Company, Inc., Preface, Inc., One Thousand Realty & Investment Company and certain other subsidiaries of Von Hoffmann Corporation, as borrowers, the lenders party thereto, The CIT Group/ Business Credit, Inc., as administrative agent, Credit Suisse First Boston, Cayman Islands Branch, as syndication agent, sole lead arranger and sole book running manager and U.S. Bank National Association, as documentation agent. 10.5* Financial Advisory Agreement, dated March 26, 2002, between Von Hoffmann Corporation and Credit Suisse First Boston Corporation. 12.1** Statement regarding calculation of ratio of earnings to fixed charges. 21** Subsidiaries of Holdings. 23.1* Consent of Ernst & Young LLP. 23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1 hereto). 24.1 Power of Attorney (included on signature page). 25.1** Form T-1 statement of eligibility under the Trust Indenture Act of 1939, as amended, of U.S. Bank National Association, as trustee. 99.1** Letter of Transmittal for 10 1/4% Senior Notes due 2009. 99.2** Letter of Transmittal for 10 3/8% Senior Subordinated Notes due 2007. 99.3** Letter of Transmittal for 13 1/2% Subordinated Exchange Debentures due 2009. 99.4** Notice of Guaranteed Delivery for 10 1/4% Senior Notes due 2009. 99.5** Notice of Guaranteed Delivery for 10 3/8% Senior Subordinated Notes due 2007.
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EXHIBIT NO. EXHIBIT DESCRIPTION - --------------------- ------------------------------------------------------------ 99.6** Notice of Guaranteed Delivery for 13 1/2% Subordinated Exchange Debentures.
- ------------------------ * Filed herewith. ** To be filed by amendment. ITEM 17. UNDERTAKINGS. Each of 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; (ii) To reflect in the prospectus any facts or events arising after the effective date of the 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 the 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) if, in the aggregate, the changes in volume and price represent no more than 20 percent 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 the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (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. (4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a 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 Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of St. Louis, state of Missouri, on this 21st day of June, 2002. VON HOFFMANN CORPORATION By: /s/ ROBERT S. MATHEWS ----------------------------------------- Robert S. Mathews, Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on June 21, 2002 in the capacities indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ THOMPSON DEAN ------------------------------------------- Chairman and Director June 21, 2002 Thompson Dean Chief Executive Officer, /s/ ROBERT S. MATHEWS President, Chief ------------------------------------------- Operating Officer and June 21, 2002 Robert S. Mathews Director (Principal Executive Officer) Vice Chairman of the Board, Vice President, Chief /s/ PETER C. MITCHELL Financial Officer and ------------------------------------------- Treasurer (Principal June 21, 2002 Peter C. Mitchell Accounting and Financial Officer)
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SIGNATURE CAPACITY DATE --------- -------- ---- /s/ DAVID F. BURGSTAHLER ------------------------------------------- Director June 21, 2002 David F. Burgstahler /s/ JAMES A. QUELLA ------------------------------------------- Director June 21, 2002 James A. Quella /s/ ROBERT S. CHRISTIE ------------------------------------------- Director June 21, 2002 Robert S. Christie
II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of St. Louis, state of Missouri, on this 21st day of June, 2002. VON HOFFMANN HOLDINGS INC. By: /s/ /S ROBERT S. MATHEWS ----------------------------------------- Robert S. Mathews, Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on June 21, 2002 in the capacities indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ ROBERT A. UHLENHOP ------------------------------------------- Chairman and Director June 21, 2002 Robert A. Uhlenhop Chief Executive Officer, /s/ ROBERT S. MATHEWS President and Director ------------------------------------------- (Principal Executive June 21, 2002 Robert S. Mathews Officer) Executive Vice President, /s/ PETER C. MITCHELL Chief Financial Officer ------------------------------------------- and Treasurer (Principal June 21, 2002 Peter C. Mitchell Accounting and Financial Officer) /s/ DAVID F. BURGSTAHLER ------------------------------------------- Vice Chairman and Director June 21, 2002 David F. Burgstahler
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SIGNATURE CAPACITY DATE --------- -------- ---- /s/ THOMPSON DEAN ------------------------------------------- Director June 21, 2002 Thompson Dean /s/ JAMES A. QUELLA ------------------------------------------- Director June 21, 2002 James A. Quella /s/ ROBERT S. CHRISTIE ------------------------------------------- Director June 21, 2002 Robert S. Christie
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of St. Louis, state of Missouri, on this 21st day of June, 2002. ONE THOUSAND REALTY & INVESTMENT COMPANY By: /s/ ROBERT S. MATHEWS ----------------------------------------- Robert S. Mathews, Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on June 21, 2002 in the capacities indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- Chairman, Chief Executive /s/ ROBERT S. MATHEWS Officer, President and ------------------------------------------- Director (Principal June 21, 2002 Robert S. Mathews Executive Officer) Vice President, Chief /s/ PETER C. MITCHELL Financial Officer, ------------------------------------------- Treasurer and Director June 21, 2002 Peter C. Mitchell (Principal Accounting and Financial Officer)
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of St. Louis, state of Missouri, on this 21st day of June, 2002. H & S GRAPHICS, INC. By: /s/ ROBERT S. MATHEWS ----------------------------------------- Robert S. Mathews, Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on June 21, 2002 in the capacities indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- Chairman, Chief Executive /s/ ROBERT S. MATHEWS Officer and Director ------------------------------------------- (Principal Executive June 21, 2002 Robert S. Mathews Officer) Vice President, Chief /s/ PETER C. MITCHELL Financial Officer, ------------------------------------------- Treasurer and Director June 21, 2002 Peter C. Mitchell (Principal Accounting and Financial Officer)
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of St. Louis, state of Missouri, on this 21st day of June, 2002. PREFACE, INC. By: /s/ ROBERT S. MATHEWS ----------------------------------------- Robert S. Mathews, Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on June 21, 2002 in the capacities indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- Chairman, Chief Executive /s/ ROBERT S. MATHEWS Officer and Director ------------------------------------------- (Principal Executive June 21, 2002 Robert S. Mathews Officer) Vice President, Chief /s/ PETER C. MITCHELL Financial Officer, ------------------------------------------- Treasurer and Director June 21, 2002 Peter C. Mitchell (Principal Accounting and Financial Officer)
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of St. Louis, state of Missouri, on this 21st day of June, 2002. PRECISION OFFSET PRINTING COMPANY By: /s/ ROBERT S. MATHEWS ----------------------------------------- Robert S. Mathews, Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints each of Robert Mathews and Peter C. Mitchell or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-1 (including all pre-effective and post-effective amendments), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on June 21, 2002 in the capacities indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- Chairman, Chief Executive /s/ ROBERT S. MATHEWS Officer and Director ------------------------------------------- (Principal Executive June 21, 2002 Robert S. Mathews Officer) Vice President, Chief /s/ PETER C. MITCHELL Financial Officer, ------------------------------------------- Treasurer and Director June 21, 2002 Peter C. Mitchell (Principal Accounting and Financial Officer)
II-12 EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION - ----------- ------------------------------------------------------------ 3.1* Certificate of Incorporation of Von Hoffmann Corporation and Certificate of Ownership and Merger of Von Hoffmann Graphics, Inc. with and into Von Hoffmann Press, Inc. 3.2* By-Laws of Von Hoffmann Corporation. 3.3* Certificate of Incorporation of Von Hoffmann Holdings Inc. and Certificate of Amendment to the Certificate of Incorporation of Von Hoffmann Corporation. 3.4* By-Laws of Von Hoffmann Holdings Inc. 3.5* Certificate of Incorporation of One Thousand Realty & Investment Company. 3.6* By-Laws of One Thousand Realty & Investment Company. 3.7* Certificate of Incorporation of H&S Graphics, Inc. 3.8* By-Laws of H&S Graphics, Inc. 3.9* Certificate of Incorporation of Preface, Inc. 3.10* By-Laws of Preface, Inc. 3.11* Certificate of Incorporation of Precision Offset Printing Company, Inc. 3.12* By-Laws of Precision Offset Printing Company, Inc. 4.1* Indenture, dated March 26, 2002 among Von Hoffmann Corporation, the Guarantors party thereto and U.S. Bank National Association, as trustee, with respect to the 10 1/4% Senior Notes due 2009. 4.2** Indenture, dated May 22, 1997 among Von Hoffmann Corporation, the Guarantors party thereto and Marine Midland Bank, as trustee, with respect to the 10 3/8% Senior Subordinated Notes due 2007. 4.3* Indenture, dated October 16, 1998 between Holdings and Marine Midland Bank, as Trustee, with respect to the 13.5% Subordinated Exchange Debentures due 2009 4.4* Form of 2009 Notes (included in Exhibit 4.1 hereto). 4.5** Form of 2007 Notes (included in Exhibit 4.2 hereto). 4.6* Form of Global Exchange Debenture (included in Exhibit 4.3 hereto) 4.7* Registration Rights Agreement, dated March 26, 2002 among Von Hoffmann Corporation, the Guarantors party thereto, Credit Suisse First Boston Corporation and Scotia Capital (USA) Inc. 4.8** Registration Rights Agreement, dated May 22, 1997 among Von Hoffmann Corporation, the Guarantors party thereto and Donaldson, Lufkin & Jenrette Securities Corporation. 4.9** Registration Rights Agreement, dated June 13, 1997 between Von Hoffman Corporation and Donaldson, Lufkin & Jenrette Securities Corporation. 4.10** Shareholders Agreement, dated May 22, 1997, among Von Hoffmann Holdings Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P. and the other shareholders party thereto. 4.11** Amendment No. 1, dated November 30, 2000, to the Shareholders Agreement, dated May 22, 1997, among Von Hoffmann Holdings Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P. and the other shareholders party thereto. 4.12** Amendment No. 2, dated June 20, 2002, to the Shareholders Agreement, dated May 22, 1997, among Von Hoffmann Holdings Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P. and the other shareholders party thereto.
EXHIBIT NO. EXHIBIT DESCRIPTION - ----------- ------------------------------------------------------------ 4.13** Stock Purchase Agreement, dated June 21, 2002, among Von Hoffmann Holdings Inc., Von Hoffmann Corporation, Robert Uhlenhop and the Robert A. Uhlenhop 1998 Irrevocable Trust Dated 1/27/98. 4.14** Stock Purchase Agreement, dated March 26, 2002, among Von Hoffmann Holdings, DLJ Merchant Banking Partners II, L.P. and certain of its affiliates. 4.15** Stock Purchase Agreement, dated June 21, 2002, among Von Hoffmann Holdings Inc., ZS VH II L.P. and DLJ Merchant Banking Partners II, L.P. 5.1** Opinion of Weil, Gotshal & Manges LLP. 10.1* Employment Agreement, dated January 31, 2002, between Von Hoffmann Press, Inc. and Robert Mathews. 10.2* Employment Agreement, dated January 31, 2002, between Von Hoffmann Press, Inc. and Peter Mitchell. 10.3* Amended and Restated Employment Agreement, dated June 21, 2002, among Von Hoffmann, Holdings and Robert Uhlenhop. 10.4* Credit Agreement, dated March 26, 2002, among Von Hoffmann Holdings Inc., Von Hoffmann Corporation, H&S Graphics, Inc., Precision Offset Printing Company, Inc., Preface, Inc., One Thousand Realty & Investment Company and certain other subsidiaries of Von Hoffmann Corporation, as borrowers, the lenders party thereto, The CIT Group/ Business Credit, Inc., as administrative agent, Credit Suisse First Boston, Cayman Islands Branch, as syndication agent, sole lead arranger and sole book running manager and U.S. Bank National Association, as documentation agent. 10.5* Financial Advisory Agreement, dated March 26, 2002, between Von Hoffmann Corporation and Credit Suisse First Boston Corporation. 12.1** Statement regarding calculation of ratio of earnings to fixed charges. 21** Subsidiaries of Holdings. 23.1* Consent of Ernst & Young LLP. 23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1 hereto). 24.1 Power of Attorney (included on signature page). 25.1** Form T-1 statement of eligibility under the Trust Indenture Act of 1939, as amended, of U.S. Bank National Association, as trustee. 99.1** Letter of Transmittal for 10 1/4% Senior Notes due 2009. 99.2** Letter of Transmittal for 10 3/8% Senior Subordinated Notes due 2007. 99.3** Letter of Transmittal for 13 1/2% Subordinated Exchange Debentures due 2009. 99.4** Notice of Guaranteed Delivery for 10 1/4% Senior Notes due 2009. 99.5** Notice of Guaranteed Delivery for 10 3/8% Senior Subordinated Notes due 2007. 99.6** Notice of Guaranteed Delivery for 13 1/2% Subordinated Exchange Debentures.
- ------------------------ * Filed herewith. ** To be filed by amendment. EX-3.1 3 a2082545zex-3_1.txt EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF VON HOFFMANN PRESS, INC. THE UNDERSIGNED, being a natural person for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware, hereby certifies that: FIRST: The name of the Corporation (which is hereinafter referred to as the "Corporation") is: "Von Hoffmann Press, Inc." SECOND: The address of the registered office of the Corporation in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended (the "DGCL"). The Corporation shall have all powers that may now or hereafter be lawful for a corporation to exercise under the DGCL. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 15,000, all of which shares, with the par value of $100.00 per share, shall be designated Common Stock. FIFTH: The name and mailing address of the incorporator are Stephen M. Besen, Esq., c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153. SIXTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate of Incorporation, the by-laws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any by-laws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot. SEVENTH: (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgment, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974, as in effect from time to time) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of such person's heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in paragraph (b) of this Article, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article shall be a contract right and shall include the right to have the Corporation pay the expenses incurred in defending any such proceeding in advance of its final disposition; any advance payments to be paid by the Corporation within 20 calendar days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; PROVIDED, HOWEVER, that, if and to the extent the DGCL requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so 2 advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified under this Article or otherwise. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to have the Corporation pay the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. (b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under section (a) of this Article is not paid in full by the Corporation within 30 calendar days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article Seventh not be exclusive of any other right which any person (including, without 3 limitation, any person other than an officer or director of the Corporation) may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. No repeal, modification or amendment of, or adoption of any provision inconsistent with, this Article Seventh, or, to the fullest extent permitted by applicable law, any modification of law, shall in any way diminish or adversely affect the rights of any director or officer of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal, amendment, adoption or modification. (d) INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. (e) SEVERABILITY. If any provision of this Article Seventh shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article (including, without limitation, each portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article (including, without limitation, each such portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the DGCL) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached that duty of loyalty to the Corporation or its stockholders, (ii) shall 4 not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit, or claim that, but, for this Article would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. If the DGCL is amended after approval by the stockholders of this Article Eighth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Incorporation on this 17th day of September, 1998. /s/ Stephen M. Besen --------------------------- Stephen M. Besen Sole Incorporator 5 CERTIFICATE OF OWNERSHIP AND MERGER OF VON HOFFMANN GRAPHICS, INC. (A DELAWARE CORPORATION) WITH AND INTO VON HOFFMANN PRESS, INC. (A DELAWARE CORPORATION) (PURSUANT TO SECTION 253 OF THE DELAWARE GENERAL CORPORATION LAW) ******************** Von Hoffmann Press, Inc., a Delaware corporation (the "Company"), does hereby certify: FIRST: That the Company is incorporated under and pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Company owns all of the outstanding shares of each class of capital stock of Von Hoffmann Graphics, Inc., a Delaware corporation ("VH Graphics"). THIRD: That the Company, by the following resolutions of its Board of Directors, duly adopted as of February 22, 2002, determined to, and hereby does, merge VH Graphics with and into itself on the terms and conditions set forth in such resolutions: RESOLVED, that the Board of Directors of Von Hoffmann Press, Inc. (the "Company") deems it desirable and in the best interests of the Company to merge with and into itself Von Hoffmann Graphics, Inc., a Delaware corporation and wholly-owned subsidiary of the Company; and further RESOLVED, that, effective on February 25, 2002 (the "Effective Date"), following the filing of an executed Certificate of Ownership and Merger (the "Certificate of Merger") merging Von Hoffmann Graphics, Inc. with and into the Company in accordance with Section 253 of the Delaware General Corporation Law, Von Hoffmann Graphics, Inc. shall be merged with and into the Company (the "Merger"), the separate corporate existence of Von Hoffmann Graphics, Inc. shall cease, and the Company shall continue as the surviving corporation as a result of the Merger and shall assume all of the liabilities and obligations of Von Hoffmann Graphics, Inc.; and further RESOLVED, that the Merger be, and the same hereby is, authorized, approved and adopted in all respects; and further RESOLVED, that the Board of Directors deems it desirable and in the best interest of the Company that, upon consummation of the Merger, the corporate name of the Company be changed to "Von Hoffmann Corporation", and that the same be, and it hereby is, authorized, approved and adopted in all respects; and further RESOLVED, that the officers of the Company be, and each of them hereby is, authorized, empowered and directed, in the name and on behalf of the Company, to take such additional lawful actions and to execute and deliver such additional agreements, documents or instruments as any of them may deem necessary or appropriate to implement the provisions of the foregoing resolutions, including, but not limited to, the execution and filing with the Secretary of State of the State of Delaware of the Certificate of Merger, the authority for the taking of such actions and the execution and delivery of such agreements, documents and instruments to be conclusively evidenced thereby; and further RESOLVED, that all actions heretofore taken by any officer, representative or agent of the Company in connection with the matters referred to in the foregoing resolutions, be, and the same hereby are, ratified, approved and confirmed in all respects. FOURTH: That the effective date of the Merger shall be February 25, 2002. [signatures appear on following page] 2 IN WITNESS WHEREOF, the Company has caused this Certificate of Ownership and Merger to be executed as of February 25, 2002. VON HOFFMANN PRESS, INC. By: /s/ Peter C. Mitchell --------------------------- Name: Peter C. Mitchell Title: Executive Vice President and Treasurer 3 EX-3.2 4 a2082545zex-3_2.txt EXHIBIT 3.2 EXHIBIT 3.2 BY-LAWS OF VON HOFFMANN PRESS, INC. (a Delaware corporation) ARTICLE I STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meetings of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Chairman of the Board, by the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation. SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held. SECTION 4. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 5. QUORUM. Except as otherwise provided by law or the Corporation's Certificate of Incorporation (including any amendments thereto, the "Certificate of Incorporation"), a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder. SECTION 6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board or, in the Chairman of the Board's absence, the President, or in the absence of either of such officers, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. SECTION 7. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Delaware General Corporation Law or the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-laws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast. (b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 2 SECTION 8. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. ARTICLE II BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be fixed from time to time by action of the stockholders or Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman of the Board. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies. (b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. (c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and, if authorized by a resolution of the Board of Directors, may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 3 Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting. SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, the President or by a majority of the directors then in office. SECTION 8. NOTICE OF MEETINGS. A notice of the place, date and time of each meeting of the Board of Directors shall be given to each director by mailing the same at least three days before the special meeting, or by telegraphing, transmitting by facsimile or telephoning the same or by delivering the same personally not later than the day before the day of the meeting, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting other than for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Any such notice need not state the purpose of the meeting. SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman of the Board, or in the Chairman of the Board's absence or inability to act, the President, or in the absence of both, a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary. 4 SECTION 10. RESIGNATION; REMOVAL. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors. SECTION 11. VACANCIES. Unless otherwise provided in these By-laws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders by the holders of shares entitled to vote for the election of directors. SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. SECTION 13. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of the Board of Directors may participate in any meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. ARTICLE III COMMITTEES SECTION 1. APPOINTMENT. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment. SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors. 5 SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee. SECTION 4. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of any committee of the Board of Directors may participate in any meeting of such committee of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 5. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors. ARTICLE IV OFFICERS SECTION 1. REQUIRED OFFICERS. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Treasurer, and a Secretary. Any number of officers may be held by the same person unless the certificate of incorporation or these By-laws otherwise provide. SECTION 2. ADDITIONAL OFFICERS. The Board of Directors may appoint a Chairman of the Board, Vice Chairman, Chief Executive Officer, Chief Operating Officer and/or a Chief Financial Officer as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined or prescribed from time to time by the Board of Directors. The President may appoint subordinate officers, including one or more vice presidents and other assistant officers and employees, as he shall deem necessary, who shall hold their offices for such times and shall exercise such powers and perform such duties as shall be determined from time to time by the President. SECTION 3. ELECTION OF OFFICERS. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose the officers of the Corporation, except that the first officers of the Corporation shall be chosen by the initial directors at the organizational meeting of the Board of Directors following incorporation. SECTION 4. COMPENSATION. The salaries of all officers and agents of the Corporation shall be fixed by or in the manner prescribed by the Board of Directors. SECTION 5. TENURE. Each officer of the Corporation shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. 6 SECTION 6. REMOVAL. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the entire Board of Directors. Any subordinate officer appointed by the President may be removed at any time by the President or by the affirmative vote of the Board of Directors. SECTION 7. RESIGNATION. Any officer may resign at any time upon written notice. Any such resignation shall take effect at the date of receipt of such notice or at any other date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 8. VACANCIES. Any vacancy occurring in any office of the Corporation appointed by the Board of Directors shall be filled by or in the manner prescribed by the Board of Directors. Any vacancy occurring in any subordinate office of the Corporation may be filled by the President. SECTION 9. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors. Any document or instrument may be signed by the Chairman of the Board on behalf and in the name of the Corporation. The Chairman of the Board shall have other duties as the Board of Directors may from time to time establish. SECTION 10. PRESIDENT. The President shall have general and active supervision and management of the business and affairs of the Corporation. The President may sign, on behalf and in the name of the Corporation, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other documents or instruments of the Corporation, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed, and, in general, shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. SECTION 11. VICE PRESIDENT. A vice president shall generally assist the President and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. A vice president may execute and deliver, on behalf and in the name of the Corporation, contracts and other obligations and instruments of the Corporation pertaining to the regular course of the duties of said office, except in cases where the signing or execution thereof shall be expressly delegated by the Board of Directors or these By-laws to some other officer or agent of the Corporation. SECTION 12. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings of the meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose, and shall perform like duties for the standing committees when requested by such committees. The Secretary shall give, or cause to be given, required notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary 7 shall have custody of the stock certificate books and stockholder records and such other books and records as the Board of Directors may direct. The Secretary shall have custody of the corporate seal of the Corporation and shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the secretary's signature. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his signature. The Secretary shall, in general, perform all duties incident to the office of a secretary of a corporation and such other duties as, from time to time, may be prescribed by the Board of Directors or the President. SECTION 13. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and the Board of Directors, at its regular meetings, or when the Chairman of the Board, the President or the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation, and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. ARTICLE V BOOKS AND RECORDS SECTION 1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-laws and by such officer or agent as shall be designated by the Board of Directors. SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or by overnight courier, or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If 8 no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 9 ARTICLE VI CERTIFICATES REPRESENTING STOCK SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation. SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon. SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate, therefore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be 10 made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars for any class or series of its capital stock. ARTICLE VII DIVIDENDS Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VIII RATIFICATION Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. ARTICLE IX CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or 11 otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE XI WAIVER OF NOTICE Whenever notice is required to be given by these By-laws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XII BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC. SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer. SECTION 2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman of the Board, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman of the Board, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and 12 may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person. SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law. ARTICLE XIII AMENDMENTS The Board of Directors shall have power to adopt, amend or repeal By-laws. By-laws adopted by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors. 13 EX-3.3 5 a2082545zex-3_3.txt EXHIBIT 3.3 EXHIBIT 3.3 CERTIFICATE OF INCORPORATION OF VON HOFFMANN CORPORATION THE UNDERSIGNED, being a natural person for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware, hereby certifies that: FIRST: The name of the Corporation (which is hereinafter referred to as the "Corporation") is: "Von Hoffmann Corporation." SECOND: The address of the registered office of the Corporation in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, City of Wilmington, Country of New Castle, State of Delaware. The name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended (the "DGCL"). The Corporation shall have all powers that may now or hereafter be lawful for a corporation to exercise under the DGCL. FOURTH: (a) The total number of shares of capital stock which the Corporation shall have authority to issue is 102 million, of which 100 million shares, with the par value of $.01 per share, shall be designated Common Stock, and two million shares, with the par value of $.01 per share, shall be designated Preferred Stock. (b) Each share of Common Stock shall entitle the holder thereof to one (1) vote on all matters submitted to a vote of the stockholders of the Corporation. (c) Shares of Preferred Stock may be issued from time to time in one or more series of any number of shares as may be determined from time to time by the Board of Directors of the Corporation, provided that the aggregate number of shares issued and not canceled of any and all such series shall not exceed the total number of shares of Preferred Stock authorized by this Certificate of Incorporation. Each series of Preferred Stock shall be distinctly designated. Except in respect of the particulars fixed for series by the Board of Directors of the Corporation as permitted hereby, all shares shall be alike in every particular, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative. The voting powers, if any, of each such series and the preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and the Board of Directors of the Corporation is hereby expressly granted authority to fix, in the resolution or resolutions providing for the issue of a particular series of Preferred Stock, the voting powers, if any, of each such series and the designations, preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof to the full extent now or hereafter permitted by this Certificate of Incorporation and the laws of the State of Delaware. (d) Except as set forth in that certain Shareholders' Agreement, dated as of May 22, 1997, among the Corporation and the holders of shares of the Company's Common Stock, the stockholders of the Corporation shall have no preemptive right to acquire additional shares of stock of any class or series of the Corporation, or any securities of the Corporation convertible into such shares. FIFTH: The name and mailing address of the incorporator are Stephen M. Besen, Esq., c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153. SIXTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate of Incorporation, the by-laws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any by-laws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot. 2 SEVENTH: (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgment, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974, as in effect from time to time) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of such person's heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in paragraph (b) of this Article, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article shall be a contract right and shall include the right to have the Corporation pay the expenses incurred in defending any such proceeding in advance of its final disposition; any advance payments to be paid by the Corporation within 20 calendar days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; PROVIDED, HOWEVER, that, if and to the extent the DGCL requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified under this Article or otherwise. The Corporation may, to the extent authorized from time to time 3 by the Board of Directors, grant rights to indemnification, and rights to have the Corporation pay the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. (b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under section (a) of this Article is not paid in full by the Corporation within 30 calendar days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article Seventh shall not be exclusive of any other right which any person (including, without limitation, any person other than an officer or director of the Corporation) may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. No repeal, modification or 4 amendment of, or adoption of any provision inconsistent with, this Article Seventh, or, to the fullest extent permitted by applicable law, any modification of law, shall in any way diminish or adversely affect the rights of any director or officer of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal, amendment, adoption or modification. (d) INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. (e) SEVERABILITY. If any provision of this Article Seventh shall be held to be invalid, illegal or unenforceable for any person whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article (including, without limitation, each portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article (including, without limitation, each such portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the DGCL) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached the duty of loyalty to the Corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing 5 violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit, or claim that, but, for this Article would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. If the DGCL is amended after approval by the stockholders of this Article Eighth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. IN WITNESS WHEREOF, the undersigned had duly executed this Certificate of Incorporation in this 17th day of September, 1998. /s/ Stephen M. Besen --------------------------- Stephen M. Besen Sole Incorporator 6 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF VON HOFFMANN CORPORATION Von Hoffmann Corporation (the "Corporation"), a corporation organized and existing under and by virtue of the Delaware General Corporation Law ("DGCL"), does hereby certify pursuant to Section 242 of the DGCL: FIRST: That, on February 21, 2002, the Board of Directors of the Corporation duly adopted resolutions setting forth proposed amendments to the Certificate of Incorporation of the Corporation, declaring such amendments advisable, and submitted the amendments to the stockholders of the Corporation for consideration thereof. The resolutions setting forth the proposed amendments are as follows: RESOLVED, that the Board of Directors of the Corporation deems it advisable and in the best interest of the Corporation to amend the Corporation's Certificate of Incorporation in order to change the name of the Corporation to "Von Hoffmann Holdings Inc." and to increase the number of shares that the Corporation is authorized to issue; and further RESOLVED, that Article FIRST of the Certificate of Incorporation of the Corporation be amended, so that, as amended, said Article shall be and read as follows: "FIRST: The name of the Corporation (which is hereinafter referred to as the "Corporation") is: Von Hoffmann Holdings Inc." ; and further RESOLVED, that paragraph (a) of Article FOURTH of the Certificate of Incorporation of the Corporation be amended and restated, so that, as amended and restated, said paragraph (a) of Article FOURTH shall be and read as follows: "FOURTH: (a) The total number of shares of capital stock which the Corporation shall have authority to issue is 152 million, of which 150 million shares, with the par value of $.01 per share, shall be designated Common Stock, and two million shares, with the par value of $.01 per share, shall be designated Preferred Stock." SECOND: That, in lieu of a meeting and vote of stockholders and in accordance with Section 228 of the DGCL, by Written Consent, dated February 21, 2002, the holders of a majority of the outstanding shares of common stock entitled to vote thereon, and a majority of the holders of each class of stock entitled to vote thereon as a class, voted in favor of the amendments. THIRD: That the aforesaid amendments to the Certificate of Incorporation of the Corporation were duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the DGCL. FOURTH: That the aforesaid amendments to the Corporation's Certificate of Incorporation shall be effective on February 22, 2002, following the filing by the Corporation of this Certificate of Amendment with the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, Von Hoffmann Corporation has caused this Certificate of Amendment to be executed by its Executive Vice President this 22nd day of February, 2002. VON HOFFMANN CORPORATION By: /s/ Peter C. Mitchell ---------------------------- Name: Peter C. Mitchell Title: Executive Vice President 2 EX-3.4 6 a2082545zex-3_4.txt EXHIBIT 3.4 EXHIBIT 3.4 BY-LAWS OF VON HOFFMANN CORPORATION (a Delaware corporation) ARTICLE I STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Chairman of the Board, by the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation. SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held. SECTION 4. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 5. QUORUM. Except as otherwise provided by law or the Corporation's Certificate of Incorporation (including any amendments thereto, the "Certificate of Incorporation"), a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder. SECTION 6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board or, in the Chairman of the Board's absence, the President, or in the absence of either of such officers, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as a secretary of every meeting, but if neither the Secretary nor an Assistant 2 Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. SECTION 7. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Delaware General Corporation Law or the Certificate of Incorporation (including resolutions designating any class or series of preferred stock pursuant to Article FOURTH of the Certificate of Incorporation) provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-laws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast. (b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 8. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear 3 or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. ARTICLE II BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be fixed from time to time by action of the stockholders or Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman of the Board. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies. (b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are 4 elected and qualified or until their earlier resignation or removal. (c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and, if authorized by a resolution of the Board of Directors, may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting. SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, the President or by a majority of the directors then in office. 5 SECTION 8. NOTICE OF MEETINGS. A notice of the place, date and time of each meeting of the Board of Directors shall be given to each director by mailing the same at least three days before the special meeting, or by telegraphing, transmitting by facsimile or telephoning the same or by delivering the same personally not later than the day before the day of the meeting, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting other than for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Any such notice need not state the purpose of the meeting. SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman of the Board, or in the Chairman of the Board's absence or inability to act, the President, or in the absence of both, a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary. SECTION 10. RESIGNATION; REMOVAL. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors. SECTION 11. VACANCIES. Unless otherwise provided in these By-laws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders by the holders of shares entitled to vote for the election of directors. SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or 6 writings are filed with the minutes of proceedings of the Board of Directors. SECTION 13. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of the Board of Directors may participate in any meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 14. PREFERRED DIRECTORS. Notwithstanding anything else contained herein, whenever the holders of one or more classes or series of Preferred Stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of the resolutions applicable thereto adopted by the Board of Directors pursuant to the Certificate of Incorporation. ARTICLE III COMMITTEES SECTION 1. APPOINTMENT. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment. SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors. SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any 7 committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee. SECTION 4. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of any committee of the Board of Directors may participate in any meeting of such committee of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 5. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors. ARTICLE IV OFFICERS SECTION 1. REQUIRED OFFICERS. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Treasurer, and a Secretary. Any number of officers may be held by the same person unless the certificate of incorporation or these By-laws otherwise provide. SECTION 2. ADDITIONAL OFFICERS. The Board of Directors may appoint a Chairman of the Board, Vice Chairman, Chief Executive Officer, Chief Operating Officer and/or a Chief Financial Officer as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined or prescribed from time to time by the Board of Directors. The President may appoint subordinate officers, including one or more vice presidents and other assistant officers and employees, as he shall deem necessary, who shall hold their offices for such times and shall exercise such powers and perform such duties as shall be determined from time to time by the President. SECTION 3. ELECTION OF OFFICERS. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose the officers of the Corporation, except that the first officers of the Corporation shall be 8 chosen by the initial directors at the organizational meeting of the Board of Directors following incorporation. SECTION 4. COMPENSATION. The salaries of all officers and agents of the Corporation shall be fixed by or in the manner prescribed by the Board of Directors. SECTION 5. TENURE. Each officer of the Corporation shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. SECTION 6. REMOVAL. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the entire Board of Directors. Any subordinate officer appointed by the President may be removed at any time by the President or by the affirmative vote of the Board of Directors. SECTION 7. RESIGNATION. Any officer may resign at any time upon written notice. Any such resignation shall take effect at the date of receipt of such notice or at any other date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 8. VACANCIES. Any vacancy occurring in any office of the Corporation appointed by the Board of Directors shall be filled by or in the manner prescribed by the Board of Directors. Any vacancy occurring in any subordinate office of the Corporation may be filled by the President. SECTION 9. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors. Any document or instrument may be signed by the Chairman of the Board on behalf and in the name of the Corporation. The Chairman of the Board shall have other duties as the Board of Directors may from time to time establish. SECTION 10. PRESIDENT. The President shall have general and active supervision and management of the business and affairs of the Corporation. The President may sign, on behalf and in the name of the Corporation, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other documents or instruments of the Corporation, except in cases where the 9 signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed, and, in general, shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. SECTION 11. VICE PRESIDENT. A vice president shall generally assist the President and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. A vice president may execute and deliver, on behalf and in the name of the Corporation, contracts and other obligations and instruments of the Corporation pertaining to the regular course of the duties of said office, except in cases where the signing or execution thereof shall be expressly delegated by the Board of Directors or these By-laws to some other officer or agent of the Corporation. SECTION 12. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings of the meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose, and shall perform like duties for the standing committees when requested by such committees. The Secretary shall give, or cause to be given, required notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary shall have custody of the stock certificate books and stockholder records and such other books and records as the Board of Directors may direct. The Secretary shall have custody of the corporate seal of the Corporation and shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the secretary's signature. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his signature. The Secretary shall, in general, perform all duties incident to the office of a secretary of a corporation and such other duties as, from time to time, may be prescribed by the Board of Directors or the President. SECTION 13. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and 10 disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and the Board of Directors, at its regular meetings, or when the Chairman of the Board, the President or the Board of Directors, so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation, and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. ARTICLE V BOOKS AND RECORDS SECTION 1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-laws and by such officer or agent as shall be designated by the Board of Directors. SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or by overnight courier, or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice 11 of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any changes, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the 12 record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. ARTICLE VI CERTIFICATES REPRESENTING STOCK SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation. SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon. 13 SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars for any class or series of its capital stock. ARTICLE VII DIVIDENDS Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be 14 required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VII RATIFICATION Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. ARTICLE IX CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal. 15 ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE XI WAIVER OF NOTICE Whenever notice is required to be given by these By-laws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XII BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC. SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer. SECTION 2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman of the Board, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the 16 Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman of the Board, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person. SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law. ARTICLE XIII AMENDMENTS The Board of Directors shall have power to adopt, amend or repeal By-laws. By-laws adopted by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors. 17 EX-3.5 7 a2082545zex-3_5.txt EXHIBIT 3.5 EXHIBIT 3.5 CERTIFICATE OF INCORPORATION OF ONE THOUSAND REALTY & INVESTMENT COMPANY THE UNDERSIGNED, being a natural person for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware, hereby certifies that: FIRST: The name of the Corporation (which is hereinafter referred to as the "Corporation") is: "One Thousand Realty & Investment Company." SECOND: The address of the registered office of the Corporation in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended (the "DGCL"). The Corporation shall have all powers that may now or hereafter be lawful for a corporation to exercise under the DGCL. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 30,000, all of which shares, with the par value of $1.00 per share, shall be designated Common Stock. FIFTH: The name and mailing address of the incorporator are Stephen M. Besen, Esq., c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153. SIXTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate of Incorporation, the by-laws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any by-laws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot. SEVENTH: (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust of other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgment, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974, as in effect from time to time) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of such person's heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in paragraph (b) of this Article, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article shall be a contract right and shall include the right to have the Corporation pay the expenses incurred in defending any such proceeding in advance of its final disposition; any advance payments to be paid by the Corporation within 20 calendar days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; PROVIDED, HOWEVER, that, if and to the extent the DGCL requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director of officer, to repay all amounts so 2 advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified under this Article or otherwise. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to have the Corporation pay the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. (b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under section (a) of this Article is not paid in full by the Corporation within 30 calendar days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article Seventh shall not be exclusive of any other right which any person (including, without 3 limitation, any person other than an officer or director of the Corporation) may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. No repeal, modification or amendment of, or adoption of any provision inconsistent with, this Article Seventh, or, to the fullest extent permitted by applicable law, any modification of law, shall in any way diminish or adversely affect the rights of any director or officer of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal, amendment, adoption or modification. (d) INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. (e) SEVERABILITY. If any provision of this Article Seventh shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article (including, without limitation, each portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article (including, without limitation, each such portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the DGCL) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached that duty of loyalty to the Corporation or its stockholders, (ii) shall 4 not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit, or claim that, but, for this Article would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. If the DGCL is amended after approval by the stockholders of this Article Eighth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Incorporation on this 2nd day of October, 1998. /s/ Stephen M. Besen --------------------------- Stephen M. Besen Sole Incorporator 5 EX-3.6 8 a2082545zex-3_6.txt EXHIBIT 3.6 EXHIBIT 3.6 BY-LAWS OF ONE THOUSAND REALTY & INVESTMENT COMPANY (a Delaware corporation) ARTICLE I STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Chairman of the Board, by the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation. SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held. SECTION 4. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 5. QUORUM. Except as otherwise provided by law or the Corporation's Certificate of Incorporation (including any amendments thereto, the "Certificate of Incorporation"), a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder. SECTION 6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board or, in the Chairman of the Board's absence, the President, or in the absence of either of such officers, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. SECTION 7. VOTING: PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Delaware General Corporation Law or the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-laws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast. (b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with 2 the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 8. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. ARTICLE II BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be fixed from time to time by action of the stockholders or Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman of the Board. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies. (b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. (c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and, if authorized by a resolution of the Board of 3 Directors, may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3. QUORUM AND MANNER OF VOTING. Expect as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting. SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, the President or by a majority of the directors then in office. SECTION 8. NOTICE OF MEETINGS. A notice of the place, date and time of each meeting of the Board of Directors shall be given to each director by mailing the same at least three days before the special meeting, or by telegraphing, transmitting by facsimile or telephoning the same or by delivering the same personally not later than the day before the day of the meeting, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting other than for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Any such notice need not state the purpose of the meeting. SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman of the Board, or in the Chairman of the Board's absence or inability to act, the President, or in the absence of both, a chairman chosen by the directors, shall preside. 4 The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary. SECTION 10. RESIGNATION; REMOVAL. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors. SECTION 11. VACANCIES. Unless otherwise provided in these By-laws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders by the holders of shares entitled to vote for the election of directors. SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. SECTION 13. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of the Board of Directors may participate in any meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. ARTICLE III COMMITTEES SECTION 1. APPOINTMENT. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment. SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes 5 of its proceedings, and actions taken by a committee shall be reported to the Board of Directors. SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee. SECTION 4. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of any committee of the Board of Directors may participate in any meeting of such committee of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 5. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors. ARTICLE IV OFFICERS SECTION 1. REQUIRED OFFICERS. The officer of the Corporation shall be chosen by the Board of Directors and shall include a President, a Treasurer, and a Secretary. Any number of officers may be held by the same person unless the certificate of incorporation or these By-laws otherwise provide. SECTION 2. ADDITIONAL OFFICERS. The Board of Directors may appoint a Chairman of the Board, Vice Chairman, Chief Executive Officer, Chief Operating Officer and/or a Chief Financial Officer as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined or prescribed from time to time by the Board of Directors. The president may appoint subordinate officers, including one or more vice presidents and other assistant officers and employees, as he shall deem necessary, who shall hold their offices for such times and shall exercise such powers and perform such duties as shall be determined from time to time by the President. SECTION 3. ELECTION OF OFFICERS. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose the officers of the Corporation, except that the first officers of the Corporation shall be chosen by the initial directors at the organizational meeting of the Board of Directors following incorporation. SECTION 4. COMPENSATION. The salaries of all officers and agents of the Corporation shall be fixed by or in the manner prescribed by the Board of Directors. 6 SECTION 5. TENURE. Each Officer of the Corporation shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. SECTION 6. REMOVAL. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the entire Board of Directors. Any subordinate officer appointed by the President may be removed at any time by the President or by the affirmative vote of the Board of Directors. SECTION 7. RESIGNATION. Any officers may resign at any time upon written notice. Any such resignation shall take effect at the date of receipt of such notice or at any other date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 8. VACANCIES. Any vacancy occurring in any office of the Corporation appointed by the Board of Directors shall be filled by or in the manner prescribed by the Board of Directors. Any vacancy occurring in any subordinate office of the Corporation may be filled by the President. SECTION 9. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors. Any document or instrument may be signed by the Chairman of the Board on behalf and in the name of the Corporation. The Chairman of the Board shall have other duties as the Board of Directors may from time to time establish. SECTION 10. PRESIDENT. The President shall have general and active supervision and management of the business and affairs of the Corporation. The President may sign, on behalf and in the name of the Corporation, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other documents or instruments of the Corporation, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed, and, in general, shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. SECTION 11. VICE PRESIDENT. A vice president shall generally assist the President and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. A vice president may execute and deliver, on behalf and in the name of the Corporation, contracts and other obligations and instruments of the Corporation pertaining to the regular course of the duties of said office, except in cases where the signing or execution thereof shall be expressly delegated by the Board of Directors or these By-laws to some other officer or agent of the Corporation. SECTION 12. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings of the meetings of the stockholders and of the Board of Directors in a book 7 to be kept for that purpose, and shall perform like duties for the standing committees when requested by such committees. The Secretary shall give, or cause to be given, required notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary shall have custody of the stock certificate books and stockholder records and such other books and records as the Board of Directors may direct. The Secretary shall have custody of the corporate seal of the Corporation and shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the secretary's signature. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his signature. The Secretary shall, in general, perform all duties incident to the office of a secretary of a corporation and such other duties as, from time to time, may be prescribed by the Board of Directors or the President. SECTION 13. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and the Board of Directors, at its regular meetings, or when the Chairman of the Board, the President or the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation, and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. ARTICLE V BOOKS AND RECORDS SECTION 1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-laws and by such officer or agent as shall be designated by the Board of Directors. SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or by overnight courier, or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or 8 to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 9 ARTICLE VI CERTIFICATES REPRESENTING STOCK SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation. SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon. SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be 10 made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such certificate. SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars for any class or series of its capital stock. ARTICLE VII DIVIDENDS Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VIII RATIFICATION Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim of execution of any judgment in respect of such questioned transaction. ARTICLE IX CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or 11 otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be calendar year. ARTICLE XI WAIVER OF NOTICE Whenever notice is required to be given by these By-laws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XII BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC. SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer. SECTION 2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman of the Board, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers, incident to the ownership of stock by the Corporation. The Chairman of the Board, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and 12 may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person. SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law. ARTICLE XIII AMENDMENTS The Board of Directors shall have power to adopt, amend or repeal By-laws. By-laws adopted by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors. 13 EX-3.7 9 a2082545zex-3_7.txt EXHIBIT 3.7 EXHIBIT 3.7 CERTIFICATE OF INCORPORATION OF H&S ACQUISITION CORP. THE UNDERSIGNED, being a natural person for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware, hereby certifies that: FIRST: The name of the Corporation is H&S Acquisition Corp. SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act of activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is One Thousand (1,000), all of which shares shall be Common Stock having a par value of $0.01. FIFTH: The name and mailing address of the incorporator is Stuart C. Hirsch, c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153. SIXTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in these articles of incorporation, by-laws of the Corporation may be adopted, amended or repealed by a majority of the board of directors of the Corporation, but any by-laws adopted by the board of directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot. SEVENTH: The Corporation shall indemnify, to the full extent permitted by Section 145 of the General Corporation Law of Delaware, as amended from time to time, all persons whom it may indemnify pursuant thereto. No director shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the General Corporation Law of Delaware or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached his or her duty of loyalty to the Corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article Seventh nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article Seventh, shall eliminate or reduce the effect of this Article Seventh in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Seventh, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Incorporation on this 8th day of May, 1998. /s/ Stuart C. Hirsch --------------------------- Stuart C. Hirsch Sole Incorporator 2 EX-3.8 10 a2082545zex-3_8.txt EXHIBIT 3.8 EXHIBIT 3.8 BY-LAWS OF H&S GRAPHICS, INC. (a Delaware corporation) ARTICLE I STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation. SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held. SECTION 4. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 5. QUORUM. Except as otherwise provided by law or the Corporation's Certificate of Incorporation, a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder. SECTION 6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairman's absence the Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the President, if any, or if none or in the President's absence a Vice-President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. SECTION 7. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-laws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast. (b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 8. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, 2 the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. ARTICLE II BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be two (2), or such larger number as may be fixed from time to time by action of the stock holders or Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies. (b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. (c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of 3 the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting. SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, President or by a majority of the directors then in office. SECTION 8. NOTICE OF MEETINGS. A notice of the place, date and time and the purpose or purposes of each meeting of the Board of Directors shall be given to each director by mailing the same at least two days before the special meeting, or by telegraphing or telephoning the same or by delivering the same personally not later than the day before the day of the meeting. SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman, if any, or if none or in the Chairman's absence or inability to act the President, or in the President's absence or inability to act any Vice-President who is a member of the Board of Directors, or in such Vice-President's absence or inability to act a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary. SECTION 10. RESIGNATION. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors. 4 SECTION 11. VACANCIES. Unless otherwise provided in these By-laws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders, by the holders of shares entitled to vote for the election of directors. SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. ARTICLE III COMMITTEES SECTION 1. APPOINTMENT. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment. SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors. SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee. SECTION 4. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors. ARTICLE IV OFFICERS SECTION 1. ELECTION AND QUALIFICATIONS. The Board of Directors shall elect the officers of the Corporation, which shall include a President and a Secretary, and 5 may include, by election or appointment, one or more Vice-Presidents (any one or more of whom may be given an additional designation of rank of function), a Treasurer and such assistant secretaries, such Assistant Treasurers and such other officers as the Board may from time to time deem proper. Each officer shall have such powers and duties as may be prescribed by these By-laws and as may be assigned by the Board of Directors or the President. Any two or more offices may be held by the same person except the offices of President and Secretary. SECTION 2. TERM OF OFFICE AND REMUNERATION. The term of office of all officers shall be one year and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the Board of Directors. Any vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors. The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide. SECTION 3. RESIGNATION; REMOVAL. Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any officer shall be subject to removal, with or without cause, at any time by vote of a majority of the entire Board. SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors. SECTION 5. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President shall be the Chief Executive Officer of the Corporation and shall have such duties as customarily pertain to that office. The President shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employees; and may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments. SECTION 6. VICE-PRESIDENT. A Vice-President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority as from time to time may be assigned by the Board of Directors or the President. SECTION 7. TREASURER. The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors or the President. SECTION 8. SECRETARY. The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors or the President. 6 SECTION 9. ASSISTANT OFFICERS. Any assistant officer shall have such powers and duties of the officer such assistant officer assists as such officer or the Board of Directors shall from time to time prescribe. ARTICLE V BOOKS AND RECORDS SECTION 1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-laws and by such officer or agent as shall be designated by the Board of Directors. SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a 7 meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. ARTICLE VI CERTIFICATES REPRESENTING STOCK SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation. SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon. SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of 8 the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of the stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. ARTICLE VII DIVIDENDS Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VIII RATIFICATION Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. 9 ARTICLE IX CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE XI WAIVER OF NOTICE Whenever notice is required to be given by these By-laws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XII BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC. SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer. SECTION 2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. 10 SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person. SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law. ARTICLE XIII AMENDMENTS The Board of Directors shall have power to adopt, amend or repeal By-laws. By-laws adopted by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors. 11 EX-3.9 11 a2082545zex-3_9.txt EXHIBIT 3.9 EXHIBIT 3.9 CERTIFICATE OF INCORPORATION OF PREFACE ACQUISITION CORP. THE UNDERSIGNED, being a natural person for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware, hereby certifies that: FIRST: The name of the Corporation is Preface Acquisition Corp. SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the Corporation in the state of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is One Thousand (1,000), all of which shares shall be Common Stock having a par value of $0.01. FIFTH: The name and mailing address of the incorporator is Stuart C. Hirsch, c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153. SIXTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in these articles of incorporation, by-laws of the Corporation may be adopted, amended or repealed by a majority of the board of directors of the Corporation, but any by-laws adopted by the board of directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot. SEVENTH: The Corporation shall indemnify, to the full extent permitted by Section 145 of the General Corporation Law of Delaware, as amended from time to time, all persons whom it may indemnify pursuant thereto. No director shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the General Corporation Law of Delaware or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached his or her duty of loyalty to the Corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article Seventh nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article Seventh, shall eliminate or reduce the effect of this Article Seventh in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Seventh, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Incorporation on this 8th day of May, 1998. /s/ Stuart C. Hirsch -------------------------- Stuart C. Hirsch Sole Incorporator 2 EX-3.10 12 a2082545zex-3_10.txt EXHIBIT 3.10 EXHIBIT 3.10 BY-LAWS OF PREFACE, INC. (a Delaware corporation) ARTICLE I STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation. SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held. SECTION 4. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 5. QUORUM. Except as otherwise provided by law or the Corporation's Certificate of Incorporation, a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder. SECTION 6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairman's absence the Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the President, if any, or if none or in the President's absence a Vice-President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. SECTION 7. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such shareholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-laws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast. (b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 8. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, 2 the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. ARTICLE II BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be two (2), or such larger number as may be fixed from time to time by action of the stockholders or Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies. (b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. (c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of 3 the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting. SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, President or by a majority of the directors then in office. SECTION 8. NOTICE OF MEETINGS. A notice of the place, date and time and the purpose or purposes of each meeting of the Board of Directors shall be given to each director by mailing the same at least two days before the special meeting, or by telegraphing or telephoning the same or by delivering the same personally not later than the day before the day of the meeting. SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman, if any, or if none or in the Chairman's absence or inability to act the President, or in the President's absence or inability to act any Vice-President who is a member of the Board of Directors, or in such Vice-President's absence or inability to act a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary. SECTION 10. RESIGNATION. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors. 4 SECTION 11. VACANCIES. Unless otherwise provided in these By-laws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders, by the holders of shares entitled to vote for the election of directors. SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. ARTICLE III COMMITTEES SECTION 1. APPOINTMENT. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment. SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors. SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee. SECTION 4. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors. ARTICLE IV OFFICERS SECTION 1. ELECTION AND QUALIFICATIONS. The Board of Directors shall elect the officers of the Corporation, which shall include a President and a Secretary, and 5 may include, by election or appointment, one or more Vice-Presidents (any one or more of whom may be given an additional designation of rank or function), a Treasurer and such assistant secretaries, such Assistant Treasurers and such other officers as the Board may from time to time deem proper. Each officer shall have such powers and duties as may be prescribed by these By-laws and as may be assigned by the Board of Directors or the President. Any two or more offices may be held by the same person except the offices of President and Secretary. SECTION 2. TERM OF OFFICE AND REMUNERATION. The term of office of all officers shall be one year and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the Board of Directors. Any vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors. The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide. SECTION 3. RESIGNATION; REMOVAL. Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any officer shall be subject to removal, with or without cause, at any time by vote of a majority of the entire Board. SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors. SECTION 5. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President shall be the Chief Executive Officer of the Corporation and shall have such duties as customarily pertain to that office. The President shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employees; and may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments. SECTION 6. VICE-PRESIDENT. A Vice-President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority as from time to time may be assigned by the Board of Directors or the President. SECTION 7. TREASURER. The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors or the President. SECTION 8. SECRETARY. The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors or the President. 6 SECTION 9. ASSISTANT OFFICERS. Any assistant officer shall have such powers and duties of the officer such assistant officer assists as such officer or the Board of Directors shall from time to time prescribe. ARTICLE V BOOKS AND RECORDS SECTION 1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-laws and by such officer or agent as shall be designated by the Board of Directors. SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a 7 meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. ARTICLE VI CERTIFICATES REPRESENTING STOCK SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation. SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon. SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual of facsimile signature of an officer of 8 the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. ARTICLE VII DIVIDENDS Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VIII RATIFICATION Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. 9 ARTICLE IX CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE XI WAIVER OF NOTICE Whenever notice is required to be given by these By-laws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XII BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC. SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer. SECTION 2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. 10 SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person. SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law. ARTICLE XIII AMENDMENTS The Board of Directors shall have power to adopt, amend or repeal By-laws. By-laws adopted by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors. 11 EX-3.11 13 a2082545zex-3_11.txt EXHIBIT 3.11 EXHIBIT 3.11 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:00 PM 02/20/2002 020111049 - 3493694 CERTIFICATE OF INCORPORATION OF PRECISION OFFSET PRINTING COMPANY, INC. THE UNDERSIGNED, being a natural person for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware, hereby certifies that: FIRST: The name of the Corporation (which is hereinafter referred to as the "Corporation") is: "Precision Offset Printing Company, Inc." SECOND: The address of the registered office of the Corporation in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware, as from time to time amended (the "DGCL"). The Corporation shall have all powers that may now or hereafter be lawful for a corporation to exercise under the DGCL. FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 500, all of which shares, with the par value of $100.00 per share, shall be designated Common Stock. FIFTH: The name and mailing address of the incorporator are David M. Blittner, c/o Weil, Gotshal & Manages LLP, 767 Fifth Avenue, New York, New York, 10153. SIXTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate of Incorporation, the by-laws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any by-laws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot. SEVENTH: (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgment, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974, as in effect from time to time) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of such person's heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in paragraph (b) of this Article, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article shall be a contract right and shall include the right to have the Corporation pay the expenses incurred in defending any such proceeding in advance of its final disposition; any advance payments to be paid by the Corporation within 20 calendar days after the receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances from time to time; PROVIDED, HOWEVER, that, if and to the extent the DGCL requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such director or officer is not entitled to be indemnified under this Article or otherwise. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to have the Corporation pay the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. (b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under section (a) of this Article SEVENTH is not paid in full by the Corporation within 30 calendar days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standard of conduct which makes it permissible under the DGCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met 2 such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article SEVENTH shall not be exclusive of any other right which any person (including, without limitation, any person other than an officer or director of the Corporation) may have or hereafter acquire under any statute, provision of this Certificate of Incorporation, By-Laws, agreement, vote of stockholders or disinterested directors or otherwise. No repeal, modification or amendment of, or adoption of any provision inconsistent with, this Article SEVENTH, or, to the fullest extent permitted by applicable law, any modification of law, shall in any way diminish or adversely affect the rights of any director or officer of the Corporation hereunder in respect of any occurrence or matter arising prior to any such repeal, amendment, adoption or modification. (d) INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. (e) SEVERABILITY. If any provision of this Article SEVENTH shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the validity, legality and enforceability of the remaining provisions of this Article (including, without limitation, each portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (2) to the fullest extent possible, the provisions of this Article (including, without limitation, each such portion of any paragraph of this Article containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. EIGHTH: No director of the Corporation shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the DGCL) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached the duty of loyalty to the Corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article EIGHTH nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article EIGHTH, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit, or claim 3 that, but, for this Article would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. If the DGCL is amended after approval by the stockholders of this Article EIGHTH to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Incorporation on this 20th day of February, 2002. /s/ David M. Blittner ---------------------------- David M. Blittner Sole Incorporator 4 EX-3.12 14 a2082545zex-3_12.txt EXHIBIT 3.12 EXHIBIT 3.12 BY-LAWS OF PRECISION OFFSET PRINTING COMPANY, INC. (a Delaware corporation) ARTICLE I STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Chairman of the Board, by the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation. SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to held. SECTION 4. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to the vote in person or by proxy at any meeting or stockholders. SECTION 5. QUORUM. Except as otherwise provided by law or the Corporation's Certificate of Incorporation (including any amendments thereto, the "Certificate of Incorporation"), a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder. SECTION 6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board or, in the Chairman of the Board's absence, the President, or in the absence of either of such officers, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting. SECTION 7. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholders shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Delaware General Corporation Law or the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-laws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast. (b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares 2 entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. SECTION 8. INSPECTORS. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign on oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as the proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. ARTICLE II BOARD OF DIRECTORS SECTION 1. GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be fixed from time to time by action of the stockholders or Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman of the Board. The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies. (b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. 3 (c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and, if authorized by a resolution of the Board of Directors, may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting. SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholder's meeting is held. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, the President or by a majority of the directors then in office. SECTION 8. NOTICE OF MEETINGS. A notice of the place, date and time of each meeting of the Board of Directors shall be given to each director by mailing the same at least three days before the special meeting, or by telegraphing, transmitting by facsimile or telephoning the same or by delivering the same personally not later than the day before the day of the meeting, but notice need not be given to any director who shall, either before or after the meeting, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting other than for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Any such notice need not state the purpose of the meeting. 4 SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman of the Board, or in the Chairman of the Board's absence or inability to act, the President, or in the absence of both, a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary. SECTION 10. RESIGNATION; REMOVAL. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors. SECTION 11. VACANCIES. Unless otherwise provided in these By-laws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders by the holders of shares entitled to vote for the election of directors. SECTION 12. ACTION OF WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. SECTION 13. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of the Board of Directors may participate in any meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. ARTICLE III COMMITTEES SECTION 1. APPOINTMENT. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment. SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall 5 constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors. SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee. SECTION 4. MEETING BY MEANS OF COMMUNICATION EQUIPMENT. Any one or more members of any committee of the Board of Directors may participate in any meeting of such committee of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 5. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors. ARTICLE IV OFFICERS SECTION 1. REQUIRED OFFICERS. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Treasurer, and a Secretary. Any number of officers may be held by the same person unless the certificate of incorporation or these By-laws otherwise provide. SECTION 2. ADDITIONAL OFFICERS. The Board of Directors may appoint a Chairman of the Board, Vice Chairman, Chief Executive Officer, Chief Operating Officer and/or a Chief Financial Officer as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined or prescribed from time to time by the Board of Directors. The President may appoint subordinate officers, including one or more vice presidents and other assistant officers and employees, as he shall deem necessary, who shall hold their offices for such times and shall exercise such powers and perform such duties as shall be determined from time to time by the President. SECTION 3. ELECTION OF OFFICERS. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose the officers of the Corporation, except that the first officers of the Corporation shall be chosen by the initial directors at the organizational meeting of the Board of Directors following incorporation. 6 SECTION 4. COMPENSATION. The salaries of all officers and agents of the Corporation shall be fixed by or in the manner prescribed by the Board of Directors. SECTION 5. TENURE. Each officer of the Corporation shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. SECTION 6. REMOVAL. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the entire Board of Directors. Any subordinate officer appointed by the President may be removed at any time by the President or by the affirmative vote of the Board of Directors. SECTION 7. RESIGNATION. Any officer may resign at any time upon written notice. Any such resignation shall take effect at the date of receipt of such notice or at any other date specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 8. VACANCIES. Any vacancy occurring in any office of the Corporation appointed by the Board of Directors shall be filled by or in the manner prescribed by the Board of Directors. Any vacancy occurring in any subordinate office of the Corporation may be filled by the President. SECTION 9. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors. Any document or instrument may be signed by the Chairman of the Board on behalf and in the name of the Corporation. The Chairman of the Board shall have other duties as the Board of Directors may from time to time establish. SECTION 10. PRESIDENT. The President shall have general and active supervision and management of the business and affairs of the Corporation. The President may sign, on behalf and in the name of the Corporation, certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other documents or instruments of the Corporation, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-laws to some other officer or agent of the Corporation, or shall be required by law to be otherwise signed or executed, and, in general, shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. SECTION 11. VICE PRESIDENT. A vice president shall generally assist the President and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. A vice president may execute and deliver, on behalf and in the name of the Corporation, contracts and other obligations and instruments of the Corporation pertaining to the regular course of the duties of said office, except in cases where the signing or execution thereof shall be 7 expressly delegated by the Board of Directors or these By-laws to some other officer or agent of the Corporation. SECTION 12. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings of the meetings of the stockholders and of the Board of directors in a book to be kept for that purpose, and shall perform like duties for the standing committees when requested by such committees. The Secretary shall give, or cause to be given, required notice of all meetings of the stockholders and the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary shall have custody of the stock certificate books and stockholder records and such other books and records as the Board of Directors may direct. The Secretary shall have custody of the corporate seal of the Corporation and shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the secretary's signature. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his signature. The Secretary shall, in general, perform all duties incident to the office of a secretary of a corporation and such duties as, from time to time, may be prescribed the Board of Directors or by the President. SECTION 13. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors and shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, the President and the Board of Directors, at its regular meetings, or when the Chairman of the Board, the President or the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation, and shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. ARTICLE V BOOKS AND RECORDS SECTION 1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-laws and by such officer or agent as shall be designated by the Board of Directors. SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or by overnight courier, or mailed to 8 each stockholder at the stockholder's address as it appears on the records of the Corporation. SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 9 ARTICLE VI CERTIFICATES REPRESENTING STOCK SECTION 1. CERTIFICATES: SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation. SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon. SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate, therefore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal 10 representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars for any class or series of its capital stock. ARTICLE VII DIVIDENDS Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conductive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VIII RATIFICATION Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. ARTICLE IX CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or 11 otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE XI WAIVER OF NOTICE Whenever notice is required to be given by these By-laws or by the Certificate of Incorporation or by law, a written thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XII BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC. SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer. SECTION 2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman of the Board, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman of the Board, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or 12 power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person. SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law. ARTICLE XIII AMENDMENTS The Board of Directors shall have power to adopt, amend or repeal By-laws. By-laws adopted by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors. 13 EX-4.1 15 a2082545zex-4_1.txt EXHIBIT 4.1 EXHIBIT 4.1 ================================================================================ --------------------------------- Von Hoffmann Corporation and each of the Guarantors named herein 10 1/4% Senior Notes due 2009 --------------------------------- INDENTURE Dated as of March 26, 2002 --------------------------------- --------------------------------- U.S. Bank National Association Trustee --------------------------------- ================================================================================ CROSS-REFERENCE TABLE*
TRUST INDENTURE ACT SECTION INDENTURE SECTION 310(a)(1)............................................. 7.10 (a)(2)............................................. 7.10 (a)(3)............................................. N.A. (a)(4)............................................. N.A. (a)(5)............................................. 7.10 (b)................................................ 7.10 (c)................................................ N.A. 311(a)................................................ 7.11 (b)................................................ 7.11 (c)................................................ N.A. 312(a)................................................ 2.05 (b)................................................ 12.03 (c)................................................ 12.03 313(a)................................................ 7.06 (b)(1)............................................. N.A. (b)(2)............................................. 7.06; 7.07 (c)................................................ 7.06; 12.02 (d)................................................ 7.06 314(a)................................................ 4.03;12.02; 12.05 (b)................................................ N.A. (c)(1)............................................. 12.04 (c)(2)............................................. 12.04 (c)(3)............................................. N.A. (d)................................................ N.A. (e)................................................ 12.05 (f)................................................ N.A. 315(a)................................................ 7.01 (b)................................................ 7.05,12.02 (c)................................................ 7.01 (d)................................................ 7.01 (e)................................................ 6.11 316(a)(last sentence)................................. 2.09 (a)(1)(A).......................................... 6.05 (a)(1)(B).......................................... 6.04 (a)(2)............................................. N.A. (b)................................................ 6.07 (c)................................................ 2.12 317(a)(1)............................................. 6.08 (a)(2)............................................. 6.09 (b)................................................ 2.04 318(a)................................................ 12.01 (b)................................................ N.A. (c)................................................ 12.01
N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. TABLE OF CONTENTS
PAGE ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions.......................................................................1 Section 1.02 Other Definitions................................................................18 Section 1.03 Incorporation by Reference of Trust Indenture Act................................19 Section 1.04 Rules of Construction............................................................19 ARTICLE 2. THE NOTES Section 2.01 Form and Dating..................................................................20 Section 2.02 Execution and Authentication.....................................................21 Section 2.03 Registrar and Paying Agent.......................................................21 Section 2.04 Paying Agent to Hold Money in Trust..............................................22 Section 2.05 Holder Lists.....................................................................22 Section 2.06 Transfer and Exchange............................................................22 Section 2.07 Replacement Notes................................................................34 Section 2.08 Outstanding Notes................................................................34 Section 2.09 Treasury Notes...................................................................35 Section 2.10 Temporary Notes..................................................................35 Section 2.11 Cancellation.....................................................................35 Section 2.12 Defaulted Interest...............................................................35 ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee...............................................................36 Section 3.02 Selection of Notes to Be Redeemed or Purchased...................................36 Section 3.03 Notice of Redemption.............................................................36 Section 3.04 Effect of Notice of Redemption...................................................37 Section 3.05 Deposit of Redemption or Purchase Price..........................................37 Section 3.06 Notes Redeemed or Purchased in Part..............................................38 Section 3.07 Optional Redemption..............................................................38 Section 3.08 Mandatory Redemption.............................................................39 Section 3.09 Offer to Purchase by Application of Excess Proceeds..............................39 ARTICLE 4. COVENANTS Section 4.01 Payment of Notes.................................................................40 Section 4.02 Maintenance of Office or Agency..................................................41 Section 4.03 Reports..........................................................................41 Section 4.04 Compliance Certificate...........................................................42 Section 4.05 Taxes............................................................................42 Section 4.06 Stay, Extension and Usury Laws...................................................42 Section 4.07 Restricted Payments..............................................................42 Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries...................45 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.......................46
Section 4.10 Asset Sales......................................................................48 Section 4.11 Transactions with Affiliates.....................................................50 Section 4.12 Liens............................................................................50 Section 4.13 Corporate Existence..............................................................51 Section 4.14 Offer to Repurchase Upon Change of Control.......................................51 Section 4.15 Additional Subsidiary Guarantees.................................................52 ARTICLE 5. SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets.........................................53 Section 5.02 Successor Corporation Substituted................................................53 ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01 Events of Default................................................................54 Section 6.02 Acceleration.....................................................................55 Section 6.03 Other Remedies...................................................................56 Section 6.04 Waiver of Past Defaults..........................................................56 Section 6.05 Control by Majority..............................................................56 Section 6.06 Limitation on Suits..............................................................56 Section 6.07 Rights of Holders of Notes to Receive Payment....................................57 Section 6.08 Collection Suit by Trustee.......................................................57 Section 6.09 Trustee May File Proofs of Claim.................................................57 Section 6.10 Priorities.......................................................................58 Section 6.11 Undertaking for Costs............................................................58 ARTICLE 7. TRUSTEE Section 7.01 Duties of Trustee................................................................58 Section 7.02 Rights of Trustee................................................................59 Section 7.03 Individual Rights of Trustee.....................................................60 Section 7.04 Trustee's Disclaimer.............................................................60 Section 7.05 Notice of Defaults...............................................................60 Section 7.06 Reports by Trustee to Holders of the Notes.......................................60 Section 7.07 Compensation and Indemnity.......................................................61 Section 7.08 Replacement of Trustee...........................................................61 Section 7.09 Successor Trustee by Merger, etc.................................................62 Section 7.10 Eligibility; Disqualification....................................................62 Section 7.11 Preferential Collection of Claims Against Company................................63 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.........................63 Section 8.02 Legal Defeasance and Discharge...................................................63 Section 8.03 Covenant Defeasance..............................................................63 Section 8.04 Conditions to Legal or Covenant Defeasance.......................................64 Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other .............. Miscellaneous Provisions.................................................. 65 Section 8.06 Repayment to Company.............................................................65 Section 8.07 Reinstatement....................................................................66
ii ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes..............................................66 Section 9.02 With Consent of Holders of Notes.................................................67 Section 9.03 Compliance with Trust Indenture Act..............................................68 Section 9.04 Revocation and Effect of Consents................................................68 Section 9.05 Notation on or Exchange of Notes.................................................68 Section 9.06 Trustee to Sign Amendments, etc..................................................69 ARTICLE 10. NOTE GUARANTEES Section 10.01. Guarantee........................................................................69 Section 10.02. Limitation on Guarantor Liability................................................70 Section 10.03. Execution and Delivery of Note Guarantee.........................................70 Section 10.04. Guarantors May Consolidate, etc., on Certain Terms...............................71 Section 10.05. Releases of Guarantors...........................................................72 ARTICLE 11. SATISFACTION AND DISCHARGE Section 11.01 Satisfaction and Discharge.......................................................72 Section 11.02 Application of Trust Money.......................................................73 ARTICLE 12. MISCELLANEOUS Section 12.01 Trust Indenture Act Controls.....................................................74 Section 12.02 Notices..........................................................................74 Section 12.03 Communication by Holders of Notes with Other Holders of Notes....................75 Section 12.04 Certificate and Opinion as to Conditions Precedent...............................75 Section 12.05 Statements Required in Certificate or Opinion....................................75 Section 12.06 Rules by Trustee and Agents......................................................75 Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders.........76 Section 12.08 Governing Law....................................................................76 Section 12.09 No Adverse Interpretation of Other Agreements....................................76 Section 12.10 Successors.......................................................................76 Section 12.11 Severability.....................................................................76 Section 12.12 Counterpart Originals............................................................76 Section 12.13 Table of Contents, Headings, etc.................................................76
EXHIBITS Exhibit A1 FORM OF NOTE Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTE GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE iii INDENTURE dated as of March 26, 2002 among Von Hoffmann Corporation, a Delaware corporation (the "COMPANY"), the Guarantors (as defined) and U.S. Bank National Association, as trustee (the "TRUSTEE"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the Company's 10 1/4% Senior Notes due 2009 (the "NOTES"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 DEFINITIONS. "144A GLOBAL NOTE" means a Global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "ACQUIRED DEBT" means, with respect to any specified Person: (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, including, without limitation, Indebtedness 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" means an unlimited amount of Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof as part of the same class as the Initial Notes. "ADJUSTED TREASURY RATE" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 50 basis points. "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" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), 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 securities of a Person shall be deemed to be control. "AGENT" means any Registrar, co-registrar, Paying Agent or additional paying agent. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "ASSET SALE" means: (1) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory or obsolete or unused equipment or assets in the ordinary course of business (PROVIDED that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of this Indenture described under Section 4.14 and/or the provisions described under Section 5.01 and not by the provisions of Section 4.10); and (2) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (1) or (2), whether in a single transaction or a series of related transactions for Net Proceeds in excess of $2.0 million. Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale: (1) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (2) an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary; and (3) a Restricted Payment or Permitted Investment that is permitted by Section 4.07. "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 lessee, 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. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the board of directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a similar function. "BROKER-DEALER" has the meaning set forth in the Registration Rights Agreement. "BUSINESS DAY" means any day other than a Legal Holiday. 2 "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or other 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. "CASH EQUIVALENTS" means: (1) United States dollars; (2) any evidence of Indebtedness, maturing not more than one year after the date of their acquisition, issued directly by the United States of America or any agency thereof or guaranteed by the United States of America or any agency thereof; (3) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any obligor) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody's, or (ii) any lender party to the Credit Facilities (or its holding company): (4) any time deposit, certificate of deposit or bankers acceptance, maturing not more than one year after the date of their acquisition, maintained with or issued by either (i) a commercial banking institution (including U.S. branches of foreign banking institutions) that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or (ii) any lender party to the Credit Facilities; (5) short-term tax-exempt securities rated not lower than MIG-1/1+ by either Moody's or S&P with provisions for liquidity or maturity accommodations of 183 days or less; (6) repurchase agreements with respect to any securities referred to in clause (2) above entered into with any entity referred to in clause (3) or (4) above or any other financial institution whose unsecured long-term debt (or the unsecured long-term debt of whose holding company) is rated at least A- or better by S&P or Baal or better by Moody's and maturing not more than one year after the date of their acquisition; and (7) any money market or similar fund the assets of which are comprised exclusively of any of the items specified in clauses (1) through (5) above and as to which withdrawals are permitted at least every 90 days. "CLEARSTREAM" means Clearstream Banking, S.A. 3 "CHANGE OF CONTROL" means the occurrence of any of the following: (1) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d) (3) of the Exchange Act) other than DLJMB; (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (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 Existing Shareholders and an entity that is the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a 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), directly or indirectly, of 100% of the common stock of the Company, becomes the "beneficial owner" (as defined above) of more than 50% of the Voting Stock of the Company or Holdings (measured by voting power rather than number of shares); or (4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "COMPANY" means Von Hoffmann Corporation, and any and all successors thereto. "COMPARABLE TREASURY ISSUE" means the United States Treasury Security selected by the Reference Treasury Dealer as having a maturity comparable to the remaining term of the Notes that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. "COMPARABLE TREASURY PRICE" means, with respect to any redemption date: (1) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities;" or (2) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "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 4 (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 included in computing such Consolidated Net Income; PLUS (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, 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 but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) 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; PLUS (5) any non-capitalized transaction costs incurred in connection with actual or proposed financings, acquisitions or divestitures (including, but not limited to, financing and refinancing fees and costs incurred in connection with the Refinancing), in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, 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 a Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent (and in the same proportion) that the Net Income of such Subsidiary was included in calculating the Consolidated Net Income of such Person and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; PROVIDED that: (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 referent Person or a Wholly Owned Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders (other than Credit Facilities, the indebtedness of which is permitted to be incurred under this Indenture); 5 (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 cumulative effect of a change in accounting principles shall be excluded; and (5) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the Company or one of its Subsidiaries. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of this Indenture; 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 such Board of Directors at the time of such nomination or election. "CORPORATE TRUST OFFICE OF THE TRUSTEE" will be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "CREDIT FACILITIES" means, one or more debt facilities or commercial paper facilities or other agreements, in each case with banks or other institutional lenders or agents providing for revolving credit loans, term loans, financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or the issuance of securities, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time whether with the same or different banks or lenders or agents and whether represented by one or more facilities or agreements. "CSFB" means Credit Suisse First Boston Corporation its successors and their Affiliates. "CUSTODIAN" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "DEFAULT" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "DEFINITIVE NOTE" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. 6 "DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates. "DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support (other than through a Lien on its Capital Stock) for any Indebtedness of the Company. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear system. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE NOTES" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "EXCHANGE OFFER" has the meaning set forth in the Registration Rights Agreement. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Facilities) in existence on the date of this Indenture, until such amounts are repaid. "EXISTING SHAREHOLDERS" means DLJMB, ZS and the Management Holders. "FINANCIAL ADVISORY AGREEMENT" means the letter agreement dated the date of this Indenture between the Company and CSFB. "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, 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); (2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; (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); and (4) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments 7 on Equity Interests payable solely in Equity Interests of the Company and other than any dividend payment that may be deemed to have been made as a result of an increase in the liquidation preference of any preferred stock, TIMES (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings unless permanently reduced) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above: (1) acquisitions that have been made by the Company 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 to include the Consolidated Cash Flow of the acquired entities (adjusted to exclude (a) the cost of any compensation, remuneration or other benefit paid or provided to any employee, consultant, Affiliate or equity owner of the acquired entities to the extent such costs are eliminated and not replaced and (b) the amount of any reduction in general, administrative or overhead costs or other non-recurring items of the acquired entities, in each case, as determined in good faith by an officer of the Company) and 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 referent 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 applicable as of the date of determination. 8 "GLOBAL NOTES" means, individually and collectively, each of the Global Notes, substantially in the form of Exhibits A1 and A2 hereto issued in accordance with Sections 2.01, 2.06(b)(4), or 2.06(f) hereof. "GLOBAL NOTE LEGEND" means the legend set forth in Section 2.06(g)(2), which is required to be placed on all Global Notes issued under this Indenture. "GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "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, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "GUARANTORS" means all Domestic Subsidiaries and, so long as it guarantees any Obligations under the Credit Facilities, Holdings. "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; and (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HOLDER" means a Person in whose name a Note is registered. "HOLDINGS" means Von Hoffmann Holdings Inc., a Delaware corporation, and its successors. "IAI GLOBAL NOTE" means a Global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances; (3) representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property; or (4) representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is 9 assumed by such 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 will be: (1) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest; 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. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDIRECT PARTICIPANT" means a Person who holds a beneficial interest in a Global Note through a Participant. "INITIAL NOTES" means the first $215 million aggregate principal amount of Notes issued under this Indenture on the date hereof. "INITIAL PURCHASER" means Credit Suisse First Boston Corporation. "INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07. "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or 10 agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "LIQUIDATED DAMAGES" means all liquidated damages then owing pursuant to the Registration Rights Agreement. "MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any employee of the Company or Holdings (or any of their Restricted Subsidiaries). "MANAGEMENT HOLDERS" means holders of Management Equity Interests on the date of this Indenture. "MOODY'S" means Moody's Investors Service, Inc. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) 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 (including, without limitation, dispositions pursuant to sale and leaseback transactions) 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 (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the Credit Facilities) 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 the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; 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 of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and 11 (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "NON-U.S. PERSON" means a Person who is not a U.S. Person. "NOTE GUARANTEE" means the Guarantee by each Guarantor of the Company's payment obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture. "NOTES" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness, including any Guarantees of such Indebtedness. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "PARTICIPANT" means, with respect to DTC, Euroclear or Clearstream, a Person who has an account with DTC, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "PERMITTED INVESTMENTS" means (1) any Investment in the Company or in a Restricted Subsidiary of the Company; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Company; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; (4) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10; 12 (5) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (6) any loan made to management in order to enable management to purchase equity in Holdings, or any refinancing of any loan made to management, which loan was made to enable management to purchase equity in Holdings; (7) other Investments 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 (7) that are at the time outstanding, not to exceed $2.0 million; and (8) Investments received solely in exchange for Equity Interests of the Company. "PERMITTED LIENS" means (1) Liens securing Credit Facilities, other than Liens securing Indebtedness incurred under Credit Facilities that is issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace or refund, the principal of the Senior Subordinated Notes at its Stated Maturity; (2) Liens in favor of the Company or any of their Restricted Subsidiaries; (3) Liens on property of a Person existing at the time such Person is acquired by, merged into or consolidated with the Company or any Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (4) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (5) 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; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of Section 4.09 covering only the assets acquired with, or the subject of the lease or mortgage pertaining to, such Indebtedness; (7) Liens existing on the date of this Indenture; (8) 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 therefore; (9) Liens to secure any Permitted Refinancing Indebtedness, PROVIDED that such Liens are not materially more restrictive than the Liens that secured the Indebtedness being refinanced; 13 (10) statutory Liens of landlords and carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefore; (11) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Company and its Subsidiaries taken as a whole; and (12) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Subsidiary. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries; 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, premium and prepayment penalties, if any, on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other agency. "PRIVATE PLACEMENT LEGEND" means the legend set forth in Section 2.06(g)(1) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. 14 "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "REFERENCE TREASURY DEALER" means Credit Suisse First Boston Corporation and its successors; PROVIDED, HOWEVER, that if Credit Suisse First Boston Corporation shall cease to be a primary U.S. government securities dealer in New York City (a "PRIMARY TREASURY DEALER"); the Company shall substitute therefor another primary U.S. government securities dealer to be the Primary Treasury Dealer. "REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to any redemption date, the average as determined by the Trustee, of the bid and asked prices of the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by the Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of March 26, 2002, among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements among the Company, the Guarantors and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "REGULATION S PERMANENT GLOBAL NOTE" means a permanent Global Note in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, initially issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "REGULATION S TEMPORARY GLOBAL NOTE" means a temporary Global Note in the form of Exhibit A2 hereto deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "REMAINING SCHEDULED PAYMENTS" means, with respect to each Note to be redeemed, (a) the redemption price of such Note on March 15, 2005 and (b) the remaining scheduled payments of interest thereon that would be due on or prior to March 15, 2005 but after the related redemption date but for such redemption; PROVIDED, HOWEVER, that, if such redemption date is not an interest payment date on the Notes, the amount of the next succeeding scheduled interest payment on the Notes to be redeemed will be reduced by the amount of interest accrued on those Notes to such redemption date. "RESPONSIBLE OFFICER" when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the Private Placement Legend. 15 "RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private Placement Legend. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED PERIOD" means the 40-day distribution compliance period as defined in Regulation S. "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 903" means Rule 903 promulgated under the Securities Act. "RULE 904" means Rule 904 promulgated the Securities Act. "S&P" means Standard & Poor's Ratings Group. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR SUBORDINATED NOTES" means the 10 3/8% Senior Subordinated Notes due 2007 of the Company. "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article l, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, 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. "SUBORDINATED SHAREHOLDER LOAN" means one or more loans from Holdings to the Company, each of which shall: (1) have a Stated Maturity in respect of principal no earlier than 91 days following the maturity of the Notes; (2) be subordinated in right of payment to the Notes to the same or a greater extent than the Senior Subordinated Notes are subordinated to the Notes; (3) have covenants no more restrictive to the Company or its Restricted Subsidiaries than those relating to the Notes; and (4) provide that the lender thereunder will not be entitled to any cash interest payments so long as any of the Notes are outstanding. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general 16 partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "TAX SHARING AGREEMENT" means that certain tax sharing agreement between Holdings and the Company, dated as of May 22, 1997, as amended from time to time; PROVIDED such amendment or amendments do not materially adversely effect the Company. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "TRUSTEE" means the party named as such in the preamble to this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "UNRESTRICTED GLOBAL NOTE" means a permanent Global Note and does not bear and is not required to bear the Private Placement Legend. "UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the Board of Directors of the Company 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 party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) 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 the Company 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 the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors of the Company 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 foregoing conditions and was permitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a 17 Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, (ii) such Subsidiary shall execute a Note Guarantee and deliver an opinion of counsel, in accordance with the terms of this Indenture and (iii) no Default or Event of Default would be in existence following such designation. "U.S. PERSON" means a U.S. Person as defined in Rule 902(o) under the Securities Act. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (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 or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. "ZS" means ZS VH L.P., together with ZS VH II L.P., as the context requires. Section 1.02 OTHER DEFINITIONS.
