<Page>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 2002
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------
VON HOFFMANN HOLDINGS INC.
VON HOFFMANN CORPORATION
(Exact name of registrants as specified in their charters)
<Table>
DELAWARE 27323 22-1661746
DELAWARE 27323 43-0633003
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
incorporation or organization) Classification Code Number)
</Table>
<Table>
VON HOFFMANN HOLDINGS INC. PETER MITCHELL
VON HOFFMANN CORPORATION VON HOFFMANN CORPORATION
1000 CAMERA AVENUE 1000 CAMERA AVENUE
ST. LOUIS, MISSOURI 63126 ST. LOUIS, MISSOURI 63126
(314) 966-0909 (314) 966-0909
(Name, address, including zip code, and telephone (Name, address, including zip code, and telephone
number, number,
including area code, of registrants' principal executive including area code, of agent for service)
offices)
</Table>
------------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
------------------------------
WITH COPIES TO:
TODD R. CHANDLER, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153-0119
(212) 310-8000
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
10 1/4% SENIOR NOTES DUE 2009......................... $215,000,000 100% $215,000,000 $19,780
GUARANTEES OF 10 1/4% SENIOR NOTES DUE 2009........... $215,000,000 N/A N/A N/A(2)
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007............ $100,000,000 100% $100,000,000 $ 9,200
GUARANTEES OF 10 3/8% SENIOR SUBORDINATED NOTES DUE
2007................................................ $100,000,000 N/A N/A N/A(2)
13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009..... $ 48,056,397 100% $ 48,056,397 $ 4,422
TOTAL................................................. $363,056,397 $33,402
</Table>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933.
(2) The Additional Registrants will guarantee the payment of the 10 1/4% Senior
Notes Due 2009 and the 10 3/8% Senior Subordinated Notes Due 2007. Pursuant
to Rule 457(n) under the Securities Act, no additional filing fee is
required.
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
ADDITIONAL REGISTRANTS
<Table>
<Caption>
PRIMARY ADDRESS, INCLUDING ZIP CODE
STATE OR OTHER STANDARD AND TELEPHONE NUMBER,
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER INCLUDING AREA CODE, OF
EXACT NAME OF REGISTRANT AS INCORPORATION CLASSIFICATION IDENTIFICATION REGISTRANT'S PRINCIPAL
SPECIFIED IN ITS CHARTER OR ORGANIZATION CODE NUMBER NUMBER EXECUTIVE OFFICE* REGISTRATION NO.
- --------------------------- --------------- -------------- --------------- --------------------------- ----------------
One Thousand Realty &
Investment Company.... Delaware 6531 43-1432355 1000 Camera Avenue St. 333-
Louis, MO 63126 (314)
966-0909
H & S Graphics, Inc..... Delaware 27962 36-4228578 3640 Edison Place Rolling 333-
Meadows, IL 60008 (847)
506-9800
Preface, Inc............ Delaware 27962 36-4228574 1111 Plaza Drive 333-
Schaumburg, IL 60173 (847)
995-8250
Precision Offset Printing
Company............... Delaware 27323 23-1354890 133 Main Street Leesport, 333-
PA 19533 (610) 926-3900
</Table>
- ------------------------
* Name, address, including zip code and telephone number, including area code,
for agent of service of process for each of the Additional Registrants is
Peter Mitchell at 1000 Camera Avenue, St. Louis, MO 63126, (314) 966-0909.
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) an aggregate
principal amount of $215,000,000 of new 10 1/4% Senior Notes due 2009 of Von
Hoffmann Corporation that may be exchanged for an equal principal amount of
outstanding 10 1/4% Senior Notes due 2009 of Von Hoffmann Corporation, (ii) an
aggregate principal amount of $100,000,000 of new 10 3/8% Senior Subordinated
Notes due 2007 of Von Hoffmann Corporation that may be exchanged for an equal
principal amount of outstanding 10 3/8% Senior Subordinated Notes of Von
Hoffmann Corporation due 2007 and (iii) an aggregate principal amount of
$48,056,397 of new 13 1/2% Subordinated Exchange Debentures due 2009 of Von
Hoffmann Holdings Inc. that may be exchanged for an equal principal amount of
outstanding 13 1/2% Subordinated Exchange Debentures of Von Hoffmann
Holdings Inc. This Registration Statement also covers the registration of the
registered securities for resale by Credit Suisse First Boston Corporation and
its affiliates that are affiliates of registrants in market-making transactions.
The complete prospectus to be used in the exchange offer follows immediately
after this Explanatory Note. Following that are certain pages of the prospectus
relating solely to market-making transactions, including alternate front and
back cover pages, a section entitled "Risk Factors--There is no existing trading
market for the Securities" to be used in lieu of the section entitled "Risk
Factors--There may be no active trading market for the registered securities to
be issued in the exchange offers," and an alternate "Plan of Distribution"
section. In addition, the market-making prospectus will not include the
following captions (or the information set forth under those captions) in the
exchange offer prospectus: "Summary--The Exchange Offers," "Risk Factors--There
may be no active trading market for the registered securities to be issued in
the exchange offers," "The Exchange Offers" and "Material United States Federal
Income Tax Consequences--Consequences of Tendering Notes." Also, clause (i) of
the first paragraph of "Material United States Federal Income Tax Consequences"
will not be included in the market-making prospectus. All other sections of the
exchange offer prospectus will be included in the market-making prospectus.
<Page>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL OR OFFER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
<Page>
SUBJECT TO COMPLETION, DATED JUNE , 2002
PROSPECTUS
VON HOFFMANN CORPORATION
OFFER TO EXCHANGE ALL OF THE OUTSTANDING
$215,000,000 10 1/4% SENIOR NOTES DUE 2009
FOR
$215,000,000 10 1/4% SENIOR NOTES DUE 2009
REGISTERED UNDER THE SECURITIES ACT OF 1933
AND
OFFER TO EXCHANGE ALL OF THE OUTSTANDING
$100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
FOR
$100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
REGISTERED UNDER THE SECURITIES ACT OF 1933
AND
VON HOFFMANN HOLDINGS INC.
OFFER TO EXCHANGE ALL OF THE OUTSTANDING
$48,056,397 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009
FOR
$48,056,397 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009
REGISTERED UNDER THE SECURITIES ACT OF 1933
------------------------
We are offering to exchange each series of the outstanding securities
described above for the new, registered securities described above. The form and
terms of the registered securities are substantially the same as the form and
terms of the old securities, except that the registered securities to be issued
in the exchange offers have been registered under the Securities Act and will
not bear legends restricting their transfer. In this document we refer to the
outstanding securities as the "old securities" and the new securities as the
"registered securities" or "exchange securities." Each offer for a series of
outstanding securities described above shall constitute a separate exchange
offer.
MATERIAL TERMS OF THE EXCHANGE OFFERS
- - Each exchange offer expires at 5:00 p.m., New York City time, on , 2002,
unless extended.
- - The only conditions to completing an exchange offer are that the exchange
offer not violate applicable law or any applicable interpretation of the staff
of the Securities and Exchange Commission and no injunction, order or decree
has been issued that would prohibit, prevent or otherwise materially impair
our ability to proceed with the exchange offer.
- - All old securities that are validly tendered and not validly withdrawn will be
exchanged.
- - Tenders of old securities in an exchange offer may be withdrawn at any time
prior to the expiration of the exchange offer.
- - We will not receive any cash proceeds from the exchange offers.
Each broker-dealer that receives exchange securities for its own account
pursuant to the exchange offers must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange securities. The
letters of transmittal state that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the
<Page>
Securities Act. This prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of exchange
securities received in exchange for old securities where such old securities
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. For a period of 180 days after the expiration date (as
defined herein), we will make this prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
------------------------
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 2002
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
--------
Forward-Looking Statements............ i
Prospectus Summary.................... 1
Risk Factors.......................... 12
The Exchange Offers................... 20
Capitalization........................ 28
Selected Consolidated Financial
Data................................ 29
Management's Discussion And Analysis
Of Financial Condition And Results
Of Operations....................... 32
Business.............................. 41
Management............................ 52
Executive Compensation................ 54
Security Ownership Of Certain
Beneficial Owners And Management.... 57
</Table>
<Table>
<Caption>
PAGE
--------
Certain Relationships And Related
Transactions........................ 58
Description Of Certain Indebtedness... 60
Description Of The Registered
Securities.......................... 61
Material United States Federal Income
Tax Consequences.................... 133
Plan Of Distribution.................. 139
Legal Matters......................... 139
Independent Accountants............... 139
Where You Can Find More Information... 140
Index To Consolidated Financial
Statements.......................... F-1
</Table>
Von Hoffmann Corporation is a wholly-owned subsidiary of Von Hoffmann
Holdings Inc. Unless otherwise stated or the context otherwise requires, in this
prospectus, "Von Hoffmann" and "Company" refer to Von Hoffmann Corporation and
its subsidiaries. "Holdings" refers to Von Hoffmann Holdings Inc. Unless
otherwise stated or the context otherwise requires, "we," "us" and "our" refer
to Holdings and its subsidiaries. References to the "securities" means both the
old securities and the registered securities, unless the context otherwise
requires. Von Hoffmann formerly was named "Von Hoffmann Press, Inc.," and
Holdings formerly was named "Von Hoffmann Corporation."
Until , 2002, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to an unsold allotment
or subscription.
FORWARD-LOOKING STATEMENTS
This prospectus contains statements about future events and expectations,
which are forward-looking statements. We have based these forward-looking
statements on our current expectations and projections about future results.
When we use words in this document, such as "anticipates," "intends," "plans,"
"believes," "estimates," "expects," and similar expressions, we do so to
identify forward-looking statements. Examples of forward-looking statements
include statements we make regarding future prospects of growth in the
educational textbook market, the level of future activity of the public school
textbook adoption process, demographic and other trends in the instructional
materials market, our ability to maintain or increase our market share and our
future capital expenditure levels.
You should keep in mind that any forward-looking statement made by us in
this prospectus or elsewhere speaks only as of the date on which we make it. New
risks and uncertainties come up from time to time, and it is impossible for us
to predict these events or how they may affect us. We have no duty to, and do
not intend to, update or revise the forward-looking statements in this
prospectus after the date of this prospectus, except as may be required by law.
In light of these risks and uncertainties, you should keep in mind that any
forward-looking statement made in this prospectus or elsewhere might not occur.
The forward-looking statements included in this prospectus or the relevant
incorporated document are made only as of the date of this prospectus or the
relevant incorporated document, as the case may be, and, except as required by
law, we undertake no obligation to publicly update these forward-looking
statements to reflect subsequent events or circumstances.
i
<Page>
PROSPECTUS SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS
AND RELATED NOTES INCLUDED IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT
DECISION.
OUR COMPANY
We believe that we are the leading manufacturer of four-color case-bound and
soft-cover educational textbooks in the United States. Our products are sold
principally to educational publishers who, in turn, sell them into the
elementary and high school, or ELHI, and college instructional materials
markets. In addition to textbook manufacturing, we provide our customers with a
full range of value-added printing and design services from early design to
final distribution. We estimate that our market share in our core business, the
manufacture of four-color case-bound ELHI textbooks, is approximately 40%.
Since 1998, we have diversified our product offerings and added new services
through selected strategic acquisitions in order to enhance our position within
the instructional materials market. In addition to solidifying our position in
the instructional materials market, our acquisitions have enabled us to expand
our presence in the commercial book-manufacturing market. Over the past five
years, we have also invested approximately $80 million in high-quality,
high-throughput machinery and plant expansions (excluding equipment obtained in
acquisitions), enhancing our competitive position and providing capacity for
future growth. These investments include additional four-color web printing
presses, additional one- and two-color presses, sheet-fed presses, new digital
pre-press equipment and additional manufacturing space. We have also invested
extensively in customized, high-efficiency book-binding production lines.
INDUSTRY OVERVIEW
We primarily serve the instructional materials market, from which we derived
approximately 68% of our 2001 net sales. Within the overall instructional
materials market, we focus principally on the ELHI and college and higher
education areas, for which we manufacture textbooks, standardized test materials
and other educational materials. The market for ELHI and college and higher
education instructional materials is characterized by long-term growth
prospects, an ELHI textbook adoption process, a recurring revenue stream, great
emphasis on quality, service and delivery and barriers to entry.
COMPETITIVE STRENGTHS
We believe we are distinguished by the following competitive strengths:
- a leading market share in the manufacture of four-color case-bound ELHI
textbooks
- a reputation for superior quality and customer service
- a focus on instructional materials manufacture
- the ability to be a single source supplier of a broad range of services to
educational textbook manufacturers, from early design to manufacture to
distribution
- state-of-the-art manufacturing facilities
- a skilled and experienced workforce and management team
1
<Page>
BUSINESS STRATEGY
The principal features of our business strategy include the following:
- enhancing our position in the instructional materials market;
- leveraging our existing manufacturing capabilities and reputation; and
- considering selective acquisitions.
DLJ MERCHANT BANKING PARTNERS II, L.P.
In April 1997, DLJ Merchant Banking Partners II, L.P. and certain of its
affiliates (collectively, "DLJ Merchant Banking"), along with certain other
investors, acquired us. DLJ Merchant Banking owns approximately 96.3% of our
equity.
EXECUTIVE OFFICES
Holdings and Von Hoffmann are Delaware corporations. Their principal
executive offices are located at 1000 Camera Avenue, St. Louis, Missouri 63126,
and their telephone number at that address is (314) 966-0909.
2
<Page>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFERS
On March 15, 2002, Von Hoffmann issued $215.0 million aggregate principal
amount of its 10 1/4% senior notes due 2009, referred to as the 2009 notes, in a
transaction exempt from registration under the Securities Act of 1933, or the
Securities Act.
On October 16, 1998, Holdings (which at the time was named Von Hoffmann
Corporation) issued $30.4 million aggregate principal amount of its 13 1/2%
subordinated exchange debentures due 2009, referred to as the 2009 Holdings
debentures, which have accreted in principal amount to $48.1 million, in
exchange for its then outstanding 13 1/2% senior exchangeable preferred stock
due 2009.
On May 15, 1997, Von Hoffmann (which at the time was named Von Hoffmann
Press, Inc.) issued $100.0 million in aggregate principal amount of its 10 3/8%
senior subordinated notes due 2007, referred to as the 2007 notes, in a
transaction exempt from registration under the Securities Act.
We refer to each of the issuances of the old securities in this prospectus
as an "original issuance." We entered into agreements at or prior to the time of
the issuance of the old securities in which we agreed to register new securities
with substantially the same form and terms of the old securities and exchange
the registered securities for the old securities. These agreements are referred
to in this prospectus as "registration rights agreements."
You are entitled to exchange your old securities in the exchange offers for
registered securities. Unless you are a broker-dealer and assuming you satisfy
the conditions set forth below under "--Resales of the Registered Securities,"
we believe that the securities to be issued in the exchange offers may be resold
by you without compliance with the registration and prospectus delivery
requirements of the Securities Act. You should read the discussions under the
headings "The Exchange Offers" and "Description of the Registered Securities"
for further information regarding the registered securities.
<Table>
Registration Rights Agreements............ Under the registration rights agreements we are
obligated to exchange the old securities for registered
securities with terms identical in all material respects
to the old securities. The exchange offers are intended
to satisfy these rights. After the exchange offers are
complete, except as set forth in the next paragraph, you
will no longer be entitled to any exchange or
registration rights with respect to your old securities.
The registration rights agreements require us to file a
registration statement for a continuous offering in
accordance with Rule 415 under the Securities Act for
your benefit if you would not receive freely tradeable
registered securities in the exchange offers or you are
ineligible to participate in the exchange offers and
indicate that you wish to have your old securities
registered under the Securities Act. See "The Exchange
Offers--Procedures for Tendering."
The Exchange Offers....................... Von Hoffmann is offering to exchange:
- $1,000 principal amount of 10 1/4% senior notes due
2009, which have been registered under the Securities
Act, for each $1,000 principal amount of its
unregistered 10 1/4% senior notes due 2009 that were
issued in the original issuance; and
- $1,000 principal amount of 10 3/8% senior
subordinated notes due 2007, which have been registered
under the Securities Act, for each
</Table>
3
<Page>
<Table>
- $1,000 principal amount of its unregistered 10 3/8%
senior subordinated notes due 2007 that were issued in
the original issuance.
Holdings is offering to exchange:
- a principal amount of 13 1/2% subordinated exchange
debentures due 2009, which have been registered under
the Securities Act, for an equal principal amount of
its unregistered 13 1/2% subordinated exchange
debentures due 2009 that were issued in the original
issuance.
In order to be exchanged, an old security must be
validly tendered and accepted. All old securities that
are validly tendered and not validly withdrawn will be
exchanged.
As of this date, there are $215.0 million aggregate
principal amount of 10 1/4% senior notes due 2009
outstanding, $100.0 million aggregate principal amount
of 10 3/8% senior subordinated notes due 2007
outstanding and $48.1 million aggregate principal amount
of 13 1/2% subordinated exchange debentures due 2009
outstanding.
We will issue the applicable registered securities
promptly after the expiration of each exchange offer.
Resales of the Registered Securities...... Except as described below, we believe that registered
securities to be issued in the exchange offers may be
offered for resale, resold and otherwise transferred by
you without compliance with the registration and
prospectus delivery provisions of the Securities Act if
you meet the following conditions:
(1) the registered securities are acquired by you in
the ordinary course of your business;
(2) you are not engaging in and do not intend to engage
in a distribution of the registered securities;
(3) you do not have an arrangement or understanding
with any person to participate in the distribution
of the registered securities; and
(4) you are not an affiliate of ours, as that term is
defined in Rule 405 under the Securities Act.
Our belief is based on interpretations by the staff of
the Commission, as set forth in no-action letters issued
to third parties unrelated to us. The staff has not
considered the exchange offers in the context of a
no-action letter, and we cannot assure you that the
staff would make a similar determination with respect to
the exchange offers.
If you do not meet the above conditions, you may incur
liability under the Securities Act if you transfer any
registered security without delivering a prospectus
meeting the requirements of the Securities Act. We do
not assume or indemnify you against that liability.
</Table>
4
<Page>
<Table>
Each broker-dealer that is issued registered securities
in an exchange offer for its own account in exchange for
old securities which were acquired by that broker-dealer
as a result of market-making activities or other trading
activities must agree to deliver a prospectus meeting
the requirements of the Securities Act in connection
with any resales of the registered securities. A
broker-dealer may use this prospectus for an offer to
resell or to otherwise transfer registered securities.
Expiration Date........................... Each exchange offer will expire at 5:00 p.m., New York
City time, on , 2002, unless we decide to extend the
exchange offer. We refer to this date, as it may be
extended, as the "expiration date." We do not intend to
extend any of the exchange offers, although we reserve
the right to do so.
Conditions to Each Exchange Offer......... The only conditions to completing an exchange offer are
that the exchange offer not violate any applicable law
or any applicable interpretation of the staff of the
Commission and no injunction, order or decree has been
issued by any court or any governmental agency that
would prohibit, prevent or otherwise materially impair
our ability to proceed with the exchange offers. See
"The Exchange Offers--Conditions."
Procedures for Tendering Old Securities
Held in the Form of Book-Entry
Interests............................... Held in The old securities were issued as global
securities in fully registered form without interest
coupons. Beneficial interests in the old securities,
held by direct or indirect participants in The
Depository Trust Company, or DTC, are shown on, and
transfers of these interests are effected only through
records maintained in book-entry form by DTC with
respect to its participants.
If you hold old securities in the form of book-entry
interests and you wish to tender your old securities for
exchange pursuant to an exchange offer, you must
transmit to the exchange agent on or prior to the
expiration date of the applicable exchange offer either:
- a written or facsimile copy of a properly completed
and duly executed letter of transmittal for your
securities, including all other documents required by
such letter of transmittal, to the exchange agent at
the address set forth on the cover page of the letter
of transmittal; or
- a computer-generated message transmitted by means of
DTC's Automated Tender Offer Program system and
received by the exchange agent and forming a part of
a confirmation of book-entry transfer, in which you
acknowledge and agree to be bound by the terms of the
letter of transmittal for your securities.
</Table>
5
<Page>
<Table>
The exchange agent must also receive on or prior to the
expiration of the applicable exchange offer either:
- a timely confirmation of book-entry transfer of your
old securities into the exchange agent's account at DTC
pursuant to the procedure for book-entry transfers
described in this prospectus under the heading "The
Exchange Offers--Book-Entry Transfer," or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
A letter of transmittal for your securities accompanies
this prospectus. By executing the letter of transmittal
for your securities or delivering a computer-generated
message through DTC's Automated Tender Offer Program
system, you will represent to us that, among other
things:
- the registered securities to be acquired by you in
the applicable exchange offer are being acquired in the
ordinary course of your business;
- you are not engaging in and do not intend to engage
in a distribution of the registered securities;
- you do not have an arrangement or understanding with
any person to participate in the distribution of the
registered securities; and
- you are not our affiliate.
Procedures for Tendering Certificated Old
Securities.............................. If you are a holder of book-entry interests in the old
securities, you are entitled to receive, in limited
circumstances, in exchange for your book-entry
interests, certificated securities which are in equal
principal amounts to your book-entry interests. See
"Description of the Registered Securities--Forms of
Registered Securities." If you acquire certificated old
securities prior to the expiration of an Exchange Offer,
you must tender your certificated old securities in
accordance with the procedures described in this
prospectus under the heading "The Exchange
Offers--Procedures for Tendering--Certificated Old
Securities."
Special Procedures for Beneficial
Owners.................................. If you are the beneficial owner of old securities and
they are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you
wish to tender your old securities, you should contact
the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish
to tender on your own behalf, you must, prior to
completing and executing the letter of transmittal for
your securities and delivering your old securities,
either make appropriate arrangements to register
ownership of the old securities in your name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may take
considerable time. See "The Exchange Offers--Procedures
for Tendering--Procedures Applicable to All Holders."
</Table>
6
<Page>
<Table>
Guaranteed Delivery Procedures............ If you wish to tender your old securities in an exchange
offer and:
(1) they are not immediately available;
(2) time will not permit your old securities or other
required documents to reach the exchange agent
before the expiration of the exchange offer; or
(3) you cannot complete the procedure for book-entry
transfer on a timely basis,
you may tender your old securities in accordance with
the guaranteed delivery procedures set forth in "The
Exchange Offers--Procedures for Tendering--Guaranteed
Delivery Procedures."
Acceptance of Old Securities and Delivery
of Registered Securities................ Except under the circumstances described above under
"Conditions to Each Exchange Offer," we will accept for
exchange any and all old securities which are properly
tendered prior to 5:00 p.m., New York City time, on the
expiration date. The registered securities to be issued
to you in an exchange offer will be delivered promptly
following the expiration date for that exchange offer.
See "The Exchange Offers--Terms of the Exchange Offers."
Withdrawal................................ You may withdraw the tender of your old securities at
any time prior to 5:00 p.m., New York City time, on the
expiration date. We will return to you any old
securities not accepted for exchange for any reason
without expense to you as promptly as we can after the
expiration or termination of the applicable exchange
offer.
Exchange Agent............................ U.S. Bank National Association is serving as the
exchange agent in connection with the exchange offers.
Consequences of Failure to
Exchange................................ If you do not participate in the exchange offers for
your old securities, upon completion of the exchange
offers, the liquidity of the market for your old
securities could be adversely affected. See "The
Exchange Offers--Consequences of Failure to Exchange."
Material United States Federal Income Tax
Consequences............................ The exchange of old securities for registered securities
should not be a taxable event for federal income tax
purposes. See "Material United States Federal Income Tax
Consequences."
</Table>
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SUMMARY OF THE TERMS OF THE REGISTERED SECURITIES
2009 NOTES
<Table>
Issuer.................................... Von Hoffmann Corporation.
Notes Offered............................. $215,000,000 aggregate principal amount of 10 1/4%
senior notes due 2009 registered under the Securities
Act.
Maturity.................................. March 15, 2009.
Interest Rate............................. 10.25% per year.
Interest Payment Dates.................... February 15 and August 15 of each year, beginning August
15, 2002.
Guarantees................................ The registered 2009 notes will be unconditionally
guaranteed, jointly and severally, by all of Von
Hoffmann's current and future domestic subsidiaries
(other than some immaterial subsidiaries and its
accounts receivable financing subsidiary), and so long
as Holdings guarantees any of the Credit Facilities, by
Holdings.
Optional Redemption....................... Von Hoffmann may redeem the 2009 notes at any time prior
to March 15, 2005, in whole or in part, upon notice to
the holders, at a redemption price equal to the amount
as calculated in accordance with the first paragraph
under "Description of the Registered Securities--10 1/4%
Senior Notes due 2009--Optional Redemption."
Von Hoffmann may redeem the 2009 notes at any time on or
after March 15, 2005, in whole or in part, in cash at
the redemption prices described in this prospectus, plus
accrued and unpaid interest to the date of redemption.
In addition, on or before March 15, 2005, Von Hoffmann
may redeem up to 35% of the aggregate principal amount
of 2009 notes issued under the indenture governing the
2009 notes with the proceeds of certain equity
offerings. Von Hoffmann may make that redemption only
if, after the redemption, at least 65% of the aggregate
principal amount of notes issued under the indenture
governing the 2009 notes remains outstanding.
Ranking................................... The registered 2009 notes and the related guarantees
will rank:
- equal in right of payment to all of Von Hoffmann's
and the guarantors' existing and future senior
indebtedness;
- senior in right of payment to Von Hoffmann's and the
guarantors' existing and future subordinated
indebtedness; and
- effectively junior to Von Hoffmann's and the
guarantors' secured indebtedness, including any
borrowings under our revolving credit facility.
</Table>
8
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<Table>
Certain Covenants......................... The indenture governing the 2009 notes contains
covenants limiting Von Hoffmann's and its restricted
subsidiaries' ability to:
- incur additional indebtedness;
- create liens;
- pay dividends or make other equity distributions;
- purchase or redeem capital stock;
- make investments;
- sell assets;
- incur restrictions on the ability of restricted
subsidiaries to make dividends or distributions;
- engage in transactions with affiliates; and
- effect a consolidation or merger.
These covenants are subject to important exceptions and
qualifications described under "Description of the
Registered Securities--10 1/4% Senior Notes due
2009--Certain Covenants."
2007 NOTES
Issuer.................................... Von Hoffmann Corporation.
Notes Offered............................. $100,000,000 aggregate principal amount of 10 3/8%
senior subordinated notes due 2007 registered under the
Securities Act.
Maturity.................................. May 15, 2007.
Interest Rate............................. 10.375% per year.
Interest Payment Dates.................... May 15 and November 15 each year.
Guarantees................................ The registered notes will be unconditionally guaranteed,
jointly and severally, by all of Von Hoffmann's
restricted subsidiaries and so long as Holdings
guarantees any of the Credit Facilities, by Holdings.
Optional Redemption....................... Von Hoffmann may redeem the 2007 notes at any time on or
after May 15, 2002, in whole or in part, in cash at the
redemption prices described in this prospectus, plus
accrued and unpaid interest to the date of redemption.
</Table>
9
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<Table>
Ranking................................... The registered 2007 notes and the related guarantees
will rank:
- junior in right of payment to all of Von Hoffmann's
and the guarantors' existing and future senior
indebtedness; and
- equal in right of payment to Von Hoffmann's and the
guarantors' existing and future senior subordinated
indebtedness.
Certain Covenants......................... The indenture governing the 2007 notes contains
covenants limiting Von Hoffmann's and its restricted
subsidiaries' ability to:
- incur additional indebtedness;
- create liens;
- pay dividends or make other equity distributions;
- purchase or redeem capital stock;
- make investments;
- sell assets;
- incur restrictions on the ability of restricted
subsidiaries to make dividends or distributions;
- engage in transactions with affiliates; and
- effect a consolidation or merger.
These covenants are subject to important exceptions and
qualifications described under "Description of the
Registered Securities--10 3/8% Senior Subordinated Notes
due 2007--Certain Covenants."
2009 HOLDINGS DEBENTURES
Issuer.................................... Von Hoffmann Holdings Inc.
Debentures Offered........................ $48,056,397 aggregate principal amount of 13 1/2%
subordinated exchange debentures due 2009 registered
under the Securities Act.
Maturity.................................. May 15, 2009.
Interest Rate............................. 13.5% per year. Interest is not payable in cash prior to
the date on which interest would be permitted to be paid
in cash pursuant to the terms of the then-outstanding
indebtedness of Holdings and its subsidiaries and any
other contractual provisions limiting their ability to
declare or pay cash interest. Our revolving credit
facility restricts such payments. Until interest is
payable in cash, such interest will accrete to the
principal amount of the debentures on each interest
payment date.
Interest Payment Dates.................... May 15 and November 15 each year.
</Table>
10
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<Table>
Optional Redemption....................... Holdings may redeem the 2009 Holdings debentures at any
time on or after May 15, 2002, in whole or in part, in
cash at the redemption prices described in this
prospectus, plus accrued and unpaid interest to the date
of redemption.
Ranking................................... The registered 2009 Holdings debentures will rank junior
in right of payment to all of Holdings' existing and
future senior indebtedness.
Certain Covenants......................... The indenture governing the 2009 Holdings debentures
contains covenants limiting Holdings' and its
subsidiaries' ability to
- pay dividends or make other equity distributions; and
- purchase or redeem capital stock.
These covenants are subject to important exceptions and
qualifications described under "Description of the
Registered Securities--13 1/2% Subordinated Exchange
Debentures Due 2009--Certain Covenants."
TERMS COMMON TO THE EXCHANGE OFFERS
Use of Proceeds........................... We will not receive any cash proceeds upon the
completion of the exchange offers.
Form of Registered Securities............. The registered securities to be issued in the exchange
offers will be represented by one or more global
securities deposited with the trustees for the
securities for the benefit of DTC. You will not receive
registered securities in certificated form unless one of
the events set forth under the heading "Description of
the Registered Securities--Forms of Registered
Securities" occurs. Instead, beneficial interests in the
registered securities to be issued in the exchange
offers will be shown on, and transfer of these interests
will be effected only through, records maintained in
book-entry form by DTC with respect to its participants.
Risk Factors.............................. You should refer to the section entitled "Risk Factors"
for an explanation of the material risks of
participating in the exchange offers and investing in
the securities.
</Table>
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET FORTH BELOW AS WELL AS
THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING TO
PARTICIPATE IN THE EXCHANGE OFFERS. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY
RISKS FACING US. ADDITIONAL RISKS AND UNCERTAINTIES NOT CURRENTLY KNOWN TO US OR
THAT WE CURRENTLY DEEM TO BE IMMATERIAL MAY ALSO MATERIALLY AND ADVERSELY AFFECT
OUR BUSINESS OPERATIONS. ANY OF THE FOLLOWING RISKS COULD MATERIALLY AND
ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS. THE
FACTORS SET FORTH BELOW, HOWEVER, ARE GENERALLY APPLICABLE TO THE OLD SECURITIES
AS WELL AS THE REGISTERED SECURITIES.
RISKS RELATING TO THE SECURITIES
IF YOU FAIL TO EXCHANGE YOUR OLD SECURITIES, THEY MAY CONTINUE TO BE RESTRICTED
SECURITIES AND MAY BECOME LESS LIQUID.
Old securities that you do not tender or we do not accept may, following the
exchange offers, continue to be restricted securities. You may not offer or sell
untendered old securities except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. We will issue new securities in exchange for the old securities pursuant
to the exchange offers only following the satisfaction of the procedures and
conditions described elsewhere in this prospectus. These procedures and
conditions include timely receipt by the exchange agent of the old securities
and of a properly completed and duly executed letter of transmittal for your
securities.
Because we anticipate that most holders of old securities will elect to
exchange their old securities, we expect that the liquidity of the market for
any old securities remaining after the completion of the exchange offers may be
substantially limited. Any old security tendered and exchanged in an exchange
offer will reduce the aggregate principal amount of the old securities of that
class outstanding.
THERE MAY BE NO ACTIVE TRADING MARKET FOR THE REGISTERED SECURITIES TO BE ISSUED
IN THE EXCHANGE OFFERS.
There is no established market for the registered securities. We cannot
assure you with respect to:
- the liquidity of any market for the registered securities that may
develop;
- your ability to sell registered securities; or
- the price at which you will be able to sell the registered securities.
If a public market were to exist, the registered securities could trade at
prices that may be higher or lower than their principal amount or purchase
price, depending on many factors, including prevailing interest rates, the
market for similar securities, and our financial performance. We do not intend
to list the registered securities to be issued to you on any securities exchange
or to seek approval for quotations through any automated quotation system. No
active market for the registered securities is currently anticipated.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE SECURITIES.
We have now and, after the exchange offers, will continue to have, a
significant amount of indebtedness. As of May 31, 2002, we had total
indebtedness of $391.7 million and had $50.8 million of additional borrowings
available under our revolving credit facility, after excluding $1.3 million of
letters of credit outstanding under that facility.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the securities;
- increase our vulnerability to general adverse economic and industry
conditions;
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- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate needs;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- result in higher interest expense in the event of increases in interest
rates as some of our debt is, and will continue to be, at variable rates
of interest;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit our ability to borrow additional funds.
In addition, the indentures governing the 2009 senior notes and the 2007
senior subordinated notes and our revolving credit facility contain restrictive
covenants that will limit our ability to engage in activities that may be in our
long-term best interests. These covenants limit or restrict our ability to:
- incur additional indebtedness;
- create liens;
- pay dividends or make other equity distributions;
- purchase or redeem capital stock;
- make investments;
- sell assets;
- incur restrictions on the ability of subsidiaries to make dividends or
distributions;
- engage in transactions with affiliates; and
- effect a consolidation or merger.
These limitations and restrictions may adversely affect our ability to
finance our future operations or capital needs or engage in other business
activities that may be in our best interests. In addition, our revolving credit
facility requires us to comply with certain financial ratios and our ability to
borrow under it is subject to borrowing base requirements. Our ability to comply
with these ratios may be affected by events beyond our control. If we breach any
of the covenants in our revolving credit facility or our indentures, or if we
are unable to comply with the required financial ratios, we may be in default
under our revolving credit facility or our indentures. If we default, the
holders of the securities or lenders under our revolving credit facility could
declare all borrowings owed to them, including accrued interest and other fees,
to be due and payable. If we were unable to repay the borrowings under our
revolving credit facility when due, the lenders under the revolving credit
facility could also proceed against the collateral granted to them, which could
result in the holders of the securities receiving less, ratably, than those
lenders.
WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR INDEBTEDNESS. OUR
ABILITY TO GENERATE CASH DEPENDS ON FACTORS BEYOND OUR CONTROL.
Our ability to make payments on our indebtedness, including our revolving
credit facility and the securities, and to fund our business initiatives will
depend on our ability to generate cash in the future. This, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us under our
revolving credit facility in an amount sufficient to
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enable us to service our indebtedness, including our revolving credit facility
and the securities, or to fund our other liquidity needs. We may need to
refinance all or a portion of our indebtedness, including our revolving credit
facility and the securities, on or before maturity. We cannot assure you that we
will be able to refinance any of our indebtedness, including our revolving
credit facility or the securities, on commercially reasonable terms or at all.
AS HOLDERS OF THE 2007 NOTES AND 2009 NOTES, YOUR RIGHT TO RECEIVE PAYMENTS ON
THE SECURITIES IS EFFECTIVELY SUBORDINATED TO THE RIGHTS OF VON HOFFMANN'S
EXISTING AND FUTURE SECURED CREDITORS. FURTHERMORE, THE GUARANTEES OF THE NOTES
ARE EFFECTIVELY SUBORDINATED TO ALL OUR GUARANTORS' EXISTING AND FUTURE SECURED
INDEBTEDNESS.
Holders of our secured indebtedness will have claims that are prior to your
claims as holders of the 2007 notes and 2009 notes to the extent of the value of
the assets securing that other indebtedness. Holdings, Von Hoffmann and the
guarantors of the notes are parties to our revolving credit facility, which is
secured by liens on our outstanding capital stock and substantially all of our
and our subsidiaries' property and assets. The securities, including our 2009
notes and our 2007 notes, are effectively subordinated to all that indebtedness
to the extent of the related security. In the event of any distribution or
payment of our assets in any foreclosure, dissolution, winding-up, liquidation,
reorganization or other bankruptcy proceeding, holders of secured indebtedness
will have a prior claim to those of our assets that constitute their collateral.
Holders of the 2007 notes and 2009 notes will participate ratably with all
holders of our unsecured indebtedness that is deemed to be of the same class as
those securities or which is not expressly subordinated to those securities, and
potentially with all of our other general creditors, based upon the respective
amounts owed to each holder or creditor, in our remaining assets. In any of the
foregoing events, we cannot assure you that there will be sufficient assets to
pay amounts due on the securities. As a result, holders of the 2007 notes and
2009 notes may receive less, ratably, than holders of secured indebtedness.
As of May 31, 2002, the aggregate amount of our secured indebtedness and the
secured indebtedness of our subsidiaries would have been approximately
$391.7 million, and approximately $50.8 million would have been available for
additional borrowing under our revolving credit facility, after excluding
$1.3 million of letters of credit outstanding under that facility. See
"Description of Certain Indebtedness--Revolving credit facility."
YOUR RIGHT TO RECEIVE PAYMENT AS A HOLDER OF THE 2009 HOLDINGS DEBENTURES IS
EFFECTIVELY SUBORDINATED IN RIGHT OF PAYMENT TO ALL LIABILITIES OF THE
SUBSIDIARIES OF HOLDINGS AND TO THE RIGHTS OF OUR EXISTING AND FUTURE SECURED
CREDITORS.
The only asset of Holdings is the capital stock of Von Hoffman. Generally
claims of creditors of a subsidiary of Holdings including trade creditors,
secured creditors and creditors holding indebtedness and guarantees issued by
such subsidiary, and claims of preferred stockholders, if any, of such
subsidiary will have priority with respect to the assets and earnings of such
subsidiary over the claims of the creditors of Holdings. The 2009 Holdings
debentures will be effectively subordinate in right of payment to all
liabilities including trade payables of all subsidiaries of Holdings.
THE ABILITY OF HOLDINGS TO PAY CASH INTEREST EXPENSE ON THE 2009 HOLDINGS
DEBENTURES IS RESTRICTED BY OUR DEBT INSTRUMENTS.
We conduct substantially all of our operations through the subsidiaries of
Holdings. Our ability to pay cash interest expense on the 2009 Holdings
debentures depends upon, other things, receipt of dividends or other
distributions by Holdings from its subsidiaries. Holdings' obligation to make
cash interest payments with respect to the 2009 Holdings debentures is subject
to the terms of the then-outstanding indebtedness of Holdings and its
subsidiaries and any other contractual provisions limiting the ability of
Holdings and its subsidiaries to declare or pay cash interest. Our revolving
credit
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facility restricts such payments. Accordingly, Holdings does not currently make,
and in the foreseeable future does not intend to make, cash interest payments on
the 2009 Holdings debentures. Further, restrictions contained in the indenture
future borrowings by our subsidiaries including Von Hoffmann could contain,
restrictions or prohibitions on the payment of dividends and other distributions
by our subsidiaries to Holdings. In addition, applicable law may limit the
amount that our subsidiaries may pay us as dividends on their capital stock.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE SECURITIES INDENTURES.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding securities at 101% of
the principal amount thereof plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase. However, it is possible that we will
not have sufficient funds at the time of the change of control to make the
required repurchase of securities. Moreover, our revolving credit facility will
prohibit our repurchase of the 2007 notes and the 2009 Holdings debentures upon
a change of control and our 2009 notes will limit our ability to repurchase our
2007 notes upon a change of control. Additionally, the occurrence of a change of
control may require us to repay our revolving credit facility.
YOUR RIGHT TO REQUIRE US TO REDEEM THE SECURITIES IS LIMITED.
The holders of securities have limited rights to require us to purchase or
redeem the securities in the event of a takeover, recapitalization or similar
restructuring, including an issuer recapitalization or similar transaction with
management. Consequently, the change of control provisions of the indentures for
the securities will not afford any protection in a highly leveraged transaction,
including such a transaction initiated by us, if such transaction does not
result in a change of control or otherwise result in an event of default under
the securities indentures. Accordingly, these change of control provisions are
likely to be of limited usefulness in such situations.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND REQUIRE NOTE HOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of the guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; and
- was insolvent or rendered insolvent by reason of such incurrence; or
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
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The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets;
- the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
On the basis of historical financial information, we believe that each
guarantor, at the time it guaranteed the 2009 notes or 2007 notes, was not
insolvent, did not have unreasonably small capital for the business in which it
was engaged and had not incurred debts beyond its ability to pay such debts as
they mature. We cannot assure you, however, as to what standard a court would
apply in making these determinations or that a court would agree with our
conclusions in this regard.
RISKS RELATING TO OUR BUSINESS
WE HAVE A NARROW PRODUCT RANGE AND OUR BUSINESS WOULD SUFFER IF OUR PRODUCTS
BECOME OBSOLETE OR CONSUMPTION OF THEM DECREASED.
We derive a significant portion of our net sales from customers in the
business of publishing textbooks intended for the ELHI and college markets.
Therefore, we are dependent upon the sale of books to these markets. Our
business would suffer if consumption of these products decreased or if these
products became obsolete. Our business could be adversely affected by factors
such as changes in the funding of large institutional users of books such as
elementary and high schools and colleges and universities.
OUR RESULTS OF OPERATIONS ARE DEPENDENT ON OUR PRINCIPAL PRODUCTION FACILITY FOR
FOUR-COLOR EDUCATIONAL TEXTBOOKS.
Approximately 50% of our net sales and 50% of our earnings before interest,
taxes, depreciation and amortization for 2001 were generated from our Jefferson
City, Missouri production facility where we manufacture, among other products,
our four-color educational textbooks. Any disruption of our production
capabilities at this facility for a significant term could adversely effect our
operating results. While we maintain levels of insurance we believe to be
adequate to protect against significant interruption in operations at our
Jefferson City facility, there is no assurance that any proceeds from insurance
would be sufficient to return such facility to operational status or that we
could relocate our operations from such facility without incurring significant
costs, including the possible loss of customers during any period during which
production is interrupted.
OUR BUSINESS IS SUBJECT TO SEASONAL AND CYCLICAL FLUCTUATIONS IN SALES.
We experience seasonal fluctuations in our sales. The seasonality of the
ELHI market is significantly influenced by state and local school book
purchasing schedules, which commence in the spring and peak in the summer months
preceding the start of the school year. The college textbook market is also
seasonal with the majority of textbook sales occurring during June through
August and November through January. Significant amounts of inventory are
acquired by publishers prior to those periods in order to meet customer delivery
requirements. This places significant pressure on publishers and textbook
manufacturers to monitor production and distribution accurately to satisfy these
delivery requirements.
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We also experience cyclical fluctuations in our sales. The cyclicality of
the ELHI market is primarily attributable to the textbook adoption cycle.
Industry sales volume gains or losses in any year are principally due to shifts
in adoption schedules and the availability of state and local government
funding. To a lesser extent, the cyclicality of our business is also
attributable to fluctuations in paper prices. Actual or perceived changes in
paper prices will result in fluctuations in purchases by our customers and,
accordingly, impact our sales in a given year. Lower than expected sales by us
during the adoption period or a general economic downturn in our market or
industry could have a material adverse effect on the timing of our cash flows
and, therefore, on our ability to service our obligations with respect to the
notes and our other indebtedness.
ANY PROBLEM OR INTERRUPTION IN OUR SUPPLY OF PAPER OR OTHER RAW MATERIALS COULD
DELAY PRODUCTION AND ADVERSELY AFFECT OUR SALES.
We rely on independent suppliers for key raw materials, principally paper,
ink, bindery materials and adhesives, which may be available only from limited
sources. Although supplies of our raw materials currently are adequate,
shortages could occur in the future due to interruption of supply or increased
industry demand.
In addition, we do not have long-term contracts with any of our suppliers.
We cannot assure you that these suppliers will continue to provide raw materials
to us at attractive prices, or at all, or that we will be able to obtain such
raw materials in the future from these or other providers on the scale and
within the time frames we require. Although we believe we can obtain paper and
other raw materials from alternate suppliers, any failure to obtain such raw
materials on a timely basis at an affordable cost, or any significant delays or
interruptions of supply could have a material adverse effect on our business,
financial condition and results of operations.
A SIGNIFICANT AMOUNT OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF CUSTOMERS
AND OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOSE ONE OR MORE
OF THEM AS CUSTOMERS.
Our business depends on a limited number of customers. Our customers
include, among others, approximately 50 autonomous divisions of the four major
educational textbook publishers. Each of these divisions maintains its own
manufacturing relationships and generally makes textbook manufacturing decisions
independently of other divisions. Combining division sales, these four
publishers accounted for approximately 18.0%, 14.0%, 7.3% and 6.5%,
respectively, of our net sales during 2001. We do not have long-term contracts
with any of these customers. Accordingly, our ability to retain or increase our
business often depends upon our relationships with each customer's divisional
managers and senior executives. One or more of these customers may stop buying
textbook manufacturing from us or may substantially reduce the amount of
textbooks we manufacture for it. Any cancellation, deferral or significant
reduction in manufacturing sold to these principal customers or a significant
number of smaller customers could seriously harm our business, financial
condition and results of operations.
WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT.
Competition in our industry is intense. In particular, the educational
textbook manufacturing market is concentrated and is served by large national
printers and smaller regional printers. Because of greater resources, some of
our competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements or to devote greater resources
to the promotion and sale of their products than we can. Since the textbook
manufacturing process represents a small percentage of the total cost to publish
a textbook, providers of textbook manufacturing have traditionally competed on
the bases of quality of product, customer service, availability of printing time
on appropriate equipment, timeliness of delivery and, to a lesser extent, price.
We believe that maintaining a competitive advantage will require continued
investment by us in product development,
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manufacturing capabilities and sales and marketing. We cannot assure you that we
will have sufficient resources to make the necessary investments to do so, and
we cannot assure you that we will be able to compete successfully in our market
or against our competitors. Accordingly, new competitors may emerge and rapidly
acquire market share.
IF WE DO NOT RETAIN OUR KEY PERSONNEL AND ATTRACT AND RETAIN OTHER HIGHLY
SKILLED EMPLOYEES, OUR BUSINESS COULD SUFFER.
If we fail to retain and recruit the necessary personnel, our business and
our ability to obtain new customers, maintain the quality of our products and
provide acceptable levels of customer service could suffer. The success of our
business depends heavily on the leadership of our senior management personnel
and certain other key employees. If any of these persons were to leave our
company it could be difficult to replace them, and our business could be harmed.
See "Management."
Our success also depends on our ability to recruit, retain and motivate
highly skilled personnel. We believe that our success is attributable largely to
the experience and stability of our labor force and our experienced and
relatively stable workforce is one of our most significant assets. Our salaried
and hourly employees have an average tenure with us of approximately 20 and
11 years, respectively. As our workforce ages and retirements occur, we may need
to replace a significant portion of our skilled labor. Competition for these
persons is intense, and we may not be successful in recruiting, training or
retaining qualified personnel. Our productivity and growth depends on our
ability to attract and retain additional qualified employees, and our failure to
replace or expand our existing employee base could have a material adverse
effect on our ability to grow.
OUR ULTIMATE PRINCIPAL SHAREHOLDER'S INTERESTS MAY CONFLICT WITH YOURS.
DLJ Merchant Banking owns approximately 96.3% of Holdings' outstanding
common stock. Holdings owns 100% of Von Hoffmann's common stock. As a result,
DLJ Merchant Banking is in a position to control all matters affecting us, and
may authorize actions or have interests that could conflict with your interests.
WE COULD FACE CONSIDERABLE BUSINESS AND FINANCIAL RISK IN IMPLEMENTING OUR
ACQUISITION STRATEGY.
As part of our growth strategy, we intend to consider acquiring
complementary businesses. We cannot assure you that future acquisition
opportunities will exist or, if they do, that we will be able to finance those
opportunities. Future acquisitions could result in us incurring debt and
contingent liabilities or incurring impairment charges with respect to goodwill.
Risks we could face with respect to acquisitions also include:
- difficulties in the integration of the operations, technologies, products
and personnel of the acquired company;
- risks of entering markets in which we have no or limited prior experience;
- potential loss of employees;
- diversion of management's attention away from other business concerns; and
- expenses of any undisclosed or potential legal liabilities of the acquired
company.
The risks associated with acquisitions could have a material adverse effect
upon our business, financial condition and results of operations. We cannot
assure you that we will be successful in consummating future acquisitions on
favorable terms or at all.
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WE MAY BE REQUIRED TO MAKE SIGNIFICANT CAPITAL EXPENDITURES IN ORDER TO REMAIN
TECHNOLOGICALLY AND ECONOMICALLY COMPETITIVE.
Production technology in the printing industry has evolved and continues to
evolve. Although we have invested approximately $80.0 million in equipment and
plant expansions (excluding equipment obtained in acquisitions) over the past
five years and do not currently forecast any further major expenditure, the
emergence of any significant technological advances utilized by competitors
could require us to invest significant capital in additional production
technology in order to remain competitive. We cannot assure you that we would be
able to fund any such investments. Our failure to invest in new technologies
could have a material adverse effect on our business, financial condition or
results of operations.
WE ARE SUBJECT TO SIGNIFICANT ENVIRONMENTAL REGULATION AND ENVIRONMENTAL
COMPLIANCE EXPENDITURES AND LIABILITIES.
Our businesses are subject to many environmental and health and safety laws
and regulations, particularly with respect to the generation, storage,
transportation, disposal, release and emission into the environment of various
substances. We believe we are in substantial compliance with these laws.
Compliance with these laws and regulations is a significant factor in our
business. Some or all of the environmental laws and regulations to which we are
subject could become more stringent or more stringently enforced in the future
and more stringent laws or regulations could be enacted. Our failure to comply
with applicable environmental laws and regulations and permit requirements could
result in civil or criminal fines or penalties or enforcement actions, including
regulatory or judicial orders enjoining or curtailing operations or requiring
corrective measures, installation of pollution control equipment or remedial
actions.
