<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number 0-28090
DECISIONONE HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3435409
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Commission File Number 333-28411
DECISIONONE CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2328680
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
50 East Swedesford Road, Frazer, Pennsylvania 19355
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code (610) 296-6000
Indicate by check mark whether registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrants were required to file such reports), and (2) have
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of January 31, 1999, 12,576,615 shares of DecisionOne Holdings Corp. common
stock were outstanding and one share of DecisionOne Corporation common stock was
outstanding.
DecisionOne Corporation meets the requirements set forth in General Instruction
H(1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE> 2
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES AND
DECISIONONE CORPORATION AND SUBSIDIARIES
FORM 10-Q FEBRUARY 16, 1999
CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements of
DecisionOne Holdings Corp. and Subsidiaries:
Condensed Consolidated Balance Sheets -
December 31, 1998 and June 30, 1998
(unaudited) 2
Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss) - Three and Six Months
Ended December 31, 1998 and 1997 (unaudited) 3
Condensed Consolidated Statements of
Cash Flows - Six Months Ended December 31, 1998
and 1997 (unaudited) 4
Notes to Condensed Consolidated Financial
Statements (unaudited) 5
Condensed Consolidated Financial Statements
of DecisionOne Corporation and Subsidiaries:
Condensed Consolidated Balance Sheets -
December 31, 1998 and June 30, 1998
(unaudited) 10
Condensed Consolidated Statements of Operations
and Comprehensive Income (Loss) - Three and Six Months
Ended December 31, 1998 and 1997 (unaudited) 11
Condensed Consolidated Statements of
Cash Flows - Six Months Ended December 31, 1998
and 1997 (unaudited) 12
Notes to Condensed Consolidated
Financial Statements (unaudited) 13
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations - Three and Six Months Ended
December 31, 1998 and 1997. 18
Item 3. Quantitative and Qualitative Disclosure
About Market Risk. 31
PART II OTHER INFORMATION 32
</TABLE>
<PAGE> 3
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands, Except Number of Shares)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1998 1998
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 35,179 $ 6,415
Accounts receivable, net of allowances of $19,617 and $22,572 115,050 114,082
Consumable parts, net of allowances of $10,732 and $9,271 20,222 23,097
Prepaid expenses and other assets 27,425 28,106
--------- ---------
Total current assets 197,876 171,700
Repairable parts, net of accumulated amortization of $150,063 and $135,277 146,269 142,446
Property and equipment, net of accumulated depreciation
of $33,971 and $39,829 32,296 29,095
Intangibles, net of accumulated amortization of $71,071 and $60,827 141,387 154,029
Other assets 27,888 44,717
--------- ---------
Total Assets $ 545,716 $ 541,987
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of debt $ 780,068 $ 13,311
Accounts payable and accrued expenses 109,639 101,851
Deferred revenues 35,503 40,758
Income taxes and other liabilities 10,039 10,925
--------- ---------
Total current liabilities 935,249 166,845
Debt 1,225 731,012
Other Liabilities 8,076 5,736
Shareholders' Deficit:
Preferred stock, no par value; authorized 5,000,000 shares; none outstanding -- --
Common stock, $.01 par value; authorized 100,000,000 shares;
issued and outstanding 12,584,219 shares 126 126
Additional paid-in capital 242,181 242,181
Accumulated deficit (637,836) (601,195)
Accumulated other comprehensive loss (3,305) (2,718)
--------- ---------
Total shareholders' deficit (398,834) (361,606)
--------- ---------
Total Liabilities and Shareholders' Deficit $ 545,716 $ 541,987
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE> 4
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- -------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 185,017 $ 200,075 $ 381,061 $ 402,339
Cost of Revenues 150,782 153,306 299,261 310,751
--------- --------- --------- ---------
Gross Profit 34,235 46,769 81,800 91,588