Defined in Term Section ---- ------- "AFFILIATE TRANSACTION"............................................................. 4.11 "ASSET SALE OFFER".................................................................. 3.09 "AUTHENTICATION ORDER".............................................................. 2.02 "CHANGE OF CONTROL OFFER"........................................................... 4.14 "CHANGE OF CONTROL PAYMENT"......................................................... 4.14 "CHANGE OF CONTROL PAYMENT DATE".................................................... 4.14 "COVENANT DEFEASANCE"............................................................... 8.03 "DTC"............................................................................... 2.03 "EVENT OF DEFAULT".................................................................. 6.01 "EXCESS PROCEEDS"................................................................... 4.10
18
Defined in Term Section ---- ------- "INCUR"............................................................................. 4.09 "LEGAL DEFEASANCE".................................................................. 8.02 "OFFER AMOUNT"...................................................................... 3.09 "OFFER PERIOD"...................................................................... 3.09 "PAYING AGENT"...................................................................... 2.03 "PERMITTED DEBT".................................................................... 4.09 "PURCHASE DATE"..................................................................... 3.09 "REGISTRAR"......................................................................... 2.03 "RESTRICTED PAYMENTS"............................................................... 4.07 "SUBORDINATED INDEBTEDNESS"......................................................... 4.07
Section 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and "OBLIGOR" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) "will" shall be interpreted to express a command; (6) provisions apply to successive events and transactions; and 19 (7) references to sections of or rules under the Securities Act will be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES Section 2.01 FORM AND DATING. (a) GENERAL. The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibit A1 hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) GLOBAL NOTES. Notes issued in global form will be substantially in the form of Exhibits A1 or A2 attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) TEMPORARY GLOBAL NOTES. Initial Notes offered and sold in reliance on Regulation S will be issued initially in the form of the Regulation S Temporary Global Note, which will be deposited on behalf of the purchasers of the Notes represented thereby with the Custodian, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period will be terminated upon the receipt by the Trustee of: (1) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof); and (2) an Officers' Certificate from the Company certifying that the Restricted Period has terminated. 20 Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note will be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee will cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (3) EUROCLEAR AND CLEARSTREAM PROCEDURES APPLICABLE. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearsteam. Section 2.02 EXECUTION AND AUTHENTICATION. One Officer must sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid. A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee will, upon receipt of a written order of the Company signed by one Officer (an "AUTHENTICATION ORDER"), authenticate Notes for original issue up to the aggregate principal amount stated in the Notes plus Notes issued to pay Liquidated Damages pursuant to paragraph 2 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 REGISTRAR AND PAYING AGENT. The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. All payments on the Notes will be made at the office or agency of the Paying Agent unless the Company elects to make interest payments by check mailed to the Holders at their address set forth in the register of Holders. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. 21 The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST. The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes. Section 2.05 HOLDER LISTS. The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.06 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if: (1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; (2) in the case of a Global Note held for an account of Euroclear or Clearstream, Euroclear or Clearstream, as the case may be, (A) is closed for business for a continuous period of 14 days (other than by reason of statutory or other holidays), or (B) announces and intention permanently to cease business or does in fact do so; (3) there shall have occurred and be continuing an Event of Default with respect to the Notes and requested by the Trustee; 22 (4) a request for Certificated Notes has been made upon 60 days' prior written notice give to the Trustee in accordance with DTC's customary procedures and a copy of such notice has been received by the Company from the Trustee; or (5) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; PROVIDED that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (1) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; PROVIDED, HOWEVER, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1). (2) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL NOTES. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either: (A) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and 23 (ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or (B) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; PROVIDED that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (3) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (4) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial 24 interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar and the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES. (1) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who 25 takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (2) BENEFICIAL INTERESTS IN REGULATION S TEMPORARY GLOBAL NOTE TO DEFINITIVE NOTES. Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the 26 Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (2) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Company and Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO UNRESTRICTED DEFINITIVE NOTES. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note 27 issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) will not bear the Private Placement Legend. (d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS. (1) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the 28 case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (2) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Company or Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Company and Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (3) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. 29 If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (1) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (2) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a broker-dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or 30 (D) the Registrar receives the following: (i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) UNRESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate: (1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered into the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company; and (2) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will execute and the Trustee will authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) LEGENDS. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (1) Private Placement Legend. 31 (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (V) TO US OR ANY OF OUR SUBSIDIARIES OR (VI) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend. (2) GLOBAL NOTE LEGEND Each Global Note will bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY 32 PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (3) REGULATION S TEMPORARY GLOBAL NOTE LEGEND The Regulation S Temporary Global Note will bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON." (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (1) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 or at the Registrar's request. (2) No service charge will be made to a Holder of a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof). (3) The Registrar will not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (5) The Company will not be required: 33 (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection; (B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (7) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar or the Company pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07 REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08 OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. 34 If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest. Section 2.09 TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded. Section 2.10 TEMPORARY NOTES. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes will be entitled to all of the benefits of this Indenture. Section 2.11 CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12 DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date, PROVIDED that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. 35 ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01 NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth: (1) the clause of this Indenture pursuant to which the redemption shall occur; (2) the redemption date; (3) the principal amount of Notes to be redeemed; and (4) the redemption price or formula, in the case of Section 3.07(a) Section 3.02 SELECTION OF NOTES TO BE REDEEMED. If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption or purchase as follows: (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not listed on any national securities exchange, on a PRO RATA basis, by lot or by such method as the Trustee shall deem fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase. The Trustee will promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of $1,000 or whole multiples of $1,000, except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03 NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 11 of this Indenture. The notice will identify the Notes to be redeemed and will state: 36 (1) the redemption date; (2) the redemption price or how such price will be calculated; (3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in making such redemption payment, interest on Notes or portions of them called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee will give the notice of redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company has delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 DEPOSIT OF REDEMPTION. On or before the redemption or purchase price date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption of and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Liquidated Damages, if any, on, all Notes to be redeemed or purchased. If the Company complies with the provisions of the preceding paragraph, on and after the redemption, interest will cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is 37 paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07 OPTIONAL REDEMPTION. (a) The Notes may be redeemed, in whole or in part, at any time prior to March 15, 2005 at the option of the Company upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to, as determined by the Reference Treasury Dealer, the sum of the present values of the Remaining Scheduled Payments discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable date of redemption. (b) At any time on or prior to March 15, 2005, the Company may redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 110.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of a sale of Equity Interests (other than Disqualified Stock) of the Company or a capital contribution to the Company's common equity from Holdings; PROVIDED that: (1) at least 65% of the aggregate principal amount of Notes issued under this Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption occurs within 90 days of the date of the closing of such sale or contribution. (c) This Section 3.07 does not restrict the Company's ability to separately make open market, privately negotiated or other purchases of Notes from time to time. (d) Except pursuant to the first two paragraphs of this Section 3.07, the Notes are not redeemable at the Company's option prior to March 15, 2005. (e) On or after March 15, 2005, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2005................................. 107.688% 2006................................. 105.125% 2007................................. 102.563% 2008 and thereafter.................. 100.000%
38 (f) Unless the Company defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the Notes or portions thereof called for redemption. (g) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08 MANDATORY REDEMPTION. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company is required to commence an offer to all Holders to purchase Notes (an "ASSET SALE OFFER"), it will follow the procedures specified below. The Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness that is PARI PASSU with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales and assets. The Asset Sale Offer will remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than three Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company will apply all Excess Proceeds (the "OFFER AMOUNT") to the purchase of Notes and such other PARI PASSU Indebtedness (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the Asset Sale Offer If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, and Liquidated Damages, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company will send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which will govern the terms of the Asset Sale Offer, will state: (1) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer will remain open; (2) the Offer Amount, the purchase price and the Purchase Date; (3) that any Note not tendered or accepted for payment will continue to accrue interest; (4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase Date; (5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only; 39 (6) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the expiration of the Offer Period; (7) that Holders will be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (8) that, if the aggregate principal amount of Notes and other PARI PASSU Indebtedness surrendered by Holders exceeds the Offer Amount, the Company will select the Notes and other PARI PASSU Indebtedness to be purchased on a PRO RATA basis based on the principal amount of Notes and such other PARI PASSU Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, will be purchased); and (9) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company will, to the extent lawful, accept for payment, on a PRO RATA basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and will deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company will promptly issue a new Note, and the Trustee, upon written request from the Company will authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on the Purchase Date. ARTICLE 4. COVENANTS Section 4.01 PAYMENT OF NOTES. The Company will pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Liquidated Damages, if any will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company will pay all Liquidated Damages, if any in the amounts set forth in the Registration Rights Agreement. 40 The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. Section 4.03 REPORTS. So long as any Notes are outstanding, the Company will furnish to the Holders of Notes all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Restricted Subsidiaries and, with respect to the annual information only, a report thereon by the Company's certified independent accountants. In addition, following the consummation of the Exchange Offer, whether or not required by the SEC, the Company will file all of the information set forth in the preceding paragraph with the SEC for public availability (unless the SEC will not accept such a filing) concurrently with furnishing such information to Holders of Notes. The Company and the Guarantors have also agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. However, to the extent not required by the Trust Indenture Act, this Indenture will not require the Company to make any information available to the foregoing sentence or the first paragraph of this Section 4.03 to any Holder of Notes that the Company reasonably believes to be a competitor of the Company. 41 Section 4.04 COMPLIANCE CERTIFICATE. (a) Each of the Company and the Guarantors (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of its activities during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the it has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the it has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company or such Guarantor is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) So long as any of the Notes are outstanding, the Company will deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 TAXES. The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 STAY, EXTENSION AND USURY LAWS. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 RESTRICTED PAYMENTS. 42 The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated in right of payment to the Notes ("SUBORDINATED INDEBTEDNESS"), except a payment of interest or a payment of principal at Stated Maturity; or (4) make any Restricted Investment (all such payments and other actions set forth in clauses (1) through (4) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (2) the Company would, 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, have been 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 Section 4.09; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since May 22, 1997 (excluding Restricted Payments permitted by clause (2) of the next succeeding paragraph), is less than the sum of: (a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) commencing July l, 1997 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), PLUS (b) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since May 22, 1997 of (A) Equity Interests of the Company (other than Disqualified Stock), (B) any Restricted Subsidiaries or (C) Disqualified Stock or debt securities of the Company that have been converted into Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), PLUS (c) 100% of the aggregate amount of capital contributions to the Company's common equity since May 22, 1997, PLUS (d) 100% of the net proceeds received by the Company or any of its Restricted Subsidiaries since May 22, 1997 from (A) the sale or other disposition of any Restricted Investment or (B) dividends on or the sale of stock of Unrestricted Subsidiaries. The foregoing provisions will not prohibit: 43 (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 this Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock) or from the net proceeds of a capital contribution by Holdings to the Company; PROVIDED that the amount of any such net proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition since May 22, 1997 shall be excluded from clause (3)(b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness (a) with the net proceeds from an incurrence of Permitted Refinancing Indebtedness or (b) in an amount not to exceed the net proceeds received by the Company since May 22, 1997 from Subordinated Shareholder Loans (other than Subordinated Shareholder Loans that have constituted Permitted Refinancing Indebtedness); (4) the repurchase, redemption or other acquisition or retirement for value of any Management Equity Interests or the repurchase, redemption or other acquisition or retirement for value of Indebtedness incurred pursuant to clause (12) of the second paragraph of Section 4.09 (including, in each case, any dividend or distribution to Holdings used for such purpose); PROVIDED that the aggregate price paid for all such repurchased, redeemed, acquired or retired Management Equity Interests shall not exceed the sum of (a) $3.0 million in any twelve-month period but not more than $15.0 million in the aggregate PLUS (b) cash proceeds from the sale of Management Equity Interests to management, directors or consultants of the Company (or any of its Restricted Subsidiaries) since May 22, 1997; (5) repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options; (6) other Restricted Investments not to exceed $15.0 million; (7) Restricted Investments made or received by the Company and its Restricted Subsidiaries as non-cash consideration from Asset Sales to the extent permitted by Section 4.10 or received by a person in exchange for trade or other claims against such person in connection with a financial reorganization or restructuring or such person; (8) any loans, advances, distributions or payments between the Company and its Restricted Subsidiaries; (9) the payment of dividends or distributions to Holdings in an amount not to exceed $2.0 million per calendar year to allow Holdings to pay reasonable legal, accounting, investment banking, financial advisory, outside director or other professional and administrative fees and expenses incurred by it related to its business; (10) payments pursuant to the Tax Sharing Agreement; (11) payments to CSFB or dividends to Holdings to allow Holdings to pay CSFB in respect of fees for advisory services in accordance with the Financial Advisory Agreement; (12) upon the occurrence of a Change of Control, during the 60-day period commencing after the completion of the offer to repurchase the Notes pursuant to Section 4.14 (including the purchase of the 44 Notes tendered), any purchase or redemption of subordinated Indebtedness or any Capital Stock of the Company required pursuant to the terms thereof as a result of such Change of Control at a purchase or redemption price not to exceed 101% of the outstanding principal amount or liquidation amount thereof, plus accrued and unpaid interest or dividends (if any); PROVIDED, HOWEVER, that at the time of such purchase or redemption no Default shall have occurred and be continuing (or would result therefrom); (13) upon the occurrence of an Asset Sale, during the 60-day period commencing after the completion of an Asset Sale Offer to repurchase the Notes pursuant to Section 4.10 (including the purchase of the Notes tendered), any purchase or redemption of subordinated Indebtedness or any Capital Stock of the Company required pursuant to the terms thereof as a result of such Asset Sale at a purchase or redemption price not to exceed 100% of the outstanding principal amount or liquidation amount thereof, plus accrued and unpaid interest or dividends (if any), PROVIDED, HOWEVER, that at the time of such purchase or redemption no Default shall have occurred and be continuing (or would result therefrom); and (14) dividends or distributions in an amount not to exceed the aggregate amount of capital contributions received by the Company since the date of this Indenture, less any amount used from capital contributions to redeem, repurchase, retire, defease or acquire subordinated Indebtedness or Equity Interests of the Company pursuant to clause (2) of this paragraph; PROVIDED that the amount of such capital contributions that are utilized for such dividends or distributions shall be excluded from clause (3)(c) of the preceding paragraph. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors of the Company whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by Section 4.07 were computed. Section 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to or guarantee any Indebtedness of the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) Existing Indebtedness as in effect on the date of this Indenture; 45 (2) the Credit Facilities as in effect as of the date of this Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive with respect to such dividend and other payment restrictions than those contained in the Credit Facilities as in effect on the date of this Indenture; (3) this Indenture, the Notes and the Note Guarantees; (4) applicable law; (5) any instrument governing Indebtedness or Capital Stock of a Person acquired by, merged into or consolidated with the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition, merger or consolidation (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (6) customary non-assignment provisions in leases entered into in the ordinary course of business; (7) purchase money obligations for property acquired in the ordinary course of business or Indebtedness incurred pursuant to clause (4) of the second paragraph of Section 4.09 that impose restrictions of the nature described in clause (3) of the preceding paragraph on the property so acquired; (8) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive than those contained in the agreements governing the Indebtedness being refinanced; (9) restrictions with respect to sales of assets or dispositions of stock of the Company or any Restricted Subsidiary imposed pursuant to agreements relating to the sale of such assets or stock; or (10) any instrument governing Acquired Debt, or any Lien in respect of Acquired Debt, assumed in connection with assets acquired by the Company or any of its Restricted Subsidiaries, as in effect at the time of such acquisition, which encumbrance or restriction does not extend to any other assets of the Company or any of its Restricted Subsidiaries, PROVIDED such Acquired Debt was permitted by the terms of this Indenture to be incurred. Section 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company or any Guarantor may incur Indebtedness (including Acquired Debt) and the Company's Restricted Subsidiaries may issue shares of preferred stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such preferred stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness 46 had been incurred or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following: (1) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness under the Credit Facilities pursuant to this clause (1) in an aggregate principal amount not to exceed $115.0 million at any one time outstanding; (2) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness represented by the Notes and the Note Guarantees to be issued in this offering, the Exchange Notes or any new notes issued in exchange for the Senior Subordinated Notes or Additional Notes issued hereunder, PROVIDED, any new notes are issued pursuant to arrangements similar to those described in the Registration Rights Agreement; (4) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations in an aggregate principal amount not to exceed $50.0 million at any time outstanding; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Acquired Debt in an amount not to exceed $25.0 million; PROVIDED that such Indebtedness was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the Company or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, such acquisition by the Company or one of its Restricted Subsidiaries; (6) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by this Indenture to be incurred; (7) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; (8) the incurrence by the Company and 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; (9) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by this Indenture; (10) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness arising from the issuance of Subordinated Shareholder Loans in an aggregate principal amount not to exceed $50.0 million outstanding at any one time; (11) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness to repurchase, redeem or otherwise acquire or retire for value Management Equity Interests as permitted by 47 clause (4) of the second paragraph of Section 4.07; PROVIDED that such Indebtedness is subordinated to the Notes to at least the same extent as the Company's Senior Subordinated Notes are subordinated to the Notes; and (12) the incurrence by the Company and its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (12), not to exceed $30.0 million. For purposes of determining compliance with this Section 4.09, 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, the Company will be permitted to classify such item of Indebtedness on the date of its incurrence under one or more of such clauses and such paragraph, or later reclassify all or a portion of such item of Indebtedness as having been incurred, in any manner that complies with this covenant. Indebtedness under the Credit Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture will be deemed to have been incurred on such date in reliance on the exception provided by clause (1) above. Section 4.10 ASSET SALES. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of; and (2) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following will be deemed to be cash: (a) any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets; and (b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion). The 75% limitation referred to in clause (2) above will not apply to any Asset Sale in which the cash portion of the consideration received therefrom, determined in accordance with the foregoing proviso, is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company or any Restricted Subsidiary may apply those Net Proceeds at its option: 48 (1) to repay Indebtedness (other than Indebtedness that by its terms is subordinated in right of payment to the Notes or any Note Guarantee) and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (2) to acquire a controlling interest in another business; (3) to make a capital expenditure; or (4) to acquire other long-term assets, in each case in accordance with the terms of this Indenture. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million or, if no Senior Subordinated Notes are outstanding, $10.0 million, the Company will make an Asset Sale Offer to all Holders of Notes and at its option, an offer to all holders of other Indebtedness that ranks equally with the Notes containing provisions similar to those in the Indenture with respect to offers to purchase or redeem with the proceeds of assets sales to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer for the Notes will be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer and such offer for PARI PASSU Indebtedness, the Company may use those Excess Proceeds for general corporate purposes, including to make a similar offer for the Senior Subordinated Notes pursuant to this Indenture for such Notes. If the aggregate principal amount of Notes tendered into such Asset Sale Offer and such offer for PARI PASSU Indebtedness exceeds the amount of Excess Proceeds, the Trustee will select the Notes to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. Notwithstanding the foregoing, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with the preceding paragraphs if (i) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of (as evidenced by a resolution of the Company's Board of Directors set forth in an Officers' Certificate delivered to the Trustee), and (ii) at least 75% of the consideration for such Asset Sale constitutes assets or other property of a kind usable by the Company and its Restricted Subsidiaries in the business of the Company and its Restricted Subsidiaries as conducted by the Company and its Restricted Subsidiaries on the date of this Indenture; PROVIDED that any cash consideration received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Proceeds subject to the provisions of the two preceding paragraphs. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with Sections 3.09 or 4.10 of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such provisions of this Indenture by virtue of such conflict. 49 Section 4.11 TRANSACTIONS WITH AFFILIATES. The Company 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 (each of the foregoing, an "AFFILIATE TRANSACTION"), unless: (1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person: and (2) the Company delivers to the Trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors of the Company set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (1) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company, if any; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, other than transactions between the Company or any of its Restricted Subsidiaries on the one hand, and CSFB on the other hand, 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 will 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 the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary and ordinary course loans to employees; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) Restricted Payments or Permitted Investments that are not prohibited by the provisions of Section 4.07; (4) payments and transactions in connection with the Refinancing; and (5) any agreement as in effect on the date of this Indenture (including, without limitation, the new revolving credit facility) or any amendment or replacement of such agreement or any transactions contemplated thereby (including pursuant to any amendment or replacement of such agreement) so long as any such amendment or replacement agreement is not more disadvantageous to the Holders of the Notes in any material respect than the original agreement as in effect on the date of this Indenture. Section 4.12 LIENS. The Company will not, and will not permit any of it Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien (the "INITIAL LIEN") securing Indebtedness or trade payables on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens, unless the Notes are equally and 50 ratably secured (except that Liens securing subordinated Indebtedness shall be expressly subordinate to Liens securing the Notes to the same extent such subordinated Indebtedness is subordinate to the Notes). Any Lien created for the benefit of the Holders of the Notes pursuant to the preceding sentence shall provide by its terms that such Lien shall automatically and unconditionally be released and discharged upon the release and discharge of the Initial Lien. Section 4.13 CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect: (1) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and (2) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.14 OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, the Company will make an offer (a "CHANGE OF CONTROL OFFER") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of such Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages on the Notes repurchased, if any, to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes properly tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; 51 (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.14, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.14 by virtue of such conflict. (b) On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment all 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 Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such 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 Notes surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) Notwithstanding anything to the contrary in this Section 4.14, the Company 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 this Section 4.14 and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer. Section 4.15 ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of its Restricted Subsidiaries shall acquire or create another Domestic Subsidiary after the date of this Indenture, then such newly acquired or created Domestic Subsidiary, except for a Domestic Subsidiary that has properly been designated as an Unrestricted Subsidiary in accordance with this Indenture for so long as it continues to constitute an Unrestricted Subsidiary, shall execute and deliver to the Trustee a supplemental indenture in form and substance substantially similar to Exhibit F hereto pursuant to which such Domestic Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes on the terms set forth in such supplemental indenture and deliver 52 to the Trustee an opinion of counsel reasonably satisfactory to the Trustee that such supplemental indenture has been duly executed and delivered by such subsidiary. Section 4.16 DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph or clause (6) of the second paragraph of Section 4.07 or Permitted Investments, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. ARTICLE 5. SUCCESSORS Section 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Company may not: (1) consolidate or merge with or into (whether or not the Company is the surviving corporation); or (2), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless: (1) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, 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 entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (3) immediately after such transaction no Default or Event of Default exists; and (4) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction 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 Section 4.09. Section 5.02 SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of 53 this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01 EVENTS OF DEFAULT. Each of the following is an "Event of Default": (1) the Company defaults for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (2) the Company defaults in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes; (3) the Company fails to comply with the provisions of Sections 3.09, 4.07, 4.09, 4.10 or 4.14 hereof; (4) the Company or any of its Subsidiaries fails to observe or perform any other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (5) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, if that default: (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default and the aggregate amount of such principal, premium and interest that has not been paid exceeds $5.0 million (a "Payment Default"); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (6) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; PROVIDED that the aggregate of all such unpaid, undischarged or unstayed judgments exceeds $5.0 million; 54 (7) the Company or any of its Restricted Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) generally is not paying its debts as they become due; or (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any of its Restricted Subsidiaries or any group of Subsidiaries, that, taken together would constitute a Significant Subsidiary, in an involuntary case; (B) appoints a Custodian of the Company, any of its Restricted Subsidiaries or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, or for all or substantially all of the property of the Company, any of its Significant Subsidiaries or any group of Subsidiaries that taken, taken together, would constitute a Significant Subsidiary, or (C) orders the liquidation of the Company or any of its Restricted Subsidiaries, and the order or decree remains unstayed and in effect for 60 consecutive days; or (9) except as permitted by this Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Note Guarantee. Section 6.02 ACCELERATION. In the case of an Event of Default specified in clause (7) or (8) of Section 6.01 hereof, with respect to the Company or any Restricted Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding 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 Notes may declare all the Notes to be due and payable immediately. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. 55 In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (5) of Section 6.01, the declaration of acceleration of the Notes shall be automatically annulled if the holders of any Indebtedness described in clause (5) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (a) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction, and (b) all existing Events of Default, except nonpayment of principal or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. Section 6.03 OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Liquidated Damages, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 WAIVER OF PAST DEFAULTS. Holders of a majority in aggregate principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange for Notes) by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase other than as a result of acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06 LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (1) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; 56 (3) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. 57 Section 6.10 PRIORITIES. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; SECOND: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and THIRD: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and the TIA and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. 58 However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. The Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holders have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company or Guarantor will be sufficient if signed by an Officer of the Company or Guarantor. 59 (f) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable security or indemnity against the loss, liability or expense that might be incurred by it in compliance with such request or direction. (g) Except with respect to Section 4.01, the Trustee shall have no duty to inquire as to the performance of the Company with respect to the covenants contained in Article 4. In addition, the Trustee shall not be deemed to have knowledge of an Event of Default except (i) any Default or Event of Default occurring pursuant to Sections 4.01, 6.01(1) or 6.01(2) or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. Section 7.03 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any Guarantor or any Affiliate of the Company or any Guarantor with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 TRUSTEE'S DISCLAIMER. The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium or Liquidated Damages, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. (a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports as required by TIA Section 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which the 60 Notes are listed in accordance with TIA Section 313(d). The Company will promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07 COMPENSATION AND INDEMNITY. (a) The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company and the Guarantors will indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee will notify the Company and the Guarantors promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company or any of the Guarantors of its obligations hereunder. The Company or such Guarantor will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent will not be unreasonably withheld. (c) The obligations of the Company and the Guarantors under this Section 7.07 will survive the satisfaction and discharge of this Indenture. (d) To secure the Company's payment obligations in this Section 7.07, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. (f) The Trustee will comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08 REPLACEMENT OF TRUSTEE. (a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: 61 (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a custodian or public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee. Section 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee. Section 7.10 ELIGIBILITY; DISQUALIFICATION. There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture will always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). 62 Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02 LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Note Guarantees) on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Note Guarantees, which will thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Liquidated Damages, if any, on such Notes when such payments are due from the trust referred to in Section 8.04(1) hereof; (2) the Company's obligations with respect to such Notes under Sections 2.03, 2.06, 2.07, 2.10 and 4.02 hereof; (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith; and (4) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03 COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 3.09, 4.05 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 4.14 and 4.15, hereof with respect to the outstanding 63 Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes will thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Note Guarantees, the Company and the Guarantors may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Note Guarantees will be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(5) hereof will not constitute Events of Default. Section 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, and premium and Liquidated Damages, if any, and interest on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (2) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of an election under Section 8.03 hereof, the Company 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 Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; 64 (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the 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, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (7) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (8) the Company 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. Section 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Liquidated Damages, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 REPAYMENT TO COMPANY. 65 Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Liquidated Damages, if any, or interest on any Note and remaining unclaimed for one years after such principal, premium or Liquidated Damages, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07 REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantor's obligations under this Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any payment of principal of, premium or Liquidated Damages, if any, or interest on any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Note Guarantees or the Notes without the consent of any Holder of a Note: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company or a Guarantor pursuant to Article 5 or Article 10 hereof; (4) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; (5) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; 66 (6) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture; or (7) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture (including, without limitation, Section 3.09, 4.10 and 4.14 hereof), the Note Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for Notes), and, subject to Sections 6.04 and 6.07 hereof and except as provided below in this Section 9.02, any existing Default (other than a Default in the payment of the principal of, premium or Liquidated Damages, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental indenture. It is not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it is sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture, the Note Guarantees or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): 67 (1) reduce the principal amount of 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 or waive any of the provisions with respect to the redemption of the Notes (other than the provisions of Sections 3.09, 4.10 and 4.14) hereof in a manner adverse to the Holders of the Notes; (3) reduce the rate of or change the time for payment of interest, or Liquidated Damages, if any, on any Note; (4) waive a Default or Event of Default in the payment of principal of or premium or Liquidated Damages, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in Section 6.04 or 6.07 hereof; (7) waive a redemption payment with respect to any Note (other than a payment required by Sections 4.10 or 4.14); (8) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture; or (9) make any change in the amendment and waiver provisions of this Section 9.02. Section 9.03 COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes will be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. The Company may, but shall not be obligated to, fix a record date for determining which Holders of the Notes must consent to such amendment, supplement or waiver. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders of Notes furnished for the Trustee prior to such solicitation pursuant to Section 2.05 hereof or (ii) such other date as the Company shall designate. Section 9.05 NOTATION ON OR EXCHANGE OF NOTES. 68 The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental indenture until its Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture. ARTICLE 10. NOTE GUARANTEES Section 10.01. GUARANTEE. (a) Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (1) the principal of, premium and Liquidated Damages, if any, and interest on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other payment obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable graced period, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court 69 in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Note Guarantee will not be discharged except by complete performance of the guaranteed obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by the Company or any Guarantor to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect. (d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee. Section 10.02. LIMITATION ON GUARANTOR LIABILITY. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Section 10.03. EXECUTION AND DELIVERY OF NOTE GUARANTEE. To evidence its Note Guarantee set forth in Section 10.01, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form attached as Exhibit E hereto will be endorsed by an Officer of such Guarantor, which endorsement may be a manual or facsimile signature, on each Note authenticated and delivered by the Trustee and that this Indenture will be executed on behalf of such Guarantor by one of its Officers. Each Guarantor hereby agrees that its Note Guarantee set forth in Section 10.01 will remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. 70 If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantees is endorsed, the Note Guarantee will be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any Domestic Subsidiary after the date of this Indenture, if required by Section 4.15 hereof, the Company will cause such Domestic Subsidiary to comply with the provisions of Section 4.15 hereof and this Article 10, to the extent applicable. Section 10.04. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) Except as otherwise provided in Section 10.05, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) or sell or otherwise dispose of all or substantially all of its assets, to another Person, whether or not affiliated with such Guarantor, unless: (1) subject to Section 10.05 hereof, the Person formed by or surviving any such consolidation or merger (if other than the Guarantor) assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under this Indenture; (2) immediately after giving effect to such transaction, no Default or Event of Default exists; and (3) the Company would be permitted, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of Section 4.09. Notwithstanding the provisions of the preceding paragraph, this Indenture shall not prohibit the merger of two of the Company's Restricted Subsidiaries or the merger of a Restricted Subsidiary into the Company. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued will in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 71 Section 10.05. RELEASES OF GUARANTORS. The Note Guarantee of a Guarantor will be released: (a) in connection with any sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee; or (b) if the Company designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with Section 4.16; PROVIDED that, in the case of a sale or other disposition of all of the assets or Capital Stock of a Guarantor or the designation of a Guarantor as an Unrestricted Subsidiary, the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Sections 3.09 and 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee will execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. Notwithstanding the provisions of this Section 10.05, if all of the Guarantees of Holdings issued pursuant to Credit Facilities are released, Holdings' Note Guarantees will also be released. Except as set forth in this Article 10, no provision contained in this Indenture shall apply to, limit or restrict the operations of Holdings. Any Guarantor not released from its obligations under its Note Guarantee will remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 10. ARTICLE 11. SATISFACTION AND DISCHARGE Section 11.01 SATISFACTION AND DISCHARGE. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when: (1) either: (a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of 72 the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Liquidated Damages, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default has occurred and is continuing on the date of such deposit or will occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the provisions of Section 11.02 and Section 8.06 will survive. In addition, nothing in this Section 11.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture. Section 11.02 APPLICATION OF TRUST MONEY. Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 11.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01; PROVIDED that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. 73 ARTICLE 12. MISCELLANEOUS Section 12.01 TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties will control. Section 12.02 NOTICES. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Telecopier No.: (314) 966-0983 Attention: Chief Financial Officer With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Telecopier No.: (212) 310-8007 Attention: Todd R. Chandler If to the Trustee: U.S. Bank National Association 180 East 5th Street St. Paul, MN 55101 Telecopier No.: (651) 244-0711 Attention: Corporate Trust Administration The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder will be mailed by first class mail to its address shown on the register kept by the Registrar. Any notice or communication will also be so mailed to any Person 74 described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time. Section 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA Section 314(e) and must include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 12.06 RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. 75 Section 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture or the Note Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 12.08 GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.10 SUCCESSORS. All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 10.05. Section 12.11 SEVERABILITY. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Section 12.12 COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement. Section 12.13 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 76 SIGNATURES Dated as of March 26, 2002 VON HOFFMANN CORPORATION By: --------------------------------------- Name: Title: VON HOFFMANN HOLDINGS INC. By: --------------------------------------- Name: Title: ONE THOUSAND REALTY & INVESTMENT COMPANY By: --------------------------------------- Name: Title: H&S GRAPHICS, INC. By: --------------------------------------- Name: Title: PREFACE, INC. By: --------------------------------------- Name: Title: PRECISION OFFSET PRINTING COMPANY, INC. By: --------------------------------------- Name: Title: 77 U.S. BANK NATIONAL ASSOCIATION By: --------------------------------------- Name: Title: 78 SCHEDULE I SCHEDULE OF GUARANTORS The following schedule lists each Guarantor under the Indenture as of the date of the Indenture: VON HOFFMANN HOLDINGS, INC. ONE THOUSAND REALTY & INVESTMENT COMPANY H&S GRAPHICS, INC. PREFACE, INC. PRECISION OFFSET PRINTING COMPANY, INC. EXHIBIT A1 [Face of Note] CUSIP/CINS ____________ 10 1/4% Senior Notes due 2009 No. ___ $____________ VON HOFFMANN CORPORATION promises to pay to CEDE & CO. or registered assigns, the principal sum of____________________________________________________________ Dollars on March 15, 2009. Interest Payment Dates: February 15 and August 15 Record Dates: February 1 and March 1 Dated: March 26, 2002 VON HOFFMANN CORPORATION By: --------------------------------------- Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: --------------------------------- Authorized Signatory A1-1 [Back of Note] 10 1/4% Senior Notes due 2009 [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) INTEREST. Von Hoffmann Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 10 1/4% per annum from March 26, 2002 until maturity and shall pay the Liquidated Damages, if any, payable pursuant to the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, semi-annually in arrears on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; PROVIDED that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest Payment Date shall be August 15, 2002. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the interest rate then applicable on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. (2) METHOD OF PAYMENT. The Company will pay interest on the Notes and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the February 1 or August 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. All payments on the Notes will be made at the office or agency of the Paying Agent unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. (3) PAYING AGENT AND REGISTRAR. Initially, U.S. Bank National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. (4) INDENTURE. The Company issued the Notes under an Indenture dated as of March 26, 2002 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the A1-2 Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are unsecured obligations of the Company. (5) OPTIONAL REDEMPTION. (a) The Notes may be redeemed, in whole or in part, at any time prior to March 15, 2005 at the option of the Company upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to, as determined by the Reference Treasury Dealer, the sum of the present values of the Remaining Scheduled Payments discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable date of redemption. (b) At any time on or prior to March 15, 2005, the Company may redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 110.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of a sale of Equity Interests (other than Disqualified Stock) of the Company or a capital contribution to the Company's common equity from Holdings; PROVIDED that: (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 90 days of the date of the closing of such sale or contribution. (c) On or after March 15, 2005, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2005.......................................................... 107.688% 2006.......................................................... 105.125% 2007.......................................................... 102.563% 2008 and thereafter........................................... 100.000%
(6) MANDATORY REDEMPTION. The Company will not be required to make mandatory redemption payments with respect to the Notes. (7) REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, the Company will make an offer to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase. Within 30 days following any Change of Control, the Company will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. A1-3 (b) If the Company or a Subsidiary consummates any Asset Sales, any Net Proceeds from Asset Sales that are not applied or invested as provided in the Indenture will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million or, if no Senior Subordinated Notes are outstanding, $10.0 million, the Company will make an offer (an "Asset Sale Offer") to all Holders of Notes to purchase the maximum principal amount of Notes and PARI PASSU notes with similar asset sale provisions that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer for the Notes will be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for general corporate purposes, including to make a similar offer for the Senior Subordinated Notes pursuant to the indenture for such Notes. If the aggregate principal amount of Notes tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. (8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. (9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not issue, register the transfer of or exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption and ending at the close of business on the day of selection or during the period between a record date and the corresponding Interest Payment Date. (10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. (11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, if any, voting as a single class, and any existing default or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder, the Indenture, the Note Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or any Guarantor's obligations to Holders in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of A1-4 the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes. (12) DEFAULTS AND REMEDIES. Events of Default include: (i) if the Company defaults for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) if the Company defaults in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes; (iii) if the Company fails to comply with the provisions of Sections 3.09, 4.07, 4.09, 4.10 or 4.14 of the Indenture; (iv) if the Company or any of its Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (v) if a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default: (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default and the aggregate amount of such principal, premium and interest that has not been paid exceeds $5.0 million (a "PAYMENT DEFAULT"); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) if a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; PROVIDED that the aggregate of all such undischarged judgments exceeds $5.0 million; (vii) if the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) generally is not paying its debts as they become due; or (viii) if a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any of its Restricted Subsidiaries in an involuntary case; (B) appoints a Custodian of the Company, any of its Restricted Subsidiaries or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, or for all or substantially all of the property of the Company, any of its Significant Subsidiaries or any group of Subsidiaries that taken, taken together, would constitute a Significant Subsidiary, or (C) orders the liquidation of the Company or any of its Restricted Subsidiaries, and the order or decree remains unstayed and in effect for 60 consecutive days; or (ix) except as permitted by the Indenture, if any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Note Guarantee. (13) TRUSTEE DEALINGS WITH COMPANY. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any Guarantor or any Affiliate of the Company or any Guarantor with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting A1-5 interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 of the Indenture. (14) NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Guarantors, as such, will not have any liability for any obligations of the Company or such Guarantor under the Notes, the Note Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (15) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. (16) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (17) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders will have all the rights set forth in the Registration Rights Agreement dated as of March 26, 2002, among the Company, the Guarantors and the other parties named on the signature pages thereof ( the "Registration Rights Agreement"). (18) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Attention: Chief Financial Officer A1-6 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: ------------------- Your Signature: ------------------------ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: ----------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-7 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below: / /Section 4.10 / /Section 4.14 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $________________ Date: --------------- Your Signature: --------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ------------------ Signature Guarantee*: ----------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-8 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE* The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Amount of Amount of Principal Amount decrease in increase in of this Global Note Signature of Principal Amount Principal Amount following such authorized officer of of decrease of Trustee or Date of Exchange this Global Note this Global Note (or increase) Custodian - ---------------- ---------------- ---------------- ------------------- ------------------
* THIS SCHEDULE SHOULD BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM. A1-9 EXHIBIT A2 [Face of Regulation S Temporary Global Note] CUSIP/CINS __________ 10 1/4% Senior Notes due 2009 No. ___ $__________ VON HOFFMANN CORPORATION promises to pay to CEDE & CO. or registered assigns, the principal sum of ___________________________________________________________ Dollars on March 15, 2009. Interest Payment Dates: February 15 and August 15 Record Dates: February 1 and August 1 Dated: March 26, 2002 VON HOFFMANN CORPORATION By: --------------------------------------- Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: ------------------------------------- Authorized Signatory A2-1 [Back of Regulation S Temporary Global Note] 10 1/4% Senior Notes due 2009 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN A2-2 EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (V) TO US OR ANY OF OUR SUBSIDIARIES OR (VI) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) INTEREST. Von Hoffmann Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 10 1/4% per annum from March 26, 2002 until maturity and shall pay the Liquidated Damages, if any, payable pursuant to the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages, if any, semi-annually in arrears on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; PROVIDED that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the first Interest Payment Date shall be August 15, 2002. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the interest rate then applicable on the Notes to the extent lawful it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if any, (without regard to any applicable grace periods) on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. (2) METHOD OF PAYMENT. . The Company will pay interest on the Notes and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the February 1 or August 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. All payments on the Notes will be made at the office or agency of the Paying Agent unless the Company elects to make interest payments by check mailed to the Holders at their addresses set forth in the register of Holders. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.. (3) PAYING AGENT AND REGISTRAR. Initially, U.S. Bank National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. A2-3 (4) INDENTURE. The Company issued the Notes under an Indenture dated as of March 26, 2002 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are unsecured. (5) OPTIONAL REDEMPTION. (a) The Notes may be redeemed, in whole or in part, at any time prior to March 15, 2005 at the option of the Company upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to, as determined by the Reference Treasury Dealer, the sum of the present values of the Remaining Scheduled Payments discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable date of redemption. (b) At any time on or prior to March 15, 2005, the Company may redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 110.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of a sale of Equity Interests (other than Disqualified Stock) of the Company or a capital contribution to the Company's common equity from Holdings; PROVIDED that: (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption must occur within 90 days of the date of the closing of such sale or contribution. (c) On or after March 15, 2005, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on March 15 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2005.......................................................... 107.688% 2006.......................................................... 105.125% 2007.......................................................... 102.563% 2008 and thereafter........................................... 100.000%
(6) MANDATORY REDEMPTION. The Company will not be required to make mandatory redemption payments with respect to the Notes. (7) REPURCHASE AT OPTION OF HOLDER. (a) Upon the occurrence of a Change of Control, the Company will make an offer to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such A2-4 Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, thereon, if any, to the date of purchase. Within 10 days following any Change of Control, the Company will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales, any Net Proceeds from Asset Sales that are not applied or invested as provided in the Indenture will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million or, if no Senior Subordinated Notes are outstanding, $10.0 million, the Company will make an offer (an "Asset Sale Offer") to all Holders of Notes to purchase the maximum principal amount of Notes and PARI PASSU notes with similar asset sale provisions that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer for the Notes will be equal to 100% of principal amount plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for general corporate purposes, including to make a similar offer for the Senior Subordinated Notes pursuant to the indenture for such Notes. If the aggregate principal amount of Notes tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. (8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. (9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not issue, or register the transfer of or exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption and ending at the close of business on the day of selection or during the period between a record date and the corresponding Interest Payment Date. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. (10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. A2-5 (11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes, if any, voting as a single class. Without the consent of any Holder, the Indenture, the Note Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or any Guarantor's obligations to Holders in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes. (12) DEFAULTS AND REMEDIES. Events of Default include: (i) if the Company defaults for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) if the Company defaults in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on the Notes; (iii) if the Company fails to comply with the provisions of Sections 3.09, 4.07, 4.09, 4.10 or 4.14 of the Indenture; (iv) if the Company or any of its Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (v) if a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default: (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default and the aggregate amount of such principal, premium and interest that has not been paid exceeds $5.0 million (a "PAYMENT DEFAULT"); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) if a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries, which judgment or judgments are not paid, discharged or stayed for a period of 60 days; PROVIDED that the aggregate of all such undischarged judgments exceeds $5.0 million; (vii) if the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a custodian of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) generally is not paying its debts as they become due; or (viii) if a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any of its Restricted Subsidiaries in an involuntary case; (B) appoints a Custodian of the Company, any of its Restricted Subsidiaries or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, or for all or substantially all of the A2-6 property of the Company, any of its Significant Subsidiaries or any group of Subsidiaries that taken, taken together, would constitute a Significant Subsidiary, or (C) orders the liquidation of the Company or any of its Restricted Subsidiaries, and the order or decree remains unstayed and in effect for 60 consecutive days; or (ix) except as permitted by the Indenture, if any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Note Guarantee. (13) TRUSTEE DEALINGS WITH COMPANY. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any Guarantor or any Affiliate of the Company or any Guarantor with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 of the Indenture. (14) NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Guarantors, as such, will not have any liability for any obligations of the Company or such Guarantor under the Notes, the Note Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (15) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. (16) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (17) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders will have all the rights set forth in the Registration Rights Agreement dated as of March 26, 2002, among the Company, the Guarantors and the other parties named on the signature pages (the "Registration Rights Agreement"). (18) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Attention: Chief Financial Officer A2-7 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: ---------------- Your Signature: ------------------------ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: ----------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-8 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below: / /Section 4.10 / /Section 4.14 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased: $________________ Date: ---------------- Your Signature: ------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ---------------- Signature Guarantee*: ----------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A2-9 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made:
Principal Amount Amount of Amount of at maturity of this decrease in increase in Global Note Signature of Principal Amount Principal Amount following such authorized officer at maturity of at maturity of decrease of Trustee or Date of Exchange this Global Note this Global Note (or increase) Custodian - ---------------- ---------------- ---------------- ------------------- ------------------
A2-10 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 U.S. Bank National Association 180 East 5th Street St. Paul, MN 55101 Re: 10 1/4% SENIOR NOTES due 2009 Reference is hereby made to the Indenture, dated as of March 26, 2002 (the "INDENTURE"), among Von Hoffmann Corporation, as issuer (the "COMPANY"), the Guarantors named on the signature pages thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "TRANSFEROR") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "TRANSFER"), to ___________________________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a B-1 plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) / / such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) / / such Transfer is being effected to the Company or a subsidiary thereof; or (c) / / such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) / / such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer B-2 restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. --------------------------------------- [Insert Name of Owner] By: ----------------------------------- Name: Title: Dated: ------------- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP _________), or (ii) / / Regulation S Global Note (CUSIP _________), or (iii) / / IAI Global Note (CUSIP _________); or (b) / / a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP _________), or (ii) / / Regulation S Global Note (CUSIP _________), or (iii) / / IAI Global Note (CUSIP _________); or (iv) / / Unrestricted Global Note (CUSIP _________); or (b) / / a Restricted Definitive Note; or (c) / / an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 U.S. Bank National Bank 180 East 5th Street St. Paul, MN 55101 Re: 10 1/4% SENIOR NOTES DUE 2009 (CUSIP ) Reference is hereby made to the Indenture, dated as of March 26, 2002 (the "INDENTURE"), among Von Hoffmann Corporation, as issuer (the "COMPANY"), the Guarantors named on the signature pages thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "OWNER") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in C-1 accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] / / 144A Global Note, / / Regulation S Global Note, / / IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. --------------------------------------- [Insert Name of Transferor] By: ----------------------------------- Name: Title: Dated: ----------------- C-2 EXHIBIT C EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 U.S. Bank National Bank 180 East 5th Street St. Paul, MN 55101 RE: 10 1/4% SENIOR NOTES DUE 2009 Reference is hereby made to the Indenture, dated as of March 26, 2002 (the "INDENTURE"), among Von Hoffmann Corporation, as issuer (the "COMPANY"), the guarantors named on the signature pages thereto and U.S. Bank National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) / / a beneficial interest in a Global Note, or (b) / / a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "SECURITIES ACT"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of a principal amount of Notes, at the time of transfer of less than $250,000, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. C-1 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. --------------------------------------- [Insert Name of Accredited Investor] By: ----------------------------------- Name: Title: Dated: ----------------- D-2 EXHIBIT C [FORM OF NOTATION OF GUARANTEE] For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of March 26, 2002 (the "INDENTURE") among Von Hoffmann Corporation, (the "COMPANY"), the Guarantors listed on Schedule I thereto and U.S. Bank National Association, as trustee (the "TRUSTEE"), (a) the prompt payment when due, subject to any applicable grace period, of the principal of, premium and Liquidated Damages, if any, and interest on the Notes, whether at maturity, by acceleration, redemption or otherwise, interest on overdue principal of and interest on the Notes, if any, if lawful, and the performance of all other payment obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; PROVIDED, HOWEVER, that the Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. [NAME OF GUARANTOR(S)] By: ----------------------------------- Name: Title: C-1 EXHIBIT F [FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS] SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as of ________________, 200__, among __________________ (the "GUARANTEEING SUBSIDIARY"), a subsidiary of Von Hoffmann Corporation (or its permitted successor), a Delaware corporation (the "COMPANY"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as trustee under the indenture referred to below (the "TRUSTEE"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "INDENTURE"), dated as of March 26, 2002 providing for the issuance of an aggregate principal amount of up to $215,000,000 of 10 1/4% Senior Notes due 2009 (the "NOTES"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "NOTE GUARANTEE"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns that: (i) the principal of, and premium and Liquidated Damages, if any, and interest on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other payment obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for F-1 whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) The Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee. (i) Pursuant to Section 10.02 of the Indenture, after giving effect to any maximum amount and all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture, this new Note Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Note Guarantee will not constitute a fraudulent transfer or conveyance. F-2 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not sell or otherwise dispose of all substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor unless: (i) immediately after giving effect to such transaction, no Default or Event of Default exists; and (ii) either (A) subject to Sections 10.04 and 10.05 of the Indenture, the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger unconditionally assumes all the obligations of that Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set forth herein or therein; or (B) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation, Section 4.10 thereof. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 and Section 10.05 of Article 10 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of F-3 merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee; PROVIDED that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. (b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 10 of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. F-4 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, 20___ [GUARANTEEING SUBSIDIARY] By: ----------------------------------- Name: Title: [COMPANY] By: ----------------------------------- Name: Title: [EXISTING GUARANTORS] By: ----------------------------------- Name: Title: [TRUSTEE], as Trustee By: ----------------------------------- Authorized Signatory F-5 EX-4.3 16 a2082545zex-4_3.txt EXHIBIT 4.3 EXHIBIT 4.3 ================================================================================ VON HOFFMANN CORPORATION ---------------------------------------- 13.5% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 ---------------------------------------- ------------------- INDENTURE DATED AS OF OCTOBER 16, 1998 ------------------- MARINE MIDLAND BANK Trustee ================================================================================ CROSS-REFERENCE TABLE*
TRUST INDENTURE ACT SECTION INDENTURE SECTION 310 (a)(1)................................................. 7.10 (a)(2)................................................. 7.10 (a)(3) ................................................ N.A. (a)(4)................................................. N.A. (a)(5)................................................. 7.10 (b) ................................................... 7.03; 7.10 (c) ................................................... N.A. 311 (a) ................................................... 7.11 (b) ................................................... 7.11 (c) ................................................... N.A. 312 (a).................................................... 2.05 (b).................................................... 13.03 (c) ................................................... 13.03 313 (a) ................................................... 7.06 (b)(1) ................................................ N.A. (b)(2) ................................................ 7.06; 7.07 (c) ................................................... 7.06;13.02 (d).................................................... 7.06 314 (a) ................................................... 4.03;13.05 (b) ................................................... N.A. (c)(1) ................................................ 13.04 (c)(2) ................................................ 13.04 (c)(3) ................................................ N.A. (d).................................................... N.A. (e) .................................................. 13.05 (f).................................................... N.A. 315 (a).................................................... 7.01 (b).................................................... 7.05,13.02 (c) .................................................. 7.01 (d).................................................... 7.01 (e).................................................... 6.11 316 (a)(last sentence) .................................... 2.09 (a)(1)(A).............................................. 6.05 (a)(1)(B) ............................................. 6.04 (a)(2) ................................................ N.A. (b) ................................................... 6.07 (c) ................................................... N.A. 317 (a)(1) ................................................ 6.08 (a)(2)................................................. 6.09 (b) ................................................... 2.04 318 (a).................................................... 13.01 (b).................................................... N.A. (c).................................................... 13.01
N.A. means not applicable. * This Cross-Reference Table is not part of the Indenture. i TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE...............................1 Section 1.01. Definitions..............................................................1 Section 1.02. Other Definitions........................................................9 Section 1.03. Incorporation by Reference of Trust Indenture Act........................9 Section 1.04. Rules of Construction...................................................10 ARTICLE 2 THE DEBENTURES..........................................................10 Section 2.01. Form and Dating.........................................................10 Section 2.02. Execution and Authentication............................................11 Section 2.03. Registrar and Paying Agent..............................................11 Section 2.04. Paying Agent to Hold Money in Trust.....................................12 Section 2.05. Holder Lists............................................................12 Section 2.06. Transfer and Exchange...................................................12 Section 2.07. Replacement Debentures..................................................25 Section 2.08. Outstanding Debentures..................................................26 Section 2.09. Treasury Debentures.....................................................26 Section 2.10. Temporary Debentures....................................................26 Section 2.11. Cancellation............................................................27 Section 2.12. Defaulted Interest......................................................27 Section 2.13. Record Date.............................................................27 Section 2.14. Computation of Interest.................................................27 Section 2.15. CUSIP Number............................................................28 Section 2.16. Certificate Regarding Interest..........................................28 ARTICLE 3 REDEMPTION AND PREPAYMENT...............................................28 Section 3.01. Notices to Trustee......................................................28 Section 3.02. Selection of Debentures to be Redeemed or Purchased.....................28 Section 3.03. Notice of Redemption....................................................29 Section 3.04. Effect of Notice of Redemption..........................................30 Section 3.05. Deposit of Redemption or Purchase Price.................................30 Section 3.06. Debentures Redeemed in Part.............................................31 Section 3.07. Optional Redemption.....................................................31 Section 3.08. Mandatory Redemption....................................................31 Section 3.09. Change of Control Offer.................................................31 ARTICLE 4 COVENANTS...............................................................33 Section 4.01. Payment of Debentures...................................................33 Section 4.02. Maintenance of Office or Agency.........................................34
ii TABLE OF CONTENTS (CONTINUED)
PAGE ---- Section 4.03. SEC Reports.............................................................34 Section 4.04. Compliance Certificate..................................................35 Section 4.05. Taxes...................................................................35 Section 4.06. Stay, Extension and Usury Laws..........................................36 Section 4.07. Restricted Payments.....................................................36 Section 4.08. [Intentionally Omitted].................................................36 Section 4.09. [Intentionally Omitted].................................................36 Section 4.10. [Intentionally Omitted].................................................36 Section 4.11. [Intentionally Omitted].................................................36 Section 4.12. [Intentionally Omitted].................................................36 Section 4.13. Offer to Purchase Upon Change of Control................................36 Section 4.14. Corporate Existence.....................................................37 ARTICLE 5 SUCCESSORS..............................................................38 Section 5.01. Merger, Consolidation or Sale of Assets.................................38 Section 5.02. Successor Corporation Substituted.......................................38 ARTICLE 6 DEFAULTS AND REMEDIES...................................................39 Section 6.01. Events of Default.......................................................39 Section 6.02. Acceleration............................................................40 Section 6.03. Other Remedies..........................................................41 Section 6.04. Waiver of Past Defaults.................................................41 Section 6.05. Control by Majority.....................................................42 Section 6.06. Limitation on Suits.....................................................42 Section 6.07. Rights of Holders of Debentures to Receive Payment......................42 Section 6.08. Collection Suit by Trustee..............................................43 Section 6.09. Trustee MayFile Proofs of Claim.........................................43 Section 6.10. Priorities..............................................................43 Section 6.11. Undertaking for Costs...................................................44 ARTICLE 7 TRUSTEE.................................................................44 Section 7.01. Duties of Trustee.......................................................44 Section 7.02. Rights of Trustee.......................................................46 Section 7.03. Individual Rights of Trustee............................................47 Section 7.04. Trustee's Disclaimer....................................................47 Section 7.05. Notice of Defaults......................................................47 Section 7.06. Reports by Trustee to Holders of the Debentures.........................47 Section 7.07. Compensation and Indemnity..............................................48 Section 7.08. Replacement of Trustee..................................................49 Section 7.09. Successor Trustee by Merger, etc........................................50
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PAGE ---- Section 7.10. Eligibility; Disqualification...........................................50 Section 7.11. Preferential Collection of Claims Against The Company...................50 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE................................50 Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance................50 Section 8.02. Legal Defeasance and Discharge..........................................50 Section 8.03. Covenant Defeasance.....................................................51 Section 8.04. Conditions to Legal or Covenant Defeasance..............................51 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions..........................................53 Section 8.06. Repayment to The Company................................................53 Section 8.07. Reinstatement...........................................................54 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER........................................54 Section 9.01. Without Consent of Holders of the Debentures............................54 Section 9.02. With Consent of Holders of Debentures...................................55 Section 9.03. Compliance with Trust Indenture Act.....................................56 Section 9.04. Revocation and Effect of Consents.......................................56 Section 9.05. Notation on or Exchange of Debentures...................................57 Section 9.06. Trustee to Sign Amendments, etc.........................................57 ARTICLE 10 SUBORDINATION...........................................................57 Section 10.01. Agreement to Subordinate................................................57 Section 10.02. Liquidation; Dissolution; Bankruptcy....................................58 Section 10.03. Default on Designated Senior Debt.......................................58 Section 10.04. Acceleration of Debentures..............................................59 Section 10.05. When Distribution Must Be Paid Over.....................................59 Section 10.06. Notice by Company.......................................................60 Section 10.07. Subrogation.............................................................60 Section 10.08. Relative Rights.........................................................60 Section 10.09. Subordination MayNot Be Impaired by Company.............................60 Section 10.10. Distribution or Notice to Representative................................61 Section 10.11. Rights of Trustee and Paying Agent......................................61 Section 10.12. Authorization to Effect Subordination...................................61 Section 10.13. Amendments..............................................................62 Section 10.14. No Waiver of Subordination Provisions...................................62 Section 10.15. Certain Definitions.....................................................62
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PAGE ---- ARTICLE 11 MISCELLANEOUS...........................................................62 Section 11.01. Trust Indenture Act Controls............................................62 Section 11.02. Notices.................................................................62 Section 11.03. Communication by Holders of Debentures with Other Holders of Debentures.64 Section 11.04. Certificate and Opinion as to Conditions Precedent......................64 Section 11.05. Statements Required in Certificate or Opinion...........................64 Section 11.06. Rules by Trustee and Agents.............................................65 Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders............................................................65 Section 11.08. Governing Law...........................................................65 Section 11.09. No Adverse Interpretation of Other Agreements...........................65 Section 11.10. Successors..............................................................65 Section 11.11. Severability............................................................65 Section 11.12. Counterpart Originals...................................................65 Section 11.13. Table of Contents, Headings, etc........................................66
EXHIBITS Exhibit A FORM OF DEBENTURE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR v Indenture, dated as of October 16, 1998, between Von Hoffmann Corporation, a Delaware corporation (the "COMPANY"), and Marine Midland Bank, as trustee (the "TRUSTEE"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the holders of the Company's 13.5% Subordinated Exchange Debentures due 2009 (the "EXCHANGE DEBENTURES") and the Company's Series B 13.5% Subordinated Exchange Debentures due 2009 (the "SERIES B DEBENTURES" and, together with the Exchange Debentures, the "DEBENTURES"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "144A GLOBAL DEBENTURE" means the global Debenture in the form of EXHIBIT A hereto bearing the Global Debenture Legend and the Private Placement Legend and deposited with and registered in the name of the Depository or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Debentures issued to QIBs in exchange for shares of Preferred Stock that are Transfer Restricted Securities. "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" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), 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 securities of a Person shall be deemed to be control. "AGENT" means any Registrar, Paying Agent or co-registrar. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of beneficial interests in a Global Debenture, the rules and procedures of the Depository that apply to such transfer and exchange. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means the board of directors of the Company or (except in the case of the definition of Change of Control) any authorized committee of such board of directors. "BUSINESS DAY" means any day other than a Legal Holiday. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CERTIFICATE OF DESIGNATIONS" means the Amended and Restated Certificate of Designations, Preferences and Rights relating to the Preferred Stock. "CHANGE OF CONTROL" means the occurrence of any of the following: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than any person or group comprised solely of the Initial Investors, becomes the "beneficial owner" (as such term is defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a 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), by way of merger, consolidation or otherwise, of 50% or more of the voting power of all classes of voting securities of the Company and such person or group beneficially owns a greater percentage of the voting power of all classes of voting securities of the Company than that beneficially owned by the Initial Investors; (ii) the consummation of a sale or transfer of all or substantially all of the assets of the Company or VHP to any person or group (as defined above), other than any person or group comprised solely of the Initial Investors or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company, together with any new directors whose election was approved by a vote of a majority of directors then still in office who either were directors at the beginning of such period or whose election or nomination for the election was previously so approved, cease for any reason to constitute a majority of the directors of the Company then in office, other than as a result of election of removal of directors, or a reduction of the number of directors comprising the Board of Directors of the Company, pursuant to the provisions governing the election and removal of directors of the Certificate of Designations or the Shareholders Agreement. "COMMISSION" means the Securities and Exchange Commission. "COMPANY" means Von Hoffmann Corporation, a Delaware corporation. "CORPORATE TRUST OFFICE" means the corporate trust office of the Trustee at such location designated by the Trustee. "DEBENTURES" means the Exchange Debentures and the Series B Debentures. 2 "DEBENTURE CUSTODIAN" means the Trustee, as custodian for the Depository with respect to the Debentures in global form, or any successor entity thereto. "DEBENTURE OBLIGATIONS" means all Obligations with respect to the Debentures, including, without limitation, principal, premium, if any, and interest payable pursuant to the terms of the Debentures (including upon acceleration or redemption thereof), together with and including any amounts received or receivable upon the exercise of rights of rescission or other rights of action (including claims for damages) or otherwise. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "DEFINITIVE DEBENTURES" means a certificated Debenture registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of EXHIBIT A hereto, except that such Debenture shall not bear the Global Debenture Legend and shall not have the "Schedule of Exchanges of Interests in the Global Debenture" attached thereto. "DEPOSITORY" means, with respect to the Debentures issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depository with respect to the Debentures, until a successor shall have been appointed and become such pursuant to Section 2.06 of this Indenture, and, thereafter, "Depository" shall mean or include such successor. "DESIGNATED SENIOR DEBT," means (i) any Obligations of the Company under the New Credit Agreement and (ii) in the event no Indebtedness is outstanding under the New Credit Agreement, any other Senior Debt the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Debentures mature. "DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates. "DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE DEBENTURES" means the Company's 13.5% Subordinated Exchange Debentures due 2009. 3 "EXCHANGE OFFER" means the offer by the Company to Holders to exchange Series B Debentures for Exchange Debentures. "EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in the Registration Rights Agreement. "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 applicable as of the date of determination. "GLOBAL DEBENTURES" means, individually and collectively, each of the Restricted Global Debentures and the Unrestricted Global Debentures, in the form of EXHIBIT A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "GLOBAL DEBENTURE LEGEND" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Debentures issued under this Indenture. "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, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HOLDER" means a Person in whose name a Debenture is registered. "IAI GLOBAL DEBENTURE" means the global Debenture in the form of EXHIBIT A hereto bearing the Global Debenture Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depository or its nominee that will be issued to Institutional Accredited Investors in exchange for shares of Preferred Stock that are Transfer Restricted Securities. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by 4 such Person) and, to the extent not otherwise included, the Guarantee by such Person of any Indebtedness of any other Person. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INDIRECT PARTICIPANT" means a Person who holds an interest through a Participant. "INITIAL INVESTORS" means DLJMB, ZS and the Management Holders and, in each case, their respective permitted assigns under the Shareholders Agreement. "INITIAL PURCHASER" means Donaldson, Lufkin & Jenrette Securities Corporation. "INSTITUTIONAL ACCREDITED INVESTOR" means an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York, the city in which the principal corporate trust office of the Trustee is located or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment shall be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Debentures for use by such Holders in connection with the Exchange Offer. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "LIQUIDATION VALUE" has the meaning set forth in the Certificate of Designations. "MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any employee of the Company or any of its Subsidiaries. "MANAGEMENT HOLDERS" means holders of Management Equity Interests on the date that the Preferred Stock was originally issued by the Company. "MERGER AGREEMENT" means that certain agreement and plan of merger, dated April 3, 1997, among DLJMB, VH Acquisition, Inc., ZS and Robert A. Uhlenhop. "MOODY'S" means Moody's Investors Service, Inc. 5 "NEW CREDIT AGREEMENT" means that certain credit agreement, dated as of May 22, 1997, by and among the Company, DLJ Capital Funding, Inc. and the lenders party thereto, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time, including any agreement (i) extending or shortening the maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii) adding or deleting borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder or (iv) otherwise altering the terms and conditions thereof. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness, including any guarantees of such Indebtedness. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 11.04 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 11.04 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "PARTICIPANT" means, with respect to DTC, a Person who has an account with DTC. "PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt securities of the Company that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Debentures are subordinated to Senior Debt. "PERSON" means any individual, corporation, partnership, joint venture, association, limited liability company, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PREFERRED STOCK" means the Company's 13.5% Senior Exchangeable Preferred Stock due 2009 and the Company's Series B 13.5% Senior Exchangeable Preferred Stock due 2009. "PRIVATE PLACEMENT LEGEND" means the legend in the form set forth in Section 2.06(e) hereof. 6 "PUBLIC OFFERING" means any underwritten or best efforts public offering of shares of common stock of the Company or VHP pursuant to an effective registration statement under the Securities Act. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of June 13, 1997, by and between the Company and the Initial Purchaser. "REPRESENTATIVE" means The Bank of Nova Scotia as Administrative Agent under the New Credit Agreement, or its successor thereunder, or any other representative of holders of Senior Debt identified pursuant to Section 10.04. "RESPONSIBLE OFFICER" when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "RESTRICTED BENEFICIAL INTEREST" means any beneficial interest of a Participant or Indirect Participant in the 144A Global Debenture. "RESTRICTED BROKER DEALER" has the meaning set forth in the Registration Rights Agreement. "RESTRICTED DEFINITIVE DEBENTURE" means a Definitive Debenture bearing the Private Placement Legend. "RESTRICTED GLOBAL DEBENTURE" means a Global Debenture bearing the Private Placement Legend. "RULE 144" means Rule 144 promulgated under the Securities Act. "RULE 144A" means Rule 144A promulgated under the Securities Act. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SENIOR DEBT" means (i) all Obligations of the Company under the New Credit Agreement and under all Hedging Obligations payable to a lender under the New Credit Agreement or any of its affiliates, including, without limitation, interest accruing subsequent to the filing of, or which would have accrued but for the filing of, a petition for bankruptcy, whether or not such interest is an allowable claim in such bankruptcy proceeding, (ii) all Obligations of the Company in respect of the VHP Notes and the indenture related thereto, (iii) any other Indebtedness of the Company unless the 7 instrument under which such Indebtedness is incurred expressly provides that it is PARI PASSU or subordinated in right of payment to the Debentures and (iv) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (a) any liability for federal, state, local or other taxes, (b) any Indebtedness of the Company to any of its Subsidiaries or (c) any trade payables. "SERIES B DEBENTURES" means the Company's Series B 13.5% Subordinated Exchange Debentures due 2009. "SHAREHOLDERS AGREEMENT" means the Shareholders Agreement, dated as of May 22, 1997, among the Company and the shareholders of the Company named therein. "SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "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 Act, as such Regulation is in effect on the date hereof. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as amended, as in effect on the date hereof. "TRANSFER RESTRICTED SECURITIES" has the meaning set forth in the Registration Rights Agreement. "TRUSTEE" means the Trustee named in the preamble hereto until a successor replaces it in accordance with the applicable provisions of this Indenture, and thereafter means the successor. "UNRESTRICTED GLOBAL DEBENTURE" means a permanent global Debenture in the form of EXHIBIT A attached hereto that bears the Global Debenture Legend and that has the "Schedule of Exchanges of Interests in the Global Debenture" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depository, representing a series of Debentures that do not bear the Private Placement Legend. "UNRESTRICTED DEFINITIVE DEBENTURE" means one or more Definitive Debentures that do not bear and are not required to bear the Private Placement Legend. 8 "VHP" means Von Hoffmann Press, Inc., a Delaware corporation. "VHP NOTES" means the 10 3/8% Senior Subordinated Notes due 2007 of VHP. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. "ZS" means ZSVH, L.P. together with ZS VH II L.P., as the context requires. SECTION 1.02. OTHER DEFINITIONS.