Some environmental laws and regulations impose liability and responsibility
on present and former owners, operators or users of facilities and sites for
contamination at such facilities and sites without regard to causation or
knowledge of contamination. In addition, we occasionally evaluate various
alternatives with respect to our facilities, including possible dispositions or
closures. Investigations undertaken in connection with these activities may lead
to discoveries of contamination that must be remediated, and closures of
facilities may trigger compliance requirements that are not applicable to
operating facilities. Consequently, we cannot assure you that existing or future
circumstances or developments with respect to contamination will not require
significant expenditures by us.
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THE EXCHANGE OFFERS
PURPOSE AND EFFECT
Von Hoffmann issued the 2009 notes and the 2007 notes on March 15, 2002 and
May 15, 1997, respectively, in separate private placements to a limited number
of qualified institutional buyers, as defined under the Securities Act, and to a
limited number of persons outside the United States. The 2009 Holdings
debentures were issued by Holdings in exchange for its senior exchangeable
preferred stock on October 16, 1998. In connection with each of these issuances,
we entered into an indenture and a registration rights agreement. These
agreements require that we file a registration statement under the Securities
Act with respect to the registered securities to be issued in the exchange
offers and, upon the effectiveness of the registration statement, offer to you
the opportunity to exchange your old securities for a like principal amount of
the relevant registered securities. These registered securities will be issued
without a restrictive legend and, except as set forth below, may be reoffered
and resold by you without registration under the Securities Act. After we
complete the exchange offers for a series of old securities, our obligations
with respect to the registration of those old securities and the registered
securities will terminate, except as provided in the last paragraph of this
section. A copy of each indenture relating to the securities and each
registration rights agreement have been filed as exhibits to the registration
statement of which this prospectus is a part.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, if you are not our "affiliate" within
the meaning of Rule 405 under the Securities Act or a broker-dealer referred to
in the next paragraph, we believe that registered securities to be issued to you
in the exchange offers may be offered for resale, resold and otherwise
transferred by you, without compliance with the registration and prospectus
delivery provisions of the Securities Act. This interpretation, however, is
based on your representation to us that:
(1) the registered securities to be issued to you in the exchange offers are
acquired in the ordinary course of your business;
(2) you are not engaging in and do not intend to engage in a distribution of
the registered securities to be issued to you in the exchange offers; and
(3) you have no arrangement or understanding with any person to participate
in the distribution of the registered securities to be issued to you in
the exchange offers.
If you tender your old securities in an exchange offer for the purpose of
participating in a distribution of the registered securities to be issued to you
in the exchange offers, you cannot rely on this interpretation by the staff of
the Commission. Under those circumstances, you must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that receives registered
securities in the exchange offers for its own account in exchange for old
securities that were acquired by the broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of those registered securities. See "Plan of Distribution."
If you will not receive freely tradeable registered securities in an
exchange offer or are not eligible to participate in the exchange offers, you
can elect, by indicating on the letter of transmittal for your securities and
providing certain additional necessary information, to have your old securities
registered in a "shelf" registration statement on an appropriate form pursuant
to Rule 415 under the Securities Act. If we are obligated to file a shelf
registration statement, we will be required to keep the shelf registration
statement effective until the earlier of (a) the time when the securities
covered by the shelf registration statement may be sold pursuant to Rule 144,
(b) two years from the date the securities were originally issued or (c) the
date on which all the securities registered under the shelf registration
statement are disposed in accordance with the shelf registration statement.
Other than as set forth in
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<Page>
this paragraph, you will not have the right to require us to register your old
securities under the Securities Act. See "--Procedures for Tendering."
CONSEQUENCES OF FAILURE TO EXCHANGE
After we complete the exchange offers, if you have not tendered your old
securities, you will not have any further registration rights, except as set
forth above. Your old securities may continue to be subject to certain
restrictions on transfer. Therefore, the liquidity of the market for your old
securities could be adversely affected upon completion of the exchange offers if
you do not participate in the exchange offers.
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal for your securities, we will accept any and all
old securities validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the expiration date. We will issue a principal amount of
registered securities in exchange for each principal amount of old securities
accepted in an exchange offer. You may tender some or all of your old securities
pursuant to the exchange offers. However, old securities other than the 2009
debentures, may be tendered only in integral multiples of $1,000 principal
amount.
The form and terms of the registered securities are substantially the same
as the form and terms of the old securities, except that the registered
securities to be issued in the exchange offers have been registered under the
Securities Act and will not bear legends restricting their transfer. The
registered securities will be issued pursuant to, and entitled to the benefits
of, the indenture. The indenture also governs the old securities. Each class of
registered securities and related old securities will be deemed one issue of
securities under the indenture under which they were issued.
As of the date of this prospectus, $215.0 million in aggregate principal
amount of 2009 senior notes were outstanding, $100.0 million in aggregate
principal amount of 2007 notes and $48.1 million in aggregate principal amount
of 2009 Holdings debentures were outstanding. This prospectus, together with the
applicable letter of transmittal, is being sent to all registered holders and to
others believed to have beneficial interests in the old securities. We intend to
conduct the exchange offers in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the Commission promulgated
under the Exchange Act.
We will be deemed to have accepted validly tendered outstanding securities
when, as, and if we have given oral or written notice of our acceptance to the
exchange agent. The exchange agent will act as our agent for the tendering
holders for the purpose of receiving the registered securities from us. If we do
not accept any tendered securities because of an invalid tender, the occurrence
of certain other events set forth in this prospectus or otherwise, we will
return certificates for any unaccepted old securities, without expense, to the
tendering holder as promptly as practicable after the expiration date.
You will not be required to pay brokerage commissions or fees or, except as
set forth below under "--Transfer Taxes," transfer taxes with respect to the
exchange of your old securities in the exchange offers. We will pay all charges
and expenses, other than certain applicable taxes, in connection with the
exchange offers. See "--Fees and Expenses" below.
EXPIRATION DATE; AMENDMENTS
Each exchange offer will expire at 5:00 p.m., New York City time, on ,
2002, unless we determine, in our sole discretion, to extend an exchange offer,
in which case, it will expire at the later date and time to which it is
extended. We do not intend to extend any of the exchange offers, although we
reserve the right to do so. If we extend an exchange offer, we will give oral or
written notice of the extension to the exchange agent and give each registered
holder of outstanding securities for which the
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exchange offer is being made notice by means of a press release or other public
announcement of any extension prior to 9:00 a.m., New York City time, on the
next business day after the scheduled expiration date for the exchange offer.
We also reserve the right, in our sole discretion,
(1) to delay accepting any old securities or, if any of the conditions set
forth below under "--Conditions" have not been satisfied or waived, to
terminate an exchange offer by giving oral or written notice of such
delay or termination to the exchange agent; or
(2) to amend the terms of an exchange offer in any manner, by complying with
Rule 14e-l(d) under the Exchange Act to the extent that rule applies.
We acknowledge and undertake to comply with the provisions of Rule 14e-l(c)
under the Exchange Act, which requires us to pay the consideration offered, or
return the old securities surrendered for exchange, promptly after the
termination or withdrawal of an exchange offer. We will notify you as promptly
as we can of any extension, termination or amendment.
PROCEDURES FOR TENDERING
BOOK-ENTRY INTERESTS
The old securities were issued as global securities in fully registered form
without interest coupons. Beneficial interests in the global securities, held by
direct or indirect participants in DTC, are shown on, and transfers of these
interests are effected only through, records maintained in book-entry form by
DTC with respect to its participants.
If you hold old securities in the form of book-entry interests and you wish
to tender your old securities for exchange pursuant to an exchange offer, you
must transmit to the exchange agent on or prior to the expiration date either:
(1) a written or facsimile copy of a properly completed and duly executed
letter of transmittal for your securities, including all other documents
required by such letter of transmittal, to the exchange agent at the
address set forth on the cover page of the letter of transmittal; or
(2) a computer-generated message transmitted by means of DTC's Automated
Tender Offer Program system and received by the exchange agent and
forming a part of a confirmation of book-entry transfer, in which you
acknowledge and agree to be bound by the terms of the letter of
transmittal for your securities.
In addition, in order to deliver old securities held in the form of
book-entry interests:
(1) a timely confirmation of book-entry transfer of such securities into the
exchange agent's account at DTC pursuant to the procedure for book-entry
transfers described below under "--Book-Entry Transfer" must be received
by the exchange agent prior to the expiration date; or
(2) you must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD SECURITIES AND THE APPLICABLE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR
ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU
SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OLD SECURITIES TO US. YOU MAY
REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR NOMINEE TO EFFECT
THE ABOVE TRANSACTIONS FOR YOU.
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CERTIFICATED OLD SECURITIES
Only registered holders of certificated old securities may tender those
securities in the exchange offers. If your old securities are certificated notes
and you wish to tender those securities for exchange pursuant to an exchange
offer, you must transmit to the exchange agent on or prior to 5:00 p.m. on the
expiration date, a written or facsimile copy of a properly completed and duly
executed letter of transmittal, including all other required documents, to the
address set forth below under "--Exchange Agent." In addition, in order to
validly tender your certificated old securities:
(1) the certificates representing your old securities must be received by
the exchange agent prior to the expiration date; or
(2) you must comply with the guaranteed delivery procedures described below.
PROCEDURES APPLICABLE TO ALL HOLDERS
If you tender an old security and you do not withdraw the tender prior to
5:00 p.m. on the expiration date, you will have made an agreement with us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal for your securities.
If your old securities are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender your
securities, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
for your securities and delivering your old securities, either make appropriate
arrangements to register ownership of the old securities in your name or obtain
a properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless:
(1) old notes tendered in an exchange offer are tendered either
(A) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery
Instructions" on the holder's applicable letter of transmittal; or
(B) for the account of an eligible institution; and
(2) the box entitled "Special Registration Instructions" on the letter of
transmittal has not been completed.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a financial institution,
which includes most banks, savings and loan associations and brokerage houses,
that is a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Program or the Stock Exchanges Medallion
Program.
If the letter of transmittal for your securities is signed by a person other
than you, your old securities must be endorsed or accompanied by a properly
completed bond power and signed by you as your name appears on those old
securities.
If the letter of transmittal for your securities or any old securities or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity, those persons should so indicate when signing. Unless
we waive this requirement, in this instance you must submit with the letter of
transmittal for your securities proper evidence satisfactory to us of their
authority to act on your behalf.
We will determine, in our sole discretion, all questions regarding the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of tendered old securities. This determination will
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<Page>
be final and binding. We reserve the absolute right to reject any and all old
securities not properly tendered or any old securities our acceptance of which
would, in the opinion of our counsel, be unlawful. We also reserve the right to
waive any defects, irregularities or conditions of tender as to particular old
securities. Our interpretation of the terms and conditions of the exchange
offers, including the instructions in the respective letters of transmittal for
your securities, will be final and binding on all parties.
You must cure any defects or irregularities in connection with tenders of
your old securities within the time period we determine unless we waive that
defect or irregularity. Although we intend to notify you of defects or
irregularities with respect to your tender of old securities, neither we, the
exchange agent nor any other person will incur any liability for failure to give
this notification. Your tender will not be deemed to have been made and your
securities will be returned to you if:
(1) you improperly tender your old securities;
(2) you have not cured any defects or irregularities in your tender; and
(3) we have not waived those defects, irregularities or improper tender.
The exchange agent will return your securities, unless otherwise provided in
the letter of transmittal for your securities, as soon as practicable following
the expiration of the applicable exchange offer.
In addition, we reserve the right in our sole discretion, with respect to an
exchange offer, to:
(1) purchase or make offers for, or offer registered securities for, any old
securities that remain outstanding subsequent to the expiration of the
exchange offer;
(2) terminate the exchange offer; and
(3) to the extent permitted by applicable law, purchase securities in the
open market, in privately negotiated transactions or otherwise.
The terms of any of these purchases or offers could differ from the terms of
the exchange offer.
By tendering in an exchange offer, you will represent to us that, among
other things:
(1) the registered securities to be acquired by you in the exchange offer
are being acquired in the ordinary course of your business,
(2) you are not engaging in and do not intend to engage in a distribution of
the registered securities to be acquired by you in the exchange offer,
(3) you do not have an arrangement or understanding with any person to
participate in the distribution of the registered securities to be
acquired by you in the exchange offer, and
(4) you are not our "affiliate," as defined under Rule 405 of the Securities
Act.
In all cases, issuance of registered securities for old securities that are
accepted for exchange in the exchange offers will be made only after timely
receipt by the exchange agent of certificates for your old securities or a
timely book-entry confirmation of your old securities into the exchange agent's
account at DTC, a properly completed and duly executed letter of transmittal for
your securities, or a computer-generated message instead of the letter of
transmittal, and all other required documents. If any tendered old securities
are not accepted for any reason set forth in the terms and conditions of the
exchange offer or if old securities are submitted for a greater principal amount
than you desire to exchange, the unaccepted or non-exchanged old securities, or
old securities in substitution therefor, will be returned without expense to
you. In addition, in the case of old securities, tendered by book-entry transfer
into the exchange agent's account at DTC pursuant to the book-entry transfer
procedures described below, the non-exchanged old securities will be credited to
your account maintained with DTC, as promptly as practicable after the
expiration or termination of the exchange offers.
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GUARANTEED DELIVERY PROCEDURES
If you desire to tender your old securities and your old securities are not
immediately available or one of the situations described in the immediately
preceding paragraph occurs, you may tender if:
(1) you tender through an eligible financial institution;
(2) on or prior to 5:00 p.m., New York City time, on the expiration date,
the exchange agent receives from an eligible institution, a written or
facsimile copy of a properly completed and duly executed letter of
transmittal for your securities and notice of guaranteed delivery for
your securities, substantially in the form provided by us; and
(3) the certificates for all certificated old securities, in proper form for
transfer, or a book-entry confirmation, and all other documents required
by the letter of transmittal for your securities, are received by the
exchange agent within three New York Stock Exchange trading days after
the date of execution of the notice of guaranteed delivery for your
securities.
The notice of guaranteed delivery for your securities may be sent by
facsimile transmission, mail or hand delivery. The notice of guaranteed delivery
must set forth:
(1) your name and address;
(2) the amount of old securities you are tendering; and
(3) a statement that your tender is being made by the notice of guaranteed
delivery for your securities and that you guarantee that within three New
York Stock Exchange trading days after the execution of the notice of
guaranteed delivery, the eligible institution will deliver the following
documents to the exchange agent:
(A) the certificates for all certificated old securities being tendered,
in proper form for transfer or a book-entry confirmation of tender;
(B) a written or facsimile copy of the letter of transmittal for your
securities, or a book-entry confirmation instead of the letter of
transmittal; and
(C) any other documents required by the letter of transmittal for your
securities.
BOOK-ENTRY TRANSFER
The exchange agent will establish accounts with respect to book-entry
interests at DTC for purposes of the exchange offers promptly after the date of
this prospectus. You must deliver your book-entry interest by book-entry
transfer to the account maintained by the exchange agent at DTC for the
applicable exchange offer. Any financial institution that is a participant in
DTC's systems may make book-entry delivery of book-entry interests by causing
DTC to transfer the book-entry interests into the relevant account of the
exchange agent at DTC in accordance with DTC's procedures for transfer.
If one of the following situations occur:
(1) you cannot deliver a book-entry confirmation of book-entry delivery of
your book-entry interests into the relevant account of the exchange agent
at DTC; or
(2) you cannot deliver all other documents required by the letter of
transmittal to the exchange agent prior to the expiration date;
then you must tender your book-entry interests according to the guaranteed
delivery procedures discussed above.
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WITHDRAWAL RIGHTS
You may withdraw tenders of your old securities at any time prior to
5:00 p.m., New York City time, on the expiration date.
For your withdrawal to be effective, the exchange agent must receive a
written or facsimile transmission notice of withdrawal at its address set forth
below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date.
The notice of withdrawal must:
(1) state your name;
(2) identify the specific old securities to be withdrawn, including the
certificate number or numbers and the principal amount of securities to
be withdrawn;
(3) be signed by you in the same manner as you signed the letter of
transmittal for your securities when you tendered your old securities,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient for the exchange agent to register the
transfer of the old securities into your name; and
(4) specify the name in which the old securities are to be registered, if
different from yours.
We will determine all questions regarding the validity, form and
eligibility, including time of receipt, of withdrawal notices. Our determination
will be final and binding on all parties. Any old securities withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
exchange offers. Any old securities which have been tendered for exchange but
which are not exchanged for any reason will be returned to you without cost as
soon as practicable after withdrawal, rejection of tender or termination of the
applicable exchange offer. Properly withdrawn old securities may be retendered
by following one of the procedures described under "--Procedures for Tendering"
above at any time on or prior to 5:00 p.m., New York City time, on the
expiration date.
CONDITIONS
Notwithstanding any other provision of an exchange offer and subject to our
obligations under the applicable registration rights agreement, we will not be
required to accept for exchange, or to issue registered securities in exchange
for, any old securities in any exchange offer and may terminate or amend an
exchange offer, if at any time before the acceptance of any old securities for
exchange in the exchange offer any of the following events occur:
(1) any injunction, order or decree has been issued by any court or any
governmental agency that would prohibit, prevent or otherwise materially
impair our ability to proceed with the exchange offer; or
(2) the exchange offer violates any applicable law or any applicable
interpretation of the staff of the Commission.
These conditions are for our sole benefit and we may assert them regardless
of the circumstances giving rise to them, subject to applicable law. We also may
waive in whole or in part at any time and from time to time any particular
condition to an exchange offer in our sole discretion. If we waive a condition,
we may be required in order to comply with applicable securities laws, to extend
the expiration date of an exchange offer. Our failure at any time to exercise
any of the foregoing rights will not be deemed a waiver of these rights and
these rights will be deemed ongoing rights which may be asserted at any time and
from time to time.
In addition, we will not accept for exchange any old securities tendered,
and no registered securities will be issued in exchange for any of those old
securities, if at the time the securities are tendered any stop order is
threatened by the Commission or in effect with respect to the registration
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statement of which this prospectus is a part or the qualification of the
indenture under the Trust Indenture Act of 1939, as amended.
None of the exchange offers are conditioned on any minimum principal amount
of old securities being tendered for exchange.
EXCHANGE AGENT
We have appointed U.S. Bank National Association as exchange agent for each
of the exchange offers. Questions, requests for assistance and requests for
additional copies of the prospectus, the letter of transmittal for your
securities and other related documents should be directed to the exchange agent
addressed as follows:
BY REGISTERED OR CERTIFIED MAIL:
U.S. Bank National Association
Attention: Reorganization Department
180 East 5th Street
St. Paul, MN 55101
BY HAND OR BY OVERNIGHT COURIER:
U.S. Bank National Association
Attention: Reorganization Department
180 East 5th Street
St. Paul, MN 55101
Corporate Trust Services Window
Ground Level
<Table>
By Facsimile: (651) 244-0711 By Telephone: (651) 244-0721
Attention: Reorganization Section
</Table>
The exchange agent also acts as trustee under the indenture governing the
2009 notes.
FEES AND EXPENSES
We will not pay brokers, dealers, or others soliciting acceptances of the
exchange offers. The principal solicitation is being made by mail. Additional
solicitations, however, may be made in person or by telephone by our officers
and employees.
We will pay the cash expenses to be incurred in connection with the exchange
offers.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection with a
tender of your old securities for exchange unless you instruct us to register
registered securities in the name of, or request that old securities not
tendered or not accepted in the exchange offers be returned to, a person other
than the registered tendering holder, in which event the registered tendering
holder will be responsible for the payment of any applicable transfer tax.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offers. We will amortize the expense of the
exchange offers over the term of the registered securities under generally
accepted accounting principles.
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CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of Holdings as of March 31, 2002. The following table should be
read in conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Description of Certain Indebtedness" and the consolidated financial statements
of Holdings, together with the related notes thereto, included elsewhere in this
prospectus.
<Table>
<Caption>
AS OF MARCH 31, 2002
--------------------
(UNAUDITED)
(IN MILLIONS)
Cash and cash equivalents................................... $ 28.8
======
Debt:
Revolving credit facility(1).............................. $ 27.0
10 1/4% Senior Notes Due 2009............................. 215.0
10 3/8% Senior Subordinated Notes due 2007................ 100.0
------
Total operating company debt............................ 342.0
13 1/2% Subordinated Exchange Debentures due 2009(2)...... 44.6
------
Total debt.............................................. 386.6
Stockholders' Equity........................................ 25.6
------
Total capitalization...................................... $412.2
------
</Table>
- ------------------------
(1) The revolving credit facility provides for revolving loans of $90.0 million
and may be increased to provide for borrowings of up to $100.0 million if we
are able to find lenders willing to provide such increase. As of March 31,
2002 we had total indebtedness of $27.0 million and had $49.1 million of
additional borrowings available under our revolving credit facility, after
excluding $1.3 million of letters of credit outstanding under that facility.
(2) Reflects redemption value of the 2009 Holdings debentures net of the fair
value of the warrants issued concurrently with the debentures. The
redemption value of the 2009 Holdings debentures at March 31, 2002 was
$47.3 million. Until such time as cash interest is payable on the 2009
Holdings debentures, interest on the 2009 Holdings debentures accretes to
principal at 13.5% per annum. Holdings' obligation to make cash interest
payments with respect to the 2009 Holdings debentures is subject to the
terms of the then-outstanding indebtedness of Holdings and its subsidiaries
and any other contractual provisions limiting the ability of Holdings and
its subsidiaries to declare or pay cash interest. Our revolving credit
facility restricts such payments. Accordingly, Holdings does not currently
make, and in the foreseeable future does not intend to make, cash interest
payments on the debentures. See "Description of Certain
Indebtedness--Subordinated Exchange Debentures."
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SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of Holdings' predecessor
company for the period from January 1, 1997 to May 24, 1997 and Holdings for the
period from May 25, 1997 to December 31, 1997 and for the four years ended
December 31, 2001 are derived from the audited consolidated financial
statements. The financial data for the three-month periods ended March 31, 2001
and 2002 are derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which Holdings considers necessary for a fair presentation of the
financial position and the results of operations for these periods.
Operating results for the three months ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2002. The following table should be read in conjunction with
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of
Holdings, including the related notes thereto, appearing elsewhere in this
prospectus.
<Table>
<Caption>
PREDECESSOR
COMPANY HOLDINGS
------------- ------------------------------------------------------------------------------------
FOR THE FOR THE QUARTER ENDED
PERIOD PERIOD -------------------------
OF JANUARY 1- OF MAY 25- FISCAL YEAR ENDED DECEMBER 31, MARCH 31, MARCH 31,
MAY 24, DECEMBER 31, ----------------------------------------- 2001 2002
1997 1997 1998(1) 1999(1) 2000(1) 2001 (UNAUDITED) (UNAUDITED)
------------- ------------ -------- -------- -------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
STATEMENT OF
OPERATIONS DATA:
Net sales............ $77,794 $106,723 $310,608 $386,108 $443,423 $407,096 $112,852 $82,666
Cost of products and
services........... 61,130 87,532 249,826 322,311 374,166 346,917 96,174 73,297
------- -------- -------- -------- -------- -------- -------- -------
Gross profit......... 16,664 19,191 60,782 63,797 69,257 60,179 16,678 9,369
Operating
expenses(2)........ 11,443 8,289 49,482 34,143 35,747 33,317 8,738 7,094
------- -------- -------- -------- -------- -------- -------- -------
Operating income..... 5,221 10,902 11,300 29,654 33,510 26,862 7,940 2,275
Interest expense --
subsidiary......... 244 13,605 28,625 32,111 36,855 32,144 9,535 6,394
Interest expense --
subordinated
exchange
debentures(3)...... -- -- 541 4,694 5,296 5,983 1,427 1,613
Other income
(expense).......... 224 648 (1,107) (89) (172) (247) 8 (446)
------- -------- -------- -------- -------- -------- -------- -------
Income (loss) before
income taxes and
extraordinary
item............... 5,201 (2,055) (18,973) (7,240) (8,813) (11,512) (3,014) (6,178)
Income tax provision
(benefit).......... 3,981 663 (4,195) 855 (702) (1,268) (256) (2,354)
------- -------- -------- -------- -------- -------- -------- -------
Net income (loss)
before
extraordinary
item............... 1,220 (2,718) (14,778) (8,095) (8,111) (10,244) (2,758) (3,824)
Extraordinary item,
net of taxes (4)... -- -- -- -- -- -- -- (1,969)
------- -------- -------- -------- -------- -------- -------- -------
Net Income (loss).... $ 1,220 $ (2,718) $(14,778) $ (8,095) $ (8,111) $(10,244) $ (2,758) $(5,793)
======= ======== ======== ======== ======== ======== ======== =======
</Table>
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<Table>
<Caption>
PREDECESSOR
COMPANY HOLDINGS
------------- ------------------------------------------------------------------------------------
FOR THE FOR THE QUARTER ENDED
PERIOD PERIOD -------------------------
OF JANUARY 1- OF MAY 25- FISCAL YEAR ENDED DECEMBER 31, MARCH 31, MARCH 31,
MAY 24, DECEMBER 31, ----------------------------------------- 2001 2002
1997 1997 1998(1) 1999(1) 2000(1) 2001 (UNAUDITED) (UNAUDITED)
------------- ------------ -------- -------- -------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
OTHER DATA:
EBITDA(5)............ $19,779 $ 25,854 $ 65,267 $ 73,611 $ 79,399 $ 76,493 $ 19,520 $13,164
Depreciation and
amortization(6).... 5,687 14,982 34,792 40,327 43,459 47,319 11,459 9,647
LIFO pre-tax
adjustment(7)...... -- (385) (808) 704 281 258 -- --
Non-compete and
special consulting
expenses(8)........ 167 355 1,483 2,926 2,149 578 121 1,242
Restructuring
charge(9).......... -- -- -- -- -- 1,476 -- --
Impairment
charge(10)......... -- -- 18,500 -- -- -- -- --
Recapitalization
charge(11)......... 8,704 -- -- -- -- -- -- --
Ratio of earnings to
fixed
charges(12)........ 22.3x 0.9x 0.4x 0.8x 0.8x 0.7x 0.7x 0.2x
Capital
expenditures....... $ 1,017 $ 5,009 $ 14,860 $ 22,639 $ 28,132 $ 23,876 $ 12,068 $ 6,396
BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash
equivalents........ $ 9,390 $ 1,109 $ 2,454 $ 5,686 $ 18,320 $ 5,576 $28,802
Accounts
receivable......... 20,681 45,402 59,969 57,899 46,751 64,273 47,851
Inventories.......... 14,898 33,442 31,650 36,117 23,262 43,391 32,084
Working capital...... 32,631 34,614 40,351 67,266 36,950 27,437 78,393
Property, plant and
equipment, net..... 97,847 176,526 164,514 163,316 148,476 166,121 144,694
Total assets......... 324,376 463,796 453,493 466,418 428,748 477,856 453,292
Operating company
debt(13)........... 216,875 346,875 347,700 364,775 341,555 360,496 342,000
Total debt........... 216,875 373,919 379,437 401,808 384,571 398,956 386,629
Total stockholders'
equity............. 52,110 35,836 27,629 19,395 8,972 16,604 25,625
</Table>
- --------------------------
(1) We acquired Bawden Printing in January 1998, H&S Graphics and Preface in
June 1998, Custom Printing in July 1998 and Precision in March 2000. The
results of operations of these acquired businesses have been included in our
consolidated financial statements since their respective dates of
acquisition. Our results of operations for the periods prior to these
acquisitions may not be comparable to our results of operations for
subsequent periods.
(2) Operating expenses include selling and administrative expenses, non-compete
and special consulting expenses, restructuring charge, impairment charge and
recapitalization charge.
(3) Holdings' obligation to make cash interest payments with respect to the
debentures is subject to its subsidiaries' ability to pay dividends under
applicable law, the terms of their outstanding indebtedness and any other
applicable contractual provisions limiting their ability to declare and pay
cash dividends. Our revolving credit facility will restrict such payments.
Accordingly, Holdings does not currently make, and in the foreseeable future
does not intend to make, cash interest payments on the debentures.
(4) On March 26, 2002, we entered into our revolving credit facility which
resulted in the extinguishment of the previous credit agreement. We
recognized an extraordinary loss of approximately $2.0 million, net of tax
benefit of $1.2 million. The entire loss represented the write-off of
deferred debt issuance costs associated with the previous credit agreement.
30
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(5) EBITDA represents operating income plus depreciation and amortization, LIFO
pre-tax adjustments, non-compete and special consulting expenses,
restructuring charge, impairment charge and recapitalization charge. EBITDA
is not a measure of performance under accounting principles generally
accepted in the United States. EBITDA should not be considered a substitute
for cash flow from operations, net earnings or other measures of performance
as defined by accounting principles generally accepted in the United States
or as a measure of our profitability or liquidity. EBITDA does not give
effect to the cash we must use to service our debt, if any, or pay our
income taxes and thus does not reflect the funds actually available for
capital expenditures or other discretionary uses. Our presentation of EBITDA
may not be comparable to other similarly titled captions of other companies
due to differences in the method of calculation. It is included herein to
provide additional information with respect to the ability of us to meet our
consolidated debt service, capital expenditure and working capital
requirements.
(6) Includes depreciation and amortization that is included within operating
income and excludes amortization of deferred financing costs, which is
classified in interest expense-subsidiary.
(7) The LIFO pre-tax adjustment, which is reflected in cost of products and
services, reflects an annual adjustment to record inventory on the last-in,
first-out method.
(8) Non-compete and special consulting expenses relate to the amortization of
certain amounts allocated in respect of non-competition agreements made in
connection with our acquisition of H&S Graphics as well as costs incurred
for consulting services used in assisting in the acquisition integration
process. The cash portion of these expenses amounted to $0.2 million,
$0.4 million, $1.4 million, $2.7 million, $1.9 million, $0.4 million,
$0.1 million and $1.2 million for the periods presented, respectively.
(9) Restructuring charge represents the cost for employee severance and
equipment relocation related to certain sheet-fed, plate-making and
book-binding operations of our company.
(10) Impairment charge relates to the goodwill impairment of the carrying value
of the H&S Graphics acquisition as a result of a material and permanent
reduction in forecasted cash flows for the operation.
(11) Recapitalization charge represents the cost of compensation earned by
management as a result of a recapitalization transaction in May 1997. In
addition, the recapitalization charge includes costs such as legal,
accounting and financial advisory services incurred by the predecessor
company.
(12) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income or loss before income taxes and extraordinary
items plus fixed charges. Fixed charges consist of interest expense
(including amortization of deferred financing costs). For the period
beginning May 25, 1997 through December 31, 1997, additional earnings of
$2.1 million would have been required to cover fixed charges during the
period. For the fiscal years ending December 31, 1998, 1999, 2000 and 2001,
additional earnings of $19.0 million, $7.2 million, $8.8 million and
$11.5 million would have been required to cover fixed charges during the
years, respectively. For the quarterly periods ended March 31, 2001 and
2002, additional earnings of $3.0 million and $6.2 million would have been
required to cover fixed charges during the periods, respectively.
(13) Operating company debt reflects the debt of Von Hoffmann and excludes the
2009 Holdings debentures in the amount of $0, $0, $27.0 million,
$31.7 million, $37.0 million, $43.0 million, $38.5 million and
$44.6 million for the periods presented, respectively.
31
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements, including the notes thereto, contained elsewhere in this prospectus.
Certain statements in this section are forward-looking statements. See "Forward-
Looking Statements."
GENERAL
We manufacture four-color case-bound and soft-cover educational textbooks in
the United States. Our products are sold principally to educational publishers
who, in turn, sell them into the ELHI and college instructional materials
markets. In addition to instructional materials manufacturing, we provide our
customers with a full range of value-added printing and design services from
early design processes to final manufacture and distribution of our products. A
small portion of our products is sold to the commercial market where we target
business-to-business catalog manufacturers, the federal government printing
office, trade publishers, health-care catalog manufacturers, the financial
services industry and numerous other small niches.
Our results of operations are affected by a number of factors, including
demographic trends in ELHI and college enrollment, instructional materials
spending, the ELHI textbook adoption process, general economic conditions and
seasonality. We also believe our business has been positively affected by the
heightened profile of education in the public and political arenas.
We derive approximately 68% of our net sales from the sale of instructional
materials, primarily the sale of textbooks to educational publishers. The
primary factors affecting the instructional materials market are: (i) a
continued high level of student enrollment at both the ELHI and college levels;
(ii) a continued increase in the number of textbooks per student;
(iii) increased state funding for public elementary and secondary schools;
(iv) increased content per textbook; and (v) increased importance of
supplemental materials.
The textbook adoption process, around which ELHI book publishers schedule
the timing of new textbook introductions, is typically limited to a small number
of disciplines in any state in any given year. Adoptions in core disciplines
such as reading, mathematics or science in larger states such as California,
Texas or Florida, however, can lead to significant increases in net sales in a
given year. Additionally, orders for reprints associated with a textbook awarded
through the adoption process can generate significant revenues during the
adoption cycle, which can range from four to eight years, depending on the
subject matter and the state. Non-adoption, or open territory states, tend to
follow the lead provided by adoption states as many new titles are brought to
the market in specific response to the adoption schedule.
Our net sales of products and services are also affected by general economic
conditions. In particular, net sales to the instructional materials market are
affected as the majority of public funding for education comes from state and
local tax revenues, which have a direct correlation with prevailing economic
activity levels. Product demand in the segments of the commercial market we also
serve is sensitive to economic conditions.
We experience seasonal fluctuations in our net sales and production for the
educational textbook and commercial markets. State and local textbook purchasing
and delivery schedules significantly influence the seasonality of the demand for
our products in these areas. The purchasing schedule for the ELHI markets
usually starts in the spring and peaks in the summer months preceding the start
of the school year. The majority of college textbook sales occur from June
through August and November through January. Our net sales to the commercial
market tend to peak in the third and fourth quarters, with the fourth quarter
representing the strongest quarter. Net sales of our digital pre-press and
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<Page>
composition businesses tend to precede the peak production periods for textbook
manufacturing by a quarter with our business peaking in the first and second
quarters of our calendar fiscal year.
A significant portion of our growth over the past five years has been due to
five acquisitions we made since 1998, which have increased our sources of
revenue within the instructional materials market and provided us with a
significant presence in the one- and two-color commercial book market.
RECAPITALIZATION RESTATED TO A PURCHASE
We treated DLJ Merchant Banking's 1997 acquisition of a controlling interest
in Holdings as a recapitalization on the basis that ZS VH II L.P., or ZS, and
certain of its affiliates, which collectively had owned a controlling interest
in Holdings, retained an ownership interest of approximately 10.0% in Holdings
after the acquisition transaction. As a result of treating the transaction as a
recapitalization, Holdings did not give purchase accounting treatment to the
transaction and did not record goodwill. On June 20, 2002, ZS sold their
remaining interest in Holdings to us. The purchase price paid for ZS's interest
came from cash on hand of Holdings, which cash was proceeds from DLJ Merchant
Banking's equity contribution in March 2002. As a result of the sale, there is
no longer continuity in the share ownership of Holdings pre- and
post-acquisition. Accordingly, we have restated our financial statements on the
basis that there has been a retroactive change in reporting entity as of
May 25, 1997, the date of DLJ Merchant Banking's original acquisition, and given
the transaction purchase accounting treatment from that date. As a result of the
change, our gross profit for 1999, 2000 and 2001 decreased by $10.8 million,
$12.3 million and $12.5 million, respectively, and our EBITDA for those periods
remains consistent with previously reported amounts. The selected financial
information and consolidated financial statements contained in this prospectus
reflect the restatement of our financial statements to apply purchase accounting
from the acquisition date. See "Note 2 to Notes to Consolidated Financial
Statements."
RESULTS OF OPERATIONS
Our net sales represent our per-book charges for each book manufactured;
fees for pre-press, composition and creative work; set-up charges for each print
run; the sale of paper for use in the production of instructional materials; and
charges for fulfillment and distribution of books.
Our cost of products and services consists primarily of the cost of paper,
ink and bindery materials, depreciation, manufacturing overhead and labor costs.
Paper costs are incurred both through our paper management programs, which
include special arrangements on payment, inventorying and billing among our
company, the paper company and the customer, as well as direct purchases of
paper by us for specific customer orders. In both cases, paper costs generally
flow through to the customer. Ink and bindery materials are direct material
inputs to our manufacturing process in the production of a book. We depreciate
our plant and equipment using straight-line or accelerated methods over their
estimated useful lives. This depreciation is included as a direct cost of
products and services. Manufacturing overhead includes a range of costs such as
electrical power, maintenance costs, supervisory salaries, insurance and real
estate taxes. Labor costs are divided into direct and indirect components.
Direct labor includes all crews working on the production of books and other
materials along with associated fringe-benefit costs. Indirect labor includes
all supervisory compensation and benefit costs along with the cost of other
employees not directly involved in the production process.
Our operating expenses represent selling and administrative expenses and
non-compete and special consulting expenses and a restructuring charge incurred
in 2001. Selling and administrative expenses consist primarily of the
compensation of, and cost of benefits for, our administrative and sales
personnel as well as amortization of goodwill. Additionally, our selling and
administrative costs include corporate expenses such as legal, audit and other
professional fees and telephone and travel costs. Our non-compete and special
consulting expenses relate to the amortization of certain amounts allocated in
respect of non-competition agreements made in connection with our acquisition of
H&S Graphics, our
33
<Page>
digital pre-press and composition business, as well as costs incurred for
consulting services used in assisting in the acquisition integration process.
Restructuring charge includes the costs associated with the closure of our
Mid-Missouri Graphics bindery in Owensville, Missouri and our St. Louis
sheet-fed operations.
Interest expense--subsidiary represents the consolidated interest expense on
the debt of Holdings, consisting of the bank debt facilities and senior
subordinated notes. Interest expense--subordinated exchange debenture relates to
interest on the 2009 Holdings debentures of Holdings, which Holdings issued in
exchange for its then outstanding senior exchangeable preferred stock in 1998.
The 2009 Holdings debentures bear interest at 13.5% per annum. While cash
interest payments are prohibited, interest on the subordinated exchange
debentures accretes to principal. Holdings' obligation to make cash interest
payments with respect to the subordinated exchange debentures is subject to the
terms of its and its subsidiaries' then-outstanding indebtedness and any other
applicable contractual provisions limiting their ability to declare and pay cash
interest. Our existing senior credit facility restricts, and our revolving
credit facility will restrict, such payments. Accordingly, Holdings does not
currently make, and in the foreseeable future does not intend to make, cash
interest payments on the subordinated exchange debentures.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
NET SALES. Net sales decreased by $36.3 million, or 8.2%, from
$443.4 million in 2000 to $407.1 million in 2001. This decrease was attributable
primarily to a decrease in sales to the instructional materials market due, in
part, to a general decline in sales throughout the instructional materials
manufacturing industry caused by a softening economy and smaller budgets at the
state and local levels. Additionally, educational publishers were holding excess
inventories at the end of 2000, which significantly impacted their order levels
in 2001, particularly in the second half of the year as the economy continued to
slow.
As a result of the decrease in sales, we conducted a thorough review of our
manufacturing capacity against our anticipated demand levels. This process
resulted in the closure of our Mid-Missouri Graphics bindery operation in
Owensville, Missouri in September, 2001, which was consolidated into our
Jefferson City, Missouri operations. Other selective cost reductions were
implemented throughout the last half of 2001, including manning reductions,
overhead eliminations and hiring freezes.
COST OF PRODUCTS AND SERVICES. Cost of products and services decreased by
$27.3 million, or 7.3%, from $374.2 million in 2000 to $346.9 million in 2001.
The primary reason for the decrease in our cost of products and services was the
impact of the decline in sales volume on our variable costs. Also, sale of scrap
items, including waste paper and consumed aluminum printing plates, which are
offset against cost of products and services, decreased by 50% in dollar value
due to lower prices in these markets and lower volumes generated in our plants
due to lower sales levels. As a percentage of net sales, cost of products and
services increased from 84.4% during 2000 to 85.2% during 2001. This increase
was a result of lower sales volumes and the semi-fixed nature of the labor
component in our cost structure. While initiatives were taken to address our
cost position in 2001, they were not sufficient to fully offset the impact of
the lower sales volumes on our operations.
GROSS PROFIT. Gross profit for 2001 decreased by $9.1 million, or 13.1%,
from $69.3 million in 2000 to $60.2 million for 2001. Gross profit, expressed as
a percentage of net sales, was 15.6% for 2000, compared to 14.8% for 2000. This
reduction in gross profit was attributable to higher headcount within our
four-color textbook manufacturing operations in the first half of 2001 and lower
scrap volume, price and lower activity levels in our operations in the second
half of 2001.
OPERATING EXPENSES. Operating expenses decreased by $2.4 million, or 6.8%,
from $35.7 million for 2000 to $33.3 million in 2001. This decrease was
primarily attributable to reductions in incentive compensation payouts in 2001
based on the deteriorated performance in comparison to 2000.
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INTEREST EXPENSE--SUBSIDIARY. Interest expense--subsidiary decreased
$4.8 million, or 12.8%, from $36.9 million in 2000 to $32.1 million in 2001.
This decrease was a result of lower interest rates reducing our borrowing costs
on the variable interest component of our debt, along with lower average
borrowings under the revolving component of our existing senior credit facility.
During 2001, the average annual interest rate, excluding amortization of debt
issuance costs, was 8.45% for the senior and subordinated debt at the Von
Hoffmann level, compared to a 9.39% rate for 2000. Our interest rate hedge of
$63.0 million expired in December 2000 and has not been replaced, allowing us to
benefit from the lower interest rates that prevailed in 2001.
INTEREST EXPENSE--subordinated exchange debentures. Interest
expense--subordinated exchange debentures increased $0.7 million, or 13.0%, from
$5.3 million in 2000 to $6.0 million in 2001. This increase resulted from the
interest compounding effect on the accretion of this debenture.
INCOME TAX BENEFIT. Income tax benefit increased $0.6 million, from
$0.7 million in 2000 to $1.3 million in 2001, due to a higher level of pre-tax
losses in 2001, partially offset by the impact of non-deductible goodwill and
taxable income allocations among the states in which we do business changing our
effective tax rate.
NET LOSS. Net loss increased $2.1 million, or 26.3%, from $8.1 million in
2000 to $10.2 million in 2001. The increased net loss in 2001 primarily resulted
from the impact of lower sales described above.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
NET SALES. Net sales increased by $57.3 million, or 14.8%, from
$386.1 million in 1999 to $443.4 million in 2000. This increase was primarily
attributable to the inclusion of Precision from its acquisition date of
March 30, 2000, which added $13.8 million in sales, and sales growth primarily
related to volume increases aggregating $44.0 million in our other operations
other than our one- and two-color textbook manufacturing business, which
experienced a small sales decline.
COST OF PRODUCTS AND SERVICES. Cost of products and services increased
$51.9 million, or 16.1%, from $322.3 million in 1999 to $374.2 million in 2000.
The primary reason for this increase was the higher sales volume that drove
increases in direct materials, labor and manufacturing overheads. Additionally,
cost of products and services increased in 2000 due to the acquisition of
Precision, which added $9.5 million to cost of products and services from its
March 30, 2000 acquisition date. As a percentage of net sales, cost of products
and services increased from 83.5% during 1999 to 84.4% during 2000, due to
profit erosion in the commercial side of the business, which underwent a
significant turnaround in the second half of 2000.
GROSS PROFIT. Gross profit increased $5.5 million, or 8.6%, from
$63.8 million in 1999 to $69.3 million in 2000. Gross profit, expressed as a
percentage of net sales, was 16.5% for 1999, compared to 15.6% for 2000. The
reduction was primarily due to the impact of an increase in lower-margin one-
and two-color book business and higher costs experienced in the four-color
operation in 2000, as a result of the increased labor costs resulting from
increased volume levels.
OPERATING EXPENSES. Operating expenses increased $1.6 million, or 4.7%,
from $34.1 million in 1999 to $35.7 million in 2000. This increase was primarily
attributable to general cost increases and increased selling and administrative
expenses, including $1.0 million associated with the Precision acquisition.
INTEREST EXPENSE--SUBSIDIARY. Interest expense--subsidiary increased
$4.8 million, or 14.8%, from $32.1 million in 1999 to $36.9 million in 2000.
This increase was a result of increased debt levels required to effect the
Precision acquisition in 2000 as well as higher prevailing interest rates
impacting the floating rate component of our existing senior credit facility.
During 2000 the average annual interest rate was 9.39% for the senior and
subordinated debt at the Von Hoffmann level. This
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compares to an 8.86% rate for 1999. Our interest rate hedge of $63.0 million
expired in December 2000 and has not been replaced.
INTEREST EXPENSE--SUBORDINATED EXCHANGE DEBENTURES. Interest
expense--subordinated exchange debentures increased $0.6 million, or 12.8%, from
$4.7 million in 1999 to $5.3 million in 2000, because of the compounding effects
of the accretion of the debenture.
INCOME TAX PROVISION (BENEFIT). Income tax provision decreased
$1.6 million, from $0.9 million tax provision in 1999 to $0.7 million tax
benefit in 2000. This decrease resulted from the impact of non-deductible
goodwill and state income tax on the effective income tax rate.
NET LOSS. Net loss of $8.1 million in 1999 was comparable to $8.1 million
net loss in 2000. Higher operating performance in 2000 was offset by higher
interest costs.
QUARTER ENDED MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001
NET SALES. Net sales decreased by $30.2 million, or 26.7%, from
$112.9 million for the quarter ended March 31, 2001 to $82.7 million for the
quarter ended March 31, 2002. This decrease was primarily attributable to
decreased volume in sales to the instructional materials market. The decrease in
sales throughout the instructional materials industry was caused by a softening
economy, reduced budgets at the state and local levels as well as a reduction in
textbook adoption activity in major states in 2002.
COST OF PRODUCTS AND SERVICES. Cost of products and services decreased by
$22.9 million, or 23.8%, from $96.2 million for the quarter ended March 31, 2001
to $73.3 million for the quarter ended March 31, 2002. The primary reason for
the decrease was the impact of the decline in sales volume on our variable
costs. As a percentage of net sales, cost of products and services increased
from 85.2% during the quarter ended March 31, 2001 to 88.7% during the quarter
ended March 31, 2002. This increase was a result of lower sales volumes and the
semi-fixed nature in the labor component of our cost structure. While
initiatives continue to be taken to address our cost position in 2002, they were
not sufficient to fully offset the impact of the lower sales volumes on our
operations.
GROSS PROFIT. Gross profit decreased by $7.3 million, or 43.8%, from
$16.7 million for the quarter ended March 31, 2001 to $9.4 million for the
quarter ended March 31, 2002. This corresponds to a 14.8% gross margin for the
first quarter of 2001 as compared to 11.3% for the corresponding period in 2002.
The decrease in gross profit is attributable to factors noted above within net
sales and cost of products and services.
OPERATING EXPENSES. Operating expenses decreased by $1.6 million, or 18.8%,
from $8.7 million for the quarter ended March 31, 2001 to $7.1 million for the
quarter ended March 31, 2002. The decrease was primarily attributable to the
reduction of amortization expense by $2.3 million related to the adoption of
SFAS No. 142, Goodwill and Other Intangibles in which goodwill related to
business acquisitions is no longer being amortized. The decrease was offset by
special consulting expenses paid to an affiliate of a stockholder associated
with formulation of financial strategies, including securing our new debt in
March 2002.
INTEREST EXPENSE--SUBSIDIARY. Interest expense--subsidiary decreased
$3.1 million, or 32.9%, from $9.5 million for the quarter ended March 31, 2001
to $6.4 million for the quarter ended March 31, 2002. The decrease was a result
of decreased borrowing levels as well as lower interest rates on the floating
rate component of our borrowings.
INTEREST EXPENSE--SUBORDINATED EXCHANGE DEBENTURES. Interest
expense--subordinated exchange debentures increased $0.2 million, or 13.0%, from
$1.4 million for the quarter ended March 31, 2001 to $1.6 million for the
quarter ended March 31, 2002. This increase resulted from the interest
compounding effect on accretion of the debenture.
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INCOME TAX BENEFIT. The income tax benefit for the three months ended
March 31, 2002 was $2.4 million representing an effective tax rate of 38.1%.
This compares to an income tax benefit of $0.3 million for the quarter ended
March 31, 2001 and an effective rate of 8.5%. The effective tax rate difference
in 2001 is due to certain amortization of goodwill related to the acquisitions
which is non-deductible for tax purposes. With the adoption of SFAS No. 142,
Goodwill and Other Intangibles in 2002, we no longer amortize goodwill for book
purposes.
EXTRAORDINARY ITEM. On March 26, 2002, Von Hoffmann entered into the
revolving credit facility which provides for loans of up to $90.0 million. In
addition, Von Hoffmann issued $215.0 million of the 2009 notes at an interest
rate of 10.25%. The proceeds from these transactions were used to pay off all
outstanding balances under our previous credit agreement. As a result of these
debt transactions, we incurred an extraordinary loss from the write-off of
deferred debt issuance costs of $3.1 million. Net of taxes, the impact was an
extraordinary loss of $2.0 million.
NET LOSS. Net loss for the quarter ended March 31, 2002 was $5.8 million as
compared to net loss of $2.8 million for the quarter ended March 31, 2001. The
increase in 2002 is the result of recognition of an extraordinary loss
associated with the debt extinguishment and lower operating earnings in 2002 as
compared to the 2001 period.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
During the past three years, our principal sources of funds were cash
generated from our operating activities and long-term borrowings. We used cash
mainly for capital expenditures, working capital and debt service. In the
future, we expect that we will use cash principally to fund working capital, our
debt service and repayment obligations and capital expenditures.
HISTORICAL CASH FLOWS
CASH PROVIDED BY OPERATING ACTIVITIES
Cash provided by operations for the quarter ended March 31, 2002 was
$5.8 million, compared to $8.3 million for the quarter ended March 31, 2001, a
decrease of 30.2%. The decrease in cash provided by operating activities
primarily resulted from a weaker operating performance in the first quarter of
2002.