Operating Expenses:
Selling, general and administrative expenses 34,490 32,301 67,731 59,223
Amortization of intangibles 6,713 6,625 13,505 13,146
Merger expenses -- -- -- 69,046
--------- --------- --------- ---------
Total operating expenses 41,203 38,926 81,236 141,415
--------- --------- --------- ---------
Operating Income (Loss) (6,968) 7,843 564 (49,827)
Interest Expense, Net of Interest Income 18,681 18,420 37,205 30,153
--------- --------- --------- ---------
Loss Before Income Taxes (25,649) (10,577) (36,641) (79,980)
Provision (Benefit) for Income Taxes -- 141 -- (11,635)
--------- --------- --------- ---------
Net Loss $ (25,649) $ (10,718) $ (36,641) $ (68,345)
--------- --------- --------- ---------
Other Comprehensive Loss, Net of Tax:
Foreign Currency Translation Adjustments (15) (284) (328) (284)
Pension Liability Adjustment (259) -- (259) --
--------- --------- --------- ---------
Comprehensive Loss $ (25,923) $ (11,002) $ (37,228) $ (68,629)
========= ========= ========= =========
Basic Loss per Common Share $ (2.04) $ -- $ (2.91) $ --
Weighted Average Number of Common Shares
Outstanding 12,584 -- 12,584 --
Pro Forma Information - See Note 3:
Pro Forma Net Loss $ -- $ (10,718) $ -- $ (12,935)
Pro Forma Net Loss Per Common Share $ -- $ (0.86) $ -- $ (1.03)
Pro Forma Weighted Average Number of
Common Shares Outstanding -- 12,512 -- 12,506
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE> 5
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------------
1998 1997
-------- ---------
<S> <C> <C>
Operating Activities:
Net loss $(36,641) $ (68,345)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Amortization of repairable parts 39,657 38,789
Amortization of intangibles 13,505 13,146
Depreciation 7,116 7,822
Changes in assets and liabilities, net of effects of acquisitions 17,297 (19,784)
-------- ---------
Net cash provided by (used in) operating activities 40,934 (28,372)
Investing Activities:
Capital expenditures (12,299) (5,336)
Repairable spare parts purchases, net (43,348) (41,459)
Acquisitions of companies and contracts (2,377) (6,269)
Proceeds from sales of assets 14,108 --
-------- ---------
Net cash used in investing activities (43,916) (53,064)
Financing Activities:
Proceeds from issuance of common stock in connection
with recapitalization -- 226,583
Redemption of common stock in connection with recapitalization -- (609,654)
Redemption of common stock warrants in connection with
recapitalization -- (12,149)
Issuance of common stock warrants -- 1,880
Net proceeds from borrowings 32,355 474,116
Other, net (609) (1,622)
-------- ---------
Net cash provided by financing activities 31,746 79,154
-------- ---------
Net change in cash and cash equivalents 28,764 (2,282)
Cash and cash equivalents, beginning of period 6,415 10,877
-------- ---------
Cash and cash equivalents, end of period $ 35,179 $ 8,595
======== =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE> 6
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
DecisionOne Holdings Corp. and Subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the United States Securities and
Exchange Commission and, therefore, do not include all information and footnotes
necessary for presentation of financial position, results of operations and cash
flows required by generally accepted accounting principles. The June 30, 1998
balance sheet was derived from the Company's audited consolidated financial
statements. The information furnished reflects all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair summary of the financial position, results of operations and cash
flows. The results of operations for the three and six month periods ended
December 31, 1998 and 1997 are not necessarily indicative of operating results
to be expected for the full fiscal year. The financial statements should be read
in conjunction with the audited consolidated financial statements of the Company
and notes thereto filed with the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998.
Certain reclassifications have been made in order to conform with the December
31, 1998 presentation.
NOTE 2: MERGER, RECAPITALIZATION AND PRO FORMA INFORMATION
On August 7, 1997, the Company consummated a merger with Quaker Holding Co.
("Quaker"), an affiliate of DLJ Merchant Banking Partners II, L.P. ("DLJMB").