TERM DEFINED IN SECTION "ACCELERATION NOTICE"................................................6.02 "CHANGE OF CONTROL OFFER"............................................4.13 "CHANGE OF CONTROL PAYMENT"..........................................4.13 "CHANGE OF CONTROL PAYMENT DATE".....................................4.13 "COVENANT DEFEASANCE"................................................8.03 "EVENT OF DEFAULT"...................................................6.01 "LEGAL DEFEASANCE"...................................................8.02 "OFFER PERIOD".......................................................3.09 "PAYING AGENT".......................................................2.03 "PAYMENT DEFAULT"....................................................6.01 "PURCHASE DATE"......................................................3.09 "REGISTRAR"..........................................................2.03 "RESTRICTED PAYMENTS"................................................4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Debentures; "INDENTURE SECURITY HOLDER" means a Holder of a Debenture; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "institutional trustee" means the Trustee; 9 "OBLIGOR" on the Debentures means the Company and any successor obligor upon the Debentures. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them therein. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it herein; (2) an accounting term not otherwise defined herein has the meaning assigned to it in accordance with GAAP; (3) "OR" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time. ARTICLE 2 THE DEBENTURES SECTION 2.01. FORM AND DATING. The Debentures and the Trustee's certificate of authentication shall be substantially in the form of EXHIBIT A hereto. The Debentures may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Debenture shall be dated the date of its authentication. The Debentures shall be in denominations of $1,000 and integral multiples thereof, except to the extent provided in the Certificate of Designations upon issuance of Debentures in exchange for shares of Preferred Stock and except upon accretion of interest as provided in the Debentures. The terms and provisions contained in the Debentures shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Debentures issued in global form shall be substantially in the form of EXHIBIT A attached hereto (including the Global Debenture Legend and the "Schedule of Exchanges 10 in the Global Debenture" attached thereto). Debentures issued in definitive form shall be substantially in the form of EXHIBIT A attached hereto (but without the Global Debenture Legend and without the "Schedule of Exchanges of Interests in the Global Debenture" attached thereto). Each Global Debenture shall represent such of the outstanding Debentures as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Debentures from time to time endorsed thereon and that the aggregate principal amount of outstanding Debentures represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Debenture to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Debentures represented thereby shall be made by the Trustee or the Debenture Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign the Debentures for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Debentures and may be in facsimile form. If an Officer whose signature is on a Debenture no longer holds that office at the time a Debenture is authenticated, the Debenture shall nevertheless be valid. A Debenture shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Debenture has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers, authenticate Debentures for original issue in an initial aggregate principal amount of up to the aggregate Liquidation Value of, plus accumulated and unpaid dividends on, the Preferred Stock upon exchange of the Debentures for the Preferred Stock pursuant to the Certificate of Designations. The aggregate principal amount of Debentures outstanding at any time may not exceed such amount, plus an amount representing the accretion of interest on the Debentures as provided therein, except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Debentures. An authenticating agent may authenticate Debentures whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Debentures may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Debentures may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Debentures and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying 11 agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Debentures. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Debenture Custodian with respect to the Global Debentures. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or interest on the Debentures, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Debentures. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Debentures and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF GLOBAL DEBENTURES. A Global Debenture may not be transferred as a whole except by the Depository to a nominee of the Depository, by a nominee of the Depository to the Depository or to another nominee of the Depository, or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. All Global Debentures will be exchanged by the Company for Definitive Debentures if (i) the Company delivers to the Trustee notice from the Depository that it is unwilling or unable to continue to act as Depository or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a 12 successor Depository is not appointed by the Company within 120 days after the date of such notice from the Depository or (ii) the Company in its sole discretion determines that the Global Debentures (in whole but not in part) should be exchanged for Definitive Debentures and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Debentures shall be issued in such names as the Depository shall instruct the Trustee. Global Debentures also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Debenture authenticated and delivered in exchange for, or in lieu of, a Global Debenture or any portion thereof, pursuant to Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Debenture. A Global Debenture may not be exchanged for another Debenture other than as provided in this Section 2.06(a), however, beneficial interests in a Global Debenture may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL DEBENTURES. The transfer and exchange of beneficial interests in the Global Debentures shall be effected through the Depository, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Debentures shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Debentures also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs as applicable: (i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL DEBENTURE. Beneficial interests in any Restricted Global Debenture may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Debenture in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Debenture may be transferred only to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL DEBENTURES. In connection with all transfers and exchanges of beneficial interests (other than a transfer of a beneficial interest in a Global Debenture to a Person who takes delivery thereof in the form of a beneficial interest in the same Global Debenture), the transferor of such beneficial interest must deliver to the Registrar either (A)(1) a written order from a Participant or an Indirect Participant given to the Depository in accordance with the Applicable Procedures directing the Depository to credit or cause to be credited a beneficial interest in another Global Debenture in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B)(1) a written order from a Participant or an Indirect Participant given to the Depository in accordance with the Applicable Procedures directing the Depository to cause to be issued a Definitive Debenture 13 in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depository to the Registrar containing information regarding the Person in whose name such Definitive Debenture shall be registered to effect the transfer or exchange referred to in (1) above. Upon an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Debentures. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Debentures contained in this Indenture, the Debentures and otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Debenture(s) pursuant to Section 2.06(h) hereof. (iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL DEBENTURE. A beneficial interest in any Restricted Global Debenture may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Debenture if the transfer complies with the requirements of clause (ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Debenture, then the transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Debenture, then the transferor must deliver (x) a certificate in the form of EXHIBIT B hereto, including the certifications and certificates and Opinion of Counsel required by item (2) thereof, if applicable. (iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL DEBENTURE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL DEBENTURE. A beneficial interest in any Restricted Global Debenture may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Debenture or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture if the exchange or transfer complies with the requirements of clause (ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Debentures or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; 14 (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Debenture, a certificate from such holder in the form of EXHIBIT C hereto, including the certifications in item (1)(a) thereof; (2) if the holder of such beneficial interest in a Restricted Global Debenture proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture, a certificate from such holder in the form of EXHIBIT B hereto, including the certifications in item (3) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Debenture has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Debentures in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Debenture cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Debenture. (c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE DEBENTURES. (i) If any holder of a beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a Definitive Debenture or to transfer such beneficial interest to a Person who takes delivery 15 thereof in the form of a Definitive Debenture, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a Definitive Debenture, a certificate from such holder in the form of EXHIBIT C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2)(a) thereof; (D) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications, certificates and Opinion of Counsel required by item (2) thereof, if applicable; (E) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2)(b) thereof; or (F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Debenture to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Debenture in the appropriate principal amount. Any Definitive Debenture issued in exchange for a beneficial interest in a Restricted Global Debenture pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depository and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Debentures to the Persons in whose names such Debentures are so registered. Any Definitive Debenture issued in exchange for a beneficial interest in a Restricted Global Debenture 16 pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial interest in a Restricted Global Debenture may exchange such beneficial interest for an Unrestricted Definitive Debenture or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Debenture only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Debentures or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Debenture proposes to exchange such beneficial interest for a Definitive Debenture that does not bear the Private Placement Legend, a certificate from such holder in the form of EXHIBIT C hereto, including the certifications in item (1)(b) thereof; (2) if the holder of such beneficial interest in a Restricted Global Debenture proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Debenture that does not bear the Private Placement Legend, a certificate from such holder in the form of EXHIBIT B hereto, including the certifications in item (3) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company, to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act. 17 (iii) If any holder of a beneficial interest in an Unrestricted Global Debenture proposes to exchange such beneficial interest for a Definitive Debenture or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Debenture, then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Debenture to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Debenture in the appropriate principal amount. Any Definitive Debenture issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depository and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Debentures to the Persons in whose names such Debentures are so registered. Any Definitive Debenture issued in exchange for a beneficial interest pursuant to this section 2.06(c)(iii) shall not bear the Private Placement Legend. A beneficial interest in an Unrestricted Global Debenture cannot be exchanged for a Definitive Debenture bearing the Private Placement Legend or transferred to a Person who takes delivery thereof in the form of a Definitive Debenture bearing the Private Placement Legend. (d) TRANSFER AND EXCHANGE OF DEFINITIVE DEBENTURES FOR BENEFICIAL INTERESTS. (i) If any Holder of a Restricted Definitive Debenture proposes to exchange such Debenture for a beneficial interest in a Restricted Global Debenture or to transfer such Definitive Debentures to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Debenture, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Debenture proposes to exchange such Debenture for a beneficial interest in a Restricted Global Debenture, a certificate from such Holder in the form of EXHIBIT C hereto, including the certifications in item (2)(b) thereof; (B) if such Definitive Debenture is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (1) thereof; (C) if such Definitive Debenture is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2)(a) thereof; 18 (D) if such Definitive Debenture is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) and (C) above, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications, certificates and Opinion of Counsel required by item (2) thereof, if applicable; (E) if such Definitive Debenture is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2)(b) thereof; or (F) if such Definitive Debenture is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in EXHIBIT B hereto, including the certifications in item (2)(c) thereof, the Trustee shall cancel the Definitive Debenture, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Debenture, in the case of clause (B) above, the 144A Global Debenture, and in all other cases, the IAI Global Debenture. (ii) A Holder of a Restricted Definitive Debenture may exchange such Debenture for a beneficial interest in an Unrestricted Global Debenture or transfer such Restricted Definitive Debenture to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Debentures or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Debentures proposes to exchange such Debentures for a beneficial interest in the Unrestricted Global Debenture, a certificate from such Holder in the form of EXHIBIT C hereto, including the certifications in item (1)(c) thereof; 19 (2) if the Holder of such Definitive Debentures proposes to transfer such Debentures to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Debenture, a certificate from such Holder in the form of EXHIBIT B hereto, including the certifications in item (3) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Definitive Debentures are being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Debentures and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Debenture. (iii) A Holder of an Unrestricted Definitive Debenture may exchange such Debenture for a beneficial interest in an Unrestricted Global Debenture or transfer such Definitive Debentures to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Debenture at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Debenture and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Debentures. Prior to such exchange or transfer, the requesting Holder shall present or surrender to the Registrar the Definitive Debentures duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. If any such exchange or transfer from a Definitive Debenture to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Debenture has not yet been issued, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Debentures in an aggregate principal amount equal to the principal amount of beneficial interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above. (e) TRANSFER AND EXCHANGE OF DEFINITIVE DEBENTURES FOR DEFINITIVE DEBENTURES. Upon request by a Holder of Definitive Debentures and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Debentures. Prior to such registration of transfer or 20 exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Debentures duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, pursuant to the provisions of this Section 2.06(e). (i) Restricted Definitive Debentures may be transferred to and registered in the name of Persons who take delivery thereof if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of EXHIBIT B hereto, including the certifications in item (1) thereof; and (B) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver (x) a certificate in the form of EXHIBIT B hereto, including the certifications, certificates and Opinion of Counsel required by item (2) thereof, if applicable. (ii) Any Restricted Definitive Debenture may be exchanged by the Holder thereof for an Unrestricted Definitive Debenture or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Debenture if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a Person participating in the distribution of the Series B Debentures or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Debentures proposes to exchange such Debentures for an Unrestricted Definitive Debenture, a certificate from such Holder in the form of EXHIBIT C hereto, including the certifications in item (1)(a) thereof; 21 (2) if the Holder of such Restricted Definitive Debentures proposes to transfer such Debentures to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Debenture, a certificate from such Holder in the form of EXHIBIT B hereto, including the certifications in item (3) thereof; and (3) in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act, that the restrictions on transfer contained herein and in the Private Placement Legend are not required in order to maintain compliance with the Securities Act, and such Restricted Definitive Debenture is being exchanged or transferred in compliance with any applicable blue sky securities laws of any State of the United States. (iii) A Holder of Unrestricted Definitive Debentures may transfer such Debentures to a Person who takes delivery thereof in the form of an Unrestricted Definitive Debenture. Upon receipt of a request for such a transfer, the Registrar shall register the Unrestricted Definitive Debentures pursuant to the instructions from the Holder thereof. Unrestricted Definitive Debentures cannot be exchanged for or transferred to Persons who take delivery thereof in the form of a Restricted Definitive Debenture. (f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, or if an exchange offer with respect to the Preferred Stock has occurred pursuant to the Registration Rights Agreement prior to the original issuance of Debentures, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Debentures in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Debentures tendered for acceptance by Persons that are not (x) broker-dealers, (y) Persons participating in the distribution of the Series B Debentures or (z) Persons who are affiliates (as defined in Rule 144) of the Company and accepted for exchange in the Exchange Offer and (ii) Definitive Debentures in an aggregate principal amount equal to the principal amount of the Restricted Definitive Debentures accepted for exchange in the Exchange Offer or the aggregate Liquidation Value of, plus accumulated and unpaid dividends on, the shares of Preferred Stock exchanged for Debentures pursuant to the Certificate of Designations, as the case may be. Concurrent with the issuance of such Debentures, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Debentures to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Debentures so accepted Definitive Debentures in the appropriate principal amount. 22 (g) LEGENDS. The following legends shall appear on the face of all Global Debentures and Definitive Debentures issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) PRIVATE PLACEMENT LEGEND. (A) Except as permitted by subparagraph (b) below, each Global Debenture and each Definitive Debenture (and all Debentures issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." (B) Notwithstanding the foregoing, any Global Debenture or Definitive Debenture issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all 23 Debentures issued in exchange therefor or substitution thereof), and any Definitive Debenture issued in exchange for shares of Preferred Stock that are not Transfer Restricted Securities, shall not bear the Private Placement Legend. (ii) GLOBAL DEBENTURE LEGEND. Each Global Debenture shall bear a legend in substantially the following form: "THIS GLOBAL DEBENTURE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE GOVERNING THIS DEBENTURE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL DEBENTURE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL DEBENTURE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL DEBENTURE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL DEBENTURES. At such time as all beneficial interests in a particular Global Debenture have been exchanged for Definitive Debentures or a particular Global Debenture has been redeemed, repurchased or cancelled in whole and not in part, each such Global Debenture shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Debenture is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Debenture or for Definitive Debentures, the principal amount of Debentures represented by such Global Debenture shall be reduced accordingly and an endorsement shall be made on such Global Debenture, by the Trustee or by the Depository at the direction of the Trustee, to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Debenture, such other Global Debenture shall be increased accordingly and an endorsement shall be made on such Global Debenture, by the Trustee or by the Depository at the direction of the Trustee, to reflect such increase. (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Debentures and Definitive Debentures upon the Company's written order or at the Registrar's request. 24 (ii) No service charge shall be made to a holder of a beneficial interest in a Global Debenture or to a Holder of a Definitive Debenture for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.10, 4.13 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Debenture selected for redemption in whole or in part, except the unredeemed portion of any Debenture being redeemed in part. (iv) All Global Debentures and Definitive Debentures issued upon any registration of transfer or exchange of Global Debentures or Definitive Debentures shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Debentures or Definitive Debentures surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange Debentures during a period beginning at the opening of business 15 days before the day of any selection of Debentures for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Debenture so selected for redemption in whole or in part, except the unredeemed portion of any Debenture being redeemed in part or (C) to register the transfer of or to exchange a Debenture between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Debenture, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Debenture is registered as the absolute owner of such Debenture for the purpose of receiving payment of principal of and interest on such Debentures and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Debentures and Definitive Debentures in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a transfer or exchange may be submitted by facsimile. SECTION 2.07. REPLACEMENT DEBENTURES. If any mutilated Debenture is surrendered to the Trustee, or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Debenture, the Company shall issue and the Trustee, upon the written order of the 25 Company signed by two Officers of the Company, shall authenticate a replacement Debenture if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Debenture is replaced. The Company may charge for its expenses in replacing a Debenture. Every replacement Debenture is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Debentures duly issued hereunder. SECTION 2.08. OUTSTANDING DEBENTURES. The Debentures outstanding at any time are all the Debentures authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Debenture effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Debenture does not cease to be outstanding because the Company or an Affiliate of the Company holds the Debenture. If a Debenture is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Debenture is held by a bona fide purchaser. If the principal amount of any Debenture is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Debentures payable on that date, then on and after that date such Debentures shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY DEBENTURES. In determining whether the Holders of the required principal amount of Debentures have concurred in any direction, waiver or consent, Debentures owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Debentures that a Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY DEBENTURES. Until definitive Debentures are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Debentures upon a written order of the Company signed by two Officers of the Company. Temporary Debentures shall be substantially in 26 the form of definitive Debentures but may have variations that the Company considers appropriate for temporary Debentures and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Debentures in exchange for temporary Debentures. Holders of temporary Debentures shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver Debentures to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Debentures surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Debentures surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Debentures (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Debentures shall be delivered to the Company. The Company may not issue, except pursuant to an Exchange Offer, new Debentures to replace Debentures that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Debentures, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Debentures and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Debenture and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, PROVIDED that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. RECORD DATE. The record date for purposes of determining the identity of Holders of the Debentures entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA Section 316(c). SECTION 2.14. COMPUTATION OF INTEREST. Interest on the Debentures shall be computed on the basis of a 360-day year comprised of twelve 30-day months. 27 SECTION 2.15. CUSIP NUMBER. The Company in issuing the Debentures may use a "CUSIP" number, and if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; PROVIDED that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Debentures and that reliance may be placed only on the other identification numbers printed on the Debentures. The Company shall promptly notify the Trustee of any change in the CUSIP number. SECTION 2.16. CERTIFICATE REGARDING INTEREST. Promptly after an Interest Payment Date (as defined in paragraph 1 of the form of Debenture attached hereto as EXHIBIT A), the Company shall deliver to the Trustee a certificate signed by an Officer of the Company stating the amount of interest paid to the Holders and specifying whether such interest accreted to, and increased, the principal amount of the Debentures, or was paid in cash to the Holders, in either case, in accordance with paragraph (1) of the form of Debenture attached hereto as EXHIBIT A. Promptly after receiving such certificate, the Trustee shall promptly deliver or mail a copy thereof to the Holders. ARTICLE 3 REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Debentures pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 35 days but not more than 60 days before a redemption date (unless a shorter period is acceptable to the Trustee) an Officers' Certificate setting forth (i) the paragraph of the Debentures and/or the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Debentures to be redeemed and (iv) the redemption price. If the Company is required to make an offer to purchase Debentures pursuant to Section 4.13 hereof, it shall furnish to the Trustee, at least 30 days before the scheduled purchase date, an Officers' Certificate setting forth (i) the Section of this Indenture pursuant to which the offer to purchase shall occur, (ii) the terms of the offer, (iii) the principal amount of Debentures to be purchased, (iv) the purchase price, (v) the purchase date and (vi) and further setting forth a statement to the effect that a Change of Control has occurred. SECTION 3.02. SELECTION OF DEBENTURES TO BE REDEEMED OR PURCHASED. If less than all of the Debentures are to be redeemed at any time, selection of the Debentures for redemption shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the 28 Debentures are listed, or, if the Debentures are not so listed, on a pro rata basis, by lot or by such other method as the Trustee deems fair and appropriate; PROVIDED that no Debentures with a principal amount of $1,000 or less shall be redeemed in part. The Trustee shall promptly notify the Company in writing of the Debentures selected for redemption and, in the case of any Debenture selected for partial purchase or redemption, the principal amount thereof to be redeemed. Debentures and portions of Debentures selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Debentures of a Holder are to be purchased or redeemed, the entire outstanding amount of Debentures held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Debentures called for redemption also apply to portions of Debentures called for redemption. SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed by first class mail, a notice of redemption to each Holder whose Debentures are to be redeemed. The notice shall identify the Debentures to be redeemed and shall state: (1) the redemption date; (2) the redemption price for the Debentures and accrued interest; (3) if any Debenture is being redeemed in part, the portion of the principal amount of such Debentures to be redeemed and that, after the redemption date, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion shall be issued upon surrender of the original Debenture; (4) the name and address of the Paying Agent; (5) that Debentures called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in making such redemption payment, interest on Debentures called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Debentures and/or Section of this Indenture pursuant to which the Debentures called for redemption are being redeemed; and 29 (8) the CUSIP number, provided that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Debentures. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense; PROVIDED, HOWEVER, that the Company shall have delivered to the Trustee, at least 35 days prior to the redemption date (or such shorter period as shall be acceptable to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in the notice as provided in the preceding paragraph. The notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Debenture shall not affect the validity of the proceeding for the redemption of any other Debenture. SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Debentures called for redemption become irrevocably due and payable on the redemption date at the redemption price plus accrued and unpaid interest to such date. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION OR PURCHASE PRICE. On or before 10:00 a.m. (New York City time) on each redemption date or the date on which Debentures must be accepted for purchase pursuant to Section 4.13, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued and unpaid interest on all Debentures to be redeemed or purchased on that date. The Trustee or the Paying Agent shall promptly return to the Company upon its written request any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of (including any applicable premium) and accrued interest on all Debentures to be redeemed or purchased. If Debentures called for redemption or tendered in a Change of Control Offer are paid or if the Company has deposited with the Trustee or Paying Agent money sufficient to pay the redemption or purchase price of and accrued and unpaid interest on all Debentures to be redeemed or purchased, on and after the redemption or purchase date, interest shall cease to accrue on the Debentures or the portions of Debentures called for redemption or tendered and not withdrawn in a Change of Control Offer (regardless of whether certificates for such securities are actually surrendered). If a Debenture is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Debenture was registered at the close of business on such record date. If any Debenture called for redemption or tendered in a Change of Control Offer shall not be so paid upon surrender because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal from the redemption or 30 purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case, at the rate provided in the Debentures and in Section 4.01 hereof. SECTION 3.06. DEBENTURES REDEEMED IN PART. Upon surrender of a Debenture that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Debenture equal in principal amount to the unredeemed portion of the Debenture surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in the next paragraph, Debentures shall not be redeemable at the Company's option prior to May 15, 2002. Thereafter, the Debentures shall be subject to redemption at any time at the option of the Company, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below, PLUS any accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on May 15 of the years indicated below:
Year PERCENTAGE 2002 106.75% 2003 105.40% 2004 104.05% 2005 102.70% 2006 101.35% 2007 and thereafter 100.00%
(b) Notwithstanding the foregoing, prior to May 15, 2002, the Company may redeem all, but not less than all, outstanding Debentures at a redemption price of 113.5% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date, with the net proceeds of a Public Offering; PROVIDED that such redemption shall occur within 90 days of the date of the closing of such Public Offering. SECTION 3.08. MANDATORY REDEMPTION. Except as set forth under Sections 3.09 and 4.13 hereof, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Debentures. SECTION 3.09. CHANGE OF CONTROL OFFER. In the event that the Company shall be required to commence a Change of Control Offer pursuant to Section 4.13 hereof, the Company shall follow the procedures specified below. 31 A Change of Control Offer shall commence no later than 30 Business Days after a Change of Control (unless the Company is not required to make such offer pursuant to Section 4.13 hereof) and remain open for a period of at least 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase all Debentures tendered in response to the Change of Control Offer. Payment for any Debentures so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Debenture is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Debentures pursuant to the Change of Control Offer. Upon the commencement of a Change of Control Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Debentures pursuant to such Change of Control Offer. The Change of Control Offer shall be made to all Holders. The notice, which shall govern the terms of the Change of Control Offer, shall describe the transaction or transactions that constitute the Change of Control and shall state: (a) that the Change of Control Offer is being made pursuant to this Section 3.09 and Section 4.13 hereof and the length of time the Change of Control Offer shall remain open; (b) the purchase price and the Purchase Date; (c) that any Debenture not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Debenture accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Debenture purchased pursuant to a Change of Control Offer shall be required to surrender the Debenture, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Debenture duly completed, or transfer by book-entry transfer, to the Company, the Depository or the Paying Agent at the address specified in the notice not later than the close of business on the last day of the Offer Period; (f) that Holders shall be entitled to withdraw their election if the Company, the Depository or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Debenture the Holder 32 delivered for purchase and a statement that such Holder is withdrawing his election to have such Debenture purchased; and (g) that Holders whose Debentures were purchased only in part shall be issued new Debentures equal in principal amount to the unpurchased portion of the Debentures surrendered (or transferred by book-entry transfer). On or before 10:00 a.m. (New York City time) on the Purchase Date, the Company shall irrevocably deposit with the Trustee or Paying Agent in immediately available funds the aggregate purchase price with respect to the Debentures to be purchased, together with accrued and unpaid interest thereon, to be held for payment in accordance with the terms of this Section 3.09. On the Purchase Date, the Company shall, to the extent lawful, (i) accept for payment all Debentures or portions thereof tendered pursuant to the Change of Control Offer, (ii) deliver or cause the Paying Agent or Depository, as the case may be, to deliver to the Trustee Debentures so accepted and (iii) deliver to the Trustee an Officers' Certificate stating that such Debentures or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depository or the Paying Agent, as the case may be, shall promptly (but in any case not later than three Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Debentures tendered by such Holder and accepted by the Company for purchase, plus any accrued and unpaid interest thereon, and the Company shall promptly issue a new Debenture, and the Trustee shall authenticate and mail or deliver such new Debenture, to such Holder, equal in principal amount to any unpurchased portion of such Holder's Debentures surrendered. Any Debenture not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce in a newspaper of general circulation or in a press release provided to a nationally recognized financial wire service the results of the Change of Control Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01, 3.02, 3.05 and 3.06 hereof. ARTICLE 4 COVENANTS SECTION 4.01. PAYMENT OF DEBENTURES. The Company shall pay or cause to be paid the principal of and premium, if any, and interest on the Debentures (or, if applicable, interest shall accrete to, and increase, the principal amount of each Debenture) on the dates and in the manner provided in the Debentures. Principal, premium, if any, and interest shall be considered paid for all purposes hereunder on the date the Paying Agent (if other than the Company) holds, as of 10:00 a.m. (New York City time), money deposited by the Company in immediately 33 available funds and designated for and sufficient to pay all such principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Debentures to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or Registrar) where Debentures may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Debentures and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. SECTION 4.03. SEC REPORTS. So long as any Debentures are outstanding, the Company shall furnish to the Holders of Debentures all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its Subsidiaries and, with respect to the annual information only, a report thereon by the Company's certified independent accountants. In addition, for so long as any Debentures remain outstanding, the Company shall furnish to the Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. HOWEVER, to the extent not required by the TIA, the Company shall not be required to make any reports pursuant to the foregoing two sentences to any Holder of Debentures that the Company reasonably believes to be a competitor of the Company. The financial information to be distributed to Holders of Debentures shall be filed with the Trustee and mailed to the Holders at their addresses appearing in the register of Debentures maintained by the Registrar within 120 days after the end of the Company's fiscal years and within 60 days after the end of each of the first three quarters of each such fiscal year. 34 The Company shall provide the Trustee with a sufficient number of copies of all reports and other documents and information and, if requested by the Company, the Trustee will deliver such reports to the Holders under this Section 4.03. SECTION 4.04. COMPLIANCE CERTIFICATE. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether each has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, and that, to the best of his or her knowledge, each entity has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto). So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, in connection with the year-end financial statements delivered pursuant to Section 4.03 hereof, the Company shall use its best efforts to deliver a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Section 5.01 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. In the event that such written statement of the Company's independent public accountants cannot be obtained, the Company shall deliver an Officers' Certificate certifying that it has used its best efforts to obtain such statements and was unable to do so. The Company shall, so long as any of the Debentures are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments and governmental levies, except such as are contested in good faith and by appropriate proceedings and with respect to which appropriate reserves have been taken in accordance with GAAP. 35 SECTION 4.06. STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company; or (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Debentures, except a payment of interest or a payment of principal at Stated Maturity (all such payments and other actions set forth in clauses (i) through (iii) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof. SECTION 4.08. [INTENTIONALLY OMITTED]. SECTION 4.09. [INTENTIONALLY OMITTED]. SECTION 4.10. [INTENTIONALLY OMITTED]. SECTION 4.11. [INTENTIONALLY OMITTED]. SECTION 4.12. [INTENTIONALLY OMITTED]. SECTION 4.13. OFFER TO PURCHASE UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder of Debentures shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Debentures pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase (the "CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Debentures on the date specified in such notice, which date shall be no earlier than 30 days and no 36 later than 60 days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"), pursuant to the procedures required hereby and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Debentures as a result of a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Debentures 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 Debentures or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Debentures so accepted together with an Officers' Certificate stating the aggregate principal amount of Debentures or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Debentures so tendered the Change of Control Payment for such Debentures, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Debenture equal in principal amount to any unpurchased portion of the Debentures surrendered, if any; PROVIDED that each such new Debenture will be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Debentures required by this covenant. The Company 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 Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth herein applicable to a Change of Control Offer made by the Company and purchases all Debentures validly tendered and not withdrawn under such Change of Control Offer. SECTION 4.14. CORPORATE EXISTENCE. Subject to Section 4.13 and Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each of its Subsidiaries in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; PROVIDED that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Debentures. 37 ARTICLE 5 SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, 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; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Debentures and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; and (iii) immediately after such transaction no Default or Event of Default exists; and the Company delivers an Officers' Certificate and an Opinion of Counsel to the Trustee stating (A) that the proposed transaction and supplemental indenture comply with this Indenture and (B) that the Trustee shall be entitled to conclusively rely upon such Officers' Certificate and Opinion of Counsel. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and shall exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; PROVIDED, that in the case of any sale, assignment, transfer, lease, conveyance, or other disposition of less than all of the assets of the predecessor Company, the predecessor Company shall not be released or discharged from the obligation to pay the principal of or interest on the Debentures. 38 ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. Each of the following constitutes an "Event of Default": (i) default for 30 days in the payment when due of interest on the Debentures (whether or not prohibited by Article 10 hereof); (ii) default in payment when due of principal of or premium, if any, on the Debentures (whether or not prohibited by Article 10 hereof); (iii) failure by the Company or any Subsidiary to comply with the provisions described under Sections 3.09, 4.07 or 4.13 hereof; (iv) failure by the Company for 60 days after notice to comply with its other agreements in this Indenture or the Debentures; or (v) the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case in which it is the debtor, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, or (E) admits in writing its inability generally to pay its debts as the same become due; or (vi) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, in an involuntary case in which it is the debtor, (B) appoints a Custodian of the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken together, would 39 constitute a Significant Subsidiary, or for all or substantially all of the property of the Company, any of its Significant Subsidiaries or any group of Subsidiaries that taken, taken together, would constitute a Significant Subsidiary, or (C) orders the liquidation of the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, and the order or decree contemplated in clause (A), (B) or (C) remains unstayed and in effect for 60 consecutive days. To the extent that the last day of the period referred to in clause (i), (iv) or (vi) of the immediately preceding paragraph is not a Business Day, then the first Business Day following such day shall be deemed to be the last day of the period referred to in such clause. Any "day" will be deemed to end as of 11:59 p.m., New York City time. SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event of Default with respect to the Company specified in clause (v) or (vi) of Section 6.01 hereof) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Debentures may declare the unpaid principal of and premium, if any, and interest on all the Debentures to be due and payable by notice in writing to the Company (and the Trustee, if given by the Holders) specifying the respective Event of Default and that it is a "notice of acceleration" (the "ACCELERATION NOTICE"), and the same shall become immediately due and payable; PROVIDED, HOWEVER, that, so long as any Indebtedness permitted to be incurred pursuant to the New Credit Agreement shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Indebtedness under the New Credit Agreement or (ii) five Business Days after the giving of written notice to the Company and the Representative of such acceleration. If an Event of Default with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary specified in clause (v) or (vi) of Section 6.01 hereof occurs, all outstanding Debentures shall IPSO FACTO become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Holders of the Debentures may not enforce this Indenture or the Debentures except as provided herein. The Holders of a majority in principal amount of the then outstanding Debentures by written notice to the Trustee may rescind a Default or Event of Default (except nonpayment of principal or interest that has become due solely because of the acceleration). In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Debentures pursuant to the optional redemption 40 provisions of Section 3.07(a) hereof, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Debentures. If an Event of Default occurs prior to May 15, 2002, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Debentures prior to May 15, 2002, then the amount payable in respect of such Debentures for purposes of this paragraph for each of the twelve-month periods beginning on May 15 of the years indicated below shall be as set forth below, expressed as percentages of the principal amount that would otherwise be due but for the provisions of this sentence, plus accrued and unpaid interest to the date of payment:
Year PERCENTAGE 1997 113.50% 1998 112.15% 1999 110.80% 2000 109.45% 2001 108.10%
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of and premium, if any, and interest on the Debentures or to enforce the performance of any provision of the Debentures or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Debentures or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Debenture in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of at least a majority in principal amount of the Debentures then outstanding (including consents obtained in connection with a tender offer or exchange for Debentures) by notice to the Trustee may on behalf of the Holders of all of the Debentures waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of principal of or premium, if any, or interest on the Debentures. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. 41 SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Debentures may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Debentures or that may involve the Trustee in personal liability. The Trustee may take any other action which it deems proper which is not inconsistent with any such direction. SECTION 6.06. LIMITATION ON SUITS. A Holder of a Debenture may pursue a remedy with respect to this Indenture or the Debentures only if: (a) Holder of a Debenture gives to the Trustee written notice of a continuing Event of Default or the Trustee receives such notice from the Company; (b) the Holders of at least 25% in principal amount of the then outstanding Debentures make a written request to the Trustee to pursue the remedy; (c) such Holder of a Debenture or Holders of Debentures offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Debentures do not give the Trustee a direction inconsistent with the request. A Holder of a Debenture may not use this Indenture to prejudice the rights of another Holder of a Debenture or to obtain a preference or priority over another Holder of a Debenture. SECTION 6.07. RIGHTS OF HOLDERS OF DEBENTURES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Debenture to receive payment of principal of and premium, if any, and interest on the Debenture on or after the respective due dates expressed in the Debenture (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. 42 SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(i) or (ii) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of and premium, if any, and interest remaining unpaid on the Debentures and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Debentures allowed in any judicial proceedings relative to the Company (or any other obligor upon the Debentures), its creditors or its property and shall be entitled and empowered to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matter and to collect, receive and distribute any money or other securities or property payable or deliverable upon the conversion or exchange of the Debentures or on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, 43 expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; SECOND: to holders of Senior Debt to the extent required by Article 10 hereof; THIRD: to Holders of Debentures for amounts due and unpaid on the Debentures for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Debentures for principal, premium, if any, and interest, respectively; FOURTH: without duplication, to the Holders for any other Obligations owing to the Holders under this Indenture and the Debentures; and FIFTH: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Debentures pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Debenture pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Debentures. ARTICLE 7 TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing of which it has knowledge, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: 44 (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture or the TIA and the Trustee need perform only those duties that are specifically set forth in this Indenture or the TIA and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but shall not be obligated to verify the contents thereof. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it (including, in the Trustee's discretion, payment in cash) against any loss, liability or expense, including reasonable attorney's fees that might be incurred by it in compliance with such request or direction. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 45 SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely on the truth of the statements and correctness of the opinions contained in, and shall be protected from acting or refraining from acting upon, any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. Prior to taking, suffering or admitting any action, the Trustee may consult with counsel of the Trustee's own choosing and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall receive and retain financial reports and statements of the Company, as provided herein, but it shall have no duty to review or analyze such statements or reports to determine compliance with covenants or other obligations of the Company. (h) The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Company, except as set forth herein, but the Trustee may require of the Company full information and advice as to performance of the aforesaid covenants, conditions and agreements. 46 SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner of Debentures and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as Trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Debentures, it shall not be accountable for the Company's use of the proceeds from the Debentures or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Debentures or any other document in connection with the sale of the Debentures or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Debentures a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment on any Debenture pursuant to Section 6.01(i) or (ii) hereof, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Debentures. The Trustee shall not be required to take notice or be deemed to have notice of any Default hereunder except failure by the Company to cause to be made any of the payments to the Trustee required to be made, or an Event of Default of which the Trustee has actual knowledge, unless the Trustee shall have been specifically notified in writing of such Default by the Company or the Holders of at least 25% in aggregate principal amount of the then outstanding Debentures. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE DEBENTURES. Within 60 days after each March 15 beginning with the March 15 following the date of this Indenture, and for so long as Debentures remain outstanding, the Trustee shall mail to the Holders of the Debentures a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Debentures shall be mailed to the Company and filed with the Commission and each stock exchange on 47 which the Company has informed the Trustee in writing the Debentures are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Debentures are listed on any stock exchange and of any delisting thereof. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. To the extent permitted by law, the Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Debentures on all money or property held or collected by the Trustee, except that held in trust to pay principal of and interest on particular Debentures. Such Lien shall survive the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(v) or (vi) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. 48 SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Debentures may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a Custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Debentures may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Debentures may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Debenture who has been a Holder of a Debenture for at least six months, fails to comply with Section 7.10 hereof, such Holder of a Debenture may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and the duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to the Holders of the Debentures. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, PROVIDED that all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. 49 SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee or any Agent consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee or any Agent, as applicable. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities. The Trustee and its direct parent shall at all times have a combined capital surplus of at least $50.0 million as set forth in its most recent annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Debentures upon compliance with the conditions set forth below in this Article 8. SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Debentures on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Debentures, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all of its other obligations under such Debentures and this Indenture (and the Trustee, on demand of and at the 50 expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Debentures to receive payments in respect of the principal of and premium, if any, and interest on such Debentures when such payments are due from the trust referred to in Section 8.04(a); (b) the Company's obligations with respect to such Debentures under Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.10 and 4.02 hereof; (c) the rights, powers, trusts, duties and immunities of the Trustee, including without limitation under Sections 7.07, 8.05 and 8.07 hereof, and the Company's obligations in connection therewith; and (d) the provisions of this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 3.09, 4.05, 4.07, 4.13 and 4.14 hereof with respect to the outstanding Debentures on and after the date the conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Debentures shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Debentures shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Debentures, the Company or any of its Subsidiaries may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Debentures shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(i) through 6.01(iv) hereof shall not constitute Events of Default. SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Debentures: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Debentures, (i) cash in United States dollars, 51 (ii) non-callable Government Securities or (iii) a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of and premium, if any, and interest on the outstanding Debentures on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Debentures are being defeased to maturity or to a particular redemption date; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date hereof, 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 Debentures shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same time as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Debentures shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default of Event or Default resulting from the borrowing of funds to be applied to such deposit); (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds shall not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Debentures over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; 52 (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (i) the Trustee shall have received such other documents and assurances as the Trustee shall have reasonably required. SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "TRUSTEE") pursuant to Section 8.04 hereof in respect of the outstanding Debentures shall be held in trust and applied by the Trustee, in accordance with the provisions of such Debentures and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Debentures of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Debentures. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the written request of the Company and be relieved of all liability with respect to any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06. REPAYMENT TO THE COMPANY. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or premium, if any, or interest on any Debenture and remaining unclaimed for one year after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Debenture shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall 53 thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in THE NEW YORK TIMES and THE WALL STREET JOURNAL (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Company under this Indenture and the Debentures shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any payment of principal of or premium, if any, or interest on any Debenture following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Debentures to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF THE DEBENTURES. Notwithstanding Section 9.02 of this Indenture, without the consent of any Holder of Debentures the Company and the Trustee may amend or supplement this Indenture or the Debentures: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Debentures in addition to or in place of certificated Debentures; (c) to provide for the assumption of the Company's obligations to the Holders of Debentures in the case of a merger, or consolidation pursuant to Article 5 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of Debentures or that does not adversely affect the legal rights hereunder of any such Holder; or (e) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA. 54 Upon the written request of the Company accompanied by a resolution of its Board of Directors of the Company authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF DEBENTURES. Except as provided below in this Section 9.02, this Indenture or the Debentures may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Debentures then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer, for Debentures), and, subject to any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of or premium, if any, or interest on the Debentures, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Debentures may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Debentures (including consents obtained in connection with or a tender offer or exchange offer for the Debentures). Upon the request of the Company accompanied by a resolution of its Board of Directors of the Company authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Debentures as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may, but shall not be obligated to, enter into such amended or supplemental indenture. It shall not be necessary for the consent of the Holders of Debentures under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of each Debenture affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.02, 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Debentures then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the 55 Debentures. However, without the consent of each Holder affected, an amendment, or waiver may not (with respect to any Debenture held by a non-consenting Holder): (a) reduce the principal amount of Debentures whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Debenture or alter the provisions with respect to the redemption of the Debentures (other than provisions relating to Sections 3.09 and 4.13 hereof) in a manner adverse to the Holders of the Debentures; (c) reduce the rate of or change the time for payment of interest on any Debenture; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Debentures (except a rescission of acceleration of the Debentures by the Holders of at least a majority in aggregate principal amount of the Debentures and a waiver of the payment default that resulted from such acceleration); (e) make any Debenture payable in money other than that stated in the Debentures; (f) make any change in Section 6.04 or 6.07 hereof; (g) waive a redemption payment with respect to any Debenture (other than a payment required by Section 4.13 hereof); or (h) make any change in the amendment and waiver provisions of this Article 9. In addition, any amendment to the provision of Article 10 of this Indenture shall require the consent of the Holders of at least 75% in aggregate amount of Debentures the outstanding (including consents obtained in connection with a tender offer or exchange offer for the Debentures) if such amendment would adversely affect the rights of the Holders of Debentures. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Debentures shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Debenture is a continuing consent by the Holder and every subsequent Holder of a Debenture or portion of a Debenture that evidences the same debt as the consenting Holder's Debenture, even if notation of the consent is not made on any 56 Debenture. However, any such Holder or subsequent Holder of a Debenture may revoke the consent as to its Debenture if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. The Company may, but shall not be obligated to, fix a record date for determining which Holders of the Debentures must consent to such amendment, supplement or waiver. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders of Debentures furnished for the Trustee prior to such solicitation pursuant to Section 2.05 hereof or (ii) such other date as the Company shall designate. SECTION 9.05. NOTATION ON OR EXCHANGE OF DEBENTURES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Debenture thereafter authenticated. The Company in exchange for all Debentures may issue and the Trustee shall authenticate new Debentures that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Debenture shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until its Board of Directors approves it. In signing or refusing to sign any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 11.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. ARTICLE 10 SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Debenture agrees, that the Debenture Obligations shall be subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full in cash or cash equivalents of all Senior Debt, whether outstanding on the date hereof or thereafter incurred. 57 The provisions of this Article 10 shall constitute a continuing offer to all Persons that, in reliance upon such provisions, become holders or, or continue to hold Senior Debt; such provisions are made for the benefit of holders of Senior Debt and they or each of them may enforce the rights of holders of Senior Debt hereunder, subject to the terms and provisions hereof. SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities: (a) the holders of Senior Debt will be entitled to receive payment in full in cash or cash equivalents of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before the Holders of Debentures will be entitled to receive any payment with respect to the Debenture Obligations (except that Holders of Debentures may receive Permitted Junior Securities and payments made from the trust created pursuant to Article 8 hereof); and (b) until all Obligations with respect to Senior Debt are paid in full in cash or cash equivalents, any distribution to which the Holders of Debentures would be entitled shall be made to the holders of Senior Debt (except that Holders of Debentures may receive Permitted Junior Securities and payments made from the trust created pursuant to Article 8 hereof). SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT. The Company also may not make any payment upon or in respect of the Debentures (except that Holders of Debentures may receive Permitted Junior Securities and payments made from the trust created pursuant to Article 8 hereof) if: (i) a default in the payment of the principal of or premium, if any, or interest on, or commitment fees relating to, any Designated Senior Debt occurs and is continuing beyond any applicable period of grace; or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "PAYMENT BLOCKAGE NOTICE") from the Company or a Representative with respect to such Designated Senior Debt. Payments on the Debentures may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No 58 new period of payment blockage may be commenced unless and until 360 days have elapsed since the effectiveness of the immediately prior payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 days. SECTION 10.04. ACCELERATION OF DEBENTURES. The Company shall provide the names of the Representatives of the Senior Debt to the Trustee; PROVIDED, HOWEVER, that the failure to provide such notice shall not prejudice any of the rights hereunder of the holders of Senior Debt. SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee receives any payment of any Obligations with respect to the Debenture Obligations at a time when the Trustee has received written notice at least two Business Days prior to such payment is prohibited by Section 10.02 or 10.03 hereof, such payment shall be held by the Trustee for the benefit of, and shall be paid forthwith over and delivered, upon written request to, the holders of Senior Debt as their interest may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their interest may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. In the event that any Holder receives any payment of any Obligations with respect to the Debenture Obligations at a time when such payment is prohibited by Section 10.02 or 10.03 hereof, such payment shall be held by such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request to, the holders of Senior Debt as their interest may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their interest may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. 59 SECTION 10.06. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Debenture Obligations to violate this Article 10, but failure to give such notice shall not affect the subordination of the Debenture Obligations to the Senior Debt as provided in this Article 10. SECTION 10.07. SUBROGATION. After all Senior Debt is paid in full in cash or cash equivalents and until the Debentures are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness PARI PASSU with the Debentures) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Senior Debt. SECTION 10.08. RELATIVE RIGHTS. This Article 10 defines the relative rights of the Holders and holders of Senior Debt. Nothing in this Indenture shall: (i) impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and premium, if any, and interest on the Debentures in accordance with their terms; (ii) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Debt; or (iii) prevent the Trustee or any Holder from exercising its available remedies upon a Default or an Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article 10 to pay principal of or premium, if any, or interest on a Debenture on the due date, the failure is nevertheless a Default or an Event of Default. SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Debentures shall be prejudiced or impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. 60 SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Debentures, unless the Trustee shall have received at its Corporate Trust Office at least two Business Days prior to the date of such payment written notice that the payment of any Obligations with respect to the Debentures would violate this Article 10, PROVIDED that this Section 10.11 shall not limit or modify the rights of holders of Senior Debt to recover any such payments from the Holders of the Debentures pursuant to Sections 10.02, 10.03 and/or 10.05. Only the Company or a Representative may give such notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Debenture by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.01(v) and (vi) and Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, each Representative of Designated Senior Debt is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Debentures. 61 SECTION 10.13. AMENDMENTS. Any amendment to the provisions of this Article 10 shall require the consent of the Holders of at least 75% in aggregate amount of Debentures then outstanding if such amendment would adversely affect the rights of the Holders of Debentures. SECTION 10.14. NO WAIVER OF SUBORDINATION PROVISIONS. (a) No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act, in good faith, by any such holder. (b) Without in any way limiting the generality of paragraph (a) of this Section, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Holders of the Debentures and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders to the holders of Senior Debt, do any one or more of the following: (1) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, any Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (3) release any Person liable in any manner for the collection of Senior Debt; and (4) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.15. CERTAIN DEFINITIONS. For purposes of this Section 10, the terms "DISTRIBUTION" and "PAYMENT" include payments, distributions and other transfers of assets by or on behalf of the Company (including redemptions, repurchases or other acquisitions of the Debentures) from any source, of any kind or character, whether direct or indirect, by set-off or otherwise, whether in cash, property or securities. ARTICLE 11 MISCELLANEOUS SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 11.02. NOTICES. Any notice or communication by the Company or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight courier guaranteeing next day delivery, to the other's address: 62 If to the Company: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Telecopy: (314) 966-0983 Attention: President With a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 Telecopy: (212) 310-8007 Attention: Stephen M. Besen, Esq. If to the Trustee: Marine Midland Bank 140 Broadway 12th Floor New York, New York 10005 Telecopy: (212) 658-6425 Attention: Corporate Trust Administration -- Von Hoffmann Corporation The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to the Trustee or to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight courier guaranteeing next day delivery. Any notice or communication to the Trustee shall be deemed to have been duly given to the Trustee when received at its Corporate Trust Office (Attention: Corporate Trust Administration--Von Hoffmann Corporation). Any notice or communication to a Holder shall be mailed by first class mail to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. 63 Except with respect to notices or communications to the Trustee, if a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 11.03. COMMUNICATION BY HOLDERS OF DEBENTURES WITH OTHER HOLDERS OF DEBENTURES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Debentures. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and 64 (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 11.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Debentures or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Debentures by accepting a Debenture waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Debentures. SECTION 11.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE DEBENTURES. SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. SUCCESSORS. All agreements of the Company in this Indenture and the Debentures shall bind its successors and assigns. All agreements of the Trustee in this Indenture shall bind its successors and assigns. SECTION 11.11. SEVERABILITY. In case any provision in this Indenture or the Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 65 SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [SIGNATURE PAGE FOLLOWS] 66 SIGNATURES Dated as of October 16, 1998 Von Hoffmann Corporation By: Name: Title: Marine Midland Bank, as Trustee By: Name: Title: S-1 EXHIBIT A (Face of Debenture) [Series B] 13.5% Subordinated Exchange Debenture due 2009 No. ______ $_______________ CUSIP NO. VON HOFFMANN CORPORATION promises to pay to ___________________, or registered assigns, the principal sum of ________________ dollars (as such amount may be increased as provided herein) on May 15, 2009. Interest Payment Dates: May 15 and November 15 Record Dates: May 1 and November 1 VON HOFFMANN CORPORATION By: Name: Title: By: Name: Title: Dated: This is one of the Debentures referred to in the within-mentioned Indenture: , as Trustee By: --------------------- Name: Title: (LEGENDS APPEAR ON REVERSE FACE OF DEBENTURE) A-1 (Back of Debenture) [Series B] 13.5% Subordinated Exchange Debenture due 2009 [Unless and until it is exchanged in whole or in part for Debentures in definitive form, this Debenture may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC") to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has an interest herein.](1) [THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE - ---------- (1). This paragraph should be included only if the Debenture is issued in global form. A-2 SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.](2) Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Von Hoffmann Corporation, a Delaware corporation, or its successor (the "COMPANY"), promises to pay interest on the principal amount of this Debenture at the rate of 13.5% per annum. The Company will pay interest in United States dollars semi-annually in arrears on May 15 and November 15 of each year, commencing with the first such date following the issuance of the Debentures, or if any such day is not a Business Day, on the next succeeding Business Day (each an "INTEREST PAYMENT DATE"); PROVIDED, HOWEVER, that prior to the later to occur of (a) the first date on which interest would be permitted to be paid in cash pursuant to the terms of the then-outstanding indebtedness of the Company and its Subsidiaries and any other contractual provisions limiting the ability of the Company and its Subsidiaries to declare or pay cash interest or (b) May 22, 2002, interest shall not be paid in cash but shall accrete to, and increase, the principal amount of each Debenture. Interest on the Debentures shall accrue from the most recent date to which interest has been paid or accreted to principal amount or, if no interest has been so paid or accreted, from the date of issuance; PROVIDED that if there is no existing Default or Event of Default in the payment of interest, and if this Debenture is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date, except in the case of the original issuance of Debentures, in which case interest shall accrue from the date of authentication. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1.0% per annum in excess of the then applicable interest rate on the Debentures to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Debentures (except defaulted interest) to the Persons who are registered Holders of Debentures, or interest shall accrete to, and increase, the principal amount of each Debenture held by a registered Holder, as the case may be, at the close of business on the May 1 or November 1 next preceding the Interest Payment Date, even if such Debentures are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.13 of the Indenture with respect to defaulted interest. The Debentures shall be payable as to principal, premium, if any, and interest at the office or - ---------- (2). This paragraph should be removed if the Debentures are issued in exchange for shares of Preferred Stock that are not Transfer Restricted Securities or upon the exchange of Series B Debentures for Exchange Debentures in the Exchange Offer or upon the registration of the Exchange Debentures pursuant to the terms of the Registration Rights Agreement. A-3 agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders; PROVIDED that payment by wire transfer of immediately available funds shall be required with respect to principal of and premium, if any, and interest on all Global Debentures and on all other Debentures the Holders of which shall have provided written wire transfer instructions to the Company or the Paying Agent. Except as provided in the preceding paragraph, such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, the Trustee under the Indenture shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE. The Company issued the Debentures under an Indenture dated as of October 16, 1998 ("INDENTURE") between the Company and the Trustee. The terms of the Debentures include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"). The Debentures are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The Debentures are general unsecured Obligations of the Company limited in aggregate principal amount to the aggregate Liquidation Value of, plus accumulated and unpaid dividends on, the Preferred Stock upon exchange of the Debentures for the Preferred Stock pursuant to the Certificate of Designations, plus an amount representing the accretion of interest on the Debentures as provided herein. 5. OPTIONAL REDEMPTION. Except as set forth in the next paragraph, the Debentures shall not be redeemable at the Company's option prior to May 15, 2002. Thereafter, the Debentures shall be subject to redemption at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices set forth in the Indenture. Notwithstanding the foregoing, prior to May 15, 2002, the Company may redeem all, but not less than all, outstanding Debentures at a redemption price of 113.5% of the principal amount thereof, plus accrued and unpaid interest thereon to the redemption date, with the net proceeds of a Public Offering; PROVIDED that such redemption shall occur within 90 days of the date of the closing of such Public Offering. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Debentures. 7. REPURCHASE AT OPTION OF HOLDER. Upon the occurrence of a Change of Control, each Holder of Debentures will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such A-4 Holder's Debentures pursuant to a Change of Control Offer at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon to the date of purchase. Holders of the Debentures that are the subject of a Change of Control Offer may elect to have such Debentures purchased by completing the form titled "Option of Holder to Elect Purchase" appearing below. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Debentures are to be redeemed at its registered address. Debentures in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Debentures held by a Holder are to be redeemed. On and after the redemption date, interest ceases to accrue on the Debentures or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Debentures are in registered form without coupons in initial denominations of $1,000 and integral multiples of $1,000, except to the extent provided in the Certificate of Designations upon issuance of Debentures in exchange for shares of Preferred Stock and except upon accretion of interest as provided herein. The transfer of the Debentures may be registered and the Debentures may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Debenture or portion of a Debenture selected for redemption, except for the unredeemed portion of any Debenture being redeemed in part. Also, it need not exchange or register the transfer of any Debentures for a period of 15 days before a selection of Debentures to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. SUBORDINATION. Each Holder by accepting a Debenture agrees that the payment of principal of and premium, if any, and interest on each Debenture is subordinated in right of payment, to the extent and in the manner provided in Article 10 of the Indenture, to the prior payment in full of all Senior Debt (whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed), and the subordination is for the benefit of the holders of Senior Debt. 11. PERSONS DEEMED OWNERS. The registered Holder of a Debenture may be treated as its owner for all purposes. 12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following paragraphs and the provisions of the Indenture, the Debentures may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Debentures then outstanding (including, without limitation, consents obtained in connection with a purchase of or, tender offer or exchange offer for Debentures), and any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of or premium, if any, or interest on the Debentures, except a payment default resulting from an acceleration that has been rescinded) or compliance A-5 with any provision of the Indenture or the Debentures may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Debentures (including consents obtained in connection with a tender offer or exchange offer for Debentures). Without the consent of any Holder of Debentures, the Company and the Trustee may amend or supplement the Indenture or the Debentures to cure any ambiguity, defect or inconsistency, to provide for uncertificated Debentures in addition to or in place of certificated Debentures, to provide for the assumption of the Company's obligations to Holders of Debentures in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Debentures or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. In addition, any amendment to the provision of Article 10 of the Indenture shall require the consent of the Holders of at least 75% in aggregate amount of Debentures then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Debentures) if such amendment would adversely affect the rights of the Holders of Debentures. 13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest with respect to the Debentures (whether or not prohibited by Article 10 of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Debentures (whether or not prohibited by Article 10 of the Indenture); (iii) failure by the Company or any Subsidiary to comply with the provisions described in Sections 3.09, 4.07 or 4.13 of the Indenture; (iv) failure by the Company or any Subsidiary for 60 days after notice from the Trustee or the Holders of at least 25% in principal amount of the Debentures then outstanding to comply with its other agreements in the Indenture or the Debentures; and (v) certain events of bankruptcy or insolvency with respect to the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Debentures may declare all the Debentures to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" and the same shall become immediately due and payable; PROVIDED, HOWEVER, that, so long as any Indebtedness permitted to be incurred pursuant to the New Credit Agreement shall be outstanding, no such acceleration shall be effective until the earlier of (i) acceleration of any such Indebtedness under the New Credit Agreement or (ii) five Business Days after the giving of written notice to the Company and the Representative of such acceleration. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Debentures will become due and payable without A-6 further action or notice. Holders of the Debentures may not enforce the Indenture or the Debentures except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Debentures may direct the Trustee in its exercise of any trust or power. The Holders of a majority in aggregate principal amount of the Debentures then outstanding, by notice to the Trustee, may on behalf of the Holders of all of the Debentures 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 principal of or interest on the Debentures. The Trustee may withhold from Holders of the Debentures notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in such Holders' interest. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default to deliver to the Trustee a statement specifying such Default or Event of Default. 14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 15. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Debentures or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Debentures by accepting a Debenture waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Debentures. 16. AUTHENTICATION. This Debenture shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 18. [ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of the Debentures under the Indenture, Holders of Transferred Restricted Securities (as defined in the Registration Rights Agreement) shall have all the rights set forth in the Registration Rights Agreement, dated as of June 13, 1997, between the Company and the Initial Purchaser (the "REGISTRATION RIGHTS AGREEMENT").] 19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Debentures and the Trustee may use CUSIP A-7 numbers in notices of redemption as a convenience to the Holders. No representation is made as to the accuracy of such numbers either as printed on the Debentures or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Von Hoffmann Corporation 100 Camera Avenue St. Louis, Missouri 63126 Telecopy: (314) 966-0983 Attention: President A-8 Assignment Form To assign this Debenture, fill in the form below: (I) or (we) assign and transfer this Debenture to (Insert assignee's soc. sec. or tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint to transfer this Debenture on the books of the Company. The agent may substitute another to act for him. Date: ---------------------------- Your Signature: ----------------------------------------------- (Sign exactly as your name appears on the face of this Debenture) Signature Guarantee: ----------------------------------------------- A-9 Option of Holder to Elect Purchase If a Change of Control has occurred and you want to elect to have this Debenture purchased by the Company pursuant to Section 4.13 of the Indenture, check this box If a Change of Control has occurred and you want to elect to have only part of the Debenture purchased by the Company pursuant to Section 4.13 of the Indenture, state the amount you elect to have purchased: $___________ Date: --------------------- Your Signature: ------------------------------------------- (Sign exactly as your name appears on the Debenture) Tax Identification No.: ------------------- Signature Guarantee: ------------------------------------------- A-10 SCHEDULE OF EXCHANGES OF DEBENTURE(3) THE FOLLOWING EXCHANGES OF A PART OF THIS GLOBAL DEBENTURE FOR OTHER DEBENTURES HAVE BEEN MADE:
Principal Amount of this Global Amount of decrease in Amount of increase in Debenture Signature of authorized Principal Amount of Principal Amount of following such officer of Trustee or Date of Exchange this Global Debenture this Global Debenture decrease (or increase) Debenture Custodian - ----------------------------------------------------------------------------------------------------------------------