Cash provided by operations for the year ended December 31, 2001 was
$59.6 million, compared to $39.9 million for the year ended December 31, 2000,
an increase of 49.3%. The increased level of cash provided by operating
activities primarily resulted from $24.0 million in reductions of accounts
receivable and inventory. These reductions were attributable to aggressive
efforts to reduce investments in working capital and a reduction in business
levels in the second half of the year.
Cash provided by operations for the year ended December 31, 2000 was
$39.9 million as compared to $20.6 million for the corresponding period in 1999.
The increased level of cash provided by operating activities primarily resulted
from reduction in various working capital items.
CASH USED IN INVESTING ACTIVITIES
Net cash used in investing activities for the quarter ended March 31, 2001
was $6.3 million, compared to $12.0 million for the first quarter of 2001. The
reduction was primarily driven by reduced capital expenditures as expenditures
focused on manufacturing efficiencies as opposed to any capital enhancement.
Net cash used in investing activities for the year ended December 31, 2001
was $23.7 million, compared to $52.5 million for the year ended December 31,
2000, a decrease of 54.9%. The decrease
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in cash used in investing activities was primarily due to the Precision
acquisition for approximately $25.3 million, which occurred in 2000. In
addition, we incurred $23.9 million in capital expenditures in 2001 as compared
to $28.1 million in 2000 as discussed further below under Capital Expenditure
Requirements.
Net cash used in investing activities for the year ended December 31, 2000
was $52.5 million, compared to $20.1 million for the year ended December 31,
1999. The increased use was primarily due to the Precision acquisition as noted
above. In addition, we incurred $28.1 million on capital expenditures in 2000 as
compared to $22.6 million in 1999 as discussed further below under Capital
Expenditure Requirements.
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Cash provided by financing activities during the first quarter of 2002
resulted from debt and equity transactions. On March 26, 2002, we entered into
our revolving credit facility, which includes a revolving loan commitment of
$90.0 million. At our one-time option, the available borrowing base may be
increased to provide borrowings of up to $100.0 million, subject to finding
lenders to provide such increase. On March 26, 2002, we also issued the 2009
Notes for $215.0 million. The proceeds from the revolving credit facility and
the 2009 Notes were used to pay off all outstanding balances under our previous
credit facility. In addition, Holdings issued 20,000,000 shares of common stock
to its majority stockholder for $20.0 million on March 26, 2002. Cash provided
by financing activities during the first quarter of 2001 was $3.6 million as a
result of limited financing activity.
Net cash used in financing activities was $23.3 million for the year ended
December 31, 2001, compared to net cash provided by financing activities of
$15.8 million and $0.8 million for the year ended December 31, 2000 and 1999,
respectively. The difference is primarily due to the repayment of $14.0 million
of debt under our existing senior credit facility in 2001, compared with drawing
$23.5 million and $6.0 million from our senior credit facility in 2000 and 1999,
respectively.
CAPITAL EXPENDITURE REQUIREMENTS
Capital expenditures for the year ended December 31, 2001 were
$23.9 million, compared to $28.1 million in 2000 and $22.6 million in 1999.
These capital expenditures focused on manufacturing capacity increases as well
as efficiency enhancements. The 2000 and 1999 capital expenditure programs
focused on capacity-enhancement projects, specifically with respect to our press
and bindery equipment. These programs also focused on maintenance projects for
our manufacturing facilities and processing equipment. In 2001, capital
expenditures were focused on completion of capacity enhancements with our new
bindery line in our Jefferson City, Missouri facility and efficiency
enhancements with respect to the material handling systems in our Jefferson City
and Owensville, Missouri facilities.
Capital expenditures for the quarter ended March 31, 2002 were
$6.4 million, compared to $12.1 million for the quarter ended March 31, 2001.
These capital expenditures focused on manufacturing efficiencies in order to
improve operating performance. We expect our capital expenditures for 2002 to be
approximately $19.0 million, based on a capital expenditure program directed at
continued efficiency gains and will include material handling systems and
equipment upgrades. We believe that current capacity is adequate in the near
term based on anticipated utilization rates. Accordingly, our focus is directed
at capital expenditures that will improve our cost position.
DEBT SERVICE REQUIREMENTS
Our revolving credit facility provides for revolving loans of
$90.0 million. The facility is secured by accounts receivable, inventory and
property, plant and equipment and at our option, may be increased to provide for
borrowings of up to $100.0 million, subject to finding lenders to provide such
increase. The facility is subject to borrowing base availability and includes
covenants restricting the incurrence of
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additional indebtedness, liens, certain payments (including pre-payment of the
notes) and the sale of assets. As of May 31, 2002, we had total indebtedness of
$391.7 million and had $50.8 million of additional borrowings available under
our revolving credit facility, after excluding $1.3 million of letters of credit
outstanding under that facility. See "Description of Certain
Indebtedness--Revolving credit facility."
Based on our current level of operations, we believe our cash flows from
operations, available cash and available borrowings under our revolving credit
facility will be adequate to meet our liquidity needs for the foreseeable
future, including scheduled payments of interest on the securities and payments
of interest on the borrowings under our revolving credit facility. Our ability
to make payments on and to refinance our indebtedness, including our revolving
credit facility, the securities, and to fund our business initiatives, however,
will depend on our ability to generate cash in the future. This, to a certain
extent, is subject to general economic, financial, competitive, legislative, and
other factors that are beyond our control. We cannot assure you that our
business will generate sufficient cash flow from operations or that future
borrowings will be available to us under our revolving credit facility in an
amount sufficient to enable us to pay our indebtedness, including our senior
credit facility, the securities, or to fund our other liquidity needs. See "Risk
Factors--We will require a significant amount of cash to service our
indebtedness."
MARKET AND CREDIT RISK
We are exposed to market risk from changes in interest rates. At
December 31, 2001, we had approximately $241.6 million outstanding borrowings
against our senior secured credit agreement at variable rate. With the issuance
of our Senior Notes in March 2002, all of our remaining long-term debt is at
fixed interest rates. Therefore, exposure to interest rate fluctuations is
immaterial.
Two customers and their affiliates accounted approximately 32.0% of 2001 net
sales, respectively, and approximately 28.1% of December 31, 2001 accounts
receivable. The loss of either of these customers or a significant reduction in
order volumes from them would have a material adverse effect on us. We manage
credit risk by continually reviewing creditworthiness of our customer base as
well as thoroughly analyzing new accounts to effectively manage our exposure.
INFLATION
The impact of inflation on our operations has not been significant to date.
We cannot predict what effect future inflation rates will have on our operating
results.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE
ASSETS, effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill will no longer be amortized, but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives.
We will apply the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. Application of the
non-amortization of goodwill is expected to result in an increase in net income
of approximately $8.9 million per year ($0.17 per diluted share). During 2002,
we will perform the first of the required impairment tests and have not yet
determined what the effect of these tests will be on our earnings and financial
position.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and
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accompanying notes. On an ongoing basis, management evaluates its estimates and
judgments, including those related to the recovery of inventories, property,
plant and equipment and goodwill. Management bases its estimates and judgments
on historical experience, current and expected economic conditions and other
factors believed to be reasonable under the circumstances, the results of which
form the basis of making judgments about the carrying value of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. Actual results may differ
from these estimates. The significant accounting policies which management
believes are most critical to aid in fully understanding and evaluating our
reported financial results include the following:
INVENTORIES
We value substantially all of the Company's inventory at the lower of cost,
as determined using the last-in, first-out (LIFO) method, or market. The
remainder of inventory is valued at the lower of cost, as determined using the
first-in, first-out (FIFO) method, or market. Inventories include material,
labor and manufacturing overhead. We record a reserve for excess and obsolete
inventory based primarily upon historical and forecasted demand. If actual
market conditions are less favorable than those projected by management,
additional inventory write-downs may be required.
REVENUE RECOGNITION
We recognize revenue when the specific project is complete as determined by
the contractual agreement. The Securities and Exchange Commission's Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition," provides guidance on
the application of accounting principles generally accepted in the United States
to selected revenue recognition issues. The policy is consistent with trade
practice within the printing industry.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. We capitalize all repair
and maintenance costs which result in significant increases in the useful life
of the underlying asset. All other repair and maintenance costs are expensed.
Depreciation is computed using straight-line or accelerated methods over various
lives, dependent on the asset. Management assesses long-lived assets for
impairment under Statement of Financial Accounting Standards (SFAS) No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets." Changes in
market conditions or poor operating results could result in a decline in value
thereby potentially requiring an impairment charge in the future.
GOODWILL
Effective January 1, 2002, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under this
new rule, goodwill will no longer be amortized, but will be subject to annual
impairments. Other intangible assets will continue to be amortized over their
useful lives. We will perform a transitional impairment test of our existing
goodwill by June 30, 2002 and annual impairment tests thereafter. Changes in
market conditions or poor operating results could result in a decline in value
thereby potentially requiring an impairment charge in the future.
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BUSINESS
THE COMPANY
We believe that we are the leading manufacturer of four-color case-bound and
soft-cover educational textbooks in the United States. Our products are sold
principally to educational publishers who, in turn, sell them into the
elementary and high school, or ELHI, and college instructional materials
markets. In addition to textbook manufacturing, we provide our customers with a
full range of value-added printing and design services from early design to
final distribution. We believe we have an established reputation for superior
quality, reliability and customer service, allowing us to build strong
relationships with our customers, which include the major publishers of
educational textbooks in the United States, including Houghton Mifflin, Pearson,
McGraw-Hill and Harcourt. We estimate that our market share in our core
business, the manufacture of four-color case-bound ELHI textbooks, is
approximately 40%.
Since 1998, we have diversified our product offerings and added new services
through selected strategic acquisitions in order to enhance our position within
the instructional materials market. In 1998, we added services such as design,
art procurement, color separation and image setting and expanded our product
offerings with one- and two-color printing capabilities, workbooks and test
kits. In 2000, we further diversified our product offerings with the addition of
plastic inserts and overhead transparencies. We believe that these acquisitions
position us to offer the broadest range of products and services available to
the instructional materials market, from early design to manufacture to
distribution. In addition to solidifying our position in the instructional
materials market, our acquisitions have enabled us to expand our presence in the
commercial book-manufacturing market.
Over the past five years, we have also invested approximately $80 million in
high-quality, high-throughput machinery and plant expansions (excluding
equipment obtained in acquisitions), enhancing our competitive position and
providing capacity for future growth. These investments include additional
four-color web printing presses, additional one- and two-color presses,
sheet-fed presses, new digital pre-press equipment and additional manufacturing
space. We have also invested extensively in customized, high-efficiency
bookbinding production lines. As a result of our capital investments, we believe
we have created an opportunity to gain greater market share as well as a barrier
to entry for potential competitors.
COMPETITIVE STRENGTHS
We believe we are distinguished by the following competitive strengths:
- LEADING MARKET SHARE. We estimate that we have a market share of
approximately 40% in our core business, the manufacture of four-color
case-bound ELHI textbooks. We believe that our broad range of products and
services positions us well to maintain our leading ELHI market share and
to benefit from the expected growth in that market. In addition, we
believe that we can leverage our leading position in the ELHI market and
our range of products and services to expand our presence in the
instructional materials market and other complementary printing markets.
- REPUTATION FOR SUPERIOR QUALITY AND CUSTOMER SERVICE. We believe we are
well regarded in the educational publishing market, where reliable service
and product quality are important competitive attributes. We believe that
our products are among the highest quality in the market. In addition, we
believe that we have developed a reputation for solving complex production
and distribution problems.
- FOCUSED INSTRUCTIONAL MATERIALS MANUFACTURER. We believe that we are the
only major book manufacturer principally focused on serving the ELHI and
college instructional materials market. Because of our commitment to this
market and our understanding of its key drivers and
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the needs of our customers, we believe that we are better positioned than
many of our competitors to satisfy the rigorous production and logistical
requirements of the market.
- SINGLE SOURCE SUPPLIER AND ABILITY TO EXPAND RELATIONSHIPS. We believe
that we offer the broadest range of services among educational textbook
manufacturers, from early design to manufacture to distribution. Our
strategy of acquiring businesses that are complementary to our textbook
manufacturing business has positioned us to increase our sales and enhance
our relationships with our key customers by allowing us to offer a broader
range of services. For example, our 1998 acquisitions of H&S Graphics and
Preface added upstream services such as design, art procurement, color
separation and image setting. These services allow us to collaborate with
publishers in the early design phase of a book, thereby permitting us to
establish a broader and deeper relationship with the educational publisher
as well as providing an additional source of revenue.
- STATE-OF-THE-ART MANUFACTURING FACILITIES. We have invested approximately
$80 million in high-quality, high-throughput machinery and plant
expansions (excluding equipment obtained in acquisitions) over the past
five years, which has enhanced our competitive position and significantly
increased our production capacity. We believe that our eight manufacturing
facilities and our highly specialized and flexible printing equipment are
well suited to efficiently accommodate both large and small print runs
characteristic of the instructional materials industry and provide
barriers to entry. We also believe our competitors' capital investments
have lagged behind our own, thereby creating an opportunity for us to gain
greater market share.
- SKILLED AND EXPERIENCED WORKFORCE AND MANAGEMENT TEAM. We believe that our
reputation for customer service can be attributed to the skill, experience
and stability of our management and employees. We believe that our
significant investment in training, equipment and technology has increased
the productivity level of our workforce. We also have a highly-seasoned
senior management team with an average of over 20 years experience in the
instructional materials and book manufacturing industries.
BUSINESS STRATEGY
The principal features of our business strategy include the following:
- ENHANCE OUR POSITION IN THE INSTRUCTIONAL MATERIALS MARKET. We will
continue to leverage our capabilities and our long-standing customer
relationships to maintain and enhance our position in the instructional
materials market. In the last five years, we have invested approximately
$80 million in high-quality, high-throughput machinery and plant
expansions (excluding equipment obtained in acquisitions), enhancing our
competitive position and providing capacity for future growth. In
addition, we have made acquisitions to enhance our product and service
offerings to the instructional materials market. As a result, we believe
we have maintained our 40% market share in our core business, the
manufacturing of four-color case-bound ELHI textbooks, while expanding our
product offerings.
- LEVERAGE OUR EXISTING MANUFACTURING CAPABILITIES AND CAPACITY. Our recent
investments in our manufacturing facilities have enabled us to increase
our manufacturing capabilities and capacity. We intend to leverage our
facilities and our reputation in the overall instructional materials
market to enter or increase our presence in certain niche markets within
the instructional materials market. By doing so, we believe that we will
be able to maximize the utilization of our capacity and capabilities and
increase our market share. We also intend to take advantage of the
seasonality in the instructional materials market by committing our
resources and capacity to the manufacturing of more products for the
commercial market.
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- CONSIDER SELECTIVE ACQUISITIONS. Since 1998, we have pursued a focused
acquisition strategy that has increased our sales and cash flow while
broadening our product offerings to our educational customers. Our
acquisition strategy is distinct in that we target smaller companies
within the instructional materials manufacturing market. Historically,
these markets have been highly fragmented, and there are a number of
candidates that our management believes would be meaningful additions to
our current business. In particular, we are exploring opportunities with
respect to additional four-color manufacturing capacity, book covers and
other textbook-related components, and other related products and
services.
THE INSTRUCTIONAL MATERIALS INDUSTRY
We primarily serve the instructional materials market, from which we derived
approximately 68% of our 2001 net sales. Within the overall instructional
materials market, we focus principally on the ELHI and college and higher
education areas, for which we manufacture textbooks, standardized test materials
and other educational materials. Increased focus on education in the United
States has been favorable for the instructional materials market, which remains
one of the strongest segments of the book publishing industry. Education has
become one of the most high-profile issues on the U.S. political landscape given
today's highly competitive global market. This political climate has placed
great civilian and government emphasis on the educated citizen, which has
translated into strong sales growth for textbooks. Funding for instructional
materials has been increased in response to the growing recognition of the
importance of these materials to the learning process, as well as growing
political pressure to improve the quality of public education.
ELHI MARKET
The ELHI instructional materials market is driven by the textbook adoption
cycle, student enrollment, an increased focus on accountability and testing
standards and state and federal funding for education.
The textbook adoption process is a key factor affecting annual fluctuations
in ELHI textbook sales. This process drives new content, and thus new product,
into the textbook market. The ELHI textbook market is divided between states
where publishers can market their books directly to school districts, known as
"open territory" states, and states where districts must first get state
approval to purchase textbooks, known as "adoption" states. In open territory
states, textbooks are purchased independently by local school districts or by
individual schools themselves. These states do not issue statewide schedules for
purchasing or lists of state-selected instructional materials. By contrast, in
an adoption state, a committee screens textbooks for approval for purchase
within the state. Once they are on an approved list, these textbooks can be
purchased by the individual districts within the state. These initial purchases
tend to take place over a one- to three-year timeframe with reprints extending
over an additional four to five years.
Adoptions can represent a significant revenue stream for publishers and can
be particularly lucrative when large adoption states such as California, Texas
or Florida adopt materials in key subject areas such as reading, mathematics or
science. The 21 adoption states typically represent 50% of the K-12 publishers'
annual textbook sales, with the balance coming from the open territories. While
the two groups are roughly equal in the number of schools that each represents,
adoption states drive product development, which drives sales in non-adoption
states as well.
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ADOPTION AND NON-ADOPTION STATES IN 2001
[LOGO]
According to U.S. Department of Education statistics, a record number of
approximately 53 million students was expected to enter K-12 classrooms for the
2001-2002 school year. This number is expected to remain at historically high
levels through 2005.
Standards, accountability and testing have also impacted the ELHI market.
The mounting importance of standardized test scores and, in many cases,
performance-based pay for teachers, have given rise to strong sales of
standardized tests in the past decade and publisher's acquisitions of testing
companies. In January 2002, Congress re-authorized the Elementary and Secondary
Education Act, which was initially enacted in 1965, to raise student achievement
levels through a combination of higher standards, stronger accountability,
improved teacher quality and increased resources. It also provided for a 20%
increase in overall funding for federal elementary and secondary education
programs.
Funds allocated to instructional materials at the ELHI levels increased from
1996 to 2000 as a consequence of higher enrollments, more robust state tax
revenues and increased state and local spending as a result of an increased
emphasis on improving the quality of public education. The five largest textbook
markets, ranked by total textbook spending--California, Florida, Texas, New York
and Illinois, which account for approximately 27% of all spending--saw a
combined state funding increase of 94.3% from 1996 to 2000, reaching
$1.1 billion for the 2000-2001 school year.
According to the 2001 Veronis Suhler Communications Industry Forecast, or
the Veronis Forecast, projected total spending on ELHI instructional materials
is expected to increase at a compound annual growth rate of 6.8% from 2000 to
2005, reaching an estimated $5.2 billion in 2005. Increased state funding,
anticipated adoptions and moderate enrollment growth are expected to generate
revenue growth in the ELHI market in the forecasted period.
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GROWTH IN END-USER SPENDING--ELHI INSTRUCTIONAL MATERIALS MARKET
($ IN BILLIONS)
GROWTH IN END-USER SPENDING--ELHI INSTRUCTIONAL MATERIALS MARKET
($ IN BILLIONS)
[LOGO]
COLLEGE MARKET
The college instructional materials market is driven primarily by student
enrollment. College enrollment is projected to rise to 18.2 million by the year
2010, an increase of 17% from 2000. The most important factor in the projected
rise of college enrollment is the projected 18% increase in the traditional
college-age population of 18- to 24-year-olds from 1998 to 2010. In addition,
the slowing economy has triggered a "back-to-college" trend for laid-off workers
and the young adult population in general, eager to retain and enhance their
skill sets in a tighter job market.
According to the Veronis Forecast, end-user spending on college
instructional materials is projected to rise at a compound annual growth rate of
6.3% from 2000 to 2005, reaching an estimated $5.1 billion in 2005.
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GROWTH IN END USER SPENDING--COLLEGE INSTRUCTIONAL MATERIALS MARKET
($ IN BILLIONS)
GROWTH IN END-USER SPENDING--COLLEGE INSTRUCTIONAL MATERIALS MARKET
($ IN BILLIONS)
[LOGO]
THE COMMERCIAL PRINTING MARKET
We compete in a $7 billion subset of the $100 billion commercial printing
market, supplying a wide variety of end users with one-, two- and four-color
soft-cover printing with varied binding styles. The areas in which we compete
include business-to-business catalogs, trade, religious and self-help materials,
healthcare manuals, computer hardware and software manuals and documentation and
government (state and federal) manuals. This market does not experience the same
seasonality as the instructional materials market, with increased volume
occurring in the second half of the year.
OPERATING DIVISIONS
We provide our products and services to the instructional materials and
commercial printing markets through our four operating divisions as follows:
<Table>
<Caption>
OPERATING DIVISION PRODUCT AND SERVICE OFFERINGS
- ------------------ --------------------------------------------------------
Von Hoffmann, or VH - Four-color hard- and soft-cover educational textbooks
- One- and two-color educational textbooks
- Standardized, secure educational testing materials
- Commercial one- and two-color books
- Fulfillment
Precision - Plastic printing: overhead transparency products and
plastic inserts for scholastic textbooks
H&S Graphics - Digital pre-press
- Composition
Preface - Design and creative services
- Editorial development
- Composition
</Table>
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VH. VH is our largest operating division and includes the business of Von
Hoffmann Graphics, which was merged into it in February 2002. VH produces
four-color textbooks and testing materials for the instructional materials
market and one- and two-color books for the commercial market. Its educational
customers include virtually all of the major domestic publishers of ELHI and
college textbooks, including the educational publishing divisions of Houghton
Mifflin, Pearson, McGraw-Hill, and Harcourt. Its commercial customers include
the U.S. Government Printing Office, General Motors Corporation, Microsoft
Corporation, IBM Corporation, The Boeing Company and Texas Instruments
Incorporated.
VH's Jefferson City, Missouri facility focuses almost exclusively on the
manufacture of four-color textbooks for the ELHI and college markets. We employ
specially modified machinery to meet the demanding service, quality and delivery
requirements of this market and believe that we are better able than our
competitors to accommodate the relatively short lead-times and highly variable
run lengths that typify the four-color textbook industry. These factors
distinguish us from other book manufacturers who focus on multiple markets and
for whom four-color textbooks represent only a small portion of overall product
mix. VH also operates our Owensville, Missouri and Eldridge, Iowa facilities,
which focus on the one- and two-color book manufacturing market. These
facilities also feature binding operations, including adhesive and saddle-stitch
styles, and provide fulfillment and distribution services. In addition, VH
operates our Frederick, Maryland facility, which is strategically located near
our customer base in the Northeast, and which produces products for the
specialty trade and ancillary education workbook market.
Over the past five years, we have invested in state-of-the-art, integrated
digital pre-press equipment that streamlines and enhances the traditional
pre-press process, which historically involved a publisher sending artwork out
for color separation and the production of film, which is then sent to a printer
to create printing plates. Through the purchase of this equipment and the
acquisitions of H&S Graphics and Preface, we now have the ability to perform all
the necessary pre-press work from digital media provided by our customers. This
system gives us the capability to make plates in a computer-to-plate
environment, saving time and reducing the opportunities for error. This is
particularly significant in the textbook adoption process, which entails
repeated changes to a book and multiple short-run print jobs.
PRECISION. Founded in 1951, Precision is a sheet-fed printer and binder
operation that sells primarily to the educational textbook market. We acquired
Precision in March 2000 in order to provide our customers with a more complete
and balanced product offering. Precision derives approximately 80% of its
revenues from plastic printing, which consists of overhead transparency products
and plastic inserts for educational textbooks, with the remaining 20% of
revenues derived from paper printing. Management believes that Precision enjoys
a strong market share in its core markets of plastic inserts and overhead
transparencies. Precision's customer base includes the same major educational
publishing houses with whom we have long-standing relationships, including
McGraw-Hill, Houghton Mifflin, Pearson and Harcourt. The acquisition of
Precision also strategically advanced our goal of providing our customers with
more complete and balanced product offerings.
Precision also has a presence in the commercial printing market and is
implementing an extensive plan to significantly grow its presence further in the
market.
H&S GRAPHICS AND PREFACE. In June 1998, we acquired H&S Graphics and
Preface, which added to our ability to serve publishers in the design, creative
editorial development, digital pre-press and composition areas of book
production. These stages, which represent the early production processes in the
manufacturing of a book, position us to manage production more efficiently and
more fully serve the needs of the educational publisher.
SALES AND MARKETING
INSTRUCTIONAL MATERIALS MARKET. Our educational textbook sales team,
consisting of approximately 10 employees, works to develop, support and enhance
our relationships with publishers in both the
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college and ELHI markets, as well as with smaller independent publishers. The
cost of printing a textbook typically represents a small percentage of a
publisher's total cost for a textbook, but the failure to meet a production
deadline could result in a significant loss to the publisher. As a result,
competition in the textbook manufacturing industry is equally service- and
quality-driven as price driven. Accordingly, a significant element of our
marketing efforts consists of maintaining close relationships with our customers
to insure proper production and scheduling and timely delivery. Our senior
management team and sales support staff maintain close contact with key
customers in order to identify relevant issues affecting these customers as well
as to identify competitive threats. In addition, the sales force and planners
are in daily contact with the manufacturing personnel of our customers with
pending indications or firm orders in order to deal with changes or production
issues that arise throughout the process.
We have concentrated on maintaining long-standing relationships with the
major publishers. These publishers have consolidated significantly over the past
several years, reducing the major publishers to four. These publishers accounted
for approximately 18.0%, 14.0%, 7.3% and 6.5%, respectively, of our net sales
during 2001.
COMMERCIAL PRINTING MARKET. Our sales and marketing organization has
developed and is pursuing a focused sales strategy across the identified
commercial market segments. With 25 dedicated sales people, we address this
market on a national level. Customer needs are matched to one of our four
manufacturing facilities and our array of production capabilities.
OPERATIONS AND PRODUCTION
As a contract textbook manufacturer, we principally manufacture textbooks
pursuant to firm customer orders. Our key manufacturing and distribution
functions include:
- creating digital files and page designs;
- producing printing plates from film or directly from digital files
provided by the publishers or created from our extensive library;
- purchasing paper and other book components supplied by other
manufacturers;
- printing and binding textbooks;
- packaging, storing and shipping finished textbooks;
- archiving, preserving and reformatting film and digital files for
reprints; and
- fulfillment of customer orders, inserting CDs and arranging course packs.
Our typical production run size ranges from less than 10,000 units to over
100,000 units, with the capability to produce profitably runs under 5,000 units.
We can cost-effectively produce these short runs due to our unique ability to
change plates and shift work rapidly among printing presses. Each plate change
entails press down-time, as the plates are physically changed, and press
start-up time, as the press is brought into production and proper color and
registration is achieved. Because each plate prints eight pages of one color, a
300-page four-color book requires 150 plate changes. Therefore, short runs
significantly increase the production cost per book. As a result of competition
in the textbook publishing industry, publishers generally seek to lower costs by
maintaining low inventory levels and ordering small quantities for just-in-time
delivery. Our management believes that our ability to produce short runs
effectively is a significant competitive advantage.
We have configured our physical plant and trained our workforce to print
both short-run and long-run quantities. The length of run of a given title is
highly variable over its life span. We believe our "make ready" time per
changeover is significantly less than that of our major competitors. This
capability lowers unit costs, making it economically feasible to print fewer
copies. This is important as it allows our customers to minimize their inventory
levels while maintaining the ability to adjust subsequent production orders in
response to unforeseen sales patterns and unexpected stock shortages.
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As the trend towards more customized products becomes more apparent, we believe
we are well-positioned to produce shorter runs efficiently and thereby
accommodate our customers' needs.
PLANNING, SCHEDULING AND TRACKING
EDUCATIONAL TEXTBOOKS. We centrally manage all of our four-color
educational textbook production scheduling from our St. Louis headquarters. We
have a team of planners who work with our chief scheduler. Due to the short
lead-time and the just-in-time manufacturing requirements of textbook
publishing, customers frequently change their production levels and timetables.
We have developed a customized system to control our production planning. This
process is supported by our fully integrated scheduling and tracking system,
which enables salespersons, planners and employees at each of the manufacturing
facilities to access information regarding company-wide scheduling and tracking.
COMMERCIAL. In order to meet the demands of the highly competitive,
time-sensitive commercial printing market we manage estimating and pricing
centrally from our St. Louis headquarters, while scheduling is managed from our
production plants. Work may move from plant to plant based on specific
capabilities or capacity demands. We have dedicated customer service
representatives at each facility in an effort to meet the needs of our
commercial customers. We are in the process of implementing a master scheduling
program for commercial business that will optimize plant utilization on a
company-wide basis.
PRE-PRESS. We have invested in state-of-the-art, integrated digital
pre-press equipment that streamlines and enhances the traditional pre-press
process. Rather than outsourcing this service, all of our printing facilities
have the ability to perform the complete digital pre-press workflow directly
from digital media provided by our customers. This system gives us the
capability to make plates using the single-burn process, saving time and
expense, while reducing the chance of error. This is particularly significant in
the textbook adoption process, which entails repeated changes to a book and
multiple short-run print jobs. We provide direct-to-plate capabilities, which
eliminate the film-output step of the pre-press process. We now have complete
redundancy in the digital pre-press process throughout our plants, which gives
us increased flexibility in the manufacturing process.
PRINTING AND BINDING. We have a variety of web printing presses configured
to maximize our manufacturing flexibility. Although a certain number of our
presses are dedicated to 9", 10" or 11" textbooks, these presses are highly
specialized and have been modified to have the flexibility to print any of these
sizes on the next-larger press size. Specifically, we have developed equipment
adaptations and proprietary production methods for our textbook printing and
binding operations that significantly reduce the make-ready time per changeover
of plates as compared to that of our competitors. In addition, our
state-of-the-art modified web presses are capable of running at speeds of up to
50,000 impressions per hour.
Over the past five years, we have invested approximately $80 million in
high-quality, high-throughput machinery and plant expansions (excluding
equipment obtained in acquisitions), enhancing our competitive position and
significantly expanding our production capacity for future growth. Our
investments have been made in additional four-color web printing presses,
additional sheet-fed presses, new digital pre-press equipment and additional
manufacturing space. We have also invested extensively in customized, highly
efficient bookbinding production lines.
We currently maintain multiple binding lines in each of the manufacturing
plants, providing several different binding methods to accommodate various
customer preferences. We offer virtually all the textbook binding options used
in the industry, including the proprietary "Von-Bind" Case, McCain, Smyth Case,
Spiral Wire Hardbound, Spiral Wire, Adhesive Case, Side Wire, Saddle Stitch,
Adhesive Paper, Plastic Comb, Wire-O-Hardback, Wire-O and Spiral Plastic.
REPRINTS. Approximately 50% of ELHI textbooks are shipped to states that
require publishers to keep a particular title in print and supply orders for
reprints for periods generally ranging from five to
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eight years. Other ELHI and college textbooks are kept in print for
approximately four to six years. The reprint business is also necessitated by
partial corrections or copyright edition changes that must be made in order to
incorporate new information or to comply with editorial changes demanded by
school committees in various states. In 2001, approximately 80% of our
four-color ELHI net sales were generated from reprints, and we retained over 98%
of our ELHI reprint business while losing less than 2% to competitors.
When a textbook is first published, digital files or a set of film are
created for producing reprints. It is both time-consuming and costly to move
film or digital files from one printer to another with different presses, as the
film or digital files would likely require reformatting. Therefore, publishers
have a disincentive to switch manufacturers for the reprints of a title, which
creates a backlog of future business for the original manufacturer. While the
new digital workflows make this less of an obstacle to transfer work, reprints
from films and digital files in our archives still generally account for an
estimated 60% to 65% of our total annual revenues.
FACILITIES. Our facilities consist of our corporate headquarters located in
St. Louis, Missouri and eight separate production facilities located in
Jefferson City and Owensville, Missouri; Eldridge, Iowa; Frederick, Maryland;
Schaumburg and Rolling Meadows, Illinois; and Leesport and Dauberville,
Pennsylvania. The Jefferson City facility is our principal production facility
for our four-color web presses and building capabilities. Certain information
regarding our facilities is set forth in the table below.
<Table>
<Caption>
FACILITY LOCATION PRINCIPAL PURPOSE SQUARE FOOTAGE STATUS
- ----------------- ---------------------------------- -------------- --------
St. Louis, Missouri............... Corporate headquarters 170,000 Owned
Jefferson City, Missouri.......... Four-color book manufacturing 636,000 Owned
Owensville, Missouri.............. One- and two-color book 450,000 Owned
manufacturing, distribution and
fulfillment
Eldridge, Iowa.................... One- and two-color book 225,000 Owned
manufacturing
Frederick, Maryland............... One-and two-color book 200,000 Owned
manufacturing
Schaumburg, Illinois.............. Book design 9,100 Leased
Rolling Meadows, Illinois......... Digital pre-press and book design 23,000 Owned
Leesport, Pennsylvania............ Printing inserts and overheads 29,000 Owned
Dauberville, Pennsylvania......... Precision bindery and 24,000 Owned
manufacturing
</Table>
RAW MATERIALS
Paper costs represent approximately 40% of our net sales and over 80% of raw
material costs in the manufacturing process. Paper costs generally flow through
to the customer as we generally order paper for specific orders and do not take
significant commodity risk on paper.
We have implemented a paper management program with several customers, which
is designed to allow us to: (i) standardize the type of paper we use on presses
and greatly reduces production and start-up costs; and (ii) avoid the cost of
additional storage space and production inefficiencies required by separating
each publisher's consigned paper. Because the type and size of paper
traditionally delivered to manufacturers by textbook publishers was not uniform
across different publishing houses, we were forced to adjust press lines and
incur significant warehousing, set-up costs and delays when changing between
different orders. Under our paper management program, we provide paper for the
publisher to use in printing our textbooks rather than the publisher supplying
its own paper. The resulting standardization of utilized paper allows for
significant savings in manufacturing and inventory management costs. In 2001,
approximately 55% of our paper usage was procured through this program.
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We operate our paper programs with three major paper suppliers, the largest
and most significant of which is The Mead Corporation, now known as MeadWestvaco
Corporation, which provides approximately 90% of the paper for this program. The
benefits to us, our customers and paper producers have allowed our paper
management program to grow consistently.
EMPLOYEES
As of May 31, 2002, we had 2,077 employees, approximately 336 of whom are
represented by affiliates of the Graphic Communications International Union
under collective bargaining agreements that expire between August and November
of 2005. We believe that relations with our employees are good.
COMPETITION
The educational textbook market is highly competitive. The factors by which
textbook manufacturers are chosen include the ability to maintain and adhere to
a strict manufacturing schedule, the quality of product and service, competitive
pricing and capability to provide "one-stop shopping" to the publisher. The
commercial book manufacturing market is also very competitive. Competitive
advantages include pricing, quality, service and rapid turnaround as well as
other non-print, value-added services including fulfillment and distribution.
We compete in the educational textbook market by leveraging our reputation
for quality and full-service and by providing competitive pricing and rapid
turnaround. By directing a highly-focused sales effort, opportunities for us are
often identified in niches where value-added services are required and
commodity-like price competition is less prevalent.
Our major competitors in the one- and two-color educational and commercial
book manufacturing markets are: R.R. Donnelley & Sons Company, Quebecor
World Inc., D.B. Hess Group, Banta Corporation, and Phoenix Color Corp. R.R.
Donnelley and Quebecor are also major competitors in the four-color educational
textbook manufacturing market.
We believe that there are significant barriers to entry in the instructional
materials market due to the significant initial investment in people, equipment
and facilities that is required to compete. In addition, we believe it would
take several years for a new entrant to develop the reputation for quality,
service and delivery necessary to develop the significant base of titles needed
to establish the recurring reprint volume required to achieve sufficient
capacity utilization.
LEGAL AND ENVIRONMENTAL MATTERS
We do not believe that there are any pending legal proceedings which, if
adversely determined, would have a material adverse effect on our financial
condition or results of operations.
We are subject to regulations under various and changing federal, state and
local laws relating to the environment and to employee safety and health. These
environmental regulations include those relating to the generation, storage,
transportation, disposal, release and emission into the environment of various
substances. Permits are required for operation of our business (particularly air
emission permits), and these permits are subject to renewal, modification and,
in certain circumstances, revocation. We are also subject to regulation under
various and changing federal, state and local laws that allow regulatory
authorities to compel (or to seek reimbursement for) the clean-up of
environmental contamination at our own sites and at facilities where our waste
products are or have been disposed.
We have internal controls dedicated to compliance with all applicable
environmental laws. Management believes that our capital expenditures to comply
with federal, state and local provisions for environmental controls, as well as
expenditures for our share of costs for environmental clean-up, if any, will not
be material and will not have a material effect upon our earnings or our
competitive position.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names of our directors and executive officers and their respective ages
and positions are as follows:
VON HOFFMANN CORPORATION
<Table>
<Caption>
NAME AGE POSITION
- ---- -------- --------
Thompson Dean............................. 43 Chairman of the Board and Director
Robert S. Mathews(1)*..................... 50 Chief Executive Officer, President, Chief Operating
Officer and Director
Peter C. Mitchell(+)...................... 46 Vice Chairman of the Board, Executive Vice
President, Chief Financial Officer and Treasurer
Ron M. Garrison........................... 51 Senior Vice President of Manufacturing
Jack R. Field............................. 44 Senior Vice President of Sales and Marketing
Craig Nelson.............................. 55 Vice President of Human Resources
Jay Skilton............................... 52 President of Preface
James D. Nallo............................ 49 President of Precision
David F. Burgstahler...................... 33 Director
James A. Quella(1)........................ 52 Director
Robert S. Christie(1)..................... 48 Director
</Table>
HOLDINGS
<Table>
<Caption>
NAME AGE POSITION
- ---- -------- --------
Robert A. Uhlenhop........................ 58 Chairman of the Board and Director
Robert S. Mathews(2)(3)*.................. 50 Chief Executive Officer, President and Director
Peter C. Mitchell(+)...................... 46 Executive Vice President, Chief Financial Officer
and Treasurer
David F. Burgstahler(2)(3)................ 33 Director
Thompson Dean............................. 43 Director
James A. Quella(3)........................ 52 Director
Robert S. Christie(2)..................... 48 Director
</Table>
- ------------------------
* Chairman, Chief Executive Officer and Director of One Thousand Realty &
Investment Company, H&S Graphics, Inc., Preface, Inc. and Precision Offset
Printing Company; Mr. Mathews is also President of One Thousand Realty &
Investment Company.
+ Vice President, Chief Financial Officer, Treasurer and Director of One
Thousand Realty & Investment Company, H&S Graphics, Inc., Preface, Inc. and
Precision Offset Printing Company.
(1) Member of the Operations Review Committee of Von Hoffmann.
(2) Member of the Audit Committee of Holdings.
(3) Member of the Compensation Committee of Holdings.
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THOMPSON DEAN was appointed as the Chairman of the Board of Von Hoffmann in
February 2002. He has been a director of Von Hoffmann and Holdings since 1997
and was Chairman of the Board of Holdings from May 1997 to February 2002. He is
a Managing Director and the Head of Leveraged Corporate Private Equity for
Credit Suisse First Boston Corporation, or CSFB. Mr. Dean joined CSFB in 2000
when it merged with Donaldson, Lufkin & Jenrette, Inc., or DLJ, where he has
acted as Managing Partner of DLJ Merchant Banking Partners since 1995. Prior to
becoming its Managing Partner, he served as Managing Director of DLJ Merchant
Banking Partners from 1991 to 1995. Mr. Dean also serves as Chairman of the
Board of Arcade Holding Corporation and DeCrane Aircraft Holdings, Inc. and as a
director of Charles River Laboratories, Inc., Formica Corporation, Insilco
Holding Company, Manufacturers' Services Ltd. and Mueller Holdings (N.A.), Inc.
ROBERT S. MATHEWS was appointed as Chief Operating Officer of Von Hoffmann
in January 2002 and as President, Chief Executive Officer and a director of Von
Hoffmann in February 2002. Mr. Mathews also was appointed as Chief Executive
Officer, President and a director of Holdings in February 2002. From 2000 to
2001, Mr. Mathews was President of our Von Hoffmann Graphics operating division,
which was merged into Von Hoffmann in February 2002. From 1997 to 2000, he
served as Senior Vice President of Quebecor World, which is a competitor of ours
in the book manufacturing industry, and from 1996 to 1997, Mr. Mathews was
Executive Vice President of Graphic Industries Inc. From 1994 to 1996, he was
President of R.R. Donnelley, which is a competitor of ours in the book
manufacturing industry.
PETER C. MITCHELL has been Von Hoffmann's and Holdings' Chief Financial
Officer and Treasurer since 1997. Mr. Mitchell has also served as Vice Chairman
of the Board of Von Hoffmann since 2001 and as an Executive Vice President of
Von Hoffmann and Holdings since 2000. From 1993 to 1997, he served as Senior
Vice President and Chief Financial Officer of Crown Packaging Corporation, and
from 1990 to 1993, served as Chief Financial Officer of Paperboard Industries
Corporation, each of which was an integrated recycled-based paper packaging
company.
RON M. GARRISON was appointed as Senior Vice President of Manufacturing of
Von Hoffmann in January 2002. From 2000 to 2001, Mr. Garrison served as Vice
President of Manufacturing. From 1997 to 1999 he served as a Vice President and
Division Director of R.R. Donnelley.
JACK R. FIELD was appointed as Senior Vice President of Sales and Marketing
of Von Hoffmann in January 2002. From 2000 to 2002, he was Senior Vice President
of Sales for our Von Hoffmann Graphics division, which was merged into Von
Hoffmann in February 2002. From 1998 to 2000, he was Vice President of Sales for
Graphic Communications, Inc., which is a company that provides printing and
binding services, and from 1980 to 1998 he was a Senior Account Executive for
R.R. Donnelley.
CRAIG NELSON has been Vice President of Human Resources of Von Hoffmann
since 1990 and joined us in 1973.
JAY SKILTON has been President of Preface since 1992, joining us in 1998
when we acquired Preface.
JAMES D. NALLO has been the President of Precision since 1984, joining us in
2000 when we acquired Precision. Mr. Nallo also served as Chief Executive
Officer of Precision from 1984 to 2000.
DAVID F. BURGSTAHLER has been a director of Von Hoffmann since 2000 and
Holdings since 1998. He is a Director of CSFB and Principal of DLJ Merchant
Banking Partners. Mr. Burgstahler joined CSFB in 2000 when it merged with DLJ,
where he was a Vice President of DLJ Merchant Banking Partners from 1999 to 2001
and an associate from 1997 to 1999. Mr. Burgstahler also serves as a director of
Haights Cross Communications, Inc., WRC Media Inc., Focus Technologies Inc. and
McCulloch Corporation.
JAMES A. QUELLA has been a director of Von Hoffmann and Holdings since 2000.
He holds the position of Managing Director of DLJ Merchant Banking Partners.
Mr. Quella joined CSFB in 2000
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when it merged with DLJ, where he was a Managing Director and Senior Operating
Partner in DLJ Merchant Banking Partners. Mr. Quella was a Managing Director for
GH Venture Partners LLC from January 2000 to July 2000. From 1997 to 2000,
Mr. Quella served as Vice Chairman of Mercer Management Consulting, Inc. He was
a senior consultant with Mercer from 1990 to 1997. Mr. Quella currently serves
as a director of Advanstar Communications Inc., Arcade Holding Corporation,
Formica Corporation and Merrill Corporation.
ROBERT S. CHRISTIE was appointed as a director of Von Hoffmann and Holdings
in February 2002. He was the President and Chief Executive Officer for Thomson
Learning Corporation from 1998 to 2001, and from 1996 to 1998, he was President
and Chief Executive Officer of Thomson Learnings' subsidiary Thomson & Thomson.
ROBERT A. UHLENHOP was appointed as a Chairman of the Board of Holdings in
February 2002 and has served as a director of Holdings since 1996. He served as
Chairman of the Board, President and Chief Executive Officer of Von Hoffmann
from 1995 to February 2002 and as the Chief Executive Officer and President of
Holdings from 1996 to February 2002. From 1977 to 1997, he was Chief Financial
Officer and Treasurer of Von Hoffmann.
Each director serves for a term of one year.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years awarded to or earned by each person who served
Chief Executive Officer of Von Hoffmann or Holdings in 2001 and the four other
most highly compensated executive officers serving as executive officers at
December 31, 2001.
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- ----------------------------------
AWARDS PAYOUTS
----------------------- --------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
SALARY BONUS SATION(1) AWARDS SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION(*) YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------------ -------- -------- -------- --------- ---------- ---------- -------- ---------
Robert Uhlenhop,.................... 2001 $250,000 $322,335 -- -- -- -- $45,078
Chairman of the Board, 2000 $233,400 $766,942 -- -- -- -- $43,177
President and Chief Executive
Officer(2) 1999 $233,400 $466,000 -- -- -- -- $40,626
Peter Mitchell,..................... 2001 $208,400 $ 75,000 -- -- -- -- $18,540
Vice-Chairman of the Board, 2000 $208,400 $182,553 -- -- -- -- $18,500
Executive Vice President, Chief 1999 $183,400 $100,000 -- -- -- -- $17,561
Financial Officer and Treasurer
James D. Nallo,..................... 2001 $200,018 $ 50,000 -- -- -- -- $11,900
President of Precision 2000 $200,026 $100,000 -- -- 100,000 -- $ 4,000
1999 -- -- -- -- -- -- --
Robert Mathews,..................... 2001 $200,000 $ 70,635 -- -- -- -- $ 4,575
President of Von Hoffmann 2000 $123,750 $ 60,000 -- -- 100,000 -- $ 146
Graphics(3) 1999 -- -- -- -- -- -- --
Jack R. Field,...................... 2001 $171,000 $ 19,549 -- -- -- -- $ 248
Senior Vice President of Sales 2000 $ 44,292 $ 13,124 -- -- -- -- $ 20
for Von Hoffmann Graphics(4) 1999 -- -- -- -- -- -- --
* Reflects principal position at December 31, 2001
</Table>
- ------------------------------
(1) Excludes perquisites where the aggregate amount of such compensation is the
lesser of either $50,000 or 10% of the total annual salary and bonus
reported for Messrs. Uhlenhop, Mitchell and Garrison.
(2) Mr. Uhlenhop served as Chairman of the Board, President and Chief Executive
Officer of Von Hoffmann from 1995 to February 2002. Mr. Uhlenhop was
appointed as Chairman of the Board of Holdings in February 2002.
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(3) Mr. Mathews served as President of our Von Hoffmann Graphics operating
division, which was merged into Von Hoffmann in February 2002, from 2000 to
2001. Mr. Mathews was appointed as Chief Operating Officer of Von Hoffmann
in January 2002 and as President, Chief Executive Officer and a director of
Von Hoffmann and Holdings in February 2002.
(4) Mr. Field served as Senior Vice President of Sales for our Von Hoffmann
Graphics operating division, which was merged into Von Hoffmann in
February 2002, from 2000 to 2002. Mr. Field was appointed as our Senior Vice
President of Sales and Marketing in January 2002.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
No stock options were granted to or exercised by the named executive
officers during 2001.
AGGREGATED OPTION/SAR EXERCISES DURING LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information with respect to the
exercise of options to purchase our common stock during the twelve-month period
ended December 31, 2001, and the unexercised options held and the value thereof
at that date, for each of the named executive officers.
<Table>
<Caption>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTION
ACQUIRED ON END (#) AT FISCAL YEAR END ($)
EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ----------- -------------
Robert Uhlenhop................. -- -- 1,601,600 398,400 -- --
Peter Mitchell.................. -- -- 340,600 159,400 -- --
James D. Nallo.................. -- -- 29,080 70,920 -- --
Robert Mathews.................. -- -- 29,080 70,920 -- --
Jack R. Field................... -- -- -- -- -- --
</Table>
LONG TERM INCENTIVE PLAN
We have no Long Term Incentive Plan in place.
EMPLOYMENT AGREEMENTS
MATHEWS EMPLOYMENT AGREEMENT
We have entered into an employment agreement with Mr. Mathews effective as
of January 1, 2002. Pursuant to that agreement, Mr. Mathews will serve in an
executive position for us until December 31, 2004. Currently, Mr. Mathews serves
as President and Chief Executive Officer of both Von Hoffmann and Holdings. In
exchange for his services, Mr. Mathews is compensated with a base salary of
$225,000, an annual non-discretionary bonus in the amount of $75,000 and an
additional annual bonus in an amount equal to 1.4% of EBITDA in excess of
certain EBITDA targets for each calendar year. This additional bonus may not
exceed $210,000 for any calendar year. In the event that Mr. Mathews is
terminated for cause, he will be entitled to his base salary through the date of
his termination, but will not be entitled to any additional compensation. If
Mr. Mathews is terminated without cause he is entitled to receive an amount in
cash equal to $337,500, but will not be entitled to any other compensation. The
employment agreement also includes a non-competition provision prohibiting
Mr. Mathews from competing with us for one year from the termination of his
employment agreement.
MITCHELL EMPLOYMENT AGREEMENT
We have entered into an employment agreement with Mr. Mitchell, effective as
of January 1, 2002. Pursuant to that agreement, Mr. Mitchell will serve in an
executive position with us until December 31, 2004. Currently, Mr. Mitchell
serves as Chief Financial Officer, Treasurer and Executive Vice President
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of Holdings and as Vice Chairman, Chief Financial Officer, Treasurer and
Executive Vice President of Von Hoffmann. In exchange for his services,
Mr. Mitchell is compensated with a base salary of $225,000 subject to
discretionary increases, an annual non-discretionary bonus in the amount of
$75,000, and an additional bonus per calendar year in an amount equal to 1.4% of
EBITDA in excess of certain EBITDA targets for each calendar year. This
additional bonus may not exceed $210,000 for any calendar year. In the event
that Mr. Mitchell is terminated for cause, he will be entitled to his base
salary through the date of his termination, but will not be entitled to any
additional compensation. If Mr. Mitchell is terminated without cause, he is
entitled to receive an amount in cash equal to $337,500, but will not be
entitled to any other compensation. In the event that Mr. Mitchell's employment
is terminated without cause prior to December 31, 2002 after a change in control
of our company, he is entitled to receive an amount in cash equal to $30,000.
