-----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, J/S3df64HM3QmQq+XrdjLPLXfjxfElqPA0e4yjfihKiuaj5gC1jO+2UfnIvc10Wq RAhntMC3opMnzuod03dy5g== 0001068800-01-500211.txt : 20010814 0001068800-01-500211.hdr.sgml : 20010814 ACCESSION NUMBER: 0001068800-01-500211 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL WELL INC CENTRAL INDEX KEY: 0000920321 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 841250533 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12551 FILM NUMBER: 1707094 BUSINESS ADDRESS: STREET 1: 8310 S VALLEY HWY #400 STREET 2: STE 160 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3037908023 MAIL ADDRESS: STREET 1: 8310 S VALLEY HWY #400 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: MAIL WELL HOLDINGS INC DATE OF NAME CHANGE: 19940328 10-Q 1 tenq.txt MAIL-WELL, INC. FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 Commission file number 1-12551 MAIL-WELL, INC. (Exact name of Registrant as specified in its charter.) COLORADO 84-1250533 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 8310 S. Valley Highway, #400 Englewood, CO 80112 (Address of principal executive offices) (Zip Code) 303-790-8023 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECKMARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes /X/ No / / As of August 1, 2001, the Registrant had 47,653,248 shares of Common Stock, $0.01 par value, outstanding. ================================================================================ 1 MAIL-WELL, INC. AND SUBSIDIARIES TABLE OF CONTENTS - ----------------------------------------------------------------------------------------------------------
PAGE ---- Part I - FINANCIAL INFORMATION Item 1. Financial Statements...................................................... 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................................... 17 Part II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders....................... 18 Item 6. Exhibits and Reports on Form 8-K ......................................... 18 Signature Page.................................................................................. 21
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 2001 DECEMBER 31, 2000 (UNAUDITED) ------------- ------------------- ASSETS Current assets Cash and cash equivalents $ 245 $ 94 Accounts receivable, net 104,874 146,529 Investment in accounts receivable securitization 122,974 75,427 Inventories, net 117,732 131,417 Net assets of discontinued operations 305,233 405,514 Net assets held for sale 55,406 - Other current assets 50,566 48,948 ----------- ----------- Total current assets 757,030 807,929 Property, plant and equipment, net 395,623 431,025 Intangible assets, net 365,677 389,148 Other assets, net 42,814 45,064 ----------- ----------- Total assets $ 1,561,144 $ 1,673,166 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 139,844 $ 127,912 Accrued compensation 45,890 48,444 Other current liabilities 63,221 57,905 Current portion of long-term debt 40,725 40,040 ----------- ----------- Total current liabilities 289,680 274,301 Long-term debt 861,741 879,753 Deferred income taxes 89,892 107,047 Other long-term liabilities 25,241 26,212 ----------- ----------- Total liabilities 1,266,554 1,287,313 SHAREHOLDERS' EQUITY Common stock, $0.01 par value; 100,000,000 shares authorized, 47,656,801 and 47,454,879 shares issued and outstanding in 2001 and 2000, respectively 474 474 Paid-in capital 210,092 210,067 Retained earnings 93,937 182,840 Accumulated other comprehensive loss (9,913) (7,528) ----------- ----------- Total shareholders' equity 294,590 385,853 ----------- ----------- Total liabilities and shareholders' equity $ 1,561,144 $ 1,673,166 =========== =========== See notes to condensed consolidated financial statements.
3 MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, -------- -------- 2001 2000 2001 2000 ---- ---- ---- ---- Net sales ...................................... $ 418,278 $ 442,148 $ 851,254 $ 876,822 Cost of sales .................................. 332,263 349,398 677,405 689,209 --------- --------- --------- --------- Gross profit ................................... 86,015 92,750 173,849 187,613 Other operating expenses: Selling and administrative expenses .......... 61,071 61,536 123,946 118,756 Amortization of intangibles .................. 3,427 2,691 6,702 5,441 Impairment loss on assets held for sale ...................................... 8,807 - 8,807 - Restructuring charges ........................ 17,674 - 17,674 - --------- --------- --------- --------- Operating income (loss) ........................ (4,964) 28,523 16,720 63,416 Other expense (income): Interest expense ............................. 13,797 17,134 28,548 31,052 Other expense (income) ....................... 538 (55) 1,064 (300) --------- --------- --------- --------- Income (loss) from continuing operations before income taxes .......................... (19,299) 11,444 (12,892) 32,664 Income tax provision (benefit) ................. (4,349) 3,932 (2,129) 12,619 --------- --------- --------- --------- Income (loss) from continuing operations ....... (14,950) 7,512 (10,763) 20,045 Income from discontinued operations: Income (loss) from discontinued operations, net of tax ................................ (1,610) 3,732 (2,175) 7,535 Loss on disposal, net of tax benefit ......... (75,965) - (75,965) - --------- --------- --------- --------- Income (loss) before extraordinary items ....... (92,525) 11,244 (88,903) 27,580 Extraordinary items, net of taxes .............. - - - 1,447 --------- --------- --------- --------- Net income (loss) .............................. $ (92,525) $ 11,244 $ (88,903) $ 29,027 ========= ========= ========= ========= Earnings (loss) per share - basic Continuing operations ..................... $ (0.31) $ 0.15 $ (0.23) $ 0.41 Discontinued operations ................... (1.64) 0.08 (1.64) 0.15 Extraordinary items ....................... - - - 0.03 --------- --------- --------- --------- Earnings (loss) per share - basic ......... $ (1.95) $ 0.23 $ (1.87) $ 0.59 ========= ========= ========= ========= Earnings (loss) per share - diluted Continuing operations ..................... $ (0.31) $ 0.15 $ (0.23) $ 0.39 Discontinued operations ................... (1.64) 0.07 (1.64) 0.13 Extraordinary items ....................... - - - 0.03 --------- --------- --------- --------- Earnings (loss) per share - diluted ....... $ (1.95) $ 0.22 $ (1.87) $ 0.55 ========= ========= ========= ========= Weighted average shares - basic ................ 47,464 49,273 47,460 49,251 Weighted average shares - diluted .............. 47,464 57,116 47,460 57,466 See notes to condensed consolidated financial statements.
4 MAIL-WELL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED ---------------- JUNE 30, -------- 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) from continuing operations ............................... $ (10,763) $ 20,045 Adjustments to reconcile net income (loss) to cash provided by operating activities: Write-down of assets held for sale ................................... 8,807 - Depreciation and amortization ........................................ 30,948 28,355 Extraordinary loss on early retirement of debt ....................... - (2,355) Deferred income taxes ................................................ (979) 2,861 Other ................................................................ (20) 51 Changes in operating assets and liabilities, excluding the effects of businesses acquired: Trade receivables ................................................. 24,912 2,845 Inventories ....................................................... 3,127 (12,361) Accounts payable and accrued expenses ............................. 15,547 5,194 Net change in other current assets and other current liabilities .. 34,510 (8,570) ----------- ----------- Net cash provided by operating activities ......................... 106,089 36,065 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition costs, net of cash acquired ................................ (3,844) (328,093) Capital expenditures ................................................... (15,661) (32,254) Investment in marketable securities, net ............................... 518 (12,594) Proceeds from the sale of assets ....................................... 3,335 1,142 ----------- ----------- Net cash used in investing activities ............................. (15,652) (371,799) CASH FLOWS FROM FINANCING ACTIVITIES Decrease in accounts receivable securitization ......................... (75,000) (73,500) Proceeds from common stock issuance .................................... 6 - Proceeds from long-term debt ........................................... 361,530 940,374 Repayments of long-term debt ........................................... (375,323) (516,239) Debt issuance costs .................................................... (2,260) (14,164) Redemption of a nonvoting common stock of a subsidiary ................. - (3,500) ----------- ----------- Net cash provided by (used in) financing activities ............... (91,047) 332,971 CASH FLOWS FROM DISCONTINUED OPERATIONS Net cash provided by discontinued operations ........................... 773 2,506 ----------- ----------- Effect of exchange rate changes on cash and cash equivalents .............. (12) - ----------- ----------- Net increase (decrease) in cash and cash equivalents ...................... 151 (257) Cash and cash equivalents at beginning of year ............................ 94 290 ----------- ----------- Cash and cash equivalents at end of year .................................. $ 245 $ 33 =========== =========== See notes to condensed consolidated financial statements.
5 MAIL-WELL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements of Mail-Well, Inc. and subsidiaries (collectively, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. Certain amounts included in the statement of operations for the three- and six-months ended June 30, 2000 have been reclassified to conform with the current year presentation including the reclassification of billed freight from cost of sales and discontinued operations previously reported as part of the continuing operations. See Exhibit 99.1 filed herewith for the Consolidating Condensed Financial Statements of MWI ("Issuer"), Guarantor Subsidiaries, Non-guarantor Subsidiaries and Parent Guarantor. These statements are provided to comply with the reporting requirements under the indenture for the 8 3/4% Senior Subordinated Notes due in 2008. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. 2. RESTRUCTURING 2001 Restructuring - In May 2001, the Company approved a new strategic plan. In connection with the new strategic plan, the Company approved plans to consolidated certain of its operations to eliminate excess internal capacity in order to improve its cost effectiveness and long-term competitive position. A liability in the amount of $15.4 million was recorded in the second quarter of 2001 in connections with these plans. Additional cash restructuring charges of $2.3 million were recorded for a total of $17.7 million of restructuring charges. The following table and discussion presents additional detail related to this charge:
COMMERCIAL (IN THOUSANDS) ENVELOPE PRINTING CORPORATE TOTAL --------------------------------------------------------------------------- Termination and related employee costs $ 8,872 $ 372 $ - $ 9,244 Lease termination costs 1,368 346 - 1,714 Exit costs 3,699 1,080 - 4,779 Strategic assessment costs - - 1,937 1,937 --------------------------------------------------------------------------- $13,939 $1,798 $1,937 $17,674 ===========================================================================
The Envelope segment implemented a plan to consolidate nine of its manufacturing facilities into other facilities. This consolidation plan, which will eliminate substantial excess internal capacity, will take 18 months to execute and will result in additional restructuring expenses during that time. The termination and related employee costs recorded in the second quarter of 2001 cover approximately 920 employees expected to be terminated. The first of the plant closures is expected to be completed in August 2001. 6 The Commercial Printing segment implemented a plan to consolidate its two printing operations in the Philadelphia, Pennsylvania area into an existing facility. This plan will improve the cost effectiveness of these two operations and their competitive position in the Philadelphia market. The consolidation is expected to be completed in December 2001 and will result in additional charges as the plan is executed. The termination and related employee costs recorded cover approximately 25 employees expected to be terminated. The Company incurred consulting and other costs in connection with its strategic assessment and expects to incur additional such expenses as its new strategy is implemented. 2000 Restructuring - In December 2000, the Company began the comprehensive review of its business operations and recorded a restructuring charge to cover certain of the expenses of restructuring plans that were approved. During the six months ended June 30, 2001, the Company did not incur material additional restructuring costs. The Envelope segment has completed the closure of its Vancouver, Washington facility, and the Commercial Printing segment has closed its bindery operation in Mexico. Of the total 184 employees expected to be terminated as a result of these two closures, 169 had been terminated as of June 30, 2001. The Commercial Printing segment expects to close a manufacturing facility in the third quarter of 2001, at which time all restructuring plans implemented in December 2000 by the Commercial Printing and Envelope segments will be complete. A summary of activity charged to the restructuring liability during the six-months ended June 30, 2001 was as follows:
(IN THOUSANDS) 2000 RESTRUCTURE ---------------------------------------------------------------- Balance at December 31, 2000 $ 3,146 Transfer of reserves related to discontinued operations (1,575) Cash payments for severance (529) Cash payments for property exit costs (336) Cash payments for other exit activities (414) ---------------------------------------------------------------- Balance at June 30, 2001 $ 292 ================================================================
3. DISCONTINUED OPERATIONS In connection with the new strategic plan, the Company adopted a formal plan to sell its Label and Printed Office Products segments. These segments have been segregated from continuing operations and reported as discontinued operations in the accompanying consolidated financial statements. The reported loss on disposition of these two business segments includes the write-down to net realizable value based on estimated proceeds, costs associated with the planned dispositions, the estimated loss from operations of the discontinued businesses through the expected date of these dispositions and an income tax benefit of approximately $1.7 million. The estimated loss from operations includes allocated interest expense based upon the relative net assets of the Label and Printed Office Products segments in the amounts of $6.3 and $13.1 for the three- and six-months ended June 30, 2001, respectively, and $6.8 and $11.9 for the three- and six-months ended June 30, 2000, respectively. The Company expects to complete the sales of both segments by December 31, 2001. 7 The Company's financial statements have been presented to reflect the Label and Printed Office Products segments as discontinued operations for all periods presented. Operating results of the discontinued operations are summarized as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, (IN THOUSANDS) 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------- Label segment: Net sales $ 58,877 $ 59,747 $ 115,420 $ 115,992 Income from operations before interest and taxes 2,355 3,984 4,724 6,710 Allocated interest expense 2,581 3,223 5,344 5,625 Loss on disposal 60,090 - 60,090 - Income tax expense (benefit) (14,602) 318 (14,919) 453 - ------------------------------------------------------------------------------------------------------------------------- Income (loss) from the discontinued Label segment $ (45,714) $ 443 $ (45,791) $ 632 - ------------------------------------------------------------------------------------------------------------------------- Printed Office Products segment: Net sales $ 94,295 $ 101,076 $ 193,998 $ 174,769 Income from operations before interest and taxes 1,070 8,756 5,430 16,299 Allocated interest expense 3,756 3,587 7,777 6,259 Loss on disposal 17,356 - 17,356 - Income tax expense 11,819 2,266 12,646 4,195 - ------------------------------------------------------------------------------------------------------------------------- Income (loss) from the discontinued Printed Office Products segment $ (31,861) $ 2,903 $ (32,349) $ 5,845 - ------------------------------------------------------------------------------------------------------------------------- Income from the discontinued Extrusion Coating and Laminating segment - 386 - 1,058 - ------------------------------------------------------------------------------------------------------------------------- Total income (loss) from the discontinued operations $ (77,575) $ 3,732 $ (78,140) $ 7,535 - -------------------------------------------------------------------------------------------------------------------------
The assets and liabilities of discontinued operations, which have been reflected on a net basis in the consolidated balance sheets, are summarized as follows:
JUNE 30, DECEMBER 31, (IN THOUSANDS) 2001 2000 - ------------------------------------------------------------------------------ Label segment: Current assets $ 58,544 $ 57,221 Long-term assets 104,240 148,259 - ------------------------------------------------------------------------------ Total assets 162,784 205,480 Current liabilities 43,732 30,732 Long-term liabilities 4,027 1,565 - ------------------------------------------------------------------------------ Net assets of the discontinued Label segment 115,025 173,183 - ------------------------------------------------------------------------------ Printed Office Products segment: Current assets $ 57,436 $ 59,400 Long-term assets 217,903 210,023 - ------------------------------------------------------------------------------ Total assets 275,339 280,423 Current liabilities 50,508 39,410 Long-term liabilities 34,623 8,682 - ------------------------------------------------------------------------------ Net assets of the discontinued Printed Office Products segment 190,208 232,331 - -------------------------------------------------------------- -------------- Total net assets of discontinued operations 305,233 405,514 - ------------------------------------------------------------------------------
8 Net assets of discontinued operations include the write-down of assets to estimated net realizable value, the accrual of obligations associated with the sale of the two segments, and deferred tax assets and liabilities related to these two segments. 4. ASSETS HELD FOR SALE The Company's strategic plan also includes the sale of certain operations that are not strategic to its Envelope and Commercial Printing segments. Certain of these assets were written down to estimated fair market value based on estimated sales proceeds. This resulted in an impairment charge in the second quarter of 2001 of $8.8 million. The Company expects to complete the dispositions of these operations prior to December 31, 2001. The following table presents the sales and operating income of the assets held for sale for the three- and six- months ended June 30, 2001. Also presented are the assets and liabilities of these operations that are reported as "assets held for sale" in the accompanying condensed balance sheet.