- ---------- (3). This should be included only if the Debenture is issued in global form. A-11 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Marine Midland Bank 140 Broadway 12th Floor New York, New York 10005 Attn: Corporate Trust Administration-- Von Hoffmann Corporation Re: 13.5% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 OF VON HOFFMANN CORPORATION Reference is hereby made to the Indenture, dated as of October 16, 1998_ (the "INDENTURE"), between Von Hoffmann Corporation, a Delaware corporation, as issuer (the "COMPANY"), and Marine Midland Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________ (the "TRANSFEROR") owns and proposes to transfer the Debenture[s] or interest in such Debenture[s] specified in Annex A hereto, in the principal amount of $___________ in such Debenture[s] or interests (the "TRANSFER"), to __________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL DEBENTURE OR A DEFINITIVE DEBENTURE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Debenture is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Debenture for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Debenture and/or the Definitive Debenture and in the Indenture and the Securities Act. B-1 2. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL DEBENTURE OR A DEFINITIVE DEBENTURE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Debentures and Restricted Definitive Debentures and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) / / such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) / / such Transfer is being effected to the Company or a Subsidiary thereof; or (c) / / such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) / / such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Debenture or Restricted Definitive Debentures and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of EXHIBIT D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Debenture and/or the Definitive Debentures and in the Indenture and the Securities Act. 3. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL DEBENTURE OR OF AN UNRESTRICTED DEFINITIVE DEBENTURE. (a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions B-2 contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Debentures, on Restricted Definitive Debentures and in the Indenture. (b) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Debenture will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Debentures or Restricted Definitive Debentures and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ---------------------------------------- [Insert Name of Transferor] By: ------------------------------------ Name: Title: Dated: , ------------------ B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) / / a beneficial interest in the: (i) / / 144A Global Debenture (CUSIP ), or (ii) / / IAI Global Debenture (CUSIP_______); or (b) / / a Restricted Definitive Debenture. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) / / a beneficial interest in the: (i) / / 144A Global Debenture (CUSIP______), or (ii) / / IAI Global Debenture (CUSIP_______); or (iii) / / Unrestricted Global Debenture (CUSIP_______); or (b) / / a Restricted Definitive Debenture; or (c) / / an Unrestricted Definitive Debenture, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Marine Midland Bank 140 Broadway 12th Floor New York, New York 10005 Attn: Corporate Trust Administration-- Von Hoffmann Corporation Re: 13.5% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 OF VON HOFFMANN CORPORATION Reference is hereby made to the Indenture, dated as of October 16, 1998 (the "INDENTURE"), between Von Hoffmann Corporation, a Delaware corporation, as issuer (the "COMPANY"), and Marine Midland Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _____________ (the "OWNER") owns and proposes to exchange the Debenture[s] or interest in such Debenture[s] specified herein, in the principal amount of $____________ in such Debenture[s] or interests (the "EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE DEBENTURES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL DEBENTURE FOR UNRESTRICTED DEFINITIVE DEBENTURES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL DEBENTURE (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL DEBENTURE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL DEBENTURE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Debenture for a beneficial interest in an Unrestricted Global Debenture in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Debentures and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Debenture is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-1 (b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL DEBENTURE TO UNRESTRICTED DEFINITIVE DEBENTURE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Debenture for an Unrestricted Definitive Debenture, the Owner hereby certifies (i) the Definitive Debenture is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Debentures and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Debenture is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE DEBENTURE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL DEBENTURE. In connection with the Owner's Exchange of a Restricted Definitive Debenture for a beneficial interest in an Unrestricted Global Debenture, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Debentures and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE DEBENTURE TO UNRESTRICTED DEFINITIVE DEBENTURE. In connection with the Owner's Exchange of a Restricted Definitive Debenture for an Unrestricted Definitive Debenture, the Owner hereby certifies (i) the Unrestricted Definitive Debenture is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Debentures and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Debenture is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-2 2. EXCHANGE OF RESTRICTED DEFINITIVE DEBENTURES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL DEBENTURES FOR RESTRICTED DEFINITIVE DEBENTURES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL DEBENTURES (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL DEBENTURE TO RESTRICTED DEFINITIVE DEBENTURE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Debenture for a Restricted Definitive Debenture with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Debenture is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Debenture issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Debenture and in the Indenture and the Securities Act. (b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE DEBENTURE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL DEBENTURE. In connection with the Exchange of the Owner's Restricted Definitive Debenture for a beneficial interest in the [CHECK ONE] 0 144A Global Debenture, 0 IAI Global Debenture with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Debentures and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Debenture and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. [Insert Name of Owner] By: Name: Title: Dated: , ----------------- C-3 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Marine Midland Bank 140 Broadway 12th Floor New York, New York 10005 Attn: Corporate Trust Administration-- Von Hoffmann Corporation Re: 13.5% SUBORDINATED EXCHANGE DEBENTURES DUE 2009 OF VON HOFFMANN CORPORATION Reference is hereby made to the Indenture, dated as of October 16, 1998 (the "INDENTURE"), between Von Hoffmann Corporation, a Delaware corporation, as issuer (the "COMPANY"), and Marine Midland Bank, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) / / a beneficial interest in a Global Debenture, or (b) / / a Definitive Debenture, we confirm that: 1. We understand that any subsequent transfer of the Debentures or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Debentures or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "SECURITIES ACT"). 2. We understand that the offer and sale of the Debentures have not been registered under the Securities Act, and that the Debentures and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Debentures or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes D-1 (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) pursuant to the provisions of Rule 144 under the Securities Act or (E) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Debenture or beneficial interest in a Global Debenture from us in a transaction meeting the requirements of clauses (A) through (D) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Debentures or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Debentures purchased by us will bear a legend to the foregoing effect. We further understand that any subsequent transfer by us of the Debentures or beneficial interest therein acquired by us must be effected through one of the Placement Agents. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Debentures, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Debentures or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. [Insert Name of Accredited Investor] By: Name: Title: Dated: , ----------------- D-2 EX-4.7 17 a2082545zex-4_7.txt EXHIBIT 4.7 EXHIBIT 4.7 $215,000,000 VON HOFFMANN CORPORATION 10 1/4% SENIOR NOTES DUE 2009 REGISTRATION RIGHTS AGREEMENT March 26, 2002 Credit Suisse First Boston Corporation Scotia Capital (USA) Inc. c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Ladies and Gentlemen: Von Hoffmann Corporation, a Delaware corporation (the "ISSUER"), proposes to issue and sell to Credit Suisse First Boston Corporation and Scotia Capital (USA) Inc. (together, the "INITIAL PURCHASERS"), upon the terms set forth in a purchase agreement dated March 15, 2002 (the "PURCHASE AGREEMENT"), $200,000,000 aggregate principal amount of its 10 1/4% Senior Notes due 2009 (the "Notes"), to be guaranteed (the "GUARANTEES", and together with the Notes, the "OFFERED SECURITIES") by: Von Hoffmann Holdings Inc. (so long as it guarantees the Issuer's new revolving credit facility), a Delaware corporation; One Thousand Realty & Investment Company, a Delaware corporation; H&S Graphics, Inc., a Delaware corporation; Preface, Inc., a Delaware corporation; and Precision Offset Printing Company, Inc., a Delaware corporation (the "GUARANTORS" and, collectively with the Issuer, the "COMPANY"). The Offered Securities will be issued pursuant to an Indenture, dated as of March 26, 2002 (the "INDENTURE"), among the Issuer, the Guarantors and U.S. Bank National Association, as trustee (the "TRUSTEE"). As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company agrees with the Initial Purchasers, for the benefit of the Initial Purchasers and the holders of the Securities (as defined below) (collectively the "HOLDERS"), as follows: 1. REGISTERED EXCHANGE OFFER. Unless not permitted by applicable law (after the Company has complied with the ultimate paragraph of this Section 1), the Company shall prepare and, on or prior to 90 days (such 90th day being a "FILING DEADLINE") after the date on which the Initial Purchasers purchase the Offered Securities pursuant to the Purchase Agreement (the "CLOSING DATE"), file with the Securities and Exchange Commission (the "COMMISSION") a registration statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form under the Securities Act of 1933, as amended (the "SECURITIES ACT"), with respect to a proposed offer (the "EXCHANGE OFFER") to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Exchange Offer, to issue and deliver to such Holders, in exchange for the Offered Securities, a like aggregate principal amount of debt securities of the Issuer and guarantees of the Guarantors issued under the Indenture, identical in all material respects to the Offered Securities and registered under the Securities Act (the "EXCHANGE NOTES"). The Company shall (i) use its reasonable best efforts to have such Exchange Offer Registration Statement declared effective by the Commission under the Securities Act on or prior to 180 days after the Closing Date and (ii) unless the Exchange Offer would not be permitted by applicable law or Commission policy, the Company will, following the declaration of the effectiveness of the Exchange Offer Registration Statement (a) commence the Exchange Offer and (b) use its reasonable best efforts to issue on or prior to 35 business days after the date on which the Exchange Offer Registration Statement was declared effective by the Commission, Exchange Notes, in exchange for all Offered Securities tendered prior to thereto in the Exchange Offer (such period being called the "EXCHANGE OFFER REGISTRATION PERIOD"). Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder of Transfer Restricted Securities, electing to exchange the Offered Securities for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer), to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Offered Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (an "EXCHANGING DEALER"), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Securities (as defined below) acquired in exchange for Offered Securities constituting any portion of an unsold allotment, is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. Subject to the next paragraph, for so long as any of the Securities are outstanding and if, in the reasonable judgment of the Initial Purchasers or its counsel, the Initial Purchasers or any of their affiliates (as defined in the rules and regulations under the Securities Act) is required to deliver a prospectus (any such prospectus, a "MARKET MAKING PROSPECTUS") in connection with sales of the Securities, to (i) provide the Initial Purchasers and their affiliates, without charge, as many copies of the Market Making Prospectus as they may reasonably request, (ii) periodically amend the Offering Document (as defined in the Purchase Agreement) and the Exchange Offer Registration Statement so that the information contained therein complies with the requirements of Section 10(a) of the Securities Act, (iii) amend the Exchange Offer Registration Statement or amend or supplement the Market Making Prospectus when necessary to reflect any material changes in the information provided therein and promptly file such amendment or supplement 2 with the Commission, (iv) provide the Initial Purchasers and their affiliates with copies of each amendment or supplement so filed and such other documents, including opinions of counsel and "comfort" letters, as they may reasonably request and (v) indemnify the Initial Purchasers and their affiliates with respect to the Market Making Prospectus and, if applicable, contribute to any amount paid or payable by the Purchasers and their affiliates in a manner substantially identical to that specified in Section 7 of the Purchase Agreement (with appropriate modifications). The Company consents to the use, subject to the provisions of the Securities Act and the state securities or Blue Sky laws of the jurisdictions in which the Offered Securities are offered by the Purchasers, of each Market Making Prospectus. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes; PROVIDED, HOWEVER, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or the Initial Purchasers, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Notes held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Notes for a period of not less than 180 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Exchange Offer, the Initial Purchasers hold Offered Securities acquired by them as part of their initial distribution, the Company, simultaneously with the delivery of the Exchange Notes pursuant to the Exchange Offer, shall issue and deliver to the Initial Purchasers upon the written request of the Initial Purchasers, in exchange (the "PRIVATE EXCHANGE") for the Offered Securities held by the Initial Purchasers, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects to the Offered Securities (the "PRIVATE EXCHANGE NOTES"). The Offered Securities, the Exchange Notes and the Private Exchange Notes are herein collectively called the "SECURITIES". In connection with the Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Exchange Offer open for not less than 25 business days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; 3 (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (e) otherwise comply with all applicable laws. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall: (x) accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (y) deliver to the Trustee for cancellation all the Offered Securities so accepted for exchange; and (z) cause the Trustee to authenticate and deliver promptly to each Holder of the Offered Securities, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Offered Securities of such Holder so accepted for exchange. The Indenture will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter. Interest on each Exchange Note and Private Exchange Note issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Offered Securities surrendered in exchange therefor or, if no interest has been paid on the Offered Securities, from the date of original issue of the Offered Securities. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Notes within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes and (v) if such Holder is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for Offered Securities that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act 4 and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state 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. If following the date hereof there has been announced a change in Commission policy with respect to exchange offers that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Registered Exchange Offer is permitted by applicable federal law, the Company will seek a no-action letter or other favorable decision from the Commission allowing the Company to consummate the Registered Exchange Offer. The Company will pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company will take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (i) participating in telephonic conferences with the Commission, (ii) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that the Registered Exchange Offer should be permitted and (iii) diligently pursuing a resolution (which need not be favorable) by the Commission staff. 2. SHELF REGISTRATION. If, (i) the Company is not: (a) required to file the Exchange Offer Registration Statement; or (b) permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy; or (ii) any holder of Transfer Restricted Securities notifies the Issuer prior to the 20th day following consummation of the Exchange Offer that: (a) it is prohibited by law or Commission policy from participating in the Exchange Offer; or (b) that it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales; or (c) that it is a broker-dealer and owns Securities acquired directly from the Company or an affiliate of the Company, the Company shall take the following actions (the date on which any of the conditions described in the foregoing clauses (i) and (ii) occur, being a "TRIGGER DATE"): (a) The Company will file a registration statement (the "SHELF REGISTRATION STATEMENT") with the Commission and use its reasonable best efforts to cause such filing to be made on or prior to 35 days after such filing obligation arises and to cause the Shelf Registration Statement to be declared effective by the Commission under the Securities Act, on or prior to 75 days after such filing. The Shelf Registration Statement and the Exchange Offer Registration Statement are referred to herein as a "REGISTRATION STATEMENT". The Shelf Registration Statement shall be filed on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "SHELF REGISTRATION"); PROVIDED, HOWEVER, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf 5 Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is in the judgment of counsel for the Company required by applicable law. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3. REGISTRATION PROCEDURES. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Company shall (i) furnish to the Initial Purchasers, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that the Initial Purchasers (with respect to any portion of an unsold allotment from the original offering) are participating in the Exchange Offer or the Shelf Registration Statement, the Company shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as the Initial Purchasers reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by the Initial Purchasers, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement 6 of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Notes received by such broker-dealer in the Registered Exchange Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders. (b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading. (c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement. 7 (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall deliver to each Exchanging Dealer and the Initial Purchasers, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Initial Purchasers or any such Holder requests, all exhibits thereto (including those incorporated by reference). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Company shall deliver to the Initial Purchasers, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by the Initial Purchasers, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Notes covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement. (h) Prior to any public offering of the Securities pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; PROVIDED, HOWEVER, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. 8 (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Offered Securities, the Exchange Notes or the Private Exchange Notes, as the case may be, and provide the applicable trustee with printed certificates for the Offered Securities, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification 9 would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (p) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; PROVIDED, HOWEVER, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by you and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof. (q) In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as 10 of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein, of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities and (iii) its independent public accountants to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. (r) In connection with a resale under the Exchange Offering Registration Statement, if requested by the Initial Purchasers or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to the Initial Purchasers or such Participating Broker-Dealer a signed opinion in the form set forth in Section 6(c) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 6(a) of the Purchase Agreement, with appropriate date changes. (s) If a Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Offered Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or caused to be marked, on the Offered Securities so exchanged that such Offered Securities are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall the Offered Securities be marked as paid or otherwise satisfied. (t) The Company will use its reasonable best efforts to (a) if the Offered Securities have been rated prior to the initial sale of such Offered Securities, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Offered Securities were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the managing underwriters, if any. (u) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "RULES") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or 11 a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules. (v) The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby. 4. REGISTRATION EXPENSES. (a) All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws; (iii) all expenses of printing (including printing certificates for the Securities to be issued in the Exchange Offer and the Private Exchange and printing of prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company. 12 (b) In connection with any Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Offered Securities in the Registered Exchange Offer and/or selling or reselling Securities pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. 5. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "INDEMNIFIED PARTIES") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, 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 to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; PROVIDED, HOWEVER, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder or Participating 13 Broker-Dealer; PROVIDED FURTHER, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. 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 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. 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 14 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 a failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (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 (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the sale of the Transfer Restricted Securities, or (ii) if the allocation provided by the foregoing clause (i) 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 indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such 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 any other provision of this Section 5, the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this subsection (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 15 6. LIQUIDATED DAMAGES. (a) Liquidated damages (the "LIQUIDATED DAMAGES") with respect to the Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a "REGISTRATION DEFAULT"): (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the date specified for such filing; (ii) any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the date specified for such effectiveness (the "EFFECTIVENESS TARGET DATE"); (iii) the Registered Exchange Offer has not been consummated within 35 business days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement; or (iv) any Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable in connection with resales of Transfer Restricted Securities during the periods specified herein. Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission. The Company shall pay Liquidated Damages to each Holder in the event of a Registration Default. Liquidated Damages shall accrue, at an annual rate of 1.0% of the aggregate principal amount of the Securities, on the date of such Registration Default, payable in cash semiannually in arrears on each interest payment date with respect to the Securities, commencing on the date of such Registration Default. All accrued Liquidated Damages will be paid by the Company in the same manner and at the times as interest is paid. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. (b) A Registration Default referred to in Section 6(a)(iv) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material 16 events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; PROVIDED, HOWEVER, that in any case if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured. (c) Any amounts of Liquidated Damages due pursuant to Section 6(a) will be the exclusive remedy available to holders of Transfer Restricted Securities for any Registration Default. (d) "TRANSFER RESTRICTED SECURITIES" means each Security until (i) the date on which such Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of an Initial Security for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act. 7. RULES 144 AND 144A. The Company shall use its reasonable best efforts to, upon the request of any Holder of Securities, make publicly available any information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Offered Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Offered Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("MANAGING UNDERWRITERS") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, 17 underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 9. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (c) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company. (2) if to the Initial Purchasers: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group with a copy to: Latham & Watkins 885 Third Avenue New York, NY 10022-4802 Fax No.: (212) 751-4864 Attention: Peter M. Labonski (3) if to the Company, at its address as follows: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, MO 63126 Fax No.: (314) 966-0983 Attention: Chief Financial Officer 18 with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Fax No.: (212) 310-8007 Attention: Todd R. Chandler All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (d) THIRD PARTY BENEFICIARIES. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. (e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Company and its successors and assigns. (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (i) SEVERABILITY. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) SECURITIES HELD BY THE COMPANY. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 19 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Initial Purchasers, the Issuer and the Guarantors in accordance with its terms. Very truly yours, Von Hoffmann Corporation By: --------------------------------------- Name: Title: Von Hoffmann Holdings Inc. By: --------------------------------------- Name: Title: One Thousand Realty & Investment Company By: --------------------------------------- Name: Title: H&S Graphics, Inc. By: --------------------------------------- Name: Title: Preface, Inc. By: --------------------------------------- Name: Title: Precision Offset Printing Company, Inc. By: --------------------------------------- Name: Title: 20 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION SCOTIA CAPITAL (USA) INC. BY: CREDIT SUISSE FIRST BOSTON CORPORATION By: --------------------------------------- Name: Title: 21 ANNEX A Each broker-dealer that receives Exchange 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 Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Offered Securities where such Offered Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 22 ANNEX B Each broker-dealer that receives Exchange Notes for its own account in exchange for Offered Securities, where such Offered Securities 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 Exchange Notes. See "Plan of Distribution." 23 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange 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 Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Offered Securities where such Offered Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will 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 Exchange Notes may be required to deliver a prospectus.(1) The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission 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 the Company 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. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. - -------- (1) In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. 24 ANNEX D [ ] 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 Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Offered Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 25 EX-10.1 18 a2082545zex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 EXECUTIVE EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT dated as of January 31, 2002, and effective as of January 1, 2002 ("Effective Date"), by and among Von Hoffmann Press, Inc., a Delaware corporation ("Company") and Robert S. Mathews ("Executive"). NOW, THEREFORE, in consideration of the mutual undertakings contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. As used herein, the following terms shall have the following meanings. "BOARD" means the Board of Directors of a member of the Company Group. "CAUSE" means (i) the conviction of Executive by a court of competent jurisdiction of, or entry of a plea of NOLO CONTENDERE with respect to, a felony or any other crime which involves fraud, dishonesty or moral turpitude; (ii) fraud or embezzlement on the part of Executive; (iii) Executive's chronic abuse of or dependency on alcohol or drugs (illicit or otherwise) which interferes with the performance of Executive's duties, responsibilities or obligations under this Agreement; (iv) the material breach by Executive of Section 2.5, 2.6 or 2.7 hereof; or (v) any act of moral turpitude or willful misconduct by Executive which (A) is intended to result in substantial personal enrichment of Executive at the expense of the Company Group or (B) may have a material adverse impact on the business or reputation of the Company Group. "CHANGE IN CONTROL" means (i) the acquisition by a person or group of persons of greater than 50% of the voting power of the Company; (ii) the sale of all or substantially all of the assets of the Company in one transaction or a series of related transactions; or (iii) a merger or consolidation of the Company in which the shareholders of the Company immediately prior to such consolidation own directly or indirectly less than 50% of the voting power of the resulting corporation. "COMPANY GROUP" means, collectively, Holding, the Company and their respective Subsidiaries, successors or assigns. "EBITDA" means, for any period, consolidated net income of Holding, the Company and its subsidiaries determined in accordance with GAAP plus (i) provisions for taxes based on income or profits to the extent included in computing such consolidated net income, plus (ii) consolidated interest expense of Holding and its subsidiaries for such period, whether paid or accrued, to the extent any such expense was deducted in computing such consolidated net income, plus (iii) depreciation, amortization and other non-cash expenses of Holding and its subsidiaries for such period (excluding any such non-cash expenses to the extent it represents an accrual or reserve for cash expenses in any future period or amortization of a prepaid cash expense paid in a prior period) to the extent any such expense was deducted in computing such consolidated net income, plus (iv) any fees or expenses related to the transactions contemplated by the Merger Agreement to the extent any such expense was deducted in computing consolidated net income for such period, plus (v) any annual retainer payment made to Donaldson, Lufkin & Jenrette Securities Corporation or its affiliates to the extent any such expense was deducted in computing consolidated net income for such period, minus (vi) any gain on any sale or disposition of assets of Holding or any of its subsidiaries in excess of $200,000 in any year, minus (vii) any interest or dividend income or income from any other investments, minus (viii) any gain on the sale of any investment or any stock of any subsidiary of Holding or any of its subsidiaries, and (ix) plus any increase in the LIFO reserve or minus any decrease in the LIFO reserve, in each case for such period to the extent any such increase or decrease was included in computing consolidated net income for such period. "EMPLOYMENT PERIOD" has the meaning set forth in Section 2.1. "GAAP" means U.S. generally accepted accounting principles applied in accordance with the Company's accounting methodologies and procedures. "HOLDING" means Von Hoffmann Corporation. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that Person or combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, association or other business entity. 2 ARTICLE II EMPLOYMENT 2.1 EMPLOYMENT. The Company agrees to employ Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 2.4 (the "Employment Period"). 2.2 POSITION AND DUTIES. (a) Commencing on the Effective Date and continuing during the Employment Period, Executive shall serve in an executive position for the Company Group as determined by the Chief Executive Officer of the Company. (b) Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company Group. The Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. In the performance of his duties hereunder, Executive shall at all times report and be subject to the lawful direction of the Chief Executive Officer of the Company and any Board of Directors of any Person within the Company Group and perform his duties hereunder subject to and in accordance with the directions of the Chief Executive Officer of the Company and the resolutions or any other determinations of any Board of Directors of any Person within the Company Group and the By-laws of any Person within the Company Group, as from time to time in effect. During the Employment Period, Executive shall not become an employee of any Person other than a member of the Company Group. Executive shall be permitted to make, monitor and pursue private passive investments that do not interfere with the performance of his duties hereunder. Executive shall make application for, and submit to any examination as may be reasonably requested by, the Chief Executive Officer of the Company or the Board of Directors of Holding in order to obtain key-man or other insurance on the life of Executive for the benefit of the Company Group as the Chief Executive Officer of the Company or the Board of Directors of Holding shall direct. 2.3 BASE SALARY AND BENEFITS. (a) During the Employment Period, Executive's base salary shall be $225,000 (subject to increase, if any, provided under Section 2.3(d)) per annum (the "Base Salary"), which salary shall be payable in regular installments in accordance with the Company's general payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes, social security taxes and state disability insurance. (b) During the Employment Period, Executive shall be entitled to an annual bonus in an amount equal to $75,000 per annum (the "Non-Discretionary Bonus"). During the Employment Period, Executive will also be eligible to receive an additional bonus each year (the "Additional Bonus", and together with the Non- 3 Discretionary Bonus, the "Total Annual Bonus"). The Additional Bonus for a calendar year shall equal 1.4% of EBITDA for such calendar year in excess of certain EBITDA targets to be established by the Board from time to time, but in no event shall the Additional Bonus exceed $210,000 for any calendar year. The Total Annual Bonus shall be payable in December, 2002 for calendar year 2002, and each December thereafter during the Employment Period for the calendar year then ending, based on an estimate of EBITDA in accordance with current practices. An adjustment for any underpayment or overpayment shall be made in the next calendar year by the Company or Executive, as the case may be, within 30 days of receipt of certified financial statements for the Company Group. At the option of the Company, the Additional Bonus may be paid in its entirety within 30 days after receipt of certified financial statements for the Company Group for the year to which such Additional Bonus relates. The Total Annual Bonus shall be subject to deduction for customary withholdings, including, without limitation, federal and state withholding taxes, social security taxes and state disability insurance. (c) In addition to the Base Salary, the Total Annual Bonus payable to Executive pursuant to Section 2.3(b), Executive shall be entitled, during the Employment Period, to (i) participate in all retirement, disability, pension, health, medical, insurance and other fringe benefits or plans of the Company generally available to employees, and (ii) the following benefits (collectively, "Benefits") at the Company's expense: (A) Four (4) weeks of vacation; and (B) Reimbursement of all dues and assessments due in respect of a corporate membership in Greenbriar Hills Country Club maintained on behalf of Executive. (d) Executive's base salary described in Section 2.3(a) may be increased during the Employment Period at the sole discretion of the Board of Holding. 2.4 TERM. (a) The Employment Period shall end at 11:59 p.m. on December 31, 2004, subject to earlier termination (i) by reason of Executive's death, (ii) by action of the Company or Holding, with or without Cause or (iii) upon Executive's voluntary resignation or for any other reason not set forth above. (b) RESIGNATION OR TERMINATION FOR CAUSE. If the Employment Period is terminated as a result of Executive's voluntary resignation, or by the Company or Holding for Cause, or for any other reason not set forth in Sections 2.4(c) or 2.4(d) hereof, the Executive shall be entitled to his Base Salary through the date of termination, but shall not be entitled to any further Base Salary, Total Annual Bonus or Benefits for that year or any future year, or to any severance compensation of any kind, nature or amount. Executive agrees that he shall provide at least 90 days' written notice prior to any voluntary resignation. (c) DEATH. If Executive's employment is terminated as a result of his death, the Company shall pay to his estate all previously earned and accrued but unpaid 4 Base Salary up to the date of such termination, but neither Executive nor his estate shall be entitled to any further Base Salary, Total Annual Bonus or Benefits for that year or any future year or to any severance compensation of any kind, nature or amount. (d) TERMINATION WITHOUT CAUSE. Subject to Section 2.4(e) hereof, if the Executive's employment is involuntarily terminated by the Company or Holding without Cause, Executive shall be entitled to all previously earned and accrued but unpaid Base Salary up to the date of such termination, but shall not be entitled to any further Base Salary, Total Annual Bonus or Benefits for that year or any future year, and Executive agrees that no severance compensation of any kind, nature or amount shall be payable, except that Executive shall be entitled to an amount in cash equal to $337,500, of which (i) $112,500 shall be payable in one lump sum within five (5) days after the effective date of termination and (ii) $225,000 shall be payable in twelve (12) equal monthly payments of $18,750 each. Any payments to be made pursuant to clause (ii) of the immediately preceding sentence shall be made in monthly installments on the payment dates on which Executive's Base Salary would have otherwise been paid if the Employment Period had continued, and as of the date of the final such payment none of the Company, Holding, or any other member of the Company Group shall have any further obligation to Executive pursuant to this Section 2.4. (e) Executive agrees that Executive shall be entitled to the payments provided for in Section 2.4(d) if and only if Executive has not breached as of the date of termination of the Employment Period the provisions of Sections 2.5, 2.6 and 2.7 hereof and does not breach such sections at any time during the period for which such payments are to be made; PROVIDED, that the Company's obligation to make such payments will terminate upon the occurrence of any such breach during such severance period. (f) Executive hereby agrees that no severance compensation of any kind, nature or amount shall be payable to Executive, except as expressly set forth in this Section 2.4, and Executive hereby irrevocably waives any claim for any other severance compensation. (g) All of Executive's rights to Benefits and Total Annual Bonuses hereunder (if any) accruing after the termination of the Employment Period shall cease upon such termination. 2.5 CONFIDENTIAL INFORMATION. Executive acknowledges that the information, observations and data obtained by him while employed by Holding, the Company or any other member of the Company Group (whether prior to or during the Employment Period) concerning the business or affairs of any member of the Company Group ("Confidential Information") are the property of Holding, the Company or such other member of the Company Group. Therefore, Executive agrees that he shall not disclose to any unauthorized Person or use for his own account any Confidential Information without the prior written consent of the Board of Holding, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive's acts or omissions to act. Executive shall deliver to Holding at the termination of Executive's employment, or at any other 5 time Holding may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) and the business of the Company Group which he may then possess or have under his control. Executive acknowledges that (a) the Confidential Information is commercially and competitively valuable to the Company Group; (b) the unauthorized use or disclosure of the Confidential Information would cause irreparable harm to the Company Group; (c) Holding and the Company have taken and are taking all reasonable measures to protect their legitimate interest in the Confidential Information, including, without limitation, affirmative action to safeguard the confidentiality of such Confidential Information; (d) the restrictions on the activities in which Executive may engage set forth in this Agreement, and the periods of time for which such restrictions apply, are reasonably necessary in order to protect the Company Group's legitimate interests in its Confidential Information; and (e) nothing herein shall prohibit Holding or the Company from pursuing any remedies, whether in law or equity, available to Holding or the Company for breach or threatened breach of this Agreement, including the recovery of damages from Executive. 2.6 INVENTIONS AND PATENTS. Executive agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, and all similar or related information which relates to the Company Group's actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed by Holding, the Company or any other member of the Company Group (whether prior to or during the Employment Period) ("Work Product") belong to Holding, the Company or such other member of the Company Group, and Executive hereby assigns to Holding and the Company his entire right, title and interest in any such Work Product. Executive will promptly disclose such Work Product to the Board of Holding and perform all actions reasonably requested by the Board of Holding (whether during or after Executive's employment period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 2.7 NONCOMPETE, NONSOLICITATION. (a) Executive acknowledges that in the course of his employment with Holding, the Company or any other member of the Company Group he has become familiar, and he will become familiar, with the Company Group's trade secrets and with other Confidential Information and that his services have been and will be of special, unique and extraordinary value to the Company Group. Therefore, Executive agrees that, during the time he is employed by the Company or any other member of the Company Group and thereafter for a period of twelve (12) months (the "Noncompete Period"), Executive shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business with any person (including by himself or in association with any person, firm, corporate or other business organization or through any other entity) in competition with the businesses of the Company Group as such businesses exist or are in process on the date of the termination of Executive's employment, within any geographical area in which the Company Group 6 engages or plans on the date of the termination of Executive's employment to engage in such businesses. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation. (b) During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any other member of the Company Group to leave the employ of the Company or such other member of the Company Group, or in any way interfere with the relationship between any member of the Company Group and any employee thereof, (ii) hire any person who was an employee of the Company Group at any time within the six-month period prior to the date of termination of Executive's employment with the Company or any other member of the Company Group, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee, franchisor or other business relation of the Company or any other member of the Company Group to cease doing business with the Company or such other member of the Company Group, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee, franchisor or business relation and the Company or any other member of the Company Group. (c) Executive agrees that: (i) the covenants set forth in this Section 2.7 are reasonable in geographical and temporal scope and in all other respects, (ii) Holding and the Company would not have entered into this Agreement but for the covenants of Executive contained herein, and (iii) the covenants contained herein have been made in order to induce Holding and the Company to enter into this Agreement. (d) If, at the time of enforcement of this Section 2.7, a court or arbiter shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. ARTICLE III MISCELLANEOUS 3.1 EXECUTIVE'S REPRESENTATIONS. Executive hereby represents and warrants to Holding and the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by Holding and the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and 7 obligations under this Agreement and that he fully understands the terms and conditions contained herein. 3.2 SURVIVAL. Sections 2.5, 2.6, 2.7 and 3.3 through 3.13 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 3.3 NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications will be sent to the address indicated below: To the Company or Holding: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Attention: Chief Executive Officer Facsimile: (314) 966-0983 To Executive: Robert S. Mathews 465 Newport Heights Alpharetta, GA 30005 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. 3.4 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 3.5 COMPLETE AGREEMENT. This Agreement embodies the complete agreement and understanding among the parties and supersedes and preempts prior understandings, agreements or representations by or among the parties, written or oral, if any, including any agreements between the parties dated July 14, 1997 and January 1, 1999. 8 3.6 COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 3.7 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by Holding, the Company, and their respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive. 3.8 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen hereto by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement. 3.9 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 3.10 GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the domestic law of the State of Missouri, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Missouri or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Missouri. 3.11 REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 2.5, 2.6 and 2.7 hereof, and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 3.12 DISPUTE RESOLUTION. (a) ARBITRATION. In the event of disputes between the parties with respect to the terms and conditions of this Agreement, such disputes shall be resolved by and through an arbitration proceeding to be conducted under the auspices of the American Arbitration Association (or any like organization successor thereto) in St. Louis, Missouri. Such arbitration proceeding shall be conducted pursuant to the commercial arbitration rules (formal or informal) of the American Arbitration Association in as expedited a manner as is then permitted by such rules (the "Arbitration"). Both the foregoing agreement of the parties to arbitrate any and all such claims, and the results, determination, finding, judgment and/or award rendered through 9 such Arbitration, shall be final and binding on the parties hereto and may be specifically enforced by legal proceedings. (b) PROCEDURE. Such Arbitration may be initiated by written notice from either party to the other which shall be a compulsory and binding proceeding on each party. The Arbitration shall be conducted by an arbitrator selected in accordance with the procedures of the American Arbitration Association. Time is of the essence of this arbitration procedure, and the arbitrator shall be instructed and required to render his or her decision within thirty (30) days following completion of the Arbitration. (c) VENUE AND JURISDICTION. Any action to compel arbitration hereunder shall be brought in the Circuit Court of St. Louis County, State of Missouri. 3.13 AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of Holding, Company, and Executive. * * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first written above. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. VON HOFFMANN PRESS, INC. By: ------------------------ Name: Title: ---------------------------- ROBERT S. MATHEWS 10 EX-10.2 19 a2082545zex-10_2.txt EXHIHBIT 10.2 EXHIBIT 10.2 EXECUTIVE EMPLOYMENT AGREEMENT EXECUTIVE EMPLOYMENT AGREEMENT dated as of January 31, 2002, and effective as of January 1, 2002 ("Effective Date"), by and among Von Hoffmann Press, Inc., a Delaware corporation ("Company") and Peter C. Mitchell ("Executive"). NOW, THEREFORE, in consideration of the mutual undertakings contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. As used herein, the following terms shall have the following meanings. "BOARD" means the Board of Directors of a member of the Company Group. "CAUSE" means (i) the conviction of Executive by a court of competent jurisdiction of, or entry of a plea of NOLO CONTENDERE with respect to, a felony or any other crime which involves fraud, dishonesty or moral turpitude; (ii) fraud or embezzlement on the part of Executive; (iii) Executive's chronic abuse of or dependency on alcohol or drugs (illicit or otherwise) which interferes with the performance of Executive's duties, responsibilities or obligations under this Agreement; (iv) the material breach by Executive of Section 2.5, 2.6 or 2.7 hereof; or (v) any act of moral turpitude or willful misconduct by Executive which (A) is intended to result in substantial personal enrichment of Executive at the expense of the Company Group or (B) may have a material adverse impact on the business or reputation of the Company Group. "CHANGE IN CONTROL" means (i) the acquisition by a person or group of persons of greater than 50% of the voting power of the Company; (ii) the sale of all or substantially all of the assets of the Company in one transaction or a series of related transactions; or (iii) a merger or consolidation of the Company in which the shareholders of the Company immediately prior to such consolidation own directly or indirectly less than 50% of the voting power of the resulting corporation. "COMPANY GROUP" means, collectively, Holding, the Company and their respective Subsidiaries, successors or assigns. "EBITDA" means, for any period, consolidated net income of Holding, the Company and its subsidiaries determined in accordance with GAAP plus (i) provisions for taxes based on income or profits to the extent included in computing such consolidated net income, plus (ii) consolidated interest expense of Holding and its subsidiaries for such period, whether paid or accrued, to the extent any such expense was deducted in computing such consolidated net income, plus (iii) depreciation, amortization and other non-cash expenses of Holding and its subsidiaries for such period (excluding any such non-cash expenses to the extent it represents an accrual or reserve for cash expenses in any future period or amortization of a prepaid cash expense paid in a prior period) to the extent any such expense was deducted in computing such consolidated net income, plus (iv) any fees or expenses related to the transactions contemplated by the Merger Agreement to the extent any such expense was deducted in computing consolidated net income for such period, plus (v) any annual retainer payment made to Donaldson, Lufkin & Jenrette Securities Corporation or its affiliates to the extent any such expense was deducted in computing consolidated net income for such period, minus (vi) any gain on any sale or disposition of assets of Holding or any of its subsidiaries in excess of $200,000 in any year, minus (vii) any interest or dividend income or income from any other investments, minus (viii) any gain on the sale of any investment or any stock of any subsidiary of Holding or any of its subsidiaries, and (ix) plus any increase in the LIFO reserve or minus any decrease in the LIFO reserve, in each case for such period to the extent any such increase or decrease was included in computing consolidated net income for such period. "EMPLOYMENT PERIOD" has the meaning set forth in Section 2.1. "GAAP" means U.S. generally accepted accounting principles applied in accordance with the Company's accounting methodologies and procedures. "HOLDING" means Von Hoffmann Corporation. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that Person or combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, association or other business entity. 2 ARTICLE II EMPLOYMENT 2.1 EMPLOYMENT. The Company agrees to employ Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending as provided in Section 2.4 (the "Employment Period"). 2.2 POSITION AND DUTIES. (a) Commencing on the Effective Date and continuing during the Employment Period, Executive shall serve in an executive position for the Company Group as determined by the Chief Executive Officer of the Company. (b) Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company Group. The Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. In the performance of his duties hereunder, Executive shall at all times report and be subject to the lawful direction of the Chief Executive Officer of the Company and any Board of Directors of any Person within the Company Group and perform his duties hereunder subject to and in accordance with the directions of the Chief Executive Officer of the Company and the resolutions or any other determinations of any Board of Directors of any Person within the Company Group and the By-laws of any Person within the Company Group, as from time to time in effect. During the Employment Period, Executive shall not become an employee of any Person other than a member of the Company Group. Executive shall be permitted to make, monitor and pursue private passive investments that do not interfere with the performance of his duties hereunder. Executive shall make application for, and submit to any examination as may be reasonably requested by, the Chief Executive Officer of the Company or the Board of Directors of Holding in order to obtain key-man or other insurance on the life of Executive for the benefit of the Company Group as the Chief Executive Officer of the Company or the Board of Directors of Holding shall direct. 2.3 BASE SALARY AND BENEFITS. (a) During the Employment Period, Executive's base salary shall be $225,000 (subject to increase, if any, provided under Section 2.3(d)) per annum (the "Base Salary"), which salary shall be payable in regular installments in accordance with the Company's general payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes, social security taxes and state disability insurance. (b) During the Employment Period, Executive shall be entitled to an annual bonus in an amount equal to $75,000 per annum (the "Non-Discretionary Bonus"). During the Employment Period, Executive will also be eligible to receive an additional bonus each year (the "Additional Bonus", and together with the Non- 3 Discretionary Bonus, the "Total Annual Bonus"). The Additional Bonus for a calendar year shall equal 1.4% of EBITDA for such calendar year in excess of certain EBITDA targets to be established by the Board from time to time, but in no event shall the Additional Bonus exceed $210,000 for any calendar year. The Total Annual Bonus shall be payable in December, 2002 for calendar year 2002, and each December thereafter during the Employment Period for the calendar year then ending, based on an estimate of EBITDA in accordance with current practices. An adjustment for any underpayment or overpayment shall be made in the next calendar year by the Company or Executive, as the case may be, within 30 days of receipt of certified financial statements for the Company Group. At the option of the Company, the Additional Bonus may be paid in its entirety within 30 days after receipt of certified financial statements for the Company Group for the year to which such Additional Bonus relates. The Total Annual Bonus shall be subject to deduction for customary withholdings, including, without limitation, federal and state withholding taxes, social security taxes and state disability insurance. (c) In addition to the Base Salary, the Total Annual Bonus payable to Executive pursuant to Section 2.3(b), Executive shall be entitled, during the Employment Period, to (i) participate in all retirement, disability, pension, health, medical, insurance and other fringe benefits or plans of the Company generally available to employees, and (ii) the following benefits (collectively, "Benefits") at the Company's expense: (A) Four (4) weeks of vacation; and (B) Reimbursement of all dues and assessments due in respect of a corporate membership in Greenbriar Hills Country Club maintained on behalf of Executive. (d) Executive's base salary described in Section 2.3(a) may be increased during the Employment Period at the sole discretion of the Board of Holding. 2.4 TERM. (a) The Employment Period shall end at 11:59 p.m. on December 31, 2004, subject to earlier termination (i) by reason of Executive's death, (ii) by action of the Company or Holding, with or without Cause or (iii) upon Executive's voluntary resignation or for any other reason not set forth above. (b) RESIGNATION OR TERMINATION FOR CAUSE. If the Employment Period is terminated as a result of Executive's voluntary resignation, or by the Company or Holding for Cause, or for any other reason not set forth in Sections 2.4(c) or 2.4(d) hereof, the Executive shall be entitled to his Base Salary through the date of termination, but shall not be entitled to any further Base Salary, Total Annual Bonus or Benefits for that year or any future year, or to any severance compensation of any kind, nature or amount. Executive agrees that he shall provide at least 90 days' written notice prior to any voluntary resignation. (c) DEATH. If Executive's employment is terminated as a result of his death, the Company shall pay to his estate all previously earned and accrued but unpaid 4 Base Salary up to the date of such termination, but neither Executive nor his estate shall be entitled to any further Base Salary, Total Annual Bonus or Benefits for that year or any future year or to any severance compensation of any kind, nature or amount. (d) TERMINATION WITHOUT CAUSE. Subject to Section 2.4(e) hereof, if the Executive's employment is involuntarily terminated by the Company or Holding without Cause, Executive shall be entitled to all previously earned and accrued but unpaid Base Salary up to the date of such termination, but shall not be entitled to any further Base Salary, Total Annual Bonus or Benefits for that year or any future year, and Executive agrees that no severance compensation of any kind, nature or amount shall be payable, except that Executive shall be entitled to an amount in cash equal to $337,500, of which (i) $112,500 shall be payable in one lump sum within five (5) days after the effective date of termination and (ii) $225,000 shall be payable in twelve (12) equal monthly payments of $18,750 each. Any payments to be made pursuant to clause (ii) of the immediately preceding sentence shall be made in monthly installments on the payment dates on which Executive's Base Salary would have otherwise been paid if the Employment Period had continued, and as of the date of the final such payment none of the Company, Holding, or any other member of the Company Group shall have any further obligation to Executive pursuant to this Section 2.4. (e) TERMINATION AFTER CHANGE IN CONTROL. Subject to Section 2.4(f), in addition to the benefits provided pursuant to Section 2.4(d), if Executive's employment is involuntarily terminated by the Company or Holding without Cause after a Change in Control has occurred and such termination occurs prior to December 31, 2002, Executive shall be entitled to a one-time lump sum cash payment in an amount equal to $30,000, which payment shall be made by the Company to Executive within fifteen (15) days after the date of termination. (f) Executive agrees that Executive shall be entitled to the payments provided for in Sections 2.4(d) and (e) if and only if Executive has not breached as of the date of termination of the Employment Period the provisions of Sections 2.5, 2.6 and 2.7 hereof and does not breach such sections at any time during the period for which such payments are to be made; PROVIDED, that the Company's obligation to make such payments will terminate upon the occurrence of any such breach during such severance period. (g) Executive hereby agrees that no severance compensation of any kind, nature or amount shall be payable to Executive, except as expressly set forth in this Section 2.4, and Executive hereby irrevocably waives any claim for any other severance compensation. (h) All of Executive's rights to Benefits and Total Annual Bonuses hereunder (if any) accruing after the termination of the Employment Period shall cease upon such termination. 5 2.5 CONFIDENTIAL INFORMATION. Executive acknowledges that the information, observations and data obtained by him while employed by Holding, the Company or any other member of the Company Group (whether prior to or during the Employment Period) concerning the business or affairs of any member of the Company Group ("Confidential Information") are the property of Holding, the Company or such other member of the Company Group. Therefore, Executive agrees that he shall not disclose to any unauthorized Person or use for his own account any Confidential Information without the prior written consent of the Board of Holding, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive's acts or omissions to act. Executive shall deliver to Holding at the termination of Executive's employment, or at any other time Holding may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) and the business of the Company Group which he may then possess or have under his control. Executive acknowledges that (a) the Confidential Information is commercially and competitively valuable to the Company Group; (b) the unauthorized use or disclosure of the Confidential Information would cause irreparable harm to the Company Group; (c) Holding and the Company have taken and are taking all reasonable measures to protect their legitimate interest in the Confidential Information, including, without limitation, affirmative action to safeguard the confidentiality of such Confidential Information; (d) the restrictions on the activities in which Executive may engage set forth in this Agreement, and the periods of time for which such restrictions apply, are reasonably necessary in order to protect the Company Group's legitimate interests in its Confidential Information; and (e) nothing herein shall prohibit Holding or the Company from pursuing any remedies, whether in law or equity, available to Holding or the Company for breach or threatened breach of this Agreement, including the recovery of damages from Executive. 2.6 INVENTIONS AND PATENTS. Executive agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, and all similar or related information which relates to the Company Group's actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed by Holding, the Company or any other member of the Company Group (whether prior to or during the Employment Period) ("Work Product") belong to Holding, the Company or such other member of the Company Group, and Executive hereby assigns to Holding and the Company his entire right, title and interest in any such Work Product. Executive will promptly disclose such Work Product to the Board of Holding and perform all actions reasonably requested by the Board of Holding (whether during or after Executive's employment period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 2.7 NONCOMPETE, NONSOLICITATION. (a) Executive acknowledges that in the course of his employment with Holding, the Company or any other member of the Company Group he has become 6 familiar, and he will become familiar, with the Company Group's trade secrets and with other Confidential Information and that his services have been and will be of special, unique and extraordinary value to the Company Group. Therefore, Executive agrees that, during the time he is employed by the Company or any other member of the Company Group and thereafter for a period of twelve (12) months (the "Noncompete Period"), Executive shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business with any person (including by himself or in association with any person, firm, corporate or other business organization or through any other entity) in competition with the businesses of the Company Group as such businesses exist or are in process on the date of the termination of Executive's employment, within any geographical area in which the Company Group engages or plans on the date of the termination of Executive's employment to engage in such businesses. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation. (b) During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any other member of the Company Group to leave the employ of the Company or such other member of the Company Group, or in any way interfere with the relationship between any member of the Company Group and any employee thereof, (ii) hire any person who was an employee of the Company Group at any time within the six-month period prior to the date of termination of Executive's employment with the Company or any other member of the Company Group, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee, franchisor or other business relation of the Company or any other member of the Company Group to cease doing business with the Company or such other member of the Company Group, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee, franchisor or business relation and the Company or any other member of the Company Group. (c) Executive agrees that: (i) the covenants set forth in this Section 2.7 are reasonable in geographical and temporal scope and in all other respects, (ii) Holding and the Company would not have entered into this Agreement but for the covenants of Executive contained herein, and (iii) the covenants contained herein have been made in order to induce Holding and the Company to enter into this Agreement. (d) If, at the time of enforcement of this Section 2.7, a court or arbiter shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. 7 ARTICLE III MISCELLANEOUS 3.1 EXECUTIVE'S REPRESENTATIONS. Executive hereby represents and warrants to Holding and the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by Holding and the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein. 3.2 SURVIVAL. Sections 2.5, 2.6, 2.7 and 3.3 through 3.13 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 3.3 NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications will be sent to the address indicated below: To the Company or Holding: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Attention: Chief Executive Officer Facsimile: (314) 966-0983 To Executive: Peter C. Mitchell 53 Daryl Lane Ladue, MO 63124 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. 3.4 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or 8 unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 3.5 COMPLETE AGREEMENT. This Agreement and the other documents which have been executed by Holding, the Company, and Executive (I.E., Shareholders Agreement, Security and Pledge Agreement, Management Stock Purchase Agreement and Non-Recourse Secured Promissory Note) embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, including the agreements between the parties dated July 14, 1997 and January 1, 1999. 3.6 COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 3.7 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by Holding, the Company, and their respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive. 3.8 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen hereto by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement. 3.9 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 3.10 GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the domestic law of the State of Missouri, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Missouri or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Missouri. 3.11 REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 2.5, 2.6 and 2.7 hereof, and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance 9 and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 3.12 DISPUTE RESOLUTION. (a) ARBITRATION. In the event of disputes between the parties with respect to the terms and conditions of this Agreement, such disputes shall be resolved by and through an arbitration proceeding to be conducted under the auspices of the American Arbitration Association (or any like organization successor thereto) in St. Louis, Missouri. Such arbitration proceeding shall be conducted pursuant to the commercial arbitration rules (formal or informal) of the American Arbitration Association in as expedited a manner as is then permitted by such rules (the "Arbitration"). Both the foregoing agreement of the parties to arbitrate any and all such claims, and the results, determination, finding, judgment and/or award rendered through such Arbitration, shall be final and binding on the parties hereto and may be specifically enforced by legal proceedings. (b) PROCEDURE. Such Arbitration may be initiated by written notice from either party to the other which shall be a compulsory and binding proceeding on each party. The Arbitration shall be conducted by an arbitrator selected in accordance with the procedures of the American Arbitration Association. Time is of the essence of this arbitration procedure, and the arbitrator shall be instructed and required to render his or her decision within thirty (30) days following completion of the Arbitration. (c) VENUE AND JURISDICTION. Any action to compel arbitration hereunder shall be brought in the Circuit Court of St. Louis County, State of Missouri. 3.13 AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of Holding, Company, and Executive. * * * * * * IN WITNESS WHEREOF, the parties hereto have executed this Executive Employment Agreement as of the date first written above. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. VON HOFFMANN PRESS, INC. By: ---------------------------- Name: Title: 10 ---------------------------- PETER C. MITCHELL 11 EX-10.3 20 a2082545zex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 DRAFT 6/14/02 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of June __, 2002, by and among Von Hoffmann Holdings Inc., a Delaware corporation formerly named "Von Hoffmann Corporation" (including its successors and assigns, "Holding"), Von Hoffmann Corporation, a Delaware corporation formerly named "Von Hoffmann Press, Inc." (including its successors and assigns, the "Company"), and Robert A. Uhlenhop ("Employee"). WHEREAS, Holding, the Company and Employee are parties to that certain Employment Agreement, dated as of December 20, 2001 and effective as of January 1, 2002 (the "Original Agreement"); and WHEREAS, Holding, the Company and Employee desire to amend and restate the Original Agreement in its entirety as hereinafter provided; NOW, THEREFORE, in consideration of the mutual undertakings contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. As used herein, the following terms shall have the following meanings. "BOARD" means the Board of Directors of a member of the Company Group. "CAUSE" means (i) the conviction of Employee by a court of competent jurisdiction of, or entry of a plea of NOLO CONTENDERE with respect to, a felony or any other crime which involves fraud, dishonesty or moral turpitude; (ii) fraud or embezzlement on the part of Employee; (iii) Employee's chronic abuse of or dependency on alcohol or drugs (illicit or otherwise) which interferes with the performance of Employee's duties, responsibilities or obligations under this Agreement; (iv) the material breach by Employee of Section 2.5, 2.6 or 2.7 hereof; or (v) any act of moral turpitude or willful misconduct by Employee which (A) is intended to result in substantial personal enrichment of Employee at the expense of the Company Group or (B) may have a material adverse impact on the business or reputation of the Company Group. "COMPANY GROUP" means, collectively, Holding, the Company and their respective Subsidiaries, successors or assigns. "CODE" means the Internal Revenue Code of 1986, as amended. "EMPLOYMENT PERIOD" has the meaning set forth in Section 2.1 hereof. "PERMANENT DISABILITY" shall have the meaning assigned thereto in the disability insurance policy referred to as item 3 on SCHEDULE 2.3(c) hereto. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. ARTICLE II EMPLOYMENT 2.1 EMPLOYMENT. The Company agrees to employ Employee, and Employee hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning as of January 1, 2002 and ending as provided in Section 2.4 (the "Employment Period"). 2.2 POSITION AND DUTIES. (a) During the remainder of the Employment Period, Employee shall be employed by the Company as Chief Executive EMERITUS and Special Advisor to the Chief Executive Officer. In addition, as requested by the Board of the Company, Employee shall serve as Chairman of the Board of Holding. Notwithstanding anything to the contrary contained in the By-laws of the Company or the By-laws of Holding, while Employee holds the positions set forth herein, Employee shall be considered an employee of the Company (but not an officer of either the Company or Holding) obligating Employee and the Company to the rights and duties inherent in an employment relationship. (b) In his capacity as Chief Executive EMERITUS and Special Advisor to the Chief Executive Officer, Employee shall not in any way be deemed to be the Chief Executive Officer of the Company and will not be responsible for day-to-day operating functions of the Company, but shall perform such duties as shall be reasonably determined from time to time by the Chief Executive Officer or Board of the Company, including, without limitation, to the extent reasonably requested, providing guidance and assistance to members of the Company's senior management and to the Chief Executive Officer of the Company, and assisting the Company in maintaining and further developing its relationships with its existing customers and developing new customers. In his capacity as Chairman of the Board of Holding, Employee will not be responsible for day-to-day operating functions of Holding or any other member of the Company Group. In the performance of his duties as Chairman of the Board of Holding, Employee shall at all times report and be subject to the lawful direction of the Board of Holding and perform his duties hereunder subject to and in accordance with the resolutions or any other determinations of the Board of Holding and the By-laws of Holding, as from time to time in effect, provided that Employee's duties shall not be expanded beyond those specifically described in this Section 2.2. Employee shall perform his duties and responsibilities as Chief Executive EMERITUS and Special Advisor to the Chief Executive Officer, and Chairman of the Board of Holding, as the case may be, to the best of his 2 abilities in a diligent, trustworthy, businesslike and efficient manner, and may perform his duties either at or away from the Company's offices, as appropriate for the business needs of the Company Group. Notwithstanding anything contained in the By-laws of Holding or the By-laws of the Company to the contrary, while serving in the positions set forth herein, Employee shall not in any way present himself as, hold himself out to be, the Chief Executive Officer of the Company or any member of the Company Group, and shall not execute any document or instrument on behalf or in the name of, or take any action to legally bind, the Company or any other member of the Company Group without the express written consent of the Board of the Company or the Board of Holding, as applicable. (c) During the Employment Period, Employee shall not become an employee of any Person other than a member of the Company Group. Employee shall be permitted to make, monitor and pursue private passive investments that do not interfere with the performance of his duties hereunder. 2.3 BASE SALARY AND BENEFITS. (a) Except as may otherwise be provided in Section 2.4 hereof, during the Employment Period, Employee's base salary shall be $250,000 (subject to increase, if any, provided under Section 2.3(d)) per annum (the "Base Salary"), which salary shall be payable in regular installments in accordance with the Company's general payroll practices and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes, social security taxes and state disability insurance. (b) Except as may otherwise be provided in Section 2.4 hereof, during each full calendar year in the Employment Period, Employee shall be entitled to an annual bonus in an amount equal to $300,000 (subject to increase, if any, provided under Section 2.3(e)) per annum (the "Bonus"); IT BEING UNDERSTOOD that for the portion of the Employment Period between January 1, 2004 and January 21, 2004, Employee shall not be entitled to receive a Bonus or any portion thereof. Any Bonus shall be payable on each December 1 during the Employment Period for the calendar year then ending and shall be subject to deduction for customary withholdings, including, without limitation, federal and state withholding taxes, social security taxes and state disability insurance. (c) In addition to the Base Salary and the Bonus, except as may otherwise be provided in Section 2.4 hereof, Employee shall be entitled, during the Employment Period (and following the Employment Period if, and to the extent, provided in Section 2.3(c)(ii) below), to (i) participate in all retirement, disability, pension, savings, health, medical, dental, insurance and other fringe benefits or plans of Holding or the Company made generally available to their respective executive employees and shall be entitled to the other benefits set forth on SCHEDULE 2.3(c) hereto, and (ii) the following benefits (collectively, "Benefits") at the Company's expense: (A) six (6) weeks of vacation; 3 (B) [intentionally omitted]. (C) (w) payment or reimbursement of the amount of reasonable expenses properly incurred by Employee in connection with the performance of his duties hereunder, (x) payment or reimbursement of reasonable legal expenses incurred by Employee in connection with the negotiation of this Agreement, (y) payment or reimbursement of reasonable expenses (if any) incurred to enforce this Agreement (but only if a settlement agreement is reached or a final judgment is rendered by a court or arbiter in favor of the position taken by Employee), which shall survive the termination of this Agreement or the Employment Period, and (z) payment of $10,000 per annum for reasonable personal tax and legal expenses, in each case provided that proper vouchers are submitted to the Company by Employee evidencing such expenses and the purposes for which the same were incurred; (D) the Company will continue to pay the premiums on the disability insurance policies referred to on SCHEDULE 2.3(c) hereto and will gross-up Employee's compensation in accordance with past practices to reimburse him for the taxes associated with the inclusion of these benefits in his income (such gross-up to be calculated under the procedure described in the last sentence of Section 3.1 hereof); (E) until the earliest of (i) January 21, 2006, (ii) Employee's resignation or Employee's voluntary termination of his employment with the Company hereunder for any reason, (iii) Employee's death, or (iv) Employee's termination for Cause, the Company will continue to pay the premiums on the life insurance policy referred to on SCHEDULE 2.3(c) hereto and will gross-up Employee's compensation in accordance with past practices to reimburse him for the taxes associated with the inclusion of these benefits in his income (such gross-up to be calculated under the procedure described in the last sentence of Section 3.1 hereof); (F) until the earliest of (i) such individual's Medicare entitlement on or after attainment of age 65, (ii) Employee's receipt of coverage under another employer's coverage, or (iii) Employee's termination for Cause, Employee and his current spouse, respectively, shall be entitled to coverage under the Company's health care insurance plan (or comparable coverage if the current health care plan is substantially modified or eliminated) and group term life and accidental death and dismemberment plan, which coverage shall not be diminished solely because Employee's salary has diminished following the Employment Period; (G) in the event of Employee's Permanent Disability, after the expiration of the Employment Period as a result of such Permanent Disability, the Company will continue to pay the premiums on the disability insurance policies described in Section 2.3(c)(ii)(D) during any disability waiting period, but only to the extent necessary to ensure that such disability insurance policy is not terminated during such waiting period; and (H) the Company shall reimburse Employee for dues and assessments for Employee's personal membership in Greenbrier Hills Country Club and 4 Fox Run Golf Club, both located in St. Louis, Missouri, until the earliest of (i) January 21, 2006, (ii) Employee's death, (iii) Employee's resignation or Employee's voluntary termination of his employment with the Company hereunder for any reason, or (iv) Employee's termination for Cause. (d) Employee's Base Salary described in Section 2.3(a) may be increased during the Employment Period at the sole discretion of the Board of the Company. (e) Employee's Bonus described in Section 2.3(b) may be increased during the Employment Period at the sole discretion of the Board of the Company. 2.4 TERM. (a) The Employment Period shall commence on January 1, 2002 and end at 11:59 p.m. (St. Louis, Missouri local time) on January 21, 2004, subject to earlier termination (i) by reason of Employee's death or Permanent Disability, (ii) by an appropriate resolution of the Company's Board, for or without Cause, or (iii) upon Employee's resignation or Employee's voluntary termination of his employment with the Company hereunder for any reason. (b) TERMINATION FOR CAUSE; RESIGNATION. If the Employment Period is terminated by the Company for Cause or by Employee upon his resignation or his voluntary termination of his employment with the Company hereunder for any reason, the Employee shall be entitled to his Base Salary through the date of termination, but Employee shall not be entitled to any further Base Salary or any Bonus or Benefits for that year or any future year, or to any severance compensation of any kind, nature or amount; PROVIDED, HOWEVER, that, in the case of Employee's resignation or Employee's voluntary termination, Employee shall continue to be entitled to the benefits to the extent provided in Sections 2.3(c)(ii)(C)(y) and 2.3(c)(ii)(F). (c) PERMANENT DISABILITY. If Employee's employment is terminated as a result of his Permanent Disability for which Employee receives disability insurance payments under the disability insurance policy referred to as item 3 of SCHEDULE 2.3(c) hereto, the Company shall pay to Employee all previously earned and accrued but unpaid Base Salary up to the date such disability payments commence, but Employee shall not be entitled to any further Base Salary or any Bonus for that year or any future year; PROVIDED, HOWEVER, that Employee shall be entitled to the benefits paid pursuant to the disability insurance policies referred to in Section 2.3(c)(ii)(D), and the benefits to the extent provided in Sections 2.3(c)(ii)(C)(y), (E), (F), (G) and (H). (d) DEATH. If Employee's employment is terminated as a result of his death, the Company shall pay to Employee's estate, spouse or named beneficiary, as applicable, all previously earned and accrued but unpaid Base Salary up to the date of his death; provided, that Employee's estate, spouse or named beneficiary, as applicable, shall be entitled to (i) the benefit of the life insurance policy provided for in Section 5 2.3(c)(ii)(E), and (ii) the benefits to the extent provided for in Sections 2.3(c)(ii)(C)(y) and (F). (e) TERMINATION WITHOUT CAUSE. Subject to Section 2.4(f), if during the Employment Period the Employee's employment is terminated by the Company without Cause other than pursuant to paragraphs (c) or (d) above, Employee agrees that no severance compensation of any kind, nature or amount shall be payable, except for the following: (i) if such termination occurs on or after January 1, 2002 and on or prior to December 31, 2002, Employee shall be entitled to (x) all previously earned and accrued but unpaid Base Salary up to the date of such termination, plus an amount equal to Employee's Base Salary for one (1) calendar year (I.E., assuming no increase pursuant to Section 2.3(d), $250,000) and Employee's Bonus for one (1) calendar year (I.E., assuming no increase pursuant to Section 2.3(e), $300,000), and (y) continued benefits after the date of such termination until January 21, 2004 or later if, and to the extent, provided in Sections 2.3(c)(ii)(C)(y), (E), (F) and (H); or (ii) if such termination occurs on or after January 1, 2003 and on or prior to January 21, 2004, Employee shall be entitled to (x) all previously earned and accrued but unpaid Base Salary up to the date of such termination, plus an amount equal to Employee's Base Salary for the remainder of such period and Employee's Bonus for one calendar year, provided that, if such termination occurs, between January 1, 2004 and January 21, 2004, no Bonus payment (or any portion thereof) shall be payable to Employee; and (y) continued benefits after the date of such termination until January 21, 2004 or later if, and to the extent, provided in Sections 2.3(c)(ii)(C)(y), (E), (F) and (H). (f) Employee agrees that Employee shall be entitled to the payments provided for in Section 2.4(e) if, and only if, Employee has not breached as of the date of termination of the Employment Period the provisions of Sections 2.5, 2.6 and 2.7 hereof and does not breach such sections at any time during the period for which such payments are to be made; PROVIDED, that the Company's obligation to make such payments will terminate upon the occurrence of any such breach during such severance period. (g) Any payments pursuant to this Section 2.4 shall be made in monthly installments on the payment dates on which Employee's Base Salary would have otherwise been paid if the Employment Period had continued, and, as of the date of the final such payment, neither the Company nor any other member of the Company Group shall have any further obligation to Employee pursuant to this Section 2.4, except and, if, and to the extent, provided in Section 2.3(c)(ii) (other than Section 2.3(c)(ii)(A)). (h) EMPLOYEE HEREBY AGREES THAT NO SEVERANCE COMPENSATION OF ANY KIND, NATURE OR AMOUNT SHALL BE PAYABLE TO EMPLOYEE, EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2.4, AND EMPLOYEE HEREBY IRREVOCABLY WAIVES ANY CLAIM FOR ANY OTHER SEVERANCE COMPENSATION. 6 2.5 CONFIDENTIAL INFORMATION. Employee acknowledges that the information, observations and data obtained by him while employed by the Company or any other member of the Company Group (whether prior to or during the Employment Period) concerning the business or affairs of any member of the Company Group ("Confidential Information") are the property of the Company or such other member of the Company Group. Therefore, Employee agrees that he shall not disclose to any unauthorized Person or use for his own account any Confidential Information without the prior written consent of the Board of the Company, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Employee's acts or omissions to act. Employee shall deliver to the Company at the termination of Employee's employment, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) and the business of the Company Group which he may then possess or have under his control. Employee acknowledges that (a) the Confidential Information is commercially and competitively valuable to the Company Group; (b) the unauthorized use or disclosure of the Confidential Information would cause irreparable harm to the Company Group; (c) the Company or the other members of the Company Group have taken and are taking all reasonable measures to protect their legitimate interest in the Confidential Information, including, without limitation, affirmative action to safeguard the confidentiality of such Confidential Information; (d) the restrictions on the activities in which Employee may engage set forth in this Agreement, and the periods of time for which such restrictions apply, are reasonably necessary in order to protect the Company Group's legitimate interests in its Confidential Information; and (e) nothing herein shall prohibit the Company or any other member of the Company Group from pursuing any remedies, whether in law or equity, available to Holding or the Company for breach or threatened breach of this Agreement, including the recovery of damages from Employee. 2.6 INVENTIONS AND PATENTS. Employee agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, and all similar or related information which relates to the Company Group's actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Employee while employed by the Company or any other member of the Company Group (whether prior to or during the Employment Period) ("Work Product") belong to the Company or such other member of the Company Group, and Employee hereby assigns to the Company his entire right, title and interest in any such Work Product. Employee will promptly disclose such Work Product to the Board of the Company and perform all actions reasonably requested by the Board of the Company (whether during or after Employee's employment period) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). 