The employment agreement also includes a non-competition provision prohibiting
Mr. Mitchell from competing with us for one year following the termination of
his employment agreement.
UHLENHOP EMPLOYMENT AGREEMENT
Von Hoffmann and Holdings have entered into an employment agreement with
Mr. Uhlenhop effective as of January 1, 2002 and amended and restated as of
June 21, 2002. Pursuant to the amended and restated employment agreement,
Mr. Uhlenhop will be employed as Chief Executive Emeritus and Special Advisor to
the Chief Executive Officer of Von Hoffmann. In addition, Mr. Uhlenhop will
serve as Chairman of Holdings' Board of Directors until January 21, 2004.
Pursuant to the old employment agreement, Mr. Uhlenhop had served as the
President and Chief Executive Officer of Holdings and the Chief Executive
Officer of Von Hoffmann until Mr. Mathews' appointment to those positions in
February 2002. To the extent requested by Holdings and Von Hoffmann,
Mr. Uhlenhop will provide guidance and assistance to members of Von Hoffman's
senior management and to Mr. Mathews in his capacity as Von Hoffman's new Chief
Executive Officer and President. In exchange for his services, Mr. Uhlenhop is
compensated with a base salary of $250,000 per year subject to discretionary
increases and an annual non-discretionary bonus of $300,000. In the event that
Mr. Uhlenhop is terminated for cause, he will be entitled to his base salary
through the date of his termination but will not be entitled to any additional
compensation from Von Hoffmann or Holdings. If Mr. Uhlenhop is terminated
without cause prior to December 31, 2002, he would be entitled to receive
$550,000 (I.E., his base salary and bonus for one calendar year) plus
continuation of certain benefits. If Mr. Uhlenhop is terminated without cause on
or after January 1, 2003 and prior to January 21, 2004, he would be entitled to
receive his base salary for the remainder of such period following his
termination and $300,000 (I.E., his bonus for one calendar year) plus
continuation of certain benefits. Additionally, in recognition of
Mr. Uhlenhop's past and continued service to Von Hoffmann Corporation, he
received a cash payment equal to $1,000,000 on an after tax basis upon the
execution of the amended and restated employment agreement. The amended and
restated Von Hoffmann employment agreement also includes a non-competition
provision prohibiting Mr. Uhlenhop from competing with Von Hoffmann for two
years after the last severance payment is made to Mr. Uhlenhop.
The amended and restated employment agreement also provides that so long as
Mr. Uhlenhop holds at least 2% of the outstanding common stock of Holdings, he
is entitled to serve as a director of Holdings. If, however, Mr. Uhlenhop is
terminated for cause or violates the terms of the non-competition provision, he
will no longer be entitled to serve as a director of Holdings.
DIRECTOR'S ARRANGEMENTS
In connection with Robert S. Christie serving as director of Von Hoffmann
and Holdings, Mr. Christie is reimbursed for reasonable out-of-pocket expenses
that he incurs in the performance of his duties. We also pay him an annual
retainer fee equal to $50,000, payable in equal quarterly
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installments. Additionally, we will grant him options to purchase 50,000 shares
of Holdings' common stock at an exercise price of $1.00 per share. Mr. Christie
is also the Chairman of the Operations Review Committee of the board of
directors of Von Hoffmann and a member of Holdings' Audit Committee.
Other than Mr. Christie, none of our other directors receive any fees or
other compensation for serving as a director. All directors are entitled to
reimbursement for travel expenses associated with board activities.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of
Holdings' common stock as of June 20, 2002 by (i) each person we believe owns
beneficially more than five percent of Holdings outstanding common stock;
(ii) each of Holdings' directors and named executive officers and (iii) each of
Holdings' directors and executive officers as a group.
<Table>
<Caption>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE
- ------------------------------------ ------------------ ----------
DLJ Merchant Banking(1)..................................... 67,134,000 96.6
Robert A. Uhlenhop(2)....................................... 1,601,600 2.4
Robert S. Mathews(3)........................................ 29,080 *
Peter C. Mitchell(4)........................................ 490,600 *
David F. Burgstahler........................................ --
Thompson Dean............................................... --
James A. Quella............................................. --
Robert S. Christie.......................................... --
All directors and executive officers as a group (8
persons)(5)............................................... 2,121,280 3.9
* Indicates less than one percent.
</Table>
- ------------------------
(1) Consists of (a) 62,134,000 shares and (b) warrants that are presently
exercisable or exercisable within 60 days to purchase 5,000,000 shares held
by the following entities: DLJ Merchant Banking Partners II, L.P., DLJ
Offshore Partners II, C.V. (DLJOP), DLJMB Funding II, Inc. (DLJ Funding),
DLJ Diversified Partners, L.P. (Diversified), DLJ Diversified Partners-A,
L.P. (Diversified-A), DLJ EAB Partners, L.P. (EAB), DLJ First ESC L.P.
(First ESC), DLJ Merchant Banking Partners II-A, L.P. (Partners II-A), DLJ
Millennium Partners, L.P. (Millennium L.P.), DLJ Millennium Partners-A, L.P.
(Millennium-A) and UK Investment Plan 1997 Partners (UK Investment). See
"Certain Relationships and Related Transactions--Shareholders' Agreement"
and "Plan of Distribution." The address of each of DLJ Merchant Banking
Partners II, L.P., DLJ Funding, Diversified, Diversified-A, EAB, First ESC,
Partners II-A, Millennium L.P. and Millennium-A is 11 Madison Avenue, 16th
Floor, New York, New York, 10010. The address of DLJOP is John B. Gorsiraweg
14, Willenstad, Curacao, Netherlands Antilles. The address of UK Investment
is 2121 Avenue of the Stars, Fox Plaza, Suite 3000, Los Angeles, California
90067.
(2) Includes options that are presently exercisable or exercisable within
60 days to purchase 1,601,600 shares.
(3) Consists of options that are presently exercisable or exercisable within
60 days to purchase 29,080 shares.
(4) Includes options that are presently exercisable or exercisable within
60 days to purchase 340,600 shares.
(5) Includes options and warrants that are presently exercisable or exercisable
within 60 days to purchase 2,315,040 shares.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS' AGREEMENT
On May 22, 1997, Holdings, DLJ Merchant Banking, ZS VH II L.P., and
management and other employees who own shares of Holdings entered into a
shareholders' agreement that sets forth certain rights and restrictions relating
to the ownership of Holdings' common stock and agreements among those parties as
to the governance of Holdings and, indirectly, of Von Hoffmann. The agreement
was amended on November 30, 2000, and subsequently amended on June 20, 2002.
The shareholders' agreement contains provisions which, among other things
and subject to certain exceptions: (i) restrict the ability of the management
and employee stockholders to transfer their respective ownership interests,
subject to certain rights of first refusal and tag-along rights held by the
other stockholders; (ii) grant certain drag-along rights to DLJ Merchant Banking
to require the remaining stockholders to sell their shares if DLJ Merchant
Banking sells more than 50% of the then-outstanding shares of Holdings' common
stock of Holdings and grant to the remaining stockholders, under certain
circumstances, tag-along rights with respect to sales by DLJ Merchant Banking;
(iii) grant to stockholders certain registration rights; and (iv) grant
Mr. Uhlenhop the right to require Holdings to sell shares to him on the same
basis and in a proportional amount as any sold by Holdings to DLJ Merchant
Banking.
Holdings or its designee has the right to repurchase all shares owned by any
management stockholder upon the termination of such management stockholder's
employment with us. Additionally, DLJ Merchant Banking was granted demand
registration and piggyback registration rights.
STOCK PURCHASE AGREEMENT WITH DLJ MERCHANT BANKING
On March 26, 2002, Holdings and DLJ Merchant Banking Partners II, L.P.
entered into a stock purchase agreement pursuant to which DLJ Merchant Banking
purchased from Holdings 20,000,000 shares of Holdings' common stock for a
purchase price of $1.00 per share. The stock purchase agreement further provides
that DLJ Merchant Banking may, in its discretion, purchase up to an additional
5,000,000 shares of Holdings' Common Stock at any time prior to December 31,
2002.
STOCK REPURCHASE AGREEMENT WITH ZS VH II L.P.
On June 21, 2002, ZS VH II L.P., Holdings and DLJ Merchant Banking Partners
II, L.P. entered into a stock purchase agreement pursuant to which ZS VH II L.P.
sold 5,000,000 shares of common stock of Holdings for a purchase price of $1.00
per share to Holdings.
The stock purchase agreement provides that each of the parties, along with
ZS VH L.P., agree to release each other from any and all claims, liabilities and
other legal actions which may have arisen or may later arise between the parties
under: (i) the Agreement and Plan of Merger, dated as of May 22, 1997, by and
among VH Acquisition Corp., Holdings, DLJ Merchant Banking Partners II, L.P. and
certain of its affiliates, and certain shareholders, and the ancillary documents
delivered in connection with the execution of the Agreement and Plan of Merger,
(ii) the Shareholders' Agreement, (iii) and the stock purchase agreement. Robert
Horne, the board designee of ZS, resigned concurrently with the sale of the
shares. Under the agreement, Holdings releases Mr. Horne from any liability for
any claims in connection with Mr. Horne serving as a director of Holdings.
The purchase price paid for ZS VH II L.P.'s shares came from cash on hand of
Holdings, which cash was proceeds from DLJ Merchant Banking's equity
contribution in March, 2002.
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STOCK REPURCHASE AGREEMENT WITH ROBERT UHLENHOP
On June 21, 2002, Holdings and Von Hoffmann entered into a stock purchase
agreement with Robert Uhlenhop, the Chairman of the Board of Directors of
Holdings, and the Robert A. Uhlenhop 1998 Irrevocable Trust Dated January 27,
1998. Each of Mr. Uhlenhop and the trust sold 1,000,000 shares of Holdings'
outstanding common stock to Holdings in exchange for $1,000,000. Of the
$1,000,000 received by Mr. Uhlenhop, approximately $797,000 was paid to Von
Hoffmann as settlement of the outstanding principal amount of, and the unpaid
and accrued interest through June 19, 2002 on, the non-recourse secured
promissory note, dated as of May 22, 1997, from Mr. Uhlenhop to Von Hoffmann.
The payment from Mr. Uhlenhop to Von Hoffmann fully discharged and satisfied all
of Mr. Uhlenhop's obligations to Von Hoffmann under the promissory note. The
purchase price paid for Mr. Uhlenhop's shares came from cash on hand of
Holdings, which cash was proceeds from DLJ Merchant Banking's equity
contribution in March, 2002.
FINANCIAL SERVICES AGREEMENT
On March 26, 2002 we entered into a financial advisory agreement with CSFB.
Pursuant to this agreement, CSFB has been retained to act as our financial
advisor for a five-year period, unless terminated earlier. Under this agreement
CSFB, among other things, assists us in analyzing our operations and performance
and future prospects. In addition, CSFB advises us on our continued evaluation
of our capital structure, potential acquisitions and strategic plan and
alternatives. For its services, CSFB is entitled to receive up to $3.5 million,
payable at certain times and in certain amounts, depending upon the services
performed. As contemplated by the agreement, we have agreed to indemnify CSFB
against specified losses or liability arising out of, or in connection with,
advice and services rendered under the agreement. This agreement is terminable
by either us or CSFB at any time upon written notice.
MITCHELL LOAN
On August 15, 1997, pursuant to a non-recourse secured promissory note, DLJ
loaned Peter C. Mitchell, an executive officer of Holdings and of Von Hoffmann,
$75,000 at an interest rate of 9.4% per annum for the purchase of 75,000 shares
of Holdings' common stock. DLJ subsequently sold this promissory note to us. As
of December 31, 2001, the balance was $112,177.
NELSON LOAN
On May 22, 1997, pursuant to a non-recourse secured promissory note, DLJ
loaned Craig Nelson, the Vice President of Human Resources of Von Hoffmann,
$100,000 at an interest rate of 9.4% per annum for the purchase of 100,000
shares of Holdings' common stock. DLJ subsequently sold this promissory note to
us. As of December 31, 2001, the balance was $152,711.
UHLENHOP LOAN
On May 22, 1997, pursuant to a non-recourse secured promissory note, DLJ
loaned Robert A. Uhlenhop, the Chairman of the Board and a director of Holdings,
$500,000 at an interest rate of 9.4% per annum for the purchase of 500,000
shares of Holdings' common stock. DLJ subsequently sold this promissory note to
us. As of December 31, 2001, the balance was $763,559. The loan was repaid on
June 20, 2002, as described above under "--Stock Repurchase Agreement with
Robert Uhlenhop."
OTHER
CSFB and certain of its affiliates have performed investment banking,
financial advisory and/or lending services for us from time to time, for which
they have received customary compensation and may do so in the future. CSFB was
the syndication agent under our revolving credit facility and
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<Page>
received customary compensation in connection with acting in that role.
Additionally, an affiliate of CSFB is a lender under our revolving credit
facility.
DESCRIPTION OF CERTAIN INDEBTEDNESS
REVOLVING CREDIT FACILITY
We entered into a revolving credit facility on March 26, 2002, which
provides for revolving loans of $90.0 million, and which includes a
$10.0 million sublimit for the issuance of stand by and commercial letters of
credit and a $10.0 million sublimit for swingline loans. As of May 31, 2002, we
had total indebtedness of $391.7 million and had $50.8 million of additional
borrowings available under our revolving credit facility, after excluding
$1.35 million of letters of credit outstanding under that facility. The facility
will terminate November 15, 2006, although in certain circumstances it can be
extended to March 26, 2007. At any time prior to that date, we have the right,
subject to finding lenders willing to provide such increase, to effectuate an
one-time increase to provide for borrowings of up to $100.0 million under the
revolving credit facility. Von Hoffmann is the borrower under the facility and
Holdings and all of Von Hoffmann subsidiaries unconditionally guarantee Von
Hoffman'S obligations under the facility.
All borrowings, except for swingline loans, bear interest, at our option, at
either the administrative agent's alternate base rate plus 1.75% per annum or
reserve-adjusted LIBOR plus 3.0% per annum. Swingline loans bear interest as
base rate loans. The applicable margins may be adjusted beginning approximately
two quarters after the closing of the facility based on our ratio of debt to
EBITDA. We pay customary administration fees and expenses and pay commitment
fees of 0.625% per annum on the unused portion of the revolving credit facility.
We may prepay outstanding revolving loans without penalty, PROVIDED,
HOWEVER, that LIBOR breakage costs, if any, will be for our account. Subject to
certain exceptions, we are required to make certain mandatory prepayments (and
concurrently to reduce the commitments under the facility), including with:
(i) 100% of the net proceeds from certain asset sales; (ii) 100% of the net
proceeds from the sale or issuance of certain debt securities other than the
notes; (iii) 50% of the net proceeds from the sale or issuance of certain equity
securities; and (iv) certain proceeds of casualty or condemnation events. We are
also required to paydown our revolving facility from time to time with excess
cash.
Borrowings and letters of credit under the revolving credit facility are
limited to an amount not in excess of a borrowing base equal to specified
percentages of our eligible inventory and receivables and, subject to a limit,
our eligible property, plant and equipment.
Our obligations under the revolving credit facility are secured by a
first-priority perfected lien on our outstanding capital stock and substantially
all of our and our subsidiaries' property and assets.
The revolving credit facility contains customary covenants and restrictions
on our ability to engage in certain activities, including incurring debt or
liens, paying dividends or repurchasing our equity securities, voluntarily
prepaying certain indebtedness (including the 2009 notes and the 2007 notes),
selling assets, making acquisitions, entering into mergers or similar
transactions or engaging in transactions with affiliates. The revolving credit
facility restricts us from repurchasing the 2009 notes and the 2007 notes prior
to their maturity, except under certain circumstances. In addition, the
revolving credit facility requires that we meet or exceed certain fixed charge
coverage ratios and not exceed specified leverage ratios. It also includes
customary events of default.
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<Page>
DESCRIPTION OF THE REGISTERED SECURITIES
THE FOLLOWING DESCRIPTION IS ONLY A SUMMARY OF CERTAIN PROVISIONS OF THE
INDENTURES AND THE REGISTERED SECURITIES THAT WE CONSIDER MATERIAL. YOU CAN
RECEIVE A COPY OF THE INDENTURES UPON REQUEST TO US AT THE ADDRESS SET FORTH
UNDER "WHERE YOU CAN FIND MORE INFORMATION."
10 1/4% SENIOR NOTES DUE 2009
You can find the definitions of certain terms used in this description of
the 2009 notes under the subheading "--Certain Definitions." In this
description, the term "Von Hoffmann" refers only to Von Hoffmann Corporation and
not to any of its subsidiaries.
Von Hoffmann issued the old 2009 notes under an indenture among itself, the
Guarantors and U.S. Bank National Association, as trustee, in a private
transaction that is not subject to the registration requirements of the
Securities Act. The terms of the 2009 notes include those stated in the
indenture governing them and those made part of that indenture by reference to
the Trust Indenture Act of 1939, as amended.
The following description is a summary of the material provisions of the
indenture governing the 2009 notes and the registration rights agreement
relating to the 2009 notes. It does not restate those agreements in their
entirety. We urge you to read the indenture and the registration rights
agreement governing the 2009 notes because they, and not this description,
define your rights as holders of the notes. Copies of the indenture and the
registration rights agreement governing the 2009 notes are available as set
forth below under "--Additional Information."
BRIEF DESCRIPTION OF THE 2009 NOTES AND THE NOTE GUARANTEES
The 2009 notes:
- will be general unsecured obligations of Von Hoffmann;
- will be PARI PASSU in right of payment with all existing and future senior
indebtedness of Von Hoffmann;
- will be senior in right of payment to all existing and future subordinated
indebtedness of Von Hoffmann; and
- will be unconditionally guaranteed by the Guarantors.
However, the 2009 notes will be effectively subordinated to all borrowings under
our revolving credit facility, which will be secured by substantially all of the
assets of Von Hoffmann and the Guarantors. See "Risk Factors--Your right to
receive payments on the securities is effectively subordinated to the rights of
our existing and future secured creditors."
THE NOTE GUARANTEES
The 2009 notes will be guaranteed by all of Von Hoffmann's current and
future Domestic Subsidiaries and, for so long as Holdings guarantees any of the
Credit Facilities, by Holdings.
Each guarantee of the 2009 notes:
- will be a general unsecured obligation of the Guarantor;
- will be PARI PASSU in right of payment to all existing and future
unsecured senior indebtedness of that Guarantor; and
- will be senior in right of payment to all existing and future subordinated
indebtedness of that Guarantor.
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As of the date of the exchange offers, all of Von Hoffmann's subsidiaries
will be "Restricted Subsidiaries." However, under the circumstances described
below under the subheading "--Certain Covenants--Designation of Restricted and
Unrestricted Subsidiaries," Von Hoffmann will be permitted to designate certain
of its subsidiaries as "Unrestricted Subsidiaries." Von Hoffmann's Unrestricted
Subsidiaries will generally not be subject to the restrictive covenants in the
indenture governing the 2009 notes and will not guarantee the 2009 notes.
PRINCIPAL, MATURITY AND INTEREST
The indenture governing the 2009 notes does not limit the maximum aggregate
principal amount of the 2009 notes that Von Hoffmann may issue thereunder. Von
Hoffmann issued the old 2009 notes in an aggregate principal amount of
$215 million. Von Hoffmann may issue additional 2009 notes from time to time,
subject to the covenant described below under the caption "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock." The 2009 notes and
any additional notes subsequently issued under the indenture governing the 2009
notes will be treated as a single class for all purposes under the indenture
governing the 2009 notes, including, without limitation, waivers, amendments,
redemptions and offers to purchase. Von Hoffmann will issue the 2009 notes in
denominations of $1,000 and integral multiples of $1,000. The 2009 notes will
mature on March 15, 2009. Interest on the 2009 notes will accrue at the rate of
10 1/4% per annum and will be payable semi-annually in arrears on February 15
and August 15, commencing on August 15, 2002. Von Hoffmann will make each
interest payment to the holders of record on the immediately preceding
February 1 and August 1. Interest on the 2009 notes will accrue from the date of
original issuance or, if interest has already been paid, from the date it was
most recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
All payments on 2009 notes will be made at the office or agency of the
paying agent unless Von Hoffmann elects to make interest payments by check
mailed to the holders at their address set forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE 2009 NOTES
The trustee currently acts as paying agent and registrar. Von Hoffmann may
change the paying agent or registrar without prior notice to the holders of the
2009 notes, and Von Hoffmann or any of its subsidiaries may act as paying agent
or registrar.
NOTE GUARANTEES
The 2009 notes will be guaranteed by all of Von Hoffmann's current and
future Domestic Subsidiaries and, so long as Holdings guarantees any of the
Credit Facilities, by Holdings. The note guarantees will be joint and several
obligations of the Guarantors. The obligations of each Guarantor under its note
guarantee will be limited as necessary to prevent that note guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors--Federal and State statutes allow courts, under specific circumstances,
to void guarantees and require note holders to return payments received from
guarantors."
No Guarantor may consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person) or sell or otherwise dispose of all or
substantially all of its assets to, another corporation, Person or entity,
whether or not affiliated with such Guarantor, unless:
(1) subject to the provisions below, the Person formed by or surviving
any such consolidation or merger (if other than such Guarantor) assumes all
the obligations of such Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the trustee, under the
indenture governing the 2009 notes;
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(2) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(3) Von Hoffmann would be permitted, immediately after giving effect to
such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described under the caption "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock."
Notwithstanding the provisions of this paragraph, the indenture governing the
2009 notes will not prohibit the merger of two of Von Hoffmann's Restricted
Subsidiaries or the merger of a Restricted Subsidiary into Von Hoffmann.
The note guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise; or
(2) in connection with any sale or other disposition of all of the
Capital Stock of a Guarantor; or
(3) the designation of a Guarantor as an Unrestricted Subsidiary;
PROVIDED, that, in the case of a sale or other disposition of all of the assets
or Capital Stock of a Guarantor or the designation of a Guarantor as an
Unrestricted Subsidiary, the Net Proceeds of such sale or other disposition are
applied, or such designation is made, in accordance with the applicable
provisions of the indenture governing the 2009 notes. See "--Repurchase at the
Option of Holders--Asset Sales" and "--Certain Covenants--Restricted Payments."
The indenture governing the 2009 notes will also provide that if all of the
Guarantees of Holdings issued pursuant to Credit Facilities are released,
Holdings' note guarantee will also be released. Except as set forth above, the
limitations and restrictions in the indenture governing the 2009 notes will not
apply to, limit or restrict the operations of Holdings.
OPTIONAL REDEMPTION
The 2009 notes may be redeemed, in whole or in part, at any time prior to
March 15, 2005 at the option of Von Hoffmann upon not less than 30 nor more than
60 days prior notice mailed by first-class mail to each holder's registered
address, at a redemption price equal to, as determined by the Reference Treasury
Dealer, the sum of the present values of the Remaining Scheduled Payments
discounted to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus accrued
and unpaid interest and Liquidated Damages, if any, to the applicable date of
redemption.
At any time on or prior to March 15, 2005, Von Hoffmann may redeem up to 35%
of the aggregate principal amount of the 2009 notes issued under the indenture
governing the 2009 notes at a redemption price of 110.25% of the principal
amount, plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net proceeds of a sale of Equity Interests (other than
Disqualified Stock) of Von Hoffmann or a capital contribution to Von Hoffmann's
common equity from Holdings; PROVIDED that:
(1) at least 65% of the aggregate principal amount of the 2009 notes
issued under the indenture governing the 2009 notes remains outstanding
immediately after the occurrence of such redemption (excluding the 2009
notes held by Von Hoffmann and its Subsidiaries); and
(2) the redemption occurs within 90 days of the date of the closing of
such sale or contribution.
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The indenture governing the 2009 notes will not restrict Von Hoffmann's
ability to separately make open market, privately negotiated or other purchases
of the 2009 notes from time to time.
Except pursuant to the first two paragraphs of this section, the 2009 notes
will not be redeemable at Von Hoffmann's option prior to March 15, 2005.
On or after March 15, 2005, Von Hoffmann may redeem all or a part of the
2009 notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, on the 2009
notes redeemed, to the applicable redemption date, if redeemed during the
twelve-month period beginning on March 15 of the years indicated below:
<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------
2005........................................................ 107.688%
2006........................................................ 105.125%
2007........................................................ 102.563%
2008 and thereafter......................................... 100.000%
</Table>
Unless Von Hoffmann defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the 2009 notes or
portions thereof called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," Von
Hoffmann is not required to make mandatory redemption or sinking fund payments
with respect to the 2009 notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of the 2009 notes will have the
right to require Von Hoffmann to repurchase all or any part (equal to $1,000 or
an integral multiple of $1,000) of that holder's 2009 notes pursuant to a Change
of Control Offer on the terms set forth in the indenture governing the 2009
notes. In the Change of Control Offer, Von Hoffmann will offer at an offer price
in cash equal to 101% of the aggregate principal amount of the 2009 notes
repurchased plus accrued and unpaid interest and Liquidated Damages, if any, on
the 2009 notes repurchased, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, Von Hoffmann will
mail a notice to each holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase the 2009 notes on
the date specified in the notice, which date will be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the indenture
governing the 2009 notes and described in such notice. Von Hoffmann will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with the repurchase of the 2009 notes
as a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions of
the indenture governing the 2009 notes, Von Hoffmann will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control provisions of the indenture
governing the 2009 notes by virtue of such conflict.
On the Change of Control Payment Date, Von Hoffmann will, to the extent
lawful:
(1) accept for payment all the 2009 notes or portions of the 2009 notes
properly tendered pursuant to the Change of Control Offer;
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(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all the 2009 notes or portions of the 2009
notes properly tendered; and
(3) deliver or cause to be delivered to the trustee the 2009 notes
properly accepted together with an Officers' Certificate stating the
aggregate principal amount of the 2009 notes or portions of the 2009 notes
being purchased by Von Hoffmann.
The paying agent will promptly mail to each holder of the 2009 notes
properly tendered the Change of Control Payment for such 2009 notes, and the
trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each holder a new 2009 note equal in principal amount to any
unpurchased portion of the 2009 notes surrendered, if any; PROVIDED that each
new 2009 note will be in a principal amount of $1,000 or an integral multiple of
$1,000.
Von Hoffmann will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
The provisions described above that require Von Hoffmann to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the indenture governing the 2009 notes are applicable.
Except as described above with respect to a Change of Control, the indenture
governing the 2009 notes does not contain provisions that permit the holders of
the 2009 notes to require that Von Hoffmann repurchase or redeem the 2009 notes
in the event of a takeover, recapitalization or similar transaction.
The revolving credit facility limits Von Hoffmann from purchasing or
redeeming any 2009 notes, and also provides that certain change of control
events with respect to Von Hoffmann would constitute a default thereunder. Any
future credit agreements or other agreements to which Von Hoffmann becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when Von Hoffmann is prohibited from purchasing or
redeeming the 2009 notes, it could seek the consent of its lenders to the
purchase of the 2009 notes or could attempt to refinance the borrowings that
contain such prohibition. If Von Hoffmann does not obtain such a consent or
repay such borrowings, it will remain prohibited from purchasing the 2009 notes.
In such case, Von Hoffmann's failure to purchase tendered 2009 notes would
constitute an Event of Default under the indenture governing the 2009 notes,
which would, in turn, constitute a default under the revolving credit facility.
In addition, Von Hoffmann's ability to pay cash to the holders of the 2009 notes
upon a repurchase may be limited by its then existing financial resources.
Von Hoffmann will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture governing the 2009 notes applicable to a Change of Control
Offer made by Holdings and purchases all the 2009 notes validly tendered and not
withdrawn under the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Von Hoffmann and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of the 2009 notes to require Von
Hoffmann to repurchase the 2009 notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of Von Hoffmann
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
Von Hoffmann's ability to pay cash to the holders of the 2009 notes upon a
repurchase may be limited by Von Hoffmann then existing financial resources. See
"Risk Factors--We may not have the ability to raise the funds necessary to
finance the change of control offer required by the securities indentures."
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ASSET SALES
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Von Hoffmann (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of the Asset Sale at least equal to the
fair market value (evidenced by a resolution of the board of directors of
Von Hoffmann set forth in an Officers' Certificate delivered to the trustee)
of the assets or Equity Interests issued or sold or otherwise disposed of;
and
(2) at least 75% of the consideration received in the Asset Sale by Von
Hoffmann or such Restricted Subsidiary is in the form of cash. For purposes
of this provision, each of the following will be deemed to be cash:
(a) any liabilities, as shown on Von Hoffmann's or such Restricted
Subsidiary's most recent consolidated balance sheet, of Von Hoffmann or
any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the 2009 notes or any
note guarantee) that are assumed by the transferee of any such assets;
and
(b) any securities, notes or other obligations received by Von
Hoffmann or any such Restricted Subsidiary from such transferee that are
immediately converted by Von Hoffmann or such Restricted Subsidiary into
cash (to the extent of the cash received in that conversion).
The 75% limitation referred to in clause (2) above will not apply to any
Asset Sale in which the cash portion of the consideration received therefrom,
determined in accordance with the foregoing proviso, is equal to or greater than
what the after-tax proceeds would have been had such Asset Sale complied with
the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Von Hoffmann or any Restricted Subsidiary may apply those Net Proceeds at its
option:
(1) to repay Indebtedness (other than Indebtedness that by its terms is
subordinated in right of payment to the 2009 notes or any note guarantee)
and, if the Indebtedness repaid is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto;
(2) to acquire a controlling interest in another business;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets,
in each case in accordance with the terms of the indenture governing the 2009
notes. Pending the final application of any Net Proceeds, Von Hoffmann may
temporarily reduce revolving credit borrowings or otherwise invest the Net
Proceeds in any manner that is not prohibited by the indenture governing the
2009 notes.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5.0 million or, if no Senior
Subordinated Notes are outstanding, $10.0 million, Von Hoffmann will make an
offer (an "Asset Sale Offer") to all holders of the 2009 notes and, at its
option, an offer to all holders of other Indebtedness that ranks equally with
the 2009 notes containing similar provisions to those in the indenture governing
the 2009 notes with respect to offers to purchase or redeem with the proceeds of
asset sales to purchase the maximum principal amount of the 2009 notes that may
be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer
for the 2009 notes will be equal to 100% of principal amount plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase, and
will be payable in cash. If any Excess Proceeds remain after
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consummation of an Asset Sale Offer and such offer for PARI PASSU Indebtedness,
Von Hoffmann may use those Excess Proceeds for general corporate purposes,
including to make a similar offer for the Senior Subordinated Notes pursuant to
the indenture for such notes. If the aggregate principal amount of notes
tendered into such Asset Sale Offer and such other offer exceeds the amount of
Excess Proceeds, the trustee will select the 2009 notes to be purchased on a pro
rata basis. Upon completion of each Asset Sale Offer, the amount of Excess
Proceeds will be reset at zero.
Notwithstanding the foregoing, Von Hoffmann and its Restricted Subsidiaries
will be permitted to consummate an Asset Sale without complying with the
preceding paragraphs if (i) Von Hoffmann or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets or other property
sold, issued or otherwise disposed of (as evidenced by a resolution of Von
Hoffmann's board of directors set forth in an Officers' Certificate delivered to
the trustee), and (ii) at least 75% of the consideration for such Asset Sale
constitutes assets or other property of a kind usable by Von Hoffmann and its
Restricted Subsidiaries in the business of Von Hoffmann and its Restricted
Subsidiaries as conducted by Von Hoffmann and its Restricted Subsidiaries on the
date of the indenture governing the 2009 notes; PROVIDED that any cash
consideration received by Von Hoffmann or any of its Restricted Subsidiaries in
connection with any Asset Sale permitted to be consummated under this paragraph
shall constitute Net Proceeds subject to the provisions of the two preceding
paragraphs.
Von Hoffmann will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with each
repurchase of the 2009 notes pursuant to an Asset Sale Offer. To the extent that
the provisions of any securities laws or regulations conflict with the Asset
Sale provisions of the indenture governing the 2009 notes, Von Hoffmann will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the Asset Sale provisions of the
indenture governing the 2009 notes by virtue of such conflict.
SELECTION AND NOTICE
Except as otherwise provided in the indenture governing the 2009 notes, if
less than all of the 2009 notes are to be redeemed at any time, the trustee will
select notes for redemption as follows:
(1) if the 2009 notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the 2009 notes are listed; or
(2) if the 2009 notes are not listed on any national securities
exchange, on a pro rata basis, by lot or by such method as the trustee deems
fair and appropriate.
No 2009 notes of $1,000 or less can be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each holder of the 2009 notes to be
redeemed at its registered address, except that redemption notices may be mailed
more than 60 days prior to a redemption date if the notice is issued in
connection with a defeasance of the 2009 notes or a satisfaction and discharge
of the indenture governing the 2009 notes. Notices of redemption may not be
conditional.
If any 2009 note is to be redeemed in part only, the notice of redemption
that relates to that 2009 note will state the portion of the principal amount of
that 2009 note that is to be redeemed. A new 2009 note in principal amount equal
to the unredeemed portion of the original 2009 note will be issued in the name
of the holder of the 2009 notes upon cancellation of the original 2009 note. The
2009 notes called for redemption become due on the date fixed for redemption. On
and after the redemption date, interest ceases to accrue on the 2009 notes or
portions of them called for redemption.
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CERTAIN COVENANTS
RESTRICTED PAYMENTS
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Von Hoffmann's Equity Interests (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of Von Hoffmann);
(2) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of Von Hoffmann;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated in right of payment to the 2009 notes ("subordinated
Indebtedness"), except a payment of interest or a payment of principal at
Stated Maturity; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(2) Von Hoffmann would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Von Hoffmann and its Restricted
Subsidiaries since May 22, 1997 (excluding Restricted Payments permitted by
clause (2) of the next succeeding paragraph), is less than the sum of:
(a) 50% of the Consolidated Net Income of Von Hoffmann for the period
(taken as one accounting period) commencing July 1, 1997 to the end of
Von Hoffmann's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), PLUS
(b) 100% of the aggregate net cash proceeds received by Von Hoffmann
from the issue or sale since May 22, 1997 of (A) Equity Interests of Von
Hoffmann (other than Disqualified Stock), (B) any Restricted Subsidiaries
or (C) Disqualified Stock or debt securities of Von Hoffmann that have
been converted into Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary
of Von Hoffmann and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), PLUS
(c) 100% of the aggregate amount of capital contributions to Von
Hoffmann's common equity since May 22, 1997, PLUS
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(d) 100% of the net proceeds received by Von Hoffmann or any of its
Restricted Subsidiaries since May 22, 1997 from (A) the sale or other
disposition of any Restricted Investment or (B) dividends on or the sale
of stock of Unrestricted Subsidiaries.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the indenture governing the 2009 notes;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of Von
Hoffmann in exchange for, or out of the net proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary of Von Hoffmann) of,
other Equity Interests of Von Hoffmann (other than any Disqualified Stock)
or from the net proceeds of a capital contribution by Holdings to Von
Hoffmann; PROVIDED that the amount of any such net proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition since May 22, 1997 shall be excluded from clause (3)(b) of
the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness (a) with the net proceeds from an incurrence of
Permitted Refinancing Indebtedness or (b) in an amount not to exceed the net
proceeds received by Von Hoffmann since May 22, 1997 from Subordinated
Shareholder Loans (other than Subordinated Shareholder Loans that have
constituted Permitted Refinancing Indebtedness);
(4) the repurchase, redemption or other acquisition or retirement for
value of any Management Equity Interests or the repurchase, redemption or
other acquisition or retirement for value of Indebtedness incurred pursuant
to clause (12) of the second paragraph of the covenant described below under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"
(including, in each case, any dividend or distribution to Holdings used for
such purpose); PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Management Equity Interests shall
not exceed the sum of (a) $3.0 million in any twelve-month period but not
more than $15.0 million in the aggregate plus (b) cash proceeds from the
sale of Management Equity Interests to management, directors or consultants
of Von Hoffmann (or any of its Restricted Subsidiaries) since May 22, 1997;
(5) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(6) other Restricted Investments not to exceed $15.0 million;
(7) Restricted Investments made or received by Von Hoffmann and its
Restricted Subsidiaries as non-cash consideration from Asset Sales to the
extent permitted by the covenant described under "--Repurchase at the Option
of Holders--Asset Sales" or received by a person in exchange for trade or
other claims against such person in connection with a financial
reorganization or restructuring or such person;
(8) any loans, advances, distributions or payments between Von Hoffmann
and its Restricted Subsidiaries;
(9) the payment of dividends or distributions to Holdings in an amount
not to exceed $2.0 million per calendar year to allow Holdings to pay
reasonable legal, accounting, investment banking, financial advisory,
outside director or other professional and administrative fees and expenses
incurred by it related to its business;
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(10) payments pursuant to the Tax Sharing Agreement;
(11) payments to CSFB or dividends to Holdings to allow Holdings to pay
CSFB in respect of fees for advisory services in accordance with the
Financial Advisory Agreement;
(12) upon the occurrence of a Change of Control, during the 60-day
period commencing after the completion of the offer to repurchase the notes
pursuant to the covenant described under "--Repurchase at the Option of
Holders--Change of Control" above (including the purchase of the 2009 notes
tendered), any purchase or redemption of subordinated Indebtedness or any
Capital Stock of Von Hoffmann required pursuant to the terms thereof as a
result of such Change of Control at a purchase or redemption price not to
exceed 101% of the outstanding principal amount or liquidation amount
thereof, plus accrued and unpaid interest or dividends (if any); PROVIDED,
HOWEVER, that at the time of such purchase or redemption no Default shall
have occurred and be continuing (or would result therefrom);
(13) upon the occurrence of an Asset Sale, during the 60-day period
commencing after the completion of an Asset Sale Offer to repurchase the
2009 notes pursuant to the covenant described under "--Repurchase at the
Option of Holders--Asset Sales" above (including the purchase of the 2009
notes tendered), any purchase or redemption of subordinated Indebtedness or
any Capital Stock of Von Hoffmann required pursuant to the terms thereof as
a result of such Asset Sale at a purchase or redemption price not to exceed
100% of the outstanding principal amount or liquidation amount thereof, plus
accrued and unpaid interest or dividends (if any); PROVIDED, HOWEVER, that
at the time of such purchase or redemption no Default shall have occurred
and be continuing (or would result therefrom); and
(14) dividends or distributions in an amount not to exceed the aggregate
amount of capital contributions received by Von Hoffmann since the date of
the indenture governing the 2009 notes, less any amount used from capital
contributions to redeem, repurchase, retire, defease or acquire subordinated
Indebtedness or Equity Interests of Von Hoffmann pursuant to clause (2) of
this paragraph; PROVIDED that the amount of such capital contributions that
are utilized for such dividends or distributions shall be excluded from
clause (3)(c) of the preceding paragraph.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Von Hoffmann or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the board
of directors whose resolution with respect thereto shall be delivered to the
trustee. Not later than the date of making any Restricted Payment, Von Hoffmann
shall deliver to the trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; PROVIDED, HOWEVER, that Von Hoffmann or any Guarantor may
incur Indebtedness (including Acquired Debt) and Von Hoffmann's Restricted
Subsidiaries may issue shares of preferred stock if the Fixed Charge Coverage
Ratio for Von Hoffmann's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such preferred stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the
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additional Indebtedness had been incurred or the preferred stock had been
issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following:
(1) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Indebtedness under the Credit Facilities pursuant to this clause (1) in an
aggregate principal amount not to exceed $115.0 million at any one time
outstanding;
(2) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Existing Indebtedness;
(3) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Indebtedness represented by the 2009 notes and the related note guarantees,
the registered 2009 notes and any new notes issued in exchange for the 2007
notes or additional notes issued under the indenture governing the 2009
notes provided any new notes are issued pursuant to arrangements similar to
those provided for in the exchange offer provisions of the registration
rights agreement for the 2009 notes;
(4) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations in an aggregate principal amount not to exceed
$50.0 million at any time outstanding;
(5) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries
of Acquired Debt in an amount not to exceed $25.0 million; PROVIDED that
such Indebtedness was incurred by the prior owner of such assets or such
Restricted Subsidiary prior to such acquisition by Von Hoffmann or one of
its Restricted Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by Von Hoffmann or one of its Restricted
Subsidiaries;
(6) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness that was
permitted by the indenture governing the 2009 notes to be incurred;
(7) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among Von Hoffmann and any of its
Restricted Subsidiaries;
(8) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the indenture governing the 2009 notes to be
outstanding;
(9) the guarantee by Von Hoffmann or any of the Guarantors of
Indebtedness of Von Hoffmann or a Restricted Subsidiary of Von Hoffmann that
was permitted to be incurred by the indenture governing the 2009 notes;
(10) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Indebtedness arising from the issuance of Subordinated Shareholder Loans in
an aggregate principal amount not to exceed $50.0 million outstanding at any
one time;
(11) the incurrence by Von Hoffmann or any of its Restricted
Subsidiaries of Indebtedness to repurchase, redeem or otherwise acquire or
retire for value Management Equity Interests as permitted by clause (4) of
the second paragraph of the covenant described above under the caption
"--Restricted Payments"; PROVIDED that such Indebtedness is subordinated to
the 2009 notes to at least the same extent as Von Hoffmann's Senior
Subordinated Notes are subordinated to the 2009 notes; and
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(12) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (12), not to exceed $30.0 million.
For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, in the event that an item of proposed
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (12) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, Von Hoffmann will be permitted
to classify such item of Indebtedness on the date of its incurrence under one or
more of such clauses and such paragraph, or later reclassify all or a portion of
such item of Indebtedness as having been incurred, in any manner that complies
with this covenant. Indebtedness under the Credit Facilities outstanding on the
date on which the 2009 notes are first issued and authenticated under the
indenture governing the 2009 notes will be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) above.
LIENS
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (the "Initial Lien") securing Indebtedness or trade payables on
any asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens
unless the 2009 notes are equally and ratably secured (except that Liens
securing subordinated Indebtedness shall be expressly subordinate to Liens
securing the notes to the same extent such subordinated Indebtedness is
subordinate to the 2009 notes). Any Lien created for the benefit of the holders
of the 2009 notes pursuant to the preceding sentence shall provide by its terms
that such Lien shall automatically and unconditionally be released and
discharged upon the release and discharge of the Initial Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions to Von Hoffmann or any
of its Restricted Subsidiaries on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to Von Hoffmann or any of its Restricted Subsidiaries;
(2) make loans or advances to or guarantee any Indebtedness of Von
Hoffmann or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Von Hoffmann or any of
its Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indenture
governing the 2009 notes;
(2) the Credit Facilities as in effect as of the date of the indenture
governing the 2009 notes, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, PROVIDED that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are not materially more
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restrictive with respect to such dividend and other payment restrictions
than those contained in the Credit Facilities as in effect on the date of
the indenture governing the 2009 notes;
(3) the indenture governing the 2009 notes, the 2009 notes and the note
guarantees;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a Person
acquired by, merged into or consolidated with Von Hoffmann or any of its
Restricted Subsidiaries as in effect at the time of such acquisition, merger
or consolidation (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance
or restriction is not applicable to any Person, or the properties or assets
of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the indenture governing the 2009
notes to be incurred;
(6) customary non-assignment provisions in leases entered into in the
ordinary course of business;
(7) purchase money obligations for property acquired in the ordinary
course of business or Indebtedness incurred pursuant to clause (4) of the
second paragraph of the covenant entitled "--Incurrence of Indebtedness and
Issuance of Preferred Stock" that impose restrictions of the nature
described in clause (3) of the preceding paragraph on the property so
acquired;
(8) Permitted Refinancing Indebtedness, PROVIDED that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive than those contained in the
agreements governing the Indebtedness being refinanced;
(9) restrictions with respect to sales of assets or dispositions of
stock of Von Hoffmann or any Restricted Subsidiary imposed pursuant to
agreements relating to the sale of such assets or stock; or
(10) any instrument governing Acquired Debt, or any Lien in respect of
Acquired Debt, assumed in connection with assets acquired by Von Hoffmann or
any of its Restricted Subsidiaries, as in effect at the time of such
acquisition, which encumbrance or restriction does not extend to any other
assets of Von Hoffmann or any of its Restricted Subsidiaries, PROVIDED such
Acquired Debt was permitted by the terms of the indenture governing the 2009
notes to be incurred.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Von Hoffmann may not (1) consolidate or merge with or into (whether or not
Von Hoffmann is the surviving corporation) or (2) sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless:
(1) Von Hoffmann is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other
than Von Hoffmann) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof
or the District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation
or merger (if other than Von Hoffmann) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of Von
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Hoffmann under the 2009 notes and the indenture governing the 2009 notes
pursuant to a supplemental indenture in a form reasonably satisfactory to
the trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) except in the case of a merger of Von Hoffmann with or into a Wholly
Owned Subsidiary of Von Hoffmann, Von Hoffmann or the entity or Person
formed by or surviving any such consolidation or merger (if other than Von
Hoffmann), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction
and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
Von Hoffmann or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by Von Hoffmann or such
Restricted Subsidiary with an unrelated Person; and
(2) Von Hoffmann delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the board of directors of Von Hoffmann set
forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (1) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members
of the board of directors of Von Hoffmann, if any; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, other than transactions between Von Hoffmann or any of its
Restricted Subsidiaries on the one hand, and CSFB on the other hand, an
opinion as to the fairness to the holders of such Affiliate Transaction
from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing.
The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by Von Hoffmann or any of its
Restricted Subsidiaries in the ordinary course of business of Von Hoffmann
or such Restricted Subsidiary and ordinary course loans to employees;
(2) transactions between or among Von Hoffmann and/or its Restricted
Subsidiaries;
(3) Restricted Payments or Permitted Investments that are not prohibited
by the provisions of the indenture governing the 2009 notes described above
under the caption "--Restricted Payments";
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(4) payments and transactions in connection with the Refinancing; and
(5) any agreement as in effect on the date of the indenture governing
the 2009 notes (including, without limitation, the revolving credit
facility) or any amendment or replacement of such agreement or any
transactions contemplated thereby (including pursuant to any amendment or
replacement of such agreement) so long as any such amendment or replacement
agreement is not more disadvantageous to the holders of the 2009 notes in
any material respect than the original agreement as in effect on the date of
the indenture governing the 2009 notes.
ADDITIONAL SUBSIDIARY GUARANTEES
If Von Hoffmann or any of its Restricted Subsidiaries shall acquire or
create another Domestic Subsidiary after the date of the indenture governing the
2009 notes, then such newly acquired or created Domestic Subsidiary, except for
a Domestic Subsidiary that has properly been designated as an Unrestricted
Subsidiary in accordance with the indenture governing the 2009 notes for so long
as it continues to constitute an Unrestricted Subsidiary, shall execute a note
guarantee and deliver an opinion of counsel, in accordance with the terms of the
indenture governing the 2009 notes.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The board of directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by Von Hoffmann and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
properly designated will be deemed to be an Investment made as of the time of
the designation and will reduce the amount available for Restricted Payments
under the first paragraph or clause (6) of the second paragraph of the covenant
described above under the caption "--Restricted Payments" or Permitted
Investments, as determined by Von Hoffmann. That designation will only be
permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
REPORTS
So long as any 2009 notes are outstanding, Von Hoffmann will furnish to the
holders of the 2009 notes all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if Von Hoffmann were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
Von Hoffmann and its Restricted Subsidiaries and, with respect to the annual
information only, a report thereon by Von Hoffmann's certified independent
accountants.
In addition, following the consummation of the exchange offers for the 2009
notes, whether or not required by the Commission, Von Hoffmann will file a copy
of all of the foregoing information with the Commission for public availability
(unless the Commission will not accept such a filing) concurrently with
furnishing such information to holders of the 2009 notes.
Von Hoffmann and the Guarantors have also agreed that, for so long as any
2009 notes remain outstanding, they will furnish to the holders, upon their
request, the information required to be delivered pursuant to Rule 144A(d)
(4) under the Securities Act. However, to the extent not required by the Trust
Indenture Act, the indenture governing the 2009 notes will not require Von
Hoffmann to make any information available pursuant to the foregoing sentence or
the first paragraph of this covenant to any holder of the 2009 notes that Von
Hoffmann reasonably believes to be a competitor of Von Hoffmann.
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EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the 2009 notes;
(2) default in payment when due of the principal of, or premium, if any,
on the 2009 notes;
(3) failure by Von Hoffmann to comply with the provisions described
under the captions "--Repurchase at the Option of Holders--Change of
Control," "--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments," or "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock";
(4) failure by Von Hoffmann or any of its Subsidiaries for 60 days after
notice to comply with any of the other agreements in the indenture governing
the 2009 notes or in the 2009 notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Von Hoffmann or any of its Subsidiaries
(or the payment of which is guaranteed by Von Hoffmann or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture governing the 2009 notes, if that
default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
and the aggregate amount of such principal, premium and interest that has
not been paid exceeds $5.0 million (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(6) failure by Von Hoffmann or any of its Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(7) any note guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor, or any Person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under its note guarantee;
and
(8) certain events of bankruptcy or insolvency with respect to Von
Hoffmann or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to Von Hoffmann, any Subsidiary that is a
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding 2009 notes will become due
and payable immediately without further action or notice. Holders of the 2009
notes may not enforce the indenture governing the 2009 notes or the 2009 notes
except as provided in the indenture governing the 2009 notes. If any other Event
of Default occurs and is continuing, the trustee or the holders of at least 25%
in principal amount of the then outstanding 2009 notes may declare all the 2009
notes to be due and payable immediately.
In the event of a declaration of acceleration of the 2009 notes because an
Event of Default has occurred and is continuing as a result of the acceleration
of any Indebtedness described in clause (5) of the preceding paragraph, the
declaration of acceleration of the 2009 notes shall be automatically annulled if
the holders of any Indebtedness described in clause (5) have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and if
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(a) the annulment of the acceleration of the 2009 notes would not conflict with
any judgment or decree of a court of competent jurisdiction, and (b) all
existing Events of Default, except nonpayment of principal or interest on the
2009 notes that became due solely because of the acceleration of the 2009 notes,
have been cured or waived.