The merger, which was recorded as a recapitalization for accounting purposes as
of the consummation date, occurred pursuant to an Agreement and Plan of Merger
between the Company and Quaker dated May 4, 1997, as amended (the "Merger
Agreement").
In accordance with the terms of the Merger Agreement, which was formally
approved by the Company's shareholders on August 7, 1997, Quaker merged with and
into the Company, and the holders of approximately 94.7% of shares of Company
common stock outstanding immediately prior to the merger received $23 in cash in
exchange for each of these shares. Holders of approximately 5.3% of shares of
Company common stock outstanding immediately prior to the merger retained such
shares in the merged Company, as determined based upon shareholder elections and
stock proration factors specified in the Merger Agreement. Immediately following
the merger, continuing shareholders owned approximately 11.9% of shares of
outstanding Company common stock. The aggregate value of the merger transaction
was approximately $940 million, including refinancing of the Company's revolving
credit facility.
In connection with the merger, the Company raised $85 million through the public
issuance of senior discount debentures (the "11 1/2% Notes"), in addition to
publicly issued senior
5
<PAGE> 7
subordinated notes for approximately $150 million (the "9 3/4% Notes"). The
Company also entered into a new syndicated credit facility (the "New Credit
Facility") providing for term loans of $470 million and revolving loans of up to
$105 million. The proceeds of the senior discount notes, senior subordinated
notes, the initial borrowings under the New Credit Facility and the purchase of
approximately $225 million of Company common stock by Quaker were used to
finance the payments of cash to cash-electing shareholders, to pay the holders
of stock options and stock warrants canceled or converted, as applicable, in
connection with the merger, to repay the Company's existing revolving credit
facility and to pay expenses incurred in connection with the merger.
As a result of the merger, the Company incurred various expenses, totaling
approximately $69.0 million on a pre-tax basis, in connection with consummating
the transaction. These costs consisted primarily of compensation costs,
underwriting discounts and commissions, professional and advisory fees and other
expenses. In addition to these expenses, the Company also incurred approximately
$22.3 million of capitalized debt issuance costs associated with the merger
financing. These costs are being charged to interest expense over the terms of
the related debt instruments.
The following summarized unaudited pro forma information for the six month
period ended December 31, 1997, assumes that the merger had occurred on July 1,
1997. The pro forma results have been prepared for comparative purposes only and
do not purport to be indicative of the results of operations which actually
would have resulted had the merger occurred as of July 1, 1997 or which may
result in the future. Historical earnings per share data is not presented
because it would not be meaningful.
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT
PER SHARE AMOUNTS)
SIX MONTHS ENDED
DECEMBER 31,
1997
---------
<S> <C>
PRO FORMA INCOME STATEMENT INFORMATION:
Revenues .......................................... $ 402,339
Operating Income .................................. 19,219
Loss from Continuing Operations Before Income Tax
Benefit ......................................... (16,044)
Net Loss .......................................... (12,935)
Net Income per Common Share ....................... $ (1.03)
Weighted Average Shares of Common Stock Outstanding 12,506
</TABLE>
The pro forma net loss for the six month period ended December 31, 1997,
reflects (1) a net increase in interest expense of approximately $5.1 million
attributable to additional financing incurred in connection with the merger, net
of the repayment of the Company's existing revolving credit facility, (2) the
elimination of the non-recurring merger expenses of approximately $69.0 million
and (3) the elimination of the net tax benefit related to these adjustments of
approximately $8.6 million, including the effect of valuation allowances against
certain deferred tax assets.
Pro forma weighted average common shares outstanding includes 12,499,979 shares
outstanding immediately subsequent to the merger on August 7, 1997, in addition
to shares subsequently issued and outstanding.
6
<PAGE> 8
NOTE 3: RESTRUCTURING PLAN
The Company has experienced declining trends in revenues, earnings and EBITDA
for the three and six-month periods ended December 31, 1998 compared to the
corresponding periods ended December 31, 1997. The declining trends principally
result from lower sales of new service contracts, higher contract erosion, and
minimal growth from acquisitions.