(IN THOUSANDS) ------------------------------------------------------- Three-months ended June 30, 2001: Sales $26,761 Operating income 3,326 ------------------------------------------------------- Six-months ended June 30, 2001: Sales $49,994 Operating income 5,638 ------------------------------------------------------- ------------------------------------------------------- Assets of businesses held for sale $65,427 Liabilities of businesses held for (10,021) sale ------------------------------------------------------- Net assets held for sale $55,406 =======
9 5. INVENTORIES Inventory by major category were:
(in thousands) JUNE 30, 2001 DECEMBER 31, 2000 - ------------------------------------------------------------------------------ Raw materials $ 31,481 $ 44,083 Work in process 27,241 27,967 Finished goods 63,385 63,684 - ------------------------------------------------------------------------------ 122,107 135,734 Reserves (4,375) (4,317) - ------------------------------------------------------------------------------ $ 117,732 $ 131,417 =========== =============
6. COMPREHENSIVE INCOME (LOSS) A summary of comprehensive income (loss) is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- (in thousands) JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 2001 JUNE 30, 2000 ------------- ------------- ------------- ------------- Net income (loss) $ (92,525) $ 11,244 $ (88,903) $ 29,027 Other comprehensive income (loss): Currency translation adjustments, net 5,062 (3,775) (1,465) (4,492) Unrealized gain (loss) on investments, net 1,688 90 547 55 Pension liability adjustment, net (1,583) - (1,467) - - ------------------------------------------------------------------------------------------------------------ Total other comprehensive income (loss) 5,167 (3,685) (2,385) (4,547) - ------------------------------------------------------------------------------------------------------------ Comprehensive income (loss) $ (87,358) $ 7,559 $ (91,288) $ 24,480 ========= ======== ========== =========
10 7. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share exclude dilution and are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. A reconciliation of the amounts included in the computation of basic earnings (loss) per share and diluted earnings (loss) per share is as follows:
THREE-MONTHS ENDED SIX-MONTHS ENDED ------------------ ---------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, (IN THOUSANDS, EXCEPT PER SHARE AMOUNT) 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------ Numerator: Numerator for basic earnings (loss) per share - income (loss) from continuing operations $(14,950) $ 7,512 $(10,762) $20,045 Interest on Convertible Notes - 1,214 - 2,524 - ------------------------------------------------------------------------------------------------------------- Numerator for diluted earnings (loss) per share - income (loss) from continuing operations after assumed conversions $(14,950) $ 8,726 $(10,762) $22,569 ============================================================================================================ Denominator: Denominator for basic earnings (loss) per share - weighted average shares 47,464 49,273 47,460 49,251 Effects of dilutive securities: Stock options - 524 - 566 Conversion of Convertible Notes - 7,319 - 7,602 Other - - - 47 - ------------------------------------------------------------------------------------------------------------- Denominator for diluted earnings (loss) per share - adjusted weighted average shares and assumed conversions 47,464 57,116 47,460 57,466 ============================================================================================================ Earnings (loss) per share from continuing operations: Basic $ (0.31) $ 0.15 $ (0.23) $ 0.41 ============================================================================================================ Diluted $ (0.31) $ 0.15 $ (0.23) $ 0.39 ============================================================================================================
During the three- and six-months ended June 30, 2001, interest on the Convertible Notes in the amount of $1,214,000 and $2,427,000, respectively, and shares of 7,319,000 that would be issued upon assumed conversion of the Convertible Notes were excluded from the calculation of diluted earnings (loss) per share due to the antidilutive effect on earnings (loss) per share. In addition, in 2001, the outstanding options to purchase approximately 6,500,000 common shares were excluded from the calculation of diluted earnings (loss) per share for the three- and six- months ended June 30, 2001 because the effect would be antidilutive. The outstanding options in 2000 to purchase approximately 1,959,900 and 1,917,510 common shares were excluded from the calculation of diluted earnings per share because the exercise price of the options exceeded the average market price for the three- and six-months ended June 30, 2000, respectively. 11 8. LONG-TERM DEBT Long-term debt consists of the following:
JUNE 30, DECEMBER 31, (IN THOUSANDS) 2001 2000 - ---------------------------------------------------------------------------- Bank borrowings: Secured Tranche A term loan, due 2006 $208,630 $237,586 Secured Tranche B term loan, due 2007 193,730 209,603 Unsecured loan, due 2003 12,532 15,559 Unsecured revolving loan facility 1,816 - Secured revolving loan facility 33,000 - Senior Subordinated Notes, due 2008 300,000 300,000 Convertible Subordinated Notes, due 2002 139,063 139,063 Other 13,695 17,982 - ---------------------------------------------------------------------------- 902,466 919,793 Less current maturities (40,725) (40,040) - ---------------------------------------------------------------------------- Long-term debt $861,741 $879,753 ============================================================================
As of June 30, 2001, the Company had initiated amendments to its various debt agreements necessitated by its plans to sell the Label and Printed Office Products segments, sell certain non-core assets and restructure operations in both the Envelope and Commercial Printing segments. These amendments were executed by August 13, 2001, and the Company is in compliance with all of the covenants of its various debt agreements. 9. SECURITIZATION The Company sold, on a revolving basis, trade receivables to a wholly owned subsidiary, Mail-Well Trade Receivables Corp. ("MTRC"). MTRC is a bankruptcy-remote special purpose entity that is subject to certain covenants and restrictions. New receivables, except those failing certain eligibility criteria, were sold to MTRC on a daily basis as previously sold accounts receivables were collected. MTRC, in turn, sold an undivided interest in the pool of receivables, up to a maximum of $75 million, to a multi-seller receivables securitization company, for which there were no repurchase agreements. The Company maintained a subordinated interest in the portion of the pooled receivables, which were not transferred to the securitization company. As of June 30, 2001, the Company had sold $123 million of accounts receivable to MTRC; however, MTRC had not sold beneficial interests in the receivables to the securitization company. The amounts reflected in the investment in accounts receivable securitization in the accompanying consolidated balance sheets are $123 million and $75.4 million at June 30, 2001 and December 31, 2000, respectively. The trade receivables securitization facility expired in July 2001. The Company does not expect such expiration to have a material effect on liquidity, and the Company has no plans to replace the facility in the near future. Trade receivables sold to MTRC will be repurchased. 10. SEGMENT INFORMATION The Company operates principally in two business segments. The Commercial Printing segment specializes in printing annual reports, brand marketing collateral, catalogs, brochures, maps and guidebooks, calendars, financial communications and CD packaging. The Envelope segment manufactures customized and stock envelopes for direct mail advertising, filing systems, billing and remittance, photo processing, medical records and catalog orders. The Envelope segment is also a producer of specialty packaging products and a manufacturer of stock products for the resale market. Operating income is net of all costs and expenses directly related to the segment involved. Corporate expenses include corporate general and administrative expenses, lease expense, amortization expense, restructuring charges, gains or losses on disposal of assets and other miscellaneous expenses. 12 Identifiable assets are accumulated by facility within each business segment. Certain operating assets, which are under lease, are reported as business segment assets for evaluation purposes creating corresponding contra assets which have been included with corporate assets in order to reconcile identifiable assets with the total assets of the Company, excluding discontinued operations. Corporate assets, excluding the contra assets discussed above, consist primarily of cash and cash equivalents, investments in accounts receivable securitization, investment securities, other accounts receivable and deferred tax assets. The following tables present certain business segment information for the three- and six-months ended June 30, 2001 and 2000 as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 - ------------------------------------------------------------------------------------- (IN THOUSANDS) 2001 2000 (a) 2001 2000 (a) - ------------------------------------------------------------------------------------- Net external sales: Commercial Printing $ 207,532 $ 229,458 $ 418,892 $ 458,854 Envelope 210,746 212,690 432,362 417,968 - ------------------------------------------------------------------------------------- Total $ 418,278 $ 442,148 $ 851,254 $ 876,822 ===================================================================================== Operating income (loss): Commercial Printing $ 6,401 $ 14,934 $ 12,365 $ 32,627 Envelope 21,519 19,653 44,635 41,795 Asset write-downs (8,807) - (8,807) Restructuring charges (17,674) - (17,674) - Corporate (6,403) (6,064) (13,799) (11,006) - ------------------------------------------------------------------------------------- Total $ (4,964) $ 28,523 $ 16,720 $ 63,416 ===================================================================================== JUNE 30 DECEMBER 31 - ------------------------------------------------------------------------------------- (IN THOUSANDS) 2001 (b) 2000 - ------------------------------------------------------------------------------------- Identifiable assets: Commercial Printing $ 634,209 $ 685,871 Envelope 569,878 635,508 Corporate (3,582) (53,727) - ------------------------------------------------------------------------------------- Total $1,200,505 $ 1,267,652 ===================================================================================== (a) Net sales for 2000 have been restated to include billed freight previously reported in cost of sales. (b) Excludes assets held for sale in 2001. See Note 4.
Intercompany sales within Commercial Printing were $1,661,0000 and $4,286,000 for the three- and six- months ending June 30, 2001, respectively. Intercompany sales within the Envelope segment were $6,217,000 and $14,001,000 for the three- and six- months ending June 30, 2001, respectively. These amounts, which are eliminated in consolidation, have been excluded above in reported net sales. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company completed a comprehensive review of its operations in May 2001 and adopted a new strategy that focuses on its two largest segments - Envelopes and Commercial Printing. In support of this strategy, the Company plans to sell its Label and Printed Office Products segments and certain other non-core assets. Additionally, the Company plans to consolidate nine of its envelope plants and two of its commercial printing plants. Results for the three- and six-months ended June 30, 2001, which are summarized in the table that follows, were significantly impacted by the Company's new strategy. The table includes acquired businesses from their acquisition dates.
THREE-MONTHS ENDED JUNE 30, SIX-MONTHS ENDED JUNE 30, --------------------------- ------------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net sales Commercial Printing $ 207,532 $ 229,458 $ 418,892 $ 458,854 Envelope 210,746 212,690 432,362 417,968 --------- --------- --------- --------- Total net sales $ 418,278 $ 442,148 $ 851,254 $ 876,822 ========= ========= ========= ========= Operating income (loss): Commercial Printing $ 6,401 $ 14,934 $ 12,365 $ 32,627 Envelope 21,519 19,653 44,635 41,795 Amortization (3,427) (2,691) (6,702) (5,441) Impairment of assets held for sale (8,807) - (8,807) - Restructuring charges (17,674) - (17,674) - Corporate (2,976) (3,373) (7,097) (5,565) --------- --------- --------- --------- Total operating income (loss) (4,964) 28,523 16,720 63,416 Interest expense 13,797 17,134 28,548 31,052 Other expense (income) 538 (55) 1,064 (300) --------- --------- --------- --------- Income (loss) from continuing operations before income taxes (19,299) 11,444 (12,892) 32,664 Income tax expense (benefit) (4,349) 3,932 (2,129) 12,619 --------- --------- --------- --------- Income (loss) from continuing operations (14,950) 7,512 (10,763) 20,045 Income (loss) from discontinued operations (77,575) 3,732 (78,140) 7,535 Extraordinary items - - - 1,447 --------- --------- --------- --------- Net income (loss) $ (92,525) $ 11,244 $ (88,903) $ 29,027 ========= ========= ========= =========
The following discussion excludes the financial condition and results of operations of the Company's Label and Printed Office Products segments, which have been reported as discontinued operations in all periods covered by this report. RESULTS OF CONTINUING OPERATIONS Sales for the second quarter of 2001 were $418.3 million, 5% below the second quarter of 2000. Sales for the six-months ended June 30, 2001 were $851.3 million, 3% below the comparable period of 2000. Excluding the impact of acquisitions completed in 2000, the sales declines for the second quarter and the first half of 2001 were $30.8 million and $54.8 million, respectively. Sales in both segments have been negatively impacted by the slowdown in the economy as customers have curtailed spending on print advertising and direct mail. The Company lost $15 million, $ 0.31 per share, from its continuing operations in the second quarter of 2001 and $10.8 million, $ 0.23 per share, in the first six months of the year. These losses were primarily due to the $17.7 14 million restructuring charge recorded in connection with the plant consolidations and the $8.8 million impairment charge recognized on certain non-core assets held for sale. Excluding the restructuring and impairment charges, the Company had operating income from continuing operations of $21.5 million and $43.2 million for the three- and six-month periods ended June 30, 2001, respectively, compared to $28.5 million and $63.4 million in the comparable periods of 2000. Operating income, excluding the restructuring and impairment charges, has been lower in 2001 due primarily to lower profits of the Commercial Printing segment which were down significantly from 2000 due to lower sales and lower gross margins, both of which have resulted from lower demand for commercial print services associated with the economic slowdown. Corporate expenses have been higher in 2001 than in 2000 primarily due to staffing vacancies that existed in the first half of 2000 that have since been filled. Finally, acquisitions completed in 2000 increased amortization expense in 2001. Interest expense has been lower in 2001 than in 2000. This was due to lower debt levels since the company has reduced its debt by $243 million since the second quarter of 2000. Additionally, blended interest rates, as they apply to the Company, are approximately 120 basis points lower in 2001 than in 2000. The tax benefit of the loss from continuing operations was only $4.3 million or 16.5% of the loss. This rate was substantially below the statutory rate of 38.5% because of the amount of non-deductible goodwill amortization contributing to the loss. BUSINESS SEGMENT RESULTS ENVELOPE SEGMENT Sales of the Envelope segment were $210.7 million in the second quarter of 2001, $1.9 million lower than sales in the second quarter of 2000. Excluding the impact of acquisitions completed in 2000, sales were down by $4.2 million. Envelope sales for the six months ended June 30, 2001 were $432.4 million, $14.4 million higher than in the comparable period of 2000. Excluding the impact of acquisitions completed in 2000, sales were $1.3 million lower than in the first six months of 2000. The sales declines were due lower sales of specialty envelopes and lower sales to direct mail customers. Operating income of the Envelope segment improved by $1.8 million, $1.6 million excluding the impact of acquisitions, over operating income of $19.7 million in the second quarter of 2000. Gross profit as a percentage of sales improved slightly in the quarter to 20.9% from 20.2% in 2000 due to profit improvement programs that have reduced manufacturing costs since the second quarter of 2000. Selling and administrative expenses were also lower in the quarter than the comparable quarter a year ago. The Envelope segment's operating income for the first half of the year was $44.6 million, an increase of $2.8 million over the same period in 2000. Acquisitions contributed $1.9 million of this increase. The remaining increase was due to lower manufacturing costs and lower selling and administrative expenses. COMMERCIAL PRINTING SEGMENT Sales of the Commercial Printing segment were $207.5 million in the second quarter of 2001, down $21.9 million from the second quarter of 2000. Sales for the first half of the year were $40 million below sales of $458.9 million in the first half of 2000. Excluding acquisitions completed in 2000, sales in the second quarter and first six months of 2001 were below the comparable periods of 2000 by $26.7 and $52.0 million, respectively. Sales to technology and communications companies are down this year compared to 2000 due to the severe economic downturn in those industries. Sales have also been significantly impacted by reduced promotional spending by customers reacting to the slowing economy. Approximately 25% of the Commercial Printing segment's sales are related to print advertising. Operating income of the Commercial Printing segment was $6.4 million in the second quarter of 2001, $8.5 million below operating income reported in the second quarter of 2000. For the first six months of the year, operating income was $12.3 million, $20.3 million below the first half of 2000. The contribution lost on lower sales explains 15 most of the decline in operating income. Contribution margins were lower by 50 basis points in the second quarter and 100 basis points for the six-months ended June 30, 2001 due to competitive pressures and efforts to maintain volume. The impact of these lower margins has been partially offset by cost reduction programs which have lowered fixed manufacturing costs. Additions to the segment staff have caused administrative expenses to be higher in 2001 than a year ago. DISCONTINUED OPERATIONS The Company's Board of Directors approved the divestiture of the Label and Printed Office Products segments in May of 2001. The Company expects to complete these dispositions by the end of 2001 and will use the proceeds from the sales to reduce its debt. The loss reported on disposition of these two business segments includes write-downs to net realizable value based on estimated sales proceeds, costs associated with the dispositions, the estimated loss from operations of the discontinued businesses through the expected disposal date and an income tax benefit of approximately $1.7 million. The estimated loss from operations includes allocated interest expense based upon the relative net assets of the Label and Printed Office Products segments in the amounts of $6.3 and $13.1 for the three- and six-months ended June 30, 2001, respectively, and $6.8 and $11.9 for the three- and six-months ended June 30, 2000, respectively. Discontinued operations incurred a loss of $1.64 per share for the quarter and six-months ended June 30, 2001, compared to income of $0.08 and $0.15 per share for the comparable periods of 2000. The Company expects to complete the sales of both segments by December 31, 2001. RESTRUCTURING The restructuring charge recorded in the second quarter of 2001 includes $17.7 million related to the Company's new strategic plan. The Envelope segment plans to consolidate nine manufacturing facilities during the next 18 months to reduce excess internal capacity. The elimination of this excess capacity will improve the segment's cost effectiveness and long-term competitive position. The costs associated with this consolidation are expected to total approximately $85 million over the 18-month implementation period and include $36.0 million to write down plant and equipment when taken out of service to estimated net realizable value, $8.9 million in severance costs covering approximately 920 employees, $1.4 million of lease termination costs and $33 million in other exit costs. Expenses totaling $13.9 million were recorded in June 2001. The Company expects to record $33.4 million of additional restructuring expenses in the second half of 2001 and $37.7 million in 2002. The savings from these consolidations are expected to be $20 million annually once fully implemented, a two and a half year pay back of cash charges expected to total approximately $49 million. The Commercial Printing segment plans to consolidate two of its operations into an existing facility to optimize capacity and reduce costs. Charges in the second quarter related to this restructuring plan totaled $1.7 million and included severance costs for approximately 25 employees, lease termination costs and other exit expenses. Additional restructuring charges of approximately $1 million are expected prior to the completion of this consolidation. The benefits associated with this consolidation are expected to be $1.4 million annually once fully implemented. The restructuring charge includes $1.9 million of expenses incurred to develop the new strategy. The restructuring plans initiated in December 2000 are substantially complete. LIQUIDITY AND CAPITAL RESOURCES Continuing operations generated cash flow of $106.1 million and $36 million during the six months ended June 30, 2001 and 2000, respectively. Discontinued operations generated cash flow of $0.8 million and $2.5 million in the first six months of 2001 and 2000, respectively. The increase in cash provided by operating activities was due primarily to improved collections of accounts receivable and revisions of vendor payment terms. Cash flow during 16 the six months ended June 30, 2001 was used to cover capital spending of $15.7 million and to reduce debt by $89 million. The Company expects its ability to generate cash flow to continue. The Company also anticipates that this cash flow and its available credit facilities will be sufficient to fund its capital expenditures, meet working capital requirements, and service and reduce existing debt. See Exhibit 99.1 filed herewith for the Consolidating Condensed Financial Statements of MWI ("Issuer"), Guarantor Subsidiaries, Non-guarantor Subsidiaries and Parent Guarantor. These statements are provided to comply with the reporting requirements under the indenture for the 8 3/4% Senior Subordinated Notes due in 2008. FORWARD-LOOKING INFORMATION Certain statements in this report and, in particular, statements found in Management's Discussion and Analysis, which are not historical in nature, may constitute forward-looking statements. These statements are often identified by the words, "believe", "expect", "plan", "appear", "project", "estimate", "intend", and words of similar import. Such statements reflect the current views of the Company with respect to future events and are considered reasonable as of the date of this filing, but are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ include, among other things, whether conditions influencing the recent economic slowdown will continue or worsen, changes in overall demand, changes in the cost or availability of raw materials, changes in general labor conditions, changes in union relations, changes in interest rates, foreign currency exchange rates, waste paper prices, competition and competitors' actions, changes in the direct mail industry, whether assumed productivity and cost savings can be obtained, whether anticipated savings from restructuring activities and facility consolidations can be achieved, whether discontinued operations and assets held for sale can be sold for the amounts estimated and on a timely basis. In view of such uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. The Company does not assume any obligation to update these forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks such as changes in interest and foreign currency exchange rates, which may adversely affect results of operations and financial position. Risks from interest and foreign currency exchange rate fluctuations are managed through normal operating and financing activities. The Company does not utilize derivatives for speculative purposes, nor does it hedge interest rate exposure through the use of swaps and options or foreign exchange exposure through the use of forward contracts. Exposure to market risk from changes in interest rates relates primarily to the Company's variable rate debt obligations. The interest on this debt is the London Interbank Offered Rate ("LIBOR") plus a margin. At June 30, 2001, the Company had outstanding variable rate debt of $444.4 million. A 1% increase in LIBOR on the maximum amount available under the Company's credit agreement, which is $661.4 million, would increase the Company's annual interest expense by $6.6 million and reduce annual net income by approximately $4.1 million. The Company has subsidiaries in Canada, the United Kingdom and Mexico, and thus is exposed to market risk for changes in foreign currency exchange rates of the Canadian dollar, the British pound and the Mexican peso. 17 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS On May 1, 2001, the Company held its Annual Meeting of Stockholders, at which the following matters were voted upon: ELECTION OF DIRECTORS--The following individuals were re-elected to the Board of Directors by the following vote: For Withhold --- -------- Frank P. Diassi 43,384,886 738,974 Frank J. Hevrdejs 43,513,035 610,825 Jerome W. Pickholz 43,458,480 602,254 Paul V. Reilly 43,443,868 679,992 William R. Thomas 43,358,767 765,093 Janice C. Peters 43,517,748 606,112 Tom Stevens 43,521,876 601,984 SELECTION OF AUDITORS--The selection of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending 2001 was ratified by the following vote: 43,161,296 For, 761,184 Against, 201,377 Abstentions. APPROVAL OF 2001 LONG-TERM EQUITY INCENTIVE PLAN--The Company's 2001 Long-Term Equity Incentive Plan was approved by the following vote: 30,199,882 For, 6,324,261 Against, 216,536 Abstentions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - ------ ---------------------- 3(i) Articles of Incorporation of the Company - incorporated by reference from Exhibit 3(i) of the Company's Form 10-Q for the quarter ended September 30, 1997. 3(ii) Bylaws of the Company - incorporated by reference from Exhibit 3.4 of the Company's Registration Statement on Form S-1 dated September 21, 1995. 4.1.1.1 Form of Certificate representing the Common Stock, par value $0.01 per share, of the Company - incorporated by reference from Exhibit 4.1 of the Company's Amendment No. 1 to Form S-3 dated October 29, 1997 (Reg. No. 333-35561). 4.1.1.2 Form of Indenture between the Company and The Bank of New York, as Trustee, dated November 1997, relating to the Company's $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002--incorporated by reference from Exhibit 4.2 to the Company's Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.1.1.3 Form of Supplemental Indenture between the Company and The Bank of New York, as Trustee, dated November 1997, relating to the Company's $152,050,000 aggregate principal amount of 5% Convertible Subordinated Notes due 2002 and Form of Convertible Note-- incorporated by reference from Exhibit 4.5 to the Company's Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337). 4.2 Indenture dated as of December 16, 1998 between Mail-Well I Corporation ("MWI") and State Street Bank and Trust Company, as Trustee, relating to MWI's $300,000,000 aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2008 - incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 4.5 Form of Senior Subordinated Note - Incorporated by reference from the company's Annual Report of Form 10-K for the year ended December 31, 1998. 10.1 Form of Indemnity Agreement between the Company and each of its officers and directors - incorporated by reference from Exhibit 10.17 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 18 10.2 Form of Indemnity Agreement between Mail-Well I Corporation and each of its officers and directors - incorporated by reference from Exhibit 10.18 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of February 23, 1994 and related Employee Stock Ownership Plan Trust Agreement - incorporated by reference from Exhibit 10.19 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.4 Form of M-W Corp. 401(k) Savings Retirement Plan - incorporated by reference from Exhibit 10.20 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7, 1997 - incorporated by reference from Exhibit 10.56 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997. 10.6 Form of 1994 Incentive Stock Option Agreement - incorporated by reference from Exhibit 10.22 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.7 Form of the Company Nonqualified Stock Option Agreement - incorporated by reference from Exhibit 10.23 of the Company's Registration Statement on Form S-1 dated March 25, 1994. 10.8 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--incorporated by reference from exhibit 10.54 of the Company's Form 10-Q for the quarter ended March 31, 1997 10.9 1997 Non-Qualified Stock Option Agreement--incorporated by reference from exhibit 10.54 of the Company's Form 10-Q for the quarter ended March 31, 1997. 10.10 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by reference from Exhibit 10.58 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.11 Form of 1998 Incentive Stock Option Agreement--incorporated by reference from Exhibit 10.59 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.12 Credit Agreement dated as of March 16, 1998 among Supremex Inc., certain Guarantors, Bank of America National Trust and Savings Association, as Agent and other financial institutions party thereto--incorporated by reference from Exhibit 10.61 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.13 Participation Agreement dated as of December 15, 1997 among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.62 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.14 Equipment Lease dated as of December 15, 1997 among Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.63 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.15 Guaranty Agreement dated as of December 15, 1997 among Mail-Well, Inc., Graphic Arts Center, Inc., Griffin Envelope Inc., Murray Envelope Corporation, Shepard Poorman Communications Corporation, Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, Mail-Well I Corporation, Keybank National Association, as Trustee and other financial institutions party thereto--incorporated by reference from Exhibit 10.64 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998. 10.16 Receivables Purchase Agreement dated as of July 1, 1999 among Mail-Well Trade Receivables Corporation, as Seller, Quincy Capital Corporation, as Issuer, The Alternative Purchasers from Time to Time Party thereto, Mail-Well I Corporation, as Servicer and Bank of America National Trust and Savings Association, as Administrator; and First Amendment thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10.17 Purchase and Sales Agreement between Mail-Well I Corporation as initial Servicer and as Guarantor, The Originators from Time to Time Party thereto and Mail-Well Trade Receivable Corporation, as Purchaser dated as of July 1, 1999; and First Amendment thereto-- incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10.18 Servicing Agreement dated as of July 1, 1999 by and among Mail-Well I Corporation, as Servicer, Mail-Well Trade Receivables Corporation, as Seller under the Receivables Purchase Agreement and Bank of America National Trust and Saving Association, as Administrator; and First Amendment thereto--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10.19 Merger Agreement and Plan of Merger by and among American Business Products, Inc., Mail-Well, Inc. and Sherman Acquisition Corporation dated January 13, 2000--incorporated by reference from Exhibit (c) (1) to the Registrant's Tender Offer Statement on Schedule 14D-1 filed with the commission on January 21, 2000. 10.20 Change of Control Agreement dated November 15, 1999, between the Company and Paul V. Reilly--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.21 Change of Control Agreement dated November 15, 1999, between the Company and Gary Ritondaro--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 19 10.22 Change of Control Agreement dated November 15, 1999, between the Company and Robert Meyer--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.23 Change of Control Agreement dated November 15, 1999, between the Company and Michael A. Zawalski--incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 10.24 Credit Agreement dated as of February 18, 2000 among Mail-Well I Corporation, Bank of American, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto. 10.25 Security Agreement dated as of February 18, 2000, by and among Mail-Well I Corporation, Mail-Well, Inc., certain other affiliates of the Company and Bank of America, N.A., as agent. 10.26 Second Amendment to Credit Agreement dated as of March 28, 2001 among Mail-Well I Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of American, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial institutions party thereto. 10.27 Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan. 10.28 Form of Non-Qualified Stock Option Agreement under 2001 Long-Term Equity Incentive Plan. 10.29 Form of Incentive Stock Option Agreement under 2001 Long-Term Equity Incentive Plan. 10.30 Form of Restricted Stock Award Agreement under 2001 Long-Term Equity Incentive Plan. 99.1 Consolidating Condensed Financial Statements of MWI ("Issuer"), Guarantor Subsidiaries, Non-guarantor Subsidiaries and Parent Guarantor for the periods ending June 30, 2001 and 2000. - ------------- (b) Reports on Form 8-K 1. Current Report on Form 8-K filed June 14, 2001 included information about the company's announcement of its new strategic plan. 2. Current Report on Form 8-K filed April 26, 2001 included information about the company's first quarter financial results. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAIL-WELL, INC. (Registrant) By /s/ Paul V. Reilly -------------------------------- Date: August 13, 2001 Paul V. Reilly Chief Executive Officer By /s/ Michel P. Salbaing -------------------------------- Date: August 13, 2001 Michel P. Salbaing Chief Financial Officer 21 EX-10.27 3 ex10p27.txt 2001 LONG-TERM EQUITY INCENTIVE PLAN EXHIBIT 10.27 MAIL-WELL, INC. 2001 LONG-TERM EQUITY INCENTIVE PLAN SECTION 1. PURPOSE This plan shall be known as the "Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan" (the "Plan"). The purpose of the Plan is to promote the interests of Mail-Well, Inc. (the "Company") and its Subsidiaries and the Company's stockholders by (i) attracting and retaining key officers, employees, and directors of, and consultants to, the Company and its Subsidiaries and any future Affiliates; (ii) motivating such individuals by means of performance-related incentives to achieve long-range performance goals, (iii) enabling such individuals to participate in the long-term growth and financial success of the Company, (iv) encouraging ownership of stock in the Company by such individuals, and (v) linking their compensation to the long-term interests of the Company and its stockholders. With respect to any awards granted under the Plan that are intended to comply with the requirements of "performance-based compensation" under Section 162(m) of the Code, the Plan shall be interpreted in a manner consistent with such requirements. SECTION 2. DEFINITIONS As used in the Plan, the following terms shall have the meanings set forth below: (a) "AFFILIATE" shall mean (i) any entity that, directly or indirectly, is controlled by the Company, (ii) any entity in which the Company has a significant equity interest, (iii) an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, and (iv) any entity in which the Company has at least twenty percent (20%) of the combined voting power of the entity's outstanding voting securities, in each case as designated by the Board as being a participating employer in the Plan. (b) "AO OPTION" shall mean an Option to purchase, at Fair Market Value at the date of grant of the AO Option, a number of Shares equal to the sum of the number of whole Shares delivered by the Option holder in payment of the Option Price of the original Option and the number of whole Shares, if any, withheld by the Company as payment for withholding taxes. (c) "AWARD" shall mean any Option, Stock Appreciation Right, Restricted Share Award, Restricted Share Unit, Performance Award, Other Stock-Based Award or other award granted under the Plan, whether singly, in combination, or in tandem, to a Participant by the Committee (or the Board) pursuant to such terms, conditions, restrictions and/or limitations, if any, as the Committee (or the Board) may establish. (d) "AWARD AGREEMENT" shall mean any written agreement, contract, or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant. (e) "BOARD" shall mean the board of directors of the Company. (f) "CHANGE IN CONTROL" shall mean, unless otherwise defined in the applicable Award Agreement, any of the following events: (i) An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term Person is used for purposes of Section 13 (d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%) or more of the combined voting power of the then outstanding Voting Securities; provided, however, that in A-1 determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any subsidiary or (ii) the Company or any Subsidiary; (ii) The individuals who, as of the date hereof, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least a majority of the Board; provided, however, that if the election or nomination for election by the Company's stockholders of any new director was approved by a vote of at least two- thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if (1) such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest or (2) such individual was designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (i) or (iii) of this paragraph; or (iii) Approval by stockholders of the Company of: (A) A merger, consolidation or reorganization involving the Company, unless, (1) The stockholders of the Company immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least seventy-five percent (75%) of the combined voting power of the outstanding Voting Securities of the corporation (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization; (2) The individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation; and (3) no Person (other than the Company, any Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Subsidiary, or any Person who, immediately prior to such merger, consolidation or reorganization, had Beneficial Ownership of forty percent (40%) or more of the then outstanding Voting Securities) has Beneficial Ownership of forty percent (40%) or more of the combined voting power of the Surviving Corporation's then outstanding Voting Securities. (B) A complete liquidation or dissolution of the Company; or (C) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary) Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increased the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the A-2 Beneficial Owner of any additional Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. (g) "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. (h) "COMMITTEE" shall mean a committee of the Board composed of not less than two Non-Employee Directors, each of whom shall be a "Non-Employee Director" for purposes of Exchange Act Section 16 and Rule 16b-3 thereunder and an "outside director" for purposes of Section 162(m) and the regulations promulgated under the Code. (i) "CONSULTANT" shall mean any consultant to the Company or its Subsidiaries or Affiliates. (j) "COVERED OFFICER" shall mean at any date (i) any individual who, with respect to the previous taxable year of the Company, was a "covered employee" of the Company