Subject to certain limitations, holders of a majority in principal amount of
the then outstanding 2009 notes may direct the trustee in its exercise of any
trust or power. The trustee may withhold from holders of the 2009 notes notice
of any continuing Default or Event of Default if it determines that withholding
the 2009 notes is in their interest, except a Default or Event of Default
relating to the payment of principal or interest or Liquidated Damages.
The holders of a majority in aggregate principal amount of the 2009 notes
then outstanding by notice to the trustee may on behalf of the holders of all of
the 2009 notes waive any existing Default or Event of Default and its
consequences under the indenture governing the 2009 notes except a continuing
Default or Event of Default in the payment of interest or Liquidated Damages on,
or the principal of, the 2009 notes.
Von Hoffmann is required to deliver to the trustee annually a statement
regarding compliance with the indenture governing the 2009 notes. Upon becoming
aware of any Default or Event of Default, Von Hoffmann is required to deliver to
the trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Von Hoffmann
or any Guarantor, as such, will have any liability for any obligations of Von
Hoffmann or the Guarantors under the 2009 notes, the indenture governing the
2009 notes, the note guarantees, or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of the 2009 notes by
accepting a note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the 2009 notes. The waiver may not
be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Von Hoffmann may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding 2009 notes and all
obligations of the Guarantors discharged with respect to their note guarantees
("Legal Defeasance") except for:
(1) the rights of holders of outstanding 2009 notes to receive payments
in respect of the principal of, or interest or premium and Liquidated
Damages, if any, on such notes when such payments are due from the trust
referred to below;
(2) Von Hoffmann's obligations with respect to the 2009 notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and Von Hoffmann's and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the indenture governing the 2009
notes.
In addition, Von Hoffmann may, at its option and at any time, elect to have
the obligations of Von Hoffmann and the Guarantors released with respect to
certain covenants that are described in the indenture governing the 2009 notes
("Covenant Defeasance") and thereafter any omission to comply with those
covenants will not constitute a Default or Event of Default with respect to the
2009 notes.
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In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency events)
described under "--Events of Default and Remedies" will no longer constitute an
Event of Default with respect to the 2009 notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Von Hoffmann must irrevocably deposit with the trustee, in trust,
for the benefit of the holders of the 2009 notes, cash in U.S. dollars,
non-callable Government Securities, or a combination of cash in U.S. dollars
and non-callable Government Securities, in amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, or interest and premium and Liquidated
Damages, if any, on the outstanding 2009 notes on the stated maturity or on
the applicable redemption date, as the case may be, and Von Hoffmann must
specify whether the 2009 notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, Von Hoffmann has delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to
the trustee confirming that (a) Von Hoffmann has received from, or there has
been published by, the Internal Revenue Service a ruling or (b) since the
date of the indenture governing the 2009 notes, there has been a change in
the applicable federal income tax law, in either case to the effect that,
and based thereon such opinion of counsel will confirm that, the holders of
the outstanding 2009 notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred;
(3) in the case of Covenant Defeasance, Von Hoffmann has delivered to
the trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding 2009 notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing on the
date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the indenture governing the 2009 notes) to which
Von Hoffmann or any of its Subsidiaries is a party or by which Von Hoffmann
or any of its Subsidiaries is bound;
(6) Von Hoffmann must deliver to the trustee an Officers' Certificate
stating that the deposit was not made by Von Hoffmann with the intent of
preferring the holders of notes over the other creditors of Von Hoffmann
with the intent of defeating, hindering, delaying or defrauding creditors of
Von Hoffmann or others;
(7) Von Hoffmann must deliver to the trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with; and
(8) Von Hoffmann must have delivered to the trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture
governing the 2009 notes, the 2009 notes or the note guarantees may be amended
or supplemented with the consent of the holders of at least a majority in
principal amount of the 2009 notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, the 2009 notes), and any existing default or compliance
with any provision of the indenture governing the 2009 notes or the 2009 notes
may be waived with the consent of the holders of a majority in principal amount
of the then outstanding 2009 notes (including consents obtained in connection
with a tender offer or exchange offer for, the 2009 notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any 2009 notes held by a non-consenting holder):
(1) reduce the principal amount of the 2009 notes whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the 2009 notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders") in a manner adverse to the holders
of the 2009 notes;
(3) reduce the rate of or change the time for payment of interest, or
Liquidated Damages, if any, on any 2009 note;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the 2009 notes
(except a rescission of acceleration of the 2009 notes by the holders of at
least a majority in aggregate principal amount of the 2009 notes and a
waiver of the payment default that resulted from such acceleration);
(5) make any 2009 note payable in money other than that stated in the
2009 notes;
(6) make any change in the provisions of the indenture governing the
2009 notes relating to waivers of past Defaults or the rights of holders of
the 2009 notes to receive payments of principal of, or interest or premium
or Liquidated Damages, if any, on the 2009 notes;
(7) waive a redemption payment with respect to any 2009 note (other than
a payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders");
(8) release any Guarantor from any of its obligations under its note
guarantee or the indenture governing the 2009 notes, except in accordance
with the terms of the indenture governing the 2009 notes; or
(9) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any holder of the 2009
notes, Von Hoffmann, the Guarantors and the trustee may amend or supplement the
indenture governing the 2009 notes or the 2009 notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated 2009 notes in addition to or in place
of certificated 2009 notes;
(3) to provide for the assumption of Von Hoffmann's or a Guarantor's
obligations to holders of the 2009 notes in the case of a merger or
consolidation;
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(4) to make any change that would provide any additional rights or
benefits to the holders of the 2009 notes or that does not adversely affect
the legal rights under the indenture governing the 2009 notes of any such
holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture governing the 2009 notes under
the Trust Indenture Act or to allow any Guarantor to guarantee the 2009
notes.
SATISFACTION AND DISCHARGE
The indenture governing the 2009 notes will be discharged and will cease to
be of further effect as to all 2009 notes issued thereunder, when:
(1) either:
(a) all 2009 notes that have been authenticated, except lost, stolen
or destroyed notes that have been replaced or paid and 2009 notes for
whose payment money has been deposited in trust and thereafter repaid to
Von Hoffmann, have been delivered to the trustee for cancellation; or
(b) all 2009 notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the mailing of a
notice of redemption or otherwise or will become due and payable within
one year and Von Hoffmann or any Guarantor has irrevocably deposited or
caused to be deposited with the trustee as trust funds in trust solely
for the benefit of the holders, cash in U.S. dollars, non-callable
Government Securities, or a combination of cash in U.S. dollars and
non-callable Government Securities, in amounts as will be sufficient
without consideration of any reinvestment of interest, to pay and
discharge the entire indebtedness on the 2009 notes not delivered to the
trustee for cancellation for principal, premium and Liquidated Damages,
if any, and accrued interest to the date of maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing on the
date of the deposit or will occur as a result of the deposit and the deposit
will not result in a breach or violation of, or constitute a default under,
any other instrument to which Von Hoffmann or any Guarantor is a party or by
which Von Hoffmann or any Guarantor is bound;
(3) Von Hoffmann or any Guarantor has paid or caused to be paid all sums
payable by it under the indenture governing the 2009 notes; and
(4) Von Hoffmann has delivered irrevocable instructions to the trustee
under the indenture governing the 2009 notes to apply the deposited money
toward the payment of the 2009 notes at maturity or the redemption date, as
the case may be.
In addition, Von Hoffmann must deliver an Officers' Certificate and an opinion
of counsel to the trustee stating that all conditions precedent to satisfaction
and discharge have been satisfied.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Von Hoffmann or any Guarantor, the
indenture governing the 2009 notes limits its right to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
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The holders of a majority in principal amount of the then outstanding 2009
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture governing the 2009 notes provides that in case
an Event of Default occurs and is continuing, the trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the indenture
governing the 2009 notes at the request of any holder of the 2009 notes, unless
such holder has offered to the trustee security and indemnity satisfactory to it
against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement governing the 2009 notes without charge by writing
to: Von Hoffmann Corporation, 1000 Camera Avenue, St. Louis, Missouri, 63126,
Attention: Chief Financial Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture governing
the 2009 notes. Reference is made to the indenture governing the 2009 notes for
a full disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"ADJUSTED TREASURY RATE" means, with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, plus 50 basis points.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and leaseback) other
than sales of inventory or obsolete or unused equipment or assets in the
ordinary course of business (PROVIDED that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of Von Hoffmann
and its Subsidiaries taken as a whole will be governed by the provisions of
the indenture governing the 2009 notes described above under the caption
"--Change of Control" and/or the provisions described above under the
caption "--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant); and
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(2) the issue or sale by Von Hoffmann or any of its Restricted
Subsidiaries of Equity Interests of any of Von Hoffmann's Restricted
Subsidiaries,
in the case of either clause (1) or (2), whether in a single transaction or a
series of related transactions for Net Proceeds in excess of $2.0 million.
Notwithstanding the preceding, none of the following items will be deemed to
be an Asset Sale:
(1) a transfer of assets by Von Hoffmann to a Restricted Subsidiary or
by a Restricted Subsidiary to Von Hoffmann or to another Restricted
Subsidiary;
(2) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to Von Hoffmann or to another Wholly Owned Restricted Subsidiary;
and
(3) a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "--Restricted Payments."
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value of the obligation of the lessee for
net rental payments during the remaining term of the lease included in such sale
and leaseback transaction including any period for which such lease has been
extended or may, at the option of the lessee, be extended. Such present value
shall be calculated using a discount rate equal to the rate of interest implicit
in such transaction, determined in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or other business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"CASH EQUIVALENTS" means:
(1) United States dollars;
(2) any evidence of Indebtedness, maturing not more than one year after
the date of their acquisition, issued directly by the United States of
America or any agency thereof or guaranteed by the United States of America
or any agency thereof;
(3) commercial paper, maturing not more than nine months from the date
of issue, which is issued by (i) a corporation (other than an Affiliate of
any obligor) organized under the laws of any state of the United States or
of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody's,
or (ii) any lender party to the Credit Facilities (or its holding company);
(4) any time deposit, certificate of deposit or bankers acceptance,
maturing not more than one year after the date of their acquisition,
maintained with or issued by either (i) a commercial banking institution
(including U.S. branches of foreign banking institutions) that is a member
of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000, or (ii) any lender party to
the Credit Facilities;
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(5) short-term tax-exempt securities rated not lower than MIG- 1/1+ by
either Moody's or S&P with provisions for liquidity or maturity
accommodations of 183 days or less;
(6) repurchase agreements with respect to any securities referred to in
clause (2) above entered into with any entity referred to in clause (3) or
(4) above or any other financial institution whose unsecured long-term debt
(or the unsecured long-term debt of whose holding company) is rated at least
A- or better by S&P or Baal or better by Moody's and maturing not more than
one year after the date of their acquisition; and
(7) any money market or similar fund the assets of which are comprised
exclusively of any of the items specified in clauses (1) through (5) above
and as to which withdrawals are permitted at least every 90 days.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Von Hoffmann and
its Restricted Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d) (3) of the Exchange Act) other than DLJMB;
(2) the adoption of a plan relating to the liquidation or dissolution of
Von Hoffmann;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above), other than the Existing Shareholders and an entity that is
the "beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right
to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition), directly or indirectly,
of 100% of the common stock of Von Hoffmann, becomes the "beneficial owner"
(as defined above) of more than 50% of the Voting Stock of Von Hoffmann or
Holdings (measured by voting power rather than number of shares); or
(4) the first day on which a majority of the members of the board of
directors of Von Hoffmann are not Continuing Directors.
"COMPARABLE TREASURY ISSUE" means the United States Treasury Security
selected by the Reference Treasury Dealer as having a maturity comparable to the
remaining term of the 2009 notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the 2009 notes.
"COMPARABLE TREASURY PRICE" means, with respect to any redemption date:
(1) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on
the third Business Day preceding such redemption date, as set forth in the
daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities;" or
(2) if such release (or any successor release) is not published or does
not contain such prices on such Business Day, (A) the average of the
Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such Reference Treasury Dealer
Quotations or (B) if the trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations.
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"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period PLUS:
(1) an amount equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income); PLUS
(2) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income; PLUS
(3) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income; PLUS
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Subsidiaries
for such period to the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such Consolidated Net Income;
PLUS
(5) any non-capitalized transaction costs incurred in connection with
actual or proposed financings, acquisitions or divestitures (including, but
not limited to, financing and refinancing fees and costs incurred in
connection with the Refinancing), in each case, on a consolidated basis and
determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of a Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that the Net Income of such Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to Von Hoffmann by
such Subsidiary without prior approval (that has not been obtained), pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall
be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary
thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval
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(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders (other than Credit Facilities, the
indebtedness of which is permitted to be incurred under the indenture
governing the 2009 notes);
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded; and
(5) the Net Income of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to Von Hoffmann or one of its Subsidiaries.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the board of directors of Von Hoffmann who:
(1) was a member of such board of directors on the date of the indenture
governing the 2009 notes; or
(2) was nominated for election or elected to such board of directors
with the approval of a majority of the Continuing Directors who were members
of such board at the time of such nomination or election.
"CREDIT FACILITIES" means, one or more debt facilities or commercial paper
facilities or other agreements, in each case with banks or other institutional
lenders or agents providing for revolving credit loans, term loans, financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables), letters
of credit, Hedging Obligations or the issuance of securities, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time whether with the same or different banks or lenders
or agents and whether represented by one or more facilities or agreements.
"CSFB" means Credit Suisse First Boston Corporation and its successors and
their Affiliates.
"DEFAULT" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the notes mature.
"DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates.
"DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of Von Hoffmann that
was formed under the laws of the United States or any state of the United States
or the District of Columbia or that guarantees or otherwise provides direct
credit support (other than through a Lien on its Capital Stock) for any
Indebtedness of Von Hoffmann.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of Von Hoffmann and its
Restricted Subsidiaries (other than Indebtedness under the Credit Facilities) in
existence on the date of the indenture governing the 2009 notes, until such
amounts are repaid.
"EXISTING SHAREHOLDERS" means DLJMB, ZS and the Management Holders.
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"FINANCIAL ADVISORY AGREEMENT" means the letter agreement dated the date of
the indenture governing the 2009 notes between Von Hoffmann and CSFB.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments (if any) pursuant to Hedging Obligations);
(2) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period;
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such Guarantee or Lien is called upon); and
(4) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable
solely in Equity Interests of Von Hoffmann and other than any dividend
payment that may be deemed to have been made as a result of an increase in
the liquidation preference of any preferred stock, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that Von
Hoffmann or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings unless
permanently reduced) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of making the computation referred to above:
(1) acquisitions that have been made by Von Hoffmann or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated to include the Consolidated Cash Flow
of the acquired entities (adjusted to exclude (a) the cost of any
compensation, remuneration or other benefit paid or provided to any
employee, consultant, Affiliate or equity owner of the acquired entities to
the extent such costs are eliminated and not replaced and (b) the amount of
any reduction in general, administrative or overhead costs or other
non-recurring items of the acquired entities, in each case, as determined in
good faith by an officer of Von Hoffmann) and without giving effect to
clause (3) of the proviso set forth in the definition of Consolidated Net
Income;
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(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are applicable as of the date of determination.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTORS" means all Domestic Subsidiaries and, so long as it guarantees
any Obligations under the Credit Facilities, Holdings.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"HOLDINGS" means Von Hoffmann Holdings Inc., a Delaware corporation, and its
successors.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) or
banker's acceptances;
(3) representing Capital Lease Obligations or the balance deferred and
unpaid of the purchase price of any property; or
(4) representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value thereof, in the case of any Indebtedness that
does not require current payments of interest; and
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(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If Von Hoffmann or any Subsidiary of Von Hoffmann sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of Von Hoffmann such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of Von Hoffmann, Von Hoffmann shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not sold or disposed of
in an amount determined as provided in the final paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any
employee of Von Hoffmann or Holdings (or any of their Restricted Subsidiaries).
"MANAGEMENT HOLDERS" means holders of Management Equity Interests on the
date of the indenture governing the 2009 notes.
"MOODY'S" means Moody's Investors Service, Inc.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) gain (but not loss), together with any related provision for taxes
on such gain (but not loss), realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary or nonrecurring gain (but not loss), together with
any related provision for taxes on such extraordinary or nonrecurring gain
(but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by Von Hoffmann or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to repay Indebtedness secured by
such assets (other than pursuant to the Credit Facilities) and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
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"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither Von Hoffmann nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise), or
(c) constitutes the lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof
to be accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of Von Hoffmann or any of its
Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness, including any Guarantees of such
Indebtedness.
"PERMITTED INVESTMENTS" means
(1) any Investment in Von Hoffmann or in a Restricted Subsidiary of Von
Hoffmann;
(2) any Investment in Cash Equivalents;
(3) any Investment by Von Hoffmann or any Restricted Subsidiary of Von
Hoffmann in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of Von Hoffmann; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, Von Hoffmann or a Restricted Subsidiary of Von Hoffmann;
(4) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase
at the Option of Holders--Asset Sales;"
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of Von Hoffmann;
(6) any loan made to management in order to enable management to
purchase equity in Holdings, or any refinancing of any loan made to
management, which loan was made to enable management to purchase equity in
Holdings;
(7) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (7) that are at the time
outstanding, not to exceed $2.0 million; and
(8) Investments received solely in exchange for Equity Interests of Von
Hoffmann.
"PERMITTED LIENS" means
(1) Liens securing Credit Facilities, other than Liens securing
Indebtedness incurred under Credit Facilities that is issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew,
replace or refund, the principal of the Senior Subordinated Notes at its
Stated Maturity;
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(2) Liens in favor of Von Hoffmann or any of their Restricted
Subsidiaries;
(3) Liens on property of a Person existing at the time such Person is
acquired by, merged into or consolidated with Von Hoffmann or any Subsidiary
of Von Hoffmann; PROVIDED that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with Von
Hoffmann;
(4) Liens on property existing at the time of acquisition thereof by Von
Hoffmann or any Subsidiary of Von Hoffmann, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock" covering only the assets acquired with, or the subject of the lease
or mortgage pertaining to, such Indebtedness;
(7) Liens existing on the date of the indenture governing the 2009
notes;
(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
PROVIDED that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) Liens to secure any Permitted Refinancing Indebtedness, PROVIDED
that such Liens are not materially more restrictive than the Liens that
secured the Indebtedness being refinanced;
(10) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's, or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings,
if a reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor;
(11) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of Von Hoffmann and
its Subsidiaries taken as a whole; and
(12) Liens incurred in the ordinary course of business of Von Hoffmann
or any Subsidiary of Von Hoffmann with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by Von Hoffmann or such Subsidiary.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Von Hoffmann
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries;
PROVIDED that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest, premium and
prepayment penalties, if any, on, the Indebtedness so extended,
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refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the 2009 notes,
such Permitted Refinancing Indebtedness has a final maturity date later than
the final maturity date of, and is subordinated in right of payment to, the
2009 notes on terms at least as favorable to the holders of the 2009 notes
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Von Hoffmann or by the
Restricted Subsidiary that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"REFERENCE TREASURY DEALER" means Credit Suisse First Boston Corporation and
its successors; PROVIDED, HOWEVER, that if Credit Suisse First Boston
Corporation shall cease to be a primary U.S. government securities dealer in New
York City (a "Primary Treasury Dealer"), Von Hoffmann shall substitute therefor
another primary U.S. government securities dealer to be the Primary Treasury
Dealer.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect to any redemption
date, the average as determined by the trustee, of the bid and asked prices of
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the trustee by the Reference Treasury
Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.
"REMAINING SCHEDULED PAYMENTS" means, with respect to each 2009 note to be
redeemed, (a) the redemption price of such note on March 15, 2005 and (b) the
remaining scheduled payments of interest thereon that would be due on or prior
to March 15, 2005 but after the related redemption date but for such redemption;
PROVIDED, HOWEVER, that, if such redemption date is not an interest payment date
on the 2009 notes, the amount of the next succeeding scheduled interest payment
on the 2009 notes to be redeemed will be reduced by the amount of interest
accrued on those 2009 notes to such redemption date.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the relevant
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group.
"SENIOR SUBORDINATED NOTES" means the 10 3/8% Senior Subordinated Notes due
2007 of Von Hoffmann.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
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to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBORDINATED SHAREHOLDER LOAN" means one or more loans from Holdings to Von
Hoffmann, each of which shall: (1) have a Stated Maturity in respect of
principal no earlier than 91 days following the maturity of the 2009 notes;
(2) be subordinated in right of payment to the 2009 notes to the same or a
greater extent than the Senior Subordinated Notes are subordinated to the 2009
notes; (3) have covenants no more restrictive to Von Hoffmann or its Restricted
Subsidiaries than those relating to the 2009 notes; and (4) provide that the
lender thereunder will not be entitled to any cash interest payments so long as
any of the 2009 notes are outstanding.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TAX SHARING AGREEMENT" means that certain tax sharing agreement between
Holdings and Von Hoffmann, dated as of May 22, 1997, as amended from time to
time; PROVIDED such amendment or amendments do not materially adversely effect
Von Hoffmann.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
board of directors of Von Hoffmann as an Unrestricted Subsidiary pursuant to a
board resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Von Hoffmann or any Restricted Subsidiary of Von Hoffmann
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Von Hoffmann or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of Von Hoffmann;
(3) is a Person with respect to which neither Von Hoffmann nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Von Hoffmann or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of Von Hoffmann or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of Von Hoffmann or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors of Von Hoffmann shall be
evidenced to the trustee by filing with the trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
indenture governing the 2009 notes and any Indebtedness of such Subsidiary shall
be deemed to be incurred by a Restricted Subsidiary of Von Hoffmann as of such
date
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(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock," Von Hoffmann shall be in default of such
covenant). The Board of Directors of Von Hoffmann may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Von Hoffmann of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, (ii) such Subsidiary shall
execute a note guarantee and deliver an opinion of counsel, in accordance with
the terms of the indenture governing the 2009 notes and (iii) no Default or
Event of Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing: (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
"ZS" means ZS VH L.P., together with ZS VH II L.P., as the context requires.
FORMS OF REGISTERED SECURITIES
The certificates representing the registered securities will be issued in
fully registered form, without coupons. Except as described in the next
paragraph, the registered securities will be deposited with, or on behalf of,
DTC, and registered in the name of Cede & Co., as DTC's nominee, in the form of
a global security. Holders of the registered notes will own book-entry interests
in the global note evidenced by records maintained by DTC.
Book-entry interests may be exchanged for certificated securities of like
tenor and equal aggregate principal amount, if
(1) DTC notifies us that it is unwilling or unable to continue as depositary
or we determine that DTC is unable to continue as depositary and we fail
to appoint a successor depositary within 90 days,
(2) we provide for the exchange pursuant to the terms of the indenture
governing the 2009 notes, or
(3) we determine that the book-entry interests will no longer be represented
by global notes and we execute and deliver to the Trustee instructions to
that effect.
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10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
You can find the definitions of certain terms used in this description of
the 2007 notes under the subheading "--Certain Definitions." In this
description, the term "Von Hoffmann" refers only to Von Hoffmann Corporation and
not to any of its subsidiaries.
Von Hoffmann issued the old 2007 notes under an indenture among itself, the
Guarantors and Marine Midland Bank (now HSBC Bank USA), as trustee, in a private
transaction that was not subject to the registration requirements of the
Securities Act. The terms of the 2007 notes include those stated in the
indenture governing the 2007 notes and those made part of that indenture by
reference to the Trust Indenture Act of 1939, as amended.
The following description is a summary of the material provisions of the
indenture governing the 2007 notes and the registration rights agreement
relating to the 2007 notes. It does not restate those agreements in their
entirety. We urge you to read the indenture and the registration rights
agreement governing the 2007 notes because they, and not this description,
define your rights as holders of the notes. Copies of the indenture and the
registration rights agreement governing the 2007 notes are available as set
forth below under "--Additional Information."
BRIEF DESCRIPTION OF THE 2007 NOTES AND THE NOTE GUARANTEES
The 2007 notes:
- will be general unsecured obligations of Von Hoffmann;
- will be junior in right of payment with all existing and future senior
indebtedness of Von Hoffmann;
- will be PARI PASSU in right of payment with all existing and future senior
subordinated indebtedness of Von Hoffmann;
- will be senior in right of payment to all existing and future subordinated
indebtedness of Von Hoffmann; and
- will be unconditionally guaranteed by the Guarantors.
THE NOTE GUARANTEES
The 2007 notes will be guaranteed by all of Von Hoffmann's current and
future Restricted Subsidiaries and for so long as it guarantees any obligations
under the New Credit Agreement, Holdings.
Each guarantee of the 2007 notes:
- will be a general unsecured obligation of that Guarantor;
- will be junior in right of payment with all existing and future senior
indebtedness of that Guarantor;
- will be PARI PASSU in right of payment to all existing and future senior
indebtedness of that Guarantor; and
- will be senior in right of payment to all existing and future subordinated
indebtedness of that Guarantor.
As of the date of the exchange offer, all of Von Hoffmann's subsidiaries
will be "Restricted Subsidiaries." However, under the circumstances described
below under the subheading "--Certain
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Covenants--Designation of Restricted and Unrestricted Subsidiaries," Von
Hoffmann will be permitted to designate certain of its subsidiaries as
"Unrestricted Subsidiaries." Von Hoffmann's Unrestricted Subsidiaries will
generally not be subject to the restrictive covenants in the indenture governing
the 2007 notes and will not guarantee the 2007 notes.
PRINCIPAL, MATURITY AND INTEREST
The 2007 notes will be limited in aggregate principal amount to
$100.0 million and mature on May 15, 2007. Interest on the 2007 notes accrues at
the rate of 10.375% per annum and is payable semi-annually in arrears on May 15
and November 15 to holders of record on the immediately preceding May 1 and
November 1. Interest on the 2007 notes accrues from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest is computed on the basis of a 360-day year comprised
of twelve 30-day months. Principal of and premium, if any, and interest and
Liquidated Damages, if any, on the 2007 notes will be payable at the office or
agency of Von Hoffmann maintained for such purpose or, at its option, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the 2007 notes at their respective addresses set forth in the
register of Holders of the 2007 notes; PROVIDED that all payments of principal,
premium, interest and Liquidated Damages, if any, with respect to the 2007 notes
the Holders of which have given wire transfer instructions to Von Hoffmann will
be required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by Von
Hoffmann, its office for the payment of principal of and premium, if any, and
interest on the 2007 notes will be the office of the Trustee maintained for such
purpose. The 2007 notes will be issued in denominations of $1,000 and integral
multiples thereof. Von Hoffmann is currently paying Liquidated Damages to
holders of the 2007 notes. Upon consummation of the exchange offer for the 2007
notes, holders of the 2007 notes will no longer receive Liquidated Damages.
SUBORDINATION
The payment of Subordinated Note Obligations are subordinated in right of
payment, as set forth in the indenture governing the 2007 notes, to the prior
payment in full in cash or cash equivalents of all Senior Debt, whether
outstanding on the date of the indenture governing the 2007 notes or thereafter
incurred.
Upon any distribution to creditors of Von Hoffmann in a liquidation or
dissolution of it or in a bankruptcy, reorganization, insolvency, receivership
or similar proceeding relating to Von Hoffmann or its property, an assignment
for the benefit of creditors or any marshalling of its assets and liabilities,
the holders of Senior Debt will be entitled to receive payment in full in cash
or cash equivalents of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of the 2007 notes
will be entitled to receive any payment with respect to the Debenture
Obligations, and until all Obligations with respect to Senior Debt are paid in
full in cash or cash equivalents, any distribution to which the Holders of the
2007 notes would be entitled shall be made to the holders of Senior Debt (except
that Holders of the 2007 notes may receive Permitted Junior Securities and
payments made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
Von Hoffmann also may not make any payment upon or in respect of the
Subordinated Note Obligations (except in Permitted Junior Securities or payments
made from the trust described under "--Legal Defeasance and Covenant
Defeasance") if (i) a default in the payment of the principal of or premium, if
any, or interest on, or commitment fees relating to, any Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to any Designated Senior Debt that
permits holders of the Designated Senior
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Debt as to which such default relates to accelerate its maturity and the Trustee
receives a written notice of such default (a "Payment Blockage Notice") from Von
Hoffmann or the holders of such Designated Senior Debt (or its representative).
Payments on the 2007 notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated. No new period of payment blockage may be
commenced unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been cured or waived for a period of not less
than 90 days.
The indenture governing the 2007 notes further requires that Von Hoffmann
promptly notifies holders of Senior Debt if payment of the 2007 notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of the 2007 notes may recover less ratably
than creditors of Von Hoffmann who are holders of Senior Debt. The indenture
limits, subject to certain conditions, the amount of additional Indebtedness,
including Senior Debt, that Von Hoffmann and its subsidiaries can incur. See
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock."
PAYING AGENT AND REGISTRAR FOR THE 2007 NOTES
The trustee currently acts as paying agent and registrar. Von Hoffmann may
change the paying agent or registrar without prior notice to the holders of the
2007 notes, and Von Hoffmann or any of its Subsidiary may act as paying agent or
registrar.
NOTES GUARANTEES
Von Hoffmann's payment obligations under the 2007 notes are jointly and
severally guaranteed (the "Notes Guarantees") by the Guarantors. The Notes
Guarantee of each Guarantor will be subordinated to the prior payment in full in
cash or cash equivalents of all Senior Debt of such Guarantor, including such
Guarantors Guarantee of Obligations under the New Credit Agreement, to the same
extent as the 2007 notes are subordinated to Senior Debt of Von Hoffmann. The
indenture governing the 2007 notes provides that if the Guarantee of Holdings
issued pursuant to the New Credit Agreement is released, Holdings' Notes
Guarantee will also be released.
The indenture governing the 2007 notes provides that no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) or sell all or substantially all of its assets to, another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the Obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the indenture governing the 2007 notes; (ii) immediately after
giving effect to such transaction, no Default or Event of Default exists; and
(iii) Von Hoffmann would be permitted, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant described under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock." Notwithstanding the provisions of this paragraph, the
indenture governing the 2007 notes will not prohibit the merger of two of Von
Hoffmann's Restricted Subsidiaries or the merger of a Restricted Subsidiary into
Von Hoffmann.
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The indenture governing the 2007 notes provides that in the event of (i) a
sale or other disposition of all of the assets of any Guarantor, by way of
merger, consolidation or otherwise, (ii) a sale or other disposition of all of
the capital stock of any Guarantor or (iii) the designation of a Guarantor as an
Unrestricted Subsidiary, then such Guarantor will be released and relieved of
any obligations under its Notes Guarantee; PROVIDED that the Net Proceeds of
such sale or other disposition are applied or such designation is made in
accordance with the applicable provisions of the indenture governing the 2007
notes. See "--Redemption or Repurchase at Option of Holders--Asset Sales" and
"--Certain Covenants--Restricted Payments." Except as set forth above, the
limitations and restrictions in the indenture governing the 2007 notes will not
apply to, limit or restrict the operations of Holdings.
OPTIONAL REDEMPTION
The 2007 notes will be subject to redemption at any time at Von Hoffmann's
option, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on May 15 of the years indicated below:
<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------
2002........................................................ 105.188%
2003........................................................ 103.458%
2004........................................................ 101.729%
2005 and thereafter......................................... 100.000%
</Table>
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," Von
Hoffmann is not required to make mandatory redemption or sinking fund payments
with respect to the notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of the 2007 notes
will have the right to require Von Hoffmann to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's 2007 notes pursuant
to the offer described below (the "Change of Control Offer") at an offer price
in cash equal to 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
Von Hoffmann will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
indenture governing the 2007 notes and described in such notice. Von Hoffmann
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the 2007 notes
as a result of a Change of Control.
On the Change of Control Payment Date, Von Hoffmann will, to the extent
lawful, (1) accept for payment all the 2007 notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all the
2007 notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the 2007 notes so accepted together with an Officers'
Certificate stating the aggregate principal
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amount of 2007 notes or portions thereof being purchased by Von Hoffmann. The
Paying Agent will promptly mail to each Holder of the 2007 notes so tendered the
Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new 2007 note equal in principal amount to any unpurchased portion of the 2007
notes surrendered, if any, PROVIDED that each such new 2007 note will be in a
principal amount of $1,000 or an integral multiple thereof. The indenture
governing the 2007 notes provides that, prior to complying with the provisions
of this covenant, but in any event within 90 days following a Change of Control,
Von Hoffmann will either repay all outstanding Senior Debt or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Debt to permit the repurchase of the 2007 notes required by this covenant. Von
Hoffmann will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the indenture governing the 2007 notes are
applicable. Except as described above with respect to a Change of Control, the
indenture governing the 2007 notes does not contain provisions that permit the
Holders of the 2007 notes to require that Von Hoffmann repurchase or redeem the
2007 notes in the event of a takeover, recapitalization or similar transaction.
The provisions of the indenture governing the 2007 notes do not necessarily
afford Holders of the 2007 notes protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving Von Hoffmann that may adversely affect Holders of the 2007 notes.
The revolving credit facility currently prohibits Von Hoffmann from
purchasing or redeeming any notes, and also provides that certain change of
control events with respect to it would constitute a default thereunder. Any
future credit agreements or other agreements relating to Senior Debt to which
Von Hoffmann becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when Von Hoffmann is prohibited
from purchasing or redeeming the 2007 notes, Von Hoffmann could seek the consent
of its lenders to the purchase of the 2007 notes or could attempt to refinance
the borrowings that contain such prohibition. If Von Hoffmann does not obtain
such a consent or repay such borrowings, Von Hoffmann will remain prohibited
from purchasing the 2007 notes. In such case, Von Hoffmann's failure to purchase
tendered 2007 notes would constitute an Event of Default under the indenture
governing the 2007 notes which would, in turn, constitute a default under the
New Credit Agreement. In such circumstances, the subordination provisions in the
indenture governing the 2007 notes would likely restrict payments to the Holders
of the 2007 notes. In addition, Von Hoffmann's ability to pay cash to the
Holders of the 2007 notes upon a repurchase may be limited by its then existing
financial resources.
Von Hoffmann will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture governing the 2007 notes applicable to a Change of Control
Offer made by Von Hoffmann and purchases all the 2007 notes validly tendered and
not withdrawn under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Von Hoffmann and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of 2007 Notes to require Von Hoffmann
to repurchase such notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of its assets and its Subsidiaries taken as a
whole to another Person or group may be uncertain.
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ASSET SALES
The indenture governing the 2007 notes provides that Von Hoffmann will not,
and will not permit any of its Restricted Subsidiaries to, consummate an Asset
Sale unless (i) Von Hoffmann (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by Von Hoffmann or such Restricted Subsidiary is
in the form of cash; PROVIDED that the amount of (a) any liabilities (as shown
on Von Hoffmann's or such Restricted Subsidiary's most recent balance sheet), of
us or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the 2007 notes or any
guarantee thereof) that are assumed by the transferee of any such assets and
(b) any securities, notes or other obligations received by Von Hoffmann or any
such Restricted Subsidiary from such transferee that are immediately converted
by Von Hoffmann or such Restricted Subsidiary into cash (to the extent of the
cash received), shall be deemed to be cash for purposes of this provision and,
PROVIDED FURTHER, that the 75% limitation referred to in clause (ii) will not
apply to any Asset Sale in which the cash portion of the consideration received
therefrom, determined in accordance with the foregoing proviso, is equal to or
greater than what the after-tax proceeds would have been had such Asset Sale
complied with the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Von Hoffmann may apply such Net Proceeds, at its option, (a) to repay Senior
Debt (and to correspondingly reduce commitments with respect thereto in the case
of revolving borrowings) or (b) to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other long-term assets, in each case, by Von Hoffmann or any Restricted
Subsidiary and in accordance with the terms of the indenture governing the 2007
notes. Pending the final application of any such Net Proceeds, Von Hoffmann may
temporarily reduce Senior Debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by the indenture governing the 2007 notes. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, Von Hoffmann
will be required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of the 2007 notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
thereon to the date of purchase, in accordance with the procedures set forth in
the indenture governing the 2007 notes. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, Von Hoffmann may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of the 2007 notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the 2007 notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
Notwithstanding the immediately preceding paragraph, Von Hoffmann and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such paragraph if (i) Von Hoffmann or the applicable Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value of the assets or other property
sold, issued or otherwise disposed of (as evidenced by a resolution of its Board
of Directors set forth in an Officers' Certificate delivered to the Trustee),
and (ii) at least 75% of the consideration for such Asset Sale constitutes
assets or other property of a kind usable by Von Hoffmann and its Restricted
Subsidiaries in its business and its Restricted Subsidiaries as conducted by Von
Hoffmann and its Restricted Subsidiaries on the date of the indenture governing
the 2007 notes; PROVIDED that any cash consideration received by Von Hoffmann or
any of its Restricted Subsidiaries in connection with any
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Asset Sale permitted to be consummated under this paragraph shall constitute Net
Proceeds subject to the provisions of the two succeeding paragraphs.
SELECTION AND NOTICE
Except as otherwise provided in the indenture, if less than all of the 2007
notes are to be redeemed at any time, the trustee will select notes for
redemption as follows:
(1) if the 2007 notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the 2009 notes are listed; or
(2) if the 2007 notes are not listed on any national securities
exchange, on a pro rata basis, by lot or by such method as the trustee deems
fair and appropriate.
No 2007 notes of $1,000 or less can be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each holder of the 2007 notes to be
redeemed at its registered address, except that redemption notices may be mailed
more than 60 days prior to a redemption date if the notice is issued in
connection with a defeasance of the 2007 notes or a satisfaction and discharge
of the indenture. Notices of redemption may not be conditional.
If any 2007 note is to be redeemed in part only, the notice of redemption
that relates to that 2007 note will state the portion of the principal amount of
that 2007 note that is to be redeemed. A new 2007 note in principal amount equal
to the unredeemed portion of the original 2007 note will be issued in the name
of the holder of the 2007 notes upon cancellation of the original 2007 note. The
2007 notes called for redemption become due on the date fixed for redemption. On
and after the redemption date, interest ceases to accrue on the 2007 notes or
portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of its Equity Interests (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of Von Hoffmann); (ii) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of Von Hoffmann; (iii) make any payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the 2007 notes, except a payment
of interest or a payment of principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) Von Hoffmann would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Von Hoffmann and its Restricted
Subsidiaries after the date of the indenture governing the 2007 notes
(excluding Restricted Payments permitted by clause (ii) of the next
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succeeding paragraph), is less than the sum of (i) 50% of the Consolidated
Net Income of us for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of the
indenture governing the 2007 notes to the end of Von Hoffmann's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by us from the issue
or sale since the date of the indenture governing the 2007 notes of
(A) Equity Interests of Von Hoffmann (other than Disqualified Stock),
(B) any Restricted Subsidiaries or (C) Disqualified Stock or debt securities
of Von Hoffmann that have been convened into Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of Von Hoffmann and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iii) 100% of the aggregate amount of capital contributions to
its common equity or repayments from Holdings of amounts in respect of the
Intercompany Note, plus (iv) 100% of the net proceeds received by Von
Hoffmann or any of its Restricted Subsidiaries from (A) the sale or other
disposition since the date of the indenture governing the 2007 notes of any
Restricted Investment or (B) dividends on or the sale of stock of
Unrestricted Subsidiaries.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
indenture governing the 2007 notes; (ii) the redemption, repurchase, retirement,
defeasance or other acquisition of any subordinated Indebtedness or Equity
Interests of Von Hoffmann's company in exchange for, or out of the net proceeds
of the substantially concurrent sale (other than to a Restricted Subsidiary of
Von Hoffmann) of, other Equity Interests of Von Hoffmann (other than any
Disqualified Stock) or from the net proceeds of a capital contribution by
Holdings to us or repayments from Holdings of amounts in respect of the
Intercompany Note; PROVIDED that the amount of any such net proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the repurchase, redemption or other acquisition
or retirement for value of any Management Equity Interests or the repurchase,
redemption or other acquisition or retirement for value of Indebtedness incurred
pursuant to clause (xi) of the second paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"
(including, in each case, any dividend or distribution to Holdings used for such
purpose); PROVIDED that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Management Equity Interests shall not exceed the
sum of (a) $2.0 million in any twelve-month period but not more than
$10.0 million in the aggregate plus (b) cash proceeds from the sale of
Management Equity Interests to management, directors or consultants of Von
Hoffmann (or any of its Restricted Subsidiaries); (v) repurchases of Equity
Interests deemed to occur upon exercise of stock options if such Equity
Interests represent a portion of the exercise price of such options; (vi) other
Restricted Investments not to exceed $10.0 million; (vii) Restricted Investments
made or received by Von Hoffmann and its Restricted Subsidiaries as non-cash
consideration from Asset Sales to the extent permitted by the covenant described
under "--Repurchase at the Option of Holders--Asset Sales" or received by a
person in exchange for trade or other claims against such person in connection
with a financial reorganization or restructuring or such person; (viii) the
payment of dividends or distributions to Holdings which are used solely to repay
any Indebtedness (including any accrued interest thereon) due from Holdings to
Von Hoffmann pursuant to the Intercompany Note or any cancellation or forgiving
of such Indebtedness (including any accrued interest thereon); (ix) any loans,
advances, distributions or payments between Von Hoffmann and its Restricted
Subsidiaries; (x) the payment of dividends or distributions to Holdings in an
amount not to exceed $1.0 million per calendar year to allow Holdings to pay
reasonable legal, accounting,
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investment banking, financial advisory, outside director or other professional
and administrative fees and expenses incurred by it related to its business;
(xi) payments pursuant to the Tax Sharing Agreement; (xii) payments to DLJSC, or
dividends to Holdings to allow Holdings to pay DLJSC, in respect of a retainer
for advisory services in an amount not to exceed $250,000 per year; and
(xiii) payments pursuant to the indemnity provisions of the Merger Agreement.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by Von
Hoffmann and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by us or such Restricted Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee. Not later
than the date of making any Restricted Payment, Von Hoffmann shall deliver to
the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "Restricted Payments" were computed.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; PROVIDED, HOWEVER, that Von Hoffmann and its Restricted
Subsidiaries may incur Indebtedness (including Acquired Debt) and its Restricted
Subsidiaries may issue shares of preferred stock if the Fixed Charge Coverage
Ratio for Von Hoffmann's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such preferred stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following:
(i) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Indebtedness under the New Credit Agreement in an aggregate principal amount
not to exceed $200.0 million at any one time outstanding;
(ii) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Indebtedness represented by the 2007 notes and the notes Guarantees;
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(iv) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations in an aggregate principal amount not to exceed
$10.0 million at any time outstanding;
(v) the incurrence by Von Hoffmann or any of its Restricted Subsidiaries
of Acquired Debt in an amount not to exceed $15.0 million; PROVIDED that
such Indebtedness was incurred by the prior owner of such assets or such
Restricted Subsidiary prior to such acquisition by Von Hoffmann or its
Restricted Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by Von Hoffmann or its Restricted
Subsidiaries;
(vi) the incurrence by Von Hoffmann or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
that was permitted by the indenture governing the 2007 notes to be incurred;
(vii) the incurrence by Von Hoffmann or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among Von Hoffmann and
any of its Wholly Owned Restricted Subsidiaries;
(viii) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this indenture governing the 2007 notes to be
outstanding;
(ix) the guarantee by Von Hoffmann or any of the Guarantors of
Indebtedness of Von Hoffmann or its Restricted Subsidiary that was permitted
to be incurred by the indenture governing the 2007 notes;
(x) the incurrence by Von Hoffmann or its Restricted Subsidiaries of
Indebtedness to repurchase, redeem or otherwise acquire or retire for value
Management Equity Interests as permitted by clause (iv) of the second
paragraph of the covenant described above under the caption "--Restricted
Payments"; PROVIDED that such Indebtedness is subordinated to the 2007 notes
to at least the same extent as the 2007 notes are subordinated to Senior
Debt; and
(xi) the incurrence by Von Hoffmann and its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (xi), not to exceed $20.0 million.
LIENS
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENTS RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
Von Hoffmann or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to Von Hoffmann or any of its
Restricted Subsidiaries, (ii) make loans or advances to or
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guarantee any Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries
or (iii) transfer any of its properties or assets to Von Hoffmann or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
indenture governing the 2007 notes, (b) the New Credit Agreement as in effect as
of the date of the indenture governing the 2007 notes, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the New Credit
Agreement as in effect on the date of the indenture governing the 2007 notes,
(c) the indenture governing the 2007 notes and the 2007 notes, (d) applicable
law, (e) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Von Hoffmann or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the indenture governing the 2007
notes to be incurred, (f) by reason of customary non-assignment provisions in
leases entered into in the ordinary course of business, (g) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, (h) Permitted Refinancing Indebtedness, PROVIDED that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, or (i) restrictions with respect to sales of
assets or dispositions of stock of Von Hoffmann or any Restricted Subsidiary
imposed pursuant to agreements relating to the sale of such assets or stock.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
Von Hoffmann may not consolidate or merge with or into (whether or not it is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, Person or entity unless
(i) Von Hoffmann is the surviving corporation or the entity or the Person formed
by or surviving any such consolidation or merger (if other than Von Hoffmann) or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than Von Hoffmann) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of us under the notes and the indenture governing the 2007
notes pursuant to a supplemental indenture in a form reasonably satisfactory to
the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of Von Hoffmann with or
into a Wholly Owned Subsidiary of it, Von Hoffmann or the entity or Person
formed by or surviving any such consolidation or merger (if other than Von
Hoffmann), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
Von Hoffmann will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase
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any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
Von Hoffmann or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by us or such Restricted Subsidiary
with an unrelated Person and (ii) Von Hoffmann delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, other than transactions between Von Hoffmann and any of its
Restricted Subsidiaries on the one hand, and DLJSC and its Affiliates on the
other hand, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; PROVIDED that (1) any employment
agreement entered into by Von Hoffmann or any of its Restricted Subsidiaries in
the ordinary course of business of Von Hoffmann or such Restricted Subsidiary
and ordinary course loans to employees, (2) transactions between or among Von
Hoffmann and/or its Restricted Subsidiaries, (3) Restricted Payments that are
permitted by the provisions of the indenture governing the 2007 notes described
above under the caption "--Restricted Payments," and (4) payments and
transactions in connection with the Recapitalization and the application of the
net proceeds from this Offering, including the payment of any fees and expenses
with respect thereto, in each case, shall not be deemed Affiliate Transactions."
ADDITIONAL NOTES GUARANTEES
If Von Hoffmann or any of its Restricted Subsidiaries shall acquire or
create another Subsidiary after the date of the indenture governing the 2007
notes, then such newly acquired or created Subsidiary, except for all
Subsidiaries that have properly been designated as Unrestricted Subsidiaries in
accordance with the indenture governing the 2007 notes for so long as they
continue to constitute Unrestricted Subsidiaries, shall execute a Notes
Guarantee and deliver an opinion of counsel, in accordance with the terms of the
indenture governing the 2007 notes.
NO SENIOR SUBORDINATED DEBT
Von Hoffmann will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to the
2007 notes.
REPORTS
So long as any 2007 notes are outstanding, Von Hoffmann will furnish to the
Holders of the 2007 notes all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if Von Hoffmann were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
Von Hoffmann and its Restricted Subsidiaries and, with respect to the annual
information only, a report thereon by its certified independent accountants. In
addition, Von Hoffmann and the Guarantors have agreed that, for so long as any
notes remain outstanding, they will furnish to the Holders, upon their request,
the information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. However, to the extent not required by the Trust Indenture Act,
the indenture governing the 2007 notes will not require Von Hoffmann to make any
reports pursuant to the foregoing two sentences to any Holder of the 2007 notes
that it reasonably believes to be a competitor of Von Hoffmann.
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EVENTS OF DEFAULT AND REMEDIES
The indenture governing the 2007 notes provides that each of the following
constitutes an Event of Default: (i) default for 30 days in the payment when due
of interest on, or Liquidated Damages with respect to, the 2007 notes (whether
or not prohibited by the subordination provisions of the indenture governing the
2007 notes); (ii) default in payment when due of the principal of or premium, if
any, on the 2007 Notes (whether or not prohibited by the subordination
provisions of the indenture governing the 2007 notes); (iii) failure by Von
Hoffmann to comply with the provisions described under the captions "--Change of
Control," "--Asset Sales," "--Restricted Payments" or "--Incurrence of
Indebtedness and Issuance of Preferred Stock"; (iv) failure by Von Hoffmann for
60 days after notice to comply with any of its other agreements in the indenture
governing the 2007 notes or the 2007 notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by Von Hoffmann or any
of its Subsidiaries (or the payment of which is guaranteed by Von Hoffmann or
any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of the indenture governing the 2007 notes, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default and the aggregate
amount of such principal, premium and interest that has not been paid exceeds
$5.0 million (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by Von Hoffmann or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to Von Hoffmann or any of its Restricted Subsidiaries; or (viii) any Notes
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Notes Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding 2007 notes may
declare all the 2007 notes to be due and payable immediately; PROVIDED, HOWEVER,
that, so long as any Indebtedness permitted to be incurred pursuant to the New
Credit Agreement shall be outstanding, no such acceleration shall be effective
until the earlier of (i) acceleration of any such Indebtedness under the New
Credit Agreement or (ii) five business days after the giving of written notice
to Von Hoffmann and the representative under the New Credit Agreement of such
acceleration. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to Von
Hoffmann, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding 2007 notes
will become due and payable without further action or notice. Holders of the
2007 notes may not enforce the indenture governing the 2007 notes or the 2007
notes except as provided in the indenture governing the 2007 notes. In the event
of a declaration of acceleration of the 2007 notes because an Event of Default
has occurred and is continuing as a result of the acceleration of any
Indebtedness described in clause (v) of the preceding paragraph, the declaration
of acceleration of the 2007 notes shall be automatically annulled if the holders
of any Indebtedness described in clause (v) have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration and if (a) the annulment of the acceleration of the 2007 notes would
not conflict with any judgment or decree of a court of competent jurisdiction,
and (b) all existing Events of Default, except nonpayment of principal or
interest on the 2007 notes that became due solely because of the acceleration of
the 2007 notes, have been cured or waived.