2.7 NONCOMPETE, NONSOLICITATION; NO DISPARAGEMENT. (a) Employee acknowledges that in the course of his employment with the Company or any other member of the Company Group he has become familiar, and 7 he will become familiar, with the Company Group's trade secrets and with other Confidential Information and that his services have been and will be of special, unique and extraordinary value to the Company Group. Therefore, Employee agrees that, during the time he is employed by the Company or any other member of the Company Group and thereafter for the period of time equal to two years after the last severance payment of Base Salary or Bonus is received by Employee pursuant to Section 2.4 (the "Noncompete Period"), Employee shall not directly or indirectly own, manage, control, participate in, consult with, render services for, or in any manner engage in any business with any person (including by himself or in association with any person, firm, corporate or other business organization or through any other entity) in competition with the businesses of the Company Group as such businesses exist or are in process on the date of the termination of Employee's employment, within any geographical area in which the Company Group engages or plans on the date of the termination of Employee's employment to engage in such businesses. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. (b) During the Noncompete Period, Employee shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any other member of the Company Group to leave the employ of the Company or such other member of the Company Group, or in any way interfere with the relationship between any member of the Company Group and any employee thereof, (ii) hire any person who was an employee of the Company Group at any time within the six-month period prior to the date of termination of Employee's employment with the Company or any other member of the Company Group, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee, franchisor or other business relation of the Company or any other member of the Company Group to cease doing business with the Company or such other member of the Company Group, or in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee, franchisor or business relation and the Company or any other member of the Company Group. (c) Employee agrees that: (i) the covenants set forth above in this Section 2.7 are reasonable in geographical and temporal scope and in all other respects, (ii) Holding and the Company would not have entered into this Agreement but for the covenants of Employee contained herein, and (iii) the covenants contained herein have been made in order to induce Holding and the Company to enter into this Agreement. (d) If, at the time of enforcement of the covenants set forth above in this Section 2.7, a court or arbiter shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. 8 (e) Employee agrees that he will not now or at any time in the future, make any communications, whether oral or written, which negatively reflect upon, or disparage in any way, or induce or encourage others to disparage in any way, the Company or Holding, any member of the Company Group, their businesses, services, their products, or any of their directors, officers, employees or agents. The Company and Holding agree that they will use their reasonable best efforts to cause their respective directors and executive officers to not now or at any time in the future, make any communications, whether oral or written, which negatively reflect upon, or disparage in any way, or induce or encourage others to disparage in any way, Employee or his service to the Company Group. ARTICLE III MISCELLANEOUS 3.1 SPECIAL BONUS. In recognition of Employee's years of service to the Company Group and continued dedication and commitment to the success of the Company Group, and in consideration for, and appreciation of, Employee's assistance with transitioning the Company's new Chief Executive Officer into such role, past and continued guidance and assistance to members of the Company's senior management, assistance in maintaining and further developing the Company's relationships with its customers and service providers, assistance in finding and developing new customers of the Company Group and past and continued advice and guidance (strategic, operational, financial and other) regarding the business and operations of the Company Group, upon the execution of this Agreement, the Company shall pay Employee a special bonus equal to $1,000,000 (the "Special Bonus"), payable in cash, plus an additional "gross-up" payment equal to an amount such that, after payment by Employee of all federal, state and local income taxes imposed on such "gross-up" payment, Employee retains an amount of the "gross-up" payment equal to the federal, state and local income taxes imposed upon the payment of the Special Bonus to Employee. For purposes of determining the amount of the "gross-up" payment, Employee shall be deemed to pay federal income taxes at the highest marginal rates of federal income taxation applicable to individuals in the calendar year in which the "gross-up" payment is to be made, and state and local income taxes at the highest marginal rates of taxation applicable to individuals as are in effect in the state and locality of Employee's residence in the calendar year in which the "gross-up" payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account any limitations applicable to individuals subject to federal income tax at the highest marginal rates. 3.2 BOARD MEMBERSHIP; RESIGNATION. Continuing during the Employment Period or thereafter, unless Employee's employment hereunder is terminated by the Company for Cause, for as long as Employee's beneficial equity interest in Holding (I.E., Holding's Common Stock beneficially owned by Employee plus the number of shares of Holding's Common Stock issuable upon the exercise of stock options granted to Employee that have vested and are exercisable as of the time of such determination in accordance with the terms of Holdings's 1997 Stock Option Plan and any applicable stock option grant agreement) exceeds 2% of Holding's Common Stock outstanding on a 9 fully diluted basis (I.E., all outstanding shares of Holding's Common Stock (not including treasury shares) and all shares of Holding's Common Stock issuable in respect of securities convertible into or exchangeable for shares of Holding's Common Stock, share appreciation rights or options, warrants and other rights to purchase or subscribe for shares of Holding's Common Stock or securities convertible into or exchangeable for shares of Holding's Common Stock), Employee shall be entitled to serve as a member of the Board of Holding. Employee hereby agrees that upon termination of the Employment Period for any reason whatsoever, Employee shall promptly resign from the Board of Holding (i) immediately if he is terminated for Cause, (ii) on the date he violates the terms of Section 2.7, or (iii) in all other events, as soon as his equity interest in Holding falls below the 2% threshold set forth above, and if he does not so resign, Employee may be removed from the Board of Holding by stockholder action. In addition, except as provided in the immediately preceding sentence, upon the termination of his employment with the Company for any reason, Employee shall be deemed, without the need to take further action, to have resigned his position as an officer or director of any member of the Company Group effective on the date of termination. 3.3 EMPLOYEE'S REPRESENTATIONS. Employee hereby represents and warrants to Holding and the Company that (i) the execution, delivery and performance of this Agreement by Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which he is bound, (ii) except for (x) the Original Agreement, and (y), to the extent set forth in Section 3.7 below, the Executive Employment Agreement, dated as of April 3, 1997, by and among Von Hoffmann Corporation (now named "Von Hoffmann Holdings Inc.") (as successor to VH Acquisition Corp.), the Company and Employee, which, except as set forth in Section 3.7 or the Original Agreement and Section 3.7 below, expired by its terms at 11:59 p.m. on December 31, 2001 (such agreement, the "1997 EMPLOYMENT AGREEMENT"), Employee is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity (other than the Company or Holding), and (iii) upon the execution and delivery of this Agreement by Holding and the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms. Employee hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein. 3.4 SURVIVAL. Sections 2.3(c)(ii)(C)(y), 2.3(c)(ii)(E), 2.3(c)(ii)(F), 2.3(c)(ii)(G), 2.3(c)(ii)(H), 2.5, 2.6, 2.7, 3.2 and Sections 3.5 through 3.15 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 3.5 NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile to the recipient. Such notices, demands and other communications will be sent to the address indicated below: 10 To the Company or Holding: Von Hoffmann Corporation 1000 Camera Avenue St. Louis, Missouri 63126 Attention to: Chief Executive Officer Facsimile: (314) 966-0984 With a copy to: DLJ Merchant Banking Partners II, Inc. 11 Madison Avenue 16th Floor New York, New York 10010 Attention: Thompson Dean David F. Burgstahler Facsimile: (212) 538-0415 To Employee: Robert A. Uhlenhop 6 Claycrest St. Louis, Missouri 63131 Facsimile: (314) 991-2356 With a copy to: Brian W. Berglund, Esq. Bryan Cave LLP One Metropolitan Square, 36th Floor St. Louis, Missouri 63102 Facsimile: (314) 259-2020 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. 3.6 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 3.7 COMPLETE AGREEMENT. The Shareholders' Agreement, dated as of May 22, 1997 (as amended), among Holding and certain of its stockholders (the "SHAREHOLDERS' AGREEMENT"), the Security and Pledge Agreement, Management Stock Purchase Agreement and Non-Recourse Secured Promissory Note, each between Holding and Employee and each dated May 22, 1997, the stock option agreements between Holding and Employee (as amended), this Agreement, and the specific provisions of the 1997 Employment Agreement referred to below, embody the complete agreement and 11 understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, including the Original Agreement and the 1997 Employment Agreement, which agreement terminated in all respects by its terms at 11:59 p.m. on December 31, 2001; PROVIDED, HOWEVER, that, by virtue of Section 3.7 of the Original Agreement and as expressly contemplated and agreed to hereunder, (i) the provisions of the third clause of Section 2.3(c)(ii)(C) of the 1997 Employment Agreement shall continue to survive, and (ii) the gross-up provisions contained in Section 2.3(c)(ii)(D) of the 1997 Employment Agreement shall continue to survive until the payment to Employee of any such gross-up payments. 3.8 COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. 3.9 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by Holding, the Company, and their respective successors and assigns. Except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Employee. 3.10 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen hereto by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied to this Agreement. 3.11 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 3.12 GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits and schedules hereto will be governed by and construed in accordance with the domestic law of the State of Missouri, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Missouri or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Missouri. 3.13 REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 2.5, 2.6 and 2.7 hereof, and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 3.14 DISPUTE RESOLUTION. 12 (a) ARBITRATION. In the event of disputes between the parties with respect to the terms and conditions of this Agreement, such disputes shall be resolved by and through an arbitration proceeding to be conducted under the auspices of the American Arbitration Association (or any like organization successor thereto) in Chicago, Illinois. Such arbitration proceeding shall be conducted pursuant to the commercial arbitration rules (formal or informal) of the American Arbitration Association in as expedited a manner as is then permitted by such rules (the "Arbitration"). Both the foregoing agreement of the parties to arbitrate any and all such claims, and the results, determination, finding, judgment and/or award rendered through such Arbitration, shall be final and binding on the parties hereto and may be specifically enforced by legal proceedings. (b) PROCEDURE. Such Arbitration may be initiated by written notice from either party to the other which shall be a compulsory and binding proceeding on each party. The Arbitration shall be conducted by an arbitrator selected in accordance with the procedures of the American Arbitration Association. Time is of the essence of this arbitration procedure, and the arbitrator shall be instructed and required to render his or her decision within thirty (30) days following completion of the Arbitration. (c) VENUE AND JURISDICTION. Any action to compel arbitration hereunder shall be brought in the Circuit Court of St. Louis County, State of Missouri. 3.15 AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of Holding, Company and Employee. 3.16 FURTHER ASSURANCES. The parties hereto agree to take all action and to do all things reasonably necessary, proper or advisable as early as reasonably practicable so that the terms of this Agreement shall be made applicable to and consistent and not in conflict with certain other existing agreements concerning Employee's relationship with the Company and Holding (other than the Original Agreement and the 1997 Employment Agreement, except as expressly provided below in this Section 3.16), and VICE VERSA, including, but not limited to, (x) preserving the intent of Sections 3.1(c), (d) and (f) of the 1997 Employment Agreement (if, and then only to the extent, necessary, proper or advisable), and/or (y) appropriately amending any relevant provision of the Shareholders' Agreement, the Special Nonqualified Stock Option Grant Letter from Holding to Employee, dated as of May 22, 1997 (as amended), the Standard Nonqualified Stock Option Grant Letter from Holding to Employee, dated as of May 22, 1997 (as amended), the Non-Recourse Secured Promissory Note, dated May 22, 1997, issued by Employee to the Company, and the Security and Pledge Agreement, dated May 22, 1997, between Employee and Holding, in any such case, if, and then only to the extent, necessary, proper or advisable, and otherwise to carry out the purposes of this Agreement. Employee also agrees to use his best efforts to minimize the likelihood that the Company will not be entitled to deduct, for federal income tax purposes, any amounts with respect to payments made to, or benefits conferred upon, Employee pursuant to this Agreement. 13 3.17 EFFECT ON ORIGINAL AGREEMENT. This Agreement shall supercede and supplant the Original Agreement in all respects. * * * * * 14 IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. COMPANY: VON HOFFMANN CORPORATION By: ------------------------------------- Robert S. Mathews Chief Executive Officer and President HOLDING: VON HOFFMANN HOLDINGS INC. By: ------------------------------------- Robert S. Mathews Chief Executive Officer and President EMPLOYEE: ----------------------------------------- ROBERT A. UHLENHOP [Signature page to this Amended and Restated Employment Agreement, dated as of June __, 2002, by and among Von Hoffmann Holdings Inc., Von Hoffmann Corporation and Robert A. Uhlenhop] 15 SCHEDULE 2.3(c) 1. Disability policy (number 9161587) provided by Massachusetts Mutual. 2. Disability policy (number 9335328) provided by Massachusetts Mutual. 3. Disability policy (number 17053) provided by Petersen International (Lloyd's of London). 4. Life insurance policy (number 9856478) provided by Massachusetts Mutual. 5. Two travel accident policies provided by CHUBB. 16 EX-10.4 21 a2082545zex-10_4.txt EXHIBIT 10.4 EXHIBIT 10.4 EXECUTION COPY CREDIT AGREEMENT dated as of March 26, 2002 among VON HOFFMANN HOLDINGS INC., VON HOFFMANN CORPORATION, H&S GRAPHICS, INC., PRECISION OFFSET PRINTING COMPANY, INC., PREFACE, INC., ONE THOUSAND REALTY & INVESTMENT COMPANY and CERTAIN OTHER SUBSIDIARIES OF VON HOFFMANN CORPORATION, as the Borrowers, VARIOUS FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO, as the Lenders, THE CIT GROUP/BUSINESS CREDIT, INC., as the Administrative Agent for the Lenders, CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH, as the Syndication Agent for the Lenders, and U.S. BANK NATIONAL ASSOCIATION, as the Documentation Agent for the Lenders. CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH, as Sole Lead Arranger and Sole Book Running Manager CREDIT AGREEMENT This CREDIT AGREEMENT, dated as of March 26, 2002, is among VON HOFFMANN HOLDINGS INC. a Delaware corporation formerly known as Von Hoffmann Corporation (the "PARENT"), VON HOFFMANN CORPORATION, a Delaware corporation formerly known as Von Hoffmann Press, Inc. ("VHC"), H&S GRAPHICS, INC., PRECISION OFFSET PRINTING COMPANY, INC., PREFACE, INC., ONE THOUSAND REALTY & INVESTMENT COMPANY and certain other Subsidiaries of VHC which shall become parties hereto as Borrowers after the Closing Date in accordance with SECTIONS 7.1.8 and 11.15 (together with VHC, each a "BORROWER" and, collectively, the "BORROWERS"), the various financial institutions and other Persons from time to time party hereto as lenders (each a "LENDER" and, collectively, the "LENDERS"), THE CIT GROUP/BUSINESS CREDIT, INC., as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"), CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH ("CSFB"), as syndication agent for the Lenders (in such capacity, the "SYNDICATION AGENT" and, together with the Administrative Agent, the "AGENTS"), U.S. BANK NATIONAL ASSOCIATION, as documentation agent for the Lenders (in such capacity, the "DOCUMENTATION AGENT"), and CSFB, as sole lead arranger and sole book running manager (in such capacity, the "LEAD ARRANGER"). W I T N E S S E T H: WHEREAS, effective February 25, 2002, Von Hoffmann Graphics, Inc., a Delaware corporation ("VHG"), merged (such transaction being referred to herein as the "MERGER") with and into Von Hoffmann Press, Inc., a Delaware corporation, and Von Hoffmann Press, Inc., as the surviving entity of the Merger, simultaneously changed its name to "Von Hoffmann Corporation"; WHEREAS, concurrently with the effectiveness of the Merger, the Parent changed its name from "Von Hoffmann Corporation" to "Von Hoffmann Holdings Inc."; WHEREAS, VHC is a wholly-owned, direct Subsidiary of the Parent; WHEREAS, VHC intends to refinance (the "REFINANCING") all existing senior secured indebtedness outstanding under the Credit Agreement, dated as of May 22, 1997 (as amended, supplemented, amended and restated or otherwise modified prior to the Closing Date, the "EXISTING CREDIT AGREEMENT"), among VHC, the banks and other financial institutions party thereto as lenders, Credit Suisse First Boston, as successor to DLJ Capital Funding, Inc., as syndication agent, The Bank of Nova Scotia, as administrative agent, Fleet National Bank, as documentation agent, and Mercantile Bank National Association, as co-agent; WHEREAS, approximately $250,000,000 in cash will be required to effect the Refinancing, to pay accrued interest and fees, if any, payable in respect of the Indebtedness being refinanced in the Refinancing, to pay fees, costs and expenses associated with the new Indebtedness incurred to effect the Refinancing (including fees, costs and expenses related hereto and to the Senior Note Issuance described below), and to consummate all other transactions related hereto or thereto (collectively, the "TRANSACTIONS"); WHEREAS, concurrently with the execution and delivery of, and the initial Borrowing under, this Agreement, VHC will issue its 10 1/4% senior notes, due 2009 (the "SENIOR NOTES", with the issuance thereof being herein referred to as the "SENIOR NOTE ISSUANCE") for gross cash proceeds of $215,000,000; WHEREAS, subject to the terms and conditions of this Agreement, the Lenders and the Issuers have committed to provide the Borrowers with the following: (a) a Revolving Loan Commitment, in an aggregate principal amount of $90,000,000 (inclusive of the Letter of Credit Commitment and the Swingline Loan Commitment described below), pursuant to which Revolving Loans will be made to the Borrowers from time to time on and subsequent to the Closing Date but prior to the Commitment Termination Date; (b) a Letter of Credit Commitment, in an aggregate principal amount of $10,000,000, pursuant to which Letters of Credit will be issued for the account of the Borrowers from time to time on and subsequent to the Closing Date but prior to the Commitment Termination Date; and (c) a Swingline Loan Commitment, in an aggregate principal amount of $10,000,000, pursuant to which Swingline Loans will be made to the Borrowers from time to time on and subsequent to the Closing Date but prior to the fifth Business Day immediately preceding the Commitment Termination Date; WHEREAS, on the Closing Date, subject to the terms and conditions hereof, the Borrowers intend to continue certain letters of credit outstanding under the Existing Credit Agreement as Letters of Credit hereunder, to borrow Revolving Loans under this Agreement and to use the proceeds thereof, together with the net cash proceeds received by VHC from the Senior Note Issuance and cash on hand of the Borrowers, for purposes of effecting the Refinancing and consummating the remaining Transactions; WHEREAS, additional Revolving Loans, Swingline Loans and Letters of Credit made or issued from time to time hereunder on and after the Closing Date will be used for the ongoing working capital needs and other general corporate purposes of the Borrowers; and WHEREAS, the Lenders and the Issuers are willing, on the terms and subject to the conditions hereinafter set forth, to extend the Commitments, to make the Loans and to issue or continue (or participate in) the Letters of Credit contemplated hereunder; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. DEFINED TERMS. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): -2- "ACCOUNT" means any "account" (as defined in the UCC). "ACCOUNT DEBTOR" means an "account debtor" (as defined in the UCC). "ADMINISTRATIVE AGENT" is defined in the PREAMBLE and includes each other Person appointed as the successor Administrative Agent pursuant to SECTION 9.4. "ADMINISTRATIVE AGENT'S FEE LETTER" means the confidential letter, dated the Closing Date, among the Administrative Agent and the VHC. "AFFILIATE" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding (x) any trustee under, or any committee with responsibility for administering, any Plan and (y) CSFB and its affiliates (other than the DLJMB Entities that hold directly, or are general partners or managers of DLJMB Entities that hold directly, equity interests in the Parent)). "CONTROL" (and its derivatives) means, with respect to any Person, the power, directly or indirectly, (i) to vote 10% or more of the Capital Securities (determined on a fully diluted basis) of such Person having ordinary voting power for the election of directors, managing members or general partners (as applicable) or (ii) to direct or cause the direction of the management and policies of such Person (whether by contract or otherwise). "AGENTS" is defined in the PREAMBLE. "AGREEMENT" means, on any date, this Credit Agreement as originally in effect on the Closing Date and as thereafter amended, supplemented, amended and restated or otherwise modified from time to time in accordance with the terms hereof and in effect on such date. "ALTERNATE BASE RATE" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (i) the Base Rate in effect for such day and (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will promptly notify the Borrowers and the Lenders of changes in the Alternate Base Rate; PROVIDED that the failure to give such notice shall not affect the Alternate Base Rate in effect after such change. "APPLICABLE MARGIN" means with respect to all Loans, the applicable percentage set forth below determined by reference to the Leverage Ratio as certified in the most recent Compliance Certificate delivered as of such date pursuant to CLAUSE (d) of SECTION 7.1.1 (PROVIDED, HOWEVER, that at all times prior to the date of delivery of the Compliance Certificate (pursuant to CLAUSE (d) of SECTION 7.1.1) for the second Fiscal Quarter ended after the Closing Date, the Applicable Margin shall be (i) 1.75%, in the case of Base Rate Loans, and (ii) 3.00%, in the case of LIBO Rate Loans): -3-
Then the Then the Applicable Applicable If the Margin For Margin For Leverage Ratio is: Base Rate Loans is: LIBO Rate Loans is: ----------------- ------------------ ------------------ GREATER THAN 5.0:1.0 2.00% 3.25% GREATER THAN 4.0:1.0 LESS THAN OR EQUAL TO 5.0:1.0 1.75% 3.00% GREATER THAN 3.0:1.0 LESS THAN OR EQUAL TO 4.0:1.0 1.50% 2.75% LESS THAN OR EQUAL TO 3.0:1.0 1.25% 2.50%
Changes in the Applicable Margin resulting from a change in the Leverage Ratio shall become effective upon delivery by VHC to the Administrative Agent of a new Compliance Certificate pursuant to CLAUSE (d) of SECTION 7.1.1. If VHC fails to deliver a Compliance Certificate on or before the date specified for such delivery in CLAUSE (d) of SECTION 7.1.1, the Applicable Margin from and including the 61st (or 91st, as the case may be) day after the end of such Fiscal Quarter to but excluding the date on which VHC delivers to the Administrative Agent a Compliance Certificate shall be the highest Applicable Margin set forth above. "APPROVED FUND" means any Person (other than a natural Person) that (i) is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and (ii) is administered or managed by a Lender, an affiliate of a Lender or a Person or an affiliate of a Person that administers or manages a Lender. "ASSET APPRAISAL" means (i) initially, an appraisal of the orderly liquidation value of the Inventory and property (including real property), plant and Equipment (including fixtures) of the Borrowers prepared by Daley-Hodkin Appraisal Corporation and delivered to the Lead Arranger on or prior to the Closing Date in accordance with SECTION 5.1.24 hereof and (ii) at any time after the performance of an asset appraisal by or on behalf of the Administrative Agent pursuant to SECTION 7.1.5(c) hereof, the asset appraisal most recently performed by or on behalf of the Administrative Agent pursuant to SECTION 7.1.5(c) hereof. "ASSUMED INDEBTEDNESS" means Indebtedness of a Person existing at the time such Person becomes a Subsidiary of a Borrower or assumed in connection with an Eligible Acquisition and not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of a Borrower or such Eligible Acquisition. "AUTHORIZED OFFICER" means, relative to any Obligor, those of its officers (including, without limitation, its chief executive officer, president, chief financial officer, treasurer, assistant treasurer, secretary or assistant secretary), general partners or managing members (as applicable) whose signatures and incumbency shall have been certified to the Administrative Agent, the Lenders and the Issuers pursuant to SECTION 5.1.1. "AVAILABLE BALANCE" means, on any day, with respect to any Deposit Account (i) without duplication, all funds on deposit in such Deposit Account on such day which the depositary bank maintaining such Deposit Account, in accordance with its standard practices for posting of debits -4- and credits to demand deposit accounts of a type similar to such Deposit Account deems to be collected funds, including, without limitation, all wire transfers credited to such Deposit Account on such day and all other Federal or other immediately available funds on deposit in or deposited into such Deposit Account, on such day less (ii) all Items deducted from such Deposit Account on such day. "AVERAGE LIFE" means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness multiplied by the amount of such principal payment by (ii) the sum of all such principal payments. "BASE RATE" means, at any time, the rate of interest then most recently announced or established by the Administrative Agent in New York City as its prime rate for Dollars loaned in the United States. The Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. "BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "BORROWER" and "BORROWERS" are defined in the PREAMBLE. "BORROWING" means Loans made hereunder to a Borrower which are of the same type and, in the case of LIBO Rate Loans, have the same Interest Period and that are made or to be made by all Lenders required to make such Loans on the same Business Day and pursuant to the same Borrowing Request. "BORROWING BASE AMOUNT" means, at any time with respect to the Borrowers, an amount equal to the lesser of (i) the Revolving Loan Commitment Amount then in effect and (ii) the sum of (A) 85% of the Net Asset Value of all Eligible Accounts of the Borrowers PLUS (B) 38.25% of the Net Asset Value of all Eligible Inventory of the Borrowers PLUS (C) the lesser of (y) 50% of the Orderly Liquidation Value of Eligible PP&E of the Borrowers and (z) the Maximum PP&E Advance Amount, in the case of each amount referred to in CLAUSES (A), (B) and (C) above, as certified by the VHC to the Administrative Agent and the Lenders in the most recently delivered Borrowing Base Certificate, including the Borrowing Base Certificate delivered on the Closing Date pursuant to SECTION 5.1.22 MINUS (D) such reserves in respect of trade payables which are 90 days or more overdue as the Administrative Agent[, in its commercially reasonable discretion after consultation with VHC,] shall determine to be necessary or appropriate at such time. "BORROWING BASE AUDIT" means, (i) initially, the written audit of the accounts receivable, inventory, accounts payable and cash accounts of the Borrowers prepared by PricewaterhouseCoopers LLP and delivered to the Lead Arranger on or prior to the Closing Date in accordance with SECTION 5.1.23 hereof or (ii) at any time after the performance of an audit of the accounts receivable, inventory, accounts payable and cash accounts of the Borrowers by or on behalf of the Administrative Agent pursuant to CLAUSE (b) of SECTION 7.1.5, the most recent such audit so performed by or on behalf of the Administrative Agent pursuant to CLAUSE (b) of SECTION 7.1.5 hereof. -5- "BORROWING BASE CERTIFICATE" means a certificate duly completed and executed by the president, chief executive officer, treasurer, assistant treasurer, controller or chief financial Authorized Officer of VHC, substantially in the form of EXHIBIT E-2 hereto. "BORROWING REQUEST" means a request and certificate for a Loan which has been duly executed by an Authorized Officer of a Borrower, substantially in the form of EXHIBIT B-1 hereto. "BUSINESS DAY" means (i) any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in New York, New York, and (ii) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day which is a Business Day described in CLAUSE (i) above and which is also a day on which dealings in Dollars are carried on in the London interbank eurodollar market. "CAPITAL EXPENDITURES" means, for any period, the aggregate amount (without duplication) of (i) all expenditures of the Parent and its Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures and (ii) Capitalized Lease Liabilities incurred by the Parent and its Subsidiaries during such period. "CAPITAL SECURITIES" means, with respect to any Person, all shares of capital stock or equivalent shares, interests, participations or similar equivalents, including options, warrants and the like (however designated, whether voting or non-voting), whether now outstanding or issued after the Closing Date. "CAPITALIZED LEASE LIABILITIES" means, with respect to any Person, all monetary obligations of such Person and its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, should be classified as capitalized leases, and for purposes of each Loan Document the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a premium or a penalty. "CASH COLLATERALIZE" means, with respect to a Letter of Credit, the deposit of immediately available funds into a cash collateral account maintained with (or on behalf of) the Administrative Agent on terms reasonably satisfactory to the Administrative Agent in an amount equal to the Stated Amount of such Letter of Credit. "CASH EQUIVALENT INVESTMENT" means, at any time: (a) any direct obligation of (or unconditionally guaranteed by) the United States or a State thereof (or any agency or political subdivision thereof, to the extent such obligations are supported by the full faith and credit of the United States or a State thereof) maturing not more than one year after such time; (b) commercial paper maturing not more than 270 days from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any State of the United States or of the District of -6- Columbia and rated A-1 by S&P or P-1 by Moody's, or (ii) any Lender (or its holding company); (c) any certificate of deposit, cash demand deposit, time deposit or bankers acceptance, maturing not more than one year after its date of issuance, which is issued by either (i) any bank organized under the laws of the United States (or any State thereof) or any U.S. branch of a foreign banking institution which has a combined capital and surplus greater than $500,000,000, or (ii) any Lender (or its holding company); (d) debt instruments of a domestic issuer that mature in one year or less and that are rated Baa1 or higher by Moody's or A- or higher by S&P on the date of acquisition of such investment; (e) short-term tax-exempt securities rated MIG-1/1+ or higher by either Moody's or S&P with provisions for liquidity or maturity accommodations of 183 days or less; (f) repurchase agreements with respect to any securities referred to in CLAUSE (a) above entered into with any entity referred to in CLAUSE (b), (c) or (d) above or any other financial institution whose unsecured long-term debt (or the unsecured long-term debt of whose holding company) is rated A- or higher by S&P or Baa1 or higher by Moody's and maturing not more than one year after such time; or (g) any money market or similar fund at least 95% of the assets of which consist of any of the items specified in CLAUSES (a) through (f) above and as to which withdrawals are permitted at least every 90 days. "CASUALTY EVENT" means, with respect to any Person, the damage, destruction or condemnation, as the case may be, of any property of such Person. "CASUALTY PROCEEDS" means, with respect to any Casualty Event, the amount of any insurance proceeds or condemnation awards received by the Parent or any of its Subsidiaries in connection therewith, but excluding any proceeds or awards required to be paid to a creditor (other than the Lenders) which holds a first-priority Lien permitted by SECTION 7.2.3 on the property which is the subject of such Casualty Event. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "CERTIFICATE OF MERGER" means the Certificate of Merger relating to the Merger of VHG with and into VHC, as filed with the Secretary of State of Delaware on February 25, 2002. -7- "CHANGE IN CONTROL" means (i) the failure of the Permitted Holders at any time (A) to own, directly or indirectly, beneficially, on a fully-diluted, as-if-converted basis, at least 51% of the issued and outstanding Voting Securities of the Parent or (B) to have the right to elect a majority of the Board of Directors of the Parent; or (ii) the failure of the Parent at any time to own, directly or indirectly, beneficially and of record, on a fully-diluted, as-if-converted basis, 100% of the outstanding Capital Securities of VHC, free and clear of all Liens (other than Liens permitted to exist under CLAUSES (a), (f) and (l) of SECTION 7.2.3); or (iii) the occurrence of any "Change of Control" or similar term under (and as defined in) the Senior Note Indenture, the Senior Subordinated Note Indenture or the Parent Debenture Indenture. "CLOSING DATE" means the date of the initial Credit Extension hereunder, which shall not be later than April 15, 2002. "CLOSING DATE CERTIFICATE" means the closing date certificate executed and delivered by an Authorized Officer of VHC, substantially in the form of EXHIBIT D hereto. "CODE" means the Internal Revenue Code of 1986, and the regulations thereunder, in each case as amended, reformed or otherwise modified from time to time. "COLLECTION ACCOUNTS" means the Concentration Account and each other Deposit Account of VHC and its Subsidiaries designated as a Collection Account on SCHEDULE VI hereto. "COMMITMENT" means, as the context may require, (i) a Lender's Revolving Loan Commitment, (ii) an Issuer's Letter of Credit Commitment or (iii) the Swingline Lender's Swingline Loan Commitment. "COMMITMENT AMOUNT" means, as the context may require, the Revolving Loan Commitment Amount, the Letter of Credit Commitment Amount or the Swingline Loan Commitment Amount. "COMMITMENT INCREASE DATE" is defined in SECTION 2.2.3. "COMMITMENT LETTER" means the senior bank financing commitment letter (together with the term sheet annexed thereto), dated March 5, 2002, between the Lead Arranger and VHC. "COMMITMENT TERMINATION DATE" means the earliest of (i) April 15, 2002 (if the initial Credit Extension has not occurred on or prior to such date), (ii) November 15, 2006 or if, prior to May 15, 2006, either (A) the Senior Subordinated Notes have been refinanced on No More Favorable Terms And Conditions (or other terms and conditions reasonably satisfactory to the Agents), with any such refinancing indebtedness having a stated maturity date not earlier than -8- the 366th day after the fifth anniversary of the Closing Date, or (B) the maturity thereof has otherwise been extended to a date which is at least 366 days after the fifth anniversary of the Closing Date, the fifth anniversary of the Closing Date, (iii) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to the terms of this Agreement, and (iv) the date on which any Commitment Termination Event occurs. "COMMITMENT TERMINATION EVENT" means (i) the occurrence of any Event of Default with respect to the Parent or any Borrower described in CLAUSES (b) through (d) of SECTION 8.1.9; or (ii) the occurrence and continuance of any other Event of Default and either (A) the declaration of all or any portion of the Loans to be due and payable pursuant to SECTION 8.3, or (B) the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrowers that the Commitments have been terminated. "COMPLIANCE CERTIFICATE" means a certificate duly completed and executed by an Authorized Officer of VHC, substantially in the form of EXHIBIT E-1 hereto. "CONCENTRATION ACCOUNT" means the demand deposit account designated as such to be maintained by VHC with the Administrative Agent. "CONTINGENT LIABILITY" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise is or becomes contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the Capital Securities of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby. "CONTINUATION/CONVERSION NOTICE" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of a Borrower, substantially in the form of EXHIBIT B-3 hereto. "CONTROLLED GROUP" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with any Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "COPYRIGHT SECURITY AGREEMENT" means any Copyright Security Agreement executed and delivered by any Obligor in substantially the form of Exhibit C to the Pledge and Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. -9- "CREDIT EXTENSION" means, as the context may require, (i) the making of a Loan by a Lender or (ii) the issuance of any Letter of Credit (including as a result of the continuation of the Existing Letters of Credit on the Closing Date as Letters of Credit hereunder), or the extension of any Stated Expiry Date of any existing Letter of Credit, by an Issuer. "CSFB" is defined in the PREAMBLE. "DEBT FOR BORROWED MONEY" means, with respect to any Person, Indebtedness of such Person of a type described in CLAUSE (a), (b) (other than undrawn commercial letters of credit and undrawn letters of credit in respect of workers' compensation, insurance, performance and surely bonds, rental and other payments in respect of operating leases and similar obligations, in each case incurred in the ordinary course of business) or (c) of the definition of Indebtedness, or any Contingent Liability of such Person in respect of any such type of Indebtedness incurred or owed by another Person. "DEFAULT" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "DEFAULT LOANS" is defined in SECTION 2.3.2(a). "DEFAULTING LENDER" means a Lender that shall have failed to fund any Loan hereunder that it was required to have funded in accordance with the terms hereof, which Loan was included in any Borrowing in respect of which a majority of the aggregate principal amount of all Loans included in such Borrowing were funded by the Lenders party thereto. "DEPOSIT ACCOUNT" means a "deposit account" (as defined in the UCC). "DEPOSITARY BANK" means U.S. Bank National Association, and it successors. "DISBURSEMENT" is defined in SECTION 2.6.2. "DISBURSEMENT ACCOUNT" means the Operating Account and each other Deposit Account of VHC and its Subsidiaries designated as a Disbursement Account on SCHEDULE VI hereto. "DISBURSEMENT DATE" is defined in SECTION 2.6.2. "DISBURSEMENT DUE DATE" is defined in SECTION 2.6.2. "DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as SCHEDULE I, as it may be amended, supplemented, amended and restated or otherwise modified from time to time by the Borrowers with the written consent of the Required Lenders. "DISPOSITION" (or similar words such as "DISPOSE") means any sale, transfer or other disposition (including by way of merger) of any of the Parent's or its Subsidiaries' assets (including accounts receivable and Capital Securities of Subsidiaries) to any other Person (other than any such transfer or conveyance to any Borrower or any Subsidiary Guarantor) in a single transaction or series of transactions. Without limiting the foregoing, a Disposition shall include any sale, transfer or other conveyance of any Capital Securities of any Subsidiary of the Parent -10- (other than by the issuer thereof) other than to a Borrower or a wholly-owned Subsidiary of a Borrower. "DLJMB ENTITIES" means DLJ Merchant Banking Partners II, L.P., DLJ Diversified Partners, L.P., DLJ EAB Partners, L.P., DLJ Offshore Partners II, C.V., DLJMB Funding II, Inc., DLJ First ESC L.P., UK Investment Plan 1997 Partners, DLJ Diversified Partners-A, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Millennium Partners, L.P. and DLJ Millennium Partners-A L.P, and their respective affiliates. "DOCUMENTATION AGENT" is defined in the PREAMBLE. "DOLLAR" and the sign "$" mean lawful money of the United States. "DOMESTIC OFFICE" means the office of a Lender designated as its "Domestic Office" on SCHEDULE II hereto or in a Lender Assignment Agreement, or such other office within the United States as may be designated from time to time by notice from such Lender to the Administrative Agent and VHC. "EARN-OUTS" means any obligations of any Borrower or any of their respective Subsidiaries to pay any amounts constituting the payment of deferred purchase price with respect to any acquisition of a business (whether through the purchase of assets or shares of Capital Securities), the amount of which payments is calculated on the basis of, or by reference to, the bona fide financial or other operating performance of such business or specified portion thereof or any other similar arrangement. "EBITDA" means, for any applicable period, the sum (without duplication) for VHC and its Subsidiaries on a consolidated basis of (i) Net Income, PLUS (ii) the amount deducted in determining Net Income representing non-cash charges or expenses, including depreciation, amortization and non-cash LIFO reserve adjustments to Inventory, PLUS (iii) the amount deducted in determining Net Income representing income taxes (whether paid or deferred), PLUS (iv) the amount deducted in determining Net Income representing Interest Expense and fees, expenses, management bonuses (to the extent paid at or prior to the Closing Date) and financing costs incurred (x) prior to the Closing Date, (y) in connection with the Transaction or (z) in connection with any Eligible Acquisition, -11- PLUS (v) non-recurring cash out-of-pocket expenses representing severance payments reasonably made, or reasonable consulting fees paid in respect of services rendered, in connection with plant closures and/or the integration of acquisitions, MINUS (vi) an amount equal to the amount of all non-cash gains included in determining Net Income, MINUS (vii) Restricted Payments of the type referred to in CLAUSE (b)(i) of SECTION 7.2.6 made during such period. "ELIGIBLE ACCOUNT" means, with respect to the Borrowers at the time of any determination thereof, any Account as to which each of the following requirements has been fulfilled to the reasonable satisfaction of the Administrative Agent: (a) such Account is a legal, valid, binding and enforceable obligation of each Account Debtor with respect thereto; (b) a Borrower has the full and unqualified right to assign and grant a Lien on such Account to the Administrative Agent, for its benefit and that of the Lenders, as security for the Obligations; (c) such Account is evidenced by an invoice rendered to the Account Debtor (which shall include computer records) or is reflected by computer records maintained by a Borrower evidencing such Account; (d) such Account arose from the sale of goods or services by a Borrower in the ordinary course of such Borrower's business, and such goods or services have been shipped or delivered (in the case of goods) or rendered in full (in the case of services) to the Account Debtor for such Account; and (e) such Account shall not have been billed on a date materially later than it would have been billed in accordance with such Borrower's past practice; in each case other than the following (none of which shall be considered Eligible Accounts for purposes of this Agreement): (i) Accounts owing from any Person that is an Affiliate of a Borrower; (ii) Accounts more than 90 days past the original billing date therefor (in the case of Accounts accounted for on an invoice basis) or more than 60 days past the due date therefor (in the case of Accounts accounted for on a due date basis); -12- (iii) Accounts of any Account Debtor if, at the time of determination, in excess of 50% of the aggregate amount of all outstanding Accounts of such Account Debtor (other than Accounts which are the subject of BONA FIDE disputes between such Account Debtor and any Borrower or any U.S. Subsidiary, as the case may be) are more than 90 days past the original billing date therefor (in the case of Accounts accounted for on an invoice basis) therefor or more than 60 days past the due date therefor (in the case of Accounts accounted for on a due date basis); (iv) Accounts the liability for which has been disputed by the Account Debtor or which are otherwise subject to any offsetting contra-account, setoff, counterclaim or other claim or defense on the part of the Account Debtor or any other Person denying liability thereunder; PROVIDED, HOWEVER, that any such Account shall constitute an Eligible Account to the extent it is not subject to any such dispute, offsetting contra-account, setoff, counterclaim or other claim or defense; (v) Accounts owing from any Person that, to the knowledge of any Borrower, shall take or be the subject of any action or proceeding of the type described in CLAUSES (b) through (d) of SECTION 8.1.9 hereof; (vi) Accounts owing from any Person that is also a supplier to or creditor of any Borrower or to whom any Borrower is otherwise indebted, unless such Borrower and the applicable Account Debtor shall have entered into an enforceable agreement whereby the Account Debtor is prohibited from exercising any right of setoff with respect to the Accounts of such Borrower; PROVIDED that in any event, if such an agreement prohibiting setoff rights is not delivered by the Account Debtor, then only up to the amount that such Borrower is indebted to such Account Debtor shall be excluded as an Eligible Account pursuant to this clause); (vii) Accounts arising out of sales to Account Debtors outside the United States, Canada and Puerto Rico, unless the Account is (A) fully backed by an irrevocable letter of credit containing terms acceptable to the Administrative Agent issued by a financial institution satisfactory to the Administrative Agent or (B) otherwise on terms acceptable to the Administrative Agent; (viii) Accounts arising out of sales on a bill-and-hold (other than bill-and-hold Accounts not constituting, individually or in the aggregate, more than 15% of the aggregate amount of all Eligible Accounts under which, pursuant to a written contract reasonably acceptable to the Administrative Agent signed by the applicable Account Debtor, (A) the applicable Account Debtor has contractually taken title to all goods covered thereby and (B) the applicable Account Debtor is obligated to remit payment on normal trade terms without regard to whether delivery of any goods thereunder has occurred) guaranteed sale, sale-and-return, sale on approval or consignment basis or subject to any right of return or charge-back; -13- (ix) Accounts owing from an Account Debtor that is an agency, department or instrumentality of the United States or any state Governmental Authority in the United States; PROVIDED, HOWEVER, that such Accounts shall not be excluded from the calculation of "Eligible Accounts" by reason of this CLAUSE (ix) (A) during the 90-day period immediately following the Closing Date or (B) thereafter to the extent, as of the relevant date of determination, (y) the applicable Borrower shall have satisfied (or delivered to the Administrative Agent all filings, documents and other materials necessary to satisfy (which filings, documents and other materials shall be in a form expressly approved by the applicable Governmental Authority and shall be fully executed and ready for delivery to the applicable Governmental Authority)) the requirements of the Assignment of Claims Act of 1940, as amended, and any similar state legislation in respect thereof and (z) the Administrative Agent is satisfied as to the absence of set-offs, counterclaims and other defenses to payment on the part of the United States or such state Governmental Authority; (x) Accounts in respect of which the Pledge and Security Agreement does not or has ceased to create a valid and perfected first priority Lien in favor of the Administrative Agent, subject only to Permitted Liens; and (xi) Accounts owing from any Person to the extent that, at the time of determination, the aggregate amount of all outstanding Accounts owed by such Account Debtor exceeds 10% of the aggregate amount of all Eligible Accounts of the Borrowers; PROVIDED, HOWEVER, that Accounts owed to any Borrower by any of McGraw-Hill, Inc., Pearson Inc., Thomson Corporation or Reed Elsevier Inc. individually may constitute up to 20% of the aggregate amount of all Eligible Accounts of the Borrowers so long as such Account Debtor's senior unsecured debt is rated at least BBB by Moody's and Baa2 by S&P. "ELIGIBLE ACQUISITION" means any purchase or acquisition by VHC or any of its Subsidiaries of all or any part of the assets or Capital Securities of a Person engaged in business activities of the type in which VHC and its Subsidiaries are engaged on the Closing Date and such activities as may be incidental, similar or related thereto; PROVIDED that (i) the representations and warranties made by the Obligors in each Loan Document shall be true and correct in all material respects at and as of the date of such acquisition (as if made on such date after giving effect to such acquisition), except to the extent such representations and warranties expressly relate to an earlier date or dates (in which case such representations and warranties shall be true and correct in all material respects at and as of such earlier date or dates); (ii) the Administrative Agent shall have received all guaranties and all items in respect of the Capital Securities or property or assets acquired in such acquisition required to be delivered by SECTIONS 7.1.8 and 7.1.9; (iii) in the case of an acquisition of the Capital Securities of another Person, (A) except in the case of the incorporation of a new Subsidiary or the acquisition of Capital Securities that are not publicly held, the board of directors (or other comparable governing body) of such other Person shall have duly approved such acquisition and (B) the Capital Securities acquired shall constitute at least a majority of the total Capital Securities of the issuer thereof or shall increase a controlling interest of VHC or one or more of its Subsidiaries in such issuer; and (iv) no Default or Event of Default shall have occurred and be continuing -14- immediately before or immediately after giving effect to such acquisition and, in the case of each such acquisition made or to be made for aggregate consideration (including cash, Earn-outs, assumption of Indebtedness and non-cash consideration) equal to or in excess of $25,000,000, VHC shall have delivered to the Administrative Agent a pro-forma Compliance Certificate demonstrating that, upon giving effect to such acquisition on a pro-forma basis (calculated in accordance with SECTION 1.4(c)), (A) VHC shall be in compliance with all of the financial covenants set forth in SECTION 7.2.4 hereof as of the last day of the most recent period of four consecutive fiscal quarters of VHC which precedes or ends on the date of such acquisition and with respect to which the Administrative Agent has received the consolidated financial information required under CLAUSES (a) and (b) of SECTION 7.1.1 and the certificate required by CLAUSE (d) of SECTION 7.1.1 and (B) the Excess Availability after giving effect to such acquisition and all Credit Extensions made or to be made on such date shall equal or exceed $20,000,000. "ELIGIBLE ASSIGNEE" means (i) a Lender, (ii) an affiliate of a Lender (so long as such assignment is not made in conjunction with the sale of such affiliate), (iii) an Approved Fund or (iv) any other Person (other than a natural Person) approved (in the case of this CLAUSE (iv)) by the Administrative Agent and the Issuer (but with respect to the Administrative Agent and the Issuer only in the case of any assignment of the Revolving Loan Commitment) and, unless (x) such assignment is by the Syndication Agent in connection with the primary syndication of the Revolving Loan Commitment Amount, (y) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivatives transaction or (z) an Event of Default has occurred and is continuing, VHC (such approval not to be unreasonably withheld or delayed). "ELIGIBLE INVENTORY" means, with respect to the Borrowers at the time of any determination thereof and without duplication, all raw materials and finished goods Inventory of the Borrowers which, in the case of finished goods Inventory, is held by them for sale or to be furnished under contracts of sale which conforms in all respects to the representations and warranties contained herein and in the Pledge and Security Agreement and which is subject to a valid and perfected first priority lien and security interest in favor of the Administrative Agent, for the benefit of the Secured Parties, but (A) excluding in any event (i) Inventory subject to any Lien (other than the Liens of the Loan Documents and Liens described in CLAUSES (d), (f), (j) and (l) of SECTION 7.2.3), (ii) Inventory which is not in good condition or fails to meet standards for sale or use imposed by any Governmental Authority, (iii) raw materials Inventory consisting of bindery, packaging materials, plates, film, ink, cartons, laminate, CD sleeves or diskettes, (iv) Inventory located outside the United States, (v) Inventory located at a leased location or in the possession of any vendor or supplier, in either case in a jurisdiction whose laws provide for a statutory landlords' or vendors' lien, with respect to which the Administrative Agent shall not have received a waiver reasonably satisfactory to the Administrative Agent, and (vi) Inventory which is leased or on consignment, and (B) less (A) all reserves for obsolescence, market value declines, special order goods, discontinued Inventory, slow moving Inventory, shrinkage, applicable customs, freight, duties, Taxes, inventory adjustments and damages (including, but not limited to, foreign exchange adjustments) and (B) such additional reserves as the Administrative Agent deems necessary in its reasonable judgment after consultation with VHC as a result of negative trends in the business, industry, profits, operations or financial conditions of VHC and its U.S. Subsidiaries, taken as a whole, which could reasonably be expected to either -15- impair the value of the Collateral or impair the ability of VHC and its U.S. Subsidiaries to repay their Obligations. "ELIGIBLE PP&E" means, with respect to the Borrowers at the time of any determination thereof and without duplication, all property (including real property), plant and Equipment (including fixtures) of the Borrowers which conforms in all respects to the representations and warranties contained herein, in the Pledge and Security Agreement (in the case of Equipment) and in any applicable Mortgage, but (A) excluding in any event (i) property, plant and Equipment assets subject to any Lien (other than the Liens of the Loan Documents and Liens described in CLAUSE (d), (f), (g), (h), (j) and (l) of SECTION 7.2.3), (ii) property, plant and Equipment assets which are not in good condition or materially fail to meet standards for use imposed by any Governmental Authority, (iii) property, plant and Equipment assets which are not useable in the ordinary course of business, (iv) property, plant and Equipment assets located outside the United States, (v) property, plant and Equipment assets located at a leased location or in the possession of any vendor or supplier, in either case in a jurisdiction whose laws provide for a statutory landlord's or vendor's lien, with respect to which the Administrative Agent shall not have received a waiver reasonably satisfactory to the Administrative Agent, (vi) property, plant and Equipment assets which are leased and (vii) property, plant and Equipment assets in which the Administrative Agent does not have, for the benefit of the Secured Parties, a valid, enforceable and perfected Lien (it being understood and agreed that during the period from the Closing Date until the date upon which all of the obligations of the Borrower set forth in SECTIONS 7.1.12 and 7.1.13 have been satisfied in full or, in the event such obligations have not been satisfied within 60 days following the Closing Date, at all times and on and after the Closing Date, $25,540,000, representing the orderly liquidation value of the real property assets of the Borrowers reflected in the initial Asset Appraisal, shall be excluded from Eligible PP&E pursuant to this CLAUSE (vii)), and (B) less such reserves as the Administrative Agent deems necessary in its reasonable judgment after consultation with VHC as a result of negative trends in the business, industry, profits, operations or financial condition of VHC and its U.S. Subsidiaries, taken as a whole, which could reasonably be expected to either impair the value of the Collateral or impair the ability of VHC and its U.S. Subsidiaries to repay their Obligations. "ENVIRONMENTAL LAWS" means all applicable federal, state or local statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to the protection of the environment or the effect of the environment on human health. "EQUIPMENT" means all "equipment" (as defined in the UCC). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to Sections of ERISA also refer to any successor Sections thereto. "EVENT OF DEFAULT" is defined in SECTION 8.1. "EXCESS AVAILABILITY" means, at any time, the excess of (i) the Borrowing Base Amount in effect at such time over (ii) the aggregate Revolving Outstandings at such time. -16- "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXISTING CREDIT AGREEMENT" is defined in the FOURTH RECITAL. "EXISTING LETTERS OF CREDIT" means the letters of credit issued before the Closing Date pursuant to the Existing Credit Agreement and described by date of issuance, letter of credit number, undrawn amount, name of beneficiary and date of expiry on SCHEDULE V hereto, and "EXISTING LETTER OF CREDIT" means any one of them. "FEDERAL FUNDS RATE" means, for any day, a fluctuating interest rate per annum equal to (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or (ii) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "FEE LETTER" means the confidential fee letter, dated March 5, 2002, between the Lead Arranger and VHC. "FILING AGENT" is defined in SECTION 5.1.11. "FILING STATEMENTS" is defined in SECTION 5.1.11. "FISCAL QUARTER" means any fiscal quarter of a Fiscal Year. "FISCAL YEAR" means any 52 or 53 week period ending on the last Sunday in a calendar year; any reference to a Fiscal Year with a number corresponding to any calendar year refers to the Fiscal Year ended on the last Sunday of such calendar year (E.G., "2002 Fiscal Year" refers to the Fiscal Year ending on the last Sunday in such calendar year). "FIXED CHARGE COVERAGE RATIO" means, at the end of any Fiscal Quarter, the ratio computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters of: (i) the difference of (A) EBITDA for all such Fiscal Quarters less (B) Capital Expenditures actually made during all such Fiscal Quarters pursuant to CLAUSE (a) of SECTION 7.2.7 (excluding Capital Expenditures constituting Capitalized Lease Liabilities and by way of the incurrence of Indebtedness permitted pursuant to CLAUSE (c) of SECTION 7.2.2 to a financier of any assets permitted to be acquired pursuant to SECTION 7.2.7 to finance the acquisition of such assets); TO (ii) the sum (without duplication) of: -17- (A) the cash portion of Interest Expenses (net of interest income) for all such Fiscal Quarters; PLUS (B) all scheduled payments of principal of funded Debt for Borrowed Money (including the principal portion of any Capitalized Lease Liabilities) during all such Fiscal Quarters; PLUS (C) all taxes actually paid in cash during all such Fiscal Quarters; PLUS (D) all Restricted Payments actually made during all such Fiscal Quarters pursuant to CLAUSE (b)(ii) of SECTION 7.2.6. "F.R.S. BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in CLAUSE (a) of SECTION 1.4. "GRANTING BANK" has the meaning specified in CLAUSE (f) of SECTION 11.10. "GOVERNMENTAL AUTHORITY" means the government of the United States, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other Person exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "GUARANTOR" means the Parent and each Subsidiary Guarantor. "HAZARDOUS MATERIAL" means (i) any "hazardous substance", as defined by CERCLA, (ii) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended, or (iii) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance (including any petroleum product) within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended. "HEDGING OBLIGATIONS" means, with respect to any Person, all liabilities of such Person under currency exchange agreements, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates, currency exchange rates or commodity prices. -18- "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document. "IMPERMISSIBLE QUALIFICATION" means any qualification or exception to the opinion or certification of any independent public accountant as to any financial statement of VHC (i) which is of a "going concern" or similar nature, (ii) which relates to the limited scope of examination of matters relevant to such financial statement, or (iii) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the occurrence of in Event of Default under SECTION 7.2.4. "INCLUDING" and "INCLUDE" means including without limiting the generality of any description preceding such term, and, for purposes of each Loan Document, the parties hereto agree that the rule of EJUSDEM GENERIS shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "INDEBTEDNESS" of any Person means: (a) all obligations of such Person for borrowed money or for the deferred purchase price of property or services (exclusive of (i) deferred purchase price arrangements in the nature of open or other accounts payable owed to suppliers on normal terms in connection with the purchase of goods and services in the ordinary course of business and (ii) Earn-outs which at such time of determination are not recorded or required to be recorded as a liability of such Person in accordance with GAAP) and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person constituting Capitalized Lease Liabilities; (d) net Hedging Obligations of such Person; (e) whether or not included as liabilities on the balance sheet of such Person in accordance with GAAP, all Indebtedness of such Person of the types referred to in CLAUSES (a) through (d) above (excluding prepaid interest thereon) secured by a Lien on property owned or being acquired by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such Indebtedness shall have been assumed by such Person or is limited in recourse; PROVIDED, HOWEVER, that, to the extent such Indebtedness is limited in recourse to the assets securing such Indebtedness, the amount of such Indebtedness shall be limited to the fair market value of such assets; and -19- (f) without duplication, all Contingent Liabilities of such Person in respect of any of the foregoing types of Indebtedness. The Indebtedness of any Person shall include the Indebtedness of any other Person (including any partnership or joint venture in which such Person is a general partner or joint venturer) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such Person. "INDEMNIFIED LIABILITIES" is defined in SECTION 11.4. "INDEMNIFIED PARTIES" is defined in SECTION 11.4. "INITIAL PUBLIC OFFERING" means, for any Person, any sale of the Capital Securities of such Person to the public pursuant to an initial primary offering registered under the Securities Act of 1933. "INTEREST EXPENSE" means, for any Person during any applicable period, the aggregate interest expense, both accrued and paid, of such Person during such applicable period, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense (in accordance with GAAP) but excluding (to the extent included in interest expense) up-front fees and expenses and other deferred financing costs incurred (i) prior to the Closing Date, (ii) in connection with the Transaction or (iii) in connection with any Eligible Acquisition. "INTEREST PERIOD" means, relative to any LIBO Rate Loan, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to SECTIONS 2.3 or 2.4 and ending on the day which numerically corresponds to such date one, two, three or six (or, if made available by all Revolving Lenders, nine or twelve) months thereafter, as a Borrower may select in its relevant notice pursuant to SECTIONS 2.3 or 2.4; PROVIDED, HOWEVER, that (a) no more than 8 Interest Periods may be in effect at any one time; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); (c) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (d) no Interest Period for any Loan may end later than the stated maturity date for such Loan determined pursuant to this Agreement. "INVENTORY" means all "inventory" (as defined in the UCC). -20- "INVESTMENT" means, relative to any Person, (i) the beneficial ownership by such Person of any Indebtedness or Capital Securities issued or incurred by another Person or (ii) any loan, advance or extension of credit made by such Person to any other Person, including the purchase by such Person of any bonds, notes, debentures or other debt securities of such other Person. The amount of any Investment shall be the stated principal amount (in the case of Debt for Borrowed Money) or capital amount (in the case of Capital Securities), less all returns of principal or equity thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment. "ISP RULES" is defined in SECTION 11.9. "ISSUANCE" is defined in SECTION 7.2.9. "ISSUANCE REQUEST" means a request and certificate for a Letter of Credit which has been duly executed by an Authorized Officer of a Borrower, substantially in the form of EXHIBIT B-2 hereto. "ISSUER" means U.S. Bank National Association and any other Lender or affiliate of a Lender selected by a Borrower with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed) and such Lender or affiliate, in each case in its capacity as the Issuer of one or more Letters of Credit. "ITEM" means any "item" as defined in Section 4-104 of the UCC. "JOINDER AGREEMENT" means a Joinder Agreement, substantially in the form of EXHIBIT F hereto, duly executed and delivered by an Authorized Officer of the applicable Borrower in accordance with SECTIONS 7.1.8 and 11.15 hereof. "LEAD ARRANGER" is defined in the PREAMBLE. "LENDER" and "LENDERS" are defined in the PREAMBLE and includes any Person which becomes a Lender hereunder pursuant to a Lender Assignment Agreement. "LENDER ASSIGNMENT AGREEMENT" means an assignment agreement substantially in the form of EXHIBIT I hereto. "LENDER PARTIES" means the Lenders, the Issuers and the Agents, collectively. "LETTER OF CREDIT" is defined in SECTION 2.1.2 and, on and after the Closing Date, shall also include each outstanding Existing Letter of Credit. "LETTER OF CREDIT COMMITMENT" means the Issuer's obligation to issue Letters of Credit pursuant to SECTION 2.1.2. "LETTER OF CREDIT COMMITMENT AMOUNT" means, on any date, a maximum amount of $10,000,000, as such amount may be permanently reduced from time to time pursuant to SECTION 2.2. -21- "LETTER OF CREDIT OUTSTANDINGS" means, on any date, an amount equal to the sum of (i) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, and (ii) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LEVERAGE RATIO" means, at the end of any Fiscal Quarter, the ratio of: (a) the sum of (i) total Debt for Borrowed Money of VHC and its Subsidiaries on a consolidated basis outstanding at such time, other than Revolving Outstandings and net of cash and Cash Equivalent Investments (other than cash and Cash Equivalent Investments constituting proceeds of capital contributions to or sales of Capital Securities of the Parent which have been contributed to the capital of VHC), plus (ii) the average of the Revolving Outstandings (other than Revolving Outstandings in respect of undrawn commercial Letters of Credit and undrawn Letters of Credit in respect of workers' compensation, insurance, performance and surety bonds, rental and other payments in respect of operating leases and similar obligations) as of the last day of each of the three fiscal months ended most recently on or prior to the last day of such Fiscal Quarter; TO (b) EBITDA for the period of four consecutive Fiscal Quarters ended on such date. "LIBO RATE" means, relative to any Interest Period for LIBO Rate Loans, the applicable London interbank offered rate for deposits in Dollars appearing on Moneyline Telerate Page 3750 (or the applicable successor page on the Telerate Service) as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period; PROVIDED, HOWEVER, that, if Moneyline Telerate Page 3750 (or the applicable successor page on the Telerate Service) is not available for any reason, the applicable LIBO Rate for the relevant Interest Period shall instead be the applicable London interbank offered rate for deposits in Dollars appearing on Reuters Screen FRBD (or the applicable successor page) as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period; PROVIDED, FURTHER, that if neither Moneyline Telerate Page 3750 (or the applicable successor page) nor Reuters Screen FRBD (or the applicable successor page) is available for any reason, the applicable LIBO Rate shall be the interest rate per annum at which the Administrative Agent or one of its affiliate banks offers deposits in Dollars to leading banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a period equal to such Interest Period in the approximate amount of Loans of the Administrative Agent (or its affiliate) to which such LIBO Rate is to apply. "LIBO RATE LOAN" means a Revolving Loan bearing interest at a rate determined by reference to a LIBO Rate (Reserve Adjusted). -22- "LIBO RATE (RESERVE ADJUSTED)" means, relative to any Revolving Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula: LIBO Rate = LIBO Rate (Reserve Adjusted) -------------------------------------- 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding as of the effective date of any change in the LIBOR Reserve Percentage. "LIBOR OFFICE" means, relative to any Lender, the office of such Lender designated as its "LIBOR Office" on SCHEDULE II hereto or in a Lender Assignment Agreement, or such other office designated from time to time by notice from such Lender to VHC and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining the LIBO Rate Loans of such Lender. "LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of or including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. "LIEN" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, or other priority or preferential arrangement of any kind or nature whatsoever that is intended, directly or indirectly, to have the practical effect of securing payment of a debt or performance of an obligation. "LOAN" means, as the context may require, a Revolving Loan or a Swingline Loan. "LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the Letters of Credit, each Qualified Hedging Obligation, the Administrative Agent's Fee Letter, the Fee Letter, each agreement pursuant to which the Administrative Agent is granted a Lien to secure the Obligations and each other agreement, certificate, document or instrument delivered in connection with any Loan Document, whether or not specifically mentioned herein or therein. "MATERIAL ADVERSE EFFECT" means (a) material adverse effect on the financial condition, operations, assets, business, properties or prospects of VHC or VHC and its Subsidiaries, taken as a whole, (b) a material impairment of the ability of any Borrower or any other Obligor to perform its respective material obligations under the Loan Documents to which it is or will be a party, or (c) a material impairment of the validity or enforceability of, or the rights, remedies or benefits available to the Lender Parties under, this Agreement or any other Loan Document. -23- "MAXIMUM PP&E ADVANCE AMOUNT" means $40,000,000, unless the PP&E Release Event shall have occurred, in which case the "Maximum PP&E Advance Amount" shall be $0 for all purposes of this Agreement. "MERGER" is defined in the FIRST RECITAL. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGE" means each mortgage or deed of trust executed and delivered by any Obligor in favor of the Administrative Agent for the benefit of the Lender Parties pursuant to the requirements of this Agreement in substantially the form of EXHIBIT H hereto under which a Lien is granted on the real property and fixtures described therein, in each case as amended, supplemented, amended and restated or otherwise modified from time to time. "NET ASSET VALUE" means, at any time of any determination with respect to the Borrowers, (i) with respect to Eligible Accounts, an amount equal to (A) the book value of all Eligible Accounts as reflected on the books of the Borrowers in accordance with GAAP, net of (B) all reserves, credits, discounts and allowances (and net of all unissued credits in the form of competitive allowances or otherwise) in respect of such Eligible Accounts and (C) such additional reserves as the Administrative Agent deems necessary in its reasonable judgment after consultation with VHC as a result of negative trends in the business, industry, profits, operations or financial condition of VHC and its U.S. Subsidiaries, taken as a whole, which could reasonably be expected to either impair the value of the Collateral or impair the ability of VHC and its U.S. Subsidiaries to repay their Obligations, and (ii) with respect to Eligible Inventory, an amount equal to the lesser of the cost (determined on a first-in, first-out basis) or fair market value of all Eligible Inventory as reflected on the books of the Borrowers as at such time in accordance with GAAP. "NET CASUALTY PROCEEDS" means, with respect to any Casualty Event, (i) the amount of any insurance proceeds or condemnation awards actually received by the Parent or any of its Subsidiaries (or the Administrative Agent on their behalf) in connection with such Casualty Event, net of (ii) the sum of (A) all reasonable and customary fees, costs and expenses in respect thereof, (B) any such proceeds or awards required to be paid to a creditor (other than the Lenders) which holds a first priority Lien permitted by SECTION 7.2.3 on the property which is the subject of such Casualty Event, (C) in the case of any proceeds received by any Non-U.S. Subsidiary, any taxes or other costs or expenses resulting from repatriating any such proceeds to the United States and (D) in the case of any proceeds received by a Subsidiary that is not a wholly-owned Subsidiary, an amount equal to the product of such proceeds (as reduced pursuant to CLAUSES (ii)(A), (ii)(B) and (ii)(C)) multiplied by the percentage equity interest in such Subsidiary not held, directly or indirectly, by the Parent. "NET DEBT PROCEEDS" means, with respect to the sale or issuance by the Parent or any of its Subsidiaries of any Debt for Borrowed Money to any other Person after the Closing Date which is not expressly permitted by SECTION 7.2.2, the excess of (i) the gross cash proceeds actually received by such Person from such sale or issuance OVER (ii) the sum of (A) all reasonable and customary underwriting fees and commissions, and all legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements and -24- other reasonable and customary fees, expenses and charges actually incurred in connection with such sale or issuance (other than any such fees, commissions or disbursements paid to the Parent or any of its Subsidiaries in connection therewith), (B) in the case of any Debt for Borrowed Money sold or issued by any Non-U.S. Subsidiary, any taxes or other costs or expenses resulting from repatriating any such proceeds to the United States and (C) in the case of any Debt for Borrowed Money sold or issued by a Subsidiary that is not a wholly-owned Subsidiary, an amount equal to the product of such gross cash proceeds (as reduced pursuant to CLAUSES (ii)(A) and (i)(B)) multiplied by the percentage equity interest in such Subsidiary not held, directly or indirectly, by the Parent. "NET DISPOSITION PROCEEDS" means, with respect to any Disposition by the Parent or any of its Subsidiaries (other than a Disposition permitted pursuant to CLAUSE (a), (b) (except to the extent of Dispositions permitted under CLAUSE (ii) of SECTION 7.2.9), (c), (d), (f) (to the extent the proceeds of the Deposition permitted thereunder constitute Net Casualty Proceeds) or (g) of SECTION 7.2.11), the excess of (i) the gross cash proceeds actually received by the Parent or any of its Subsidiaries from any such Disposition, together with any cash actually received (but only when received) in respect of promissory notes or other non-cash consideration previously delivered to the Parent or any of its Subsidiaries in respect of any such Disposition, OVER (ii) the sum of (A) all reasonable and customary legal, investment banking, brokerage and accounting and other professional fees, sales commissions and expenses and other reasonable and customary fees, expenses and charges actually incurred in connection with such Disposition (other than any such fees, commissions or disbursements paid to the Parent or any of its Subsidiaries in connection therewith), (B) all taxes and other governmental charges actually paid or estimated by the Parent or such Subsidiary to be payable in cash in connection with such Disposition, (C) all payments made by the Parent or such Subsidiary to retire Indebtedness (other than the Credit Extensions) where payment of such Indebtedness is required in connection with such Disposition, (D) liability reserves established by the Parent or such Subsidiary in respect of such Disposition in accordance with GAAP, (E) reserves for purchase price adjustments and retained fixed liabilities reasonably expected to be payable by VHC and its Subsidiaries in cash in connection therewith and (F) in the case of any Disposition by a Subsidiary that is not a wholly-owned Subsidiary, an amount equal to the product of such gross cash proceeds (as reduced pursuant to CLAUSES (ii)(A) through (ii)(D)) multiplied by the percentage equity interest in such Subsidiary not held, directly or indirectly, by the Parent; PROVIDED, HOWEVER, that if, 15 days after the payment of all taxes, purchase price adjustments and/or retained fixed liabilities with respect to such Disposition, in each case as and when due, the amount of estimated taxes, purchase price adjustments or retained fixed liabilities, if any, pursuant to CLAUSE (ii)(B) or (ii)(E) above exceeded the taxes, purchase price adjustments or retained fixed liabilities actually paid in cash in respect of such Disposition, the aggregate amount of such excess shall constitute Net Disposition Proceeds. "NET EQUITY PROCEEDS" means with respect to any Issuance occurring after the Closing Date by the Parent or any of its Subsidiaries of any Capital Securities of the Parent or any of its Subsidiaries or any warrants or options in respect thereof or the exercise of any such warrants or options (other than pursuant to (i) any subscription agreement, option plan, incentive plan or similar arrangement with any officer, employee or director of the Parent, any Borrower or any Subsidiary of any Borrower, (ii) any loan by any Borrower or the Parent, to any such officer, employee or director solely for the purpose of purchasing such shares pursuant to CLAUSE (i) of -25- SECTION 7.2.5, (iii) proceeds from the sale of any Capital Securities of the Parent or any of its Subsidiaries to any officer, director or employee of the Parent, any Borrower or any Subsidiary of any Borrower in an amount not to exceed $2,000,000 in the aggregate after the Closing Date or (iv) the exercise of any options or warrants issued to any officer, employee or director pursuant to any agreement, plan or arrangement referred to in CLAUSE (ii) above), the EXCESS of (i) the gross cash proceeds actually received by or on behalf of the Parent or such Subsidiary in connection with such Issuance, OVER (ii) all reasonable and customary arranging or underwriting fees and commissions, and all legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements and other reasonable and customary fees, closing costs and expenses actually incurred in connection with such Issuance (other than any such fees, costs and expenses which have been paid to the Parent or any of its Subsidiaries in connection therewith). "NET INCOME" means, for any period, consolidated net income of VHC and its Subsidiaries for such period (exclusive of (x) extraordinary gains and extraordinary losses and (y) other gains or losses on Dispositions of assets other than Inventory Disposed of in the ordinary course of business). "NET PROCEEDS" means, as the context may require, either Net Casualty Proceeds, Net Debt Proceeds, Net Disposition Proceeds or Net Equity Proceeds. "NO MORE FAVORABLE TERMS AND CONDITIONS" means, with respect to any refinancing or other replacement of the Indebtedness in respect of the Senior Notes, the Senior Subordinated Notes or the Parent Debentures (i) such Indebtedness has a maturity date no earlier than the maturity date of the Senior Notes, the Senior Subordinated Notes or the Parent Debentures as applicable, (ii) such Indebtedness has an Average Life at the time such Indebtedness is incurred that is equal to or greater than the Average Life of the Senior Notes, the Senior Subordinated Notes or the Parent Debentures as applicable, (iii) in the case of, the Senior Subordinated Notes or the Parent Debentures such Indebtedness is subordinated to the Obligations to the same or greater extent as such, the Senior Subordinated Notes or the Parent Debentures, and (iv) such Indebtedness contains covenants, events of default, remedies, acceleration rights, amortization schedules and other material terms that, taken as a whole, (x) are not materially more favorable to the holders of such Indebtedness than the similar terms contained in the Senior Notes, the Senior Subordinated Notes or the Parent Debentures, as applicable, and (y) no less favorable to the Lender Parties under the Loan Documents as of the date of such refinancing or replacement. "NON-CONSENTING LENDER" means any Lender that, in response to any request by VHC or any Agent for a departure from, waiver of or amendment to any provision of any Loan Document that requires the agreement of all Lenders, and with respect to which the Required Lenders have granted consent, shall not have given its consent to such departure, waiver or amendment. "NON-U.S. LENDER" means any Lender that is not a "United States person", as defined under Section 7701(a)(30) of the Code. "NON-U.S. SUBSIDIARY" means a Subsidiary of any Borrower that is not a U.S. Subsidiary. -26- "NOTE" means, as the context may require, a Revolving Note or the Swingline Note. "NOTICE OF CASH DOMINION" means a notice by the Administrative Agent to the Depositary Bank and each other bank maintaining any Collection Account of any Borrower or one or more of its Subsidiaries (with a copy to such Borrower), substantially in the form of EXHIBIT B-4 hereto, notifying the Depositary Bank, such other banks and such Borrower that the Administrative Agent has elected to effect the cash dominion procedures in accordance with SECTION 2.8. "OBLIGATIONS" means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of each Borrower and each other Obligor arising under or in connection with a Loan Document, including Reimbursement Obligations and the principal of and interest (including interest accruing during the pendency of any proceeding of the type described in SECTION 8.1.9, whether or not allowed in such proceeding) on the Loans and Reimbursement Obligations. "OBLIGOR" means, as the context may require, a Borrower or any other Person (other than a Secured Party or a bank, securities intermediary or issuer party in its capacity as such to a control agreement with respect to a deposit or securities account maintained with, or securities issued by, such bank, securities intermediary or issuer) obligated under any Loan Document. "OPERATING ACCOUNT" means the demand deposit account numbered 1001613379 maintained with the Depositary Bank by VHC on which the VHC draws checks to pay operating expenses. "ORDERLY LIQUIDATION VALUE" means, at any time of determination with respect to Eligible PP&E, the orderly liquidation value of all Eligible PP&E of the Borrowers existing at such time, which orderly liquidation value was attributed to such Eligible PP&E in the Asset Appraisal. "ORGANIC DOCUMENT" means, relative to any Obligor, as applicable, its certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation, limited liability agreement, operating agreement and all shareholder agreements, voting trusts and similar arrangements to which, in the case of any such shareholder agreement, voting trust or similar arrangement, such Obligor is a party applicable to any of such Obligor's partnership interests, limited liability company interests or authorized shares of Capital Securities. "OVERADVANCE LOANS" is defined in SECTION 2.3.2(a). "PARENT" is defined in the PREAMBLE. "PARENT DEBENTURE DOCUMENTS" mean, collectively, the Parent Debenture Indenture, and any other indentures, note purchase agreements, promissory notes, registration rights agreements, guarantees and other instruments and agreements evidencing the terms of the Parent Debentures, as amended, supplemented, amended and restated or otherwise modified in accordance with SECTION 7.2.12. "PARENT DEBENTURE INDENTURE" means the Indenture dated as of October 16, 1998 among the Parent and Marine Midland Bank, as Trustee, as in effect on the Closing Date (as the same -27- may be amended or otherwise modified from time to time thereafter in accordance with the terms hereof and thereof), pursuant to which the Parent Debentures were issued. "PARENT DEBENTURES" means the Parent's 13.5% Subordinate Exchange Debentures due 2009 and shall also include any and all registered exchange debentures issued in exchange therefore in accordance with the Parent Debenture Documents. "PARTICIPANT" is defined in SECTION 11.10. "PATENT SECURITY AGREEMENT" means any Patent Security Agreement executed and delivered by any Obligor in substantially the form of Exhibit A to the Pledge and Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. "PBGC" means the Pension Benefit Guaranty Corporation and any Person succeeding to any or all of its functions under ERISA. "PENSION PLAN" means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Parent or any corporation, trade or business that is, along with the Parent, a member of a Controlled Group, has or within the past six years has had liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "PERCENTAGE" means, relative to any Lender, the applicable percentage relating to Revolving Loans set forth opposite its name on SCHEDULE II hereto or set forth in a Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreements executed by such Lender and its assignee Lender and delivered pursuant to SECTION 11.10. A Lender shall not have any Revolving Loan Commitment if its Percentage is zero. "PERFECTION CERTIFICATE" means a Perfection Certificate executed and delivered by an Authorized Officer of a Borrower pursuant to SECTION 5.1.19, substantially in the form of EXHIBIT C hereto. "PERMITTED HOLDERS" means the DLJMB Entities and their Affiliates, collectively. "PERMITTED PURPOSE" means with respect to proceeds of capital contributions to and Issuance of Capital Securities by the Parent: (i) to the extent no Default or Event of Default has occurred and is continuing at the time of any such prepayment, purchase or redemption, to prepay, purchase or otherwise redeem Parent Debentures, (ii) the holding of such proceeds by the Parent as cash or Cash Equivalent Investments or (iii) the contribution of such proceeds by the Parent to the capital of VHC and the use by VHC and its Subsidiaries of such proceeds, within 30 days following its receipt of such contribution, (A) so long as no Default or Event of Default shall have occurred and be continuing at the time thereof, to make Eligible Acquisitions pursuant to SECTION 7.2.5(g), (B) to make Capital Expenditures pursuant to SECTION 7.2.7(b)(i); PROVIDED, HOWEVER, that if a Default or an Event of Default shall have occurred and be continuing, the -28- aggregate amount of Capital Expenditures which shall constitute a "Permitted Purpose" shall not exceed that amount which is necessary to maintain (and is not accretive to) the Borrowers' existing capital assets, (C) so long as no Default or Event of Default shall have occurred and be continuing, to prepay, purchase or otherwise redeem Senior Notes or Senior Subordinated Notes pursuant to SECTION 7.2.8, (D) so long as no Default or Event of Default shall have occurred and be continuing, to make regularly schedule interest payments with respect to the Senior Notes pursuant to SECTION 7.2.8, or (E) to make voluntary prepayments of Revolving Loans pursuant to SECTION 3.1.1(a). "PERSON" means any natural person, corporation, limited liability company, partnership, association, trust or unincorporated organization, Governmental Authority or any other legal entity, whether acting in an individual, fiduciary or other capacity. "PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security Agreement executed and delivered by an Authorized Officer of each Obligor, substantially in the form of EXHIBIT G hereto, as amended, supplemented, amended and restated or otherwise modified from time to time. "PLEDGED SUBSIDIARY" means each Subsidiary of the Parent in respect of which the Administrative Agent has been granted a security interest in or a pledge of (i) any of the Capital Securities issued by such Subsidiary or (ii) any intercompany notes of such Subsidiary owing to the Parent, any Borrower or any other Subsidiary of the Parent. "PP&E RELEASE EVENT" is defined in SECTION 7.2.15. "QUALIFIED BY MATERIALITY" means, with respect to any provision of any representation or warranty set forth herein or in any Loan Document, that such provision is qualified by the concept of Material Adverse Effect, a materiality standard or a similar qualification. "QUALIFIED HEDGING OBLIGATION" means, collectively, any interest rate swap, cap, collar or similar agreement entered into by the Parent or any of its Subsidiaries under which the counterparty of such agreement is (or at the time such agreement was entered into, was) a Lender or an affiliate of a Lender. "QUARTERLY PAYMENT DATE" means the last day of March, June, September and December, or, if any such day is not a Business Day, the next succeeding Business Day. "REDEMPTION" is defined in CLAUSE (b) of SECTION 7.2.6. "REFINANCING" is defined in the FOURTH RECITAL. "REFUNDED SWINGLINE LOANS" is defined in CLAUSE (b) of SECTION 2.3.2. "REGISTER" is defined in CLAUSE (c) of SECTION 2.7. "REIMBURSEMENT OBLIGATION" is