within the meaning of Section 162(m); provided, however, that the term "Covered Officer" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any Award or at any subsequent time, as reasonably expected not to be such a "covered employee" with respect to the current taxable year of the Company and (ii) any individual who is designated by the Committee, in its discretion, at the time of any Award or at any subsequent time, as reasonably expected to be such a "covered employee" with respect to the current taxable year of the Company or with respect to the taxable year of the Company in which any applicable Award will be paid. (k) "DIRECTOR" shall mean a member of the Board. (l) "EMPLOYEE" shall mean a current or prospective officer or employee of the Company or of any Subsidiary or Affiliate. (m) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended from time to time. (n) "FAIR MARKET VALUE" with respect to the Shares, shall mean, for purposes of a grant of an Award as of any date, (i) the closing sales price of the Shares on the New York Stock Exchange, or any other such exchange on which the shares are traded, on such date, or in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported or (ii) in the event there is no public market for the Shares on such date, the fair market value as determined, in good faith, by the Committee in its sole discretion, and for purposes of a sale of a Share as of any date, the actual sales price on that date. (o) "INCENTIVE STOCK OPTION" shall mean an option to purchase Shares from the Company that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. (p) "NON-QUALIFIED STOCK OPTION" shall mean an option to purchase Shares from the Company that is granted under Section 6 or 10 of the Plan and is not intended to be an Incentive Stock Option. (q) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is not an officer or employee of the Company or any Subsidiary or Affiliate. (r) "OPTION" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. (s) "OPTION PRICE" shall mean the purchase price payable to purchase one Share upon the exercise of an Option. (t) "OTHER STOCK-BASED AWARD" shall mean any Award granted under Section 9 or 10 of the Plan. A-3 (u) "PARTICIPANT" shall mean any Employee, Director, Consultant or other person who receives an Award under the Plan. (v) "PERFORMANCE AWARD" shall mean any Award granted under Section 8 of the Plan. (w) "PERSON" shall mean any individual, corporation, partnership, limited liability company, associate, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. (x) "RESTRICTED SHARE" shall mean any Share granted under Section 7 or 10 of the Plan. (y) "RESTRICTED SHARE UNIT" shall mean any unit granted under Section 7 or 10 of the Plan. (z) "SEC" shall mean the Securities and Exchange Commission or any successor thereto. (aa) "SECTION 16" shall mean Section 16 of the Exchange Act and the rules promulgated thereunder and any successor provision thereto as in effect from time to time. (bb) "SECTION 162 (M)" shall mean Section 162 (m) of the Code and the regulations promulgated thereunder and any successor or provision thereto as in effect from time to time. (cc) "SHARES" shall mean shares of the common stock, $0.01 par value, of the Company. (dd) "STOCK APPRECIATION RIGHT OR SAR" shall mean a stock appreciation right granted under Section 6 or 10 of the Plan that entitles the holder to receive, with respect to each Share encompassed by the exercise of such SAR, the amount determined by the Committee and specified in an Award Agreement. In the absence of such a determination, the holder shall be entitled to receive, with respect to each Share encompassed by the exercise of such SAR, the excess of the Fair Market Value on the date of exercise over the Fair Market Value on the date of grant. (ee) "SUBSIDIARY" shall mean any Person (other than the Company) of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company. (ff) "SUBSTITUTE AWARDS" shall mean Awards granted solely in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or with which the Company combines. (gg) "TANDEM SAR" shall mean an SAR that is granted under Section 6 or 10 of the Plan in relation to a particular Option and that can be exercised only upon the surrender to the Company, unexercised, of that portion of the Option to which the SAR relates. SECTION 3. ADMINISTRATION 3.1 Authority of Committee. The Plan shall be administered by the Committee, which shall be appointed by and serve at the pleasure of the Board; provided, however, with respect to Awards to Directors who are members of the Committee, all references in the Plan to the Committee shall be deemed to be references to the Board. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority in its discretion to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with Awards; (iv) determine the timing, terms, and conditions of any Award; (v) accelerate the time at which all or any part of an Award may be settled or exercised; (vi) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vii) determine whether, to what extent, and under A-4 what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) except to the extent prohibited by Section 6.2, amend or modify the terms of any Award at or after grant with the consent of the holder of the Award; (x) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan, subject to the exclusive authority of the Board under Section 14 hereunder to amend or terminate the Plan. 3.2 Committee Discretion Binding. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary or Affiliate, any Participant and any holder or beneficiary of any Award. 3.3 Action by the Committee. The Committee shall select one of its members as its Chairperson and shall hold its meetings at such times and places and in such manner as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The exercise of an Option or receipt of an Award shall be effective only if an Award Agreement shall have been duly executed and delivered on behalf of the Company following the grant of the Option or other Award. The Committee may appoint a Secretary and may make such rules and regulations for the conduct of its business, as it shall deem advisable. 3.4 Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers or managers of the Company or of any Subsidiary or Affiliate, or to a Committee of such officers or managers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by Participants who are not officers or directors of the Company for purposes of Section 16 or who are otherwise not subject to such Section. 3.5 No Liability. No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder. SECTION 4. SHARES AVAILABLE FOR AWARDS 4.1 Shares Available. Subject to the provisions of Section 4.2 hereof, the stock to be subject to Awards under the Plan shall be the Shares of the Company and the maximum number of Shares with respect to which Awards may be granted under the Plan shall be 4,425,000 (which includes 61,281 Shares with respect to which awards under the Mail-Well, Inc. 1994 Stock Option Plan (the "1994 Plan") were authorized but not granted, 294,000 Shares with respect to which awards under the Mail-Well, Inc. 1996 Directors Stock Option Plan (the "1996 Plan") were authorized but not granted, 26,465 Shares with respect to which awards under the Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan (the "1997 Plan") were authorized but not granted, and 42,971 Shares with respect to which awards under the Mail-Well, Inc. 1998 Stock Option Plan (the "1998 Plan") were authorized but not granted), of which (i) the number of Shares with respect to which Incentive Stock Options may be granted shall be no more than 4,425,000 and (ii) no more than 800,000 shall be Shares with respect to which Awards other than Options may be granted. Notwithstanding the foregoing and subject to adjustment as provided in Section 4.2, the maximum number of Shares with respect to which Awards may be granted under the Plan shall be increased by the number of Shares with respect to which Options or other Awards were granted under the 1994, 1996, 1997 and 1998 Plans, as of the effective date of this Plan, but which terminate, expire A-5 unexercised, or are settled for cash, forfeited or canceled without the delivery of Shares under the terms of such Plans after the effective date of this Plan. If, after the effective date of the Plan, any Shares covered by an Award granted under this Plan, or to which such an Award relates, are forfeited, or if such an Award is settled for cash or otherwise terminates, expires unexercised, or is canceled without the delivery of Shares, then the Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such settlement, forfeiture, termination, expiration, or cancellation, shall again become Shares with respect to which Awards may be granted. In the event that any Option or other Award granted hereunder is exercised through the delivery of Shares or in the event that withholding tax liabilities arising from such Award are satisfied by the withholding of Shares by the Company, the number of Shares available for Awards under the Plan shall be increased by the number of Shares so surrendered or withheld. Notwithstanding the foregoing and subject to adjustment as provided in Section 4.2 hereof, no Participant may receive Options or SAR's under the Plan in any calendar year that relate to more than 1,500,000 Shares, unless such Options or SAR's are granted in connection with the recruiting and hiring of a Participant simultaneously with such Award. 4.2 Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee, in its sole discretion, to be appropriate, then the Committee shall, in such manner as it may deem equitable (and, with respect to Incentive Stock Options, in such manner as is consistent with Section 422 of the Code and the regulations thereunder): (i) adjust any or all of (1) the aggregate number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted under the Plan; (2) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards under the Plan; and (3) the grant or exercise price with respect to any Award under the Plan, provided that the number of shares subject to any Award shall always be a whole number; (ii) if deemed appropriate, provide for an equivalent award in respect of securities of the surviving entity of any merger, consolidation or other transaction or event having a similar effect; or (iii) if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award. 4.3 Substitute Awards. Any Shares issued by the Company as Substitute Awards in connection with the assumption or substitution of outstanding grants from any acquired corporation shall not reduce the Shares available for Awards under the Plan. 4.4 Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of issued Shares that have been reacquired by the Company. SECTION 5. ELIGIBILITY Any Employee, Director or Consultant shall be eligible to be designated a Participant; provided, however, that Non-Employee Directors shall only be eligible to receive Awards granted consistent with Section 10. SECTION 6. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS 6.1 Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Options and SAR's shall be granted, the number of Shares subject to each Award, the exercise price and the conditions and limitations applicable to the exercise of each Option and SAR. An Option may be granted with or without a Tandem SAR. An SAR may be granted with or without a related Option. The Committee shall have the authority to grant A-6 Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant both types of Options. In the case of Incentive Stock Options or Tandem SAR's related to such Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code, as from time to time amended, and any regulations implementing such statute. A person who has been granted an Option or SAR under this Plan may be granted additional Options or SAR's under the Plan if the Committee shall so determine; provided, however, that to the extent the aggregate Fair Market Value (determined at the time the Incentive Stock Option or Tandem SAR related thereto is granted) of the Shares with respect to which all Incentive Stock Options or Tandem SAR's related to such Option are exercisable for the first time by an Employee during any calendar year (under all plans described in subsection (d) of Section 422 of the Code of the Company and its Subsidiaries) exceeds $100,000 (or such higher amount as is permitted in the future under Section 422(d) of the Code, such Options shall be treated as Non-Qualified Stock Options. 6.2 Price. The Committee in its sole discretion shall establish the Option Price at the time each Option is granted. Except in the case of Substitute Awards, the Option Price of an Option may not be less than 100% of the Fair Market Value of the Shares with respect to which the Option is granted on the date of grant of such Option. Notwithstanding the foregoing and except as permitted by the provisions of Section 4.2 and Section 14 hereof, the Committee shall not have the power to (i) amend the terms of previously granted Options to reduce the Option Price of such Options, or (ii) cancel such Options and grant substitute Options with a lower Option Price than the canceled Options. Except with respect to Substitute Awards, SAR's may not be granted at a price less than the Fair Market Value of a Share on the date of grant. 6.3 Term. Subject to the Committee's authority under Section 3.1 and the provisions of Section 6.6, each Option and SAR and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the Award Agreement. The Committee shall be under no duty to provide terms of like duration for Options or SAR's granted under the Plan. Notwithstanding the foregoing, no Option or Tandem SAR that relates to such Option shall be exercisable after the expiration of ten (10) years from the date such Option or SAR was granted. 6.4 Exercise. (a) Each Option and SAR shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee shall have full and complete authority to determine, subject to Section 6.6 herein, whether an Option or SAR will be exercisable in full at any time or from time to time during the term of the Option or SAR, or to provide for the exercise thereof in such installments, upon the occurrence of such events and at such times during the term of the Option or SAR as the Committee may determine. (b) The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or advisable. The exercise of any Option granted hereunder shall be effective only at such time as the sale of Shares pursuant to such exercise will not violate any state or federal securities or other laws. (c) An Option or SAR may be exercised in whole or in part at any time, with respect to whole Shares only, within the period permitted thereunder for the exercise thereof, and shall be exercised by written notice of intent to exercise the Option or SAR, delivered to the Company at its principal office, and payment in full to the Company at the direction of the Committee of the amount of the Option Price for the number of Shares with respect to which the Option is then being exercised. A Tandem SAR that is related to an Incentive Stock Option may be exercised only to the extent that the related Option is exercisable and only when the Fair Market Value exceeds the Option Price of the related Option. The exercise of either an Option or Tandem SAR shall result in the termination of the A-7 other to the extent of the number of Shares with respect to which either the Option or Tandem SAR is exercised. (d) Payment of the Option Price shall be made in cash or cash equivalents, or, at the discretion of the Committee, (i) in whole Shares valued at the Fair Market Value of such Shares on the date of exercise, together with any applicable withholding taxes, or (ii) by a combination of such cash (or cash equivalents) and such Shares; provided, however, that the optionee shall not be entitled to tender Shares pursuant to successive, substantially simultaneous exercises of an Option or any other stock option of the Company. Subject to applicable securities laws, an Option may also be exercised by (i) delivering a notice of exercise of the Option and simultaneously selling the Shares thereby acquired, pursuant to a brokerage or similar agreement approved in advance by proper officers of the Company, using the proceeds of such sale as payment of the Option Price, together with any applicable withholding taxes, or (ii) any other exercise method (including attestation of shares) approved by the Committee. Until the optionee has been issued the Shares subject to such exercise, he or she shall possess no rights as a stockholder with respect to such Shares. (e) At the Committee's discretion, the amount payable as a result of the exercise of an SAR may be settled in cash, Shares, or a combination of cash and Shares. A fractional Share shall not be deliverable upon the exercise of a SAR but a cash payment will be made in lieu thereof. 6.5 Accelerated Ownership Feature. An Option may, in the discretion of the Committee, include the right to acquire an AO Option. An Option that provides for the grant of an AO Option shall entitle the Option holder upon exercise of that Option and payment of the appropriate Option Price in Shares that have been owned by such Option holder for not less than six (6) months prior to the date of exercise, to receive an AO Option. An AO Option shall expire on the same date that the original Option would have expired had it not been exercised. All AO Options shall be Non-Qualified Stock Options. 6.6 Ten Percent Stock Rule. Notwithstanding any other provisions in the Plan, if at the time an Option or SAR is otherwise to be granted pursuant to the Plan the optionee or rights holder owns directly or indirectly (within the meaning of Section 424(d) of the Code) Shares of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of Stock of the Company or its parent or Subsidiary or Affiliate corporations (within the meaning of Section 422 (b) (6) of the Code), then any Incentive Stock Option or Tandem SAR to be granted to such optionee or rights holder pursuant to the Plan shall satisfy the requirement of Section 422(c) (5) of the Code, and the Option Price shall be not less than 110% of the Fair Market Value of the Shares of the Company, and such Option by its terms shall not be exercisable after the expiration of five (5) years from the date such Option is granted. SECTION 7. RESTRICTED SHARES AND RESTRICTED SHARE UNITS 7.1 Grant. (a) Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Restricted Shares and Restricted Share Units shall be granted, the number of Restricted Shares and/or the number of Restricted Share Units to be granted to each Participant, the duration of the period during which, and the conditions under which, the Restricted Shares and Restricted Share Units may be forfeited to the Company, and the other terms and conditions of such Awards. The Restricted Share and Restricted Share Unit Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the terms and conditions provided hereunder and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan. (b) Each Restricted Share and Restricted Share Unit Award made under the Plan shall be for such number of Shares as shall be determined by the Committee and set forth in the Award Agreement containing the terms of such Restricted Share or Restricted Share Unit Award. The A-8 Award Agreement shall set forth a period of time during which the grantee must remain in the continuous employment of the Company in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the Shares covered by the Restricted Share or Restricted Share Unit Award. The Award Agreement may also, in the discretion of the Committee, set forth performance or other conditions that will subject the Shares to forfeiture and transfer restrictions. The Committee may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding Restricted Share and Restricted Share Unit Awards. 