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Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding 2007 notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the 2007 notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the 2007 notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the 2007 notes waive any existing Default or Event of Default and its
consequences under the indenture governing the 2007 notes except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the 2007 notes.
Von Hoffmann is required to deliver to the Trustee annually a statement
regarding compliance with the indenture governing the 2007 notes, and Von
Hoffmann is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Von Hoffmann,
as such, shall have any liability for any of its obligations under the 2007
notes, the indenture governing the 2007 notes or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
the 2007 notes by accepting a note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the 2007 notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Von Hoffmann may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding 2007 notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding 2007 notes to
receive payments in respect of the principal of, premium, if any, and interest
on such 2007 notes when such payments are due from the trust referred to below,
(ii) its obligations with respect to the 2007 notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and its obligations in connection therewith and (iv) the Legal
Defeasance provisions of the indenture governing the 2007 notes. In addition,
Von Hoffmann may, at its option and at any time, elect to have its obligations
released with respect to certain covenants that are described in the indenture
governing the 2007 notes ("Covenant Defeasance") and thereafter any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the 2007 notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer constitute
an Event of Default with respect to the 2007 notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) Von Hoffmann must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the 2007 notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding 2007 notes on the Stated Maturity or on the applicable redemption
date, as the case may be, and it must specify whether the 2007 notes are being
defeased to maturity or to a particular redemption date; (ii) in the case of
Legal Defeasance, Von Hoffmann shall have delivered to the Trustee an opinion of
counsel in the United States
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reasonably acceptable to the Trustee confirming that (A) it has received from,
or there has been published by, the Internal Revenue Service a ruling or
(B) since the date of the indenture governing the 2007 notes, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the Holders
of the outstanding 2007 notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, Von Hoffmann shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding 2007
notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit); (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the indenture governing the 2007
notes) to which Von Hoffmann or any of its Subsidiaries is a party or by which
Von Hoffmann or any of its Subsidiaries is bound; (vi) Von Hoffmann must have
delivered to the Trustee an opinion of counsel to the effect that after the 91st
day following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) Von Hoffmann must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by Von Hoffmann with
the intent of preferring the Holders of 2007 notes over the other creditors of
Von Hoffmann with the intent of defeating, hindering, delaying or defrauding
creditors of Von Hoffmann or others; and (viii) Von Hoffmann must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange the 2007 notes in accordance with the
indenture governing the 2007 notes. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and Von Hoffmann may require a Holder to pay any taxes and fees
required by law or permitted by the indenture governing the 2007 notes. Von
Hoffmann is not required to transfer or exchange any 2007 note selected for
redemption. Also, Von Hoffmann is not required to transfer or exchange any 2007
note for a period of 15 days before a selection of the 2007 notes to be
redeemed.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture
governing the 2007 notes, the 2007 notes or the notes Guarantees may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the 2007 notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, the 2007 notes), and any existing default or compliance
with any provision of the indenture governing the 2007 notes or the 2007 notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding 2007 notes (including consents obtained in connection
with a tender offer or exchange offer for the 2007 notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting Holder): (i) reduce the
principal amount of the 2007 notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change
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the fixed maturity of any 2007 note or alter the provisions with respect to the
redemption of the 2007 notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders") in a
manner adverse to the Holders of the 2007 notes, (iii) reduce the rate of or
change the time for payment of interest or Liquidated Damages, if any, on any
2007 note, (iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest or Liquidated Damages, if any, on the 2007
notes (except a rescission of acceleration of the 2007 notes by the Holders of
at least a majority in aggregate principal amount of the 2007 notes and a waiver
of the payment default that resulted from such acceleration), (v) make any 2007
note payable in money other than that stated in the 2007 notes, (vi) make any
change in the provisions of the indenture governing the 2007 notes relating to
waivers of past Defaults or the rights of Holders of the 2007 notes to receive
payments of principal of or premium, if any, or interest on the 2007 notes,
(vii) waive a redemption payment with respect to any 2007 note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of the indenture governing the 2007 notes (which relate to
subordination) will require the consent of the Holders of at least 75% in
aggregate principal amount of the 2007 notes then outstanding if such amendment
would adversely affect the rights of Holders of the 2007 notes.
Notwithstanding the foregoing, without the consent of any Holder of the 2007
notes, Von Hoffmann and the Trustee may amend or supplement the indenture
governing the 2007 notes or the 2007 notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated notes in addition to or in place of
certificated notes, to provide for the assumption of Von Hoffmann's or a
Guarantor's obligations to Holders of the 2007 notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the 2007 notes or that does not adversely affect the
legal rights under the indenture governing the 2007 notes of any such Holder, or
to comply with requirements of the Commission in order to effect or maintain the
qualification of the indenture governing the 2007 notes under the Trust
Indenture Act or to allow any Guarantor to Guarantee the 2007 notes.
CONCERNING THE TRUSTEE
The indenture governing the 2007 notes contains certain limitations on the
rights of the Trustee, should it become a creditor of us, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding 2007
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The indenture governing the 2007 notes provides that in case
an Event of Default shall occur (which shall not be cured), the Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or powers under the
indenture governing the 2007 notes at the request of any Holder of the 2007
notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights governing the 2007 notes without charge by writing to: Von
Hoffmann Corporation, 1000 Camera Avenue, St. Louis, Missouri, 63126, Attention:
Chief Financial Officer.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture governing
the 2007 notes. Reference is made to the indenture governing the 2007 notes for
a full disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory or obsolete or unused equipment or
assets in the ordinary course of business (PROVIDED that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of Von
Hoffmann and its Subsidiaries taken as a whole will be governed by the
provisions of the indenture governing the 2007 notes described above under the
caption "--Change of Control" and/or the provisions described above under the
caption "--Merger, Consolidation or Sale of Assets" and not by the provisions of
the Asset Sale covenant), and (ii) the issue or sale by Von Hoffmann or any of
its Restricted Subsidiaries of Equity Interests of its Restricted Subsidiaries,
in the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions for Net Proceeds in excess of $2.0 million.
Notwithstanding the foregoing: (i) a transfer of assets by Von Hoffmann to a
Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to
Von Hoffmann or to another Wholly Owned Restricted Subsidiary, (ii) an issuance
of Equity Interests by a Wholly Owned Restricted Subsidiary to Von Hoffmann or
to another Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that
is permitted by the covenant described above under the caption "--Restricted
Payments," (iv) the sale of its aircraft, (v) the sale of its owned apartments
and (vi) the sale of its real property in Arizona will not be deemed to be Asset
Sales.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year after
such time, issued directly by the United States of America or any agency
thereof or guaranteed by the United States of America or any agency thereof;
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(b) commercial paper, maturing not more than nine months from the date
of issue, which is issued by (i) a corporation (other than an Affiliate of
any Obligor) organized under the laws of any state of the United States or
of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody's,
or (ii) any lender party to the New Credit Agreement (or its holding
company);
(c) any time deposit, certificate of deposit or bankers acceptance,
maturing not more than one year after such time, maintained with or issued
by either (i) a commercial banking institution (including U.S. branches of
foreign banking institutions) that is a member of the Federal Reserve System
and has a combined capital and surplus and undivided profits of not less
than $500,000,000, or (ii) any lender party to the New Credit Agreement;
(d) short-term tax-exempt securities rated not lower than MIG-1/1 + by
either Moody's or S&P with provisions for liquidity or maturity
accommodations of 183 days or less;
(e) repurchase agreements with respect to any securities referred to in
clause (a) above entered into with any entity referred to in clause (b) or
(c) above or any other financial institution whose unsecured long-term debt
(or the unsecured long-term debt of whose holding company) is rated at least
A- or better by S&P or Baa1 or better by Moody's and maturing not more than
one year after such time; or
(f) any money market or similar fund the assets of which are comprised
exclusively of any of the items specified in clauses (a) through (d) above
and as to which withdrawals are permitted at least every 90 days.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of Von Hoffmann's assets and its Restricted Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than DLJMB, (ii) the adoption of a plan relating to the
liquidation or dissolution of Von Hoffmann, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the Existing
Shareholders and an entity that is the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of 100% of its common stock, becomes the
"beneficial owner" (as defined above) of more than 50% of the Voting Stock of us
or Holdings (measured by voting power rather than number of shares), or
(iv) the first day on which a majority of the members of the Board of Directors
of Von Hoffmann are not Continuing Directors.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus
(iv) depreciation, amortization (including amortization of goodwill and
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other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, plus (v) any non-capitalized
transaction costs incurred in connection with actual or proposed financings,
acquisitions or divestitures (including, but not limited to, financing and
refinancing fees and costs incurred in connection with the Recapitalization), in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to us by such Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Subsidiary or its
stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to Von Hoffmann or one of its Subsidiaries.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
Von Hoffmann's Board of Directors who (i) was a member of such Board of
Directors on the date of the indenture governing the 2007 notes or (ii) was
nominated for election or elected to such Board of Directors with the approval
of a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT," with respect to any Person, means (i) any
Indebtedness of such Person outstanding under the New Credit Agreement and
(ii) in the event no Indebtedness is outstanding under the New Credit Agreement,
any other Senior Debt of such Person permitted under the indenture governing the
2007 notes the principal amount of which is $25.0 million or more and that has
been designated by such Person as "Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or
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redeemable at the option of the Holder thereof, in whole or in part, on or prior
to the date that is 91 days after the date on which the Notes mature.
"DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates.
"DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of Von Hoffmann and its
Restricted Subsidiaries (other than Indebtedness under the New Credit Agreement)
in existence on the date of the indenture governing the 2007 notes, until such
amounts are repaid.
"EXISTING SHAREHOLDERS" means DLJMB, ZS and the Management Holders.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of Von Hoffmann and other than any dividend payment that may be
deemed to have been made as a result of an increase in the liquidation
preference of any preferred stock, times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow
of such Person and its Restricted Subsidiaries for such period to the Fixed
Charges of such Person for such period. In the event that Von Hoffmann or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by Von Hoffmann or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated to include the
Consolidated Cash Flow of the acquired entities (adjusted to exclude (a) the
cost of any compensation, remuneration or other benefit paid or provided to any
employee, consultant, Affiliate or equity owner of the acquired entities to the
extent such costs are eliminated and not replaced and (b) the amount of any
reduction in general,
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administrative or overhead costs or other non-recurring items of the acquired
entities, in each case, as determined in good faith by an officer of us) and
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are applicable as of the date of determination.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTORS" means all Restricted Subsidiaries and, so long as it Guarantees
any Obligations under the New Credit Agreement, Holdings.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"INTERCOMPANY NOTE" means the note issued on the date of the indenture
governing the 2007 notes by Holdings in favor of Von Hoffmann in an initial
principal amount of $288.8 million.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If Von Hoffmann or any Subsidiary of it sells or otherwise disposes of any
Equity Interests of any direct or
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indirect Subsidiary of Von Hoffmann such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of Von Hoffmann, it
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any
employee of Von Hoffmann (or any of its Restricted Subsidiaries').
"MANAGEMENT HOLDERS" means holders of Management Equity Interests on the
date of the indenture governing the 2007 notes.
"MERGER AGREEMENT" means that certain agreement and plan of merger among the
DLJ Entities, VH Acquisition Corp., ZS and Robert A. Uhlenhop, dated April 3,
1997.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by Von Hoffmann or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to repay Indebtedness secured by
such assets (other than pursuant to the New Credit Agreement) and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"NEW CREDIT AGREEMENT" means that certain credit agreement, dated as of
May 22, 1997, by and among Von Hoffmann and DLJ Capital Funding, Inc., including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time, including any
agreement (i) extending or shortening the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder, PROVIDED that on the date
such Indebtedness is incurred it would not be prohibited by clause (i) of the
covenant set forth under "--Incurrence of Indebtedness and Issuance of Preferred
Stock" or (iv) otherwise altering the terms and conditions thereof.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither Von Hoffmann
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
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otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of Von
Hoffmann or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of Von Hoffmann or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness, including any Guarantees of such
Indebtedness.
"PERMITTED INVESTMENTS" means (a) any Investment in Von Hoffmann or in a
Restricted Subsidiary of Von Hoffmann; (b) any Investment in Cash Equivalents;
(c) any Investment by Von Hoffmann or any Restricted Subsidiary of Von Hoffmann
in a Person, if as a result of such Investment (i) such Person becomes a Wholly
Owned Restricted Subsidiary of Von Hoffmann and a Guarantor or (ii) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, Von Hoffmann or a
Wholly Owned Restricted Subsidiary of Von Hoffmann that is a Guarantor; (d) any
Restricted Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of Von Hoffmann; (f) any
Investment represented by the Intercompany Note; (g) any loan made to management
in order to enable management to purchase equity in Holdings, or any refinancing
of any loan made to management, which loan was made to enable management to
purchase equity in Holdings; and (h) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (h) that are at the time
outstanding, not to exceed $2.0 million.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in us or a Guarantor or
debt securities of us or a Guarantor that are subordinated to all Senior Debt
(and any debt securities issued in exchange for Senior Debt) to substantially
the same extent as, or to a greater extent than, the 2007 notes are subordinated
to Senior Debt.
"PERMITTED LIENS" means (i) Liens securing Senior Debt that was permitted by
the terms of the indenture governing the 2007 notes to be incurred; (ii) Liens
in favor of Von Hoffmann or any of its Restricted Subsidiaries; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with Von Hoffmann or any of its Subsidiaries; PROVIDED that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with Von Hoffmann; (iv) Liens on property existing
at the time of acquisition thereof by Von Hoffmann or any Subsidiary, PROVIDED
that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (v) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (iv) of the second
paragraph of the covenant entitled "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (vi) Liens existing on the date of the indenture
governing the 2007 notes; (vii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, PROVIDED that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor, (viii) Liens in
connection with any Permitted Refinancing Indebtedness, PROVIDED that such Liens
do not exceed the Liens replaced in connection with the
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Permitted Refinancing Indebtedness; (ix) statutory Liens of landlords and
carriers', warehousemen's, mechanics', suppliers', materialmen's, repairmen's,
or other like Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor, (x) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not substantial in
amount, and which do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct of the
businesses of Von Hoffmann and its Subsidiaries taken as a whole; and
(xi) Liens incurred in the ordinary course of business of Von Hoffmann or any
Subsidiary of Von Hoffmann with respect to obligations that do not exceed
$5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by Von Hoffmann or such
Subsidiary.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Von Hoffmann
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Von Hoffmann or any of its Restricted Subsidiaries;
PROVIDED that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest, premium and
prepayment penalties, if any, on, the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the 2007 notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the 2007 notes on terms at least as favorable to the
Holders of the 2007 notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by Von Hoffmann or by
the Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the relevant
Person that is not an Unrestricted Subsidiary.
"SENIOR DEBT," with respect to any Person, means (i) all Obligations of such
Person outstanding under the New Credit Agreement and all Hedging Obligations
payable to a lender under the New Credit Agreement or any of its affiliates,
including, without limitation, interest accruing subsequent to the filing of, or
which would have accrued but for the filing of, a petition for bankruptcy,
whether or not such interest is an allowable claim in such bankruptcy
proceeding, (ii) any other Indebtedness of such Person unless the instrument
under which such Indebtedness is incurred expressly provides that it is
subordinated in right of payment to any other Senior Debt of such Person and
(iii) all Obligations with respect to the foregoing. Notwithstanding anything to
the contrary in the foregoing, Senior Debt will not include (a) any liability
for federal, state, local or other taxes, (b) any Indebtedness of such Person to
any of its Subsidiaries, (c) any trade payables or (d) any Indebtedness that is
incurred in violation of the indenture governing the 2007 notes.
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"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBORDINATED NOTE OBLIGATIONS" means all Obligations with respect to the
Notes, including, without limitation, principal, premium, if any, interest and
Liquidated Damages, if any, payable pursuant to the terms of the Notes
(including upon acceleration or redemption thereof), together with and including
any amounts received or receivable upon the exercise of rights of rescission or
other rights of action (including claims for damages) or otherwise.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TAX SHARING AGREEMENT" means that certain tax sharing agreement between
Holdings and Von Hoffmann, dated as of the Closing Date, as amended from time to
time; PROVIDED such amendment or amendments do not materially adversely effect
us.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with Von Hoffmann or any of its Restricted Subsidiaries unless the
terms of any such agreement, contract, arrangement or understanding are no less
favorable to Von Hoffmann or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of Von Hoffmann,
(c) is a Person with respect to which neither Von Hoffmann nor any of its
Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe
for additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of Von Hoffmann or any of its
Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of Von Hoffmann or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of Von Hoffmann or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
indenture governing the 2007 notes and any Indebtedness of such Subsidiary shall
be deemed to be incurred by a Restricted Subsidiary of Von Hoffmann as of such
date (and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," Von Hoffmann shall be in default of such
covenant).
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Von Hoffmann's Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Von
Hoffmann of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation shall only be permitted if (i) such Indebtedness is permitted
under the covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, (ii) such Subsidiary shall execute a Subsidiary Guarantee and
deliver an opinion of counsel, in accordance with the terms of the indenture
governing the 2007 notes and (iii) no Default or Event of Default would be in
existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
"ZS" means ZS VH L.P., together with ZS VH II L.P., as the context requires.
FORMS OF REGISTERED SECURITIES
The certificates representing the registered securities will be issued in
fully registered form, without coupons. Except as described in the next
paragraph, the registered securities will be deposited with, or on behalf of,
DTC, and registered in the name of Cede & Co., as DTC's nominee, in the form of
a global security. Holders of the registered notes will own book-entry interests
in the global note evidenced by records maintained by DTC.
Book-entry interests may be exchanged for certificated securities of like
tenor and equal aggregate principal amount, if
(1) DTC notifies us that it is unwilling or unable to continue as depositary
or we determine that DTC is unable to continue as depositary and we fail
to appoint a successor depositary within 90 days,
(2) we provide for the exchange pursuant to the terms of the indenture
governing the 2009 notes, or
(3) we determine that the book-entry interests will no longer be represented
by global notes and we execute and deliver to the Trustee instructions to
that effect.
13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009
You can find the definitions of certain terms used in this description of
the 2009 Holdings debentures under the subheading "--Certain Definitions." In
this description, the term "Holdings" refers only to Von Hoffmann Holdings Inc.
and not to any of its subsidiaries.
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Holdings issued the old 2009 Holdings debentures under an indenture among
itself, and Marine Midland Bank (now HSBC Bank USA), as trustee. The terms of
the 2009 Holdings debentures include those stated in the indenture governing
them and those made part of that indenture by reference to the Trust Indenture
Act of 1939, as amended.
The following description is a summary of the material provisions of the
indenture and the registration rights agreement governing the 2009 Holdings
debentures. It does not restate those agreements in their entirety. We urge you
to read the indenture and the registration rights agreement governing the 2009
Holdings debentures because they, and not this description, define your rights
as holders of the notes. Copies of the indenture and the registration rights
agreement governing the 2009 Holdings debentures are available as set forth
below under "--Additional Information."
BRIEF DESCRIPTION OF THE 2009 HOLDINGS DEBENTURES
The 2009 Holdings debentures:
- will be general unsecured obligations of Holdings; and
- will be expressly subordinate in right of payment with all existing and
future senior indebtedness of Holdings.
PRINCIPAL, MATURITY AND INTEREST
Holdings issued the old 2009 Holdings debentures in an aggregate principal
amount of $30.4 million, which has accreted to $48.1 million in principal
amount. The 2009 Holdings debentures will mature on May 15, 2009.
Interest on the 2009 Holdings debentures accrues at the rate of 13.5% per
annum and is payable semi-annually in arrears on May 15 and November 15.
Interest shall be payable in cash PROVIDED, HOWEVER, that prior to the first
date on which interest would be permitted to be paid in cash pursuant to the
terms of the then-outstanding indebtedness of Holdings and its Subsidiaries and
any other contractual provisions limiting the ability of Holdings and its
Subsidiaries to declare or pay cash interest, interest shall not be paid in cash
but shall accrete to, and increase, the principal amount of each Debenture.
Interest on the Debentures shall accrue from the most recent date to which
interest has been paid or accreted to principal amount or, if no interest has
been so paid or accreted, from the date of issuance. Holdings will make each
interest payment to the holders of record on the immediately preceding May 1 and
November 1. All payments on the 2009 Holdings debentures will be made at the
office or agency of the paying agent unless Holdings elects to make interest
payments by check mailed to holders at their address set forth in the register
of holders.
Interest will be calculated on the basis of a 360-day year comprised of
twelve 30-day months.
PAYING AGENT AND REGISTRAR FOR THE 2009 HOLDINGS DEBENTURES
The trustee currently acts as paying agent and registrar. Holdings may
change the paying agent or registrar without prior notice to the holders of the
2009 Holdings Debentures, and Holdings or any of its subsidiaries may act as
paying agent or registrar.
SUBORDINATION
The payment of the Debenture Obligations is subordinated in right of payment
to the prior payment in full in cash or cash equivalents of all Senior Debt,
whether outstanding on the date of the indenture governing the 2009 Holdings
debentures.
Upon any distribution to creditors of Holdings in a liquidation or
dissolution of it or in a bankruptcy, reorganization, insolvency, receivership
or similar proceeding relating to Holdings or its
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property, an assignment for the benefit of creditors or any marshalling of its
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash or cash equivalents of all Obligations due in respect of
such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt) before the
holders of the 2009 Holdings debentures will be entitled to receive any payment
with respect to the Debenture Obligations, and until all Obligations with
respect to Senior Debt are paid in full in cash or cash equivalents, any
distribution to which the holders of the 2009 debentures would be entitled shall
be made to the holders of Senior Debt (except that holders of the 2009 Holdings
debentures may receive Permitted Junior Securities and payments made from the
trust described under "--Legal Defeasance and Covenant Defeasance").
Holdings also may not make any payment upon or in respect of the
Subordinated Note Obligations (except in Permitted Junior Securities or payments
made from the trust described under "--Legal Defeasance and Covenant
Defeasance") if (i) a default in the payment of the principal of or premium, if
any, or interest on, or commitment fees relating to, any Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to any Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a written notice of such
default (a "Payment Blockage Notice") from Holdings or the holders of such
Designated Senior Debt (or its representative). Payments on the 2009 Holdings
debentures may and shall be resumed (a) in the case of a payment default, upon
the date on which such default is cured or waived and (b) in case of a
nonpayment default, the earlier of the date on which such nonpayment default is
cured or waived or 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Designated Senior Debt
has been accelerated. No new period of payment blockage may be commenced unless
and until 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been cured or waived for a period of not less than 90 days.
The indenture governing the 2009 Holdings debentures further requires that
Holdings promptly notifies holders of Senior Debt if payment of the 2009
Holdings debentures is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of the 2009 Holdings debentures may recover
less ratably than creditors of Holdings who are holders of Senior Debt.
OPTIONAL REDEMPTION
The 2009 Holdings debentures shall be subject to redemption at any time at
the option of Holdings, in whole or in part, at the redemption prices (expressed
as percentages of principal amount) set forth below, PLUS any accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------
2002........................................................ 106.75%
2003........................................................ 105.40%
2004........................................................ 104.05%
2005........................................................ 102.70%
2006........................................................ 101.35%
2007 and thereafter......................................... 100.00%
</Table>
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MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders,"
Holdings is not required to make mandatory redemption or sinking fund payments
with respect to the 2009 Holdings debentures.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of the 2009 Holdings debentures
will have the right to require Holdings to repurchase all or any part (equal to
$1,000 or an integral multiple of $1,000) of that holder's 2009 Holdings
debentures pursuant to a Change of Control Offer on the terms set forth in the
indenture governing the 2009 Holdings debentures. In the Change of Control
Offer, Holdings will offer at an offer price in cash equal to 101% of the
aggregate principal amount of the 2009 Holdings debentures repurchased plus
accrued and unpaid interest and Liquidated Damages, if any, on the 2009 Holdings
debentures repurchased, to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, Holdings will mail a
notice to each holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase the 2009 Holdings debentures on
the date specified in the notice, which date will be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the indenture
governing the 2009 Holdings debentures and described in such notice. Holdings
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with the repurchase of the 2009
Holdings debentures as a result of a Change of Control.
On the Change of Control Payment Date, Holdings will, to the extent lawful:
(1) accept for payment all the 2009 Holdings debentures or portions of
the 2009 Holdings debentures properly tendered pursuant to the Change of
Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all the 2009 Holdings debentures or portions
of the 2009 Holdings debentures properly tendered; and
(3) deliver or cause to be delivered to the trustee the 2009 Holdings
debentures properly accepted together with an Officers' Certificate stating
the aggregate principal amount of the 2009 Holdings debentures or portions
of the 2009 Holdings debentures being purchased by Holdings.
The paying agent will promptly mail to each holder of the 2009 Holdings
debentures properly tendered the Change of Control Payment for such 2009
Holdings debentures, and the trustee will promptly authenticate and mail (or
cause to be transferred by book entry) to each holder a new 2009 debenture equal
in principal amount to any unpurchased portion of the 2009 Holdings debentures
surrendered, if any; PROVIDED that each new 2009 debenture will be in a
principal amount of $1,000 or an integral multiple of $1,000.
Holdings will publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
The provisions described above that require Holdings to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the indenture governing the 2009 Holdings debentures are
applicable. Except as described above with respect to a Change of Control, the
indenture governing the 2009 Holdings debentures does not contain provisions
that permit the holders of the 2009 Holdings debentures to require that Holdings
repurchase or redeem the 2009 Holdings debentures in the event of a takeover,
recapitalization or similar transaction.
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The revolving credit facility limits Holdings from purchasing or redeeming
any 2009 Holdings debentures, and also provides that certain change of control
events with respect to Holdings would constitute a default thereunder. Any
future credit agreements or other agreements to which Holdings becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when Holdings is prohibited from purchasing or
redeeming the 2009 Holdings debentures, it could seek the consent of its lenders
to the purchase of the 2009 Holdings debentures or could attempt to refinance
the borrowings that contain such prohibition. If Holdings does not obtain such a
consent or repay such borrowings, it will remain prohibited from purchasing the
2009 Holdings debentures. In such case, Holdings' failure to purchase tendered
2009 Holdings debentures would constitute an Event of Default under the
indenture governing the 2009 Holdings debentures, which would, in turn,
constitute a default under the revolving credit facility. In addition, Holdings'
ability to pay cash to the holders of the 2009 Holdings debentures upon a
repurchase may be limited by its then existing financial resources.
Holdings will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture governing the 2009 Holdings debentures applicable to a Change
of Control Offer made by Holdings and purchases all the 2009 Holdings debentures
validly tendered and not withdrawn under the Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Holdings and its Subsidiaries taken as a whole. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of the 2009 Holdings debentures to require
Holdings to repurchase the 2009 Holdings debentures as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of Holdings and its Subsidiaries taken as a whole to another Person or group may
be uncertain.
Holdings' ability to pay cash to the holders of the 2009 Holdings debentures
upon a repurchase may be limited by Holdings' then existing financial resources.
See "Risk Factors--We may not have the ability to raise the funds necessary to
finance the change of control offer required by the indenture governing the 2009
Holdings debentures."
SELECTION AND NOTICE
Except as otherwise provided in the indenture governing the 2009 Holdings
debentures, if less than all of the 2009 Holdings debentures are to be redeemed
at any time, the trustee will select debentures for redemption as follows:
(1) if the 2009 Holdings debentures are listed on any national
securities exchange, in compliance with the requirements of the principal
national securities exchange on which the 2009 Holdings debentures are
listed; or
(2) if the 2009 Holdings debentures are not listed on any national
securities exchange, on a pro rata basis, by lot or by such method as the
trustee deems fair and appropriate.
No 2009 Holdings debentures of $1,000 or less can be redeemed in part.
Notices of redemption will be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of the 2009 Holdings
debentures to be redeemed at its registered address, except that redemption
notices may be mailed more than 60 days prior to a redemption date if the notice
is issued in connection with a defeasance of the 2009 Holdings debentures or a
satisfaction and discharge of the indenture governing the 2009 Holdings
debentures. Notices of redemption may not be conditional.
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If any 2009 debenture is to be redeemed in part only, the notice of
redemption that relates to that 2009 debenture will state the portion of the
principal amount of that 2009 debenture that is to be redeemed. A new 2009
debenture in principal amount equal to the unredeemed portion of the original
2009 debenture will be issued in the name of the holder of the 2009 Holdings
debentures upon cancellation of the original 2009 debenture. The 2009 Holdings
debentures called for redemption become due on the date fixed for redemption. On
and after the redemption date, interest ceases to accrue on the 2009 Holdings
debentures or portions of them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
Holdings will not, and will not permit any of its Subsidiaries to, directly
or indirectly, (i) declare or pay any dividend or make any other payment or
distribution on account of Holdings' Equity Interests (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
Holdings); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of Holdings; or (iii) make any payment on or with respect to,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Debentures, except a payment of
interest or a payment of principal at Stated Maturity (all such payments and
other actions set forth in clauses (i) through (iii) above being collectively
referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving
effect to such Restricted Payment, no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof.
MERGER, CONSOLIDATION OR SALE OF ASSETS
MERGER, CONSOLIDATION OR SALE OF ASSETS.
Holdings may not consolidate or merge with or into (whether or not Holdings
is the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, Person or entity unless
(i) Holdings is the surviving corporation or the entity or the Person formed by
or surviving any such consolidation or merger (if other than Holdings) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than Holdings) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of Holdings under the 2009 Holdings debentures and the
indenture governing the 2009 Holdings debentures pursuant to a supplemental
indenture in a form reasonably satisfactory to the trustee; and
(iii) immediately after such transaction no Default or Event of Default exists.
REPORTS
So long as any 2009 Holdings debentures are outstanding, Holdings will
furnish to the holders of the 2009 Holdings debentures all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if Holdings were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of Holdings and its Subsidiaries and, with respect to the annual
information only, a report thereon by Holdings' certified independent
accountants.
The financial information to be distributed to holders of 2009 Holdings
debentures shall be filed with the trustee and mailed to the holders at their
addresses appearing in the register of 2009 Holdings debentures maintained by
the Registrar within 120 days after the end of Holdings' fiscal years and within
60 days after the end of each of the first three quarters of each such fiscal
year.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of interest on the 2009
Holdings debentures (whether or not prohibited by the subordination
provisions of the indenture governing the 2009 Holdings debentures);
(ii) default in payment when due of principal of or premium, if any, on the
2009 Holdings debentures (whether or not prohibited by Subordination of the
indenture governing the 2009 Holdings debentures); (iii) failure by Holdings
or any Subsidiary to comply with the provisions described under the captions
"Change of Control Offer" and "Restricted Payments" of the indenture
governing the 2009 Holdings debentures; (iv) failure by Holdings for
60 days after notice to comply with its other agreements in the indenture
governing the 2009 Holdings debentures or the 2009 Holdings debentures; or
(v) certain events of bankruptcy or insolvency with respect to Holdings or
any of its Subsidiaries.
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to Holdings, any Subsidiary that is a Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding 2009 Holdings debentures will become due
and payable immediately without further action or notice. Holders of the 2009
Holdings debentures may not enforce the indenture governing the 2009 Holdings
debentures or the 2009 Holdings debentures except as provided in the indenture
governing the 2009 Holdings debentures. If any other Event of Default occurs and
is continuing, the trustee or the holders of at least 25% in principal amount of
the then outstanding 2009 Holdings debentures may declare all the 2009 Holdings
debentures to be due and payable immediately provided, however, that, so long as
any Indebtedness permitted to be incurred pursuant to the New Credit Agreement
shall be outstanding, no such acceleration shall be effective until the earlier
of (i) acceleration of any such Indebtedness under the New Credit Agreement or
(ii) five business days after the giving of written notice to Holdings and the
representative under the New Credit Agreement of such acceleration.
Subject to certain limitations, holders of a majority in principal amount of
the then outstanding 2009 Holdings debentures may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
2009 Holdings debentures notice of any continuing Default or Event of Default if
it determines that withholding the 2009 Holdings debentures is in their
interest, except a Default or Event of Default relating to the payment of
principal or interest or Liquidated Damages.
The holders of a majority in aggregate principal amount of the 2009 Holdings
debentures then outstanding by notice to the trustee may on behalf of the
holders of all of the 2009 Holdings debentures waive any existing Default or
Event of Default and its consequences under the indenture governing the 2009
Holdings debentures except a continuing Default or Event of Default in the
payment of interest or Liquidated Damages on, or the principal of, the 2009
Holdings debentures.
Holdings is required to deliver to the trustee annually a statement
regarding compliance with the indenture governing the 2009 Holdings debentures.
Upon becoming aware of any Default or Event of Default, Holdings is required to
deliver to the trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Holdings or
any Guarantor, as such, will have any liability for any obligations of Holdings
or the Guarantors under the 2009 Holdings debentures, the indenture governing
the 2009 Holdings debentures, the note guarantees, or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder of
the 2009 Holdings debentures by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the 2009 Holdings debentures. The waiver may not
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be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Holdings may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding 2009 Holdings debentures
("Legal Defeasance") except for:
(1) the rights of holders of outstanding 2009 Holdings debentures to
receive payments in respect of the principal of, or interest or premium on
such notes when such payments are due from the trust referred to below;
(2) Holdings' obligations with respect to the 2009 Holdings debentures
concerning issuing temporary notes, registration of notes, mutilated,
destroyed, lost or stolen notes and the maintenance of an office or agency
for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and Holdings' obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture governing the 2009
Holdings debentures.
In addition, Holdings may, at its option and at any time, elect to have the
obligations of Holdings released with respect to certain covenants that are
described in the indenture governing the 2009 Holdings debentures ("Covenant
Defeasance") and thereafter any omission to comply with those covenants will not
constitute a Default or Event of Default with respect to the 2009 Holdings
debentures. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "--Events of Default and Remedies" will no longer
constitute an Event of Default with respect to the 2009 Holdings debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Holdings must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of the 2009 Holdings debentures, cash in U.S.
dollars, non-callable Government Securities, or a combination of cash in
U.S. dollars and non-callable Government Securities, in amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, or interest and premium and
Liquidated Damages, if any, on the outstanding 2009 Holdings debentures on
the stated maturity or on the applicable redemption date, as the case may
be, and Holdings must specify whether the 2009 Holdings debentures are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, Holdings has delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to
the trustee confirming that (a) Holdings has received from, or there has
been published by, the Internal Revenue Service a ruling or (b) since the
date of the indenture governing the 2009 Holdings debentures, there has been
a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel will confirm that,
the holders of the outstanding 2009 Holdings debentures will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Holdings has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding 2009 Holdings debentures will
not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax
on the same
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amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing on the
date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the indenture governing the 2009 Holdings
debentures) to which Holdings or any of its Subsidiaries is a party or by
which Holdings or any of its Subsidiaries is bound;
(6) Holdings must deliver to the trustee an Officers' Certificate
stating that the deposit was not made by Holdings with the intent of
preferring the holders of notes over the other creditors of Holdings with
the intent of defeating, hindering, delaying or defrauding creditors of
Holdings or others;
(7) Holdings must deliver to the trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been complied with; and
(8) Holdings must have delivered to the trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture
governing the 2009 Holdings debentures, the 2009 Holdings debentures or the note
guarantees may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the 2009 Holdings debentures then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, the 2009 Holdings
debentures), and any existing default or compliance with any provision of the
indenture governing the 2009 Holdings debentures or the 2009 Holdings debentures
may be waived with the consent of the holders of a majority in principal amount
of the then outstanding 2009 Holdings debentures (including consents obtained in
connection with a tender offer or exchange offer for, the 2009 Holdings
debentures).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any 2009 Holdings debentures held by a non-consenting holder):
(1) reduce the principal amount of the 2009 Holdings debentures whose
holders must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the 2009 Holdings
debentures (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders") in a manner
adverse to the holders of the 2009 Holdings debentures;
(3) reduce the rate of or change the time for payment of interest, or
Liquidated Damages, if any, on any 2009 debenture;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the 2009 Holdings
debentures (except a rescission of acceleration of the 2009 Holdings
debentures by the holders of at least a majority in aggregate principal
amount of the 2009 Holdings debentures and a waiver of the payment default
that resulted from such acceleration);
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(5) make any 2009 debenture payable in money other than that stated in
the 2009 Holdings debentures;
(6) make any change in the provisions of the indenture governing the
2009 Holdings debentures relating to waivers of past Defaults or the rights
of holders of the 2009 Holdings debentures to receive payments of principal
of, or interest or premium or Liquidated Damages, if any, on the 2009
Holdings debentures;
(7) waive a redemption payment with respect to any 2009 debenture (other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders");
(8) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to the provision relating to Subordination shall
require the consent of the holders of at least 75% in aggregate amount of the
2009 Holdings debentures then outstanding (including consents obtained in
connection with a tender offer or exchange offer) if such amendment would
adversely affect the rights of holders of the 2009 Holdings debentures.
Notwithstanding the preceding, without the consent of any holder of the 2009
Holdings debentures, Holdings and the trustee may amend or supplement the
indenture governing the 2009 Holdings debentures or the 2009 Holdings
debentures:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated 2009 Holdings debentures in addition
to or in place of certificated 2009 Holdings debentures;
(3) to provide for the assumption of Holdings' obligations to holders of
the 2009 Holdings debentures in the case of a merger or consolidation;
(4) to make any change that would provide any additional rights or
benefits to the holders of the 2009 Holdings debentures or that does not
adversely affect the legal rights under the indenture governing the 2009
Holdings debentures of any such holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture governing the 2009 Holdings
debentures under the Trust Indenture Act.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Holdings, the indenture governing the
2009 Holdings debentures limits its right to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in principal amount of the then outstanding 2009
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture governing the 2009 Holdings debentures
provides that in case an Event of Default occurs and is continuing, the trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
trustee will be under no obligation to exercise any of its rights or powers
under the indenture governing the 2009 Holdings debentures at the request of any
holder of the 2009 notes, unless such holder has offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
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ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement governing the 2009 Holdings debentures without
charge by writing to: Von Hoffmann Corporation, 1000 Camera Avenue, St. Louis,
Missouri, 63126, Attention: Chief Financial Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture governing
the 2009 Holdings debentures. Reference is made to the indenture governing the
2009 Holdings debentures for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"BOARD OF DIRECTORS" means the board of directors of Holdings or (except in
the case of the definition of Change of Control) any authorized committee of
such board of directors.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CERTIFICATE OF DESIGNATIONS" means the Amended and Restated Certificate of
Designations, Preferences and Rights relating to the Preferred Stock.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d)(2) of
the Exchange Act), other than any person or group comprised solely of the
Initial Investors, becomes the "beneficial owner" (as such term is defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition), by way of merger,
consolidation or otherwise, of 50% or more of the voting power of all classes of
voting securities of the Holdings and such person or group beneficially owns a
greater percentage of the voting power of all classes of voting securities of
Holdings than that beneficially owned by the Initial Investors; (ii) the
consummation of a sale or transfer of all or substantially all of the assets of
the Holdings or the Company to any person or group (as defined above), other
than any person or group comprised solely of the Initial Investors or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Holdings,
together with any new directors whose election was approved by a vote of a
majority of directors then still in office who either were directors at the
beginning of such period or whose election or nomination for the election was
previously so approved, cease for any reason to constitute a majority of the
directors of Holdings
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then in office, other than as a result of election of removal of directors, or a
reduction of the number of directors comprising the Board of Directors of
Holdings, pursuant to the provisions governing the election and removal of
directors of the Certificate of Designations or the Shareholders Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means Von Hoffmann Corporation, a Delaware corporation.
"DEBENTURE OBLIGATIONS" means all Obligations with respect to the
Debentures, including, without limitation, principal, premium, if any, and
interest payable pursuant to the terms of the Debentures (including upon
acceleration or redemption thereof), together with and including any amounts
received or receivable upon the exercise of rights of rescission or other rights
of action (including claims for damages) or otherwise.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT," means (i) any Obligations of Holdings under the
New Credit Agreement and (ii) in the event no Indebtedness is outstanding under
the New Credit Agreement, any other Senior Debt the principal amount of which is
$25.0 million or more and that has been designated by Holdings as "Designated
Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Debentures mature.
"DLJMB" means DLJ Merchant Banking Partners II, L.P. and its Affiliates.
"DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are applicable as of the date of determination.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"HOLDINGS" means Von Hoffmann Holdings, Inc.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness
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(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any Indebtedness
of any other Person.
"INITIAL INVESTORS" means DLJMB, ZS and the Management Holders and, in each
case, their respective permitted assigns under the Shareholders Agreement.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"MANAGEMENT EQUITY INTERESTS" means Equity Interests of Holdings held by any
employee of the Company or any of its Subsidiaries.
"MANAGEMENT HOLDERS" means holders of Management Equity Interests on the
date that the Preferred Stock was originally issued by Holdings.
"MERGER AGREEMENT" means that certain agreement and plan of merger, dated
April 3, 1997, among DLJMB, VH Acquisition, Inc., ZS and Robert A. Uhlenhop.
"MOODY'S" means Moody's Investors Service, Inc.
"NEW CREDIT AGREEMENT" means that certain credit agreement, dated as of
May 22, 1997, by and among Holdings, DLJ Capital Funding, Inc. and the lenders
party thereto, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced or refinanced from time to time,
including any agreement (i) extending or shortening the maturity of any
Indebtedness incurred thereunder or contemplated thereby, (ii) adding or
deleting borrowers or guarantors thereunder, (iii) increasing the amount of
Indebtedness incurred thereunder or available to be borrowed thereunder or
(iv) otherwise altering the terms and conditions thereof.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness, including any guarantees of such
Indebtedness.
"OFFICER" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in Holdings or debt
securities of Holdings that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Debentures are subordinated to Senior Debt.
"PERSON" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PREFERRED STOCK" means the Holdings 13.5% Senior Exchangeable Preferred
Stock due 2009 and the Holdings' Series B 13.5% Senior Exchangeable Preferred
Stock due 2009.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" means (i) all Obligations of the Company under the New Credit
Agreement and under all Hedging Obligations payable to a lender under the New
Credit Agreement or any of its
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affiliates, including, without limitation, interest accruing subsequent to the
filing of, or which would have accrued but for the filing of, a petition for
bankruptcy, whether or not such interest is an allowable claim in such
bankruptcy proceeding, (ii) all Obligations of the Company in respect of the
2007 notes and the indenture related thereto, (iii) any other Indebtedness of
the Company unless the instrument under which such Indebtedness is incurred
expressly provides that it is PARI PASSU or subordinated in right of payment to
the Debentures and (iv) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will not
include (a) any liability for federal, state, local or other taxes, (b) any
Indebtedness of the Company to any of its Subsidiaries or (c) any trade
payables.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement, dated as of
May 22, 1997, among the Company and the shareholders of the Company named
therein.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"2007 NOTES" means the 10 3/8% Senior Subordinated Notes due 2007 of the
Company.
"VHP" means Von Hoffmann Press, Inc., a Delaware corporation.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
"ZS" means ZS VH, L.P. together with ZS VH II L.P., as the context requires.
FORMS OF REGISTERED SECURITIES
The certificates representing the registered securities will be issued in
fully registered form, without coupons. Except as described in the next
paragraph, the registered securities will be deposited with, or on behalf of,
DTC, and registered in the name of Cede & Co., as DTC's nominee, in the form of
a global security. Holders of the registered notes will own book-entry interests
in the global note evidenced by records maintained by DTC.
Book-entry interests may be exchanged for certificated securities of like
tenor and equal aggregate principal amount, if
(1) DTC notifies us that it is unwilling or unable to continue as depositary
or we determine that DTC is unable to continue as depositary and we fail
to appoint a successor depositary within 90 days,
(2) we provide for the exchange pursuant to the terms of the indenture
governing the 2009 Holdings debentures, or
(3) we determine that the book-entry interests will no longer be represented
by global notes and we execute and deliver to the Trustee instructions
to that effect.
As of the date of this prospectus, no certificated securities are issued and
outstanding.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following generally summarizes certain material U.S. federal income tax
aspects of (i) the exchange of old notes for registered notes and (ii) the
ownership and disposition of registered notes. This discussion is a summary for
general information purposes only and does not consider all aspects of U.S.
federal income taxation that may be relevant to a particular holder in light of
such holder's personal circumstances. This discussion is limited to the U.S.
federal income tax consequences to persons who are beneficial owners of the old
notes or registered notes and who hold such notes as "capital assets" within the
meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"). This discussion does not address special situations, such as the
following:
- tax consequences to holders who may be subject to special tax treatment,
such as tax-exempt entities, dealers in securities or currencies, banks,
other financial institutions or "financial services entities," insurance
companies, regulated investment companies, traders in securities that
elect to use a mark-to-market method of accounting for their securities
holdings, certain expatriates or long-term residents of the United States
or corporations that accumulate earnings to avoid U.S. federal income tax;
- tax consequences to persons holding notes as part of a hedging,
integrated, constructive sale or conversion transaction or a straddle or
other risk reduction transaction;
- tax consequences to holders whose "functional currency" is not the U.S.
dollar;
- tax consequences to partnerships or similar pass-through entities or to
persons who hold notes through a partnership or similar pass-through
entity;
- U.S. federal gift or estate tax (except as to Non-U.S. Holders (as defined
below)) or alternative minimum tax consequences, if any; or
- any state, local or foreign tax consequences.
This summary is based upon current provisions of the Code, existing and
proposed regulations thereunder and current administrative rulings and court
decisions, all as in effect on the date hereof. All of the foregoing are subject
to change, possibly on a retroactive basis, and any such change could affect the
continuing validity of this discussion.
EACH HOLDER SHOULD CONSULT WITH SUCH HOLDER'S OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF PARTICIPATION IN THE EXCHANGE
OFFER AND THE OWNERSHIP AND DISPOSITION OF REGISTERED NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CONSEQUENCES OF TENDERING NOTES
The exchange of your old notes for registered notes in the exchange offers
should not constitute a sale or exchange for federal income tax purposes.
Accordingly, the exchange offers should have no federal income tax consequences
to you if you exchange your old notes for registered notes. For example, there
should be no change in your tax basis, and your holding period in your
registered notes should include the period for which you have held the old notes
exchanged therefor. In addition, the federal income tax consequences of holding
and disposing of your registered notes should be the same as those applicable to
your old notes.
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CONSEQUENCES OF HOLDING REGISTERED NOTES
U.S. HOLDERS
For purposes of the following discussion, a U.S. Holder is a beneficial
owner of a registered note that is, for U.S. federal income tax purposes:
- a citizen or resident of the United States, including an alien resident
who is a lawful permanent resident of the United States or meets the
"substantial presence" test under Section 7701(b) of the Code;
- a corporation created or organized in the United States or under the laws
of the United States or any political subdivision thereof;
- an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
- a trust, if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust.
STATED INTEREST. Except with respect to the 13 1/2% Subordinated Exchange
Debentures not acquired at a "bond premium" (as described below in "Original
Issue Discount"), interest on a registered note (including a payment made
pursuant to a guarantee) will be taxable to a U.S. Holder as ordinary interest
income at the time it accrues or is received in accordance with such U.S.
Holder's method of accounting for U.S. federal income tax purposes.
ORIGINAL ISSUE DISCOUNT. Because we are not unconditionally required to pay
interest on the 13 1/2% Subordinated Exchange Debentures in cash or other
property at least annually at a single fixed rate, such notes were issued with
original issue discount, referred to as "OID," in an amount equal to the excess
of the "stated redemption price at maturity" over the "issue price" of such
notes. The "issue price" of each such note was $1,000. The "stated redemption
price at maturity" is the sum of all payments to be made on the debentures,
other than "qualified stated interest." The term "qualified stated interest"
means, generally, stated interest that is unconditionally payable at least
annually at a qualifying rate, including a single fixed rate, during the entire
term of the debt instrument. None of the interest on the 13 1/2% Subordinated
Exchange Debentures should be qualified stated interest.
A U.S. Holder of a 13 1/2% Subordinated Exchange Debenture, in general, must
include in ordinary income OID calculated on a constant-yield to maturity method
as prescribed by Treasury regulations in advance of the receipt of the related
cash payments. Except as described below, the amount of OID included in gross
income as interest by a U.S. Holder of a 13 1/2% Subordinated Exchange Debenture
is the sum of the "daily portions" of OID with respect to that note for each day
during the taxable year or portion thereof in which the U.S. Holder holds the
note. This amount is referred to as "accrued OID." The daily portion is
determined by allocating to each day in any accrual period a pro rata portion of
the OID allocable to that accrual period. The amount of OID allocable to any
accrual period is equal to the difference between:
- the product of the debenture's adjusted issue price at the beginning of
the accrual period and the debenture's yield to maturity; and
- the qualified stated interest allocable to the accrual period.
OID allocable to the final accrual period is the difference between the
amount payable at maturity of the debenture and the debenture's "adjusted issue
price" at the beginning of the final accrual period. The "adjusted issue price"
of a debenture at the beginning of any accrual period is equal to its issue
price increased by the accrued OID for each prior accrual period.
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A U.S. Holder who acquires a 13 1/2% Subordinated Exchange Debenture at a
"bond premium" (discussed below) will not be subject to the OID rules described
herein.
MARKET DISCOUNT. If a registered note is acquired at a "market discount,"
some or all of any gain realized upon a subsequent sale, other disposition, or
full or partial principal payment, of such registered note may be treated as
ordinary income, and not capital gain, as described below. For this purpose,
"market discount" is the excess (if any) of the "stated redemption price at
maturity" (or, in the case of the 13 1/2% Subordinated Exchange Debentures, the
"revised issue price") of a debt obligation over the basis of such debt
obligation immediately after its acquisition by the taxpayer, subject to a
statutory de minimis exception. The "revised issue price" of the 13 1/2%
Subordinated Exchange Debentures is $1,000 plus the aggregate amount of OID
includible in the gross income of all holders for all periods before the
acquisition of the note by the taxpayer (determined without offset for
"acquisition premium" (discussed below), if any). Unless a U.S. Holder has
elected to include the market discount in income as it accrues, gain, if any,
realized on any subsequent disposition (other than in connection with certain
nonrecognition transactions) or full or partial principal payment of such
registered note will be treated as ordinary income to the extent of the market
discount that is treated as having accrued during the period such U.S. Holder
held such registered note.