On January 28, 1999, the Company announced a corporate restructuring plan
("Restructuring Plan") intended to restore revenue growth and improve financial
performance. The Restructuring Plan includes the following key components: (i)
focusing on all aspects of the Company's operations - from sales through service
delivery - on providing information technology support services to three
customer groups: large corporate customers (also known as "enterprise
accounts"), medium sized accounts (also known as the "middle market"), and
alliance customers (including OEMs, software publishers, systems integrators,
distributors and resellers, etc.); (ii) a cost-reduction program designed to
reduce the Company's cost structure by $40 million annually upon full
implementation, including a reduction in force of more than 500 employees; and
(iii) financial structure changes, including an additional $7.3 million
investment in the form of senior unsecured notes in DecisionOne Corporation by
DLJMB, and the Company's agreement with its lenders to waive financial covenants
in the Company's credit agreement through July 29, 1999.
NOTE 4: DEBT
During the three months ended March 31, 1998, the Company sought and
obtained amendments to the New Credit Facility to revise certain financial
performance measurements. The amended New Credit Facility contains various
terms and covenants which, among other things, place certain restrictions on
the Company's ability to pay dividends and incur additional indebtedness, and
which require the Company to meet certain minimum financial performance
measurements, including Adjusted EBITDA targets which increase over time. As of
December 31, 1998, the Company obtained a waiver of certain financial covenants
in the amended New Credit Facility until January 28, 1999 and on January 27,
1999, the Company entered into a Waiver of Financial Covenants (the "Waiver
Agreement") pursuant to which the Company's senior lenders agreed to waive
financial covenants in the amended New Credit Facility through July 29, 1999.
These waivers cover the quarters ending December 31, 1998, March 31, 1999 and
June 30, 1999. Without these waivers, the Company would not be in compliance
with certain financial covenants under the amended New Credit Facility. The
Waiver Agreement requires the Company, among other things, to meet certain
additional financial covenants as of March 31, 1999, limits the additional
borrowings available to the Company under its revolver to $10 million, and
generally, requires that interest payments on loans must be made monthly. In
connection with the Waiver Agreement, the Company incurred waiver fees of
approximately $4.3 million, which will be amortized as interest expense from
January 1999 to July 1999.
7
<PAGE> 9
On January 27, 1999, Holdings' principal shareholder, DLJMB, and certain of its
affiliates, made an additional $7.3 million investment in the form of unsecured
14% Senior Notes due 2006 in DecisionOne Corporation. The proceeds of the 14%
Notes were used for general corporate purposes.
Management believes the Company will meet the additional March 31, 1999
financial covenants contained in the Waiver Agreement. The Company anticipates
that it will engage in discussions with its lenders regarding additional
amendments or waivers under, or a potential restructuring of, the amended New
Credit Facility by July 29, 1999. However, the Company has not engaged in any
such discussions and does not have any agreement with any lenders participating
in the amended New Credit Facility with respect to any amendments, waivers, or
restructuring beyond July 29, 1999. If the Company is unable to obtain
amendments, waivers or a restructuring beyond July 29, 1999, amounts outstanding
under the amended New Credit Facility could be declared due and payable because
of the resulting defaults. The Company has therefore classified all amounts
outstanding under the amended New Credit Facility as current as of December 31,
1998. If amounts outstanding under the amended New Credit Facility were declared
to be due and payable because of a default, holders of the 11 1/2% Notes and the
9 3/4% Notes would be permitted to declare such notes to be immediately due and
payable. The Company has therefore classified all amounts outstanding under the
11 1/2% Notes and the 9 3/4% Notes as current as of December 31, 1998.
In connection with any further amendments or waivers under, or restructuring of,
the amended New Credit Facility, the Company could be required to restructure
its operations, sell assets, and/or issue additional capital or debt securities.