7.2 Delivery of Shares and Transfer Restrictions. At the time of a Restricted Share Award, a certificate representing the number of Shares awarded thereunder shall be registered in the name of the grantee. Such certificate shall be held by the Company or any custodian appointed by the Company for the account of the grantee subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may determine. The grantee shall have all rights of a stockholder with respect to the Restricted Shares, including the right to receive dividends and the right to vote such Shares, subject to the following restrictions: (i) the grantee shall not be entitled to delivery of the stock certificate until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the Award Agreement with respect to such Shares; (ii) none of the Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise determined by the Committee at or after grant, all of the Shares shall be forfeited and all rights of the grantee to such Shares shall terminate, without further obligation on the part of the Company, unless the grantee remains in the continuous employment of the Company for the entire restricted period in relation to which such Shares were granted and unless any other restrictive conditions relating to the Restricted Share Award are met. Any Shares, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Shares subject to Restricted Share Awards shall be subject to the same restrictions, terms and conditions as such restricted Shares. 7.3 Termination of Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the Restricted Share Award are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in the Award Agreement relating to the Restricted Share Award or in the Plan shall lapse as to the restricted Shares subject thereto, and a stock certificate for the appropriate number of Shares, free of the restrictions and restricted stock legend, shall be delivered to the Participant or the Participant's beneficiary or estate, as the case may be. 7.4 Payment of Restricted Share Units. Each Restricted Share Unit shall have a value equal to the Fair Market Value of a Share. Restricted Share Units shall be paid in cash, Shares, other securities or other property, as determined in the sole discretion of the Committee, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement. A Participant shall be credited with dividend equivalents on any vested Restricted Share Units credited to the Participant's account at the time of any payment of dividends to stockholders on Shares. The amount of any such dividend equivalents shall equal the amount that would have been payable to the Participant as a stockholder in respect of a number of Shares equal to the number of vested Restricted Share Units then credited to the Participant. Any such dividend equivalents shall be credited to the Participant's account as of the date on which such dividend would have been payable and shall be converted into additional Restricted Share Units (which shall be immediately vested) based upon the Fair Market Value of a Share on the date of such crediting. No dividend equivalents shall be paid in respect of Restricted Share Units that are not yet vested. Except as otherwise determined by the Committee at or after grant, Restricted Share Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of, and all Restricted Share Units and all rights of the grantee to such Restricted Share Units shall terminate, without further obligation on the part of the Company, unless the grantee remains in continuous employment of the Company for the entire restricted period in relation to which such A-9 Restricted Share Units were granted and unless any other restrictive conditions relating to the Restricted Share Unit Award are met. SECTION 8. PERFORMANCE AWARDS 8.1 Grant. The Committee shall have sole and complete authority to determine the Participants who shall receive a Performance Award, which shall consist of a right that is (i) denominated in cash or Shares, (ii) valued, as determined by the Committee, in accordance with the achievement of such performance goals during such performance periods as the Committee shall establish, and (iii) payable at such time and in such form as the Committee shall determine. All Performance Awards shall be subject to the terms and provisions of Section 11 hereof. 8.2 Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award and the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and may amend specific provisions of the Performance Award; provided, however, that such amendment may not adversely affect existing Performance Awards made within a performance period commencing prior to implementation of the amendment. 8.3 Payment of Performance Awards. Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with the procedures established by the Committee, on a deferred basis. Termination of employment prior to the end of any performance period, other than for reasons of death or Disability, will result in the forfeiture of the Performance Award, and no payments will be made. A Participant's rights to any Performance Award may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of in any manner, except by will or the laws of descent and distribution, and/or except as the Committee may determine at or after grant. SECTION 9. OTHER STOCK-BASED AWARDS The Committee shall have the authority to determine the Participants who shall receive an Other Stock-Based Award, which shall consist of any right that is (i) not an Award described in Sections 6, 7 and 8 above and (ii) an Award of Shares or an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock-Based Award. SECTION 10. NON-EMPLOYEE DIRECTOR AWARDS The Board may provide that all or a portion of a Non-Employee Director's annual retainer, meeting fees and/or other awards or compensation as determined by the Board, be payable (either automatically or at the election of a Non-Employee Director) in the form of Non-Qualified Stock Options, SAR's, Restricted Shares, Restricted Share Units and/or Other Stock-Based Awards, including unrestricted Shares. The Board shall determine the terms and conditions of any such Awards, including the terms and conditions which shall apply upon a termination of the Non-Employee Director's service as a member of the Board, and shall have full power and authority in its discretion to administer such Awards, subject to the terms of the Plan and applicable law. SECTION 11. PROVISIONS APPLICABLE TO COVERED OFFICERS AND PERFORMANCE AWARDS 11.1 Notwithstanding anything in the Plan to the contrary, Performance Awards shall be subject to the terms and provisions of this Section 11. A-10 11.2 The Committee may grant Performance Awards to Covered Officers based solely upon the attainment of performance targets related to one or more performance goals selected by the Committee from among the goals specified below. For the purposes of this Section 11, performance goals shall be limited to one or more of the following Company, Subsidiary, operating unit or division financial performance measures: (a) earnings before interest, taxes, depreciation and/or amortization; (b) operating income or profit; (c) operating efficiencies; (d) return on equity, assets, capital, capital employed, or investment; (e) after tax operating income; (f) net income; (g) earnings or book value per Share; (h) cash flow(s); (i) total sales or revenues or sales or revenues per employee; (j) production (separate work units or SWU's); (k) stock price or total shareholder return; (l) dividends; or (m) strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures; or any combination thereof. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company or any Subsidiary, operating unit or division of the Company and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, shareholders' equity and/or Shares outstanding, or to assets or net assets. 11.3 With respect to any Covered Officer, the maximum annual number of Shares in respect of which all Performance Awards may be granted under Section 8 of the Plan is 150,000 and the maximum annual amount of any Award settled in cash is $1,000,000. 11.4 To the extent necessary to comply with Section 162(m), with respect to grants of Performance Awards, no later than 90 days following the commencement of each performance period (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (1) select the performance goal or goals applicable to the performance period, (2) establish the various targets and bonus amounts which may be earned for such performance period, and (3) specify the relationship between performance goals and targets and the amounts to be earned by each Covered Officer for such performance period. Following the completion of each performance period, the Committee shall certify in writing whether the applicable performance targets have been achieved and the amounts, if any, payable to Covered Officers for such performance period. In determining the amount earned by a Covered Officer for a given performance period, subject to any applicable Award Agreement, the Committee shall have the right to reduce (but not increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the performance period. A-11 SECTION 12. TERMINATION OF EMPLOYMENT The Committee shall have the full power and authority to determine the terms and conditions that shall apply to any Award upon a termination of employment with the Company, its Subsidiaries and Affiliates, including a termination by the Company with or without cause, by a Participant voluntarily, or by reason of death, disability or retirement, and may provide such terms and conditions in the Award Agreement or in such rules and regulations as it may prescribe. SECTION 13. CHANGE IN CONTROL Upon a Change in Control, all outstanding Awards shall vest, become immediately exercisable or payable and have all restrictions lifted. SECTION 14. AMENDMENT AND TERMINATION 14.1 Amendments to the Plan. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement for which or with which the Board deems it necessary or desirable to comply; provided that any such waiver, amendment, alteration, suspension, discontinuance or termination that would adversely affect the rights of any Participants, or any holder or beneficiary, under any Award theretofore granted, shall not to that extent be effective without the consent of the affected Participant, holder, or beneficiary. 14.2 Amendments to Awards. Subject to the restrictions of Section 6.2, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would adversely affect the rights of any Participants, or any holder or beneficiary of any Award theretofore granted, shall not to that extent be effective without the consent of the affected Participant, holder, or beneficiary. 14.3 Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.2 hereof) affecting the Company, any Subsidiary or Affiliate, or the financial statements of the Company or any Subsidiary or Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. SECTION 15. GENERAL PROVISIONS 15.1 Limited Transferability of Awards. Except as otherwise provided in the Plan, no Award shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant, except by will or the laws of descent and distribution and/or as may be provided by the Committee in its discretion, at or after grant, in the Award Agreement. No transfer of an Award by will or by laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and an authenticated copy of the will and/or such other evidence as the Committee may deem necessary or appropriate to establish the validity of the transfer. 15.2 Dividend Equivalents. In the sole and complete discretion of the Committee, an Award may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities or other property on a current or deferred basis. All dividend or dividend equivalents which are not paid currently may, at the Committee's discretion, accrue interest, be reinvested into additional Shares, or in the case of dividends or dividend equivalents credited in connection with Performance Awards, be A-12 credited as additional Performance Awards and paid to the Participant if and when, and to the extent that, payment is made pursuant to such Award. The total number of Shares available for grant under Section 4 shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as Performance Awards. 15.3 No Rights to Awards. No Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each Participant. 15.4 Share Certificates. All certificates for Shares or other securities of the Company or any Subsidiary or Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the SEC or any state securities commission or regulatory authority, any stock exchange or other market upon which such Shares or other securities are then listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 15.5 Withholding. A Participant may be required to pay to the Company or any Subsidiary or Affiliate and the Company or any Subsidiary or Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan, or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding or other taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee may provide for additional cash payments to holders of Options to defray or offset any tax arising from the grant, vesting, exercise or payment of any Award. 15.6 Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement that shall be delivered to the Participant and may specify the terms and conditions of the Award and any rules applicable thereto. In the event of a conflict between the terms of the Plan and any Award Agreement, the terms of the Plan shall prevail. 15.7 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary or Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of Options, Restricted Shares, Restricted Share Units, Other Stock-Based Awards or other types of Awards provided for hereunder. 15.8 No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Subsidiary or Affiliate. Further, the Company or a Subsidiary or Affiliate may at any time dismiss a Participant from employment, free from any liability or any claim under the Plan, unless otherwise expressly provided in an Award Agreement. 15.9 No Rights as Stockholder. Subject to the provisions of the Plan and the applicable Award Agreement, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until such person has become a holder of such Shares. Notwithstanding the foregoing, in connection with each grant of Restricted Shares hereunder, the applicable Award Agreement shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Shares. 15.10 Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Colorado without giving effect to conflicts of laws principles. 15.11 Severability. If any provision of the Plan or any Award is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed A-13 or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. 15.12 Other Laws. The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation (including applicable non-U.S. laws or regulations) or entitle the Company to recover the same under Exchange Act Section 16 (b), and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder, or beneficiary. 15.13 No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary or Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Subsidiary or Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Subsidiary or Affiliate. 15.14 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. 15.15 Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. SECTION 16. TERM OF THE PLAN 16.1 Effective Date. The Plan shall be effective as of May 1, 2001 provided it has been approved by the Board and by the Company's stockholders. 16.2 Expiration Date. No new Awards shall be granted under the Plan after the tenth (10th) anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, continue after the tenth (10th) anniversary of the Effective Date. A-14 EX-10.28 4 ex10p28.txt FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.28 MAIL-WELL, INC. 2001 LONG-TERM EQUITY INCENTIVE PLAN FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT This Non-qualified Stock Option Agreement ("Option Agreement") is between Mail-Well, Inc., a Colorado corporation (the "Company"), and __________ (the "Optionee"). W I T N E S S E T H: ------------------- WHEREAS, the Company has heretofore adopted the Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan (the "Plan") for the purpose of providing employees and directors of the Company and its Affiliates (as defined in the Plan) with additional incentive to promote the success of the business, to increase their proprietary interest in the success of the Company, and to encourage them to remain in the employ or remain as a director of the Company and its Affiliates; and WHEREAS, the Company, acting through the Compensation Committee of its Board of Directors (the "Committee"), has determined that its interests will be advanced by the issuance to Optionee of a nonqualified stock option under the Plan; NOW THEREFORE, for and in consideration of these premises it is agreed as follows: 1. Option. Subject to the terms and conditions contained herein, the ------ Company hereby irrevocably grants to Optionee the right and option ("Option") to purchase from the Company ________ shares of the Company's common stock, $0.01 par value ("Common Stock"), at a price at $______ per share (the "Option Price"). 2. Option Period. The Option herein shall vest immediately upon grant. ------------- Thereafter, options may be exercised at any time, in whole or part, after six (6) months from the date of grant (___________) and prior to the fifth anniversary of the date of grant. All unexercised options shall expire on the tenth anniversary of the date of their grant. 3. Procedure for Exercise. The Option herein granted may be exercised ---------------------- by written notice by Optionee to the Secretary of the Company setting forth the number of shares of Common Stock with respect to which the Option is to be exercised accompanied by payment for the shares to be purchased, and specifying the address to which the certificate for such shares is to be mailed. Payment shall be by means of cash, or a cashier's check, bank draft, postal or express money order payable to the order of the Company, or at the option of the Optionee, in Common Stock theretofore owned by such Optionee (or a combination of cash and Common Stock). As promptly as practicable after receipt of such written notification and payment, the Company shall deliver to Optionee certificates for the number of shares of Common Stock with respect to which such Option has been so exercised. 4. Termination of Employment. If Optionee's employment with the Company ------------------------- or its Affiliates is terminated during the Option Period for any reason, Options granted to him which are not exercisable on such date thereupon terminate. Subject to paragraphs 5 and 10 below, any Options that are exercisable on the date of his termination of employment which have not been exercised within ninety (90) days of such termination shall expire and be of no force or effect. 5. Disability or Death. If Optionee's employment with the Company or ------------------- its Affiliates is terminated by his disability or death, all Options hereunder exercisable at the date of such disability or death shall be thereafter exercisable by Optionee, his executor or administrator, or the person or persons to whom his rights under this Option Agreement shall pass by will or by the laws of descent and distribution, as the case may be, for a period of six months from the date of Optionee's disability or death, unless this Option Agreement should earlier terminate in accordance with its other terms. In no event may any Option be exercised after the end of the Option Period. Optionee shall be deemed to be disabled if, in the option of a physician selected by the Committee, he is incapable of performing services for the Company by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration. 6. Transferability. This Option shall not be transferable by Optionee --------------- otherwise than by Optionee's will or by the laws of descent and distribution. During the lifetime of Optionee, the Option shall be exercisable only by Optionee. Any heir or legatee of Optionee shall take rights herein granted subject to the terms and conditions hereof. No such transfer of this Option Agreement to heirs or legatees of Optionee shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof. 7. No Rights as Stockholder. Optionee shall have no rights as a ------------------------ stockholder with respect to any shares of Common Stock covered by this Option Agreement until the date of issuance of a certificate for shares of Common Stock purchased pursuant to this Option Agreement. Until such time, Optionee shall not be entitled to dividends or to vote at meetings of the stockholders of the Company. Except as provided in paragraph 9 hereof, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash or securities or other property) paid or distributions or other rights granted in respect of any share of Common Stock for which the record date for such payment, distribution or grant is prior to the date upon which the Optionee shall have been issued share certificates, as provided hereinabove. 