The amount of market discount treated as having accrued will be determined
either (i) on a straight-line basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the registered note was
held by the U.S. Holder and the denominator of which is the total number of days
after the date such U.S. Holder acquired the registered note up to and including
the date of its maturity or (ii) if the U.S. Holder so elects, on a constant
interest rate method. A U.S. Holder may make that election with respect to any
registered note but, once made, such election is irrevocable.
A U.S. Holder of a registered note acquired at a market discount may elect
to include market discount in income currently, through the use of either the
straight-line inclusion method or the elective constant interest method in lieu
of recharacterizing gain upon disposition or principal repayment as ordinary
income to the extent of accrued market discount at the time of such disposition
or repayment. Once made, this election will apply to all notes and other
obligations acquired by the electing U.S. Holder at a market discount during the
taxable year for which the election is made, and all subsequent taxable years,
unless the Internal Revenue Service (the "IRS") consents to a revocation of the
election. If an election is made to include market discount in income currently,
the basis of the registered note in the hands of the U.S. Holder will be
increased by the market discount thereon as it is included in income.
Unless a U.S. Holder who acquires a registered note at a market discount
elects to include market discount in income currently, such U.S. Holder may be
required to defer deductions for any interest paid on indebtedness allocable to
such registered note in an amount not exceeding the deferred income, until such
income is realized.
BOND PREMIUM. If a U.S. Holder purchases a registered note and immediately
after the purchase the adjusted basis of the registered note exceeds the sum of
all amounts payable on the instrument after the purchase date (other than
qualified stated interest), the registered note will be treated as having been
acquired with "bond premium." A U.S. Holder may elect to amortize such bond
premium over the remaining term of such registered note (or, if it results in a
smaller amount of amortizable bond premium, until an earlier call date).
If bond premium is amortized, the amount of interest that must be included
in the U.S. Holder's income for each period ending on an interest payment date
or at the stated maturity, as the case may be, except as Treasury Regulations
may otherwise provide, will be reduced by the portion of premium allocable to
such period based on the registered note's yield to maturity. If such an
election to amortize bond premium is not made, a U.S. Holder must include the
full amount of each interest payment in
135
<Page>
income in accordance with its regular method of accounting and will receive a
tax benefit from the premium only in computing such U.S. Holder's gain or loss
upon the sale or other disposition or full or partial principal payment of the
registered note.
An election to amortize bond premium will apply to amortizable bond premium
on all registered notes and other bonds, the interest on which is includible in
the U.S. Holder's gross income, held at the beginning of the U.S. Holder's first
taxable year to which the election applies or that are thereafter acquired, and
may be revoked only with the consent of the Internal Revenue Service. A U.S.
Holder who elects to amortize bond premium must reduce its adjusted basis in the
registered notes by the amount of such allowable amortization.
ACQUISITION PREMIUM. A complementary concept to bond premium is acquisition
premium, which is applicable only to the 13 1/2% Subordinated Exchange
Debentures. A 13 1/2% Subordinated Exchange Debenture is acquired at an
"acquisition premium" if the U.S. Holder's adjusted tax basis in the note
exceeds the adjusted issue price of the note but is less than or equal to all
amounts payable on the note after the purchase date (exclusive of qualified
stated interest). If a U.S. Holder acquires a 13 1/2% Subordinated Exchange
Debenture at an acquisition premium, the amount of OID includible in the U.S.
Holder's gross income generally is reduced in each period in proportion to the
percentage of the unamortized OID at the date of acquisition represented by the
acquisition premium. Alternatively, a U.S. Holder may elect to treat its
purchase as a purchase at original issuance and accrue the discount on such
purchase on a constant yield basis.
SALE, EXCHANGE OR REDEMPTION OF REGISTERED NOTES. Unless a non-recognition
provision applies, upon the disposition of a registered note by sale, exchange
or redemption, a U.S. Holder generally will recognize gain or loss equal to the
difference between (i) the amount realized on such disposition (other than
amounts attributable to accrued market discount or accrued interest not yet
taken into income, which will be treated as interest for U.S. federal income tax
purposes) and (ii) the U.S. Holder's adjusted tax basis in a registered note. A
U.S. Holder's adjusted tax basis in a registered note generally will equal the
amount such holder paid for the note, net of accrued interest, if any, increased
by accrued OID and by any accrued but unpaid stated interest and/or any accrued
market discount, in each case, to the extent that the holder previously included
such amount(s) in income, and decreased by the amount of bond premium, if any,
amortized with respect to such note.
Gain or loss from the disposition of a registered note generally will
constitute capital gain or loss and will be long-term capital gain or loss if
the U.S. Holder has held the registered note for longer than one year. The
deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING. A U.S. Holder of a registered
note may be subject, under certain circumstances, to backup withholding at a
rate of 30% (which rate is scheduled to be reduced periodically through 2010 and
increased to 31% for 2011 and thereafter) with respect to payments of interest
on, and gross proceeds from a sale or other disposition of, a registered note.
These backup withholding rules apply if the U.S. Holder, among other things:
- fails to furnish a social security number or other taxpayer identification
number, or TIN, certified under penalties of perjury within a reasonable
time after the request therefor;
- furnishes an incorrect TIN;
- fails to properly report interest; or
- under certain circumstances, fails to provide a certified statement,
signed under penalties of perjury, that the TIN furnished is the correct
number and that such U.S. Holder is not subject to backup withholding.
136
<Page>
A U.S. Holder of a registered note who does not provide his, her or its
correct taxpayer identification number may be subject to penalties imposed by
the IRS. Backup withholding is not an additional tax. Any amount paid as backup
withholding is creditable against the U.S. Holder's federal income tax
liability, provided the requisite information is provided to the IRS. Certain
persons are exempt from backup withholding, including corporations and
tax-exempt entities, provided their exemption from backup withholding is
properly established. U.S. Holders of registered notes should consult their tax
advisors as to their qualifications for exemption from backup withholding and
the procedure for obtaining such exemption.
We, or our designated paying agent, will report to the holder of a
registered note and the IRS the amount of any "reportable payments" made by us
and any amount withheld with respect to the registered notes during the calendar
year.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income and estate
tax consequences to a beneficial owner of a registered note other than a U.S.
Holder (a "Non-U.S. Holder"). For purposes of the following discussion, interest
(including OID) and gain on the sale, exchange or other disposition of a
registered note will be considered to be "U.S. trade or business income" if such
income or gain is:
- effectively connected with the conduct of a trade or business in the
United States; or
- in the case of a treaty resident, attributable to a permanent
establishment (or, in the case of an individual, a fixed base) in the
United States.
INTEREST. Generally, interest (including OID) paid to a Non-U.S. Holder of
a registered note will not be subject to U.S. federal income or withholding tax
if such interest (including OID) is not U.S. trade or business income and is
"portfolio interest." Generally, interest (including OID) on the registered
notes will qualify as portfolio interest if the Non-U.S. Holder:
- does not actually or constructively own 10% or more of the total combined
voting power of all classes of our stock;
- is not a "controlled foreign corporation" with respect to which we are a
"related person" within the meaning of the Code; and
- certifies, under penalties of perjury, that such holder is not a U.S.
person and provides such holder's name and address.
The gross amount of payments of interest (including OID) that do not qualify
for the portfolio interest exception and that are not U.S. trade or business
income will be subject to U.S. withholding tax at a rate of 30% unless a treaty
applies to reduce or eliminate withholding. U.S. trade or business income will
be taxed at regular graduated U.S. rates rather than the 30% gross rate. Any
U.S. trade or business income received by a Non-U.S. Holder that is a
corporation may, under specific circumstances, be subject to an additional
"branch profits tax." To claim an exemption from withholding, or to claim the
benefits of a treaty, a Non-U.S. Holder must provide a properly executed IRS
Form W-8BEN or W-8ECI, as applicable, prior to the payment of interest. These
forms must be periodically updated. A Non-U.S. Holder who is claiming the
benefits of a treaty may be required, in certain instances, to obtain a TIN and
to provide certain documentary evidence issued by foreign governmental
authorities to prove residence in the foreign country. Also, special procedures
are provided under applicable regulations for payments through qualified
intermediaries.
SALE, EXCHANGE OR REDEMPTION OF REGISTERED NOTES. Except as described below
and subject to the discussion concerning backup withholding, any gain realized
by a Non-U.S. Holder on the sale,
137
<Page>
exchange or redemption of a registered note generally will not be subject to
U.S. federal income tax, unless:
- such gain is U.S. trade or business income;
- subject to certain exceptions, the Non-U.S. Holder is an individual who
holds the registered note as a capital asset and is present in the United
States for 183 days or more in the taxable year of the disposition; or
- the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain U.S. expatriates (including certain former
citizens or residents of the United States).
FEDERAL ESTATE TAX. A registered note held (or treated as held) by an
individual who is a Non-U.S. Holder at the time of his or her death will not be
subject to U.S. federal estate tax, provided that the individual does not
actually or constructively own 10% or more of the total combined voting power of
all classes of our stock and income on such note was not U.S. trade or business
income.
BACKUP WITHHOLDING AND INFORMATION REPORTING. We must report annually to
the IRS and to each Non-U.S. Holder any interest that is paid or accrued to the
Non-U.S. Holder. Copies of these information returns also may be made available
under the provisions of a specific treaty or other agreement to the tax
authorities of the country in which the Non-U.S. Holder resides.
Treasury regulations provide that the backup withholding tax at a current
rate of 30% (which rate is scheduled to be reduced periodically through 2010 and
increased to 31% for 2011 and thereafter) and certain information reporting will
not apply to such payments of interest with respect to which either the
requisite certification, as described above, has been received or an exemption
otherwise has been established, provided that neither we nor our paying agent
have actual knowledge that the holder is a U.S. person or that the conditions of
any other exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of a registered note to or
through the U.S. office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
as to its non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge or reason to
know that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the proceeds from the
disposition of a registered note to or through a non-U.S. office of a non-U.S.
broker will not be subject to information reporting or backup withholding unless
the non-U.S. broker has certain types of relationships with the United States (a
U.S. related person). In the case of the payment of the proceeds from the
disposition of a registered note to or through a non-U.S. office of a broker
that is either a U.S. person or a U.S. related person, the Treasury regulations
require information reporting (but not backup withholding) on the payment unless
the broker has documentary evidence in its files that the owner is a Non-U.S.
Holder and the broker does not have actual knowledge or reason to know to the
contrary.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-U.S.
Holder's U.S. federal income tax liability, provided that the required
information is provided to the IRS.
THE PRECEDING DISCUSSION OF MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF REGISTERED NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.
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<Page>
PLAN OF DISTRIBUTION
Each broker-dealer that receives registered securities in the exchange
offers for its own account must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resales of
such securities. We reserve the right in our sole discretion to purchase or make
offers for, or to offer registered securities for, any old securities that
remain outstanding subsequent to the expiration of the exchange offers pursuant
to this prospectus or otherwise and, to the extent permitted by applicable law,
purchase old securities in the open market, in privately negotiated transactions
or otherwise. This prospectus, as it may be amended or supplemented from time to
time, may be used by all persons subject to the prospectus delivery requirements
of the Securities Act, including broker-dealers in connection with resales of
registered securities received in the exchange offers, where such securities
were acquired as a result of market-making activities or other trading
activities and may be used by us to purchase any securities outstanding after
expiration of the exchange offers. We have agreed that, for a period of
180 days after the expiration of the exchange offers, we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
We will not receive any proceeds from any sale of registered securities by
broker-dealers. Securities received by broker-dealers in the exchange offers for
their own account may be sold from time to time in one or more transactions in
the over-the counter market, in negotiated transactions, through the writing of
options on the registered securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such registered securities. Any
broker-dealer that resells registered securities that were received by it in the
exchange offers for its own account and any broker or dealer that participates
in a distribution of such securities may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of such
securities and any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The letter
of transmittal for your securities states that, by acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration of the exchange offers, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal for your securities. We have agreed to pay all
expenses incident to the exchange offers, other than commissions or concessions
of any brokers or dealers, and will indemnify holders of the securities,
including any broker-dealers, against certain liabilities under the Securities
Act.
LEGAL MATTERS
Certain legal matters with respect to the exchange offers will be passed
upon for us by Weil, Gotshal & Manges LLP, New York, New York.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Von Hoffmann Holdings Inc. at
December 31, 2001 and 2000, and for each of the three years in the period ended
December 31, 2001, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
audting.
139
<Page>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the registered
securities. This prospectus, which is a part of the registration statement,
omits certain information included in the registration statement and the
exhibits thereto. For further information with respect to us and the securities,
we refer you to the registration statement and its exhibits. The descriptions of
each contract and document contained in this prospectus are summaries and
qualified in their entirety by reference to the copy of each such contract or
document filed as an exhibit to the registration statement. You may read and
copy the registration statement, including exhibits thereto, at the Commission's
Public Reading Room located at 450 Fifth Street, N.W., Washington D.C. 20549.
You may obtain information on the operation of the Public Reading Room by
calling the Commission at 1-800-SEC-0300. The Commission also maintains an
Internet site (www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants such as us who file
electronically with the Commission.
Upon completion of the exchange offers, we will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, will file reports, proxy and information statements
with the Commission. You may inspect and copy these reports, proxy and
information statements and other information at the addresses set forth above.
You may request copies of these documents by contacting us at: Von Hoffmann
Corporation, 1000 Camera Avenue, St. Louis, Missouri 63126, Attn: Chief
Financial Officer.
140
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<Table>
<Caption>
PAGE
----
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors............................ F-2
Consolidated Balance Sheets as of December 31, 2000 and F-3
2001....................................................
Consolidated Statements of Operations for the years ended
December 31, 1999, 2000
and 2001................................................ F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended
December 31, 1999, 2000 and 2001........................ F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 2000
and 2001................................................ F-7
Notes to Consolidated Financial Statements................ F-8
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 2001 and F-21
March 31, 2002 (unaudited)..............................
Consolidated Statements of Operations (unaudited) for the
three months ended March 31, 2002 and 2001.............. F-23
Statements of Cash Flows (unaudited) for the three months F-24
ended March 31, 2002 and 2001...........................
Notes to Unaudited Financial Statements................... F-25
</Table>
F-1
<Page>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Von Hoffmann Holdings Inc.
We have audited the accompanying consolidated balance sheets of Von Hoffmann
Holdings Inc. and Subsidiaries at December 31, 2001 and 2000, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Von Hoffmann
Holdings Inc. and Subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
St. Louis, Missouri
June 20, 2002
F-2
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
DECEMBER 31,
-----------------------------
2000 2001
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,685,655 $ 18,319,923
Trade accounts receivable, less allowance for doubtful
accounts of $532,128 in 2000 and $563,957 in 2001....... 57,899,234 46,750,791
Inventories............................................... 36,117,119 23,261,846
Income taxes refundable................................... 2,205,755 2,456,573
Prepaid expenses.......................................... 1,044,266 595,951
------------- -------------
Total current assets........................................ 102,952,029 91,385,084
Deferred debt issuance cost, net of accumulated amortization
of $5,454,267 in 2000 and $7,441,351 in 2001.............. 7,440,626 5,467,105
Property, plant, and equipment:
Buildings and improvements................................ 43,958,818 46,467,711
Machinery and equipment................................... 196,759,662 221,004,588
Transportation equipment.................................. 2,832,974 2,815,781
Furniture and fixtures.................................... 8,627,176 9,853,461
------------- -------------
252,178,630 280,141,541
Allowance for depreciation and amortization............... (101,434,846) (138,471,747)
------------- -------------
150,743,784 141,669,794
Installation in process................................... 7,678,315 1,912,618
Land...................................................... 4,894,397 4,894,397
------------- -------------
163,316,496 148,476,809
Goodwill, net of accumulated amortization of $29,734,050 in
2000 and $38,805,103 in 2001.............................. 192,272,037 183,200,984
Covenant not to compete, net of accumulated amortization of
$563,637 in 2000 and $781,819 in 2001..................... 436,363 218,181
------------- -------------
$ 466,417,551 $ 428,748,163
============= =============
</Table>
F-3
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<Table>
<Caption>
DECEMBER 31,
-----------------------------
2000 2001
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and estimated expenses............. $ 17,978,439 $ 14,099,591
Salaries and wages........................................ 8,528,602 9,257,062
Taxes, other than income taxes............................ 838,575 681,215
Current portion of long-term debt......................... 7,675,000 29,235,592
Deferred income taxes..................................... 665,752 1,161,582
------------- -------------
Total current liabilities................................... 35,686,368 54,435,042
Long-term liabilities and reserves:
Reserve for product warranty.............................. 350,000 350,000
Deferred income taxes..................................... 16,853,228 9,656,093
Senior secured credit agreement--revolving loan........... 33,000,000 23,000,000
Senior secured credit agreement--term loans............... 199,100,000 189,319,331
Senior secured credit agreement--acquisition loan......... 25,000,000 --
Senior subordinated notes................................. 100,000,000 100,000,000
Subordinated exchange debentures.......................... 37,033,331 43,016,132
------------- -------------
411,336,559 365,341,556
Stockholders' equity:
Common stock; $0.01 par value per share; 100,000,000
shares authorized....................................... 515,944 515,944
Additional paid-in capital................................ 59,980,698 59,980,698
Accumulated deficit....................................... (39,699,932) (49,943,911)
Treasury stock; at cost, 60,000 shares.................... -- (90,000)
Notes receivable from the sale of stock and accrued
interest................................................ (1,402,086) (1,491,166)
------------- -------------
Total stockholders' equity.................................. 19,394,624 8,971,565
------------- -------------
$ 466,417,551 $ 428,748,163
============= =============
</Table>
See accompanying notes.
F-4
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 2000 2001
------------ ------------ ------------
Net sales.......................................... $386,107,763 $443,422,931 $407,096,402
Cost of products and services...................... 322,311,099 374,165,599 346,917,560
------------ ------------ ------------
Gross profit....................................... 63,796,664 69,257,332 60,178,842
Operating expenses:
Selling and administrative expenses.............. 31,216,360 33,597,323 31,263,254
Noncompete and special consulting expenses....... 2,926,030 2,149,239 577,959
Restructuring charge............................. -- -- 1,475,579
------------ ------------ ------------
34,142,390 35,746,562 33,316,792
------------ ------------ ------------
Income from operations............................. 29,654,274 33,510,770 26,862,050
Interest income.................................... 310,605 471,070 264,849
Loss on disposal of depreciable assets............. (399,542) (642,880) (512,467)
Interest expense--subsidiary....................... (32,111,156) (36,855,491) (32,143,823)
Interest expense--subordinate exchange
debentures....................................... (4,693,823) (5,295,989) (5,982,802)
------------ ------------ ------------
(36,893,916) (42,323,291) (38,374,243)
------------ ------------ ------------
Loss before income taxes........................... (7,239,642) (8,812,520) (11,512,193)
Income tax provision (benefit):
Current.......................................... 7,056,398 6,550,710 5,433,088
Deferred......................................... (6,200,964) (7,252,096) (6,701,302)
------------ ------------ ------------
855,434 (701,386) (1,268,214)
------------ ------------ ------------
Net loss........................................... $ (8,095,076) $ (8,111,134) $(10,243,979)
============ ============ ============
Basic and diluted loss per common share............ $ (0.16) $ (0.16) $ (0.20)
============ ============ ============
</Table>
See accompanying notes.
F-5
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<Table>
<Caption>
NUMBER OF SHARES AMOUNTS
--------------------- -------------------------------------------------------------------------------
NOTES
RECEIVABLE
FROM THE SALE
ADDITIONAL OF STOCK AND
COMMON TREASURY COMMON PAID-IN ACCUMULATED TREASURY ACCRUED
STOCK STOCK STOCK CAPITAL DEFICIT STOCK INTEREST TOTAL
---------- -------- -------- ----------- ------------ -------- ------------- ------------
Balance at December 31,
1998.................... 51,594,444 -- $515,944 $59,980,698 $(23,493,722) $ -- $(1,166,777) $ 35,836,142
Net loss.................. -- -- -- -- (8,095,076) -- -- (8,095,076)
Accrued interest.......... -- -- -- -- -- -- (112,254) (112,254)
---------- ------ -------- ----------- ------------ -------- ----------- ------------
Balance at December 31,
1999.................... 51,594,444 -- 515,944 59,980,698 (31,588,798) -- (1,279,031) 27,628,813
Net loss.................. -- -- -- -- (8,111,134) -- -- (8,111,134)
Accrued interest.......... -- -- -- -- -- -- (123,055) (123,055)
---------- ------ -------- ----------- ------------ -------- ----------- ------------
Balance at December 31,
2000.................... 51,594,444 -- 515,944 59,980,698 (39,699,932) -- (1,402,086) 19,394,624
Net loss.................. -- -- -- -- (10,243,979) -- -- (10,243,979)
Accrued interest.......... -- -- -- -- -- -- (133,517) (133,517)
Purchase of treasury
stock................... -- 60,000 -- -- -- (90,000) 44,437 (45,563)
---------- ------ -------- ----------- ------------ -------- ----------- ------------
Balance at December 31,
2001.................... 51,594,444 60,000 $515,944 $59,980,698 $(49,943,911) $(90,000) $(1,491,166) $ 8,971,565
========== ====== ======== =========== ============ ======== =========== ============
</Table>
See accompanying notes.
F-6
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 2000 2001
------------ ------------ ------------
OPERATING ACTIVITIES
Net loss............................................ $ (8,095,076) $ (8,111,134) $(10,243,979)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation.................................... 31,721,869 34,339,578 38,030,255
Amortization of intangibles..................... 8,605,242 9,118,237 9,289,234
Accretion of discount on subordinated exchange
debentures.................................... 374,583 374,583 374,583
Amortization of debt issuance costs............... 1,573,542 1,783,674 1,987,084
Loss on sale of equipment......................... 399,542 642,880 512,467
Provision for deferred income taxes............... (6,200,964) (7,252,096) (6,701,302)
Accrued interest on subordinated exchange
debentures...................................... 4,319,240 4,921,406 5,608,218
Accrued interest on notes from the sale of
stock........................................... (112,254) (123,055) (133,517)
Changes in operating assets and liabilities:
Trade accounts receivable....................... (14,566,948) 6,500,147 11,148,443
Inventories..................................... 1,792,157 (3,475,863) 12,855,273
Income taxes refundable......................... 2,223,074 (2,341,278) (250,818)
Prepaid expenses................................ 7,272 858,358 448,315
Trade accounts payable and estimated expenses... (1,481,811) 1,579,155 (3,878,848)
Salaries and wages.............................. 109,445 1,185,337 728,460
Taxes, other than income taxes.................. (40,761) (58,467) (157,360)
------------ ------------ ------------
Net cash provided by operating activities........... 20,628,152 39,941,462 59,616,508
INVESTING ACTIVITIES
Purchases of property, plant, and equipment......... (22,638,826) (28,131,550) (23,875,500)
Proceeds from sale of equipment..................... 2,529,810 930,851 172,463
Purchases of subsidiaries, net of acquired cash:
Precision Offset Printing Company, Inc............ -- (25,326,992) --
------------ ------------ ------------
Net cash used in investing activities............... (20,109,016) (52,527,691) (23,703,037)
FINANCING ACTIVITIES
Payments of debt issuance costs..................... -- (1,256,705) (13,563)
Net (payments) borrowings--revolving loan........... 6,000,000 7,000,000 (10,000,000)
Net (payments) borrowings--acquisition loan......... -- 16,500,000 (4,000,000)
Payments on senior secured debt--term loans......... (5,175,000) (6,425,000) (9,220,077)
Receipt on notes receivable from sale of stock...... -- -- 44,437
Purchase of treasury stock.......................... -- -- (90,000)
------------ ------------ ------------
Net cash (used in) provided by financing
activities........................................ 825,000 15,818,295 (23,279,203)
------------ ------------ ------------
Net increase in cash and cash equivalents........... 1,344,136 3,232,066 12,634,268
Cash and cash equivalents at beginning of year...... 1,109,453 2,453,589 5,685,655
------------ ------------ ------------
Cash and cash equivalents at end of year............ $ 2,453,589 $ 5,685,655 $ 18,319,923
============ ============ ============
</Table>
See accompanying notes.
F-7
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Von Hoffmann
Holdings Inc. (formerly known as Von Hoffmann Corporation) (the Company) and its
wholly owned subsidiary, Von Hoffmann Corporation (formerly known as Von
Hoffmann Press, Inc.) (the Subsidiary), and its wholly owned subsidiaries:
Mid-Missouri Graphics, Inc., Von Hoffmann Graphics, Inc., H&S Graphics, Inc.,
Preface, Inc., One Thousand Realty and Investment Company, and Precision Offset
Printing Company, Inc. Effective January 1, 2000, the Subsidiary's former
subsidiaries of Custom Printing Company, Inc. and Bawden Printing, Inc. were
merged together to create Von Hoffmann Graphics, Inc. Effective July 1, 2001,
Mid-Missouri Graphics, Inc. was merged into the Subsidiary. Intercompany
accounts and transactions have been eliminated. Refer to Note 11 for further
discussion.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results will differ from these estimates.
BUSINESS SEGMENT AND CONCENTRATION OF CREDIT RISK
Substantially all of the Company's assets, sales, and operating earnings are
derived from the performance of book manufacturing services to educational
publishers, commercial entities, and governmental institutions throughout the
United States. At December 31, 2001, approximately 16 percent of the Company's
workforce is subject to collective bargaining agreements. Two customers and
their affiliates accounted for 13.5 percent and 11.8 percent of 1999 net sales,
respectively, 16.7 percent and 12.1 percent of 2000 net sales, respectively, and
18.0 percent and 14.0 percent of 2001 net sales, respectively. Additionally,
these two customers and their affiliates accounted for 15.2 percent and
12.9 percent of accounts receivable, respectively, at December 31, 2001. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.
REVENUE RECOGNITION
In accordance with trade practice, revenues are recognized when the project
is complete as determined by the contractual arrangement.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to include demand deposits
and repurchase agreements with maturities of three months or less when
purchased. Cash and cash equivalents are carried at cost which approximates
market value.
F-8
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
The Company values substantially all of its inventory at the lower of cost,
as determined using the last-in, first-out (LIFO) method, or market. The
remainder of inventory is valued at the lower of cost, as determined using the
first-in, first-out (FIFO) method, or market. Effective January 1, 2000, the
Company made changes in its LIFO calculations consisting of consolidation of
LIFO pools, applying LIFO to additional portions of inventory, and changing
certain computational techniques. The impact of these changes in methods was not
material, individually or in the aggregate, to the operating results in 2000.
Inventories are comprised of the following amounts at December 31:
<Table>
<Caption>
2000 2001
----------- -----------
Raw materials...................................... $25,654,240 $18,504,261
Work-in-process.................................... 11,997,025 6,549,530
----------- -----------
37,651,265 25,053,791
Less LIFO reserve.................................. 1,534,146 1,791,945
----------- -----------
$36,117,119 $23,261,846
=========== ===========
</Table>
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. The Company capitalizes
all repair and maintenance costs which result in significant increases in the
useful life of the underlying asset. All other repair and maintenance costs are
expensed. Depreciation is computed using straight-line or accelerated methods
over the following estimated useful lives:
<Table>
<Caption>
DESCRIPTION YEARS
- ----------------------------------------------------------- ---------
Buildings and improvements................................. 11-40
Machinery and equipment.................................... 5-12
Transportation equipment................................... 4-10
Furniture and fixtures..................................... 4-7
</Table>
GOODWILL
The excess of cost over the fair value of net assets acquired (or goodwill)
generally is amortized on a straight-line basis over periods ranging between 7
and 25 years. The carrying amount of goodwill is reviewed if facts and
circumstances suggest that it may be impaired. If this review indicates that
goodwill will not be recoverable, as determined based on the estimated
undiscounted cash flows of the entity acquired over the remaining amortization
period, the carrying amount of the goodwill is reduced by the estimated
shortfall of cash flows. In addition, the Company assesses long-lived assets for
impairment under Statement of Financial Accounting Standards (SFAS) No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF. Under those rules, goodwill associated with assets acquired in a
purchase business combination is included in impairment evaluations when events
or circumstances exist that indicate the carrying amount of those assets may
F-9
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
not be recoverable. In June 2001, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND
OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill will no longer be amortized,
but will be subject to annual impairment tests. Other intangible assets will
continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning the first quarter of 2002. Application of the
non-amortization provisions of the statement is expected to result in a decrease
in net loss of approximately $8.9 million per year ($0.17 per diluted share).
During 2002, the Company will perform the first of the required impairment tests
of goodwill and has not yet determined what the effect of these tests will be on
the earnings and financial position of the Company.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the financial and tax basis of assets and liabilities. Deferred income
taxes are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled.
EMPLOYEE STOCK OPTIONS
As permitted by SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the
Company follows Accounting Principles Board (APB) Opinion No. 25 and related
interpretations in accounting for its stock compensation awards.
SHIPPING AND HANDLING COSTS
The Company records all revenues related to shipping and handling fees in
net sales and the related costs in cost of products and services.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' balances to conform
with the current year presentation.
2. RECAPITALIZATION RESTATED TO A PURCHASE
Effective May 22, 1997, a leveraged recapitalization of the Company took
place (Recapitalization) pursuant to which:
(1) The Company executed a credit agreement with a syndicate of financial
institutions representing the senior secured credit facility (the Credit
Agreement) in an aggregate amount of $200 million. Initial proceeds under
the senior secured credit facility were $125 million. The terms of the
senior secured credit facility is described in Note 5.
(2) The Company issued $100 million of senior subordinated notes (Note 5).
F-10
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED)
(3) In exchange for $67.1 million, DLJ Merchant Banking Partners II acquired
approximately 84% of the new common stock of the Company, redeemable
preferred stock, and warrants to purchase additional shares of new common
stock in the Company. On November 16, 1998, the preferred stock was
converted into 13.5 percent subordinated exchange debentures at the then
accreted value of $30.4 million. The terms of the 13.5 percent
subordinated exchange debentures are described in Note 5.
(4) The Company redeemed/exchanged the former common stock of the Company
owned by ZS VH L.P. (ZS) for (a) cash of $288.8 million and (b) 10% of
the new common stock of the Company.
(5) The Company exchanged the former common stock of the Company owned by
Robert A. Uhlenhop (Uhlenhop), the Company's former president and chief
executive officer, for approximately 2.5% of the new common stock of the
Company. In exchange for $0.3 million in cash and $0.5 million of notes
receivable, Uhlenhop acquired an additional 1.5% of the new common stock
in the Company.
(6) In exchange for $0.4 million in cash and $0.4 million of notes
receivable, certain other management personnel acquired the remaining
2.0% of the new common stock in the Company.
(7) Costs incurred by the Company related to the recapitalization were
approximately $5.9 million and were expensed in the predecessor financial
statements.
Through June 19, 2002, the Company accounted for the May 22, 1997
Recapitalization transaction using the historical basis of the Company's
existing assets and liabilities (i.e., "recapitalization accounting") because
there was substantive continuing voting ownership by ZS. Because of the events
described below and the rules in SEC Staff Accounting Bulletin 54 ("SAB 54"),
the Company was required to retroactively pushdown the new owners' basis to the
Company's separate financial statements--as if it were a new entity as of
May 22, 1997.
During 2002, the Company had the following equity transactions:
- On March 26, 2002, the Company issued 20 million shares of its common
stock to its majority shareholder for $20 million in cash.
- On June 20, 2002, the Company purchased all of the 5 million common shares
owned by ZS for $5.0 million in cash.
- On June 20, 2002, the Company purchased all of the 2 million common shares
owned by Uhlenhop for $2.0 million, consisting of approximately
$1.2 million in cash and settlement of a note receivable of approximately
$0.8 million.
As a result of these transactions, the majority owner of the Company and
affiliates owned approximately 96% of the Company's common stock. In accordance
with SAB 54, recapitalization accounting could no longer be used and the new
owners' "purchase accounting" basis had to be pushed-down to the Company's
financial statements as if it had occurred May 22, 1997. The accompanying
financial statements reflect this retroactive application and, accordingly, the
2001 and
F-11
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED)
prior balances have been restated from their recapitalization accounting
presentation in past financial statements issued by the Company.
Pushing-down the purchase accounting for the May 22, 1997 partial purchase
by the new owners' resulted in the following adjustments as of December 31, 2000
and 2001 and for the years ended December 31, 1999, 2000 and 2001:
<Table>
<Caption>
DECEMBER 31, 2000 DECEMBER 31, 2001
---------------------------- ----------------------------
PREVIOUSLY RESTATED PREVIOUSLY RESTATED
REPORTED BALANCE REPORTED BALANCE
------------- ------------ ------------- ------------
BALANCE SHEETS:
Inventories.......................... $ 28,648,925 $ 36,117,119 $ 15,789,157 $ 23,261,846
Property, plant and equipment, net... 139,072,232 163,316,496 137,709,574 148,476,809
Goodwill, net........................ 41,288,680 192,272,037 39,267,433 183,200,984
Net deferred income tax liability.... 5,883,016 17,518,980 4,116,548 10,817,675
Total stockholders' equity
(deficit).......................... (151,665,227) 19,394,624 (146,550,783) 8,971,565
</Table>
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1999 2000 2001
--------------------------- --------------------------- ---------------------------
PREVIOUSLY RESTATED PREVIOUSLY RESTATED PREVIOUSLY RESTATED
REPORTED BALANCE REPORTED BALANCE REPORTED BALANCE
------------ ------------ ------------ ------------ ------------ ------------
STATEMENTS OF
OPERATIONS:
Cost of products and
services........... $311,482,777 $322,311,099 $361,911,162 $374,165,599 $334,372,403 $346,917,560
Selling and
administrative
expenses........... 23,498,614 31,216,360 25,776,350 33,597,323 23,404,166 31,263,254
Loss on disposal of
depreciable
assets............. (48,520) (399,542) (704,875) (642,880) (394,375) (512,467)
Income tax provision
(benefit).......... 5,238,929 855,434 4,095,143 (701,386) 3,716,620 (1,268,214)
Net income (loss).... 6,418,519 (8,095,076) 7,105,751 (8,111,134) 5,293,524 (10,243,979)
Earnings (loss) per
share:
Basic.............. $ 0.12 $ (0.16) $ 0.14 $ (0.16) $ 0.10 $ (0.20)
Diluted............ $ 0.11 $ (0.16) $ 0.12 $ (0.16) $ 0.09 $ (0.20)
</Table>
The March 26, 2002 acquisition by the majority owner of the newly issued
shares and the June 20, 2002 acquisitions by the Company of all common shares
held by ZS and Uhlenhop resulted in additional purchase accounting basis being
pushed-down to the Company. Such pushdown resulted in additional goodwill of
approximately $6.0 million being recorded by the Company in 2002.
F-12
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
3. BUSINESS COMBINATIONS
PRECISION OFFSET PRINTING COMPANY, INC.
On March 30, 2000, the Company completed the acquisition of all of the
outstanding shares of Precision Offset Printing Company, Inc. and Precision
Ollan Seal, Inc. (collectively, Precision). The acquisition price, net of cash
received and including capitalized transaction costs, was approximately
$25.3 million and was principally financed with a $25 million increase in the
Senior Secured Credit Agreement (the Credit Agreement).
The acquisition was accounted for as a purchase, and the consolidated
financial statements include the results of operations of Precision from the
acquisition date. The excess purchase price over estimated fair value of net
assets acquired was approximately $17.1 million and is being amortized using the
straight-line method over 25 years. Precision operates plants in Leesport,
Pennsylvania, and Dauberville, Pennsylvania. Precision manufactures overhead
transparencies and plastic inserts for use primarily in the education market.
The 2000 and 1999 pro forma results of operations as if the Precision
acquisition had occurred at the beginning of each respective period would not
have been materially different from the reported results.
4. RESTRUCTURING CHARGE
During 2001, the Company closed the sheet-fed printing, stripping, and
platemaking operations of its St. Louis, Missouri, manufacturing location. The
majority of these operations were transferred to the Owensville, Missouri,
manufacturing location of Von Hoffmann Graphics, Inc. Additionally, the Company
reduced the workforce within the St. Louis, Missouri, manufacturing location of
the Subsidiary. Lastly, the Company closed the Owensville, Missouri,
manufacturing location of the Subsidiary. These operations and certain related
assets were consolidated into the Jefferson City, Missouri, manufacturing
locations of the Subsidiary. As a result of these restructurings, the Company
recorded total restructuring expenses of approximately $1,476,000 consisting
mainly of employee severance and equipment relocation costs. At December 31,
2001, the Company had remaining accrued reserves of approximately $106,000,
which it anticipates utilizing in the first quarter of 2002.
F-13
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
5. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<Table>
<Caption>
2000 2001
------------ ------------
Von Hoffmann Corporation:
Senior secured credit agreement--revolving
loan......................................... $ 33,000,000 $ 23,000,000
Senior secured credit agreement--term loans.... 206,775,000 197,554,923
Senior subordinated notes...................... 100,000,000 100,000,000
Senior secured credit agreement--acquisition
loan......................................... 25,000,000 21,000,000
------------ ------------
364,775,000 341,554,923
Von Hoffmann Holdings Inc.:
Subordinated exchange debentures............... 37,033,331 43,016,132
------------ ------------
37,033,331 43,016,132
------------ ------------
401,808,331 384,571,055
Less current portion............................. 7,675,000 29,235,592
------------ ------------
$394,133,331 $355,335,463
============ ============
</Table>
SENIOR SECURED CREDIT AGREEMENT
On July 15, 1998, the Subsidiary amended and restated its existing Credit
Agreement dated May 22, 1997 to increase the available credit from $200 million
to $305 million. On March 31, 2000 and May 2, 2000, the Subsidiary amended and
restated the Credit Agreement to increase the available credit an additional
$10 million and $15 million, respectively. At December 31, 2001, the available
credit under the Credit Agreement is $330 million.
The Credit Agreement is comprised of three term loan tranches with
maturities of six, seven, and eight years. Amortization of these term loans
commenced on September 30, 1997. The aggregate annual principal amounts,
adjusted for prepayments, to be amortized on the Tranche A term loan of
$25 million range from $1.25 million to $6.36 million, the Tranche B term loan
of $50 million will be amortized in aggregate annual principal amounts of
$0.5 million during each of the first six years and $44 million in the seventh
year, and the Tranche C term loan of $155 million, as amended, will be amortized
in aggregate annual principal amounts ranging from $0.5 million to
$1.55 million during each of the first seven years and $141.6 million during the
eighth year.
In addition, the Credit Agreement includes a revolving loan and an
acquisition loan commitment of $75 million and $25 million, respectively.
Amounts outstanding at December 31, 2000 under the revolving loan and
acquisition loan were $33 million and $25 million, respectively, and outstanding
borrowings at December 31, 2001 were $23 million and $21 million, respectively.
All remaining outstanding borrowings under the acquisition loan and the
revolving loan are due on May 22, 2002 and May 22, 2003, respectively.
F-14
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
5. LONG-TERM DEBT (CONTINUED)
Borrowings under the revolving loan commitment are subject to a
borrowing-base calculation based on the Subsidiary's accounts receivable and
inventory levels. At December 31, 2001, $29 million was available for additional
borrowings under the revolving loan commitment, net of $1.35 million in an
outstanding letter of credit.
Borrowings under the Credit Agreement bear interest at variable rates tied
to, at the Subsidiary's option, LIBOR or base rates of interest (weighted
average interest rate at December 31, 2001 is 5.03 percent), and such interest
is payable quarterly. Additionally, performance-based reductions of interest are
available on the three term loan tranches, the acquisition loan, and the
revolving loan subject to measures of leverage.
The indebtedness outstanding on the Credit Agreement is guaranteed by the
Company and the Subsidiary's subsidiaries and is secured by the capital stock of
the Subsidiary. Since the Company has no independent operations and no
subsidiaries other than the Subsidiary, these financial statements do not
include condensed consolidating financial information. Additionally, the
indebtedness is secured by substantially all existing and after-acquired
personal property and assets of the Subsidiary, including the capital stock of
its subsidiaries.
The Credit Agreement contains financial and other restrictive covenants,
including fixed charge and interest coverage ratios, a minimum level of earnings
before interest, taxes, depreciation, and amortization (EBITDA), limits on the
amount of dividends that can be paid, maximum capital expenditure levels, and
maximum leverage ratios. In addition, the Subsidiary is subject to mandatory
prepayments of the term portion of the Credit Agreement to the extent that
EBITDA exceeds certain threshold amounts measured on an annual basis.
SENIOR SUBORDINATED NOTES
On May 22, 1997, the Subsidiary issued $100 million of 10.375 percent senior
subordinated notes due at maturity in 2007.
The notes pay interest semiannually in arrears on May 15 and November 15 and
are a general unsecured obligation of the Subsidiary, guaranteed by the Company
and the subsidiaries of the Subsidiary, and subordinated to all current and
future senior debt, including borrowings under the Credit Agreement.
Under the senior subordinated notes indenture, the Subsidiary is subject to
certain covenants that, among other things, limit the ability of the Subsidiary
to pay dividends, incur additional indebtedness, and sell assets.
The subordinated notes indenture required the Company to file a registration
statement with the Securities and Exchange Commission within 365 days of the
issuance date or pay liquidated damages. The Company did not file a registration
statement and as a result has been paying liquidated damages at an annual rate
of 0.5 percent since May 22, 1998. The effective interest rate is
10.875 percent including this liquidated damages component.
F-15
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
5. LONG-TERM DEBT (CONTINUED)
SUBORDINATED EXCHANGE DEBENTURES/REDEEMABLE PREFERRED STOCK/WARRANTS
On May 22, 1997, the Company issued redeemable preferred stock due in 2009
and detachable warrants for $25 million. The total proceeds received were
allocated between the preferred stock and the warrants based on an estimate of
each security's fair value at the date of issuance. The preferred stock accreted
dividends at an annual rate of 13.5 percent until it was exchanged on
November 16, 1998 for subordinated exchange debentures due in 2009. The
subordinated exchange debentures accrue interest at a rate of 13.5 percent.
Interest is currently not paid in cash but accretes to and increases the
principal amount of each debenture. Beginning on May 22, 2002, interest will be
required to be paid in cash, subject to restrictions defined in the Credit
Agreement and conditions provided in the subordinated exchange debentures
indenture. The debentures cannot be redeemed by the Company until May 15, 2002
unless they are redeemed in conjunction with an initial public offering of the
Company's stock or redemption is requested by the debenture holders upon the
occurrence of a change in control of the ownership of the Company.
A total of 5,000,000 detachable warrants was issued in conjunction with the
issuance of the preferred shares. The warrants entitle the holder to purchase
common shares of the Company at a price of $0.01 per share. The warrants expire
after ten years and can be exercised at any time. The fair value assigned to
warrants of $4,495,000 is reflected in the stockholders' equity section of the
consolidated balance sheets.
Principal maturities of long-term debt for the next four years are:
<Table>
2002........................................................ $29,236,000
2003........................................................ 49,815,000
2004........................................................ 93,295,000
2005........................................................ 69,209,000
</Table>
At December 31, 2001, the fair value of the senior subordinated notes and
senior secured credit agreement--term loans was approximately $94.0 million and
$192.0 million, respectively, based on quoted market prices. The redemption
value of the subordinated exchange debentures at December 31, 2001 was
$45.8 million. The fair value of the Company's remaining debt approximates its
carrying value, based upon the Company's current incremental borrowing rates for
similar types of borrowing arrangements. Total interest paid on all debt was
$30,522,175 in 1999, $35,089,553 in 2000, and $30,346,820 in 2001.
F-16
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
6. INCOME TAXES
The reconciliation of income tax expense at the U.S. federal statutory tax
rates to the effective income tax rates is as follows:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 2000 2001
-------- -------- --------
Expected statutory rate........................... 35.00 % 35.00 % 35.00 %
Nondeductible goodwill............................ (41.04)% (35.87)% (28.00)%
Accretion on subordinated exchange debentures..... (1.91)% (1.57)% (1.20)%
State income tax and other........................ (3.87)% 10.40 % 5.22 %
------ ------ ------
Effective tax rate................................ (11.82)% 7.96 % 11.02 %
====== ====== ======
</Table>
The components of the income tax provision charged to operations follow:
<Table>
<Caption>
1999 2000 2001
----------- ----------- -----------
Current:
U.S. federal......................... $ 6,375,465 $ 6,050,239 $ 4,878,105
State and other...................... 680,933 500,471 554,983
----------- ----------- -----------
$ 7,056,398 $ 6,550,710 $ 5,433,088
=========== =========== ===========
Deferred:
U.S. federal......................... $(5,602,579) $(6,698,040) $(6,016,771)
State and other...................... (598,385) (554,056) (684,531)
----------- ----------- -----------
$(6,200,964) $(7,252,096) $(6,701,302)
=========== =========== ===========
</Table>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<Table>
<Caption>
DECEMBER 31,
---------------------------
2000 2001
------------ ------------
Deferred tax assets:
Goodwill/impairment charge................................ $ 5,902,349 $ 5,491,560
Interest on subordinated exchange debentures.............. 3,609,048 5,684,407
Vacation accrual.......................................... 1,285,732 1,149,718
Other..................................................... 811,748 805,674
------------ ------------
Total deferred tax assets................................... 11,608,877 13,131,359
Deferred tax liabilities:
Property, plant, and equipment............................ 26,325,600 20,774,125
Inventory................................................. 2,763,232 3,116,974
Other..................................................... 39,026 57,935
------------ ------------
Total deferred tax liabilities............................ 29,127,857 23,949,034
------------ ------------
Net deferred tax liabilities................................ $(17,518,980) $(10,817,675)
============ ============
</Table>
F-17
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
6. INCOME TAXES (CONTINUED)
Income taxes of, $7,991,832, $8,489,766, and $9,433,947 were paid in 1999,
2000, and 2001, respectively.
7. PENSION AND PROFIT SHARING PLANS
Effective January 1, 1999, the Company merged six defined contribution
pension and profit sharing plans which it had sponsored into one defined
contribution pension and profit sharing plan. The Company contributed a total
of, $4,175,213 in 1999, $4,385,292 in 2000, and $4,343,222 in 2001 to all
defined contribution pension and profit sharing plans.
8. EMPLOYEE STOCK OPTION PLAN
During 1997, the Company authorized a stock option plan to grant options to
management personnel for up to 6,000,000 shares of the Company's common stock.
Certain options granted under the plan vest ratably over a five-year period,
while other options have an accelerated vesting feature in which vesting occurs
ratably over a five-year period only if certain performance targets are met. If
performance targets are not met, those options automatically vest nine years and
11 months from the date of grant. Vested options may be exercised up to ten
years from the date of grant.
Information related to the Company's stock option plan is presented below.
<Table>
<Caption>
1999 2000 2001
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
Outstanding at beginning of year......... 5,525,000 $ 1.17 5,600,000 $1.18 5,525,000 $1.19
Forfeited................................ -- -- 375,000 2.12 400,000 1.27
Granted.................................. 75,000 2.25 300,000 2.25 150,000 2.25
--------- ------- --------- ----- --------- -----
Outstanding at end of year............... 5,600,000 $ 1.18 5,525,000 $1.19 5,275,000 $1.20
========= ======= ========= ===== ========= =====
Exercisable at end of year............... 2,218,030 $ 1.11 3,378,815 $1.10 3,887,685 $1.12
========= ======= ========= ===== ========= =====
Reserved for future option grants........ 400,000 475,000 725,000
========= ========= =========
</Table>
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 and has been determined as if the Company had accounted
for its employee stock options under the fair value method of SFAS No. 123. The
fair value for these options was estimated at the date of grant using the
minimum value method. Under this method, the expected volatility of the
Company's common stock is not estimated, as there is no market for the Company's
common stock in which to monitor stock price volatility. The calculation of the
fair value of the options granted in 1999, 2000, and 2001 assumes a risk-free
interest rate of 5.25, 5.50, and 5.00 percent, respectively, an assumed dividend
yield of zero, and an expected life of the options of five years. The weighted
average fair value of options granted during 1999, 2000, and 2001 was $0.52,
$0.54, and $0.50 per share, respectively. The weighted average remaining
contractual life of options is 5.75 years. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' estimated vesting period.
F-18
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
8. EMPLOYEE STOCK OPTION PLAN (CONTINUED)
Option valuation models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. Based on the above
assumptions, the Company's pro forma net income and earnings per share
incorporating this amortization would not have been materially different from
reported amounts during 1999, 2000, and 2001.
In 2001, the Company modified certain terms under option agreements with one
of its officers. Under APB No. 25, as modified by FASB Interpretation No. 44,
ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION, the Company
would be required to remeasure the intrinsic value of these modified option
agreements should it become probable that the related employee will benefit from
the modified terms for vested options as of that date. This remeasurement, if
required, could result in a significant noncash compensation expense in the
future.
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted loss per
share:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
----------------------------------------
1999 2000 2001
----------- ----------- ------------
Numerator for basic and diluted earnings per
share--loss allocable to common stockholders........ $(8,095,076) $(8,111,134) $(10,243,979)
=========== =========== ============
Denominator for basic and diluted loss per
share--weighted average shares...................... 51,594,444 51,594,444 51,579,444
=========== =========== ============
Basic and diluted loss per share...................... $ (0.16) $ (0.16) $ (0.20)
=========== =========== ============
</Table>
10. RELATED PARTY TRANSACTIONS
The Company paid consulting fees to Credit Suisse First Boston Corporation
(Credit Suisse) (or its predecessor), an affiliate of a stockholder in the
Company, of approximately $0.25 million in 1999, 2000, and 2001. As part of the
financing activity disclosed in Note 11, the Company paid consulting fees
associated with formulation of financial strategies to Credit Suisse, of
approximately $1,000,000. In addition, the Company paid underwriting fees
associated with the 2009 Senior Notes and New Credit Agreement to Credit Suisse
of approximately $8,200,000.