defined in SECTION 2.6.3. "RELEASE" means a "RELEASE", as such term is defined in CERCLA. -29- "REPLACEMENT NOTICE" is defined in SECTION 4.11. "REPLACEMENT LENDER" is defined in SECTION 4.11. "REQUIRED LENDERS" means, at any time, Lenders holding at least 51% of the Total Exposure Amount. "RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ., as amended. "RESTRICTED PAYMENT" means the declaration or payment of any dividend on, or the making of any payment or distribution on account of, or the setting apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any class of Capital Securities of any Borrower or any Subsidiary of any Borrower or any warrants or options to purchase any such Capital Securities, whether now or hereafter outstanding, or the making of any other distribution in respect thereof, either directly or indirectly, whether in cash or property, obligations of any Borrower or any Subsidiary of any Borrower or otherwise (other than (i) dividends or distributions payable solely in, or exchanges of Capital Securities for, common stock of any Borrower or any Subsidiary of any Borrower, (ii) splits or reclassifications of any Borrower's or any Subsidiary of any Borrower's Capital Securities into additional or other shares of its common stock or Capital Securities of the same class as the Capital Securities in respect of which such split or reclassification occurs or (iii) in the case of any class of Capital Securities, dividends or distributions payable solely in, or exchanges of such Capital Securities for, additional or other shares of Capital Securities of the same class as the Capital Securities in respect of which such dividend or distribution is being made). "REVOLVING LENDER" means, as of any time of determination, any Lender which (i) holds outstanding Revolving Loans or (ii) has a Percentage pursuant to SCHEDULE II hereto or pursuant to a Lender Assignment Agreement which, in either case, is greater than 0%. "REVOLVING LOAN" is defined in SECTION 2.1.1. "REVOLVING LOAN COMMITMENT" is defined in CLAUSE (a) of SECTION 2.1.1. "REVOLVING LOAN COMMITMENT AMOUNT" means, on any date, $90,000,000, as such amount may be reduced from time to time or increased pursuant to SECTION 2.2. "REVOLVING NOTE" means a promissory note of the Borrowers payable to any Revolving Lender, in the form of EXHIBIT A-1 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the Indebtedness of the Borrowers to such Revolving Lender resulting from outstanding Revolving Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "REVOLVING OUTSTANDINGS" means, at any time, (i) the aggregate outstanding principal amount of all Loans at such time PLUS (ii) all Letter of Credit Outstandings at such time. "S&P" means Standard & Poor's Rating Services, a division of McGraw-Hill, Inc. -30- "SALE AND LEASEBACK TRANSACTION" is defined in SECTION 7.2.15. "SEC" means the Securities and Exchange Commission. "SECURED PARTIES" means, collectively, the Lenders, each of the Issuers, each of the Agents, each counterparty to a Qualified Hedging Obligation that is (or at the time such Qualified Hedging Obligation was entered into, was) a Lender or an affiliate thereof, together, in each case, with each of their respective successors, transferees and assigns. "SENIOR NOTE DOCUMENTS" means, collectively, the Senior Note Indenture, and any other indentures, note purchase agreements, promissory notes, registration rights agreements, guarantees, and other instruments and agreements evidencing the terms of the Senior Notes, as amended, supplemented, amended and restated or otherwise modified in accordance with SECTION 7.2.12. "SENIOR NOTE INDENTURE" means the indenture dated as of March 26, 2002 among VHC, the guarantors set forth therein, and U.S. Bank National Association, as Trustee, as in effect on the Closing Date (as the same may be amended or otherwise modified from time to time thereafter in accordance with the terms hereof and thereof), pursuant to which the Senior Notes were issued. "SENIOR NOTE ISSUANCE" is defined in the SIXTH RECITAL. "SENIOR NOTES" is defined in the SIXTH RECITAL and shall also include any and all registered exchange notes issued in exchange therefor in accordance with the Senior Note Documents. "SENIOR SUBORDINATED NOTE DOCUMENTS" means, collectively, the Senior Subordinated Note Indenture, and any other indentures, note purchase agreements, promissory notes, registration rights agreements guarantees and other instruments and agreements evidencing the terms of the Senior Subordinated Notes, as amended, supplemented, amended and restated or otherwise modified in accordance with SECTION 7.2.12. "SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture dated as of March 22, 1997 among VHC, the guarantors set forth therein, and Marine Midland Bank, as Trustee, as in effect on the Closing Date (as the same may be amended or otherwise modified from time to time thereafter in accordance with the terms hereof and thereof), pursuant to which the Senior Subordinated Notes were issued. "SENIOR SUBORDINATED NOTES" means VHC's 10 3/8% Senior Subordinated Notes due 2007 and shall also include any and all registered exchange notes issued in exchange therefor in accordance with the Senior Subordinated Notes Documents. "SHAREHOLDERS AGREEMENT" means the Shareholders Agreement dated as of May 22, 1997 among the Parent, the DLJMB Entities and certain other equity owners and employees of the Parent, as amended, supplemented, amended and restated or otherwise modified prior to the Closing Date and as the same may be further amended, supplemented, amended and restated or otherwise modified in accordance with the terms hereof and thereof. -31- "SOLVENCY CERTIFICATE" means a certificate duly completed and executed by Authorized Officers of each of the Parent and each Borrower, in the form of EXHIBIT E-3 hereto. "SOLVENT" means, with respect to any Person and its Subsidiaries on any date of determination, that on such date (i) the fair value of the property of such Person and its Subsidiaries on a consolidated basis is greater than the total amount of liabilities, including contingent liabilities, of such Person and its Subsidiaries on a consolidated basis, (ii) the present fair salable value of the assets of such Person and its Subsidiaries on a consolidated basis is not less than the amount that will be required to pay the probable liability of such Person and its Subsidiaries on a consolidated basis on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it or its Subsidiaries will, incur debts or liabilities beyond the ability of such Person and its Subsidiaries to pay as such debts and liabilities mature, and (iv) such Person and its Subsidiaries on a consolidated basis are not engaged in business or a transaction, and such Person and its Subsidiaries on a consolidated basis are not about to engage in business or a transaction, for which the property of such Person and its Subsidiaries on a consolidated basis would constitute unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, can reasonably be expected to become an actual or matured liability. "SPC" has the meaning specified in CLAUSE (f) of SECTION 11.10. "SPECIFIED PERCENTAGE" means, at any time of determination with respect to a mandatory prepayment or commitment reduction in respect of Net Equity Proceeds pursuant to CLAUSE (c) of SECTION 3.1.1, (i) if the Leverage Ratio set forth in the Compliance Certificate most recently delivered by VHC to the Administrative Agent was equal to or greater than 3.5:1.0, 50% and (ii) if the Leverage Ratio set forth in such Compliance Certificate was less than 3.5:1.0, 25%. "STATED AMOUNT" means, on any date and with respect to any Letter of Credit, the total amount then available to be drawn under such Letter of Credit. "STATED EXPIRY DATE" is defined in SECTION 2.6. "SUB DEBT DOCUMENTS" means, collectively, the Parent Debenture Documents, the Senior Subordinated Note Documents and any other indentures, note purchase agreements, promissory notes, guarantees and other instruments and agreements evidencing the terms of any Subordinated Debt, as amended, supplemented, amended and restated or otherwise modified in accordance with SECTION 7.2.12. "SUBORDINATED DEBT" means the Parent Debentures, the Senior Subordinated Notes and any other Debt for Borrowed Money which, by its terms, is subordinated in right of payment to the Obligations. "SUBORDINATION PROVISIONS" is defined in SECTION 8.1.11. "SUBSIDIARY" means, with respect to any Person, any other Person of which more than 50% of the outstanding Voting Securities of such other Person (irrespective of whether at the time Capital Securities of any other class or classes of such other Person shall or might have -32- voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. "SUBSIDIARY GUARANTOR" means each U.S. Subsidiary of a Borrower required to execute a supplement to the Subsidiary Guaranty pursuant to SECTION 7.1.8 and, at the election of VHC in its sole discretion, any other Subsidiary of a Borrower; PROVIDED, HOWEVER, that any Non-U.S. Subsidiary which becomes a Subsidiary Guarantor shall not, unless VHC so elects in its sole discretion, be treated as if it was a U.S. Subsidiary for purposes of SECTION 7.1.8(a) or Section 7.1.9. "SUBSIDIARY GUARANTY" means a guaranty in form and substance reasonably satisfactory to the Administrative Agent executed and delivered by each Subsidiary Guarantor pursuant to the terms of this Agreement, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time. "SWINGLINE LENDER" means, subject to the terms of this Agreement, the Administrative Agent. "SWINGLINE LOAN" is defined in CLAUSE (b) of SECTION 2.1.1. "SWINGLINE LOAN COMMITMENT" is defined in CLAUSE (b) of SECTION 2.1.1. "SWINGLINE LOAN COMMITMENT AMOUNT" means, on any date, $10,000,000, as such amount may be reduced from time to time pursuant to SECTION 2.2. "SWINGLINE NOTE" means a promissory note of the Borrowers payable to the Swingline Lender, in the form of EXHIBIT A-2 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the Indebtedness of the Borrowers to the Swingline Lender resulting from outstanding Swingline Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "SYNDICATION AGENT" is defined in the PREAMBLE. "TAXES" is defined in SECTION 4.6. "TERMINATION DATE" means the date on which all Obligations have been paid in full in cash, all Letters of Credit have been terminated or expired (or been Cash Collateralized) and all Commitments shall have terminated. "TOTAL EXPOSURE AMOUNT" means, on any date of determination (and without duplication), the outstanding principal amount of all Loans, the aggregate amount of all Letter of Credit Outstandings and the unused amount of all Commitments. "TRADEMARK SECURITY AGREEMENT" means any Trademark Security Agreement executed and delivered by any Obligor substantially in the form of Exhibit B to the Pledge and Security Agreement, as amended, supplemented, amended and restated or otherwise modified from time to time. -33- "TRANSACTIONS" is defined in the FIFTH RECITAL. "TYPE" means, relative to any Revolving Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York; PROVIDED, HOWEVER, that if, by reason of any provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted to the Administrative Agent pursuant to the applicable Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than New York, then "UCC" means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of each Loan Document and relating to such perfection or effect of perfection or non-perfection. "UNITED STATES" or "U.S." means the United States of America, its fifty states and the District of Columbia. "U.S. SUBSIDIARY" means any Subsidiary that is incorporated or organized under the laws of the United States. "VHC" is defined in the PREAMBLE. "VHG" is defined in the FIRST RECITAL. "VOTING SECURITIES" means, with respect to any Person, Capital Securities of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person. "WELFARE PLAN" means a "welfare plan", as such term is defined in Section 3(1) of ERISA. "WHOLLY-OWNED SUBSIDIARY" means with respect to any Person any Subsidiary of such Person all of the outstanding Capital Securities of which (other than any director's qualifying shares or investments by foreign nationals mandated by applicable laws) is owned directly or indirectly by such Person. SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have the same meanings when used in any other Loan Document and in the Disclosure Schedule. SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references in a Loan Document to any Article or Section are references to such Article or Section of such Loan Document, and references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. (a) Unless otherwise specified and subject to CLAUSE (c) of this SECTION 1.4, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations -34- hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles as in effect from time to time in the United States, applied on a basis consistent (except for changes concurred in by VHC's independent public accountants) with the most recent audited consolidated financial statements of VHC and its Subsidiaries delivered to the Lenders ("GAAP"); PROVIDED, HOWEVER, that, if VHC notifies the Administrative Agent that the Borrowers wish to amend any covenant in SECTION 7.2.4, the definition of EBITDA, Leverage Ratio, Fixed Charge Coverage Ratio, Capital Expenditure, Net Income or Interest Expense to eliminate the effect of any change in GAAP on the operation of such covenant or definition (or if the Administrative Agent notifies the Borrowers that the Required Lenders wish to amend any such covenant or definition for such purpose), then VHC's compliance with such covenant shall be determined, and such definitions shall be applied, on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant or definition is amended in a manner satisfactory to the Borrowers and the Required Lenders. (b) Unless otherwise expressly provided, all financial covenants and defined financial terms shall be computed on a consolidated basis for VHC and its Subsidiaries, in each case without duplication, and shall be appropriately adjusted to take into account any minority ownership interests in the assets, Subsidiaries or businesses of VHC and its Subsidiaries. (c) For purposes of computing the Fixed Charge Coverage Ratio and Leverage Ratio (and any financial calculations required to be made or included within such ratios) as of the end of any Fiscal Quarter, all components of such ratios, including Capital Expenditures, in the case of any Disposition, but excluding Capital Expenditures, in the case of any acquisition, for the period of four Fiscal Quarters ending at the end of such Fiscal Quarter shall include or exclude, as the case may be, without duplication, such components of such ratios attributable to any business or assets that have been acquired or Disposed of by VHC or any of its Subsidiaries (including through mergers or consolidations) after the first day of such period of four Fiscal Quarters and prior to the end of such period, as determined in good faith by VHC on a PRO FORMA basis for such period of four Fiscal Quarters as if such acquisition or Disposition had occurred on such first day of such period (including cost savings that would have been realized had such acquisition occurred on such day and which inclusion when not otherwise permitted under GAAP has been approved by a majority of the board of directors of VHC). (d) If any determination of Interest Expense hereunder is required by the terms hereof to be made for a period of four consecutive Fiscal Quarters at a time at which fewer than four full Fiscal Quarters have elapsed since the Closing Date, such determination shall be made for the period elapsed from the Closing Date through the end of the most recent Fiscal Quarter then ended (annualized on a simple arithmetic basis, if such determination is to be used in a ratio with a balance sheet item). -35- ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES AND LETTERS OF CREDIT SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of this Agreement, the Lenders and the Issuers severally agree to make Credit Extensions as set forth below. SECTION 2.1.1. REVOLVING LOAN COMMITMENT AND SWINGLINE LOAN COMMITMENT. (a) From time to time on any Business Day occurring from and after the Closing Date to but excluding the Commitment Termination Date, each Revolving Lender hereby commits to make loans ("REVOLVING LOANS") to one or more Borrowers in an aggregate principal amount equal to such Revolving Lender's Percentage of each Borrowing of Revolving Loans requested by the applicable Borrower or Borrowers to be made on such day. The commitment of each Revolving Lender described in this clause is herein referred to as its "REVOLVING LOAN COMMITMENT". (b) From time to time on any Business Day occurring from and after the Closing Date to but excluding the Commitment Termination Date, the Swingline Lender hereby commits to make loans (its "SWINGLINE LOANS") to one or more Borrowers in an aggregate principal amount equal to the amount of any Swingline Loans requested by the applicable Borrower or Borrowers to be made on such day. The Commitment of the Swingline Lender described in this clause is herein referred to as its "SWINGLINE LOAN COMMITMENT". (c) On the terms and subject to the conditions hereof, each Borrower may from time to time borrow, prepay and reborrow Revolving Loans and Swingline Loans. SECTION 2.1.2. LETTER OF CREDIT COMMITMENT. From time to time on any Business Day occurring from and after the Closing Date to but excluding the fifth Business Day prior to the Commitment Termination Date, the Issuer hereby commits (i) to issue one or more standby or commercial letters of credit (relative to such Issuer, its "LETTER OF CREDIT") for the account of any Borrower in the Stated Amount requested by such Borrower on such day, or (ii) to extend the Stated Expiry Date of an existing Letter of Credit previously issued hereunder. No Issuer shall be permitted or required to issue any Letter of Credit if, after giving effect thereto, (A) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount or (B) the aggregate amount of all Revolving Outstandings would exceed the Borrowing Base Amount. SECTION 2.1.3. LENDERS NOT PERMITTED OR REQUIRED TO MAKE THE LOANS. No Lender shall be permitted or required to, and the Borrower shall not request any Lender to, make (a) any Revolving Loan if, after giving effect thereto and the application of the proceeds thereof, such Lender's Percentage of the aggregate Revolving -36- Outstandings would exceed such Lender's Percentage of the Borrowing Base Amount; or (b) any Swingline Loan (other than Overadvance Loans) if, after giving effect thereto, (y) the aggregate outstanding principal amount of all Swingline Loans would exceed the Swingline Loan Commitment Amount or (z) the aggregate Revolving Outstandings would exceed the Borrowing Base Amount; or (c) any Overadvance Loan if, after giving effect thereto, (x) the aggregate outstanding principal amount of all Swingline Loans would exceed the Swingline Loan Commitment, (y) the aggregate Revolving Outstandings would exceed the Borrowing Base Amount by more than $2,500,000 or (z) the aggregate Revolving Outstandings would exceed the Revolving Loan Commitment Amount. SECTION 2.2. REDUCTION OR INCREASE OF COMMITMENT AMOUNTS. VHC may, at its option, reduce any Commitment Amount or increase the Revolving Loan Commitment Amount, and the Revolving Loan Commitment Amount shall be automatically reduced, in each case as set forth below. SECTION 2.2.1. OPTIONAL REDUCTIONS. VHC may, from time to time on any Business Day occurring after the Closing Date, voluntarily reduce the amount of the Revolving Loan Commitment Amount, the Swingline Loan Commitment Amount or the Letter of Credit Commitment Amount effective as of a Business Day specified in writing by VHC; PROVIDED, HOWEVER, that all such reductions shall require at least three Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of the Revolving Loan Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral multiple of $100,000. Any optional or mandatory reduction of the Revolving Loan Commitment Amount pursuant to the terms of this Agreement which reduces the Revolving Loan Commitment Amount below the Swingline Loan Commitment Amount shall result in an automatic and corresponding reduction of the Swingline Loan Commitment Amount to an aggregate amount not in excess of the Revolving Loan Commitment Amount, as so reduced, without any further action on the part of the Swingline Lender. Any optional or mandatory reduction of the Revolving Loan Commitment Amount pursuant to the terms of this Agreement which reduces the Revolving Loan Commitment amount below the Letter of Credit Commitment Amount shall result in an automatic and corresponding reduction of the Letter of Credit Commitment Amount to an aggregate amount not in excess of the Revolving Loan Commitment amount, as so reduced, without any further action on the part of any Issuer. SECTION 2.2.2. OPTIONAL INCREASE OF REVOLVING LOAN COMMITMENT AMOUNT. (a) VHC shall have the right on a one-time basis on any date on or after the Closing Date and prior to the Commitment Termination Date to increase the Revolving Loan Commitment Amount by an amount not to exceed $10,000,000 by requesting that the Syndication Agent arrange for one or more existing Lenders to increase the amount of their respective Revolving Loan Commitments or one or more Eligible Assignees to become Revolving Lenders under this Agreement; PROVIDED that (i) if VHC in good faith objects to the terms upon which the Syndication Agent is willing to arrange such increase or the Syndication Agent is unwilling or -37- unable after diligent effort to arrange such increase, VHC (but no Lender or other financial institution) may arrange such increase; (ii) before offering Revolving Loan Commitments to Eligible Assignees, VHC or the Syndication Agent, as applicable, shall first offer the additional Revolving Loan Commitments to existing Lenders on a pro rata basis; and (iii) no Lender shall at any time be required to agree to increase its Revolving Loan Commitment or other obligations hereunder. (b) Any increase in the aggregate Revolving Loan Commitment Amount pursuant to CLAUSE (a) above shall be effective only upon the execution and delivery by each Eligible Assignee or existing Lender, as the case may be, to VHC and the Syndication Agent at least five Business Days before any such increase is to become effective of an instrument reasonably satisfactory to VHC and the Syndication Agent: (i) in the case of an Eligible Assignee, setting forth the amount of its Revolving Loan Commitment, the resulting Percentage and the date upon which its Revolving Loan Commitment and related Percentage are to become effective (the "COMMITMENT INCREASE DATE") and containing its agreement to become, and to perform all the obligations of, a Lender hereunder; and (ii) in the case of an existing Lender, setting forth the amount by which its Revolving Loan Commitment and related Percentage hereunder is to be increased and the Commitment Increase Date applicable thereto. (c) Any increase in the Revolving Loan Commitment Amount pursuant to CLAUSE (a) above shall not be effective unless: (i) no Default or Event of Default shall have occurred and be continuing on the Commitment Increase Date; (ii) each of the representations and warranties of each Borrower and each other Obligor contained in this Agreement and the other Loan Documents shall be true and correct on and as of the Commitment Increase Date; (iii) each Lender (including each Eligible Assignee which becomes a Lender pursuant to this SECTION 2.2.3) shall have received a certificate of the secretary or assistant secretary of each Borrower as to the taking of any corporate action necessary in connection with such increase; and (iv) in the case of increases arranged by the Syndication Agent, the Borrowers shall have paid to the Syndication Agent such syndication, commitment or other upfront fees as shall be required by the Syndication Agent in connection with such increase of the Revolving Loan Commitment Amount. (d) From and after the Commitment Increase Date, the term "Lenders", as used herein, shall include all Eligible Assignees which become Lenders pursuant to this SECTION 2.2.2. (e) From and after the Commitment Increase Date, (A) the Revolving Loan Commitment Amount shall be increased by the amount of the additional Revolving Loan Commitments agreed -38- to be so provided, (B) the Percentages of the respective Lenders in respect of the increased Revolving Loan Commitment Amount shall be proportionately adjusted (PROVIDED, HOWEVER, that the amount equal to the adjusted Percentage of a Lender multiplied by the Revolving Loan Commitment Amount as increased pursuant to CLAUSE (A) may not exceed the amount equal to the Percentage of such Lender immediately prior to any adjustment made pursuant to this CLAUSE (B) multiplied by the Revolving Loan Commitment Amount immediately prior to the corresponding increase thereof pursuant to CLAUSE (A) without the consent of such Lender) and such adjustment shall be recorded in the Register and (C) at such time and in such manner as the Borrowers and the Syndication Agent shall agree (it being understood that the Borrowers and the Agents will use commercially reasonable efforts to avoid the prepayment or assignment of any LIBO Rate Loan on a day other than the last day of the Interest Period applicable thereto), the Lenders shall assign and assume outstanding Revolving Loans and participations in outstanding Letters of Credit so as to cause amounts of such Revolving Loans and participations in Letters of Credit held by each Lender with a Percentage in excess of zero to conform to its Percentage of the Revolving Loan Commitment. SECTION 2.3. BORROWING PROCEDURES. Loans (other than Swingline Loans) shall be made by the Lenders in accordance with SECTION 2.3.1, and Swingline Loans shall be made by the Swingline Lender in accordance with SECTION 2.3.2. SECTION 2.3.1. REVOLVING LOANS. By delivering a Borrowing Request to the Administrative Agent on or before 12:00 Noon on a Business Day, any Borrower may from time to time irrevocably request, on not less than one Business Day's notice in the case of Base Rate Loans, or three Business Days' notice in the case of LIBO Rate Loans, and in either case not more than five Business Days' notice, that a Borrowing be made by the Revolving Lenders. Revolving Loans (other than Revolving Loans made pursuant to SECTION 2.3.2(a)(ii), SECTION 2.3.2(b) or SECTION 2.6.2, which Revolving Loans shall be made in the amounts specified therein) will be made in a minimum amount of $500,000 and integral multiples of $100,000 or in an amount equal to the unused amount of the Revolving Loan Commitment Amount. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. Each Lender that has a Commitment to make the Revolving Loans being requested shall deposit with the Administrative Agent, on or before 11:00 a.m. on the date of Borrowing, same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the applicable Borrower by wire transfer to the accounts such Borrower shall have specified in its Borrowing Request. Neither the Administrative Agent's nor any Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.3.2. SWINGLINE LOANS. (a) (i) By telephonic notice to the Swingline Lender on or before 3:00 p.m. on a Business Day (followed on such day by the delivery to the Swingline Lender of a confirming Borrowing Request), any Borrower may from time to time irrevocably request that Swingline Loans be made by the Swingline Lender in an aggregate minimum principal amount of $500,000 and integral multiples of $100,000 or (ii) if on any day on which a Notice of Cash Dominion is in effect or on which any Borrower shall have requested that -39- Swingline Loans be made available to such Borrower pursuant to this CLAUSE (ii), Items are presented to the Depositary Bank for payment against the Operating Account which Items, in the aggregate, would, if paid in full, cause the Available Balance in the Operating Account on such day to be less than $0, such presentation shall be deemed to be a request by the Borrowers for a Swingline Loan on the date of such presentation in an amount equal to the amount (rounded upward to the nearest $1,000) required to cause such Available Balance in the Operating Account to equal $0. All Swingline Loans shall be made as Base Rate Loans and shall not be entitled to be converted into LIBO Rate Loans. The proceeds of each Swingline Loan requested pursuant to CLAUSE (i) above shall be made available by the Swingline Lender to applicable Borrower by wire transfer to the Operating Account or such other account as such Borrower shall have specified in its notice therefor by the close of business on the Business Day telephonic notice is received by the Swingline Lender. The proceeds of each Swingline Loan deemed to be requested under CLAUSE (ii) above shall be disbursed by the Swingline Lender by way of direct payment of the relevant Item or by way of deposit to the Operating Account of the amount set forth in CLAUSE (ii) above, as the case may be. Notwithstanding any contrary provision set forth in this Agreement (including, without limitation, SECTION 5.2.1(b)), in the event any Default or Event of Default occurs, the Swingline Lender shall, upon receipt of a Notice of Borrowing pursuant to SECTION 2.3.2(a)(i) above or, if CLAUSE (ii) above is then in effect, the presentation of an Item for payment from the Operating Account in accordance with SECTION 2.3.2(a)(ii) above, make Swingline Loans (such Swingline Loans being referred to herein as "DEFAULT LOANS") to the applicable Borrower (which Swingline Loans shall be refunded by the Revolving Lenders in accordance with SECTION 2.3.2(b) below regardless of the existence of such Default or Event of Default) in an aggregate principal amount which, when taken together with the aggregate amount of all cash and Cash Equivalent Investments, permitted to be retained by the Borrowers and their respective Subsidiaries in accordance with SECTION 3.1.1(d)(ii), shall not exceed $2,500,000 at any time outstanding, the proceeds of which shall be used to pay payroll and other operating expenses approved by the Administrative Agent. Notwithstanding any contrary provision set forth in this Agreement, but in all respects subject to SECTION 2.1.3(c), the Swingline Lender may, in its discretion, upon receipt of a Notice of Borrowing pursuant to SECTION 2.3.2(a)(i) above or, if CLAUSE (ii) above is then in effect, the presentation of an Item for payment from the Operating Account in accordance with SECTION 2.3.2(a)(ii) above, make Swingline Loans (such Swingline Loans being referred to herein as "OVERADVANCE LOANS") to the Borrowers (which Swingline Loans shall be refunded by the Revolving Lenders in accordance with SECTION 2.3.2(b) below regardless of the existence of any Default or Event of Default) in an aggregate principal amount not to exceed $2,500,000 at any time outstanding. (b) If (i) any Swingline Loan (including any Default Loan or Overadvance Loan) shall be outstanding for more than four Business Days, (ii) any Swingline Loan (including any Default Loan or Overadvance Loan) is or will be outstanding on a date when a Borrower requests that a Revolving Loan be made, or (iii) any Default shall occur and be continuing, then each Revolving Lender (other than the Swingline Lender) irrevocably agrees that it will, at the request of the Swingline Lender, make a Revolving Loan (which shall initially be funded as a Base Rate Loan) in an amount equal to such Lender's Percentage of the aggregate principal amount of all Swingline Loans then outstanding (such outstanding Swingline Loans hereinafter referred to as the "REFUNDED SWINGLINE LOANS"). On or before 11:00 a.m. on the first Business Day following receipt by each Revolving Lender of a request to make Revolving Loans as provided in the preceding sentence, each Revolving Lender shall deposit in an account specified by the -40- Swingline Lender the amount so requested in same day funds and such funds shall be applied by the Swingline Lender to repay the Refunded Swingline Loans. At the time the Revolving Lenders make the above referenced Revolving Loans, the Swingline Lender shall be deemed to have made, in consideration of the making of the Refunded Swingline Loans, Revolving Loans in an amount equal to the Swingline Lender's Percentage of the aggregate principal amount of the Refunded Swingline Loans. Upon the making (or deemed making, in the case of the Swingline Lender) of any Revolving Loans pursuant to this clause, the amount so funded shall become outstanding as such Revolving Lender's Revolving Loan and shall no longer be owed to the Swingline Lender as a Swingline Loan. All interest payable with respect to any Revolving Loans made (or deemed made, in the case of the Swingline Lender) pursuant to this clause shall be appropriately adjusted to reflect the period of time during which the Swingline Lender had outstanding Swingline Loans in respect of which such Revolving Loans were made. Each Revolving Lender's obligation to make the Revolving Loans referred to in this clause shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swingline Lender, any Obligor or any Person for any reason whatsoever; (ii) the occurrence or continuance of any Default; (iii) any adverse change in the condition (financial or otherwise) of any Obligor; (iv) the acceleration or maturity of any Obligations or the termination of any Commitment after the making of any Swingline Loan; (v) any breach of any Loan Document by any Person or any amendment or other modification to this Agreement or any other Loan Document; or (vi) any other circumstance, occurrence or event whatsoever, whether or not similar to any of the foregoing. SECTION 2.4. CONTINUATION AND CONVERSION ELECTIONS. By delivering a Continuation/ Conversion Notice to the Administrative Agent on or before 12:00 noon on a Business Day, the applicable Borrower may from time to time irrevocably elect, on not less than one Business Day's notice in the case of a conversion of LIBO Rate Loans to Base Rate Loans, or three Business Days' notice in the case of a continuation of LIBO Rate Loans for an additional Interest Period or a conversion of Base Rate Loans to LIBO Rate Loans, and in either case not more than five Business Days' notice, that all, or any portion in an aggregate minimum amount of $500,000 and integral multiples of $100,000 of the Revolving Loans outstanding to such Borrower be, in the case of Base Rate Loans, converted into LIBO Rate Loans or be, in the case of LIBO Rate Loans, converted into Base Rate Loans or continued as LIBO Rate Loans (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days (but not more than five Business Days) before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); PROVIDED, HOWEVER, that (x) each such conversion or continuation shall be pro rated among the applicable outstanding Loans to such Borrower of all Lenders that have made such Loans, and (y) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Event of Default has occurred and is continuing. SECTION 2.5. FUNDING. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; PROVIDED, HOWEVER, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrowers to repay -41- such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, affiliate or international banking facility; and PROVIDED, FURTHER, HOWEVER, that, except for purposes of determining whether any such increased costs are payable by a Borrower, such Lender shall cause such foreign branch, affiliate or international banking facility to comply with the applicable provisions of CLAUSE (b) of SECTION 4.6 with respect to such LIBO Rate Loan. In addition, the Borrowers hereby consent and agree that, for purposes of any determination to be made for purposes of SECTIONS 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION 2.6. ISSUANCE PROCEDURES, ETC. (a) On the Closing Date, each Issuer that has issued an Existing Letter of Credit shall be deemed, without further action by any party hereto, to have sold to each Revolving Lender, and each such Revolving Lender shall be deemed, without further action by any party hereto, to have purchased from each such Issuer, without recourse or warranty, an undivided participation interest in its Percentage of such Existing Letter of Credit and the related Letter of Credit Outstandings (although any fronting fee payable under SECTION 3.3.2 shall be payable directly to the Administrative Agent for the accounting of each applicable Issuer, and the Lenders (other than such Issuer) shall have no right to receive any portion of such fronting fee) and any security therefore or guaranty pertaining thereto. On and after the Closing Date, each Existing Letter of Credit shall constitute a Letter of Credit for all purposes hereof. (b) On or after the Closing Date, by delivering to the Administrative Agent an Issuance Request on or before 12:00 noon on a Business Day, any Borrower may from time to time irrevocably request on not less than three nor more than ten Business Days' notice, in the case of an initial issuance of a Letter of Credit, and not less than three Business Days' prior notice, in the case of a request for the extension of the Stated Expiry Date of an outstanding Letter of Credit (in each case, unless a shorter notice period is agreed to by the Issuer, in its sole discretion), that an Issuer issue, or extend the Stated Expiry Date of, a Letter of Credit in such form as may be requested by such Borrower and approved by such Issuer (such approval not to be unreasonably withheld), solely for the purposes described in SECTION 7.1.7. Each Letter of Credit shall by its terms be stated to expire on a date (its "STATED EXPIRY DATE") no later than the earlier to occur of (i) the fifth Business Day immediately preceding the date specified in CLAUSE (ii) of the definition of "Commitment Termination Date" or (ii) (unless otherwise agreed to by an Issuer, in its sole discretion), one year from the date of its issuance (subject to automatic renewal provisions); PROVIDED, HOWEVER, that, notwithstanding the terms of this CLAUSE (ii), a Letter of Credit may, if required by the beneficiary thereof, contain automatic renewal provisions pursuant to which the Stated Expiry Date shall be automatically extended (to a date not beyond the date specified in CLAUSE (i) above), unless notice to the contrary shall have been given to the beneficiary prior to the then existing Stated Expiry Date in accordance with the terms specified in such Letter of Credit by the applicable Issuer or the account party of such Letter of Credit (which notice by the account party shall also have been provided to the applicable Issuer in writing). Each Issuer will make available to the beneficiary thereof the original of the Letter of Credit which it issues. SECTION 2.6.1. OTHER LENDERS' PARTICIPATION. Upon the issuance of each Letter of Credit, and without further action, each Revolving Lender (other than such Issuer) shall be deemed to have irrevocably purchased, to the extent of its Percentage, a participation interest in -42- such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation with respect thereto), and such Revolving Lender shall, to the extent of its Percentage, be responsible for reimbursing within one Business Day the Issuer for Reimbursement Obligations which have not been reimbursed by the Borrowers in accordance with SECTION 2.6.3. In addition, such Revolving Lender shall, to the extent of its Percentage, be entitled to receive a ratable portion of the Letter of Credit fees payable pursuant to SECTION 3.3.2 with respect to each Letter of Credit (other than the issuance fees payable to an Issuer of such Letter of Credit pursuant to the last sentence of SECTION 3.3.2) and of interest payable pursuant to SECTION 3.2 with respect to any Reimbursement Obligation. To the extent that any Revolving Lender has reimbursed any Issuer for a Disbursement, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from the Borrowers or otherwise) in respect of such Disbursement. SECTION 2.6.2. DISBURSEMENTS. An Issuer will notify the applicable Borrower and the Administrative Agent promptly of the presentment for payment of any drawing under Letter of Credit issued by such Issuer, together with notice of the date (the "DISBURSEMENT DATE") such payment shall be made (each such payment, a "DISBURSEMENT"). Subject to the terms and provisions of such Letter of Credit and this Agreement, the applicable Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 12:30 p.m. on the first Business Day following the Disbursement Date (the "DISBURSEMENT DUE DATE"), the applicable Borrower will reimburse the Administrative Agent (any such reimbursement obligation to be a joint and several obligation of the Borrowers), for the account of the applicable Issuer, for all amounts which such Issuer has disbursed under such Letter of Credit, together with interest thereon at a rate per annum equal to the rate per annum then in effect for Base Rate Loans (with the then Applicable Margin for Revolving Loans accruing on such amount) pursuant to SECTION 3.2 for the period from the Disbursement Date through the date of such reimbursement; PROVIDED, HOWEVER, that, if no Default shall have then occurred and be continuing, unless the applicable Borrower has notified the Administrative Agent no later than one Business Day prior to the Disbursement Due Date that it will reimburse the Issuer for the applicable Disbursement, then the amount of the Disbursement shall be deemed to be a Borrowing of Revolving Loans by the applicable Borrower constituting Base Rate Loans and, following the giving of notice thereof by the Administrative Agent to the Lenders, each Lender (other than the Issuer) will deliver to the Issuer on the Disbursement Due Date immediately available funds in an amount equal to such Lender's Percentage of such Borrowing. Each conversion of Disbursement amounts into Revolving Loans shall constitute a representation and warranty by each Borrower that on the date of the making of such Revolving Loans all of the statements set forth in SECTION 5.2.1 are true and correct. Without limiting in any way the foregoing and notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, each Borrower hereby acknowledges and agrees that it shall jointly and severally be obligated to reimburse the applicable Issuer upon each Disbursement of a Letter of Credit, and it shall be deemed to be the obligor for purposes of each such Letter of Credit issued hereunder (whether the account party on such Letter of Credit is such Borrower or any other Borrower). SECTION 2.6.3. REIMBURSEMENT. The joint and several obligation (a "REIMBURSEMENT OBLIGATION") of the Borrowers under SECTION 2.6.2 to reimburse an Issuer with respect to each Disbursement (including interest thereon) not converted into a Base Rate Loan pursuant to -43- SECTION 2.6.2 and, upon the failure of the Borrowers to reimburse an Issuer, each Revolving Lender's obligation under SECTION 2.6.1 to reimburse an Issuer or fund its Percentage of any Disbursement converted into a Base Rate Loan, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Borrower or such Revolving Lender, as the case may be, may have or have had against such Issuer or any Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in such Issuer's good faith opinion, such Disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; PROVIDED, HOWEVER, that after paying in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of any Borrower or such Lender, as the case may be, to commence any proceeding against an Issuer for any wrongful Disbursement made by such Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or willful misconduct on the part of such Issuer. SECTION 2.6.4. DEEMED DISBURSEMENTS. Upon the occurrence and during the continuation of any Event of Default of the types described in CLAUSES (b) through (d) of SECTION 8.1.9 with respect to the Parent or any Borrower or upon notification by the Administrative Agent (acting at the direction of the Required Lenders) to the Borrowers of their respective obligations under this Section, following the occurrence and during the continuation of any other Event of Default, (i) the aggregate Stated Amount of all Letters of Credit shall, without demand upon or notice to any Borrower or any other Person, be deemed to have been paid or disbursed by the Issuers of such Letters of Credit (notwithstanding that such amount may not in fact have been paid or disbursed), and (ii) the Borrowers shall be immediately obligated, jointly and severally, to reimburse the Issuers for the amount deemed to have been so paid or disbursed by such Issuers. Amounts payable by the Borrowers pursuant to this Section shall be deposited in immediately available funds with the Administrative Agent and held as collateral security for the Reimbursement Obligations. When all Events of Default giving rise to the deemed disbursements under this Section have been cured or waived the Administrative Agent shall return to VHC, on behalf of the Borrowers, all amounts then on deposit with the Administrative Agent pursuant to this Section which have not been applied to the satisfaction of the Reimbursement Obligations. SECTION 2.6.5. NATURE OF REIMBURSEMENT OBLIGATIONS. Each Borrower and the Parent and, to the extent set forth in SECTION 2.6.1, each Revolving Lender shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. No Issuer (except to the extent of its own gross negligence or willful misconduct) shall be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; -44- (c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to any Issuer or any Revolving Lender hereunder. In furtherance and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by an Issuer in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon each Obligor and each such Lender Party, and shall not put such Issuer under any resulting liability to any Obligor or any Lender Party, as the case may be. SECTION 2.7. NOTES. (a) The Borrowers agree that, upon the request to the Administrative Agent by any Lender, the Borrowers will execute and deliver to such Lender a Note evidencing the Loans made by, and payable to the order of, such Lender in a maximum principal amount equal to such Lender's Percentage of the original applicable Commitment Amount. The Borrowers hereby irrevocably authorize each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Note (or on any continuation of such grid), which notations, if made, shall evidence, INTER ALIA, the date of, the outstanding principal amount of, the interest rate and Interest Period applicable to the Loans evidenced thereby and the Borrower to whom each such Loan was made. Such notations shall, to the extent not inconsistent with notations made by the Administrative Agent in the Register, constitute prima facie evidence and shall be binding on each Obligor absent manifest error; PROVIDED, HOWEVER, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of any Obligor. (b) Each Borrower hereby designates the Administrative Agent to serve as its agent, solely for the purpose of this clause, to maintain a register (the "REGISTER") on which the Administrative Agent will record each Lender's Commitment, the Loans made by each Lender to each Borrower and each repayment in respect of the principal amount of the Loans, annexed to which the Administrative Agent shall retain a copy of each Lender Assignment Agreement delivered to the Administrative Agent pursuant to SECTION 11.10. Failure to make any recordation, or any error in such recordation, shall not affect any Obligor's Obligations. The entries in the Register shall constitute prima facie evidence and shall be binding on the Obligors absent manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person in whose name a Loan is registered (or, if applicable, to which a Note has been issued) as the owner thereof for the purposes of all Loan Documents, notwithstanding notice or any provision herein to the contrary. Any assignment or transfer of a Commitment or the Loans made pursuant hereto shall be registered in the Register only upon delivery to the Administrative Agent of a Lender Assignment Agreement that has been executed by the requisite parties pursuant to SECTION 11.10. No assignment or transfer of a Lender's Commitment or Loans shall be effective unless such assignment or transfer shall have been recorded in the Register by the Administrative Agent as provided in this Section. -45- SECTION 2.8. NOTICE OF CASH DOMINION. The parties hereto agree that (i) upon the occurrence and during the continuance of any Default or Event of Default or (ii) at any time at which the Excess Availability has been less than $10,000,000 for any period of 5 consecutive Business Days, the Administrative Agent may (and at the request of the Required Lenders shall) give a Notice of Cash Dominion (with a copy to VHC), which Notice of Cash Dominion shall remain in full force and effect until revoked or terminated in writing by the Administrative Agent. When all Defaults and Events of Default, whether giving rise to such Notice of Cash Dominion or otherwise, have been cured or waived and the Excess Availability has been greater than or equal to $10,000,000 for a period of 5 consecutive Business Days, the Administrative Agent, at the request of VHC, shall terminate the effectiveness of such Notice of Cash Dominion, and such Notice of Cash Dominion shall thereafter cease to be effective. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. REPAYMENTS AND PREPAYMENTS; APPLICATION. Each Borrower agrees that the Loans shall be repaid and prepaid pursuant to the following terms. SECTION 3.1.1. REPAYMENTS AND PREPAYMENTS. The Borrowers shall be obligated, jointly and severally, to repay in full the unpaid principal amount of each Loan on the Commitment Termination Date. Prior thereto, payments and prepayments of the Loans shall or may be made as set forth below. (a) From time to time on any Business Day, a Borrower may make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any: (i) Revolving Loans; PROVIDED, HOWEVER, that (x) any such prepayment of Revolving Loans shall be made PRO RATA among the Revolving Loans of all Lenders of the same type and, if applicable, having the same Interest Period; (y) all such voluntary prepayments shall require at least one but no more than five Business Days' prior notice to the Administrative Agent; and (z) all such voluntary partial prepayments shall be in an aggregate minimum amount of $100,000 and integral multiples thereof; and (ii) Swingline Loans; PROVIDED, HOWEVER, that (x) all such voluntary prepayments shall require prior telephonic notice to the Swingline Lender on or before 1:00 p.m. on the day of such prepayment (such notice to be confirmed in writing within 24 hours thereafter); and (y) all such voluntary partial prepayments shall be in an aggregate minimum amount of $50,000 and integral multiples of $10,000. (b) On each date when the aggregate Revolving Outstandings (excluding Overadvance Loans) exceed the Borrowing Base Amount (including as a result of a reduction in the Borrowing Base Amount in effect on such date), the Borrowers shall make a mandatory prepayment of Revolving Loans or Swingline Loans (or -46- both) and, if necessary, Cash Collateralize Letter of Credit Outstandings, in an aggregate amount equal to such excess. On the 10th day immediately following the date of any Overadvance Loan, the Borrowers shall, unless the aggregate Revolving Outstandings (including any Overadvance Loans) are then equal to or less than the Borrowing Base Amount in effect on such date, repay such Overadvance Loan in full. (c) Concurrently with the receipt by the Parent or any of its Subsidiaries of any Net Proceeds, the Borrowers shall be obligated, jointly and severally, to make mandatory prepayments of the Loans, as set forth below, and each such prepayment shall be applied as set forth in SECTION 3.1.2: (i) NET EQUITY PROCEEDS. In the event the Parent or any of its Subsidiaries receives any Net Equity Proceeds, VHC shall deliver to the Administrative Agent a calculation of the amount of such Net Equity Proceeds, and the Borrowers shall make a mandatory prepayment of the Loans in an amount equal to the Specified Percentage of such Net Equity Proceeds; PROVIDED, HOWEVER, that Net Equity Proceeds (other than the Specified Percentage of Net Equity Proceeds from an Initial Public Offering) may be used for one or more Permitted Purposes and, to the extent such proceeds are so used in all cases as provided in the definition of "Permitted Purpose", the Borrowers shall not be required to prepay Loans or Cash Collateralize Letter of Credit Outstanding pursuant to this SECTION 3.1.1(c). (ii) NET DISPOSITION PROCEEDS. In the event the Parent or any of its Subsidiaries receives any Net Disposition Proceeds, VHC shall deliver to the Administrative Agent a calculation of the amount of such Net Disposition Proceeds, and, to the extent the aggregate amount of such proceeds received by the Parent and its Subsidiaries in connection with any single transaction or series of related transactions exceeds $2,000,000, the Borrowers shall within 30 days after receipt of such Net Disposition Proceeds, be obligated, jointly and severally, to make a mandatory prepayment of the Loans in an amount equal to 100% of such Net Disposition Proceeds; PROVIDED, HOWEVER, that, upon written notice by VHC to the Administrative Agent not less than 30 days following receipt of any Net Disposition Proceeds, an aggregate amount of up to $25,000,000 (as such amount may be increased with the consent of the Required Lenders) of such proceeds over the term of this Agreement may be retained by VHC and its Subsidiaries (and be excluded from the prepayment requirements of this clause) if (x) VHC informs the Administrative Agent in such notice of its good faith intention to apply (or cause one or more of its Subsidiaries to apply) such Net Disposition Proceeds to the acquisition of other assets or properties consistent with the businesses permitted to be conducted pursuant to SECTION 7.2.1 (including by way of merger or Investment), and (y) within 365 days following the receipt of such Net Disposition Proceeds, such proceeds are applied or -47- committed to such acquisition. The amount of such Net Disposition Proceeds unused or uncommitted after such 365-day period shall be applied to the Loans as set forth in SECTION 3.1.2. At any time after receipt of any such Net Disposition Proceeds in excess of $2,000,000 but prior to the application thereof to a mandatory prepayment or the acquisition of other assets or properties as described above, the Borrowers shall prepay Loans pursuant to SECTION 3.1.1(a) (with the amount of any such prepayment to continue to be considered to be Net Disposition Proceeds for purposes of this Agreement and the other Loan Documents) or, to the extent it elects not to so prepay Loans, upon written demand by the Administrative Agent (in its reasonable discretion) to the Borrowers, deposit an amount equal to such Net Disposition Proceeds into a cash collateral account maintained with (and reasonably satisfactory to) the Administrative Agent for the benefit of the Secured Parties (and over which the Administrative Agent shall have sole dominion and control) pending such application as a prepayment or to be released as requested by VHC in respect of such acquisition. Amounts deposited in such cash collateral account shall be invested in Cash Equivalent Investments, as directed by VHC. (iii) NET CASUALTY PROCEEDS. In the event the Parent or any of its Subsidiaries receives any Net Casualty Proceeds, VHC shall deliver to the Administrative Agent a calculation of the amount of such Net Casualty Proceeds and, to the extent the aggregate amount of such proceeds received by the Parent and its Subsidiaries in respect of any single Casualty Event or series of related Casualty Events exceeds $2,000,000, the Borrowers shall, within 60 days after the receipt of such Casualty Proceeds be obligated, jointly and severally, to make a mandatory prepayment of the Loans in an amount equal to 100% of such Net Casualty Proceeds; PROVIDED, HOWEVER, that, upon written notice by VHC to the Administrative Agent not less than 60 days following receipt of any Net Casualty Proceeds, up to 100% of such proceeds may be retained by VHC and its Subsidiaries (and be excluded from the prepayment requirements of this clause) if (x) VHC informs the Administrative Agent in such notice of its good faith intention to apply (or cause one or more of its Subsidiaries to apply) such Net Casualty Proceeds to the repair or replacement of the assets or properties which have been lost or damaged as a result of the Casualty Event giving rise to such Net Casualty Proceeds or to the acquisition of other property or assets consistent with the businesses permitted to be conducted under SECTION 7.2.1, and (y) within 365 days following the receipt of such Net Casualty Proceeds such proceeds are applied or committed to such repair, replacement or acquisition. The amount of any such Net Casualty Proceeds unused or uncommitted after such 365-day period shall be applied to the Loans as set forth in SECTION 3.1.2. At any time after receipt of any such Net Casualty Proceeds in excess of $2,000,000 but prior to the application thereof to a mandatory prepayment or the repair, replacement or acquisition of lost or -48- damaged assets or property or other property or assets as described above, the Borrowers shall prepay Loans pursuant to SECTION 3.1.1(a) (with the amount of any such prepayment to be continued to be Net Casualty Proceeds for purposes of this Agreement and the other Loan Documents) or, to the extent it elects not to so prepay Loans, upon written demand by the Administrative Agent (in its reasonable discretion) to the Borrowers, deposit an amount equal to such Net Casualty Proceeds into a cash collateral account maintained with (and reasonably satisfactory to) the Administrative Agent for the benefit of the Secured Parties (and over which the Administrative Agent shall have sole dominion and control) pending such application as a prepayment or to be released as requested by VHC in respect of such repair, replacement or acquisition. Amounts deposited in such cash collateral account shall be invested in Cash Equivalent Investments, as directed by the VHC. (iv) NET DEBT PROCEEDS. In the event the Parent or any of its Subsidiaries receives any Net Debt Proceeds, the Borrowers shall be obligated, jointly and severally, to make a mandatory prepayment of the Loans in an amount equal to 100% of such Net Debt Proceeds. (d) MANDATORY REPAYMENTS FROM COLLECTION ACCOUNTS. (i) DEPOSITS OF PROCEEDS TO COLLECTION ACCOUNTS. At all times during which a Notice of Cash Dominion is in effect, the Obligors shall instruct all Account Debtors and other Persons obligated in respect of Accounts to make all payments in respect of the Accounts directly to one or more Collection Accounts. So long as no Event of Default has occurred and is continuing, all such payments shall be deposited in a Collection Account. In addition to the foregoing, each Borrower agrees that if the proceeds of any Accounts shall be received by it or by any of the other Obligors at any time during which a Notice of Cash Dominion is in effect, such Borrower shall, and shall cause each of the other Obligors to, as promptly as possible deposit such proceeds in a Collection Account. Until so deposited, all such proceeds shall be held in trust by such Obligors for the Administrative Agent on behalf of the Secured Parties and shall not be commingled with any other funds or property of such Obligors. Each Borrower hereby irrevocably authorizes and empowers the Administrative Agent, its officers, employees and authorized agents at any time during which a Notice of Cash Dominion is in effect, to endorse and sign its name or the name of any other Obligor on all checks, drafts, money orders or other media of payment so delivered, and such endorsements or assignments shall, for all purposes, be deemed to have been made by the applicable Obligor prior to any endorsement or assignment thereof by the Administrative Agent. The Administrative Agent may use any convenient or customary means for the purpose of collecting such checks, drafts, money orders or other media of payment. -49- (ii) WITHDRAWALS TO PAY OBLIGATIONS. On any date on which a Notice of Dominion is in effect, (A) the aggregate Available Balance of all Disbursement Accounts in excess of an aggregate amount equal to (x) if Excess Availability on such date exceeds $5,000,000 and no Event of Default shall have occurred and be continuing, $5,000,000, (y) if Excess Availability on such date exceeds $5,000,000 and an Event of Default shall have occurred and be continuing, $2,500,000 or (z) if Excess Availability on such date is less than or equal to $5,000,000, $0 (PROVIDED that the limitations set forth in this CLAUSE (ii) shall not affect or impair any rights or remedies of the Administrative Agent under the Pledge and Security Agreement or any other Loan Document if an Event of Default has occurred and is continuing), shall be transferred by the Borrowers and their Subsidiaries into one or more Collection Accounts, (B) the aggregate Available Balance of all Collection Accounts shall be transferred by the respective banks maintaining such Collection Accounts into the Concentration Account and (C) following the transfers referred to in CLAUSE (B) above, to the extent necessary to pay in full the Loans and/or to Cash Collateralize in full all Letter of Credit Outstandings, the Available Balance in the Concentration Account shall be withdrawn by the Administrative Agent and applied to repay Loans or Cash Collateralize Letter of Credit Outstandings. (e) On the Commitment Termination Date, the Borrowers shall be obligated, jointly and severally, to repay all the Loans, unless, pursuant to SECTION 8.3, only a portion of all the Loans has been accelerated (in which case the portion so accelerated shall be so repaid). Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by SECTION 4.4. SECTION 3.1.2. APPLICATION. Amounts prepaid pursuant to SECTION 3.1.1 shall be applied as set forth in this Section. (a) Subject to CLAUSE (b), each prepayment or repayment of the principal of the Loans shall be applied, to the extent of such prepayment or repayment, FIRST, to the principal amount thereof being maintained as Base Rate Loans, and SECOND, subject to the terms of SECTION 4.4, to the principal amount thereof being maintained as LIBO Rate Loans. (b) each prepayment of the Loans made pursuant to CLAUSES (b), (c), (d) and (e) of SECTION 3.1.1 shall be applied, FIRST, to the repayment of any outstanding Revolving Loans, and, SECOND, to the Cash Collateralization of Letter of Credit Outstandings, if necessary. SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding principal amount of the Loans shall accrue and be payable in accordance with the terms set forth below. -50- SECTION 3.2.1. RATES. Subject to SECTION 2.3.2, pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the applicable Borrower may elect that the Loans comprising a Borrowing accrue interest: (a) for each day on which such Loans are maintained as Base Rate Loans, at a rate per annum equal to the sum of the Alternate Base Rate in effect for such day plus the Applicable Margin for such day; and (b) on that portion of any Loans maintained as a LIBO Rate Loan, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin for such day. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. POST-DEFAULT RATES. After the date any principal amount of any Loan shall have become due and payable (whether on the applicable Stated Maturity Date, upon acceleration or otherwise), or any other monetary Obligation of any Borrower shall have become due and payable, the Borrowers shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the rate that would otherwise be applicable to Base Rate Loans plus 2%. SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Loan shall be payable, without duplication: (a) on the Commitment Termination Date; (b) in the case of a LIBO Rate Loan, on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan on the principal amount so paid or prepaid; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring on or after June 30, 2002; (d) with respect to LIBO Rate Loans, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on the date occurring on each three-month interval occurring after the first day of such Interest Period); and (e) with respect to the principal amount of any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to CLAUSE (c), on the date of such conversion. Interest accrued on Loans or other monetary Obligations after the date such amount is due and payable (whether on the stated maturity date, upon acceleration or otherwise) shall be payable upon demand. -51- SECTION 3.3. FEES. The Borrowers agree, jointly and severally, to pay the fees set forth below. All such fees shall be non-refundable. SECTION 3.3.1. COMMITMENT FEE. The Borrowers agree, jointly and severally, to pay to the Administrative Agent, for the account of each Lender, for each day during the period (including any portion thereof when any of its Commitments are suspended by reason of the Borrowers' inability to satisfy any condition of ARTICLE V) commencing on the Closing Date and continuing to but excluding the Commitment Termination Date, a commitment fee at a rate equal to 0.625% per annum, on such Lender's Percentage of the difference on such day of the Revolving Loan Commitment Amount less the Revolving Outstandings (net of Swingline Loans); PROVIDED, HOWEVER, that during the period from the Closing Date to but excluding the earlier of (i) the date upon which all of the obligations of the Borrowers under SECTIONS 7.1.12 and 7.1.13 have been satisfied in full and (ii) the 60th day immediately following the Closing Date, the commitment fee shall not accrue or otherwise be payable with respect to that portion of the Revolving Loan Commitment Amount, if any, which exceeds the Borrowing Base Amount solely as a result of the exclusion of the orderly liquidation value of real property assets of the Borrowers from the Borrowing Base Amount in accordance with CLAUSE (A)(vii) of the definition of "Eligible PP&E". All commitment fees payable pursuant to this Section shall be calculated on a year comprised of 360 days and shall be paid by the Borrowers in arrears on each Quarterly Payment Date, commencing with the first Quarterly Payment Date on or following June 30, 2002, and on the Commitment Termination Date. SECTION 3.3.2. LETTER OF CREDIT FEE. The Borrowers agree, jointly and severally, to pay to the Administrative Agent, (i) for the PRO RATA account of each Revolving Lender, a Letter of Credit fee for each day on which there shall be any Letters of Credit outstanding, at a per annum rate equal to (A) the Applicable Margin for such day for Revolving Loans maintained as LIBO Rate Loans, in the case of standby Letters of Credit or (B) the Applicable Margin for such day for Revolving Loans maintained as LIBO Rate Loans less 50 basis points, in the case of trade Letters of Credit, in each case on the Stated Amount of each such Letter of Credit, such fees being payable quarterly in arrears on each Quarterly Payment Date following the date of issuance of each Letter of Credit and on the Commitment Termination Date and (ii) for the account of the applicable Issuer, for each day on which there shall be any Letters of Credit issued by such Issuer outstanding, a fronting fee at a rate per annum of 0.125% on the undrawn amount of each such Letter of Credit outstanding on such day, payable quarterly in arrears on each Quarterly Payment Date, commencing with the first Quarterly Payment Date on or following June 30, 2002. ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. LIBO RATE LENDING UNLAWFUL. If any Lender shall determine (which determination shall, upon notice thereof to the Borrowers and the Administrative Agent, be prima facie evidence thereof and shall be binding on the Borrowers absent manifest error) that the introduction of or any change in or in the interpretation of any law, in each case after the later of (i) the Closing Date and (ii) the date upon which such Lender shall have become a Lender hereunder (unless, in the case of this CLAUSE (ii), such introduction or change shall have similarly affected substantially all of the other Lenders) makes it unlawful, or any Governmental Authority asserts, after such date, that it is unlawful, for such Lender to make or continue any Loan as, or -52- to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make or continue any Loan as a LIBO Rate Loan, or convert any Loan into a LIBO Rate Loan shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist (with the date of such notice being the "REINSTATEMENT DATE"), and (a) all LIBO Rate Loans previously made by such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion and (b) all Loans thereafter made by such Lender and outstanding prior to the Reinstatement Date shall be made as Base Rate Loans, with interest thereon being payable on the same date that interest is payable with respect to the corresponding Borrowing of LIBO Rate Loans made by Lenders not so affected. SECTION 4.2. DEPOSITS UNAVAILABLE. If the Administrative Agent shall have determined that (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to it in its relevant market; or (b) by reason of circumstances affecting it's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans; then, upon notice from the Administrative Agent to the Borrowers and the Lenders, the obligations of all Lenders under SECTION 2.3 and SECTION 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrowers and the Lenders that the circumstances causing such suspension no longer exist. SECTION 4.3. INCREASED LIBO RATE LOAN COSTS, ETC. The Borrowers agree, jointly and severally, to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, such Lender Commitments and the making of Credit Extensions hereunder related to the making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans) that arise as a result of any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in after the later of (i) the Closing Date and (ii) the date upon which such Lender shall have become a Lender hereunder (unless, in the case of this CLAUSE (ii), such change, introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in shall have similarly effected substantially all of the Lenders) of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any Governmental Authority, except for such changes with respect to increased capital costs and taxes which are governed by SECTIONS 4.5 and 4.6, respectively. Each affected Lender shall promptly notify the Administrative Agent and the Borrowers in writing of the occurrence of any such event, stating in reasonable detail the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrowers directly to such Lender within five days of its receipt of such notice, and such notice shall be prima facie evidence thereof and shall be binding upon the Borrowers absent manifest error. -53- SECTION 4.4. FUNDING LOSSES. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make or continue any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan, but excluding loss of margin after the date of any such conversion, repayment, prepayment or failure to borrow, continue or convert) as a result of (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loan on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to ARTICLE III or otherwise; (b) any Loans not being borrowed as LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor; then, upon the written notice of such Lender to the Borrowers (with a copy to the Administrative Agent), the Borrowers shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations thereof in reasonable detail) shall be prima facie evidence thereof and shall be binding upon the Borrowers absent manifest error. SECTION 4.5. INCREASED CAPITAL COSTS. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any Governmental Authority after the later of (i) the Closing Date and (ii) the date upon which the applicable Lender becomes a Lender hereunder (unless, in the case of this CLAUSE (ii) such change, introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in shall have similarly effected substantially all of the Lenders) affects or would affect the amount of capital required or expected to be maintained by any Lender Party or any Person controlling such Lender Party, and such Lender Party determines (in good faith but in its sole and absolute discretion) that as a result thereof the rate of return on its or such controlling Person's capital as a consequence of the Commitments or the Credit Extensions made, or the Letters of Credit participated in, by such Lender Party is reduced to a level below that which such Lender Party or such controlling Person could have achieved but for the occurrence of any such circumstance, then upon notice from time to time by such Lender Party to the Borrowers, the Borrowers shall be obligated within five days following receipt of such notice to pay directly to such Lender Party additional amounts sufficient to compensate such Lender Party or such controlling Person for such reduction in rate of return. A statement of such Lender Party as to any such additional amount or amounts (which shall include calculations thereof in reasonable detail) shall be prima facie evidence thereof and shall be binding upon the Borrowers absent manifest error. In determining such amount, such Lender Party may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable; PROVIDED, HOWEVER, that such Lender may not impose materially greater costs on the Borrowers than on similarly situated borrowers by virtue of any such averaging or attribution method. -54- SECTION 4.6. TAXES. (a) All payments by any Obligor of principal of, and interest on, the Loans and all other amounts payable hereunder or under any other Loan Document (including Reimbursement Obligations, fees and expenses) shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority from or through which payments originate or are made or deemed made by or to any Obligor, but excluding (i) any income, excise, stamp or franchise taxes and other similar taxes, fees, duties, withholdings or other charges imposed on any Lender or either of the Agents by a jurisdiction under the laws of which such Lender or Agent is organized or in which its principal executive office is located, or otherwise as a result of a present or former connection between the applicable lending office (or office through which it performs any of its actions as Lender or Agent) of such Lender or Agent and the jurisdiction of the governmental authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or taken any action to enforce, this Agreement and any Note) or (ii) any income, excise, stamp or franchise taxes and other similar taxes, fees, duties, withholdings or other charges to the extent that they are in effect and would apply as of the date any Person becomes a Lender or Assignee Lender, or as of the date that any Lender changes its applicable lending office, to the extent such taxes become applicable as a result of such change (other than a change in an applicable lending office made pursuant to SECTION 4.10 below) (such non-excluded items being called "TAXES"). In the event that any withholding or deduction from any payment to be made by any Obligor hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then (i) the applicable Obligor will pay directly to the relevant taxing authority the full amount required to be so withheld or deducted, (ii) the applicable Obligor will promptly forward to the Administrative Agent an official receipt or other documentation available to such Obligor reasonably satisfactory to the Administrative Agent evidencing such payment to such authority, and (iii) the Borrowers shall be obligated, jointly and severally, to pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required; PROVIDED, HOWEVER, that the Obligors shall not be required to pay any such additional amounts in respect of amounts payable to any Lender that is not organized under the laws of the United States or a state thereof to the extent that the related tax is imposed (or an exemption therefrom is not available) as a result of such Lender or Agent failing to comply with the requirements of CLAUSE (b) of SECTION 4.6. Moreover, if any Taxes are directly asserted against either of the Agents or any Lender with respect to any payment received by such Agents or such Lender hereunder, such Agent or such Lender may pay such Taxes and the Borrowers will promptly pay to such Person such additional amount (including any penalties, interest or expenses) as is necessary in order that the net amount received by such Person (including any Taxes on such additional amount) shall equal the amount of such Taxes paid by such Person; PROVIDED, HOWEVER, that the Borrowers shall not be obligated to make payment to the Lenders or the Agents (as the case may be) pursuant to this sentence in respect of penalties or interest attributable to any Taxes, if written demand therefor has not been made by such Lenders or the Agents within 60 days from the date on which such Lenders or the Agents knew of the imposition of Taxes by the relevant taxing authority or for any additional imposition which may arise from the failure of the Lenders or the Agents to apply -55- payments in accordance with the tax law after the Obligors have made the payments required hereunder; PROVIDED, FURTHER that the Borrowers shall not be required to pay any such additional amounts in respect of any amounts payable to any Lender or any Agent (as the case may be) that is not organized under the laws of the United States or a state thereof to the extent the related Tax is imposed as a result of such Lender failing to comply with the requirements of CLAUSE (b) of SECTION 4.6. After the Lenders or the Agents (as the case may be) learn of the imposition of Taxes, such Lenders and the Agents will act in good faith to notify the Borrowers of their obligations hereunder as soon as reasonably possible. If any Obligor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrowers, jointly and severally, shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. (b) Each Non-U.S. Lender shall, (i) on or prior to the date of the execution and delivery of this Agreement, in the case of each Lender listed on the signature pages hereof, or, in the case of an Assignee Lender, on or prior to the date it becomes a Lender, execute and deliver to the Borrowers and the Administrative Agent, two or more (as the Borrowers or the Agents may reasonably request) United States Internal Revenue Service Forms W-8ECI or Forms W-8BEN (or successor forms) establishing the Lender's exemption from United States federal withholding tax, or, solely if such Lender is claiming exemption from United States withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", United States Internal Revenue Service Forms W-8BEN and a certificate signed by a duly authorized officer of such Lender representing that such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, or such other form or documents (or successor forms or documents), appropriately completed, establishing that payments to such Lender are exempt from withholding or deduction of United States federal withholding taxes; and (ii) deliver to the Borrowers and the Administrative Agent two further copies of any such form or documents on or before the date that any such forms or document expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent such forms or document previously delivered by it to the Borrowers. Each Lender and each Agent agrees, to the extent reasonable and without material cost to it, to provide to the Borrowers and the Administrative Agent such other applicable forms or certificates as would reduce or eliminate any Tax otherwise applicable. (c) If the Borrowers determine in good faith that a reasonable basis exists for contesting the imposition of a Tax with respect to a Lender or either of the Agents, the relevant Lender or Agent, as the case may be, shall cooperate with the Borrowers in challenging such Tax at the Borrowers' expense if requested by the Borrowers; PROVIDED, HOWEVER, that nothing in this SECTION 4.6 shall require any Lender or Agent to submit to the Borrowers or any person any tax returns or any part thereof, or to prepare or file any tax returns other than as such Lender or Agent at its sole discretion shall determine. (d) If a Lender or an Agent shall receive a refund (including any offset or credit from a taxing authority (as a result of any error in the imposition of Taxes by such taxing authority)) of any Taxes paid by a Borrower pursuant to CLAUSE (a) above, such Lender or such Agent (as the -56- case may be) shall promptly pay such Borrower the amount so received, with interest from the taxing authority with respect to such refund, net of any tax liability incurred by such Lender or Agent that is attributable to the receipt of such refund and such interest. (e) Each Lender and each Agent agrees, to the extent reasonable and without material cost to it, to cooperate with the Borrowers to minimize any amounts payable by the Borrowers under this SECTION 4.6; PROVIDED, HOWEVER, that nothing in this SECTION 4.6 shall require any Lender or Agent to take any action which, in the sole discretion of such Lender or Agent, is inconsistent with its internal policy and legal and regulatory restrictions. (f) If the Borrowers are required to pay additional amounts to or for the account of any Lender or Agent pursuant to CLAUSE (a) above as a result of a change of law occurring after the date hereof, then such Lender or Agent, at the request of the Borrowers, will change the jurisdiction of its applicable lending office (or office through which it performs any of its actions as Agent) if such change (i) would eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not, in the good faith determination of such Lender or Agent, otherwise disadvantageous to such Lender or Agent. SECTION 4.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly provided in a Loan Document, all payments by the Borrowers pursuant to each Loan Document shall be made to the Administrative Agent for the PRO RATA account of the Lender Parties entitled to receive such payment. All payments shall be made without setoff, deduction or counterclaim not later than 12:30 p.m. on the date due in same day or immediately available funds to such account as the Administrative Agent shall specify from time to time by notice to the Borrowers. Funds received after that time may be deemed by the Administrative Agent to have been received by the Administrative Agent on the next succeeding Business Day. Each Borrower shall, at the time it makes any payment under this Agreement, specify to the Administrative Agent the Loan, Letter of Credit, fees or other amounts payable by such Borrower hereunder to which such payment is to be applied (and if it fails to specify or if such application would be inconsistent with the terms hereof, the Administrative Agent shall, subject to SECTION 4.8, distribute such payment to the Lender Parties in such manner as the Administrative Agent may deem appropriate). The Administrative Agent shall promptly remit in same day funds to each Lender Party its share, if any, of such payments received by the Administrative Agent for the account of such Lender Party. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan (calculated at other than the Federal Funds Rate), 365 days or, if appropriate, 366 days). Payments due on other than a Business Day shall (except as otherwise required by CLAUSE (c) of the definition of "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees in connection with that payment. SECTION 4.8. SHARING OF PAYMENTS. If any Lender Party shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Credit Extension or Reimbursement Obligation (other than pursuant to the terms of SECTIONS 4.3, 4.4, 4.5 or 4.6) in excess of its PRO RATA share of payments obtained by all Lender Parties, such Lender Party shall purchase from the other Lender Parties such participations in -57- Credit Extensions made by them as shall be necessary to cause such purchasing Lender Party to share the excess payment or other recovery ratably (to the extent such other Lender Parties were entitled to receive a portion of such payment or recovery) with each of them; PROVIDED, HOWEVER, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender Party, the purchase shall be rescinded and each Lender Party which has sold a participation to the purchasing Lender Party shall repay to the purchasing Lender Party the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender Party's ratable share (according to the proportion of (a) the amount of such selling Lender Party's required repayment to the purchasing Lender Party in respect of such recovery TO (b) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered. Each Borrower agrees that any Lender Party purchasing a participation from another Lender Party pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to SECTION 4.9) with respect to such participation as fully as if such Lender Party were the direct creditor of the applicable Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law any Lender Party receives a secured claim in lieu of a setoff to which this Section applies, such Lender Party shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lender Parties entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 4.9. SETOFF. Each Lender Party shall, upon the occurrence and during the continuance of any Default described in CLAUSES (b) through (d) of SECTION 8.1.9 with respect to the Parent or any Borrower or, with the consent of the Required Lenders, upon the occurrence and during the continuance of any other Event of Default, to the fullest extent permitted by law, have the right to appropriate and apply to the payment of the Obligations to it then due, and (as security for such Obligations) each Borrower and the Parent hereby grant to each Lender Party a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Borrower or the Parent then or thereafter maintained with such Lender Party; PROVIDED, HOWEVER, that any such appropriation and application shall be subject to the provisions of SECTION 4.8. Each Lender Party agrees promptly to notify the applicable Borrower or the Parent, as applicable, and the Administrative Agent after any such setoff and application made by such Lender Party; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender Party under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender Party may have. SECTION 4.10. MITIGATION. Each Lender agrees that if it makes any demand for payment under SECTIONS 4.3, 4.5 or 4.6, or if its obligation to fund LIBO Rate Loans is suspended under SECTION 4.1, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrowers to make payments under SECTION 4.3, 4.5 or 4.6. or would alleviate or reduce the effect of any adoption or change described in SECTION 4.1. -58- SECTION 4.11. REPLACEMENT OF LENDERS. Each Lender hereby severally agrees as set forth in this Section. If any Lender (a "SUBJECT LENDER") (a) makes demand upon any Borrower for (or if any Borrower is otherwise required to pay) amounts pursuant to SECTION 4.3, 4.5 or 4.6, (b) gives notice pursuant to SECTION 4.1 requiring a conversion of such Subject Lender's LIBO Rate Loans to Base Rate Loans or suspending such Lender's obligation to make Loans as, or to convert Loans into, LIBO Rate Loans, (c) becomes a Non-Consenting Lender or (d) becomes a Defaulting Lender, VHC may, within 180 days of receipt by it of such demand or notice (or the occurrence of such other event causing any Borrower to be required to pay such compensation) or within 180 days of such Lender becoming a Non-Consenting Lender or a Defaulting Lender, as the case may be, give notice (a "REPLACEMENT NOTICE") in writing to the Administrative Agent and such Subject Lender of its intention to replace such Subject Lender with a financial institution (a "REPLACEMENT LENDER") designated in such Replacement Notice. If the Administrative Agent shall, in the exercise of its reasonable discretion and within 30 days of its receipt of such Replacement Notice, notify VHC and such Subject Lender in writing that the designated financial institution is satisfactory to the Administrative Agent (such consent not to be unreasonably withheld or delayed and not to be required where the Replacement Lender is already a Lender), then such Subject Lender shall, subject to the payment of any amounts due pursuant to SECTION 4.4, assign, in accordance with SECTION 11.10, all of its Commitments, Loans, Notes (if applicable) and other rights and obligations under this Agreement and all other Loan Documents (including, without limitation, Reimbursement Obligations) to such designated financial institution; PROVIDED, HOWEVER, that (i) such assignment shall be without recourse, representation or warranty and shall be on terms and conditions reasonably satisfactory to such Subject Lender and such designated financial institution and (ii) the purchase price paid by such designated financial institution shall be in the amount of such Subject Lender's Loans and its Percentage of outstanding Reimbursement Obligations, together with all accrued and unpaid interest and fees in respect thereof, plus all other amounts (including the amounts demanded and unreimbursed under SECTIONS 4.3, 4.5 and 4.6), owing to such Subject Lender hereunder. Upon the effective date of an assignment described above, if requested by the applicable Replacement Lender, the Borrowers shall issue a replacement Note or Notes, as the case may be, to such designated financial institution or Replacement Lender, as applicable, and such institution shall become a "Lender" for all purposes under this Agreement and the other Loan Documents. ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION 5.1. INITIAL CREDIT EXTENSION. The obligations of the Lenders and, if applicable, the Issuer to fund the initial Credit Extension shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Article. SECTION 5.1.1. RESOLUTIONS, ETC. The Lead Arranger shall have received from each Obligor, as applicable, (i) a copy of a good standing certificate, dated a date reasonably close to the Closing Date, for each such Obligor and (ii) a certificate, dated the Closing Date, duly executed and delivered by such Obligor's Secretary or Assistant Secretary, managing member or general partner, as applicable, as to (a) resolutions of each such Obligor's Board of Directors (or other managing body, in the case of an Obligor which is not a corporation) then in full -59- force and effect authorizing, to the extent relevant, the execution, delivery and performance of each Loan Document to be executed by such Obligor and the transactions contemplated hereby and thereby; (b) the incumbency and signatures of those officers, managing members or general partners, as applicable, authorized to act on behalf of such Obligor with respect to each Loan Document to be executed and delivered by such Obligor; and (c) the full force and validity of each Organic Document (other than shareholder agreements, voting trusts and other similar arrangements) of such Obligor and copies thereof. Each Lender Party may conclusively rely upon such certificates until it shall have received a further certificate of the Secretary, Assistant Secretary, managing member or general partner, as applicable, of any such Person canceling or amending the prior certificate of such Person. SECTION 5.1.2. TRANSACTION DOCUMENTS. The Agents shall have received (with copies for each Lender that shall have expressly requested copies thereof) copies of fully executed versions of the Certificate of Merger and each of the Senior Note Documents, certified to be true and complete copies thereof by an Authorized Officer of VHC. SECTION 5.1.3. CLOSING DATE CERTIFICATE. The Lead Arranger shall have received the Closing Date Certificate, dated the Closing Date, duly executed and delivered by an Authorized Officer of VHC. SECTION 5.1.4. CONSUMMATION OF TRANSACTIONS. (a) The Agents shall have received evidence reasonably satisfactory to them that (i) all actions necessary to consummate the Refinancing and the other Transactions shall have been, or shall substantially simultaneously be, consummated in accordance with all applicable laws, (ii) all Indebtedness (except Credit Extensions made hereunder, the Parent Debentures, the Senior Subordinated Notes and Indebtedness identified in ITEM 7.2.2(b) of the Disclosure Schedule) together with all interest, all prepayment premiums and other amounts due and payable with respect thereto, shall have been or shall substantially simultaneously be paid in full from the proceeds of the initial Credit Extension and proceeds of the Senior Note Issuance, (iii) the Commitments in respect of such Indebtedness shall have been or shall substantially simultaneously be terminated and (iv) all Liens securing payment of any such Indebtedness shall have been or shall substantially simultaneously be released and appropriate payoff letters shall have been executed and delivered. (b) The Senior Note Issuance shall have been or shall substantially simultaneously be consummated pursuant to a public offering or a Rule 144A private offering on terms and conditions reasonably satisfactory to the Lead Arranger (including as to events of default), and VHC shall have received not less than $215,000,000 in gross cash proceeds as a result of such issuance. The Lead -60- Arranger shall be reasonably satisfied with the terms and conditions of all documentation related to the Senior Note Issuance, including the Senior Notes and the Senior Note Indenture. (c) In addition to, and not in limitation of, the foregoing, the Lead Arranger shall be satisfied with (i) the final structure of the Transactions, including the Refinancing and the Senior Note Issuance, (ii) the sources and uses of the proceeds used to effect the Refinancing and to consummate the other Transactions and (iii) the terms and conditions of the documents relating to the consummation of the Transactions. SECTION 5.1.5. CLOSING FEES, EXPENSES, ETC. The Agents shall have received for their own account, or for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to the Fee Letter, and, if invoiced at least one Business Day prior to the Closing Date, SECTION 11.3. SECTION 5.1.6. FINANCIAL INFORMATION, MATERIAL ADVERSE CHANGE, ETC. (a) The Lead Arranger shall have received a PRO FORMA estimated consolidated balance sheet (the "PRO FORMA BALANCE SHEET") of VHC and its Subsidiaries, as of the Closing Date certified as complete and correct in all material respects by the treasurer, chief financial or accounting Authorized Officer of VHC, giving effect to the consummation of the Refinancing and the Transactions and all the transactions contemplated by this Agreement and reflecting the proposed capital structure of the Borrowers, which shall be reasonably satisfactory to the Lead Arranger. (b) Since December 30, 2001, there shall not have been any material adverse change in the financial condition, operations, assets, business, properties or prospects of VHC and its Subsidiaries, taken as a whole. SECTION 5.1.7. COMPLIANCE CERTIFICATE. VHC shall have prepared and delivered to the Lead Arranger, an initial Compliance Certificate, prepared on a PRO FORMA basis, duly executed (and with all schedules thereto duly completed) and delivered by the treasurer, chief financial or accounting Authorized Officer of VHC, which Compliance Certificate shall reflect an unaudited estimated PRO FORMA ratio (estimated by VHC in good faith) of (A) total Debt for Borrowed Money, net of cash and Cash Equivalent Investments, of VHC and its Subsidiaries as of the Closing Date after giving effect to the Transactions to (B) EBITDA for the period of twelve consecutive fiscal months ended on or about January 31, 2002 of no more than 4.8:1.0. SECTION 5.1.8. OPINIONS OF COUNSEL. The Agents shall have received opinions, dated the Closing Date and addressed to the Agents and all Lenders, from (a) Davis, Polk & Wardwell, special New York counsel to each of the Obligors, in form and substance reasonably satisfactory to the Lead Arranger; and (b) local counsel to each of the Obligors in Delaware, in form and substance, and from counsel, satisfactory to the Administrative Agent. SECTION 5.1.9. [Reserved] -61- SECTION 5.1.10. PLEDGE AND SECURITY AGREEMENT. The Lead Arranger shall have received the Pledge and Security Agreement, dated as of the Closing Date, duly executed by the Parent and each Borrower, together with (a) certificates evidencing all of the issued and outstanding Capital Securities owned by the Parent and the Borrowers in each Borrower, which certificates in each case shall be accompanied by undated instruments of transfer duly executed in blank, or, if any Capital Securities are uncertificated Capital Securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest therein has been transferred to and perfected by the Administrative Agent for the benefit of the Secured Parties in accordance with Articles 8 and 9 of the UCC and all laws otherwise applicable to the perfection of the pledge of such Capital Securities; (b) Filing Statements naming the Parent and each Borrower as a debtor and the Administrative Agent as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the security interests of the Administrative Agent pursuant to such Pledge and Security Agreement; (c) proper payoff letters and UCC Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person in any collateral described in the Pledge and Security Agreement previously granted by any Person, together with such other UCC Form UCC-3 termination statements related thereto as the Administrative Agent may reasonably request from such Obligors; (d) certified copies of UCC Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Administrative Agent, dated a date reasonably near to the Closing Date, listing all effective financing statements which name the Parent or any Borrower (under its present name and any previous names) as the debtor, together with copies of such financing statements (none of which, except as set forth in paragraph (c) and otherwise evidencing Permitted Liens hereunder, shall cover any collateral described in any Loan Document). SECTION 5.1.11. [Reserved] SECTION 5.1.12. FILING AGENT, ETC. All Uniform Commercial Code financing statements or other similar financing statements and Uniform Commercial Code (Form UCC-3) termination statements required pursuant to the Loan Documents (collectively, the "FILING STATEMENTS") shall have been delivered to CT Corporation System or another similar filing service company acceptable to the Administrative Agent (the "FILING AGENT") on behalf of the Administrative Agent. The Filing Agent shall have acknowledged in a writing satisfactory to the Administrative Agent and its counsel (i) the Filing Agent's receipt of all Filing Statements, (ii) that the Filing Statements have either been submitted for filing in the appropriate filing -62- offices or will be submitted for filing in the appropriate offices within ten days following the Closing Date and (iii) that the Filing Agent will notify the Administrative Agent and its counsel of the results of such submissions within 30 days following the Closing Date. SECTION 5.1.13. [Reserved] SECTION 5.1.14. INSURANCE. The Lead Arranger shall have received certificates of insurance evidencing the insurance coverage required to be maintained pursuant to SECTION 7.1.4. SECTION 5.1.15. DELIVERY OF NOTES. The Administrative Agent shall have received, for the account of each Lender, such Lender's Note duly executed and delivered by an Authorized Officer of each Borrower. SECTION 5.1.16. LITIGATION, ETC. There shall exist no action, suit, investigation, litigation or proceeding pending or overtly threatened in any court or before any arbitrator or Governmental Authority that (i) could reasonably be expected to have a Material Adverse Effect or (ii) contests the consummation of the Transaction (or any part thereof). SECTION 5.1.17. GOVERNMENTAL APPROVALS. All material governmental and third party consents and approvals necessary as of the Closing Date to be obtained by the Borrowers or the Parent in connection with the Refinancing or any other Transaction, or this Agreement or any other Loan Document, shall have been obtained (without the imposition of any conditions that are not acceptable to the Lead Arranger in its reasonable judgment) and shall remain in effect, and no law or regulation shall be applicable in the judgment of the Lead Arranger that restrains, prevents or imposes materially adverse conditions upon the Transactions. SECTION 5.1.18. SATISFACTORY LEGAL FORM. All documents executed or submitted pursuant to this Agreement or any other Loan Document by or on behalf of any Obligor shall be reasonably satisfactory in form and substance to the Lead Arranger and its counsel, and the Lead Arranger and its counsel shall have received all additional information, approvals, opinions, documents or instruments in connection herewith and the transactions contemplated in connection herewith as the Lead Arranger or its counsel may reasonably request. SECTION 5.1.19. PERFECTION CERTIFICATE. The Administrative Agent shall have received a Perfection Certificate from each Obligor, dated as of the date of the initial Credit Extension, duly executed and delivered by an Authorized Officer such Obligor. SECTION 5.1.20. SOLVENCY CERTIFICATE. The Lead Arranger shall have received, with copies for each Lender, a Solvency Certificate, dated the Closing Date. SECTION 5.1.21. CASH MANAGEMENT ARRANGEMENTS, ETC. Unless otherwise waived by the Administrative Agent, the Borrowers and the Administrative Agent shall have entered into cash management, lock-box, blocked account and similar arrangements satisfactory to the Administrative Agent. SECTION 5.1.22. INITIAL BORROWING BASE CERTIFICATE. On the Closing Date, after giving effect to all extensions of credit made under the Credit Agreement on such date, the aggregate Revolving Outstandings shall not exceed the Borrowing Base Amount in effect on such date, and -63- the Lead Arranger shall have received a Borrowing Base Certificate, dated as of the Closing Date, certifying as to the estimated Borrowing Base Amount (estimated by VHC in good faith) in effect on such date and certifying that the estimated Excess Availability (estimated by the VHC in good faith) on such date is not less than $30,000,000. SECTION 5.1.23. AUDIT OF ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE, INVENTORY, ETC. The Lead Arranger shall have received the initial Borrowing Base Audit, together with such other reports as the Lead Arranger shall reasonably request, each in form and substance reasonably satisfactory to the Lead Arranger. SECTION 5.1.24. ASSET APPRAISAL. The Lead Arranger shall have received the initial Asset Appraisal, together with such other reports and supporting documentation as the Lead Arranger shall reasonably request, each in form and substance reasonably satisfactory to the Lead Arranger and, based upon such Asset Appraisal and the Borrowing Base Audit, shall be satisfied in its sole discretion with the projected Excess Availability for the period from the Closing Date through the Commitment Termination Date. SECTION 5.2. ALL CREDIT EXTENSIONS. The obligation of each Lender and each Issuer to make any Credit Extension shall be subject to the satisfaction of each of the conditions precedent set forth below. SECTION 5.2.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and after giving effect to any Credit Extension (but, if any Default of the nature referred to in SECTION 8.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds thereof) the following statements shall be true and correct: (a) except in the case of a Default Loan for a Default or Event of Default which has been identified by a Borrower to the Swingline Lender and the Administrative Agent in writing, the provisions of representations and warranties set forth in this Agreement and each other Loan Document which are Qualified By Materiality shall, in each case, be true and correct, and the provisions of representations and warranties set forth in this Agreement and each other Loan Agreement which are not Qualified By Materiality shall, in each case, be true and correct in all material respects, in both cases with the same effect as if then made (unless the facts on which such representations and warranties are based have been changed by transactions or circumstances permitted by the Loan Documents or unless stated to relate solely to an earlier date or dates, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date or dates); (b) except in the case of a Default Loan for a Default or Event of Default which has been identified by a Borrower to the Swingline Lender and the Administrative Agent in writing, no Default shall have then occurred and be continuing; and -64- (c) except in the case of an Overadvance Loan, after giving effect to such Credit Extension, the aggregate Revolving Outstandings shall not exceed the Borrowing Base Amount then in effect. SECTION 5.2.2. CREDIT EXTENSION REQUEST, ETC. Except as otherwise provided in SECTION 2.3.2 or SECTION 2.6.2, the Administrative Agent shall have received a Borrowing Request, if Loans are being requested, or an Issuance Request, if a Letter of Credit is being requested or extended. Each of the delivery of a Borrowing Request or Issuance Request and the acceptance by the applicable Borrower of the proceeds or other benefits of such Credit Extension shall constitute a representation and warranty by each Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in SECTION 5.2.1, to the extent applicable, are true and correct. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Lender Parties to enter into this Agreement and to make Credit Extensions hereunder, the Parent and each Borrower represent and warrant to each Lender Party as set forth in this Article. SECTION 6.1. ORGANIZATION, ETC. Each Obligor is (i) validly organized and existing and in good standing under the laws of the state or jurisdiction of its incorporation or organization, (ii) is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction where the nature of its business requires such qualification except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and (iii) has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under each Loan Document to which it is a party, to own and hold under lease its property and to conduct its business substantially as currently conducted by it except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. SECTION 6.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution, delivery and performance by each Obligor of each Loan Document executed or to be executed by it, each Obligor's participation in the consummation of the Transactions are in each case within such Person's powers, have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as the case may be, and do not (a) (i) contravene such Obligor's Organic Documents, (ii) result in a default under any contractual restriction binding on or affecting such Obligor except where such contravention or default could not reasonably be expected to have a Material Adverse Effect, (iii) contravene any court decree or order binding on or affecting such Obligor except where such contravention could not reasonably be expected to have a Material Adverse Effect or (iv) contravene any law or governmental regulation binding on or affecting such Obligor except where such contravention could not reasonably be expected to have a Material Adverse Effect; or -65- (b) result in, or require the creation or imposition of, any Lien on any Obligor's properties (except as permitted by this Agreement). SECTION 6.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other Person (other than (i) those that have been, or on the Closing Date will be, duly obtained or made and which are, or on the Closing Date will be, in full force and effect, (ii) filings and recordings necessary to perfect the Liens created under the Loan Documents and (iii) authorizations, approvals, actions, notices and filings whose failure to obtain or make could not reasonably be expected to have a Material Adverse Effect) is required for the due execution, delivery or performance by any Obligor of any Loan Document to which it is a party or the consummation of the Transactions. Neither the Parent nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 6.4. VALIDITY, ETC. This Agreement constitutes, and the Notes and each other Loan Document executed by any Borrower will, on the due execution and delivery thereof, constitute, valid and binding agreements of such Borrower enforceable in accordance with its terms; and each Loan Document executed pursuant hereto by each other Obligor will, on the due execution and delivery thereof by such Obligor, constitute valid and binding agreements of such Obligor enforceable in accordance with its terms, in each case with respect to this SECTION 6.4 subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. SECTION 6.5. FINANCIAL INFORMATION. VHC has delivered to the Agents and each Lender copies of (i) the consolidated balance sheet of VHC as at December 30, 2001 and the related consolidated statements of income and cash flows for the Fiscal Year then ended, reported on by Ernst & Young LLP (the "BASE FINANCIAL STATEMENTS") and (ii) the Pro Forma Balance Sheet. The Base Financial Statements have been prepared in accordance with GAAP consistently applied and the Pro Forma Balance Sheet has been prepared on a basis consistent with the basis used to prepare the Base Financial Statements. The Base Financial Statements present fairly the consolidated financial condition of the corporations covered thereby as at the date thereof and the results of their operations for the periods then ended. The Pro Forma Financial Statements include appropriate PRO FORMA adjustments to give PRO FORMA effect to the Transaction. SECTION 6.6. NO MATERIAL ADVERSE CHANGE. Since December 30, 2001, no event, circumstance or condition has occurred which has had a Material Adverse Effect. SECTION 6.7. LITIGATION, LABOR CONTROVERSIES, ETC. There is no pending or, to the knowledge of VHC, threatened action, suit, investigation, litigation, proceeding or labor controversy (i) except as disclosed in ITEM 6.7 of the Disclosure Schedule, affecting the Parent or any of its Subsidiaries, or any of their respective properties, businesses, assets or revenues, which -66- could reasonably be expected to have a Material Adverse Effect, or (ii) which could reasonably be expected to affect the legality, validity or enforceability of any Loan Document or the Transactions. No material adverse development has occurred with respect to any action, suit, investigation, litigation, proceeding or labor controversy disclosed in ITEM 6.7 of the Disclosure Schedule SECTION 6.8. SUBSIDIARIES. Nether the Parent nor any Borrower has any Subsidiaries, except those Subsidiaries which are identified in ITEM 6.8 of the Disclosure Schedule, or which are permitted to have been organized or acquired in accordance with SECTIONS 7.2.5 or 7.2.10. Subject to the effect of any transactions permitted by, and consummated pursuant to, SECTIONS 7.2.5, 7.2.10 or 7.2.11, the Parent owns, directly or indirectly, beneficially and of record, 100% of all issued and outstanding shares of Capital Securities of each Borrower and each Subsidiary Guarantor. SECTION 6.9. OWNERSHIP OF PROPERTIES. Except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, the Parent and each of its Subsidiaries owns (i) in the case of owned real property, good and valid fee title to, (ii) in the case of owned personal property, good and valid title to, or (iii) in the case of leased real or personal property, valid and enforceable leasehold interests (as the case may be) in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever, free and clear in each case of all Liens or claims, except for Liens and title conditions permitted pursuant to SECTION 7.2.3. SECTION 6.10. TAXES. The Parent and each of its Subsidiaries has filed all United States Federal income tax returns and all other material tax returns and reports required by law to have been filed by it and has paid all material taxes thereby shown to be due and owing, except any such taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.11. PENSION AND WELFARE PLANS. During the twelve-consecutive-month period prior to the Closing Date, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA which, in either case is reasonably expected to lead to a liability of such Pension Plan in excess of $3,000,000. No condition exists or event or transaction has occurred with respect to any Pension Plan which could reasonably be expected to result in the incurrence by the Parent or any member of the Controlled Group of any material liability, fine or penalty other than such condition, event or transaction which would not reasonably be expected to have a Material Adverse Effect. Except as disclosed in ITEM 6.11 of the Disclosure Schedule or otherwise approved by the Agents, since the date of the last financial statements of VHC delivered pursuant to CLAUSE (a) or (b) of SECTION 7.1.1, neither the Parent nor any member of the Controlled Group has increased any contingent liability with respect to post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA, except as would not have a Material Adverse Effect. SECTION 6.12. ENVIRONMENTAL WARRANTIES. Except as set forth in ITEM 6.12 of the Disclosure Schedule, or as, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect: -67- (a) All facilities and property owned or leased by the Parent or any of its Subsidiaries are in compliance with all Environmental Laws. (b) There are no pending or, to the knowledge of the Parent or any of its Subsidiaries (after due inquiry), threatened (i) written claims, complaints, notices or requests for information received by the Parent or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, or (ii) written complaints, notices or inquiries to the Parent or any of its Subsidiaries regarding potential liability under any Environmental Law. (c) To the best knowledge of VHC, there are no Releases of Hazardous Materials at, on or under any property owned or leased by the Parent or any of its Subsidiaries or previously owned or leased by the Parent or any of its Subsidiaries. (d) The Parent and its Subsidiaries possess, and are in compliance with, all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their business. (e) No property now or previously owned or leased by the Parent or any of its Subsidiaries is listed or, to the best knowledge of VHC or any of its Subsidiaries, proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up. (f) To the best knowledge of VHC, there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now owned or leased by the Parent or any of its Subsidiaries. (g) Neither the Parent nor any of its Subsidiaries has directly transported or directly arranged for the transportation of any Hazardous Material to any location which (i) is listed or, to the knowledge of VHC or any of its Subsidiaries, proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or (ii) which is the subject of federal, state or local enforcement actions or other investigations in respect of any Environmental Laws. (h) To the best knowledge of VHC, there are no polychlorinated biphenyls or friable asbestos present at any property now owned or leased by the Parent or any of its Subsidiaries. SECTION 6.13. ACCURACY OF INFORMATION. The factual information (other than projections) heretofore or contemporaneously furnished in writing to any Lender Party by or on behalf of any Obligor (including information contained in the Offering Memorandum, dated March 15, 2002, prepared by VHC in connection with the Senior Note Issuance and in the Confidential Information Memorandum dated March 2002, prepared by VHC in connection with the credit facilities and Commitments provided hereunder) in connection with this Agreement, any other Loan Document, any Loan or other Credit Extension contemplated hereunder or any -68- transaction contemplated hereby or in connection herewith (including the Transactions) taken as a whole, does not contain any untrue statement of a material fact, and does not omit to state any material fact necessary to make any such information not misleading in any material respect as of the date such information is delivered, dated or certified. SECTION 6.14. REGULATIONS U AND X. No Obligor is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Credit Extensions will be used in violation of F.R.S. Board Regulation U or Regulation X. Terms for which meanings are provided in F.R.S. Board Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.15. ISSUANCE OF SENIOR NOTES; STATUS OF OBLIGATIONS AS SENIOR INDEBTEDNESS, ETC. The Subordination Provisions contained in or related to the Senior Subordinated Notes Indenture are enforceable against the holders thereof by (or on behalf of) the Lender Parties in respect of any Obligations hereunder owed to such Lender Parties. All Obligations, including those to pay principal of and interest (including post-petition interest, whether or not allowed as a claim under bankruptcy or similar laws) on the Loans, the Reimbursement Obligations, all other Obligations arising hereunder and all fees, costs and expenses in connection therewith, constitute "Senior Debt", as defined in the Senior Subordinated Notes Indenture, and all such Obligations are entitled to the benefits of the subordination created by the Subordination Provisions set forth in such document and the documents and instruments related thereto. This Agreement and the other Loan Documents constitute "Credit Facilities" (as defined in the Senior Note Indenture) and part of the "New Credit Agreement" (as defined in the Senior Subordinated Note Indenture). The Parent and each Borrower each acknowledge and agree that each Lender Party is entering into this Agreement and the other Loan Documents to which it is a party, and is extending its Commitments, in reliance upon the effectiveness and enforceability of the Subordination Provisions of the Senior Subordinated Notes Indenture. SECTION 6.16. SOLVENCY. On the Closing Date, the Transaction (including the incurrence of the initial Credit Extensions hereunder, the incurrence by each applicable Borrower of the Indebtedness represented by the Notes and the Senior Notes and the application of the proceeds of such Credit Extensions) does not involve or result in any fraudulent transfer or fraudulent conveyance under the provisions of Section 548 of the Bankruptcy Code (11 U.S.C. Section 101 ET SEQ., as from time to time hereafter amended, and any successor or similar statute) or any applicable state law respecting fraudulent transfers or fraudulent conveyances. On the Closing Date, after giving effect to the Transaction, each of the Borrowers and the Parent is Solvent. SECTION 6.17. ACCOUNTS. Except to the extent the same could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, with respect to each Account, all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and all papers and documents (if any) relating thereto: (i) represent legal, valid and binding obligations of the respective Account Debtor, subject to adjustments customary in the business of the Borrowers and their respective Subsidiaries, with respect to unpaid obligations incurred by such Account Debtor in respect of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) are the only original writings evidencing and embodying such obligation of the Account -69- Debtor named therein (other than copies created for general accounting purposes) and are in compliance with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction. SECTION 6.18. FAIR LABOR STANDARDS ACT. Except for immaterial violations the effect of which could not impair the validity, perfection or enforceability of the Lien of the Loan Documents with respect to any material amount of Inventory of the Borrowers, all Inventory has or will have been produced in compliance with the applicable requirements of the Fair Labor Standards Act, as amended from time to time, or any successor statute, and regulations promulgated thereunder. ARTICLE VII COVENANTS SECTION 7.1. AFFIRMATIVE COVENANTS. The Parent and each Borrower each hereby covenants and agrees, for the benefit of each Lender Party, that until the Termination Date has occurred the Parent and each Borrower will, and will cause each of their Subsidiaries to, perform or cause to be performed the covenants and agreements set forth below. SECTION 7.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. VHC will furnish the Administrative Agent copies of the following financial statements, reports, notices and information. (a) As soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of VHC (or if VHC is required to file such information on a Form 10-Q with the Securities and Exchange Commission, promptly following such filing), VHC will provide (i) an unaudited consolidated balance sheet of VHC and its Subsidiaries as at the end of such Fiscal Quarter, (ii) the related unaudited consolidated statement of income of such Borrower and its Subsidiaries for such Fiscal Quarter and (iii) the related consolidated statements of income and cash flows of VHC and its Subsidiaries for the portion of VHC's Fiscal Year ended at the end of such Fiscal Quarter (it being understood that the foregoing requirement may be satisfied by the delivery of VHC's report to the Securities and Exchange Commission on Form 10-Q, if any). Such financial statements shall set forth in comparative form the figures (A) the corresponding Fiscal Quarter of the immediately preceding Fiscal Year and (B) the corresponding portion of VHC's immediately preceding Fiscal Year, and all such financial statements shall be certified on behalf of VHC as of the end of such Fiscal Quarter by its treasurer, chief financial or accounting Authorized Officer, as fairly presenting, in all material respects, the financial condition, results of operations and cash flows as at the end of, and for, the Fiscal Quarter and portion of VHC's Fiscal Year covered thereby, in each case in accordance with GAAP. (b) As soon as available and in any event within 90 days after the end of each Fiscal Year of VHC (or if VHC is required to file such information on a Form 10-K with the Securities and Exchange Commission, promptly following -70- such filing), VHC will provide a consolidated balance sheet of VHC and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income and cash flows of VHC and its Subsidiaries for such Fiscal Year, setting forth in comparative form the figures for the immediately preceding Fiscal Year and the figures for such Fiscal Year in the projected financial information included in the Confidential Information Memorandum with respect to this Agreement dated March 2002 (it being understood that the foregoing requirement may be satisfied by the delivery of VHC's report to the Securities and Exchange Commission on Form 10-K, if any), all audited (without any Impermissible Qualification) by Ernst & Young LLP (or other "Big Five" firm of independent accountants), which shall include a statement from such accountants that, in performing the examination necessary to deliver their opinion with respect to the financial statements of VHC and its Subsidiaries, they have not become aware of any Event of Default relating to accounting matters that has occurred and is continuing or, if in the opinion of such accounting firm such an Event of Default has occurred and is continuing, a statement as to the nature thereof. (c) As soon as available and in any event within 30 days after the end of each of the first eleven fiscal months of each Fiscal Year, VHC will provide (i) an unaudited consolidated balance sheet of VHC and its Subsidiaries for such month, (ii) the related unaudited consolidated statements of income and cash flows of VHC and its Subsidiaries for such month and (iii) the related consolidated statements of income and cash flows of VHC and its Subsidiaries for the portion of VHC's Fiscal Year ended as of such month. Such financial statements shall set forth in comparative form the figures for (A) the corresponding month of VHC's immediately preceding Fiscal Year and (B) the corresponding portion of VHC's immediately preceding Fiscal Year, and all such financial statements shall be certified, on behalf of VHC as of the end of such month by its treasurer, chief financial or accounting Authorized Officer, as fairly presenting, in all material respects, the financial condition, results of operations and cash flows as at the end of, and for, the month and portion of VHC's Fiscal Year covered thereby, in each case in accordance with GAAP. (d) Concurrently with the delivery of the financial information pursuant to CLAUSES (a) and (b), VHC will provide a Compliance Certificate, executed by the treasurer, chief financial or accounting Authorized Officer of the VHC. (e) As soon as possible and in any event within five Business Days after an executive or financial officer of VHC obtains knowledge of the occurrence of a Default if such Default is then continuing, such Borrower shall deliver a statement of an Authorized Officer of VHC setting forth details of such Default and the action which the Borrower or any other Obligor has taken and proposes to take with respect thereto. (f) As soon as possible and in any event within five Business Days after an executive or financial officer of VHC obtains knowledge of (i) the occurrence of any material adverse development with respect to any litigation, action, -71- proceeding or labor controversy described in ITEM 6.7 of the Disclosure Schedule or (ii) the commencement of any litigation, action, proceeding or labor controversy of the type and materiality described in SECTION 6.7, VHC shall deliver notice thereof and, to the extent the Administrative Agent reasonably requests, copies of non-privileged documentation relating thereto. (g) Promptly after the sending or filing thereof, VHC will provide copies of all reports, notices, prospectuses and registration statements (other than exhibits thereto and any registration statement on Form S-8 or its equivalent) which it or any other Obligor files with the SEC or any national securities exchange. (h) As soon as practicable after the chief financial officer or the chief executive officer of VHC or a member of any VHC's Controlled Group becomes aware of (i) the taking of formal steps in writing to terminate any Pension Plan which could reasonably be expected to result in a liability of any Obligor in excess of $3,000,000, (ii) any failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA in an amount in excess of $3,000,000, (iii) the taking of any action (or the failure to take any action) by any Person with respect to a Pension Plan which could reasonably be expected to result in the requirement that any Obligor furnish a bond or other security to the PBGC or such Pension Plan in an amount in excess of $3,000,000, or (iv) the occurrence of any event with respect to any Pension Plan which could reasonably be expected to result in the incurrence by any Obligor of any liability, fine or penalty in an amount in excess of $3,000,000, the Parent or VHC, as the case may be, will provide notice thereof and copies of all documentation relating thereto. (i) Unless otherwise provided (or required to be provided) hereunder, promptly following the mailing or receipt of any notice or report delivered under the terms of the Senior Notes, the Senior Subordinated Notes or the Parent Debentures, VHC will provide copies of such notice or report. (j) Following the occurrence and during the continuance of an Event of Default, at the reasonable request of the Administrative Agent, the Borrowers will hire a company reasonably acceptable to the Administrative Agent to prepare environmental reports on any of real estate owned by any Obligor. (k) As soon as available and in any event within 20 days after the end of each fiscal month, a Borrowing Base Certificate that is calculated as of the last day of such fiscal month. (l) As soon as available and in any event within 20 days after the end of each fiscal month: (A) a report listing all Accounts of the Borrowers as of the last Business Day of such month, which report shall include the amount and -72- age of each Account, the name and mailing address of each Account Debtor, a list of all Account Debtors known to VHC to be subject to a proceeding described in CLAUSE (b), (c) or (d) of SECTION 8.1.9, a list of all bill and hold transactions, a list of all customer deposits, an extended terms report, a list of all chargebacks, a description of all warranty reserves, a report of sales discount accruals, backlog credit memos, a report of sales tax accruals, a progress billing report, a reconciliation of accounts receivable of the Borrowers to the general ledger of VHC and such other information as the Administrative Agent may require in order to verify the Eligible Accounts, all in reasonable detail and in form satisfactory to the Administrative Agent; (B) a report listing all Inventory of the Borrowers as of the last Business Day of such month, which shall include the cost and location thereof, a report of slow moving Inventory, a reconciliation of such Inventory to the general ledger of VHC and such other information as the Administrative Agent may require in order to verify the Eligible Inventory, all in reasonable detail and in form satisfactory to the Administrative Agent; (C) a report listing all accounts payable of the Borrowers in reasonable detail, including agings and summary availability by division, and in form satisfactory to the Administrative Agent; and (D) a report of any significant Dispositions or purchases or acquisition of significant assets during such month. (m) The Borrowers will promptly provide such other financial and other information as any Lender or Issuer through the Administrative Agent may from time to time reasonably request with respect to the financial condition and operations of the Parent, the Borrowers and their respective Subsidiaries; provided that the Borrowers shall not be required to provide separate financial statements or Borrowing Base Amount calculations for individual Borrowers. SECTION 7.1.2. MAINTENANCE OF EXISTENCE; COMPLIANCE WITH LAWS, ETC. The Parent and each Borrower will, and will cause each of their respective Subsidiaries to, preserve and maintain its legal existence (except as otherwise permitted by SECTION 7.2.10), and, except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, comply in all material respects with all applicable laws, rules, regulations and orders, including the payment (before the same become delinquent) of all taxes imposed upon such Person or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on the books of the Borrowers or their respective Subsidiaries, as applicable. SECTION 7.1.3. MAINTENANCE OF PROPERTIES. Except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, the Parent and each Borrower will, and will cause each of their respective Subsidiaries to, maintain, preserve, protect -73- and keep its and their respective properties (other than insignificant properties) in good repair, working order and condition (ordinary wear and tear excepted), and make necessary repairs, renewals and replacements so that its business may be properly conducted at all times, unless such Borrower determines in good faith that the continued maintenance of any of its properties is no longer economically desirable, and in each case the failure to do so could not reasonably be expected to have a Material Adverse Effect. SECTION 7.1.4. INSURANCE. The Parent and each Borrower will, and will cause each of their respective Subsidiaries to maintain with responsible insurance companies insurance with respect to properties and business against casualties and contingencies in at least the amounts customarily maintained, and against such risks as are typically insured against in the same general area, by Persons of comparable size engaged in the same or similar business as the Parent and its Subsidiaries. Without limiting the foregoing, all insurance policies required pursuant to this Section shall name the Administrative Agent on behalf of the Secured Parties as loss payee (in the case of property insurance) or additional insured (in the case of liability insurance), as applicable, and provide that no cancellation or modification of the policies will be made without thirty days' prior written notice to the Administrative Agent. SECTION 7.1.5. BOOKS AND RECORDS; BORROWING BASE AUDITS. (a) The Parent and each Borrower will, and will cause each of their respective Subsidiaries to, keep books and records in accordance with GAAP which accurately reflect in all material respects all of its business affairs and transactions and permit (i) each Agent and any of its respective representatives, and (ii) at any time during which an Event of Default is continuing, each Lender and any of its respective representatives, in each case at reasonable times and intervals upon reasonable notice to each Borrower, to visit each Obligor's offices, to discuss such Obligor's financial matters with its officers and employees, and its independent public accountants (and the Parent and each Borrower hereby authorize such independent public accountant to discuss each Obligor's financial matters with each Agent and each Lender or their representatives whether or not any representative of such Obligor is present, so long as the applicable Borrower has been afforded a reasonable opportunity to be present) and to examine (and photocopy extracts from) any of its books and records. The cost and expense of each such visit shall be borne by the applicable Agent or Lender, except that each Agent may make one such visit each Fiscal Year and the cost and expense thereof shall be borne by the Borrowers. (b) Without limiting the generality of the foregoing, upon request of the Administrative Agent (i) on or before each anniversary of the Closing Date, (ii) on or before the 20th day immediately following the last day of any Fiscal Quarter, if, the average of the Excess Availability in effect on the last day of such Fiscal Quarter and each of the two fiscal months ended most recently prior to the last day of such Fiscal Quarter is less than $15,000,000 or (iii) at any time during which any Default or Event of Default has occurred and is continuing, the Administrative Agent shall have the option to perform (solely with its own personnel), at the Borrowers' expense (as provided in SECTION 11.3(d)), an audit of the accounts receivable, inventory, accounts payable and cash accounts of the Borrowers and their respective Subsidiaries, in each case in a -74- manner consistent with the Borrowing Base Audit delivered on or prior to the Closing Date. (c) At the request of the Administrative Agent, in its sole discretion (unless the PP&E Release Event shall have occurred, in which case no such appraisal shall be required), the Borrowers shall permit the Administrative Agent or one or more agents to perform, at the Borrowers' expense, an appraisal of the inventory, property, plant and equipment of the Borrowers, in each case in a manner consistent with the Asset Appraisal delivered on or prior to the Closing Date; PROVIDED, HOWEVER, that (i) the Administrative Agent shall not be entitled to perform more than one such appraisal in any calendar year and (ii) the cost to the Borrowers of performing such appraisals shall not exceed $100,000 per appraisal. SECTION 7.1.6. ENVIRONMENTAL LAW COVENANT. The Parent and the Borrowers will, and will cause each of their respective Subsidiaries to, (i) use and operate all of its and their facilities and properties in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, unless the failure to do so could not reasonably be expected to have a Material Adverse Effect, (ii) promptly notify the Administrative Agent and provide copies upon request of all written notices of violations, claims or complaints relating to the condition of its facilities and properties or its compliance with Environmental Laws which relate to environmental matters that could reasonably be expected to have a Material Adverse Effect, and shall promptly resolve any non-compliance with Environmental Laws and (iii) provide such information and certifications which the Agents may reasonably request from time to time to evidence compliance with this SECTION 7.1.6. Nothing in this provision shall be construed to limit the ability to contest in good faith any such notices of violations, written claims or complaints. SECTION 7.1.7. USE OF PROCEEDS. The Borrowers will apply the proceeds of the Credit Extensions as follows: (a) to consummate the Refinancing; (b) to pay fees and expenses incurred in connection with the Transactions; and (c) for working capital and general corporate purposes of the Borrowers and the Subsidiary Guarantors, including (in the case of Loans other than Default Loans) Eligible Acquisitions by such Persons. SECTION 7.1.8. FUTURE SUBSIDIARIES. Upon any Person becoming, after the Closing Date, a direct Subsidiary of any Borrower or any Subsidiary Guarantor, or (in the case of CLAUSE (b) below only) upon any Borrower or any Subsidiary Guarantor acquiring additional Capital Stock of any existing direct Subsidiary of such Borrower or Subsidiary Guarantor, VHC shall notify the Agents of such acquisition, and -75- (a) if such new Subsidiary is a U.S. Subsidiary, VHC shall promptly cause such Subsidiary to execute and deliver to the Administrative Agent, with counterparts for each Lender, a supplement to the Subsidiary Guaranty or, in the case of a wholly-owned U.S. Subsidiary a Joinder Agreement pursuant to SECTION 11.15 hereof, together in each case with a supplement to the Pledge and Security Agreement (and, if such Subsidiary owns any real property, to the extent required by CLAUSE (b) of SECTION 7.1.9 a Mortgage with respect to all such real property), together with Uniform Commercial Code financing statements (Form UCC-1) naming the Subsidiary as the debtor and the Administrative Agent as the secured party, or other similar instruments or documents, in appropriate form for filing under the Uniform Commercial Code and any other applicable recording statutes, in the case of real property, of all jurisdictions as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect the security interest of the Administrative Agent pursuant to the Pledge and Security Agreement or a Mortgage, as the case may be (other than the perfection of security interests in motor vehicles, leasehold interests in real property (except to the extent required by SECTION 7.1.9) and non-U.S. intellectual property); and (b) such Borrower or Subsidiary Guarantor shall promptly deliver, or cause to be delivered, to the Administrative Agent under the Pledge and Security Agreement (or a supplement thereto) certificates (if any) representing all of the issued and outstanding shares of Capital Stock of such Subsidiary owned by such Borrower or such Subsidiary Guarantor, as the case may be, along with undated stock powers for such certificates, executed in blank, or, if any securities subject thereto are uncertificated securities or are held through a securities intermediary, confirmation and evidence satisfactory to the Agents that appropriate book entries have been made in the relevant books or records of a securities intermediary or the issuer of such securities, as the case may be, or other appropriate steps shall have been taken under applicable law resulting in the perfection of the security interest granted in favor of the Administrative Agent pursuant to the terms of the Pledge and Security Agreement; together, in each case, with such opinions, in form and substance and from counsel satisfactory to the Agents, as the Agents may reasonably require; PROVIDED that not more than 65% of the Voting Securities of any Non-U.S. Subsidiary shall be required to be pledged unless such Non-U.S. Subsidiary is treated for U.S. federal income tax purposes as a branch of a Borrower or is a partnership in which the partners are Borrowers. SECTION 7.1.9. FUTURE LEASED PROPERTY AND FUTURE ACQUISITIONS OF REAL PROPERTY: FUTURE ACQUISITION OF OTHER PROPERTY. (a) Prior to entering into any new lease of real property or renewing any existing lease of real property following the Closing Date, each Borrower shall, and shall cause each of its U.S. Subsidiaries to, use its (and their) best efforts (which shall not require the expenditure of cash or the making of any material concessions under the relevant lease) to deliver to the Administrative Agent a waiver executed by the lessor of any real property that is to be leased by such Borrower or such U.S. Subsidiary for a term in excess of one year in any state whose statutes grant such lessor a "landlord's" (or similar) Lien which is superior to the Administrative Agent's, to the extent the value of any personal property of any Borrower or any -76- of its U.S. Subsidiaries to be held at such leased property exceeds (or it is anticipated that the value of such personal property will, at any point in time during the term of such leasehold term, exceed) $5,000,000. (b) In the event that any Borrower or any of their respective U.S. Subsidiaries shall acquire any real property having a value as determined in good faith by the Administrative Agent in excess of $1,000,000, such Borrower or the applicable U.S. Subsidiary shall, promptly after such acquisition, execute a Mortgage and provide the Administrative Agent with (i) evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of such Mortgage as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable effectively to create a valid, perfected first priority Lien, subject to Liens permitted by SECTION 7.2.3, against the properties purported to be covered thereby, (ii) mortgagee's title insurance policies in favor of the Agents and the Secured Parties in amounts and in form and substance and issued by insurers, reasonably satisfactory to the Agents, with respect to the property purported to be covered by such Mortgage, insuring that title to such property is marketable and that the interests created by the Mortgage constitute valid first Liens thereon free and clear of all defects and encumbrances other than as approved by the Agents, and such policies shall, if available on commercially reasonable terms, also include a revolving credit endorsement and such other endorsements as the Agents shall request and shall be accompanied by evidence of the payment in full of all premiums thereon, and (iii) such other approvals, or documents as the Agents may reasonably request. (c) In accordance with the terms and provisions of the Loans Documents, provide the Administrative Agent with evidence of all recordings and filings as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to create a valid, perfected first priority Lien, subject to the Liens permitted by SECTION 7.2.3, against all property acquired after the Closing Date (excluding motor vehicles, leases of real property and non-U.S. intellectual property). SECTION 7.1.10. COLLECTION OF ACCOUNTS. Each Borrower shall use commercially reasonable efforts to cause to be collected from each Account Debtor, as and when due, any and all amounts owing under or on account of each Account (including, without limitation, Accounts which are delinquent, such Accounts to be collected in accordance with lawful collection procedures) and shall apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account, except that an Obligor may allow in the ordinary course of business as adjustments to amounts owing under its Accounts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Obligor finds appropriate in accordance with sound business judgment and (ii) a refund or credit due as a result of discounts, over billings and miscellaneous credits, all in accordance with such Obligor's ordinary course of business. The costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by an Obligor or the Administrative Agent, shall be borne by such Obligors. SECTION 7.1.11. NOTIFICATION TO ACCOUNT DEBTORS. Upon the request of the Administrative Agent at any time following the occurrence of and during the continuance of an Event of Default, each Borrower will promptly notify each Account Debtor in respect of any Account that any payments due or to become due in respect of such Account are to be made in -77- the name of the applicable Obligor to such address and post office box as shall be specified by the Administrative Agent. Each such payment shall, upon receipt by the Administrative Agent, be deposited in the Concentration Account. Upon request of the Administrative Agent at any time following the occurrence of and during the continuance of an Event of Default, each Borrower shall promptly notify (and each Borrower hereby authorizes the Administrative Agent so to notify) each Account Debtor in respect of any Account that such Account has been assigned to the Administrative Agent for the benefit of the Secured Parties and that any payments due or to become due in respect of such Account are to be made directly to the Administrative Agent in accordance with SECTION 3.1.1(d). SECTION 7.1.12. MORTGAGES. Each Borrower shall deliver to the Administrative Agent on or before the 60th day following the Closing Date a Mortgage, with respect to each of the properties identified in SCHEDULE III duly executed and delivered by the applicable Obligor, together with (a) evidence of the completion (or reasonably satisfactory arrangements for the completion) of all recordings and filings of each Mortgage as may be necessary or, in the reasonable opinion of the Lead Arranger, desirable to create a valid, perfected first priority Lien, subject to SECTION 7.2.3, against the properties purported to be covered thereby; (b) mortgagee's title insurance policies in favor of the Administrative Agent for the benefit of the Secured Parties in form and substance and issued by insurers, reasonably satisfactory to the Lead Arranger, with respect to the property set forth on SCHEDULE III in the amounts set forth thereon, insuring that title to such property is marketable and that the interests created by such Mortgage constitute valid first Liens thereon free and clear of all defects and encumbrances other than as approved by the Lead Arranger and, if required by the Lead Arranger and if available on commercially reasonable terms, revolving credit endorsement, comprehensive endorsement, variable rate endorsement, access and utilities endorsements, mechanic's lien endorsement and such other endorsements as the Lead Arranger shall reasonably request and shall be accompanied by evidence of the payment in full of all premiums thereon; and (c) such other environmental reports, approvals, or documents as the Lead Arranger may reasonably request in form and substance reasonably satisfactory to the Lead Arranger. SECTION 7.1.13. PHASE I ENVIRONMENTAL REPORTS. On or prior to the 30th day immediately following the Closing Date, the Borrowers shall deliver or cause to be delivered to the Administrative Agent environmental and hazardous substance analyses and reports from Clayton Group Services, Inc. with respect to each of the properties listed on SCHEDULE III, in each case in scope, form and substance satisfactory to the Administrative Agent, together with reliance letters with respect thereto. SECTION 7.1.14. DEPOSIT ACCOUNT CONTROL AGREEMENTS. On or prior to the 30th day immediately following the Closing Date, the Borrowers shall deliver to the Administrative Agent -78- deposit account control agreements and other documents and agreements, in each case duly executed by the applicable Borrower and the applicable bank, as the Administrative Agent deems necessary or desirable to grant to the Administrative Agent, for the benefit of the Secured Parties, control over, and a perfected security interest in, each of the Deposit Accounts listed on SCHEDULE VI hereto; PROVIDED that the Borrowers' obligations under this SECTION 7.1.14 shall be deemed to be satisfied if, after such 30th day, (i) each and every Deposit Account maintained with U.S. Bank National Association is subject to a deposit account control agreement which is in full force and effect and effective to provide to the Administrative Agent for the benefit of the Secured Parties control of each such Deposit Account and (ii) the aggregate amount of funds on deposit in Deposit Accounts maintained with banks other than U.S. Bank National Association with respect to which a deposit account control agreement has not been so delivered does not exceed $200,000 for any period of three consecutive Business Days. SECTION 7.2. NEGATIVE COVENANTS. The Parent and each Borrower each hereby covenant and agree with each Lender, each Issuer, each Agent and each other Lender Party that, until the Termination Date has occurred, the Parent and each Borrower will, and will cause each of their respective Subsidiaries to, perform or cause to be performed the covenants and agreements set forth below. SECTION 7.2.1. BUSINESS ACTIVITIES. (a) Each Borrower will not, and will not permit any of their respective Subsidiaries to, engage in any business activity except those business activities engaged in on the date of this Agreement and activities which may be incidental, similar or reasonably related thereto. (b) The Parent will not (i) hold any assets other than the Capital Securities of VHC and cash and Cash Equivalent Investments referred to in CLAUSE (iii)(E) below, (ii) have any material liabilities other than (A) liabilities under the Loan Documents (B) liabilities under the Parent Debentures, (C) liabilities for taxes incurred in the ordinary course of business and (D) Contingent Liabilities in respect of the Senior Notes and the Senior Subordinated Notes or (iii) engage in any business or activity other than (A) owning the Capital Securities of VHC (including purchasing additional Capital Securities after the Closing Date) and activities incidental or related thereto or to the maintenance of the corporate existence of the Parent or compliance with applicable law, (B) acting as a Guarantor hereunder and pledging its assets to the Administrative Agent, for the benefit of the Lenders, pursuant to the Loan Documents to which it is a party, (C) acting as the issuer of the Parent Debentures, (D) issuing its Capital Securities, (E) holding cash received as Restricted Payments permitted under SECTION 7.2.6 or as proceeds of its issuance of Capital Securities and investing and reinvesting such cash in Cash Equivalent Investments, (F) utilizing Net Equity Proceeds for Permitted Purposes and (G) acting as a guarantor under the Senior Notes and/or the Senior Subordinated Notes and otherwise carrying out its obligations under the Senior Note Documents and Senior Subordinated Note Documents to the extent not otherwise in contravention of this Agreement. -79- SECTION 7.2.2. INDEBTEDNESS. Neither the Parent nor any Borrower will, or will permit any of their respective Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, other than: (a) Indebtedness in respect of the Obligations; (b) Indebtedness existing as of the Closing Date which is identified in ITEM 7.2.2(b) of the Disclosure Schedule, and refinancings and replacements of such Indebtedness in a principal amount not in excess of the principal amount being refinanced or replaced; PROVIDED, HOWEVER, that after giving effect to any such refinancings the Average Life of such Indebtedness shall not be less than the Average Life of such Indebtedness immediately prior to such refinancings; (c) Indebtedness incurred by a Borrower or any of its Subsidiaries that is represented by (i) Capitalized Lease Liabilities, mortgage financings or purchase money obligations (but only to the extent otherwise permitted by SECTION 7.2.7); PROVIDED that the maximum aggregate amount of all Indebtedness permitted under this CLAUSE (c) shall not at any time exceed $20,000,000 or (ii) Capitalized Lease Liabilities incurred in connection with a sale and leaseback transaction permitted under SECTION 7.2.15; (d) intercompany Indebtedness of (x) any Subsidiary of VHC owing to VHC or any of its Subsidiaries or (y) VHC to any of its Subsidiaries, which Indebtedness: (i) shall be evidenced by one or more promissory notes in form and substance satisfactory to the Agents which (except in the case of any such notes held by a Non-U.S. Subsidiary) have been duly executed and delivered to (and indorsed to the order of) the Administrative Agent in pledge pursuant to the Pledge and Security Agreement, and (ii) shall not be forgiven or otherwise discharged for any consideration other than payment (Dollar for Dollar) in cash unless the Agents otherwise consent; (e) the Senior Notes and the Senior Subordinated Notes of VHC in a principal amount not to exceed $315,000,000, and unsecured Contingent Liabilities of the Borrowers and the Guarantors in respect thereof, so long as, in the case of Contingent Liabilities in respect of the Senior Subordinated Notes, such Contingent Liabilities are subordinated to the Obligations on the same terms as the Senior Subordinated Notes, and refinancings of such Senior Notes, Senior Subordinated Notes and related Contingent Liabilities; PROVIDED, HOWEVER, that any such refinancing must be on No More Favorable Terms And Conditions than the Indebtedness being refinanced; (f) the Parent Debentures in an aggregate principal amount at maturity not to exceed approximately $125,000,000 and refinancings thereof; PROVIDED, HOWEVER, that any such refinancing must be on No More Favorable Terms and Conditions than the Indebtedness being refinanced; -80- (g) Assumed Indebtedness of a Borrower or any of its Subsidiaries in connection with Eligible Acquisitions in an aggregate amount not to exceed $25,000,000 at any one time outstanding; (h) Hedging Obligations of any Borrower or any of its Subsidiaries entered into by any Borrower or any such Subsidiary to hedge against interest rate, currency exchange rate or commodity price risk, in each case arising in the ordinary course of business of any Borrower and its Subsidiaries and not for speculative purposes; and (i) other unsecured Indebtedness of the Borrowers and their respective Subsidiaries in an aggregate amount at any time outstanding not to exceed $25,000,000; PROVIDED, HOWEVER, that no Indebtedness otherwise permitted by CLAUSE (c), (d) (as such CLAUSE (d) relates to loans made by a Borrower to Subsidiaries of VHC which are not Borrowers or Subsidiary Guarantors), (g) or (h) may be incurred or assumed, as applicable, if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing, and PROVIDED, FURTHER, HOWEVER, that all such Indebtedness of the type described in CLAUSE (d)(y) above that is owed to Subsidiaries which are not Borrowers or Subsidiary Guarantors, shall be subordinated, in writing, to the Obligations upon terms satisfactory to the Agents. SECTION 7.2.3. LIENS. The Parent and each Borrower will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or permit to exist any Lien upon any of its property (including Capital Securities of any Person), revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations; (b) Liens, exceptions and title conditions existing as of the Closing Date and disclosed in ITEM 7.2.3(b) of the Disclosure Schedule securing Indebtedness outstanding as of the Closing Date and described in CLAUSE (b) of SECTION 7.2.2; PROVIDED, HOWEVER, that no such Lien shall encumber any property other than that encumbered as of the Closing Date, and the amount of Indebtedness secured by such Lien shall not increase from that existing on the Closing Date (as such Indebtedness may have been permanently reduced subsequent to the Closing Date); (c) Liens securing Indebtedness of the type permitted under CLAUSE (c) of SECTION 7.2.2; PROVIDED, HOWEVER, that (i) such Lien is granted within 180 days after such Indebtedness is incurred and (ii) such Lien secures only the assets that are the subject of the Indebtedness referred to in such clause; (d) Liens in favor of carriers, warehousemen, mechanics, materialmen, contractors, laborers, landlords and similar liens incurred in the ordinary course of business for amounts not overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; -81- (e) Liens incurred or deposits made in the ordinary course of business in connection with worker's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory or regulatory obligations, bids, leases, insurance obligations or contracts or other similar obligations (other than for Debt for Borrowed Money) entered into in the ordinary course of business or to secure obligations on surety and appeal bonds or performance bonds or similar obligations; (f) judgment Liens that are being appealed in good faith or have been in existence for less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies and which do not result in an Event of Default under SECTION 8.1.6; (g) (i) Liens with respect to minor imperfections of title and easements, rights-of-way, restrictions, reservations, permits, servitudes and other similar encumbrances on real property and fixtures which do not materially detract from the value or materially impair the use by any Obligor in the ordinary course of their business of the property subject thereto; (ii) in the case of any property covered by a Mortgage, encumbrances disclosed in the title insurance policy issued to, and reasonably approved by, the Agents insuring the Mortgage and (iii) in the case of any property covered by a Mortgage, upon certification by the applicable Borrower that an easement, right-of-way, restriction, reservation, permit, servitude or other similar encumbrance granted or to be granted by such Borrower or any Subsidiary of such Borrower does not materially detract from the value of or materially impair the use by such Borrower or such Subsidiary in the ordinary course of its business of the property subject to or to be subject to such encumbrance, the Administrative Agent shall execute such documents as shall be reasonably requested to subordinate its Mortgage to such encumbrance, leases or subleases granted by any Borrower or any of its Subsidiaries to any other Person in the ordinary course of business; (h) leases or subleases granted by any Borrower or any of its Subsidiaries to any other Person in the ordinary course of business; (i) Liens in the nature of trustees' Liens granted pursuant to any indenture governing any Indebtedness permitted by SECTION 7.2.2, in each case in favor of the trustee under such indenture and securing only obligations to pay compensation to such trustee, to reimburse its expenses and to indemnify it under the terms thereof; (j) Liens of sellers of goods to a Borrower or any of its Subsidiaries arising under Article 2 of the Uniform Commercial Code or similar provisions of applicable law in the ordinary course of business, covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses; -82- (k) Liens on property forming a part of an Eligible Acquisition securing Assumed Indebtedness of the Borrowers and their respective Subsidiaries pursuant to CLAUSE (g) of SECTION 7.2.2; PROVIDED, HOWEVER, that (i) any such Liens attach only to the property acquired in connection with such Assumed Indebtedness and shall not attach to any assets of any Borrower or any of its Subsidiaries then existing or which arise after the date thereof (other than proceeds of the property otherwise permitted to be subject to such Lien) and (ii) the Assumed Indebtedness and other secured Indebtedness of the Borrowers and their respective Subsidiaries secured by any such Lien shall not exceed 100% of the fair market value of the assets being acquired in connection with such Assumed Indebtedness; (l) Liens for taxes, assessments and other governmental charges or levies (including Liens pursuant to Section 107(e) of CERCLA or other similar laws) not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; and (m) other Liens securing Indebtedness and other obligations in an aggregate principal amount not to exceed $2,000,000. SECTION 7.2.4. FINANCIAL CONDITION AND OPERATIONS. (a) LEVERAGE RATIO. VHC will not permit the Leverage Ratio as of the end of any Fiscal Quarter occurring during any period set forth below to be greater than the ratio set forth opposite such period:
PERIOD LEVERAGE RATIO June 15, 2002 through July 15, 2003 6.00 to 1.00 July 16, 2003 through October 15, 2003 5.75 to 1.00 October 16, 2003 through July 15, 2004 5.50 to 1.00 July 16, 2004 through October 15, 2004 5.25 to 1.00 October 16, 2004 through July 15, 2005 4.50 to 1.00 July 16, 2005 through October 15, 2005 4.25 to 1.00 October 16, 2005 through July 15, 2006 3.65 to 1.00 July 16, 2006 through October 15, 2006 3.50 to 1.00 October 16, 2006 and thereafter 3.00 to 1.00
-83- (b) FIXED CHARGE COVERAGE RATIO. VHC will not permit the Fixed Charge Coverage Ratio as of the end of any Fiscal Quarter occurring during any period set forth below to be less than the ratio set forth opposite such period:
Fixed Charge Coverage Period Ratio ------ ------------ June 15, 2002 through January 15, 2004 1.00 to 1.00 January 16, 2004 through July 15, 2005 1.05 to 1.00 July 16, 2005 and thereafter 1.10 to 1.00
SECTION 7.2.5. INVESTMENTS. The Parent and each Borrower will not, and will not permit any of their respective Subsidiaries to, purchase, make, incur, assume or permit to exist any Investment in any other Person, except: (a) Investments existing on the Closing Date and identified in ITEM 7.2.5(a) of the Disclosure Schedule; (b) cash and Cash Equivalent Investments; PROVIDED, HOWEVER, that if a Notice of Cash Dominion is in effect, the aggregate amount of cash and Cash Equivalent Investments held by the Borrowers and their respective Subsidiaries (other than cash and Cash Equivalent Investments being held for application to a Permitted Purpose) shall not exceed (i) $2,500,000 for any period of 5 or more consecutive days during which Excess Availability is greater than $5,000,000 and an Event of Default has occurred and is continuing, (ii) $5,000,000 for any period of 5 or more consecutive days during which Excess Availability is greater than $5,000,000 but no Event of Default has occurred or is continuing or (iii) $0 for any period during which Excess Availability is less than or equal to $5,000,000; (c) without duplication, Investments permitted as Indebtedness pursuant to SECTION 7.2.2 (excluding SECTION 7.2.2(d), in the case of Indebtedness owed by Subsidiaries which are not Subsidiary Guarantors); (d) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent Accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (e) Investments made by the Borrowers and their respective Subsidiaries constituting Capital Expenditures permitted pursuant to SECTION 7.2.7; (f) Investments by way of contributions to capital or purchases of Capital Securities by the Parent in a Borrower or any Subsidiary of a Borrower, or by a Borrower or any Subsidiary of a Borrower in a Borrower or any Subsidiary of a Borrower; PROVIDED, HOWEVER, that the aggregate amount of Investments under this clause in Subsidiaries that are not Borrowers or Subsidiary Guarantors, when -84- taken together with the aggregate amount of all Restricted Payments made by Subsidiaries which are not Borrowers or Subsidiary Guarantors in accordance with SECTION 7.2.6(a)(iii)(B) hereof, shall not exceed $2,500,000 in the aggregate over the term of this Agreement; (g) Investments made by VHC or any of its Subsidiaries, solely with proceeds which have been contributed, directly or indirectly after the Closing Date, to VHC or such Subsidiary as cash equity from holders of the Parent's common stock for the purpose of making an Eligible Acquisition identified in a notice to the Agents on or prior to the date that such capital contribution is made; (h) Investments to the extent the consideration received pursuant to CLAUSE (c)(i) of SECTION 7.2.11 is not all cash; (i) non-cash loans or advances (including cash loans and advances pursuant to transactions in which the cash loaned or advanced is simultaneously repaid in full to the lender thereof directly or indirectly for the purchase price of the applicable common stock of the Parent) to officers, directors and employees of the Borrowers and their respective Subsidiaries that are made for the sole purpose of purchasing common stock of the Parent; and (j) other Investments (exclusive of any such Investments made in or in respect of Subsidiaries of the Parent which are not Borrowers or Subsidiary Guarantors) which constitute Eligible Acquisitions in an amount not to exceed $25,000,000 for any such Investment or $75,000,000 in the aggregate during the term of this Agreement; PROVIDED, HOWEVER, that (k) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (l) no Investment otherwise permitted by CLAUSES (c), (f) (in each case, to the extent constituting Investments in a Subsidiary which is not a Borrower or a Subsidiary Guarantor) or (j) shall be permitted to be made if any Default has occurred and is continuing or would result therefrom. SECTION 7.2.6. RESTRICTED PAYMENTS, ETC. No Borrower will or will permit any of its Subsidiaries to, declare or make a Restricted Payment, or make any deposit for any Restricted Payment, other than the following: (a) Restricted Payments (i) made by Subsidiaries of a Borrower or a Subsidiary Guarantor to any Borrower or any Subsidiary Guarantor, (ii) made by Subsidiaries of the Parent which are not Borrowers or Subsidiary Guarantors to other Subsidiaries of the Parent which are not Borrowers or Subsidiary Guarantors or (iii) in the case of Subsidiaries which are not wholly-owned, made -85- by such Subsidiaries (A) on a pro rata basis to each holder of Capital Securities of the applicable class of such Subsidiary or (B) in connection with non-pro rata redemptions of its Capital Securities (other than Capital Securities held by the Borrowers and their respective Subsidiaries); PROVIDED that the aggregate amount of Restricted Payments made pursuant to this CLAUSE (B) by Subsidiaries which are not Borrowers or Subsidiary Guarantors, when taken together with the aggregate amount of all Investments made in Subsidiaries which are not Borrowers or Subsidiary Guarantors in accordance with SECTION 7.2.5(f) hereof, shall not exceed $2,500,000 over the term of this Agreement; (b) Restricted Payments made by VHC to the Parent to the extent necessary to enable the Parent to (i) pay its overhead expenses (including fees in respect of advisory services) in an amount not to exceed $500,000 (which amount shall include not more than $250,000 in respect of advisory services) in the aggregate in any Fiscal Year, (ii) make payments in respect of taxes, (iii) so long as (A) no Default shall have occurred and be continuing on the date such Restricted Payment is declared or to be made, nor would a Default result from the making of such Restricted Payment, (B) after giving effect to the making of such Restricted Payment VHC shall be in PRO FORMA compliance with the covenants set forth in SECTION 7.2.4 for the most recent full Fiscal Quarter immediately preceding the date of the payment of such Restricted Payment for which the relevant financial information has been delivered pursuant to CLAUSE (a) or CLAUSE (b) of SECTION 7.1.1, and (C) an Authorized Officer of VHC shall have delivered a certificate to the Agents in form and substance satisfactory to the Agents (including a calculation of VHC's compliance with the covenants set forth in SECTION 7.2.4) certifying as to the accuracy of CLAUSES (b)(iii)(A) and (b)(iii)(B) above, purchase, redeem, acquire or otherwise retire for value shares of Capital Securities of the Parent held by directors, officers or employees of the Parent or any of its Subsidiaries, or options on any such shares or related stock appreciation rights or similar securities owned by such directors, officers or employees (or their estates or beneficiaries under their estates), in all cases only upon death, disability, retirement, termination of employment or pursuant to the terms of such stock option plan or any other agreement under which such shares of Capital Securities, options, related rights or similar securities were issued (collectively referred to as a "REDEMPTION") in an aggregate amount, in the case of this CLAUSE (b)(iii), not to exceed $1,000,000 in any Fiscal Year; PROVIDED, that VHC can carry forward to each succeeding Fiscal Year the aggregate amount of Restricted Payments permitted (but not made) pursuant to this CLAUSE (b)(iii) in prior Fiscal Years, with up to a maximum amount of $5,000,000 over the term of this Agreement of the Restricted Payments permitted to be made pursuant to this CLAUSE (b)(iii) and (iv) repurchase the shares of common stock of the Parent held by Robert A. Uhlenhop and related trusts as of the Closing Date for an aggregate purchase price not to exceed $2,000,000 and, in connection therewith, forgive some or all of the loans made to Mr. Uhlenhop and/or such trusts in connection with their purchase of such shares; -86- (c) Restricted Payments made by VHC to the Parent in an aggregate amount not exceeding the aggregate amount of capital contributions made by the Parent to VHC with Net Equity Proceeds, net of the amount of such capital contributions received by VHC and used for a Permitted Purpose or which are required to be used to prepay Loans in accordance with SECTION 3.1.1(c)(i). SECTION 7.2.7. CAPITAL EXPENDITURES, ETC. (a) The Parent and each Borrower will not, and will not permit any of their respective Subsidiaries to, make or commit to make Capital Expenditures in any Fiscal Year, except (i) Capital Expenditures which do not exceed $25,000,000 in any Fiscal Year and (ii) additional Capital Expenditures which do not exceed $20,000,000 in the aggregate during the term of this Agreement: PROVIDED, HOWEVER, that to the extent the amount of Capital Expenditures permitted to be made in any Fiscal Year pursuant to CLAUSE (i) of this Section exceeds the aggregate amount of Capital Expenditures actually made during such Fiscal Year (other than pursuant to CLAUSE (ii) of this Section), up to 50% of such excess amount may be carried forward to (but only to) the next succeeding Fiscal Year (any such amount to be certified by VHC to the Agents in the Compliance Certificate delivered for the last Fiscal Quarter of such Fiscal Year, and any such amount carried forward to the succeeding Fiscal Year shall be deemed to be used prior to the Borrowers and their Subsidiaries using the amount of Capital Expenditures permitted by this Section without giving effect to such carry-forward). (b) The parties acknowledge and agree that the permitted Capital Expenditure level set forth in CLAUSE (a) above shall be exclusive of (i) the amount of Capital Expenditures actually made with cash capital contributions made, directly or indirectly, by any Person other than the Borrowers and their Subsidiaries, after the Closing Date to a Borrower or any of its Subsidiaries and specifically identified in a certificate delivered by an Authorized Officer of the Borrower to the Agents on or about the time such capital contribution is made, (ii) any portion of any Eligible Acquisition that is accounted for as a Capital Expenditure or (iii) any Capital Expenditures funded with (x) any Casualty Proceeds, as permitted under CLAUSE(c)(iii) of SECTION 3.1.1 or (y) any Net Deposition Proceeds of any Disposition permitted under CLAUSE (c) of SECTION 7.2.11 or any disposition of obsolete or worn out equipment permitted under CLAUSE (a) of SECTION 7.2.11. SECTION 7.2.8. NO PREPAYMENT OF OTHER DEBT. Other than in connection with a refinancing permitted pursuant to SECTION 7.2.2, neither the Parent nor any Borrower will or will permit any of its respective Subsidiaries to, directly or indirectly, make any payment or prepayment of principal of, or premium or interest on, or redeem, retire, purchase, defease or otherwise acquire (or make any deposit (including the payment of amounts into a sinking fund or other similar fund) for any of the foregoing purposes) any Senior Notes, any Senior Subordinated Notes or any the Parent Debentures; PROVIDED that, (i) so long as such payment would not violate the terms of this Agreement, the Senior Notes Documents or the applicable Sub Debt Documents, VHC may make payments of accrued and unpaid interest on the Senior Notes and the Senior Subordinated Notes (and accrued interest on the Parent Debentures may be capitalized and added to the outstanding principal amount thereof in accordance with the Parent Debenture Documents) on the stated, scheduled date for payment thereof set forth in the Senior Note Documents or the Senior Subordinated Note Documents, as applicable, and may make mandatory redemptions of Senior Notes following a Change of Control as required by the Senior Note Documents; (ii) the Parent may repay Indebtedness permitted pursuant to SECTION 7.2.2(f) -87- using Net Equity Proceeds to the extent such repayment constitutes a Permitted Purpose; (iii) VHC may repay, repurchase or otherwise redeem or acquire Senior Notes and/or Senior Subordinated Notes using Net Equity Proceeds, in each case to the extent such repayment, repurchase or other redemption or acquisition constitutes a Permitted Purpose. Furthermore, neither the Parent, any Borrower nor any of their respective Subsidiaries will designate any Indebtedness other than the Obligations as "Designated Senior Debt" pursuant to any Senior Subordinated Note Document or Parent Debenture Document. SECTION 7.2.9. ISSUANCE OF CAPITAL SECURITIES. The Parent will not and will not permit any of its Subsidiaries to issue, sell or otherwise transfer or assign (an "ISSUANCE") any of its Capital Securities to any Person (whether for value or otherwise), except: (i) an Issuance of Capital Securities to a Borrower or a Subsidiary Guarantor; (ii) an Issuance of Capital Securities by a Non-U.S. Subsidiary of VHC to another Non-U.S. Subsidiary of VHC; or (iii) any other Issuance; PROVIDED, HOWEVER, that all Net Equity Proceeds resulting from such Issuance shall be applied, to the extent applicable, pursuant to SECTION 3.1.1. SECTION 7.2.10. CONSOLIDATION, MERGER, ETC. The Parent will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other Person, or purchase or otherwise acquire all or substantially all of the assets of any Person (or any division thereof), except (a) any Subsidiary of VHC may liquidate or dissolve voluntarily into, and may merge with and into, VHC or any other Subsidiary of VHC (PROVIDED, HOWEVER, that a Borrower may only liquidate or dissolve into, or merge with and into, another Borrower and a Subsidiary Guarantor may only liquidate or dissolve into, or merge with and into, a Borrower or another Subsidiary Guarantor), and the assets or Capital Securities of any Subsidiary may be purchased or otherwise acquired by a Borrower or a Subsidiary Guarantor; PROVIDED, HOWEVER, that in no event shall any Pledged Subsidiary consolidate with or merge with and into any Subsidiary other than another Pledged Subsidiary unless after giving effect thereto, the Administrative Agent shall have a perfected pledge of, and security interest in and to, at least the same percentage of the issued and outstanding interests of Capital Securities (on a fully diluted basis) of the surviving Person as the Administrative Agent had immediately prior to such merger or consolidation; (b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, any Borrower or any of its Subsidiaries may purchase all or substantially all of the assets of any Person (or any division thereof) not then a Subsidiary, or acquire such Person by merger, if permitted (without duplication) pursuant to SECTION 7.2.7 or CLAUSE (g) or (j) of SECTION 7.2.5; -88- SECTION 7.2.11. PERMITTED DISPOSITIONS. Neither the Parent nor any Borrower will, or will permit any of its respective Subsidiaries to, Dispose of any assets of the Parent, or any of its Subsidiaries (including Accounts and Capital Securities of Subsidiaries of the Parent) to any Person in one transaction or a series of transactions, except for the following: (a) Dispositions in respect of Inventory, immaterial assets or properties and obsolete or worn-out property which, in each case, are being Disposed of in the ordinary course of business and which do not constitute a Disposition of all or a substantial portion of VHC's and its Subsidiaries' assets, taken as a whole. (b) Dispositions which are permitted by SECTIONS 7.2.9 or 7.2.10. (c) Dispositions (i) that constitute Investments permitted under SECTION 7.2.5, (ii) Liens permitted under SECTION 7.2.3 or (iii) Restricted Payments permitted under SECTION 7.2.6; (d) Dispositions among VHC and its Subsidiaries; PROVIDED, HOWEVER, that to the extent any Disposition to any Subsidiary of VHC which is not a Borrower or a Subsidiary Guarantor is for less than fair market value, such Disposition shall constitute an Investment in such Subsidiary for all purposes of this Agreement, including, without limitation, SECTION 7.2.5(f) above. (e) Dispositions which (x) are for fair market value and the consideration received consists of no less than 75% in cash, (y) result in gross proceeds which, when taken together with the sum of gross proceeds received from the Disposition of all other assets Disposed of pursuant to this clause since the Closing Date, do not exceed (individually or in the aggregate) $25,000,000 over the term of this Agreement and (z) an amount equal to the Net Disposition Proceeds generated from such Disposition are reinvested in the business of the Borrowers and their Subsidiaries or, to the extent required thereunder, applied pursuant to SECTIONS 3.1.1 and 3.1.2. (f) Dispositions resulting from casualties or condemnations in respect of such property or assets. (g) Dispositions consisting of sales or discounts of overdue accounts receivable in the ordinary course of business, but only in connection with the compromise or collection thereof. (h) The Disposition effectuating the PP&E Release. SECTION 7.2.12. MODIFICATION OF CERTAIN AGREEMENTS. The Parent and the Borrowers will not, and will not permit any of their respective Subsidiaries to, enter into any amendment, supplement, waiver or other modification of, or enter into any forbearance from exercising any rights with respect to the terms or provisions contained in, the Senior Note Documents, the Senior Subordinated Note Documents or the Parent Debenture Documents, in each case which would (a) increase the principal amount of, or increase the interest rate on, or add or increase any fee with respect to the Indebtedness evidenced by such Senior Note Document, Senior -89- Subordinated Note Document or Parent Debenture Document, advance any dates upon which payments of principal or interest are due thereon, (b) in the case of any Senior Subordinated Note Document or Parent Debenture Document, change the subordination provisions thereof (including any default or conditions to an event of default relating thereto), or change any collateral therefor (other than to release such collateral), if (in the case of this CLAUSE (b)) the effect of such amendment or change, individually or together with all other amendments or changes made, is to increase the obligations of the obligor thereunder or to confer any additional rights on the holders of the Senior Subordinated Notes or the Parent Debentures, as the case may be (or a trustee or other representative on their behalf), or (c) add or modify any covenants or defaults or events of default relating thereto, if (in the case of this CLAUSE (c)), the effect of such addition or modification, individually or together with all other additions or changes made, is to materially increase the obligations of the obligor thereunder or to confer any material additional rights on the holders of such Indebtedness (or a trustee or other representative on their behalf). SECTION 7.2.13. TRANSACTIONS WITH AFFILIATES. Neither the Parent nor any Borrower will or will permit any of its respective Subsidiaries to, enter into or cause or permit to exist any arrangement, transaction or contract (including for the purchase, lease or exchange of property or the rendering of services) with any of its other Affiliates that is not a Borrower or a Subsidiary Guarantor, unless such arrangement, transaction or contract is fair and equitable to the Parent, such Borrower or such Subsidiary and is of the kind which would be entered into by a prudent Person in the position of the Parent, such Borrower or such Subsidiary with a Person that is not one of its Affiliates PROVIDED, HOWEVER, that the Borrowers and their Subsidiaries shall be permitted to (a) enter into arrangements with CSFB and its affiliates for underwriting, investment banking and advisory services (including payments of the fee in respect of advisory services pursuant to CLAUSE (b)(i) of SECTION 7.2.6) on usual and customary terms, (b) make any Restricted Payment permitted under SECTION 7.2.6, (c) make payment of reasonable and customary fees and reimbursement of expenses payable to directors of the Parent, (d) enter into employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and pay reasonable fees in connection therewith and (e) consummate the Transaction. SECTION 7.2.14. RESTRICTIVE AGREEMENTS, ETC. Neither the Parent nor any Borrower will or will permit any of its respective Subsidiaries to, enter into any agreement prohibiting (a) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, to secure the Obligations (other than, (i) in the case of any assets acquired with the proceeds of any Indebtedness permitted under CLAUSE (c) of SECTION 7.2.2, customary limitations and prohibitions contained in such Indebtedness or (ii) provisions of any lease prohibiting the lessee thereunder from granting a Lien on the assets subject to such lease); (b) the ability of any Obligor to amend or otherwise modify any Loan Document; or (c) the ability of any Subsidiary of any Borrower to make any payments, directly or indirectly, to any Borrower, including by way of dividends, advances, -90- repayments of loans, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments. The foregoing prohibitions shall not apply to restrictions contained (i) in any Loan Document, (ii) in the case of CLAUSE (a), any agreement governing any Indebtedness permitted by CLAUSE (c) of SECTION 7.2.2 as to the creation of Liens on the assets financed with the proceeds of such Indebtedness, or (iii) in the case of CLAUSES (a) and (c), any agreement of a Non-U.S. Subsidiary governing the Indebtedness permitted by CLAUSE (g) of SECTION 7.2.2. SECTION 7.2.15. SALE AND LEASEBACK. The Parent and the Borrowers will not, and will not permit any of their respective Subsidiaries to, directly or indirectly enter into any agreement or arrangement providing for the sale or transfer by it of any property (now owned or hereafter acquired) to a Person and the subsequent lease or rental of such property or other similar property from such Person (a "SALE AND LEASEBACK TRANSACTION"), except that upon (i) the delivery by VHC to the Agents of projections of the Excess Availability for each fiscal month during the ensuing twelve-month period, which projections shall be in form and substance reasonably satisfactory to the Agents, and (ii) the concurrent permanent reduction of the Revolving Loan Commitment Amount by the amount of the Maximum PP&E Advance Amount then in effect, the Borrowers and their respective Subsidiaries may engage in a Sale And Leaseback Transaction involving all or any substantial portion of their respective property, plant and equipment assets on terms and conditions reasonably satisfactory to the Agents (such Sale And Leaseback Transaction being referred to herein as the "PP&E RELEASE EVENT"); PROVIDED that, prior to the consummation of such Sale and Leaseback Transaction, the Borrowers and their respective Subsidiaries shall have complied, to the extent applicable, with SECTION 7.1.9(a) with respect to any lease entered into in connection with such Sale and Leaseback Transaction. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. LISTING OF EVENTS OF DEFAULT. Each of the following events or occurrences described in this Section shall constitute an "EVENT OF DEFAULT". SECTION 8.1.1. NON-PAYMENT OF OBLIGATIONS. Any Obligor shall default in the payment or prepayment when due (whether pursuant hereto or pursuant to the Subsidiary Guaranty) of (i) any principal on any Loan, or any Reimbursement Obligation or any deposit of cash for collateral purposes pursuant to SECTION 2.6.4, or (ii) any interest on any Loan or any Reimbursement Obligation, any fee described in ARTICLE III or any other monetary Obligation and such default shall continue unremedied for a period of three Business Days after such amount was due. SECTION 8.1.2. BREACH OF WARRANTY. Any representation or warranty of any Obligor made or deemed to be made hereunder or pursuant to any other Loan Document (including any certificates delivered pursuant to ARTICLE V or ARTICLE VII) is or shall be incorrect when made or deemed to have been made in any material respect. -91- SECTION 8.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. Any Default shall occur in the due performance or observance of any provision of SECTION 7.1.1 or SECTION 7.2. SECTION 8.