8. Extraordinary Corporate Transactions. If the Company recapitalizes ------------------------------------ or otherwise changes its capital structure, or merges, consolidates, sells all of its assets or dissolves (each of the foregoing a "Fundamental Change"), then thereafter upon any exercise of an option theretofore granted the Optionee shall be entitled to purchase under such option, in lieu of the number of shares of Common Stock as to which option shall then be exercisable, the number and class of shares of stock and securities to which the Optionee would have been entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental Change, the Optionee had been the holder of record of the number of shares of Common Stock as to which such option is then exercisable. 9. Changes in Capital Structure. The existence of outstanding Options ---------------------------- shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issuance of Common Stock or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceedings, whether of a similar character or otherwise. If the outstanding shares of Common Stock of the Company shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, or recapitalization, the number and kind of shares subject to the Plan or subject to any Options theretofore granted, and the Option price and the prices at which portions of the Option may be exercisable on an accelerated basis as set forth in Section 2, shall be appropriately and equitably adjusted so as to maintain the proportionate number of shares without changing the aggregate Option price. 10. Change of Control. In the event that there is a proposed Change of ----------------- Control Event the Option shall become immediately exercisable notwithstanding the provisions of Section 2, Optionee hereunder shall be given reasonable notice of such Change of Control Event and shall have a period of at least thirty (30) days thereafter to exercise the Options. As used herein, the term "Change of Control Event" shall mean the occurrence with respect to the Company of any of the following events: (a) a report on Schedule 13D is filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than (i) the Company (or one of its subsidiaries) or (ii) any employee benefit plan sponsored by the Company (or one of its subsidiaries), is the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (b) an event of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Exchange Act or would have been required to be so reported but for the fact that such event had been "previously reported" as that term is defined in Rule 12b-2 promulgated under the Exchange Act; (c) any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than (i) the Company (or one of its subsidiaries) or (ii) any employee benefit plan sponsored by the Company (or one of its subsidiaries), shall become the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (d) the stockholders of the Company shall approve any liquidation or dissolution of the Company; (e) the stockholders of the Company shall approve a merger, consolidation, reorganization, recapitalization, exchange offer, acquisition or disposition of assets or other transaction after the consummation of which any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act) would become the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (f) individuals who constitute the Board on the date hereof ("Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the directors comprising the remaining members of the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (f), considered as though such person were a member of the Incumbent Board; or (g) a recapitalization or other transaction or series of related transactions occurs which results in a decrease by 50% or more in the aggregate percentage ownership of the then outstanding common stock of the Company or 50% or more in the combined voting power of the outstanding securities of the Company held by the stockholders of the Company immediately prior to giving effect thereto (on a primary basis or on a fully diluted basis after giving effect to the exercise of stock options and warrants). 11. Compliance With Securities Laws. Upon the acquisition of any shares ------------------------------- pursuant to the exercise of the Option herein granted, Optionee (or any person acting under paragraph 6) will enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Option Agreement. 12. Compliance With Laws. Notwithstanding any of the other provisions -------------------- hereof, Optionee agrees that he will not exercise the Option(s) granted hereby, and that the Company will not be obligated to issue any shares pursuant to this Option Agreement, if the exercise of the Option(s) or the issuance of such shares of Common Stock would constitute a violation by the Optionee or by the Company of any provision of any law or regulation of any governmental authority. 13. Withholding of Tax. To the extent that the exercise of this Option ------------------ or the disposition of shares of Common Stock acquired by exercise of this Option results in compensation income to the Optionee for federal or state income tax purposes, the Optionee shall pay to the Company at the time of such exercise or disposition (or such other time as the law permits if the Optionee is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended) such amount of money as the Company may require to meet its obligation under applicable tax laws or regulations; and, if the Optionee fails to do so, the Company is authorized to withhold from any cash remuneration then or thereafter payable to the Optionee, any tax required to be withheld by reason of such resulting compensation income or Company may otherwise refuse to issue or transfer any shares otherwise required to be issued or transferred pursuant to the terms hereof. 14. Resolution of Disputes. As a condition of the granting of the ---------------------- Option hereby, the Optionee and his heirs and successors agree that any dispute or disagreement which may arise hereunder shall be determined by the Committee in its sole discretion and judgment, and that any such determination and any interpretation by the Committee of the terms of this Option Agreement shall be final and shall be binding and conclusive, for all purposes, upon the Company, Optionee, his heirs and personal representatives. 15. Legends on Certificate. The certificates representing the shares of ---------------------- Common Stock purchased by exercise of an Option will be stamped or otherwise imprinted with legends in such form as the Company or its counsel may require with respect to any applicable restrictions on sale or transfer and the stock transfer records of the Company will reflect stop-transfer instructions with respect to such shares. 16. Forfeiture. If Optionee's employment is terminated For Cause (as ---------- defined below), or if Optionee shall, upon separation from employment for any reason, accept employment with, consult for or acquire an ownership interest in, an envelope manufacturing company, a printing company, (or any other business which is in direct competition with the Company), doing business within a 300 mile radius of any Company (or subsidiary) facility in the U.S., Canada, or any other country where the Company is doing business at that time, at any time within one (1) year after the date of Optionee's separation from employment, Optionee agrees that (i) all unexercised Options shall terminate, (ii) the Company shall have the right to repurchase any or all shares of Common Stock received upon the exercise of Options and which were then held by Optionee for an amount equal to the Option Price times the number of shares of Common Stock so repurchased and (iii) the Optionee shall pay to the Company the amount by which the proceeds from any sale of the Common Stock received upon exercise of Options exceeded the Option Price of such Common Stock sold. "For Cause" shall mean (i) gross disregard of the Company's best interest, (ii) misappropriation or embezzlement of corporate funds or other property (iii) conviction of a felony involving moral turpitude or which in the opinion of the Committee brings Optionee into disrepute or causes harm to the Company's business, customer relations, financial condition or prospects, or (iv) violation of any statutory or common law duty of loyalty to the Company. Nothing herein shall prohibit Optionee from being a passive owner of not more than 5% of the outstanding stock of any class of securities of a competitive operation which is publicly traded, so long as Optionee has no active participation in the business of such competitive operation. 17. Notices. Every notice hereunder shall be in writing and shall be ------- given by registered or certified mail. All notices of the exercise of any Option hereunder shall be directed to Mail-Well, Inc. 8310 S. Valley Hwy., #400, Englewood, Colorado 80112, Attention: Secretary. Any notice given by the Company to Optionee directed to him at his address on file with the Company shall be effective to bind him and any other person who shall acquire rights hereunder. The Company shall be under no obligation whatsoever to advise Optionee of the existence, maturity or termination of any of Optionee's rights hereunder and Optionee shall be deemed to have familiarized himself with all matters contained herein and in the Plan which may affect any of Optionee's rights or privileges hereunder. 18. Construction and Interpretation. Whenever the term "Optionee" is ------------------------------- used herein under circumstances applicable to any other person or persons to whom this award, in accordance with the provisions of paragraph 6 hereof, may be transferred, the word "Optionee" shall be deemed to include such person or persons. References to the masculine gender herein also include the feminine gender for all purposes. 19. Agreement Subject to Plan. This Option Agreement is subject to the ------------------------- Plan. The terms and provisions of the Plan (including any subsequent amendments thereto) are hereby incorporated herein by reference thereto. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. All definitions of words and terms contained in the Plan shall be applicable to this Option Agreement. 20. Employment Relationship. Employees shall be considered to be in the ----------------------- employment of the Company as long as they remain employees of the Company or a parent or subsidiary corporation (as defined in Section 424 of the Internal Revenue Code of 1986, as amended). Any questions as to whether and when there has been a termination of such employment and the cause of such termination, shall be determined by the Committee, and its determination shall be final. Nothing contained herein shall be construed as conferring upon the Optionee the right to continue in the employ of the Company, nor shall anything contained herein be construed or interpreted to limit the "employment at will" relationship between the Optionee and the Company. 21. Binding Effect. This Option Agreement shall be binding upon and -------------- inure to the benefit of any successors to the Company and all persons lawfully claiming under Optionee. IN WITNESS WHEREOF, this Option Agreement has been executed as of the ___ day of ________________, 2001. MAIL-WELL, INC. ATTEST: By: ______________________________ ______________________________ Its:______________________________ ___________________________ ___________________________ ___________________________ OPTIONEE __________________________________ __________________________________ EX-10.29 5 ex10p29.txt FORM OF INCENTIVE STOCK OPTION AGREEMENT EXHIBIT 10.29 MAIL-WELL, INC. 2001 LONG-TERM EQUITY INCENTIVE PLAN FORM OF INCENTIVE STOCK OPTION AGREEMENT This Incentive Stock Option Agreement ("Option Agreement") is between Mail-Well, Inc., a Colorado corporation (the "Company"), and ______________ (the "Optionee"). W I T N E S S E T H: ------------------- WHEREAS, the Company has heretofore adopted the Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan (the "Plan") for the purpose of providing employees and directors of the Company and its Affiliates (as defined in the Plan) with additional incentive to promote the success of the business, to increase their proprietary interest in the success of the Company, and to encourage them to remain in the employ or remain as a director of the Company and its Affiliates; and WHEREAS, the Company, acting through the Compensation Committee of its Board of Directors (the "Committee"), has determined that its interests will be advanced by the issuance to Optionee of a nonqualified stock option under the Plan; NOW THEREFORE, for and in consideration of these premises it is agreed as follows: 1. Option. Subject to the terms and conditions contained herein, the ------ Company hereby irrevocably grants to Optionee the right and option ("Option") to purchase from the Company __________ shares of the Company's common stock, $0.01 par value ("Common Stock"), at a price at $______ per share (the "Option Price"). 2. Option Period. The Option herein granted may be exercised by ------------- Optionee in whole or in part at any time during a five (5) year period beginning on June 11, 2001 ("Option Period"), subject to the limitation that said Option shall not be exercisable for more than a percentage of the aggregate number of shares offered by this option determined by the number of full or half years of employment with the Company or its Affiliates from the effective date of the Optionee's grant, to the date of such exercise, in accordance with the following schedule: Number Percentage of of Years Shares Purchasable -------- ------------------ 1 20% 2 40% 3 60% 4 80% 4 1/2 100% Notwithstanding the foregoing, if prior to December 1, 2005 the average closing price for the Company's Common Stock for any period of 20 consecutive trading-days is (i) $7.50 or more the Option shall be immediately exercisable as to one-third of the underlying shares (ii) $10.00 or more the Option shall be immediately exercisable as to an additional one-third of the underlying shares and (iii) $12.50 or more the Option shall be immediately exercisable as to the remaining one-third of the underlying shares. Notwithstanding anything in this Agreement to the contrary, the Committee, in its sole discretion may waive the foregoing schedule of vesting and upon written notice to the Optionee, accelerate the earliest date or date on which any of the Options granted hereunder are exercisable. 3. Procedure for Exercise. The Option herein granted may be exercised ---------------------- by written notice by Optionee to the Secretary of the Company setting forth the number of shares of Common Stock with respect to which the Option is to be exercised accompanied by payment for the shares to be purchased, and specifying the address to which the certificate for such shares is to be mailed. Payment shall be by means of cash, or a cashier's check, bank draft, postal or express money order payable to the order of the Company, or at the option of the Optionee, in Common Stock theretofore owned by such Optionee (or a combination of cash and Common Stock). As promptly as practicable after receipt of such written notification and payment, the Company shall deliver to Optionee certificates for the number of shares of Common Stock with respect to which such Option has been so exercised. 4. Termination of Employment. If Optionee's employment with the Company ------------------------- or its Affiliates is terminated during the Option Period for any reason, Options granted to him which are not exercisable on such date thereupon terminate. Subject to paragraphs 5 and 10 below, any Options that are exercisable on the date of his termination of employment which have not been exercised within ninety (90) days of such termination shall expire and be of no force or effect. 5. Disability or Death. If Optionee's employment with the Company or ------------------- its Affiliates is terminated by his disability or death, all Options hereunder exercisable at the date of such disability or death shall be thereafter exercisable by Optionee, his executor or administrator, or the person or persons to whom his rights under this Option Agreement shall pass by will or by the laws of descent and distribution, as the case may be, for a period of six months from the date of Optionee's disability or death, unless this Option Agreement should earlier terminate in accordance with its other terms. In no event may any Option be exercised after the end of the Option Period. Optionee shall be deemed to be disabled if, in the option of a physician selected by the Committee, he is incapable of performing services for the Company by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long, continued and indefinite duration. 6. Transferability. This Option shall not be transferable by Optionee --------------- otherwise than by Optionee's will or by the laws of descent and distribution. During the lifetime of Optionee, the Option shall be exercisable only by Optionee. Any heir or legatee of Optionee shall take rights herein granted subject to the terms and conditions hereof. No such transfer of this Option Agreement to heirs or legatees of Optionee shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof. 7. No Rights as Stockholder. Optionee shall have no rights as a ------------------------ stockholder with respect to any shares of Common Stock covered by this Option Agreement until the date of issuance of a certificate for shares of Common Stock purchased pursuant to this Option Agreement. Until such time, Optionee shall not be entitled to dividends or to vote at meetings of the stockholders of the Company. Except as provided in paragraph 9 hereof, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash or securities or other property) paid or distributions or other rights granted in respect of any share of Common Stock for which the record date for such payment, distribution or grant is prior to the date upon which the Optionee shall have been issued share certificates, as provided hereinabove. 8. Extraordinary Corporate Transactions. If the Company recapitalizes ------------------------------------ or otherwise changes its capital structure, or merges, consolidates, sells all of its assets or dissolves (each of the foregoing a "Fundamental Change"), then thereafter upon any exercise of an option theretofore granted the Optionee shall be entitled to purchase under such option, in lieu of the number of shares of Common Stock as to which option shall then be exercisable, the number and class of shares of stock and securities to which the Optionee would have been entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental Change, the Optionee had been the holder of record of the number of shares of Common Stock as to which such option is then exercisable. 9. Changes in Capital Structure. The existence of outstanding Options ---------------------------- shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issuance of Common Stock or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceedings, whether of a similar character or otherwise. If the outstanding shares of Common Stock of the Company shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, or recapitalization, the number and kind of shares subject to the Plan or subject to any Options theretofore granted, and the Option price and the prices at which portions of the Option may be exercisable on an accelerated basis as set forth in Section 2, shall be appropriately and equitably adjusted so as to maintain the proportionate number of shares without changing the aggregate Option price. 