11. SUBSEQUENT EVENT
On February 25, 2002, the Company merged Von Hoffmann Graphics, Inc. into
Von Hoffmann Press, Inc. and renamed the entity Von Hoffmann Corporation. Prior
to this merger, the former Von Hoffmann Corporation changed its name to Von
Hoffmann Holdings, Inc.
In March 26, 2002, the Subsidiary entered into a Senior Secured Credit
Agreement (New Credit Agreement), which provides $90.0 million on a revolving
basis. The facility is secured by accounts receivable, inventory, and property,
plant, and equipment. At the Company's one-time option, the
F-19
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2001
11. SUBSEQUENT EVENT (CONTINUED)
available borrowing base may be increased to provide for borrowings of up to
$100.0 million, subject to finding lenders to provide such increase. The New
Credit Agreement expires November 15, 2006.
In addition, on March 26, 2002, the Subsidiary completed financing
arrangements on $215.0 million Senior Notes, due March 15, 2009 (March 15, 2009
Senior Notes) at an interest rate of 10.25 percent. The proceeds from the
March 15, 2009 Senior Notes and the New Credit Agreement were used to pay off
all outstanding balances under the Credit Agreement. The extinguishment of the
Credit Agreement will result in the Company recording an extraordinary loss,
consisting of unamortized deferred debt issuance costs, of approximately
$2.0 million, net of taxes, in the first quarter of 2002.
On June 20, 2002, the Company and Uhlenhop amended his employment agreement
and at which time the Company paid Uhlenhop a one-time cash payment on an after
tax basis of $1.0 million, which resulted in the Company recording an expense in
June 2002 of approximately $1.8 million.
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<Table>
<Caption>
QUARTER
-----------------------------------------------------------------------
2000 FIRST SECOND THIRD FOURTH YEAR
- ---- ------------ ------------ ------------ ----------- ------------
Net sales................. $101,785,173 $120,263,666 $125,698,775 $95,675,317 $443,422,931
Gross profit.............. 16,493,232 20,426,184 20,486,933 11,850,983 69,257,332
Net loss.................. (2,439,959) (992,932) (77,089) (4,601,154) (8,111,134)
Basic and diluted loss per
share................... (0.05) (0.02) -- (0.09) (0.16)
</Table>
<Table>
<Caption>
QUARTER
-----------------------------------------------------------------------
2001 FIRST SECOND THIRD FOURTH YEAR
- ---- ------------ ------------ ------------ ----------- ------------
Net sales................. $112,852,034 $113,889,206 $107,451,937 $72,903,225 $407,096,402
Gross profit.............. 16,677,865 20,496,269 15,844,935 7,159,773 60,178,842
Net loss.................. (2,757,608) (63,354) (2,099,744) (5,323,273) (10,243,979)
Basic and diluted loss per
share................... (0.05) -- (0.04) (0.10) (0.20)
</Table>
F-20
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
DECEMBER 31,
2001 MARCH 31, 2002
------------- --------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 18,319,923 $ 28,801,959
Trade accounts receivable, less allowance for doubtful
accounts of $563,957 at December 31, 2001 and $475,084
at March 31, 2002....................................... 46,750,791 47,851,227
Inventories............................................... 23,261,846 32,083,846
Income taxes refundable................................... 2,456,573 2,056,632
Prepaid expenses.......................................... 595,951 688,488
------------- -------------
Total current assets........................................ 91,385,084 111,482,152
Deferred debt issuance cost, net of accumulated amortization
of $7,441,351 at December 31, 2001 and $1,726,611 at March
31, 2002.................................................. 5,467,105 11,269,877
Property, plant, and equipment:
Buildings and improvements................................ 46,467,711 46,841,215
Machinery and equipment................................... 221,004,588 221,220,217
Transportation equipment.................................. 2,815,781 3,141,347
Furniture and fixtures.................................... 9,853,461 9,842,840
------------- -------------
280,141,541 281,045,619
Allowance for depreciation and amortization............... (138,471,747) (146,869,964)
------------- -------------
141,669,794 134,175,655
Installation in process................................... 1,912,618 5,623,512
Land...................................................... 4,894,397 4,894,397
------------- -------------
148,476,809 144,693,564
Goodwill, net of accumulated amortization of $38,805,103 at
December 31, 2001 and March 31, 2002...................... 183,200,984 185,682,750
Covenant not to compete, net of accumulated amortization of
$781,819 at December 31, 2001 and $836,364 at March 31,
2002...................................................... 218,181 163,636
------------- -------------
$ 428,748,163 $ 453,291,979
============= =============
</Table>
F-21
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<Table>
<Caption>
DECEMBER 31,
2001 MARCH 31, 2002
------------- --------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and estimated expenses............. $ 14,099,591 $ 23,789,466
Salaries and wages........................................ 9,257,062 6,989,463
Taxes, other than income taxes............................ 681,215 878,813
Current portion of long-term debt......................... 29,235,592 --
Deferred income taxes..................................... 1,161,582 1,431,884
------------- -------------
Total current liabilities................................... 54,435,042 33,089,626
Long-term liabilities and reserves:
Reserve for product warranty.............................. 350,000 350,000
Deferred income taxes..................................... 9,656,093 7,597,892
Senior secured credit agreement--revolving loan........... 23,000,000 27,000,000
Senior secured credit agreement--term loans............... 189,319,331 --
Senior notes.............................................. -- 215,000,000
Senior subordinated notes................................. 100,000,000 100,000,000
Subordinated exchange debentures.......................... 43,016,132 44,629,127
------------- -------------
365,341,556 394,577,019
Stockholders' equity:
Common stock; $0.01 par value per share; shares authorized
are 100,000,000 at December 31, 2001 and 150,000,000 at
March 31, 2002.......................................... 515,944 715,944
Additional paid-in capital................................ 59,980,698 82,262,464
Accumulated deficit....................................... (49,943,911) (55,737,138)
Treasury stock; at cost, 60,000 shares.................... (90,000) (90,000)
Notes receivable from the sale of stock and accrued
interest................................................ (1,491,166) (1,525,936)
------------- -------------
Total stockholders' equity.................................. 8,971,565 25,625,334
------------- -------------
$ 428,748,163 $ 453,291,979
============= =============
</Table>
See notes to consolidated financial statements.
F-22
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
----------------------------
2001 2002
------------- ------------
Net sales................................................... $112,852,034 $82,666,127
Cost of products and services............................... 96,174,169 73,297,540
------------ -----------
Gross profit................................................ 16,677,865 9,368,587
Operating expenses:
Selling and administrative expenses....................... 8,616,302 5,852,006
Noncompete and special consulting expenses................ 121,328 1,241,675
------------ -----------
8,737,630 7,093,681
------------ -----------
Income from operations...................................... 7,940,235 2,274,906
Interest income............................................. 71,701 50,246
Loss on disposal of depreciable assets...................... (64,212) (495,837)
Interest expense--subsidiary................................ (9,535,273) (6,394,281)
Interest expense--subordinate exchange debentures........... (1,426,927) (1,612,995)
------------ -----------
(10,954,711) (8,452,867)
------------ -----------
Loss before extraordinary item and income taxes............. (3,014,476) (6,177,961)
Income tax (benefit) provision:
Current................................................... 1,352,986 (565,363)
Deferred.................................................. (1,609,854) (1,787,899)
------------ -----------
(256,838) (2,353,262)
------------ -----------
Loss before extraordinary item.............................. (2,757,608) (3,824,699)
Extraordinary item--loss on extinguishment of debt, net of
tax benefit of $1,156,120................................. - (1,968,528)
------------ -----------
Net loss.................................................... $ (2,757,608) $(5,793,227)
============ ===========
Basic and diluted loss per common share:
Loss before extraordinary item............................ $ (0.05) $ (0.07)
Extraordinary item........................................ - $ (0.04)
------------ -----------
Net loss.................................................. $ (0.05) $ (0.11)
============ ===========
Average number of shares outstanding--basic and diluted..... 51,594,444 52,633,245
============ ===========
</Table>
See notes to consolidated financial statements.
F-23
<Page>
\
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS (UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
-----------------------------
2001 2002
------------ --------------
OPERATING ACTIVITIES
Net loss.................................................... $(2,757,608) $ (5,793,227)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation............................................ 9,135,700 9,592,329
Amortization of intangibles............................. 2,322,308 54,545
Amortization of debt issuance costs..................... 496,771 3,621,419
Loss on sale of equipment............................... 64,212 495,837
Provision for deferred income taxes..................... (1,609,854) (1,787,899)
Accrued interest on subordinated exchange debentures.... 1,426,927 1,612,995
Accrued interest on notes from the sale of stock........ (32,693) (34,770)
Changes in operating assets and liabilities:
Trade accounts receivable............................. (6,373,763) (1,100,436)
Inventories........................................... (7,274,295) (8,822,000)
Income taxes refundable............................... 4,551,092 399,941
Prepaid expenses...................................... (106,350) (92,537)
Trade accounts payable and estimated expenses......... 7,885,589 9,689,875
Salaries and wages.................................... 484,362 (2,267,599)
Taxes, other than income taxes........................ 49,351 197,598
----------- -------------
Net cash provided by operating activities................... 8,261,749 5,766,071
INVESTING ACTIVITIES
Purchases of property, plant, and equipment................. (12,067,853) (6,395,881)
Proceeds from sale of equipment............................. 63,265 90,960
----------- -------------
Net cash used in investing activities....................... (12,004,588) (6,304,921)
FINANCING ACTIVITIES
Payments of debt issuance costs............................. (13,563) (9,424,191)
Net (payments) borrowings--revolving loan................... 7,000,000 4,000,000
Net (payments) borrowings--acquisition loan................. -- (21,000,000)
Payments on senior secured debt--term loans................. (3,353,458) (197,554,923)
Proceeds from issuance of senior notes...................... -- 215,000,000
Issuance of common stock.................................... -- 20,000,000
----------- -------------
Net cash provided by financing activities................... 3,632,979 11,020,886
----------- -------------
Net increase (decrease) in cash and cash equivalents........ (109,860) 10,482,036
Cash and cash equivalents at beginning of period............ 5,685,655 18,319,923
----------- -------------
Cash and cash equivalents at end of period.................. $ 5,575,795 $ 28,801,959
=========== =============
</Table>
See notes to consolidated financial statements.
F-24
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of Von Hoffmann
Holdings Inc. (formerly known as Von Hoffmann Corporation) (the Company) have
been prepared in accordance with instructions to Form 10-Q and reflect all
adjustments which management believes necessary (which include only normal
recurring accruals and the effect on LIFO inventory valuations of estimated
inflationary cost increases and year-end inventory levels) to present fairly the
results of operations. These statements, however, do not include all information
and footnotes necessary for a complete presentation of the Company's financial
position, results of operations and cash flows in conformity with accounting
principles generally accepted in the United States.
Diluted earnings per share for the three months ended March 31, 2002 does
not include 4,950,000 common stock equivalents because they were anti-dilutive.
The Company's business is subject to seasonal influences, therefore, interim
results may not necessarily be indicative of results which may be expected for
any other interim period or for the year as a whole.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Von Hoffmann Corporation (formerly known as Von
Hoffmann Press, Inc.) (the Subsidiary), and its wholly owned subsidiaries: Von
Hoffmann Graphics, Inc., H&S Graphics, Inc., Preface, Inc., One Thousand Realty
and Investment Company, and Precision Offset Printing Company, Inc. Effective
February 25, 2002, Von Hoffmann Graphics, Inc. was merged into the Subsidiary.
Intercompany accounts and transactions have been eliminated.
2. RECAPITALIZATION RESTATED TO A PURCHASE
Effective May 22, 1997, a leveraged recapitalization of the Company took
place (Recapitalization) pursuant to which:
(1) The Company executed a credit agreement with a syndicate of financial
institutions representing the senior secured credit facility (the Credit
Agreement) in an aggregate amount of $200 million. Initial proceeds under
the senior secured credit facility were $125 million.
(2) The Company issued $100 million of senior subordinated notes.
(3) In exchange for $67.1 million, DLJ Merchant Banking Partners II acquired
approximately 84% of the new common stock of the Company, redeemable
preferred stock, and warrants to purchase additional shares of new common
stock in the Company. On November 16, 1998, the preferred stock was
converted into 13.5 percent subordinated exchange debentures at the then
accreted value of $30.4 million.
(4) The Company redeemed/exchanged the former common stock of the Company
owned by ZS VH L.P. (ZS) for (a) cash of $288.8 million and (b) 10% of
the new common stock of the Company.
(5) The Company exchanged the former common stock of the Company owned by
Robert A. Uhlenhop (Uhlenhop), the Company's former president and chief
executive officer, for
F-25
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED)
approximately 2.5% of the new common stock of the Company. In exchange
for $0.3 million in cash and $0.5 million of notes receivable, Uhlenhop
acquired an additional 1.5% of the new common stock in the Company.
(6) In exchange for $0.4 million in cash and $0.4 million of notes
receivable, certain other management personnel acquired the remaining
2.0% of the new common stock in the Company.
(7) Costs incurred by the Company related to the recapitalization were
approximately $5.9 million and were expensed in the predecessor financial
statements.
Through June 19, 2002, the Company accounted for the May 22, 1997
Recapitalization transaction using the historical basis of the Company's
existing assets and liabilities (i.e., "recapitalization accounting") because
there was substantive continuing voting ownership by ZS. Because of the events
described below and the rules in SEC Staff Accounting Bulletin 54 ("SAB 54"),
the Company was required to retroactively pushdown the new owners' basis to the
Company's separate financial statements--as if it were a new entity as of
May 22, 1997.
During 2002, the Company had the following equity transactions:
- On March 26, 2002, the Company issued 20 million shares of its common
stock to its majority shareholder for $20 million in cash.
- On June 20, 2002, the Company purchased all of the 5 million common shares
owned by ZS for $5.0 million in cash.
- On June 20, 2002, the Company purchased all of the 2 million common shares
owned by Uhlenhop for $2.0 million, consisting of approximately
$1.2 million in cash and settlement of a note receivable of approximately
$0.8 million.
As a result of these transactions, the majority owner of the Company and
affiliates owned approximately 96% of the Company's common stock. In accordance
with SAB 54, recapitalization accounting could no longer be used and the new
owners' "purchase accounting" basis had to be pushed-down to the Company's
financial statements as if it had occurred May 22, 1997. The accompanying
financial statements reflect this retroactive application and, accordingly, the
2002 and 2001 balances have been restated from their recapitalization accounting
presentation in past financial statements issued by the Company.
F-26
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
2. RECAPITALIZATION RESTATED TO A PURCHASE (CONTINUED)
Pushing-down the purchase accounting for the May 22, 1997 partial purchase
by the new owners' and the March 26, 2002 purchase by the majority owner
resulted in the following adjustments as of December 31, 2001 and March 31, 2002
and for the three months ended March 31, 2001 and 2002:
<Table>
<Caption>
DECEMBER 31, 2001 MARCH 31, 2002
---------------------------- ----------------------------
PREVIOUSLY RESTATED PREVIOUSLY RESTATED
REPORTED BALANCE REPORTED BALANCE
------------- ------------ ------------- ------------
BALANCE SHEETS:
Inventories..................................... $ 15,789,157 $ 23,261,846 $ 24,611,157 $ 32,083,846
Property, plant and equipment, net.............. 137,709,574 148,476,809 137,355,114 144,693,564
Goodwill, net................................... 39,267,433 183,200,984 39,267,433 185,682,750
Net deferred income tax liablity................ 5,904,945 10,817,675 5,332,388 9,029,776
Total stockholders' equity (deficit)............ (146,550,783) 8,971,565 (130,218,644) 25,625,334
</Table>
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------
2001 2002
------------------------- -------------------------
PREVIOUSLY RESTATED PREVIOUSLY RESTATED
REPORTED BALANCE REPORTED BALANCE
----------- ----------- ----------- -----------
STATEMENTS OF OPERATIONS:
Cost of products and services................... $92,799,452 $96,174,169 $70,083,439 $73,297,540
Selling and administrative expenses............. 6,639,215 8,616,302 5,665,233 5,852,006
Loss on disposal of depreciable assets.......... (64,212) (64,212) (467,924) (495,837)
Income tax provision (benefit).................. 1,002,763 (256,838) (1,084,611) (2,353,262)
Net income (loss) before extraordinary item..... 1,149,620 (2,757,608) (1,664,563) (3,824,699)
Net income (loss)............................... 1,149,620 (2,757,608) (3,633,091) (5,793,227)
Basic and diluted earnings (loss) per share:
Earnings (loss) before extraordinary item..... $ 0.02 $ (0.05) $ (0.03) $ (0.07)
Extraordinary item............................ - - (0.04) (0.04)
Net income (loss)............................. $ 0.02 $ (0.05) $ (0.07) $ (0.11)
</Table>
The March 26, 2002 acquisition by the majority owner of the newly issued
shares and the June 20, 2002 acquisitions by the Company of all common shares
held by ZS and Uhlenhop resulted in additional purchase accounting basis being
pushed-down to the Company. Such pushdown resulted in an additional goodwill of
approximately $6.0 million being recorded by the Company in 2002, of which
approximately $2.5 million was recorded in March 2002.
3. INVENTORIES
Inventories are priced at cost using the last-in, first-out (LIFO) method
that does not exceed market, for the year-end period reported. The Company does
not anticipate a material adjustment to the year-end LIFO reserve and thus, no
quarterly LIFO adjustment has been made.
F-27
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES (CONTINUED)
Inventories are comprised of the following amounts:
<Table>
<Caption>
DECEMBER 31, 2001 MARCH 31, 2002
----------------- --------------
Raw materials.................................. $18,504,261 $21,439,952
Work in process................................ 6,549,530 12,435,839
----------- -----------
25,053,791 33,875,791
Less LIFO reserve.............................. 1,791,945 1,791,945
----------- -----------
$23,261,846 $32,083,846
=========== ===========
</Table>
4. RESTRUCTURING CHARGE
During the second and third quarters of 2001, the Company closed the
sheet-fed printing, stripping, and platemaking operations of its St. Louis,
Missouri manufacturing location. The majority of these operations were
transferred to the Owensville, Missouri manufacturing location of Von Hoffmann
Graphics, Inc. Additionally, the Company reduced the workforce within the St.
Louis, Missouri manufacturing location of the Subsidiary. Lastly, the Company
closed the Owensville, Missouri manufacturing location of the Subsidiary. These
operations and certain related assets were consolidated into the Jefferson City,
Missouri manufacturing locations of the Subsidiary. As a result of these
restructurings, the Company recorded total restructuring expenses of
approximately $1,476,000 consisting mainly of employee severance and equipment
relocation costs in 2001. The Company utilized approximately $1,370,000 in 2001
and $106,000 in the first quarter of 2002. The Company has no remaining
liability associated with the restructuring.
5. LONG TERM DEBT
On March 26, 2002, the Subsidiary entered into a Senior Secured Credit
Agreement (New Credit Agreement) that includes a revolving loan commitment of
$90 million. The New Credit Agreement is secured by accounts receivable,
inventory as well as property, plant and equipment. At the Company's one-time
option, the available borrowing base may be increased to provide borrowings of
up to $100 million, subject to finding lenders to provide such increase. The New
Credit Agreement expires November 15, 2006.
In addition, on March 26, 2002, the Subsidiary issued $215 million Senior
Notes, due March 15, 2009 (2009 Senior Notes) at an interest rate of
10.25 percent. The proceeds from the New Credit Agreement and the 2009 Senior
Notes were used to pay off all outstanding balances under the previous credit
agreement.
As a result of the extinguishment of the previous credit agreement, the
Company recognized an extraordinary loss of approximately $1,968,528, net of tax
benefit of $1,156,120. The entire loss represents the write-off of deferred debt
issuance costs associated with the previous credit agreement.
6. ACCOUNTING CHANGES
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires business
combinations initiated after June 20, 2001, to be accounted for
F-28
<Page>
VON HOFFMANN HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
6. ACCOUNTING CHANGES (CONTINUED)
using the purchase method. SFAS No. 141 also further clarifies the criteria for
recognition of intangible assets separately from goodwill. The adoption of this
standard did not have any effect on the Company's accounting for prior business
acquisitions.
Under SFAS No. 142 goodwill is no longer amortized, but is subject to annual
impairment tests. Accordingly, as of January 1, 2002, the Company no longer
amortizes goodwill and will perform a transitional impairment test of its
existing goodwill by June 30, 2002 and annual impairment tests thereafter. The
Company does not expect any impairment of goodwill in connection with the
initial transitional impairment test. If goodwill amortization was not recorded
in the first quarter of fiscal 2001, first quarter fiscal 2001 adjusted net loss
and basic and diluted adjusted loss per share would have been approximately
$522,932 and $0.01 per share, respectively.
7. RELATED PARTY TRANSACTION
As part of the financing activity in 2002 discussed in Note 5, the Company
paid consulting fees associated with formulation of financial strategies, as
recorded in non-compete and special consulting expenses for the period ended
March 31, 2002, to Credit Suisse First Boston Corporation (Credit Suisse), an
affiliate of the majority stockholder of the Company, of approximately
$1,000,000. In addition, the Company paid underwriting fees associated with the
2009 Senior Notes and New Credit Agreement, as reflected in deferred debt
issuance cost at March 31, 2002, to Credit Suisse of approximately $8,200,000.
8. SUBSEQUENT EVENT
On June 20, 2002, the Company and Uhlenhop amended his employment agreement
and at which time the Company paid Uhlenhop a one-time cash payment on an after
tax basis of $1.0 million, which resulted in the Company recording an expense in
June 2002 of approximately $1.8 million.
F-29
<Page>
[LOGO]
<Page>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<Page>
[ALTERNATE FRONT COVER FOR MARKET-MAKING PROSPECTUS]
SUBJECT TO COMPLETION, DATED JUNE 21, 2002
PROSPECTUS
VON HOFFMANN CORPORATION
$215,000,000 10 1/4% SENIOR NOTES DUE 2009
AND
$100,000,000 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
AND
VON HOFFMANN HOLDINGS INC.
$48,056,397 13 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009
------------------------
The Company:
- We believe that we are the leading manufacturer of four-color case-bound
and soft-cover educational textbooks in the United States.
The 2009 notes and related guarantees:
- Maturity: March 15, 2009.
- Interest Payment: February 15 and August 15 of each year, beginning
August 15, 2002.
- Optional Redemption: Von Hoffmann may redeem the 2009 notes at any time
prior to March 15, 2005, in whole or in part, upon notice to the holders,
at a redemption price equal to the amount as calculated in accordance with
the first paragraph under "Description of the Registered
Securities--10 1/4% Senior Notes due 2009--Optional Redemption."
Von Hoffmann may redeem the 2009 notes at any time on or after March 15,
2005, in whole or in part, in cash at the redemption prices described in
this prospectus, plus accrued and unpaid interest to the date of
redemption.
In addition, on or before March 15, 2005, Von Hoffmann may redeem up to
35% of the aggregate principal amount of 2009 notes issued under the 2009
notes indenture with the proceeds of certain equity offerings. Von
Hoffmann may make that redemption only if, after the redemption, at least
65% of the aggregate principal amount of notes issued under the 2009 notes
indenture remains outstanding.
- Ranking: The registered 2009 notes and the related guarantees will rank:
- equal in right of payment to all of Von Hoffmann's and the guarantors'
existing and future senior indebtedness;
- senior in right of payment to Von Hoffmann's and the guarantors'
existing and future subordinated indebtedness; and
- effectively junior to Von Hoffmann's and the guarantors' secured
indebtedness, including any borrowings under our revolving credit
facility.
The 2007 notes and related guarantees:
- Maturity: May 15, 2007.
- Interest Payment: May 15 and November 15 each year.
- Optional Redemption: Von Hoffmann may redeem the 2007 notes at any time on
or after May 15, 2002, in whole or in part, in cash at the redemption
prices described in this prospectus, plus accrued and unpaid interest to
the date of redemption.
<Page>
- Ranking: The registered 2007 notes and the related guarantees will rank:
- junior in right of payment to all of Von Hoffmann's and the guarantors'
existing and future senior indebtedness; and
- equal in right of payment to Von Hoffmann's and the guarantors'
existing and future senior subordinated indebtedness.
The 2009 Holdings debentures:
- Maturity: May 15, 2009.
- Interest Payment: May 15 and November 15 each year.
- Optional Redemption: Holdings may redeem the 2009 Holdings debentures at
any time on or after May 15, 2002, in whole or in part, in cash at the
redemption prices described in this prospectus, plus accrued and unpaid
interest to the date of redemption.
- Ranking: The registered 2009 Holdings debentures will rank junior in right
of payment to all of Holdings' existing and future senior indebtedness.
------------------------
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE OF THIS
PROSPECTUS.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This prospectus will be used by Credit Suisse First Boston Corporation in
connection with offers and sales in market-making transactions at negotiated
prices related to prevailing market prices. There is currently no public market
for the securities. We do not intend to list the securities on any securities
exchange. Credit Suisse First Boston Corporation has advised us that it is
currently making a market in the securities; however, it is not obligated to do
so and may stop at any time. Credit Suisse First Boston Corporation may act as
principal or agent in any such transaction. We will not receive the proceeds of
the sale of the securities but will bear the expenses of registration.
------------------------
Credit Suisse First Boston Corporation
------------------------
THE DATE OF THIS PROSPECTUS IS , 2002
2
<Page>
[ALTERNATE SECTIONS FOR
CREDIT SUISSE FIRST BOSTON CORPORATION]
THERE IS NO EXISTING TRADING MARKET FOR THE SECURITIES.
There is no established market for the registered securities. We cannot
assure you with respect to:
- the liquidity of any market for the registered securities that may
develop;
- your ability to sell registered securities; or
- the price at which you will be able to sell the registered securities.
If a public market were to exist, the registered securities could trade at
prices that may be higher or lower than their principal amount or purchase
price, depending on many factors, including prevailing interest rates, the
market for similar securities, and our financial performance. Although it is not
obligated to do so, Credit Suisse First Boston Corporation has advised us that
it intends to make a market in the registered securities. Any such market-making
activity may be discontinued at any time, for any reason, without notice at the
sole discretion of Credit Suisse First Boston Corporation. No assurance can be
given as to the liquidity of or the trading market for the registered
securities.
PLAN OF DISTRIBUTION
This prospectus is to be used by Credit Suisse First Boston Corporation in
connection with the offers and sales of the new securities in market-making
transactions effected from time to time. Credit Suisse First Boston Corporation
may act as a principal or agent in such transactions, including as agent for the
counterparty when acting as principal or as agent for both counterparties, and
may receive compensation in the form of discounts and commissions, including
from both counterparties when it acts as agent for both. Such sales will be made
at prevailing market prices at the time of sale, at prices related thereto or at
negotiated prices.
DLJ Merchant Banking Partners, an affiliate of Credit Suisse First Boston
Corporation, beneficially own approximately 96.3% of the common stock of
Holdings. Thompson Dean, James A. Quella and David F. Burgstahler, who are the
Managing Partner, a Managing Director and a principal of DLJ Merchant Banking,
respectively, are members of the boards of directors of Holdings and Von
Hoffman. Further, Credit Suisse First Boston Corporation acted as syndication
agent in connection with the revolving credit facility for which it received
certain customary fees and expenses. Credit Suisse First Boston Corporation has,
from time to time, provided investment banking and other financial advisory
services to Holdings in the past for which it has received customary
compensation, and will provide such services and financial advisory services to
Holdings in the future. In addition, Credit Suisse First Boston Corporation
acted as purchaser in connection with the initial sale of the 2009 notes and the
2007 notes. See "Certain Relationships and Related Transactions."
Credit Suisse First Boston Corporation has informed us that it does not
intend to confirm sales of the new securities to any accounts over which it
exercises discretionary authority without the prior specific written approval of
such transactions by the customer.
We have been advised by Credit Suisse First Boston Corporation that, subject
to applicable laws and regulations, Credit Suisse First Boston Corporation
currently intends to make a market in the new securities following completion of
the exchange offer. However, Credit Suisse First Boston Corporation is not
obligated to do so and any such market-making may be interrupted or discontinued
at any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act. There
can be no assurance that an active trading market will develop or be sustained.
See "Risk Factors--There may be no active trading market for the registered
securities."
3
<Page>
[BACK COVER FOR MARKET-MAKING PROSPECTUS]
------------------------
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Forward-Looking Statements..................................
Prospectus Summary..........................................
Risk Factors................................................
Capitalization..............................................
Selected Consolidated Financial Data........................
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................
Business....................................................
Management..................................................
Executive Compensation......................................
Security Ownership of Certain Beneficial Owners and
Management................................................
Certain Relationships and Related Transactions..............
Description of Certain Indebtedness.........................
Description of the Registered Securities....................
Plan of Distribution........................................
Legal Matters...............................................
Independent Accountants.....................................
Where You Can Find More Information.........................
Index to Consolidated Financial Statements..................
</Table>
[LOGO]
4
<Page>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.
<Table>
<Caption>
ITEM AMOUNT
- ---- --------
SEC Registration Fee........................................ $ 33,402
Printing and Engraving Costs................................ 35,000
Trustee Fees................................................ 45,000
Legal Fees and Expenses..................................... 100,000
Accounting Fees and Expenses................................ 100,000
Miscellaneous............................................... 30,000
--------
TOTAL....................................................... $343,402
========
</Table>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of each of Von Hoffmann and Holdings
contains a provision eliminating the personal liability for monetary damages of
its directors to the full extent permitted under the Delaware General
Corporation Law ("DGCL").
The Certificate of Incorporation of each of Von Hoffmann and Holdings
provides that a director or officer who is a party to any action, suit or
proceeding shall be entitled to be indemnified by us to the extent permitted by
the DGCL against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred by such director or officer in connection
with such action, suit or proceeding.
Section 145 of the DGCL provides that a corporation may indemnify a
director, officer, employee or agent made a party to an action by reason of the
fact that he was a director, officer, employee or agent of the corporation or
was serving at the request of the corporation, against liabilities, costs and
expenses actually and reasonably incurred by him in his capacity as a director
or officer or arising out of such action, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action, had no reasonable
cause to believe his conduct was unlawful. No indemnification may be provided
where the director, officer, employee or agent has been adjudged by a court,
after exhaustion of all appeals, to be liable to the corporation, unless a court
determines that the person is entitled to such indemnity.
Section 102(b)(7) of the DGCL permits a corporation to relieve its directors
from personal liability for monetary damages to the corporation or its
stockholders for breaches of their fiduciary duty as directors except for (i) a
breach of the duty of loyalty, (ii) failure to act in good faith,
(iii) intentional misconduct or knowing violation of law, (iv) willful or
negligent violations of certain provisions of the DGCL (Sections 174, 160 and
173) imposing certain requirements with respect to stock purchases, redemptions
and dividends or (v) any transaction from which the director derived an improper
personal benefit.
The above provisions of the DGCL are non-exclusive.
Von Hoffmann and Holdings have entered into indemnification agreements with
each of their respective directors and intends to enter into indemnification
agreements with each of its future directors. Pursuant to such indemnification
agreements, we have agreed to indemnify these directors
II-1
<Page>
against certain liabilities, including any liabilities arising out of this
Registration Statement. We maintain a standard form of officers' and directors'
liability insurance policy which provides coverage to our officers and directors
for certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On March 15, 2002 the Registrant sold $215,000,000 in aggregate principal
amount of its 10 1/4% Senior Notes due 2009 (the old notes), to Credit Suisse
First Boston and Scotia Capital (the "initial purchasers") in a private
placement in reliance on Section 4(2) under the Securities Act, at an offering
price of $1,000 per $1,000 principal amount at maturity. The old notes were
immediately resold by the initial purchasers in transactions not involving a
public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
<Table>
<Caption>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- --------------------- ------------------------------------------------------------
3.1* Certificate of Incorporation of Von Hoffmann Corporation and
Certificate of Ownership and Merger of Von Hoffmann
Graphics, Inc. with and into Von Hoffmann Press, Inc.
3.2* By-Laws of Von Hoffmann Corporation.
3.3* Certificate of Incorporation of Von Hoffmann Holdings Inc.
and Certificate of Amendment to the Certificate of
Incorporation of Von Hoffmann Corporation.
3.4* By-Laws of Von Hoffmann Holdings Inc.
3.5* Certificate of Incorporation of One Thousand Realty &
Investment Company.
3.6* By-Laws of One Thousand Realty & Investment Company.
3.7* Certificate of Incorporation of H&S Graphics, Inc.
3.8* By-Laws of H&S Graphics, Inc.
3.9* Certificate of Incorporation of Preface, Inc.
3.10* By-Laws of Preface, Inc.
3.11* Certificate of Incorporation of Precision Offset Printing
Company, Inc.
3.12* By-Laws of Precision Offset Printing Company, Inc.
4.1* Indenture, dated March 26, 2002 among Von Hoffmann
Corporation, the Guarantors party thereto and U.S. Bank
National Association, as trustee, with respect to the
10 1/4% Senior Notes due 2009.
4.2** Indenture, dated May 22, 1997 among Von Hoffmann
Corporation, the Guarantors party thereto and Marine Midland
Bank, as trustee, with respect to the 10 3/8% Senior
Subordinated Notes due 2007.
4.3* Indenture, dated October 16, 1998 between Holdings and
Marine Midland Bank, as Trustee, with respect to the 13.5%
Subordinated Exchange Debentures due 2009.
4.4* Form of 2009 Notes (included in Exhibit 4.1 hereto).
4.5** Form of 2007 Notes (included in Exhibit 4.2 hereto).
4.6* Form of Global Exchange Debenture (included in Exhibit 4.3
hereto).
4.7* Registration Rights Agreement, dated March 26, 2002 among
Von Hoffmann Corporation, the Guarantors party thereto,
Credit Suisse First Boston Corporation and Scotia Capital
(USA) Inc.
4.8** Registration Rights Agreement, dated May 22, 1997 among Von
Hoffmann Corporation, the Guarantors party thereto and
Donaldson, Lufkin & Jenrette Securities Corporation.
4.9** Registration Rights Agreement, dated June 13, 1997 between
Von Hoffman Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation.
</Table>
II-2
<Page>
<Table>
<Caption>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- --------------------- ------------------------------------------------------------
4.10** Shareholders Agreement, dated May 22, 1997, among Von
Hoffmann Holdings Inc., DLJ Merchant Banking Partners II,
L.P., ZS VH II L.P. and the other shareholders party
thereto.
4.11** Amendment No. 1, dated November 30, 2000, to the
Shareholders Agreement, dated May 22, 1997, among Von
Hoffmann Holdings Inc., DLJ Merchant Banking Partners II,
L.P., ZS VH II L.P. and the other shareholders party
thereto.
4.12** Amendment No. 2, dated June 20, 2002, to the Shareholders
Agreement, dated May 22, 1997, among Von Hoffmann Holdings
Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P.
and the other shareholders party thereto.
4.13** Stock Purchase Agreement, dated June 21, 2002, among Von
Hoffmann Holdings Inc., Von Hoffmann Corporation, Robert
Uhlenhop and the Robert A. Uhlenhop 1998 Irrevocable Trust
Dated 1/27/98.
4.14** Stock Purchase Agreement, dated March 26, 2002, among Von
Hoffmann Holdings, DLJ Merchant Banking Partners II, L.P.
and certain of its affiliates.
4.15** Stock Purchase Agreement, dated June 21, 2002, among Von
Hoffmann Holdings Inc., ZS VH II L.P. and DLJ Merchant
Banking Partners II, L.P.
5.1** Opinion of Weil, Gotshal & Manges LLP.
10.1* Employment Agreement, dated January 31, 2002, between Von
Hoffmann Press, Inc. and Robert Mathews.
10.2* Employment Agreement, dated January 31, 2002, between Von
Hoffmann Press, Inc. and Peter Mitchell.
10.3* Amended and Restated Employment Agreement, dated June 21,
2002, among Von Hoffmann, Holdings and Robert Uhlenhop.
10.4* Credit Agreement, dated March 26, 2002, among Von Hoffmann
Holdings Inc., Von Hoffmann Corporation, H&S Graphics, Inc.,
Precision Offset Printing Company, Inc., Preface, Inc., One
Thousand Realty & Investment Company and certain other
subsidiaries of Von Hoffmann Corporation, as borrowers, the
lenders party thereto, The CIT Group/ Business Credit, Inc.,
as administrative agent, Credit Suisse First Boston, Cayman
Islands Branch, as syndication agent, sole lead arranger and
sole book running manager and U.S. Bank National
Association, as documentation agent.
10.5* Financial Advisory Agreement, dated March 26, 2002, between
Von Hoffmann Corporation and Credit Suisse First Boston
Corporation.
12.1** Statement regarding calculation of ratio of earnings to
fixed charges.
21** Subsidiaries of Holdings.
23.1* Consent of Ernst & Young LLP.
23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1 hereto).
24.1 Power of Attorney (included on signature page).
25.1** Form T-1 statement of eligibility under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
as trustee.
99.1** Letter of Transmittal for 10 1/4% Senior Notes due 2009.
99.2** Letter of Transmittal for 10 3/8% Senior Subordinated Notes
due 2007.
99.3** Letter of Transmittal for 13 1/2% Subordinated Exchange
Debentures due 2009.
99.4** Notice of Guaranteed Delivery for 10 1/4% Senior Notes due
2009.
99.5** Notice of Guaranteed Delivery for 10 3/8% Senior
Subordinated Notes due 2007.
</Table>
II-3
<Page>
<Table>
<Caption>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- --------------------- ------------------------------------------------------------
99.6** Notice of Guaranteed Delivery for 13 1/2% Subordinated
Exchange Debentures.
</Table>
- ------------------------
* Filed herewith.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Each of the undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by a Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of St. Louis, state of Missouri, on this 21st day of
June, 2002.
<Table>
VON HOFFMANN CORPORATION
By: /s/ ROBERT S. MATHEWS
-----------------------------------------
Robert S. Mathews,
Chief Executive Officer and President
</Table>
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each
acting alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead, in any and all capacities, to sign this Registration Statement on
Form S-1 (including all pre-effective and post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming that any such
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 21, 2002
in the capacities indicated.
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ THOMPSON DEAN
------------------------------------------- Chairman and Director June 21, 2002
Thompson Dean
Chief Executive Officer,
/s/ ROBERT S. MATHEWS President, Chief
------------------------------------------- Operating Officer and June 21, 2002
Robert S. Mathews Director (Principal
Executive Officer)
Vice Chairman of the Board,
Vice President, Chief
/s/ PETER C. MITCHELL Financial Officer and
------------------------------------------- Treasurer (Principal June 21, 2002
Peter C. Mitchell Accounting and Financial
Officer)
</Table>
II-5
<Page>
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ DAVID F. BURGSTAHLER
------------------------------------------- Director June 21, 2002
David F. Burgstahler
/s/ JAMES A. QUELLA
------------------------------------------- Director June 21, 2002
James A. Quella
/s/ ROBERT S. CHRISTIE
------------------------------------------- Director June 21, 2002
Robert S. Christie
</Table>
II-6
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of St. Louis, state of Missouri, on this 21st day of
June, 2002.
<Table>
VON HOFFMANN HOLDINGS INC.
By: /s/ /S ROBERT S. MATHEWS
-----------------------------------------
Robert S. Mathews,
Chief Executive Officer and President
</Table>
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each
acting alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead, in any and all capacities, to sign this Registration Statement on
Form S-1 (including all pre-effective and post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming that any such
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 21, 2002
in the capacities indicated.
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ ROBERT A. UHLENHOP
------------------------------------------- Chairman and Director June 21, 2002
Robert A. Uhlenhop
Chief Executive Officer,
/s/ ROBERT S. MATHEWS President and Director
------------------------------------------- (Principal Executive June 21, 2002
Robert S. Mathews Officer)
Executive Vice President,
/s/ PETER C. MITCHELL Chief Financial Officer
------------------------------------------- and Treasurer (Principal June 21, 2002
Peter C. Mitchell Accounting and Financial
Officer)
/s/ DAVID F. BURGSTAHLER
------------------------------------------- Vice Chairman and Director June 21, 2002
David F. Burgstahler
</Table>
II-7
<Page>
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ THOMPSON DEAN
------------------------------------------- Director June 21, 2002
Thompson Dean
/s/ JAMES A. QUELLA
------------------------------------------- Director June 21, 2002
James A. Quella
/s/ ROBERT S. CHRISTIE
------------------------------------------- Director June 21, 2002
Robert S. Christie
</Table>
II-8
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of St. Louis, state of Missouri, on this 21st day of
June, 2002.
<Table>
ONE THOUSAND REALTY & INVESTMENT COMPANY
By: /s/ ROBERT S. MATHEWS
-----------------------------------------
Robert S. Mathews,
Chief Executive Officer and President
</Table>
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each
acting alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead, in any and all capacities, to sign this Registration Statement on
Form S-1 (including all pre-effective and post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming that any such
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 21, 2002
in the capacities indicated.
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
Chairman, Chief Executive
/s/ ROBERT S. MATHEWS Officer, President and
------------------------------------------- Director (Principal June 21, 2002
Robert S. Mathews Executive Officer)
Vice President, Chief
/s/ PETER C. MITCHELL Financial Officer,
------------------------------------------- Treasurer and Director June 21, 2002
Peter C. Mitchell (Principal Accounting and
Financial Officer)
</Table>
II-9
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of St. Louis, state of Missouri, on this 21st day of
June, 2002.
<Table>
H & S GRAPHICS, INC.
By: /s/ ROBERT S. MATHEWS
-----------------------------------------
Robert S. Mathews,
Chief Executive Officer and President
</Table>
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each
acting alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead, in any and all capacities, to sign this Registration Statement on
Form S-1 (including all pre-effective and post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming that any such
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 21, 2002
in the capacities indicated.
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
Chairman, Chief Executive
/s/ ROBERT S. MATHEWS Officer and Director
------------------------------------------- (Principal Executive June 21, 2002
Robert S. Mathews Officer)
Vice President, Chief
/s/ PETER C. MITCHELL Financial Officer,
------------------------------------------- Treasurer and Director June 21, 2002
Peter C. Mitchell (Principal Accounting and
Financial Officer)
</Table>
II-10
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of St. Louis, state of Missouri, on this 21st day of
June, 2002.
<Table>
PREFACE, INC.
By: /s/ ROBERT S. MATHEWS
-----------------------------------------
Robert S. Mathews,
Chief Executive Officer and President
</Table>
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints each of Robert S. Mathews and Peter C. Mitchell or any of them, each
acting alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead, in any and all capacities, to sign this Registration Statement on
Form S-1 (including all pre-effective and post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming that any such
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 21, 2002
in the capacities indicated.
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
Chairman, Chief Executive
/s/ ROBERT S. MATHEWS Officer and Director
------------------------------------------- (Principal Executive June 21, 2002
Robert S. Mathews Officer)
Vice President, Chief
/s/ PETER C. MITCHELL Financial Officer,
------------------------------------------- Treasurer and Director June 21, 2002
Peter C. Mitchell (Principal Accounting and
Financial Officer)
</Table>
II-11
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of St. Louis, state of Missouri, on this 21st day of
June, 2002.
<Table>
PRECISION OFFSET PRINTING COMPANY
By: /s/ ROBERT S. MATHEWS
-----------------------------------------
Robert S. Mathews,
Chief Executive Officer and President
</Table>
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and
appoints each of Robert Mathews and Peter C. Mitchell or any of them, each
acting alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead, in any and all capacities, to sign this Registration Statement on
Form S-1 (including all pre-effective and post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming that any such
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on June 21, 2002
in the capacities indicated.
<Table>
<Caption>
SIGNATURE CAPACITY DATE
--------- -------- ----
Chairman, Chief Executive
/s/ ROBERT S. MATHEWS Officer and Director
------------------------------------------- (Principal Executive June 21, 2002
Robert S. Mathews Officer)
Vice President, Chief
/s/ PETER C. MITCHELL Financial Officer,
------------------------------------------- Treasurer and Director June 21, 2002
Peter C. Mitchell (Principal Accounting and
Financial Officer)
</Table>
II-12
<Page>
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------
3.1* Certificate of Incorporation of Von Hoffmann Corporation and
Certificate of Ownership and Merger of Von Hoffmann
Graphics, Inc. with and into Von Hoffmann Press, Inc.
3.2* By-Laws of Von Hoffmann Corporation.
3.3* Certificate of Incorporation of Von Hoffmann Holdings Inc.
and Certificate of Amendment to the Certificate of
Incorporation of Von Hoffmann Corporation.
3.4* By-Laws of Von Hoffmann Holdings Inc.
3.5* Certificate of Incorporation of One Thousand Realty &
Investment Company.
3.6* By-Laws of One Thousand Realty & Investment Company.
3.7* Certificate of Incorporation of H&S Graphics, Inc.
3.8* By-Laws of H&S Graphics, Inc.
3.9* Certificate of Incorporation of Preface, Inc.
3.10* By-Laws of Preface, Inc.
3.11* Certificate of Incorporation of Precision Offset Printing
Company, Inc.
3.12* By-Laws of Precision Offset Printing Company, Inc.
4.1* Indenture, dated March 26, 2002 among Von Hoffmann
Corporation, the Guarantors party thereto and U.S. Bank
National Association, as trustee, with respect to the
10 1/4% Senior Notes due 2009.
4.2** Indenture, dated May 22, 1997 among Von Hoffmann
Corporation, the Guarantors party thereto and Marine Midland
Bank, as trustee, with respect to the 10 3/8% Senior
Subordinated Notes due 2007.
4.3* Indenture, dated October 16, 1998 between Holdings and
Marine Midland Bank, as Trustee, with respect to the 13.5%
Subordinated Exchange Debentures due 2009
4.4* Form of 2009 Notes (included in Exhibit 4.1 hereto).
4.5** Form of 2007 Notes (included in Exhibit 4.2 hereto).
4.6* Form of Global Exchange Debenture (included in Exhibit 4.3
hereto)
4.7* Registration Rights Agreement, dated March 26, 2002 among
Von Hoffmann Corporation, the Guarantors party thereto,
Credit Suisse First Boston Corporation and Scotia Capital
(USA) Inc.
4.8** Registration Rights Agreement, dated May 22, 1997 among Von
Hoffmann Corporation, the Guarantors party thereto and
Donaldson, Lufkin & Jenrette Securities Corporation.
4.9** Registration Rights Agreement, dated June 13, 1997 between
Von Hoffman Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation.
4.10** Shareholders Agreement, dated May 22, 1997, among Von
Hoffmann Holdings Inc., DLJ Merchant Banking Partners II,
L.P., ZS VH II L.P. and the other shareholders party
thereto.
4.11** Amendment No. 1, dated November 30, 2000, to the
Shareholders Agreement, dated May 22, 1997, among Von
Hoffmann Holdings Inc., DLJ Merchant Banking Partners II,
L.P., ZS VH II L.P. and the other shareholders party
thereto.
4.12** Amendment No. 2, dated June 20, 2002, to the Shareholders
Agreement, dated May 22, 1997, among Von Hoffmann Holdings
Inc., DLJ Merchant Banking Partners II, L.P., ZS VH II L.P.
and the other shareholders party thereto.
</Table>
<Page>
<Table>
<Caption>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------
4.13** Stock Purchase Agreement, dated June 21, 2002, among Von
Hoffmann Holdings Inc., Von Hoffmann Corporation, Robert
Uhlenhop and the Robert A. Uhlenhop 1998 Irrevocable Trust
Dated 1/27/98.
4.14** Stock Purchase Agreement, dated March 26, 2002, among Von
Hoffmann Holdings, DLJ Merchant Banking Partners II, L.P.
and certain of its affiliates.
4.15** Stock Purchase Agreement, dated June 21, 2002, among Von
Hoffmann Holdings Inc., ZS VH II L.P. and DLJ Merchant
Banking Partners II, L.P.
5.1** Opinion of Weil, Gotshal & Manges LLP.
10.1* Employment Agreement, dated January 31, 2002, between Von
Hoffmann Press, Inc. and Robert Mathews.
10.2* Employment Agreement, dated January 31, 2002, between Von
Hoffmann Press, Inc. and Peter Mitchell.
10.3* Amended and Restated Employment Agreement, dated June 21,
2002, among Von Hoffmann, Holdings and Robert Uhlenhop.
10.4* Credit Agreement, dated March 26, 2002, among Von Hoffmann
Holdings Inc., Von Hoffmann Corporation, H&S Graphics, Inc.,
Precision Offset Printing Company, Inc., Preface, Inc., One
Thousand Realty & Investment Company and certain other
subsidiaries of Von Hoffmann Corporation, as borrowers, the
lenders party thereto, The CIT Group/ Business Credit, Inc.,
as administrative agent, Credit Suisse First Boston, Cayman
Islands Branch, as syndication agent, sole lead arranger and
sole book running manager and U.S. Bank National
Association, as documentation agent.
10.5* Financial Advisory Agreement, dated March 26, 2002, between
Von Hoffmann Corporation and Credit Suisse First Boston
Corporation.
12.1** Statement regarding calculation of ratio of earnings to
fixed charges.
21** Subsidiaries of Holdings.
23.1* Consent of Ernst & Young LLP.
23.2** Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1 hereto).
24.1 Power of Attorney (included on signature page).
25.1** Form T-1 statement of eligibility under the Trust Indenture
Act of 1939, as amended, of U.S. Bank National Association,
as trustee.
99.1** Letter of Transmittal for 10 1/4% Senior Notes due 2009.
99.2** Letter of Transmittal for 10 3/8% Senior Subordinated Notes
due 2007.
99.3** Letter of Transmittal for 13 1/2% Subordinated Exchange
Debentures due 2009.
99.4** Notice of Guaranteed Delivery for 10 1/4% Senior Notes due
2009.
99.5** Notice of Guaranteed Delivery for 10 3/8% Senior
Subordinated Notes due 2007.
99.6** Notice of Guaranteed Delivery for 13 1/2% Subordinated
Exchange Debentures.
</Table>
- ------------------------
* Filed herewith.
** To be filed by amendment.