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. Any Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrowers by the Administrative Agent. SECTION 8.1.5. DEFAULT ON OTHER INDEBTEDNESS. A default shall occur in the payment of any amount when due (subject to any applicable grace period), whether by acceleration or otherwise, of any principal or stated amount of, or interest or fees on, any Indebtedness (other than Indebtedness described in SECTION 8.1.1) of the Parent or any of its Subsidiaries or any other Obligor having a principal or stated amount, individually or in the aggregate, in excess of $3,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness, if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause or declare such Indebtedness or other monetary obligation to become due and payable or to require such Indebtedness to be prepaid, redeemed, purchased or defeased, or require an offer to purchase, redeem or defease such Indebtedness to be made, in each case prior to its expressed maturity, stated redemption or when otherwise due. SECTION 8.1.6. JUDGMENTS. Any judgment or order for the payment of money in excess of $3,000,000 (exclusive of any amounts fully covered by insurance from an insurance company that is not denying liability with respect thereto (less any applicable deductible) shall be rendered against the Parent or any of its Subsidiaries and remain unpaid and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 8.1.7. PENSION PLANS. Any of the following events shall occur with respect to any Pension Plan: (i) the termination of any Pension Plan if, as a result of such termination, the Parent or any of its Subsidiaries would be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $3,000,000, or (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA in an amount in excess of $3,000,000. SECTION 8.1.8. CHANGE IN CONTROL. Any Change in Control shall occur. SECTION 8.1.9. BANKRUPTCY, INSOLVENCY, ETC. The Parent, any Borrower or any of their respective Subsidiaries shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness generally to pay, debts as they become due; -92- (b) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, sequestrator or other custodian for any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence in or permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days; PROVIDED that the Parent and the Borrowers hereby expressly authorize each Lender Party to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect thereof, and, if any such case or proceeding is not commenced by any Obligor, such case or proceeding shall be consented to or acquiesced in by the Parent, any Borrower or any Obligor, as the case may be, or shall result in the entry of an order for relief or shall remain for 60 days undismissed; PROVIDED that the Parent and the Borrowers hereby expressly authorize each Lender Party to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document or any Lien granted thereunder shall (except in accordance with its terms), in whole or in part, terminate, or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; any Obligor or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability of any Lien; or, except as permitted under any Loan Document, any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien subject only to those exceptions expressly permitted by the Loan Documents, except to the extent of any event referred to above (a) relates to assets of the Borrowers and their respective Subsidiaries which are immaterial, (b) results from the failure of the Administrative Agent to maintain possession of certificates representing securities pledged under the Pledge and Security Agreement or to file financing or continuation statements under the Uniform Commercial Code of any applicable jurisdiction or (c) is covered by a lender's title insurance policy and the relevant insurer promptly after the occurrence thereof shall have acknowledged in writing that the same is covered by such title insurance policy. SECTION 8.1.11. FAILURE OF SUBORDINATION. Unless otherwise waived or consented to by the Agents and the Required Lenders in writing, the subordination provisions relating to any Senior Subordinated Notes or Parent Debentures (the "SUBORDINATION PROVISIONS") shall fail to be enforceable by the Administrative Agent, the Lenders and the Issuers in accordance with the terms thereof, or the monetary Obligations shall fail to constitute "Designated Senior Debt"; or -93- the Parent or any of its Subsidiaries shall, directly or indirectly, disavow or contest in any manner (i) the effectiveness, validity or enforceability of any of the Subordination Provisions, (ii) that the Subordination Provisions exist for the benefit of the Lender Parties or (iii) that all payments of principal of or premium and interest on such Subordinated Debt shall be subject to any of such Subordination Provisions. SECTION 8.2. ACTION IF BANKRUPTCY. If any Event of Default described in CLAUSES (b) through (d) of SECTION 8.1.9 with respect to any Borrower shall occur, the Commitments shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations (including Reimbursement Obligations) shall automatically be and become immediately due and payable, without notice or demand to any Person and each Obligor shall automatically and immediately be obligated to Cash Collateralize all Letter of Credit Outstandings. SECTION 8.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default (other than any Event of Default described in CLAUSES (b) through (d) of SECTION 8.1.9 with respect to any Borrower) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrowers declare all or any portion of the outstanding principal amount of the Loans and other Obligations (including Reimbursement Obligations) to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate and the Borrowers shall automatically and immediately be obligated, jointly and severally, to Cash Collateralize all Letter of Credit Outstandings. ARTICLE IX THE ADMINISTRATIVE AGENT SECTION 9.1. ACTIONS. Each Lender hereby appoints The CIT Group/Business Credit, Inc. as its Administrative Agent under and for purposes of each Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under each Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel in order to avoid contravention of applicable law), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative Agent, PRO RATA according to such Lender's proportionate Total Exposure Amount, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Administrative Agent in any way relating to or arising out of any Loan Document, (including attorneys' fees and including any expenses, reimbursements and/or indemnities paid by the Administrative Agent to any bank pursuant to any deposit account control agreement relating to any Deposit Account), and as to which the Administrative Agent is -94- not reimbursed by the Borrowers; PROVIDED, HOWEVER, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from the Administrative Agent's gross negligence or willful misconduct. The Administrative Agent shall not be required to take any action under any Loan Document, or to prosecute or defend any suit in respect of any Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent in respect of any indemnified act shall, in the Administrative Agent's determination, be inadequate to compensate the Administrative Agent for all indemnified losses resulting from such act or shall become impaired, the Administrative Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given to its satisfaction. SECTION 9.2. FUNDING RELIANCE, ETC. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing by any Lender by 5:00 p.m., New York time, on the Business Day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the applicable Borrowers a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and each Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the applicable Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing (in the case of the Borrowers) and (in the case of a Lender), at the Federal Funds Rate (for the first two Business Days after which such amount has not been repaid), and thereafter at the interest rate applicable to Loans comprising such Borrowing. SECTION 9.3. EXCULPATION. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable to any Lender Party for any action taken or omitted to be taken by it under any Loan Document, or in connection therewith, except for its own willful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of any Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by any Obligor of its Obligations. Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action. The Administrative Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person. SECTION 9.4. SUCCESSOR. The Administrative Agent may resign as such at any time upon at least 30 days' prior notice to the Borrowers and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder. If no -95- successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the United States (or any State thereof) or a United States branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents. After any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under the Loan Documents, and SECTION 11.3 and SECTION 11.4 shall continue to inure to its benefit. SECTION 9.5. CREDIT EXTENSIONS BY EACH AGENT. Each Agent shall have the same rights and powers with respect to (x) the Credit Extensions made by it or any of its affiliates, and (y) the Notes held by it or any of its affiliates as any other Lender and may exercise the same as if it were not an Agent. Each Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with any Borrower or any Subsidiary or Affiliate of any Borrower as if such Agent were not an Agent hereunder. SECTION 9.6. CREDIT DECISIONS. Each Lender acknowledges that it has, independently of the Agents and each other Lender, and based on such Lender's review of the financial information of VHC, the Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Agents and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under the Loan Documents. SECTION 9.7. COPIES, ETC. The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by any Borrower pursuant to the terms of the Loan Documents (unless concurrently delivered to the Lenders by such Borrower). The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from any Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of the Loan Documents. SECTION 9.8. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person, and upon advice and statements of legal -96- counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by the Loan Documents, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, thereunder in accordance with instructions given by the Required Lenders or all of the Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all Lender Parties. For purposes of applying amounts in accordance with this Section, the Administrative Agent shall be entitled to rely upon any Lender Party that has entered into a Qualified Hedging Obligation with any Obligor for a determination (which such Lender Party agrees to provide or cause to be provided upon request of the Administrative Agent) of the outstanding Obligations owed to such Lender Party under any Qualified Hedging Obligation. Unless it has actual knowledge evidenced by way of written notice from any such Lender Party or any Borrower to the contrary, the Administrative Agent, in acting in such capacity under the Loan Documents, shall be entitled to assume that no Qualified Hedging Obligation or Obligations in respect thereof are in existence or outstanding between any Lender Party and any Obligor. SECTION 9.9. DEFAULTS. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has sent to the Borrowers or received from a Lender or a Borrower a written notice specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to SECTION 11.1) take such action with respect to such Default as shall be directed by the Required Lenders; PROVIDED, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Lender Parties except to the extent that this Agreement expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Required Lenders or all Lenders. SECTION 9.10. LEAD ARRANGER. Notwithstanding anything else to the contrary contained in this Agreement or any other Loan Document, the Lead Arranger, in its capacity as such, shall have no duties or responsibilities under this Agreement or any other Loan Document nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Lead Arranger in such capacity except as are explicitly set forth herein or in the other Loan Documents. The Lead Arranger shall at all times have the right to receive a current copy of the Register and any other information relating to the Lenders and the Loans that it may request from the Administrative Agent. SECTION 9.11. THE SYNDICATION AGENT, THE DOCUMENTATION AGENT AND THE ADMINISTRATIVE AGENT. Notwithstanding anything else to the contrary contained in this Agreement or any other Loan Document, the Syndication Agent, the Documentation Agent and the Administrative Agent, each in such capacity, shall have no duties or responsibilities under this Agreement or any other Loan Document nor any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Syndication Agent, the Documentation Agent -97- or Administrative Agent, as applicable, in such capacity, except as are explicitly set forth herein or in the other Loan Documents. ARTICLE X GUARANTY SECTION 10.1. GUARANTY. The Parent and each Borrower (with respect to the obligations of each other Borrower) hereby absolutely, unconditionally and irrevocably: (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration or otherwise, of all Obligations of the Borrowers now or hereafter existing, whether for principal, interest (including interest accruing at the then applicable rate provided in the Agreement after the occurrence of any Default set forth in SECTION 8.1.9, whether or not a claim for post-filing or post-petition interest is allowed under applicable law following the institution of a proceeding under bankruptcy, insolvency or similar laws), fees, Reimbursement Obligations, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section 506(b)); and (b) indemnifies and holds harmless each Lender Party for any and all reasonable costs and expenses (including reasonable attorneys' fees and expenses) incurred by such Lender Party after the occurrence and during the continuance of an Event of Default in enforcing any rights under this Agreement; Each Obligor's obligations under this Article constitute a guaranty of payment when due and not of collection, and each Obligor specifically agrees that it shall not be necessary or required that any Lender Party exercise any right, assert any claim or demand or enforce any remedy whatsoever against any Obligor or any other Person before or as a condition to the obligations of such Obligor hereunder. SECTION 10.2. REINSTATEMENT, ETC. Each Obligor hereby agrees that its obligations under this Article shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is invalidated, declared to be fraudulent or preferential, set aside, rescinded or must otherwise be restored by any Lender Party, including upon the occurrence of any Default set forth in SECTION 8.1.9 or otherwise, all as though such payment had not been made. SECTION 10.3. GUARANTY ABSOLUTE, ETC. Each Obligor's obligations under this Article shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall, unless thereafter reinstated in accordance with SECTION 10.2, remain in full force and effect until the Termination Date. Each Obligor guarantees, to the fullest extent permitted under applicable law, that the Obligations will be paid strictly in accordance with the terms of each Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Lender Party with respect thereto. The liability of each Obligor under this Article shall, to the -98- fullest extent permitted under applicable law, be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of any Loan Document (other than this ARTICLE X); (b) the failure of any Lender Party: (i) to assert any claim or demand or to enforce any right or remedy against any other Obligor or any other Person (including any other Guarantor) under the provisions of any Loan Document or otherwise, or (ii) to exercise any right or remedy against any other Guarantor of, or collateral securing, any Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Obligations, or any other extension, compromise or renewal of any Obligation; (d) any reduction, limitation, impairment or termination of any Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Obligor hereby irrevocably waives, until payment of all Obligations, any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to or departure from, any of the terms of any Loan Document; (f) any addition, exchange or release of any collateral or of any Person that is (or will become) a Guarantor of the Obligations, or any surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty held by any Lender Party securing any of the Obligations; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Obligor, any surety or any Guarantor. SECTION 10.4. WAIVER, ETC. Except for any notices expressly required to be delivered to an Obligor hereunder, each Obligor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and the guaranty set forth in this ARTICLE X and any requirement that any Lender Party protect, secure, perfect or insure any Lien, or any property subject thereto, or exhaust any right or take any action against any Obligor or any other Person (including the Parent) or entity or any collateral securing the Obligations, as the case may be. -99- SECTION 10.5. POSTPONEMENT OF SUBROGATION, ETC. Each Obligor agrees that it will not exercise any rights which it may acquire by way of rights of subrogation hereunder, nor shall such Obligor seek or be entitled to seek any contribution or reimbursement from any Obligor, in respect of any payment made hereunder, until following the Termination Date. Any other amount paid to any Obligor on account of any such subrogation rights prior to the Termination Date shall be held in trust for the benefit of the Lender Parties and shall immediately be paid and turned over to the Administrative Agent for the benefit of the Lender Parties in the exact form received by such Obligor (duly endorsed in favor of the Administrative Agent, if required), to be credited and applied against the Obligations, whether matured or unmatured, in accordance with SECTION 4.7; PROVIDED that if the Obligors have made payment to the Lender Parties of all or any part of the Obligations and the Termination Date has occurred, then at an Obligor's request, the Administrative Agent (on behalf of the Lender Parties) will, at the expense of the Parent, execute and deliver to such Obligor appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to such Obligor of an interest in the Obligations resulting from such payment. In furtherance of the foregoing, at all times prior to the Termination Date, such Obligor shall refrain from taking any action or commencing any proceeding against any other Obligor (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in respect of payments made hereunder to any Lender Party. ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. WAIVERS, AMENDMENTS, ETC. The provisions of each Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by each Obligor party thereto and the Required Lenders; PROVIDED, HOWEVER, that no such amendment, modification or waiver shall: (a) modify this Section or CLAUSE (a) of SECTION 11.10 without the consent of all Lenders; (b) increase the aggregate amount of any Credit Extensions required to be made by a Lender pursuant to its Commitments or extend the final Commitment Termination Date of Credit Extensions made (or participated in) by a Lender, in each case without the consent of such Lender (it being agreed, however, that any vote to rescind any acceleration made pursuant to SECTION 8.2 and SECTION 8.3 of amounts owing with respect to the Loans and other Obligations shall only require the vote of the Required Lenders); (c) reduce the principal amount of or rate of interest on any Lender's Loan, reduce any fees described in ARTICLE III payable to any Lender or extend the date on which interest or fees are payable in respect of such Lender's Loans, in each case without the consent of such Lender; (d) reduce the percentage set forth in the definition of "Required Lenders" or modify any requirement hereunder that any particular action be taken by all Lenders or Required Lenders without the consent of all Lenders; -100- (e) increase the Stated Amount of any Letter of Credit unless consented to by the Issuer of such Letter of Credit; (f) (i) change the definition of "Borrowing Base Amount", "Eligible Account", "Eligible Inventory", "Eligible PP&E", "Maximum PP&E Advance Amount", "Orderly Liquidation Value" or "Net Asset Value" (in each case if the effect of such change would be to require a Lender to make or participate in a Credit Extension in an amount that is greater than such Lender would have had to make or participate in immediately prior to such change), (ii) amend, modify or waive SECTION 3.1.1(b) or (iii) amend or waive any condition precedent to the making of a Revolving Loan or the issuance of a Letter of Credit without the consent of Lenders holding at least 75% of the Revolving Loan Commitments; or (g) except as otherwise expressly provided in a Loan Document, release (i) VHC from its financial Obligations under the Loan Documents or the Parent or all or substantially all of the Borrowers (other than VHC) and the Subsidiary Guarantors their respective financial Obligations under the Loan Documents (ii) all or substantially all of the collateral under the Loan Documents (other than in connection with the PP&E Release Event), in each case without the consent of all Lenders; (h) waive any Event of Default, or reverse the effects of any resulting acceleration of the Obligations, under CLAUSE (b), (c) or (d) of SECTION 8.1.9, unless consented to by all of the Lenders; or (i) affect adversely the interests, rights or obligations of the Administrative Agent (in its capacity as the Administrative Agent) or any Issuer (in its capacity as Issuer), unless consented to by the Administrative Agent or such Issuer, as the case may be. No failure or delay on the part of any Lender Party in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on any Obligor in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Lender Party under any Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 11.2. NOTICES; TIME. All notices and other communications provided under each Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted, if to a Borrower, the Parent, the Administrative Agent, a Lender or an Issuer, to the applicable Person at its address or facsimile number set forth on SCHEDULE II hereto or, in the case of a Lender that becomes a party hereto after the date hereof, set forth in the Lender Assignment Agreement pursuant to which it became a Lender, or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier -101- service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. The parties hereto agree that delivery of an executed counterpart of a signature page to this Agreement and each other Loan Document by facsimile shall be effective as delivery of an original executed counterpart of this Agreement or such other Loan Document. Unless otherwise indicated, all references to the time of a day in a Loan Document shall refer to New York time. SECTION 11.3. PAYMENT OF COSTS AND EXPENSES. The Borrowers agree, jointly and severally, to pay on demand all reasonable out-of-pocket fees, costs and expenses of the Agents (including the reasonable fees and out-of-pocket expenses of Mayer, Brown, Rowe & Maw, counsel to the Agents, and of local counsel, if any, who may be retained by or on behalf of the Agents) in connection with: (a) the syndication by the Syndication Agent and the Lead Arranger of the Loans and Commitments, the negotiation, preparation, execution and delivery of each Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; and (b) the filing or recording of any Loan Document (including the Filing Statements) and all amendments, supplements, amendments and restatements and other modifications to any thereof, searches made following the Closing Date in jurisdictions where Filing Statements (or other documents evidencing Liens in favor of the Lender Parties) have been recorded and any and all other documents or instruments of further assurance required to be filed or recorded by the terms of any Loan Document, in each case as necessary to create, maintain or continue perfection of the Liens purported to be granted pursuant to the Loan Documents; (c) the preparation and review of the form of any document or instrument relevant to any Loan Document; and (d) all costs and out-of-pocket expenses (including per diem rates of and out-of-pocket expenses incurred by employees or agents of the Administrative Agent in connection with any Borrowing Base Audit or Asset Appraisal performed by the Administrative Agent) incurred by the Agents in connection with any Asset Appraisal or Borrowing Base Audits; PROVIDED, HOWEVER, that the cost to the Borrowers of any Asset Appraisal shall not exceed $100,000 for each such appraisal. The Borrowers further agree, jointly and severally, to pay, and to save each Lender Party harmless from all liability for, any stamp and other similar which may be payable in connection with the execution or delivery of each Loan Document, the Credit Extensions or the issuance of the Notes. The Borrowers also agrees, jointly and severally, to reimburse each Lender Party upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys' fees and legal expenses of counsel to such Lender Party) incurred by such Lender Party after the occurrence and during the continuance of an Event of Default in connection with (x) the -102- negotiation of any restructuring or "work-out" with any Borrower, whether or not consummated, of any Obligations, (y) the enforcement of any Obligations and (z) to the extent permitted under applicable law, the participation in or monitoring of any bankruptcy or other reorganization or insolvency proceeding relating to any Borrower or any of their respective Subsidiaries. SECTION 11.4. INDEMNIFICATION. In consideration of the execution and delivery of this Agreement by each Lender Party, each of the Parent and each Borrower, on a joint and several basis, to the fullest extent permitted under applicable law, hereby indemnifies, exonerates and holds each Lender Party and each of their respective officers, directors, employees and agents and each other Person controlling any of the foregoing within the meaning of either Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements, whether incurred in connection with actions between or among the parties hereto or the parties hereto and third parties (collectively, the "INDEMNIFIED LIABILITIES"), in each case incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension, including all Indemnified Liabilities arising in connection with the Transactions; (b) the entering into and performance of any Loan Document by any of the Indemnified Parties (excluding any successful action brought by or on behalf of any Borrower as the result of any failure by a Lender to make any Credit Extension required to be made by it hereunder); (c) with respect to any properties of the Obligors, any investigation, litigation or proceeding related to any environmental cleanup, audit or noncompliance with or liability under any Environmental Law relating to the use, ownership or operation by any Obligor or any Subsidiary thereof of any Hazardous Material; (d) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by any Borrower or any of its Subsidiaries of all or any portion of the Capital Securities or assets of any Person, whether or not each Agent, such Issuer, such Lead Arranger or such Lender is party thereto; or (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission or releases from, any real property owned or operated by any Obligor or any Subsidiary thereof of any Hazardous Material present on or under such property in a manner giving rise to liability during or prior to the time such Obligor or Subsidiary owned or operated such property (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, such Obligor or Subsidiary; -103- except (i) for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the gross negligence or willful misconduct of such Indemnified Party or (ii) any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of any Hazardous Materials that are manufactured, emitted, generated, treated, released, stored or disposed of on any real property of the Parent or any of its Subsidiaries or any violation of Environmental Law that occurs on or with respect to any real property of the Parent or any of its Subsidiaries to the extent occurring after such real property is transferred to any Indemnified Person or its successor by foreclosure sale, deed in lieu of foreclosure, or similar transfer, except to the extent such manufacture, emission, release, generation, treatment, storage or disposal or violation is actually caused by the Parent or any of its Subsidiaries. Each of the Borrowers and the Parent and their respective successors and assigns hereby waive, release and agree not to make any claim or bring any cost recovery action against, any Indemnified Party under CERCLA or any state equivalent, or any similar law now existing or hereafter enacted, except to the extent arising out of the gross negligence or willful misconduct of any Indemnified Party or arising out of any Hazardous Materials that are manufactured, emitted, generated, treated, released, stored or disposed of on any real property of the Parent or any of its Subsidiaries or any violation of Environmental Law that occurs on or with respect to any real property of the Parent or any of its Subsidiaries to the extent occurring after such real property is transferred to any Indemnified Person or its successor by foreclosure sale, deed in lieu of foreclosure, or similar transfer, except to the extent such manufacture, emission, release, generation, treatment, storage or disposal or violation is actually caused by the Parent, any Borrower or any of their respective Subsidiaries. It is expressly understood and agreed that to the extent that any Indemnified Party is strictly liable under any Environmental Laws, the Borrowers' and the Parent's obligations to such Indemnified Party under this indemnity shall, to the extent permitted under applicable law likewise be without regard to fault on the part of any Obligor with respect to the violation or condition which results in liability of an Indemnified Party. Notwithstanding anything to the contrary herein, each Lender Party shall be responsible with respect to any Hazardous Materials that are manufactured, emitted, generated, treated, released, stored or disposed of on any real property of any Borrower or any of their Subsidiaries or any violation of Environmental Law that occurs on or with respect to any such real property to the extent it occurs after such real property is transferred to any Indemnified Party or its successor by foreclosure sale, deed in lieu of foreclosure, or similar transfer, except to the extent such manufacture, emission, release, generation, treatment, storage or disposal or violation is actually caused by the Parent, any Borrower or any of their respective Subsidiaries. If and to the extent that the foregoing undertaking may be unenforceable for any reason, each of the Borrowers and the Parent agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 11.5. SURVIVAL. The obligations of the Borrowers under SECTIONS 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, and the obligations of the Lenders under SECTION 4.8 and SECTION 9.1, shall in each case survive any assignment from one Lender to another (in the case of SECTIONS 11.3 and 11.4) and the occurrence of the Termination Date. The representations and warranties made by any Obligor in any Loan Document shall survive the execution and delivery of such Loan Document. SECTION 11.6. SEVERABILITY. Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be -104- ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.7. HEADINGS. The various headings of each Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of such Loan Document or any provisions thereof. SECTION 11.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Parent, the Borrowers, the Administrative Agent and each Lender (or notice thereof satisfactory to the Administrative Agent), shall have been received by the Administrative Agent. SECTION 11.9. GOVERNING LAW; ENTIRE AGREEMENT. EACH LOAN DOCUMENT (OTHER THAN THE LETTERS OF CREDIT, TO THE EXTENT SPECIFIED BELOW AND EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN A LOAN DOCUMENT) WILL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO LAWS OR RULES ARE DESIGNATED, THE INTERNATIONAL STANDBY PRACTICES (ISP98--INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NUMBER 590 (THE "ISP RULES")) AND, AS TO MATTERS NOT GOVERNED BY THE ISP RULES, THE INTERNAL LAWS OF THE STATE OF NEW YORK. The Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 11.10. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Parent nor any Borrower may assign or otherwise transfer any of its rights or obligations hereunder (other than, in the case of any Borrower that is a Subsidiary of VHC, pursuant to a merger, consolidation or liquidation permitted under SECTION 7.2.10) without the prior written consent of each Lender (and any attempted assignment or transfer by either the Parent or any Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnified Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement. -105- (b) Any Lender may assign to one or more Eligible Assignees pursuant to a Lender Assignment Agreement, all or any portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and/or the Loans at the time owing to it); PROVIDED, HOWEVER, that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitments and/or the Loans at the time owing to it or in the case of an assignment to a Lender or an affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitments (which for this purpose includes Loans outstanding thereunder) and/or principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Lender Assignment Agreement with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrowers otherwise consent (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loans and/or the Commitments assigned and (iii) the parties to each assignment shall execute and deliver to the Administrative Agent a Lender Assignment Agreement. The assignor Lender or the Assignee Lender must pay a processing fee in the amount of $3,000 to the Administrative Agent upon delivery of any Lender Assignment Agreement assigning any Revolving Loans and/or any Revolving Loan Commitments; PROVIDED, however that if assignments are made to or from an Approved Fund or any other Lender or affiliate of a Lender, such fee shall be waived. Subject to acceptance and recording thereof by the Administrative Agent pursuant to CLAUSE (c) of this Section, from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Lender Assignment Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Lender Assignment Agreement, be released from its obligations under this Agreement (and, in the case of a Lender Assignment Agreement covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, but shall continue to be entitled to the benefits of any provisions of this Agreement which by their terms survive the termination of this Agreement). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with CLAUSE (d). (c) The Administrative Agent shall record assignments made in accordance with this Section in the Register in accordance with CLAUSE (b) of SECTION 2.7. (d) In the event that S&P, Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders that are insurance -106- companies (or Best's Insurance Reports, if such insurance company is not rated by Insurance Watch Ratings Service)) shall, after the date that any Lender with a Commitment to make Revolving Loans or participate in Letters of Credit becomes a Lender, downgrade the long-term certificate of deposit rating or long-term senior unsecured debt rating of such Lender, and the resulting rating shall be below BBB-, Baa3 or C (or BB, in the case of Lender that is an insurance company (or B, in the case of an insurance company not rated by InsuranceWatch Ratings Service)) respectively, then the Issuer or the Borrowers (with the consent of the Agents and the Issuer) shall have the right, but not the obligation, upon notice to such Lender and the Agents, to replace such Lender with an Eligible Assignee in accordance with and subject to the restrictions contained in this Section, and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in this Section) all its interests, rights and obligations in respect of its Revolving Loan Commitment under this Agreement to such Eligible Assignee; PROVIDED, HOWEVER, that (i) no such assignment shall conflict with any law, rule and regulation or order of any governmental authority and (ii) such Eligible Assignee shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest and fees (if any) accrued to the date of payment on the Loans made, and Letters of Credit participated in, by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. (e) Any Lender may, without the consent of, or notice to, any Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "PARTICIPANT") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitments and/or the Loans owing to it); PROVIDED, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; PROVIDED that any amendment, modification or waiver with respect to the following: (i) any reduction in the interest rate or amount of fees that such Participant is otherwise entitled to, (ii) a decrease in the principal amount of, or an extension of the final stated maturity date of, any Loan in which such Participant has purchased a participating interest, (iii) a release of all or substantially all of the collateral security under the Loan Documents or all or substantially all of the Borrowers that are Subsidiaries of VHC and the Subsidiary Guarantors from their Obligations, in each case except as otherwise specifically provided in a Loan Document or (iv) a change in the date fixed for payment of any interest or fees on any Loan in which such Participant has purchased a participating interest, may require the consent of the applicable Participant(s). The Borrowers acknowledge and agree that, to the fullest extent permitted under applicable law, each -107- Participant, for purposes of SECTIONS 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 7.1.1, 11.3 and 11.4, shall be considered a Lender. Each Participant shall only be indemnified for increased costs pursuant to SECTION 4.3, 4.5 or 4.6 if and to the extent that the Lender which sold such participating interest to such Participant concurrently is entitled to make, and does make, a claim on any Borrower for such increased costs. Any Lender that sells a participating interest in any Loan, Commitment or other interest to a Participant under this Section shall indemnify and hold harmless the Borrowers and the Administrative Agent from and against any taxes, penalties, interest or other costs or losses (including reasonable attorneys' fees and expenses) incurred or payable by the Borrowers or the Administrative Agent as a result of the failure of the any Borrower or the Administrative Agent to comply with its obligations to deduct or withhold any taxes from any payments made pursuant to this Agreement to such Lender or the Administrative Agent, as the case may be, which taxes would not have been incurred or payable if such Participant had been a Non-U.S. Lender that was entitled to deliver to the Borrowers, the Administrative Agent or such Lender, and did in fact so deliver, a duly completed and valid Form W-8BEN or W-8ECI (or applicable successor form) entitling such Participant to receive payments under this Agreement without deduction or withholding of any United States federal taxes. (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (i) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or in support of its obligations to its trustee, as applicable and (ii) in connection with any securitization of any portfolio loans of such Lender, in each case without the prior written consent of any other Person; PROVIDED, that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee, trustee or assignee for such Lender as a party hereto. (g) Notwithstanding anything to the contrary contained herein, any Lender (a "GRANTING BANK") may grant to a special purpose funding vehicle (a "SPC"), identified as such in writing from time to time by the Granting Bank to the Administrative Agent and the Borrowers, the option to provide to any Borrower all or any part of any Loan that such Granting Bank would otherwise be obligated to make to any Borrower pursuant to this Agreement; PROVIDED that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Bank shall be obligated to make such Loan pursuant to the terms hereof. The making of an Loan by a SPC hereunder shall utilize the Commitment of the Granting Bank to the same extent, and as if, such Loan were made by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Bank). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or -108- other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section, any SPC may (i) with notice to, but without the prior written consent of, the Borrowers or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Bank or to any financial institutions (consented to by the Borrowers and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. SECTION 11.11. OTHER TRANSACTIONS. Nothing contained herein shall preclude the Administrative Agent, any Issuer or any other Lender from engaging in any transaction, in addition to those contemplated by the Loan Documents, with any Borrower or any of their respective Affiliates in which such Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 11.12. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, ANY ISSUER, THE PARENT OR ANY BORROWER IN CONNECTION HEREWITH OR THEREWITH MAY (TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWERS AND THE PARENT IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.2. EACH BORROWER AND THE PARENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY BORROWER OR THE PARENT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH BORROWER AND THE PARENT HEREBY IRREVOCABLY -109- WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS. SECTION 11.13. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT, EACH LENDER, EACH ISSUER, THE PARENT AND EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, SUCH LENDER, SUCH ISSUER, THE PARENT OR SUCH BORROWER IN CONNECTION THEREWITH. EACH BORROWER AND THE PARENT ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH EACH IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT, EACH LENDER AND EACH ISSUER ENTERING INTO THE LOAN DOCUMENTS. SECTION 11.14. CONFIDENTIALITY. The Lenders, the Issuers and the Agents shall hold all non-public information obtained pursuant to or in connection with this Agreement about, or obtained by them based on a review of the books and records of, the Parent or any of its Subsidiaries in accordance with their customary procedures for handling confidential information of this nature, but may make disclosure to any of their examiners, affiliates, outside auditors, counsel and other professional advisors or to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section) in connection with this Agreement or as reasonably required by any potential BONA FIDE transferee, participant or assignee, or in connection with the exercise of remedies under a Loan Document, or as requested by any governmental agency or representative thereof or pursuant to legal process or to any quasi-regulatory authority (including the National Association of Insurance Commissioners); PROVIDED, HOWEVER, that (a) unless specifically prohibited by applicable law or court order, each Lender, each Issuer and each Agent shall notify VHC of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; (b) prior to any such disclosure pursuant to this Section, each Lender shall require any such BONA FIDE transferee, participant and assignee receiving a disclosure of non-public information to agree in writing (i) to be bound by this SECTION 11.14; and (ii) to require such Person to require any other Person to whom such Person discloses such non-public information to be similarly bound by this Section; and -110- (c) except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, no Lender shall be obligated or required to return any materials furnished by the Parent or any of its Subsidiaries. SECTION 11.15. ADDITIONAL BORROWERS. Any wholly-owned U.S. Subsidiary of VHC that is required to execute a Joinder Agreement pursuant to SECTION 7.1.8(a) shall become a Borrower hereunder by executing and delivering to the Administrative Agent a Joinder Agreement and a counterpart of this Agreement. Upon delivery of such Joinder Agreement and related counterparts, such Subsidiary shall automatically become a Borrower hereunder with the same force and effect as if originally named as a Borrower hereunder. The execution and delivery of any such Joinder Agreement or counterpart shall not require the consent of any other Obligor or Lender Party hereunder. The rights and obligations of each other Obligor hereunder shall remain in full force and effect notwithstanding the addition of any new Borrower as a party to this Agreement. SECTION 11.16. RELEASE OF CERTAIN BORROWERS. Upon any Borrower (other than VHC) ceasing to be a Subsidiary of the Parent pursuant to a transaction permitted under this Agreement, such Borrower shall be released from all of its rights and obligations hereunder and under the Loan Documents and shall cease to be Borrower for any purpose hereunder or thereunder; PROVIDED that such release shall not affect the aggregate Obligations of the other Borrowers hereunder. SECTION 11.17. LIMITATION ON OBLIGATIONS OF CERTAIN BORROWERS. Anything in this Agreement to the contrary notwithstanding, each Borrower shall only be liable under this Agreement and the other Loan Documents for Loans borrowed by it hereunder and for the maximum amount of other Obligations that it can incur without rendering the agreements contained herein and in such other Loan Documents, as they relate to such Borrower, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. -111- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. BORROWERS : VON HOFFMANN HOLDINGS INC. By: ------------------------------------------- Title: VON HOFFMANN CORPORATION By: ------------------------------------------- Title: H&S GRAPHICS, INC. By: ------------------------------------------- Title: PRECISION OFFSET PRINTING COMPANY, INC. By: ------------------------------------------- Title: PREFACE, INC. By: ------------------------------------------- Title: -112- ONE THOUSAND REALTY & INVESTMENT COMPANY By: ------------------------------------------- Title: -113- AGENTS: THE CIT GROUP/BUSINESS CREDIT, INC., as the Administrative Agent and as a Lender By: ------------------------------------------- Title: -114- CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH, as the Syndication Agent, the Lead Arranger and as a Lender By: ------------------------------------------- Title: By: ------------------------------------------- Title: -115- U.S. BANK NATIONAL ASSOCIATION, as the Documentation Agent and as a Lender By: ------------------------------------------- Title: -116- ISSUER: U.S. BANK NATIONAL ASSOCIATION By: ------------------------------------------- Title: -117- LENDERS: THE CIT GROUP/BUSINESS CREDIT, INC. By: ------------------------------------------- Title: -118- CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH By: ------------------------------------------- Title: By: ------------------------------------------- Title: -119- U.S. BANK NATIONAL ASSOCIATION By: ------------------------------------------- Title: -120- THE BANK OF NOVA SCOTIA By: ------------------------------------------- Title: -121- IBJ WHITEHALL BUSINESS CREDIT CORPORATION By: ------------------------------------------- Title: -122- LASALLE BUSINESS CREDIT, INC. By: ------------------------------------------- Title: -123- TRANSAMERICA BUSINESS CAPITAL CORPORATION By: ------------------------------------------- Title: -124- CREDIT INDUSTRIEL ET COMMERCIAL By: ------------------------------------------- Title: -125- SCHEDULE I DISCLOSURE SCHEDULE TO CREDIT AGREEMENT ITEM 6.7 Litigation. None ITEM 6.8 Existing Subsidiaries. 1. One Thousand Realty & Investment Company 2. H & S Graphics, Inc. 3. Preface, Inc. 4. Precision Offset Printing Company, Inc. ITEM 6.11 Employee Benefit Plans. None ITEM 6.12 Environmental Matters. None ITEM 7.2.2(b) Existing Indebtedness.
CREDITOR OUTSTANDING PRINCIPAL AMOUNT -------- ---------------------------- 1. HSBC Bank USA Subordinated Exchange Debentures $ 45,017,736.11 $ 2,211,496.29 2. HSBC Bank USA Senior Subordinated Notes $ 100,000,000.00 $ 3,957,291.66
ITEM 7.2.3(b) Ongoing Liens. 1. Dell Financial Services, LP - equipment liens: Von Hoffmann Press, Inc. DE, UCC-1 1135420, filed 10/09/01 H&S Graphics, Inc. - DE, UCC-1 1135422, filed 10/09/01 Precision Offset Printing Company, Inc. - DE, UCC-1 1135404, filed 10/09/01 Von Hoffmann Graphics, Inc. - DE, UCC-1 1135421, filed 10/09/01 Preface, Inc. - DE, UCC-1 1135402, filed 10/09/01 2. Toyota Motor Credit Corp. - equipment lien: Von Hoffmann Press, Inc. - MO, UCC-1 4180803, filed 06/28/01 3. Toyota Financial Services - equipment liens: Von Hoffmann Press, Inc. - MO, UCC-1 20018044072C, filed 10/09/01 Von Hoffmann Graphics, Inc. - MO, UCC-1 20018050553E, filed 12/27/01 4. Bayer Financial Services- equipment lien: H & S Graphics, Inc. - IL, UCC-1 003896877, filed 08/20/98 5. AGFA 5. AGFA Division, Bayer Corporation - equipment lien: H & S Graphics, Inc. - IL, UCC-1 004002655, filed 03/11/99 6. Waminet, Inc. - equipment lien: H & S Graphics, Inc. - IL, UCC-1 004072584, filed 07/29/99 7. AGFA Corp. - equipment lien: H & S Graphics, Inc. - IL, UCC-1 004080861, filed 08/18/99 8. American Express Business Finance Corp. - equipment lien: Von Hoffmann Graphics, Inc. - MO, UCC-1 20018044668K, filed 10/10/01 ITEM 7.2.5(a) Ongoing Investments. Wholly-owned Subsidiaries as of 3/26/02
INVESTMENT AMOUNT NOTE PAYABLE H & S Graphics, Inc. $6,125,103 $13,795,715 Preface, Inc. 534,414 1,015,182 Precision Offset Printing Company, Inc. 5,100,868 16,500,000 One Thousand Realty & Investment Co. 1,087,000 -----------
-127- SCHEDULE II NOTICE INFORMATION FOR BORROWERS AND PARENT: Parent: Borrowers: Von Hoffman Holdings Inc c/o Von Hoffman Corporation 1000 Camera Avenue 1000 Camera Avenue St. Louis, MO 63126 St. Louis, MO 63126 Contact: Peter C. Mitchell Contact: Peter C. Mitchell Telephone: (314) 966-0963. Telephone: (314) 966-0963 PERCENTAGES; LIBOR OFFICE; DOMESTIC OFFICE
NAME AND NOTICE ADDRESS OF LENDER LIBOR OFFICE DOMESTIC OFFICE PERCENTAGE --------------------------------- ------------ --------------- ---------- The CIT Group/Business Credit, Inc. The CIT Group/Business Credit, Inc. The CIT Group/Business Credit, Inc. 17.77778% 1211 Avenue of the Americas 1211 Avenue of the Americas 1211 Avenue of the Americas New York, NY 10036 New York, NY 10036 New York, NY 10036 Attn: Rob Chimenti Credit Suisse, First Boston, Cayman Islands Branch Credit Suisse, First Boston, Credit Suisse, First Boston, 6.66667% 11 Madison Avenue Cayman Islands Branch Cayman Islands Branch New York, NY 10010 11 Madison Avenue 11 Madison Avenue Attn: Joe Adipietro New York, NY 10010 New York, NY 10010 U.S. Bank National Association U.S. Bank National Association U.S. Bank National Association 15.55556% 721 Locust 225 South Sixth Street 225 South Sixth Street St. Louis, MO 63101 Minneapolis, MN 55402 Minneapolis, MN 55402 The Bank of Nova Scotia The Bank of Nova Scotia The Bank of Nova Scotia 6.66667% 181 W. Madison Street, Suite 3700 600 Peachtree Street, Suite 2700 600 Peachtree Street, Suite 2700 Chicago, IL 60602 Atlanta, GA 30308 Atlanta, GA 30308 Attn: Frances Connors/Lisa Garling
NAME AND NOTICE ADDRESS OF LENDER LIBOR OFFICE DOMESTIC OFFICE PERCENTAGE --------------------------------- ------------ --------------- ---------- IBJ Whitehall Business Credit Corporation IBJ Whitehall Business Credit IBJ Whitehall Business Credit 13.33333% One State Street, 7th Floor Corporation Corporation New York, NY 10004 One State Street, 7th Floor One State Street, 7th Floor Attn: Joe Zautra New York, NY 10004 New York, NY 10004 LaSalle Business Credit, Inc. LaSalle Business Credit, Inc. LaSalle Business Credit, Inc. 13.33333% 1735 Market Street, 6th Floor 565 Fifth Avenue, 27th Floor 565 Fifth Avenue, 27th Floor Philadelphia, PA 19103 New York, NY 10017 New York, NY 10017 Attn: Michael Aliberto Transamerica Business Capital Corporation Transamerica Business Capital Transamerica Business Capital 13.33333% 555 Theodore Fremd Avenue, Suite C-301 Corporation Corporation Rye, NY 10580 555 Theodore Fremd Avenue, 555 Theodore Fremd Avenue, Attn: Frances McGinn Suite C-301 Suite C-301 Rye, NY 10580 Rye, NY 10580 Credit Industriel et Commerce Credit Industriel et Commerce Credit Industriel et Commerce 13.33333% 520 Madison Avenue, 37th Floor 520 Madison Avenue, 37th Floor 520 Madison Avenue, 37th Floor New York, NY 10022 New York, NY 10022 New York, NY 10022 Attn: Sean Mounier
SCHEDULE III REAL ESTATE PROPERTY Jefferson City, MO 321 Wilson Drive Jefferson, MO 65109 (Cole County) Crestwood, MO 1000 Camera Ave. Crestwood, MO 63126 (St. Louis County) Owensville, MO 920 Maple Ave. Owensville, MO 65066 (Gasconade County) Eldridge, IA (ScottCounty) Leesport, PA 133 Main Street Leesport, PA (Berks County) Dauberville, PA 1149 Railroad Rd. Dauberville [Centre Township], PA (Berks County) Frederick, MD 200 Monroe Avenue Frederick, MD (Frederick County, MD) Owensville, MO (Gasconade County) Rolling Meadow, IL SCHEDULE IV SUBSIDIARY GUARANTORS None SCHEDULE V EXISTING LETTERS OF CREDIT 1. Sentry Insurance Company 12/31/01 1,350,000
SCHEDULE VI DEPOSIT ACCOUNTS
OBLIGOR BANK ACCOUNT NUMBER ------------------------------------------------------------------------------------ VON HOFFMANN HOLDINGS INC. US Bank Corporation 1001613403 VON HOFFMANN CORPORATION US Bank Corporation 0000010537 US Bank Corporation 3500710789 US Bank Corporation 121713605 Branch Banking & Trust 5150916161 US Bank Corporation 1891015495 US Bank Corporation 1876200619 US Bank Corporation 952046 US Bank Corporation 3500707280 US Bank Corporation 1001235272 US Bank Corporation 1001613379 US Bank Corporation 7060 Central Bank 000272 Cass Bank 00-0032704-2 ONE THOUSAND REALTY & INVESTMENT CO. US Bank Corporation 1001485406 PRECISION OFFSET PRINTING COMPANY Allfirst Bank 00620-6530-0 Allfirst Bank H & S GRAPHICS, INC. American National Bank 5330330351 American National Bank 37215 PREFACE, INC. American National Bank 5330330378 American National Bank 37236
TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms.........................................................................2 SECTION 1.2. Use of Defined Terms.................................................................34 SECTION 1.3. Cross-References.....................................................................34 SECTION 1.4. Accounting and Financial Determinations..............................................34 ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES AND LETTERS OF CREDIT SECTION 2.1. Commitments..........................................................................35 SECTION 2.1.1. Revolving Loan Commitment and Swingline Loan Commitment.........................35 SECTION 2.1.2. Letter of Credit Commitment.....................................................36 SECTION 2.1.3. Lenders Not Permitted or Required to Make the Loans.............................36 SECTION 2.2. Reduction or Increase of Commitment Amounts..........................................36 SECTION 2.2.1. Optional Reductions.............................................................37 SECTION 2.2.2. Optional Increase of Revolving Loan Commitment Amount...........................37 SECTION 2.3. Borrowing Procedures.................................................................39 SECTION 2.3.1. Revolving Loans.................................................................39 SECTION 2.3.2. Swingline Loans.................................................................39 SECTION 2.4. Continuation and Conversion Elections................................................41 SECTION 2.5. Funding..............................................................................41 SECTION 2.6. Issuance Procedures, etc.............................................................41 SECTION 2.6.1. Other Lenders' Participation....................................................42 SECTION 2.6.2. Disbursements...................................................................42 SECTION 2.6.3. Reimbursement...................................................................43 SECTION 2.6.4. Deemed Disbursements............................................................43 SECTION 2.6.5. Nature of Reimbursement Obligations.............................................44 SECTION 2.7. Notes................................................................................45 SECTION 2.8. Notice of Cash Dominion..............................................................45
-i- TABLE OF CONTENTS (continued)
PAGE ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments; Application..............................................46 SECTION 3.1.1. Repayments and Prepayments......................................................46 SECTION 3.1.2. Application.....................................................................50 SECTION 3.2. Interest Provisions..................................................................50 SECTION 3.2.1. Rates...........................................................................50 SECTION 3.2.2. Post-Default Rates..............................................................51 SECTION 3.2.3. Payment Dates...................................................................51 SECTION 3.3. Fees.................................................................................51 SECTION 3.3.1. Commitment Fee..................................................................51 SECTION 3.3.2. Letter of Credit Fee............................................................52 ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. LIBO Rate Lending Unlawful...........................................................52 SECTION 4.2. Deposits Unavailable.................................................................53 SECTION 4.3. Increased LIBO Rate Loan Costs, etc..................................................53 SECTION 4.4. Funding Losses.......................................................................53 SECTION 4.5. Increased Capital Costs..............................................................54 SECTION 4.6. Taxes................................................................................54 SECTION 4.7. Payments, Computations, etc..........................................................57 SECTION 4.8. Sharing of Payments..................................................................57 SECTION 4.9. Setoff...............................................................................58 SECTION 4.10. Mitigation...........................................................................58 SECTION 4.11. Replacement of Lenders...............................................................58 ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION 5.1. Initial Credit Extension.............................................................59 SECTION 5.1.1. Resolutions, etc................................................................59 SECTION 5.1.2. Transaction Documents...........................................................60 SECTION 5.1.3. Closing Date Certificate........................................................60 SECTION 5.1.4. Consummation of Transactions....................................................60 SECTION 5.1.5. Closing Fees, Expenses, etc.....................................................61
-ii- TABLE OF CONTENTS (continued)
PAGE SECTION 5.1.6. Financial Information, Material Adverse Change, etc.............................61 SECTION 5.1.7. Compliance Certificate..........................................................61 SECTION 5.1.8. Opinions of Counsel.............................................................61 SECTION 5.1.9. [Reserved]......................................................................61 SECTION 5.1.10. Pledge and Security Agreement...................................................61 SECTION 5.1.11. [Reserved]......................................................................62 SECTION 5.1.12. Filing Agent, etc...............................................................62 SECTION 5.1.13. [Reserved]......................................................................62 SECTION 5.1.14. Insurance.......................................................................62 SECTION 5.1.15. Delivery of Notes...............................................................63 SECTION 5.1.16. Litigation, etc.................................................................63 SECTION 5.1.17. Governmental Approvals..........................................................63 SECTION 5.1.18. Satisfactory Legal Form.........................................................63 SECTION 5.1.19. Perfection Certificate..........................................................63 SECTION 5.1.20. Solvency Certificate............................................................63 SECTION 5.1.21. Cash Management Arrangements, etc...............................................63 SECTION 5.1.22. Initial Borrowing Base Certificate..............................................63 SECTION 5.1.23. Audit of Accounts Receivable, Accounts Payable, Inventory, etc..................63 SECTION 5.1.24. Asset Appraisal.................................................................64 SECTION 5.2. All Credit Extensions................................................................64 SECTION 5.2.1. Compliance with Warranties, No Default, etc.....................................64 SECTION 5.2.2. Credit Extension Request, etc...................................................64 ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.1. Organization, etc....................................................................65 SECTION 6.2. Due Authorization, Non-Contravention, etc............................................65 SECTION 6.3. Government Approval, Regulation, etc.................................................65 SECTION 6.4. Validity, etc........................................................................66 SECTION 6.5. Financial Information................................................................66 SECTION 6.6. No Material Adverse Change...........................................................66 SECTION 6.7. Litigation, Labor Controversies, etc.................................................66 SECTION 6.8. Subsidiaries.........................................................................66 SECTION 6.9. Ownership of Properties..............................................................67 SECTION 6.10. Taxes................................................................................67 SECTION 6.11. Pension and Welfare Plans............................................................67 SECTION 6.12. Environmental Warranties.............................................................67 SECTION 6.13. Accuracy of Information..............................................................68 SECTION 6.14. Regulations U and X..................................................................68
-iii- TABLE OF CONTENTS (continued)
PAGE SECTION 6.15. Issuance of Senior Notes; Status of Obligations as Senior Indebtedness, etc..................................................................69 SECTION 6.16. Solvency.............................................................................69 SECTION 6.17. Accounts.............................................................................69 SECTION 6.18. Fair Labor Standards Act.............................................................69 ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants................................................................70 SECTION 7.1.1. Financial Information, Reports, Notices, etc....................................70 SECTION 7.1.2. Maintenance of Existence; Compliance with Laws, etc.............................73 SECTION 7.1.3. Maintenance of Properties.......................................................73 SECTION 7.1.4. Insurance.......................................................................74 SECTION 7.1.5. Books and Records; Borrowing Base Audits........................................74 SECTION 7.1.6. Environmental Law Covenant......................................................75 SECTION 7.1.7. Use of Proceeds.................................................................75 SECTION 7.1.8. Future Subsidiaries.............................................................75 SECTION 7.1.9. Future Leased Property and Future Acquisitions of Real Property: Future Acquisition of Other Property...............................76 SECTION 7.1.10. Collection of Accounts..........................................................77 SECTION 7.1.11. Notification to Account Debtors.................................................77 SECTION 7.1.12. Mortgages.......................................................................78 SECTION 7.1.13. Phase I Environmental Reports...................................................78 SECTION 7.1.14. Deposit Account Control Agreements..............................................78 SECTION 7.2. Negative Covenants...................................................................79 SECTION 7.2.1. Business Activities.............................................................79 SECTION 7.2.2. Indebtedness....................................................................79 SECTION 7.2.3. Liens...........................................................................81 SECTION 7.2.4. Financial Condition and Operations..............................................83 SECTION 7.2.5. Investments.....................................................................84 SECTION 7.2.6. Restricted Payments, etc........................................................85 SECTION 7.2.7. Capital Expenditures, etc.......................................................87 SECTION 7.2.8. No Prepayment of Other Debt.....................................................87 SECTION 7.2.9. Issuance of Capital Securities..................................................88 SECTION 7.2.10. Consolidation, Merger, etc......................................................88 SECTION 7.2.11. Permitted Dispositions..........................................................88 SECTION 7.2.12. Modification of Certain Agreements..............................................89 SECTION 7.2.13. Transactions with Affiliates....................................................90 SECTION 7.2.14. Restrictive Agreements, etc.....................................................90 SECTION 7.2.15. Sale and Leaseback..............................................................91
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PAGE ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. Listing of Events of Default.........................................................91 SECTION 8.1.1. Non-Payment of Obligations......................................................91 SECTION 8.1.2. Breach of Warranty..............................................................91 SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations............................91 SECTION 8.1.4. Non-Performance of Other Covenants and Obligations..............................91 SECTION 8.1.5. Default on Other Indebtedness...................................................92 SECTION 8.1.6. Judgments.......................................................................92 SECTION 8.1.7. Pension Plans...................................................................92 SECTION 8.1.8. Change in Control...............................................................92 SECTION 8.1.9. Bankruptcy, Insolvency, etc.....................................................92 SECTION 8.1.10. Impairment of Security, etc.....................................................93 SECTION 8.1.11. Failure of Subordination........................................................93 SECTION 8.2. Action if Bankruptcy.................................................................93 SECTION 8.3. Action if Other Event of Default.....................................................94 ARTICLE IX THE ADMINISTRATIVE AGENT SECTION 9.1. Actions..............................................................................94 SECTION 9.2. Funding Reliance, etc................................................................95 SECTION 9.3. Exculpation..........................................................................95 SECTION 9.4. Successor............................................................................95 SECTION 9.5. Credit Extensions by Each Agent......................................................96 SECTION 9.6. Credit Decisions.....................................................................96 SECTION 9.7. Copies, etc..........................................................................96 SECTION 9.8. Reliance by Administrative Agent.....................................................96 SECTION 9.9. Defaults.............................................................................97 SECTION 9.10. Lead Arranger........................................................................97 SECTION 9.11. The Syndication Agent, The Documentation Agent and The Administrative Agent..........97 ARTICLE X Guaranty SECTION 10.1. Guaranty.............................................................................97 SECTION 10.2. Reinstatement, etc...................................................................98 SECTION 10.3. Guaranty Absolute, etc...............................................................98 SECTION 10.4. Waiver, etc..........................................................................99 SECTION 10.5. Postponement of Subrogation, etc.....................................................99
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PAGE ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. Waivers, Amendments, etc............................................................100 SECTION 11.2. Notices; Time.......................................................................101 SECTION 11.3. Payment of Costs and Expenses.......................................................102 SECTION 11.4. Indemnification.....................................................................102 SECTION 11.5. Survival............................................................................104 SECTION 11.6. Severability........................................................................104 SECTION 11.7. Headings............................................................................105 SECTION 11.8. Execution in Counterparts, Effectiveness, etc.......................................105 SECTION 11.9. Governing Law; Entire Agreement.....................................................105 SECTION 11.10. Successors and Assigns..............................................................105 SECTION 11.11. Other Transactions..................................................................109 SECTION 11.12. Forum Selection and Consent to Jurisdiction.........................................109 SECTION 11.13. Waiver of Jury Trial................................................................110 SECTION 11.14. Confidentiality.....................................................................110 SECTION 11.15. Additional Borrowers................................................................111 SECTION 11.16. Release of Certain Borrowers........................................................111 SECTION 11.17. Limitation on Obligations of Certain Borrowers......................................111 SCHEDULE I - Disclosure Schedule SCHEDULE II - Percentages; LIBOR Office; Domestic Office SCHEDULE III - Real Estate with Title Insurance Policies SCHEDULE IV - Subsidiary Guarantors SCHEDULE V - Existing Letters of Credit SCHEDULE VI - Deposit Accounts EXHIBIT A-1 - Form of Revolving Note EXHIBIT A-2 - Form of Swingline Note EXHIBIT B-1 - Form of Borrowing Request EXHIBIT B-2 - Form of Issuance Request EXHIBIT B-3 - Form of Continuation/Conversion Notice EXHIBIT B-4 - Notice of Cash Dominion EXHIBIT C - Form of Perfection Certificate EXHIBIT D - Form of Closing Date Certificate EXHIBIT E-1 - Form of Compliance Certificate EXHIBIT E-2 - Form of Borrowing Base Certificate EXHIBIT E-3 - Form of Solvency Certificate EXHIBIT F - Form of Joinder Agreement EXHIBIT G - Form of Pledge and Security Agreement EXHIBIT H - Form of Mortgage EXHIBIT I - Form of Lender Assignment Agreement
-vi- EXHIBIT J-1 - Form of Opinion of Counsel for the Obligors EXHIBIT J-2 - Form of Opinion of Special Local Counsel for the Obligors
-vii- EX-10.5 22 a2082545zex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 Peter C. Mitchell Executive Vice President and Chief Financial Officer Von Hoffmann Corporation 1000 Camera Avenue St. Louis, MO 63126 314 966 0909 March 26, 2002 Dear Peter: This letter agreement (this "Agreement") confirms our understanding that Von Hoffmann Corporation (which, together with its subsidiaries and affiliates is hereinafter referred to as the "Company" or "you") has engaged Credit Suisse First Boston Corporation and its affiliates, successors and assigns, as appropriate ("CSFB" or "we"), to act as its financial advisor for a period of five (5) years (unless terminated earlier pursuant to Section 6 of this Agreement) commencing upon the execution of this Agreement, with respect to the matters set forth in the second paragraph of Section 1 below. Additionally, CSFB has been engaged by the Company to provide the services set forth in the third paragraph of Section 1 below (such engagements are collectively referred to herein as the "Financial Advisory Assignment"). 1. APPOINTMENT AND ACCEPTANCE The Company hereby appoints CSFB as its financial advisor in connection with the Financial Advisory Assignment. CSFB hereby accepts such appointment, subject to the terms and conditions of this Agreement. In connection with the Financial Advisory Assignment, we propose to undertake certain services on your behalf, to the extent appropriate and requested by you, which shall consist of the following: (i) assisting you in analyzing the Company's operations and its historical performance; (ii) assisting you in analyzing the Company's future prospects; (iii) assisting you in preparing a strategic plan for the Company. Additionally, in connection with the Financial Advisory Assignment, we have been assisting the Company in evaluating its capital structure, analyzing financing strategies and developing an overall financing package, including a potential restructuring of its long-term debt, a new equity capital infusion and possible strategic alternatives. The Company acknowledges and agrees that CSFB has been retained solely to provide the advice or services set forth in this Agreement. CSFB's undertakings under this Agreement are subject to our continued satisfaction with the results of our ongoing review of the Company's business and affairs. 2. FEES AND EXPENSES As compensation to CSFB for its services hereunder, the Company agrees to pay CSFB as follows: (a) In connection with the Financial Advisory Assignment, (i) an annual financial advisory fee of $500,000, payable in equal quarterly installments beginning on the ninetieth day following the execution of this Agreement and continuing through the date of termination or expiration of this Agreement (if payable upon termination of this Agreement, such final installment to be paid on the effective date of such termination and prorated for any final period consisting of less than ninety days) and (ii) an initial advisory fee of $1,000,000 in consideration of the recent financial advisory services that CSFB has provided to the Company in evaluating the Company's capital structure, analyzing financing strategies and developing an overall financing package, including a potential restructuring of its long-term debt, a new equity capital infusion and possible strategic alternatives; and (b) Promptly upon request, the Company will reimburse CSFB's out-of-pocket expenses incurred in connection with its activities hereunder, including, without limitation, the fees and disbursements of its legal counsel, if any, and of any other advisor retained by CSFB (it being understood that the retention of any such advisor, other than legal counsel, will be made with the prior approval of the Company, which approval will not be unreasonably withheld), resulting from or arising out of this engagement. All fees and expenses payable hereunder are net of all applicable withholding and similar taxes. 3. INFORMATION The Company will furnish CSFB with all financial and other information concerning the Company as CSFB deems appropriate in connection with the performance of the services contemplated by this engagement and, in that connection, will provide CSFB with reasonable access to the Company's officers, directors, employees, agents, accountants, counsel and other representatives. The Company acknowledges and confirms that CSFB (i) will rely solely on such information in the performance of the services contemplated by this engagement without assuming any responsibility for independent investigation or verification thereof, (ii) assumes no responsibility for the accuracy or completeness of such information or any other information regarding the Company and (iii) will not make any appraisal of any assets of the Company. 4. INDEMNIFICATION Since CSFB will be acting on behalf of the Company in connection with its engagement hereunder and as further consideration for CSFB's services hereunder, the Company and CSFB agree to the indemnity provisions and other matters set forth in Annex A hereto which Annex A is incorporated herein by reference. The terms and provisions of Annex A shall survive any termination or expiration of this Agreement. 5. ADDITIONAL SERVICES If, at any time during the term of this Agreement or prior to the date which is five (5) years from the date hereof (whichever is later), the Company is considering a Transaction (as defined herein) and CSFB is chosen by the Company to advise with respect to such Transaction, then CSFB will be paid, as compensation for such services, customary fees to be mutually agreed upon by the parties hereto at the appropriate time. The terms of any such additional engagement will be set forth in a separate letter agreement containing terms and conditions to be mutually agreed upon by the parties hereto, including, without limitation, appropriate indemnification provisions. As used herein, the term Transaction shall mean (i) the sale, merger, consolidation or other business combination, in one or more transactions, involving any portion of the business, securities or assets of the Company; (ii) the acquisition (and any related 2 matters such as financings, divestitures, etc.), in one or more transactions, of all or a portion of the business, securities or assets of another entity or person; (iii) any recapitalization, refinancing, repurchase or restructuring of the Company's equity or debt securities or indebtedness or any amendments or modifications to the Company's debt securities or indentures whether or not in connection therewith, involving, by or on behalf of the Company, an offer to purchase or exchange for cash, property, securities, indebtedness or other consideration, or a solicitation of consents, waivers or authorizations with respect thereto; (iv) any spin-off, split-off or other extraordinary dividend of cash, securities or other assets to stockholders of the Company; or (v) any sale of securities of the Company effected pursuant to a private sale or an underwritten public offering. The Company further understands that if CSFB is asked to act for the Company in any other formal additional capacity not specifically addressed in this Agreement, such activities shall constitute separate engagements and the terms of any such additional engagements will be embodied in one or more separate written agreements containing terms and conditions to be mutually agreed upon by the parties hereto, including, without limitation, appropriate indemnification provisions. The indemnity provisions in Annex A hereto shall apply to any such other activities (unless superseded by an indemnity provision set forth in a separate agreement applicable to any such additional engagements) and shall remain in full force and effect regardless of any completion, modification or termination of CSFB's engagement(s). 6. TERMINATION This Agreement may be terminated by CSFB or the Company at any time upon written notice to the other party. Upon any termination or expiration of this Agreement, CSFB will be entitled to prompt payment of all fees accrued prior to such termination or expiration and reimbursement of all out-of-pocket expenses as described above. No termination of CSFB's engagement hereunder shall affect (i) the Company's obligations under Annex A hereto or (ii) the provisions of Sections 4 through 7 of this Agreement. 7. CONFIDENTIALITY; GENERAL No advice rendered by CSFB, whether formal or informal, may be disclosed, in whole or in part, or summarized, excerpted from or otherwise referred to without CSFB's prior written consent. To the extent consistent with legal requirements, all information given to one party of this Agreement (such party the "Recipient Party") by the other party (the "Providing Party"), including, without limitation, this Agreement, unless publicly available or otherwise available to the Recipient Party without restriction or breach of any confidentiality agreement, will be held by the Recipient Party in confidence and will not, without the Providing Party's prior approval, be disclosed to anyone other than the Recipient's agents and advisors who require such information to perform services for the Providing Party as contemplated by this Agreement (and who agree to use such information only in connection with such services) or used by such person for any purpose other than those contemplated by this Agreement. Each party hereto shall be responsible for violations of its respective agents and advisors of the obligations set forth in this paragraph. This Agreement and Annex A hereto contain the entire agreement of the parties with respect to the subject matter hereof and supersede and take precedence over all prior agreements or understandings, whether oral or written, between CSFB and the Company including, without limitation, the Letter Agreement, dated May 22, 1997 (the "DLJSC Letter Agreement"), between the Company and Donaldson, Lufkin & Jenrette Securities 3 Corporation ("DLJSC"), which DLJSC Letter Agreement is hereby terminated by DLJSC in accordance with its terms. The Company has all requisite power and authority to enter into this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly authorized by all necessary action on the part of the Company and has been duly executed and delivered by the Company and constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms. In connection with this engagement, CSFB is acting as an independent contractor and not in any other capacity, with duties owing solely to the Company. The validity and interpretation of this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to agreements made and to be fully performed therein (excluding the conflicts of law rules). All actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in the Borough of Manhattan in the City of New York, to whose jurisdiction the Company hereby irrevocably submits. The Company hereby irrevocably waives any defense or objection to the New York forum designated above. Each of CSFB and the Company, to the extent permitted by law, on behalf of their respective equity holders and creditors, hereby knowingly, voluntarily and irrevocably waives all right to trial by jury in any action, suit, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of the engagement of CSFB pursuant to, or the performance by CSFB of the services contemplated by, this agreement. The benefits of this Agreement shall inure to the parties hereto, their respective successors and assigns, and to the indemnified parties hereunder and their respective successors and assigns and representatives, and the obligations and liabilities assumed in this Agreement by the parties hereto shall be binding upon their respective successors and assigns. Please note that CSFB is a full service securities firm engaged in securities trading and brokerage activities, as well as providing investment banking and financial advisory services. In the ordinary course of our trading and brokerage activities, CSFB or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its or their accounts or for the accounts of customers, in debt or equity securities of the Company. Nothing herein shall, in itself, prevent CSFB from engaging in future transactions involving companies in a similar industry to the Company, provided the Company's confidential information is not used in connection with such engagement. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement or Annex A hereto, which shall remain in full force and effect. 4 We are delighted to accept this engagement and look forward to working with you on this assignment. If this Agreement correctly sets forth your understanding of the agreement between CSFB and the Company with respect to this engagement, please sign and return to us the enclosed copy of this Agreement. This Agreement signed by you shall constitute a binding agreement between us as of the date first above written. Very truly yours, CREDIT SUISSE FIRST BOSTON CORPORATION By: ------------------------ Name: Title: ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN: VON HOFFMANN CORPORATION By: ------------------------------------- Name: Peter C. Mitchell Title: Executive Vice President and Chief Financial Officer FOR PURPOSES OF SECTION 7 HEREOF, ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: ------------------------------------- Name: Title: 5 ANNEX A In further consideration of the engagement by Von Hoffmann Corporation (the "Company") of Credit Suisse First Boston Corporation ("CSFB") to act in the capacities set forth in our engagement letter dated the date hereof (the "engagement"), in the event that CSFB or any of its affiliates, the respective directors, officers, partners, agents or employees of CSFB or any of its affiliates, or any other person controlling CSFB or any of its affiliates (collectively, "Indemnified Persons") becomes involved in any capacity in any action, claim, suit, investigation or proceeding, actual or threatened, brought by or against any person, including stockholders of the Company, in connection with or as a result of the engagement or any matter referred to in the engagement, the Company will reimburse such Indemnified Person for its reasonable and customary legal and other expenses (including, without limitation, the costs and expenses incurred in connection with investigating, preparing for and responding to third party subpoenas or enforcing this agreement or any related engagement agreement) incurred in connection therewith as such expenses are incurred. The Company will also indemnify and hold harmless any Indemnified Person from and against, and the Company agrees that no Indemnified Person shall have any liability to the Company or its owners, parents, affiliates, security holders or creditors for, any losses, claims, damages or liabilities (including actions or proceedings in respect thereof) (collectively, "Losses") related to or arising out of the engagement or CSFB's performance thereof, except that this section shall not apply to any Losses that are finally determined by a court or arbitral tribunal to have resulted primarily from the bad faith or gross negligence of CSFB. If such indemnification is for any reason not available or insufficient to hold an Indemnified Person harmless, the Company agrees to contribute to the Losses involved in such proportion as is appropriate to reflect the relative benefits received (or anticipated to be received) by the Company, on the one hand, and by CSFB, on the other hand, with respect to the engagement or, if such allocation is determined by a court or arbitral tribunal to be unavailable, in such proportion as is appropriate to reflect other equitable considerations such as the relative fault of the Company, on the one hand, and of CSFB, on the other hand; PROVIDED, HOWEVER, that, to the extent permitted by applicable law, the Indemnified Persons shall not be responsible for amounts which in the aggregate are in excess of the amount of all fees actually received by CSFB from the Company in connection with the engagement. Relative benefits to the Company, on the one hand, and to CSFB, on the other hand, with respect to the engagement shall be deemed to be in the same proportion as (i) the total value received or proposed to be received by the Company in connection with the transactions contemplated by this Agreement, whether or not consummated, bears to (ii) all fees actually received by CSFB in connection with the engagement. Relative fault shall be determined, in the case of Losses arising out of or based on any untrue statement or any alleged untrue statement of a material fact or omission or alleged omission to state a material fact, by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company to CSFB and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act of 1933, as amended) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Company will not, without CSFB's prior written consent, settle, compromise, or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action claim, suit, investigation or proceeding (an "Action") in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is a party therein) unless the Company has given CSFB reasonable prior written notice thereof and such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Person from any liabilities arising out of such Action. The Company will not permit any such settlement, compromise, consent or termination to include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an Indemnified Person, without such Indemnified Person's prior written consent. No Indemnified Person seeking indemnification, reimbursement or contribution under this agreement will, without the Company's prior written consent, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any Action referred to herein. Prior to entering into any agreement or arrangement with respect to, or effecting, any merger, statutory exchange or other business combination or proposed sale or exchange, dividend or other distribution or liquidation of all or a significant portion of its assets in one or a series of transactions or any significant recapitalization or reclassification of its outstanding securities that does not directly or indirectly provide for the assumption of the obligations of the Company set forth herein, the Company will promptly notify CSFB in writing thereof and, if requested by CSFB, shall arrange in connection therewith alternative means of providing for the obligations of the Company set forth herein, including the assumption of such obligations by another party, insurance, surety bonds or the creation of an escrow, in each case in an amount and on terms and conditions satisfactory to CSFB. The Company's obligations hereunder shall be in addition to any rights that any Indemnified Person may have at common law or otherwise. The Company acknowledges that in connection with the engagement CSFB is acting as an independent contractor and not in any other capacity with duties owing solely to the Company. This agreement and any other agreements relating to the engagement shall be governed by and construed in accordance with the laws of the State of New York, applicable to contracts made and to be performed therein and, in connection therewith, the parties hereto consent to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County or the United States District Court for the Southern District of New York and the respective appellate courts thereof. Notwithstanding the foregoing, solely for the purpose of enforcing the Company's obligations hereunder, the Company consents to personal jurisdiction, service and venue in any court proceeding in which any claim subject to this Agreement is brought by or against any Indemnified Person. CSFB HEREBY AGREES, AND THE COMPANY HEREBY AGREES ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SECURITY HOLDERS, TO WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR ACTION ARISING OUT OF THE ENGAGEMENT, CSFB'S PERFORMANCE THEREOF OR THIS AGREEMENT. The provisions of this Agreement shall apply to the engagement (including related activities prior to the date hereof) and any modification thereof and shall remain in full force and effect regardless of the completion or termination of the engagement. If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. VON HOFFMANN CORPORATION By: ------------------------------------------ Name: Peter C. Mitchell Title: Executive Vice President and Chief Financial Officer Accepted and Agreed to: CREDIT SUISSE FIRST BOSTON CORPORATION By ------------------------------------------ Name: Title: 7 EX-23.1 23 a2082545zex-23_1.txt EXHIBIT 23.1 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 June 20, 2002, with respect to the financial statements and schedule of Von Hoffmann Holdings Inc. (Holdings), included in the Registration Statement (Form S-1 No. 333- ) and related Prospectus of Holdings and Von Hoffmann Corporation (Company) for the registration of $215,000,000 of Company's 10 1/4% Senior Notes due 2009, $100,000,000 of Company's 10 3/8% Senior Subordinated Notes due 2007, and $48,056,397 of Holdings' 13 1/2% Subordinated Exchange Debentures due 2009. /s/ Ernst & Young LLP St. Louis, Missouri June 20, 2002 -----END PRIVACY-ENHANCED MESSAGE-----