10. Change of Control. In the event that there is a proposed Change ----------------- of Control Event the Option shall become immediately exercisable notwithstanding the provisions of Section 2, Optionee hereunder shall be given reasonable notice of such Change of Control Event and shall have a period of at least thirty (30) days thereafter to exercise the Options. As used herein, the term "Change of Control Event" shall mean the occurrence with respect to the Company of any of the following events: (a) a report on Schedule 13D is filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than (i) the Company (or one of its subsidiaries) or (ii) any employee benefit plan sponsored by the Company (or one of its subsidiaries), is the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (b) an event of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Exchange Act or would have been required to be so reported but for the fact that such event had been "previously reported" as that term is defined in Rule 12b-2 promulgated under the Exchange Act; (c) any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than (i) the Company (or one of its subsidiaries) or (ii) any employee benefit plan sponsored by the Company (or one of its subsidiaries), shall become the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (d) the stockholders of the Company shall approve any liquidation or dissolution of the Company; (e) the stockholders of the Company shall approve a merger, consolidation, reorganization, recapitalization, exchange offer, acquisition or disposition of assets or other transaction after the consummation of which any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act) would become the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (f) individuals who constitute the Board on the date hereof ("Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the directors comprising the remaining members of the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (f), considered as though such person were a member of the Incumbent Board; or (g) a recapitalization or other transaction or series of related transactions occurs which results in a decrease by 50% or more in the aggregate percentage ownership of the then outstanding common stock of the Company or 50% or more in the combined voting power of the outstanding securities of the Company held by the stockholders of the Company immediately prior to giving effect thereto (on a primary basis or on a fully diluted basis after giving effect to the exercise of stock options and warrants). 11. Compliance With Securities Laws. Upon the acquisition of any shares ------------------------------- pursuant to the exercise of the Option herein granted, Optionee (or any person acting under paragraph 6) will enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Option Agreement. 12. Compliance With Laws. Notwithstanding any of the other provisions -------------------- hereof, Optionee agrees that he will not exercise the Option(s) granted hereby, and that the Company will not be obligated to issue any shares pursuant to this Option Agreement, if the exercise of the Option(s) or the issuance of such shares of Common Stock would constitute a violation by the Optionee or by the Company of any provision of any law or regulation of any governmental authority. 13. Withholding of Tax. To the extent that the exercise of this Option ------------------ or the disposition of shares of Common Stock acquired by exercise of this Option results in compensation income to the Optionee for federal or state income tax purposes, the Optionee shall pay to the Company at the time of such exercise or disposition (or such other time as the law permits if the Optionee is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended) such amount of money as the Company may require to meet its obligation under applicable tax laws or regulations; and, if the Optionee fails to do so, the Company is authorized to withhold from any cash remuneration then or thereafter payable to the Optionee, any tax required to be withheld by reason of such resulting compensation income or Company may otherwise refuse to issue or transfer any shares otherwise required to be issued or transferred pursuant to the terms hereof. 14. Resolution of Disputes. As a condition of the granting of the ---------------------- Option hereby, the Optionee and his heirs and successors agree that any dispute or disagreement which may arise hereunder shall be determined by the Committee in its sole discretion and judgment, and that any such determination and any interpretation by the Committee of the terms of this Option Agreement shall be final and shall be binding and conclusive, for all purposes, upon the Company, Optionee, his heirs and personal representatives. 15. Legends on Certificate. The certificates representing the shares of ---------------------- Common Stock purchased by exercise of an Option will be stamped or otherwise imprinted with legends in such form as the Company or its counsel may require with respect to any applicable restrictions on sale or transfer and the stock transfer records of the Company will reflect stop-transfer instructions with respect to such shares. 16. Forfeiture. If Optionee's employment is terminated For Cause (as ---------- defined below), or if Optionee shall, upon separation from employment for any reason, accept employment with, consult for or acquire an ownership interest in, an envelope manufacturing company, a printing company, (or any other business which is in direct competition with the Company), doing business within a 300 mile radius of any Company (or subsidiary) facility in the U.S., Canada, or any other country where the Company is doing business at that time, at any time within one (1) year after the date of Optionee's separation from employment, Optionee agrees that (i) all unexercised Options shall terminate, (ii) the Company shall have the right to repurchase any or all shares of Common Stock received upon the exercise of Options and which were then held by Optionee for an amount equal to the Option Price times the number of shares of Common Stock so repurchased and (iii) the Optionee shall pay to the Company the amount by which the proceeds from any sale of the Common Stock received upon exercise of Options exceeded the Option Price of such Common Stock sold. "For Cause" shall mean (i) gross disregard of the Company's best interest, (ii) misappropriation or embezzlement of corporate funds or other property (iii) conviction of a felony involving moral turpitude or which in the opinion of the Committee brings Optionee into disrepute or causes harm to the Company's business, customer relations, financial condition or prospects, or (iv) violation of any statutory or common law duty of loyalty to the Company. Nothing herein shall prohibit Optionee from being a passive owner of not more than 5% of the outstanding stock of any class of securities of a competitive operation which is publicly traded, so long as Optionee has no active participation in the business of such competitive operation. 17. Notices. Every notice hereunder shall be in writing and shall be ------- given by registered or certified mail. All notices of the exercise of any Option hereunder shall be directed to Mail-Well, Inc. 8310 S. Valley Hwy., #400, Englewood, Colorado 80112, Attention: Secretary. Any notice given by the Company to Optionee directed to him at his address on file with the Company shall be effective to bind him and any other person who shall acquire rights hereunder. The Company shall be under no obligation whatsoever to advise Optionee of the existence, maturity or termination of any of Optionee's rights hereunder and Optionee shall be deemed to have familiarized himself with all matters contained herein and in the Plan which may affect any of Optionee's rights or privileges hereunder. 18. Construction and Interpretation. Whenever the term "Optionee" is ------------------------------- used herein under circumstances applicable to any other person or persons to whom this award, in accordance with the provisions of paragraph 6 hereof, may be transferred, the word "Optionee" shall be deemed to include such person or persons. References to the masculine gender herein also include the feminine gender for all purposes. 19. Agreement Subject to Plan. This Option Agreement is subject to the ------------------------- Plan. The terms and provisions of the Plan (including any subsequent amendments thereto) are hereby incorporated herein by reference thereto. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. All definitions of words and terms contained in the Plan shall be applicable to this Option Agreement. 20. Employment Relationship. Employees shall be considered to be in the ----------------------- employment of the Company as long as they remain employees of the Company or a parent or subsidiary corporation (as defined in Section 424 of the Internal Revenue Code of 1986, as amended). Any questions as to whether and when there has been a termination of such employment and the cause of such termination, shall be determined by the Committee, and its determination shall be final. Nothing contained herein shall be construed as conferring upon the Optionee the right to continue in the employ of the Company, nor shall anything contained herein be construed or interpreted to limit the "employment at will" relationship between the Optionee and the Company. 21. Binding Effect. This Option Agreement shall be binding upon and -------------- inure to the benefit of any successors to the Company and all persons lawfully claiming under Optionee. IN WITNESS WHEREOF, this Option Agreement has been executed as of the ____ day of June, 2001. MAIL-WELL, INC. ATTEST: By: ___________________________________ _________________________________ Its: _________________________________ _____________________________ _____________________________ _____________________________ OPTIONEE ______________________________________ ______________________________________ EX-10.30 6 ex10p30.txt FORM OF RESTRICTED STOCK AWARD AGREEMENT EXHIBIT 10.30 FORM OF RESTRICTED STOCK AWARD AGREEMENT THIS RESTRICTED STOCK AWARD AGREEMENT dated as of this ____ day of ________, 2001 (the "Agreement"), between Mail-Well, Inc., a Colorado corporation (the "Company", and together with its direct and indirect subsidiaries, a "Related Entity") and _______________ (the "Executive"). RECITALS WHEREAS, the Company has awarded Executive shares (the "Shares") of the authorized but unissued common stock, $.01 par value, of the Company (the "Common Stock") pursuant to the terms of the Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan (the "Plan"); and WHEREAS, the Plan contemplates a written document evidencing the award; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties agree as follows: ARTICLE I AWARD OF SHARES 1.1 Award. Pursuant to the terms of the Plan the Executive is hereby ----- awarded ____________ shares of the Company's Common Stock. 1.2 Delivery of Certificates. Any certificates representing the Shares ------------------------ hereunder shall be held in escrow by the Secretary of the Company as provided in Article IV hereof. 1.3 Stockholder Right. Until such time as any or all of Executive's ----------------- Shares are forfeited pursuant to the terms of this Agreement, if ever, the Executive (or any successor in interest) shall have all the rights of a stockholder (including voting rights) with respect to the Shares, including Shares held in escrow under Article IV, subject, however, to the transfer restrictions of Article II. ARTICLE II TRANSFER RESTRICTIONS 2.1 Restriction on Transfer. The Executive shall not transfer, assign, ----------------------- encumber, or otherwise dispose of any Unvested Shares (as defined below) at any time. 2.2 Disposition Of Shares. Executive hereby agrees that Executive shall --------------------- make no disposition of the Vested Shares (as defined below) unless and until Executive: a. shall have notified the Company of the proposed disposition and provided a written summary of the terms and conditions of the proposed disposition; and b. shall have complied with all requirements of this Agreement applicable to the disposition of the Shares. The Company shall not be required (i) to transfer on its books any Shares which have been sold or transferred in violation of the provisions of this Article II, nor (ii) to treat as the owner of the Shares, or otherwise to accord voting or dividend rights to, any transferee to whom the Shares have been transferred in contravention of this Agreement. Executive agrees to pay the Company's reasonable expenses incurred in connection with any disposition of the Shares. 2.3 Restrictive Legends. In order to reflect the restrictions on ------------------- disposition of the Shares, the stock certificates for the Shares will be endorsed with the following restrictive legend: "THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO, AND MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH, THAT CERTAIN RESTRICTED STOCK AWARD AGREEMENT, DATED AS OF _________, 2001, BETWEEN THE COMPANY AND THE HOLDER OF THESE SECURITIES." ARTICLE III FORFEITURE OF UNVESTED SHARES 3.1 Forfeiture. Upon termination of the Executive's employment with a ---------- Related Entity, for any reason, all or any portion of the Executive's Shares in which the Executive has not acquired a vested interest in accordance with the vesting provisions set forth in Schedule I (such shares to be hereinafter called the "Unvested Shares") will be forfeited and the Executive shall have no further rights with respect to such Unvested Shares. 3.2 Vesting. Unvested Shares shall cease to be Unvested Shares and ------- shall cease to be subject to forfeiture, and the Executive shall thereupon acquire a vested interest therein (such shares to be hereinafter called the "Vested Shares") as set forth on Schedule I. 3.3 Additional Shares or Substituted Securities. In the event of any ------------------------------------------- stock dividend, stock split, recapitalization or other change affecting the Company's outstanding Common Stock as a class effected without receipt of consideration, then any new, substituted, or additional securities or other property (including money paid other than as a regular cash dividend) which is by reason of any such transaction distributed with respect to the Shares (the "Distributed Property") shall be immediately subject to forfeiture as provided in this Article III, but only to the extent the Shares are at the time subject to forfeiture. Appropriate adjustments to reflect the distribution of such Distributed Property shall be made to the number of Shares hereunder. ARTICLE IV ESCROW FOR UNVESTED SHARES 4.1 Deposit. Upon issuance, the certificates for the Unvested Shares ------- shall be deposited in escrow with the Company to be held in accordance with the provisions of this Article IV. The deposited certificates, together with any other assets or securities from time to time deposited with the Company pursuant to the requirements of this Agreement, shall remain in escrow until such time or times as the certificates (or other assets and securities) are to be released or otherwise surrendered for cancellation in accordance with Section 4.3. 4.2 Recapitalization. Any cash dividends on the Shares (or other ---------------- securities at the time held in escrow) shall be paid directly to the Executive and shall not be held in escrow. However, any Distributed Property shall be immediately delivered to the Company to be held in escrow under this Article IV, but only to the extent the Shares are at the time subject to the escrow requirements of Section 4.1. 4.3 Release/Surrender. The Shares, together with the Distributed ----------------- Property and any other assets or securities held in escrow hereunder, shall be subject to the following terms and conditions relating to their release from escrow or their surrender to the Company for repurchase and cancellation: (i) Should the Executive's Unvested Shares be forfeited as provided in Section 3.1 hereof, then the escrowed certificates for such Unvested Shares (together with any other assets or securities issued with respect thereto) shall be delivered to the Company for cancellation, and the Executive shall cease to have any further rights or claims with respect to such Unvested Shares (or other assets or securities). (ii) As the interest of the Executive in Shares (or any other assets or securities issued with respect thereto) vests in accordance with the provisions of Schedule I, the certificates for such Vested Shares (as well as all other vested assets and securities) shall be released promptly from escrow and delivered to the Executive. ARTICLE V SPECIAL TAX ELECTION 5.1 Section 83(b) Election. The Executive understands that under ---------------------- Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the fair market value of the Shares on the date any forfeiture restrictions applicable to such Shares lapse will be reportable as ordinary income to the Executive in the tax year in which such restrictions lapse. For this purpose, the term "forfeiture restrictions" includes the automatic forfeiture of Unvested Shares as provided in Section 3.1 hereof. The Executive understands, however, that he may elect to be taxed at the time the Shares are acquired hereunder, rather than when and as such Shares cease to be subject to such forfeiture restrictions, by filing an irrevocable election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the date of this Agreement. If this irrevocable election is made, the Executive will be taxed on the fair market value of the Shares as of the date of this Agreement (determined without taking into account any forfeiture restrictions). The form for making this irrevocable election is attached as Exhibit A hereto. In the event that the Executive makes this irrevocable election, and the Executive's Unvested Shares are forfeited pursuant to Section 3.1 hereof, the Executive will not be entitled to deduct the income, if any, previously recognized as income with respect to those shares as a result of the election. The Executive understands that failure to make this filing within the thirty (30) day period will result in the recognition of ordinary income by the Executive as the forfeiture restrictions lapse. THE EXECUTIVE ACKNOWLEDGES THAT IT IS EXECUTIVE'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EXECUTIVE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON SUCH EXECUTIVE'S BEHALF. This summary is necessarily incomplete, and the tax laws and regulations are subject to change. The Executive should consult a tax advisor before making an election under Section 83(b). ARTICLE VI GENERAL PROVISIONS 6.1 No Employment or Service Contract. Nothing in this Agreement shall --------------------------------- confer upon the Executive any right to employment with the Company or a Related Entity. 6.2 Notices. All notices, requests, demands, and other communications ------- under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, on the date of transmittal of service via telecopy to the party to whom notice is to be given (with a confirming copy being delivered within 24 hours thereafter), or on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, or via overnight courier providing a receipt and properly addressed. Notices to the Company shall be addressed to Mail-Well, Inc., 8310 S. Valley Highway, #400, Englewood, Colorado 80112. Attention: Secretary. Notices to Executive shall be sent to the latest address of Executive shown on the records of the Company. Any party may change its address for purposes of this Section by giving notice of the new address to each of the other parties in the manner set forth above. 6.3 No Waiver. No waiver of any breach or condition of this Agreement --------- shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature. 6.4 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Colorado for all purposes and in all respects, without giving effect to the conflict of law provisions thereof. 6.5 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original and enforceable against the parties actually executing such counterparts, but all of which together shall constitute one and the same instrument. 6.6 Successors and Assigns. The provisions of this Agreement shall ---------------------- inure to the benefit of, and be binding upon, the Company and its successors and assigns and the Executive and the Executive's legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms and conditions hereof. 6.7 Integration; Amendment. This Agreement, the Plan and the other ---------------------- documents delivered pursuant hereto constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof, and supersede any previous agreement or understanding between or among the parties with respect to such subjects. No party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 6.8 Severability. In the event that any provision of this Agreement ------------ becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 6.9 Titles and Subtitles. The titles and subtitles used in this -------------------- Agreement are used for convenience only and are not considered in construing or interpreting this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above. MAIL-WELL, INC. By:____________________________________ Name: ________________________________ Title: ________________________________ EXECUTIVE: Signature:_____________________________ Name: ________________________________ SCHEDULE I VESTING The forfeiture provisions in Section 3.1 shall automatically terminate with respect to the Shares and such Unvested Shares shall become Vested Shares according to the following schedule (the "Ordinary Vesting Schedule"): Anniversary Percentage of of this Agreement Shares Vested ----------------- ------------- Fifth 50% Sixth 50% Provided, however, that Unvested Shares shall vest immediately in the following amounts if the average closing price for the Company's Common Stock for any period of 20 consecutive trading days equal or exceeds the corresponding amounts shown below (the "Accelerated Vesting Schedule"): Average Percentage of Closing Price Shares Vested ------------- ------------- $8.00 33.3% $11.00 33.3% $14.00 33.4% If any vesting criterion under the Accelerated Vesting Schedule is attained after vesting under the Ordinary Vesting Schedule has commenced, or vice-versa, the two schedules shall work in tandem such that if a vesting criterion is attained that calls for a higher percentage of total vesting than that called for by the next-most-recently attained vesting criterion, Unvested Shares shall vest in the amount necessary to satisfy the total vesting called for by the most-recently attained vesting criterion. This method is illustrated as follows: (a) If the Common Stock reaches and maintains an $11.00 price for 20 consecutive trading days between the fifth and sixth anniversaries of the date of this Agreement, an additional 16.6% of the total grant will vest; (b) If the Common Stock reaches and maintains an $8.00 price for 20 consecutive trading days during the month immediately prior to the fifth anniversary of the date of this Agreement, then 33.3% of the total grant will vest at that time, and an additional 16.7% of the total grant will vest at the fifth anniversary; and (c) If the Common Stock reaches and maintains an $11.00 price for 20 consecutive trading days during the month immediately prior to the fifth anniversary of the date of this Agreement, then 66.6% of the total grant will have vested at that time, and no additional amount will vest at the fifth anniversary. Notwithstanding the foregoing, all Unvested Shares shall vest upon a Change of Control Event. As used herein, the term "Change of Control Event" shall mean the occurrence with respect to the Company of any of the following events: (a) a report on Schedule 13D is filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than (i) a Related Entity or (ii) any employee benefit plan sponsored by a Related Entity, is the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (b) an event of a nature that would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Exchange Act or would have been required to be so reported but for the fact that such event had been "previously reported" as that term is defined in Rule 12b-2 promulgated under the Exchange Act; (c) any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than (i) a Related Entity or (ii) any employee benefit plan sponsored by a Related Entity, shall become the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (d) the stockholders of the Company shall approve any liquidation or dissolution of the Company; (e) the stockholders of the Company shall approve a merger, consolidation, reorganization, recapitalization, exchange offer, acquisition or disposition of assets or other transaction after the consummation of which any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act) would become the beneficial owner (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the outstanding shares of common stock of the Company or 50% or more of the combined voting power of the then outstanding securities of the Company (as determined under paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to acquire common stock or other securities); (f) individuals who constitute the Board on the date hereof ("Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least two-thirds of the directors comprising the remaining members of the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (f), considered as though such person were a member of the Incumbent Board; or A recapitalization or other transaction or series of related transactions occurs which results in a decrease by 50% or more in the aggregate percentage ownership of the then outstanding common stock of the Company or 50% or more in the combined voting power of the outstanding securities of the Company held by the stockholders of the Company immediately prior to giving effect thereto (on a primary basis or on a fully diluted basis after giving effect to the exercise of stock options and warrants). MODIFICATIONS TO PERFORMANCE CRITERIA The Company or by the Board of Directors of Mail-Well or the committee of its Board of Directors responsible for administering the Plan (the "Committee") shall have the authority to amend, modify or adjust the performance or financial target criteria set forth above, in its sole discretion, in recognition of any unusual or non-recurring events affecting the Company, its subsidiaries or affiliates or their respective financial statements to prevent the dilution or enlargement of the Participant's rights awarded hereunder. Such unusual or non-recurring events include, without limitations, the events described in Section 4.2 of the Plan, a significant sale or disposal of any division or significant portion of the assets of the Company, its subsidiaries or affiliates, and changes in applicable laws, regulations or accounting principles to the extent any such events affect the performance or financial target criteria set forth herein. Any such amendment, modification or adjustment by the Committee shall be final and conclusive for all purposes under this Agreement; provided, however, that the Committee shall have determined that such amendment, modification or adjustment is consistent with the provisions of Section 14 of the Plan. ROUNDING CONVENTIONS For purposes of calculating any Share amounts pursuant to the foregoing formula, the applicable number of Shares shall be rounded to the nearest whole number. EXHIBIT A SECTION 83(B) TAX ELECTION This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2. (1) The taxpayer who performed the services is: Name: Address: Taxpayer Social Security No.: Taxable Year: Calendar Year 2001 (2) The property with respect to which the election is being made is _______ shares of the common stock, par value $.0l per share, of Mail-Well, Inc. (the "Unvested Shares"). (3) The Unvested Shares were granted on ________, 2001. (4) The Unvested Shares are subject to forfeiture if for any reason taxpayer's services with the issuer are terminated. The forfeiture restriction lapses in a series of installments. (5) The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $_____ per share. (6) The amount paid for such Unvested Shares is $0.00 per share. (7) A copy of this statement was furnished to Mail-Well, Inc. for whom taxpayer rendered the services underlying the transfer of the Unvested Shares. (8) This statement is executed as of __________, 2001. Spouse (if any) Taxpayer EX-99.1 7 ex99p1.txt CONSOLIDATING CONDENSED FINANCIAL STATEMENTS EXHIBIT 99.1 CONDENSED CONSOLIDATING FINANCIAL INFORMATION These statements are provided to comply with the reporting requirements under the indenture for the 8 3/4% Senior Subordinated Notes due in 2008. The following condensed consolidating financial information illustrates the composition of the Parent Guarantor, Issuer, Guarantor Subsidiaries and non-guarantor subsidiaries. The Issuer, the Guarantor Subsidiaries and the non-guarantor subsidiaries comprise all of the direct and indirect subsidiaries of the Parent Guarantor. Management has determined that separate complete financial statements would not provide additional material information that would be useful in assessing the financial composition of the Guarantor Subsidiaries. In December 1998, Mail-Well I Corporation ("Issuer" or "MWI"), the Company's wholly-owned subsidiary, and the only direct subsidiary of the Company, issued $300.0 million aggregate principal amount of 8 3/4% Senior Subordinated Notes ("Senior Notes") due in 2008. The Senior Notes are guaranteed by the majority of the U.S. subsidiaries (the "Guarantor Subsidiaries") of MWI, all of which are wholly owned, and by Mail-Well, Inc. ("Parent Guarantor"). The guarantees are joint and several, full, complete and unconditional. There are no material restrictions on the ability of the Guarantor Subsidiaries to transfer funds to MWI in the form of cash dividends, loans or advances, other than ordinary legal restrictions under corporate law, fraudulent transfer and bankruptcy laws. Investments in subsidiaries are accounted for under the equity method, wherein the investor company's share of earnings and income taxes applicable to the assumed distribution of such earnings are included in net income. In addition, investments increase in the amount of permanent contributions to subsidiaries and decrease in the amount of distributions from subsidiaries. The elimination entries eliminate the equity method investment in subsidiaries and the equity in earnings of subsidiaries, intercompany payables and receivables and other transactions between subsidiaries. CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION June 30, 2001 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ Current assets: Cash and cash equivalents $ - $ - $ (626) $ 902 $ - $ 276 Receivables, net - 2,399 138,825 38,213 - 179,437 Investment in accounts receivable securitization - - - 122,974 - 122,974 Accounts receivable - other - 141,355 (123,105) 1,566 - 19,816 Inventories, net - 51,399 89,626 22,071 - 163,096 Note receivable from Issuer 147,436 - - - (147,436) - Other current assets 87 24,851 36,130 2,717 (10,506) 53,279 -------- ----------- ----------- ----------- ----------- ------------ Total current assets 147,523 220,004 140,850 188,443 (157,942) 538,878 Investment in subsidiaries 295,627 284,190 74,926 - (654,743) - Property, Plant and Equipment, net - 130,454 338,256 84,062 - 552,772 Intangible assets, net - 47,735 420,890 82,870 - 551,495 Notes receivable from subsidiaries - 784,400 - - (784,400) - Other assets, net 1,425 25,625 55,664 4,412 (41,500) 45,626 -------- ----------- ----------- ----------- ----------- ------------ Total assets $444,575 $ 1,492,408 $ 1,030,586 $ 359,787 $(1,638,585) $ 1,688,771 ======== =========== =========== =========== =========== ============ Current liabilities: Accounts payable $ - $ 53,098 $ 122,842 $ 19,195 $ - $ 195,135 Accrued compensation - 23,491 89,652 6,679 - 119,822 Other current liabilities 10,922 181,398 (331,377) 185,262 (10,506) 35,699 Note payable to Parent - 147,436 - - (147,436) - Current portion of long-term debt - 32,994 2,590 5,960 - 41,544 -------- ---------- ----------- ----------- ----------- ------------ Total current liabilities 10,922 438,417 (116,293) 217,096 (157,942) 392,200 Long-term debt 139,063 704,015 13,879 12,658 - 869,615 Note payable to Issuer - - 784,400 - (784,400) - Deferred income taxes - 28,287 82,735 15,795 (21,508) 105,309 Other long-term liabilities - 26,062 20,924 63 (19,992) 27,057 -------- ----------- ---------- ----------- ----------- ------------ Total liabilities 149,985 1,198,781 785,645 245,612 (983,842) 1,394,181 Shareholders' equity 294,590 295,627 244,941 114,175 (654,743) 294,590 -------- ----------- ----------- ----------- ----------- ------------ Total liabilities and shareholders' equity $444,575 $ 1,492,408 $ 1,030,586 $ 359,787 $(1,638,585) $ 1,688,771 ======== =========== =========== =========== =========== ============
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION December 31, 2000 (in thousands)
COMBINED COMBINED PARENT GUARANTOR NONGUARANTOR GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED --------- ------ ------------ ------------ ----- ------------ Current assets: Cash and cash equivalents $ - $ 9,596 $ (9,846) $ 712 $ - $ 462 Receivables, net - 8,669 151,978 41,883 - 202,530 Investment in accounts receivable Securitization - - - 75,427 - 75,427 Accounts receivable - other - 13,499 5,615 1,063 - 20,177 Inventories, net - 51,359 91,815 23,259 - 166,433 Note receivable from Issuer 147,436 - - - (147,436) - -------- Other current assets 262 25,741 24,399 3,786 (181) 54,007 -------- ---------- ----------- -------- ----------- ---------- Total current assets 147,698 108,864 263,961 146,130 (147,617) 519,036 -------- Investment in subsidiaries 385,505 357,592 64,348 - (807,445) - Property, plant and equipment, net - 132,522 350,964 86,536 - 570,022 Intangible assets, net - 49,455 483,515 86,245 - 619,215 Note receivable from Subsidiaries - 784,400 - - (784,400) - Other assets, net 3,481 55,581 1,101 4,001 (18,882) 45,282 -------- ---------- ----------- -------- ----------- ---------- Total assets $536,684 $1,488,414 $ 1,163,889 $322,912 $(1,758,344) $1,753,555 ======== ========== =========== ======== =========== ========== Current liabilities: Accounts payable $ - $ 32,446 $ 107,569 $ 17,700 $ - $ 157,715 Accrued compensation - 24,556 31,144 7,486 - 63,186 Other current liabilities 11,768 100,773 (184,734) 155,374 (181) 83,000 Note payable to Parent - 147,436 - - (147,436) - Current portion of long-term debt - 30,767 2,662 7,113 - 40,542 -------- ---------- ----------- -------- ----------- ---------- Total current liabilities 11,768 335,978 (43,359) 187,673 (147,617) 344,443 -------- Long-term debt 139,063 718,147 18,471 12,921 - 888,602 -------- Note payable to issuer - - 784,400 - (784,400) - Deferred income taxes - 28,288 66,688 13,469 - 108,445 Other long-term liabilities - 20,496 23,992 606 (18,882) 26,212 -------- ---------- ----------- -------- ----------- ---------- Total liabilities 150,831 1,102,909 850,192 214,669 (950,899) 1,367,702 -------- Shareholders' equity 385,853 385,505 313,697 108,243 (807,445) 385,853 -------- ---------- ----------- -------- ----------- ---------- Total liabilities and shareholders' equity $536,684 $1,488,414 $ 1,163,889 $322,912 $(1,758,344) $1,753,555 ======== ========== =========== ======== =========== ==========
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Three-months ended June 30, 2001 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ NET SALES $ - $ 117,231 $ 391,286 $ 62,933 $ - $ 571,450 COST OF SALES - 94,770 302,712 46,865 - 444,347 -------- --------- --------- -------- --------- --------- GROSS PROFIT - 22,461 88,574 16,068 - 127,103 OTHER OPERATING COSTS 92 17,765 74,473 7,182 - 99,512 -------- RESTRUCTURING AND OTHER UNUSUAL CHARGES - 15,725 11,756 1 - 27,482 -------- --------- --------- -------- --------- --------- OPERATING INCOME (LOSS) (92) (11,029) 2,345 8,885 - 109 OTHER (INCOME) EXPENSE Interest expense 1,739 19,476 20,064 800 (19,980) 22,099 Other (income) expense (1,978) (17,625) (606) 453 19,980 224 -------- --------- --------- -------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES AND LOSS ON DISPOSAL 147 (12,880) (17,113) 7,632 - (22,214) PROVISION (BENEFIT) FOR INCOME TAXES - (1,775) (7,315) 3,436 - (5,654) -------- --------- --------- -------- --------- --------- INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES AND LOSS ON DISPOSAL 147 (11,105) (9,798) 4,196 - (16,560) --------- EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES (92,672) (81,567) 4,623 - 169,616 - -------- --------- --------- -------- --------- --------- INCOME (LOSS) BEFORE LOSS ON DISPOSAL (92,525) (92,672) (5,175) 4,196 169,616 (16,560) LOSS ON DISPOSAL - - (75,965) - - (75,965) -------- --------- --------- -------- --------- --------- NET INCOME $(92,525) $ (92,672) $ (81,140) $ 4,196 $ 169,616 $ (92,525) ======== ========= ========= ======== ========= =========
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Three-months Ended June 30, 2000 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ NET SALES $ - $ 110,180 $ 414,191 $ 60,531 $ - $ 584,902 COST OF SALES - 88,856 313,326 45,617 - 447,799 -------- --------- --------- -------- -------- --------- GROSS PROFIT - 21,324 100,865 14,914 - 137,103 OTHER OPERATING COSTS 59 17,822 70,970 7,321 - 96,172 -------- --------- --------- -------- -------- --------- OPERATING INCOME (LOSS) (59) 3,502 29,895 7,593 - 40,931 OTHER (INCOME) EXPENSE Interest expense 1,972 22,152 8,582 (1,190) (7,572) 23,944 Other (income) expense (2,211) (5,261) (510) 203 7,572 (207) -------- --------- --------- -------- -------- --------- INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 180 (13,389) 21,823 8,580 - 17,194 PROVISION (BENEFIT) FOR INCOME TAXES - (4,935) 8,116 3,155 - 6,336 -------- --------- --------- -------- -------- --------- INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 180 (8,454) 13,707 5,425 - 10,858 EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 11,064 21,141 4,590 - (36,795) - -------- --------- --------- -------- -------- --------- INCOME FROM CONTINUING OPERATIONS 11,244 12,687 18,297 5,425 (36,795) 10,858 DISCONTINUED OPERATIONS - (1,623) 2,009 - - 386 -------- --------- --------- -------- -------- --------- NET INCOME $ 11,244 $ 11,064 $ 20,306 $ 5,425 $(36,795) $ 11,244 ======== ========= ========= ======== ======== =========
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Six-months Ended June 30, 2001 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ NET SALES $ - $ 230,054 $ 800,095 $ 131,188 $ - $ 1,161,337 COST OF SALES - 184,931 620,134 98,000 - 903,065 -------- --------- --------- --------- --------- ----------- GROSS PROFIT - 45,123 179,961 33,188 - 258,272 OTHER OPERATING COSTS 183 35,716 150,862 15,460 - 202,221 RESTRUCTURING & OTHER UNUSUAL CHARGES - 15,876 11,759 (153) - 27,482 -------- --------- --------- --------- --------- ----------- OPERATING INCOME (LOSS) (183) (6,469) 17,340 17,881 - 28,569 OTHER (INCOME) EXPENSE Interest expense 3,477 38,244 39,432 2,452 (39,960) 43,645 Other (income) expense (3,954) (34,907) (840) 525 39,960 784 -------- --------- --------- --------- --------- ----------- INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES AND LOSS ON DISPOSAL 294 (9,806) (21,252) 14,904 - (15,860) PROVISION (BENEFIT) FOR INCOME TAXES - (429) (9,353) 6,860 - (2,922) -------- --------- --------- --------- --------- ----------- INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES AND LOSS ON DISPOSAL 294 (9,377) (11,899) 8,044 - (12,938) EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES (89,196) (79,819) 12,956 - 156,059 - -------- --------- --------- --------- --------- ----------- INCOME (LOSS) BEFORE LOSS ON DISPOSAL (88,902) (89,196) 1,057 8,044 156,059 (12,938) --------- LOSS ON DISPOSAL - - (75,965) - - (75,965) -------- --------- --------- --------- --------- ----------- NET INCOME $(88,902) $ (89,196) $ (74,908) $ 8,044 $ 156,059 $ (88,903) ======== ========= ========= ========= ========= ===========
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Six-months Ended June 30, 2000 (in thousands)
Combined Combined Parent Guarantor Nonguarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated --------- ------ ------------ ------------ ------------ ------------ NET SALES $ - $ 225,878 $ 737,399 $ 171,267 $ - $ 1,134,544 COST OF SALES - 180,978 561,665 124,741 - 867,384 -------- --------- --------- --------- -------- ----------- GROSS PROFIT - 44,900 175,734 46,526 - 267,160 OTHER OPERATING COSTS 101 34,707 120,114 25,840 - 180,762 -------- --------- --------- --------- -------- ----------- OPERATING INCOME (LOSS) (101) 10,193 55,620 20,686 - 86,398 OTHER (INCOME) EXPENSE Interest expense 4,088 39,164 15,678 (851) (15,143) 42,936 Other (income) expense (4,423) (10,865) (542) 358 15,143 (329) -------- --------- --------- --------- -------- ----------- INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 234 (18,106) 40,484 21,179 - 43,791 PROVISION (BENEFIT) FOR INCOME TAXES - (6,896) 15,789 8,376 - 17,269 -------- --------- --------- --------- -------- ----------- INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 234 (11,210) 24,695 12,803 - 26,522 EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 26,955 40,863 8,749 - (76,567) - -------- --------- --------- --------- -------- ----------- INCOME FROM CONTINUING OPERATIONS 27,189 29,653 33,444 12,803 (76,567) 26,522 DISCONTINUED OPERATIONS - (2,307) 2,009 1,356 - 1,058 -------- --------- --------- --------- -------- ----------- INCOME BEFORE EXTRAORDINARY ITEM 27,189 27,346 35,453 14,159 (76,567) 27,580 EXTRAORDINARY ITEM 1,838 (391) - - - 1,447 -------- --------- --------- --------- -------- ----------- NET INCOME $ 29,027 $ 26,955 $ 35,453 $ 14,159 $(76,567) $ 29,027 ======== ========= ========= ========= ======== ===========
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