Any issuance of equity securities would likely be highly dilutive to existing
shareholders. Furthermore, any increase in the Company's debt service
requirements or any further reduction in amounts available for borrowings under
the amended New Credit Facility could significantly affect the Company's ability
to fund capital expenditures, acquisitions, and working capital. Management
believes that it can be successful in renegotiating the amended New Credit
Facility. However, there can be no assurance that the amended New Credit
Facility will be renegotiated on terms acceptable to the Company. Currently, the
Company does not have in place any alternative sources of liquidity if the
Company cannot reach agreement in respect of the amended New Credit Facility
beyond July 29, 1999.
NOTE 5: EMPLOYEE SEVERANCE
During the quarter ended December 31, 1998, the Company recorded a $3.5 million
charge, included in selling, general and administrative expenses, for estimated
future severance costs in accordance with SFAS No. 112, Employers' Accounting
for Postemployment Benefits, which reflects the actuarially determined benefit
costs for the separation of employees who are entitled to benefits under
pre-existing separation pay plans, including employees separated under the
Restructuring Plan (see Note 3 above).
8
<PAGE> 10
NOTE 6: COMPREHENSIVE INCOME (LOSS)
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, which established standards for reporting and
disclosure of comprehensive income, effective July 1, 1998. Total comprehensive
income (loss) for the three months ended December 31, 1998 and 1997 was ($25.9)
million and ($11.0) million, respectively. Total comprehensive income (loss) for
the six months ended December 31, 1998 and 1997 was ($37.2) million and ($68.6)
million, respectively. Total comprehensive income (loss) includes net income
(loss), foreign currency translation gains (losses) and pension liability
adjustments for the periods presented.
NOTE 7: INCOME TAXES
The ultimate realization of net deferred tax assets is dependent upon the
generation of future taxable income during the periods in which the temporary
differences become deductible. Net deferred tax assets as of December 31, 1998
were approximately $25.4 million and are included in other assets in the
accompanying balance sheet.
During the three and six month periods ended December 31, 1998, the Company
recorded additional net deferred tax assets of approximately $9.0 million and
$13.4 million, respectively, principally due to the accumulation of additional
temporary differences. The Company recorded a corresponding increase to the
valuation allowance, due principally to the length of the period during which
the anticipated tax benefits are expected to be realized.
9
<PAGE> 11
DECISIONONE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1998 1998
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 26,463 $ 5,205
Accounts receivable, net of allowances of $19,617 and $22,572 115,050 114,082
Consumable parts, net of allowances of $10,732 and $9,271 20,222 23,097
Prepaid expenses and other assets 24,321 27,797
--------- ---------
Total current assets 186,056 170,181
Repairable parts, net of accumulated amortization of $150,063 and $135,277 146,269 142,446
Property and equipment, net of accumulated depreciation
of $33,971 and $39,829 32,296 29,095
Intangibles, net of accumulated amortization of $71,071 and $60,827 141,387 154,029
Parent company loan receivable 79,756 69,867
Other assets 26,898 40,821
--------- ---------
Total Assets $ 612,662 $ 606,439
========= =========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current Liabilities:
Current portion of debt $ 682,354 $ 13,311
Accounts payable and accrued expenses 109,139 101,351
Deferred revenues 35,503 40,758
Income taxes and other liabilities 10,039 10,925
--------- ---------
Total current liabilities 837,035 166,345
Debt 1,225 638,766
Other Liabilities 8,076 5,796
Shareholder's Deficit:
Common stock, no par value; one share authorized, issued
and outstanding -- --
Additional paid-in capital 12,323 12,323
Accumulated deficit (242,692) (214,073)
Accumulated other comprehensive loss (3,305) (2,718)
--------- ---------
Total shareholder's deficit (233,674) (204,468)
--------- ---------
Total Liabilities and Shareholder's Deficit $ 612,662 $ 606,439
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
10
<PAGE> 12
DECISIONONE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 185,017 $ 200,075 $ 381,061 $ 402,339
Cost of Revenues 150,782 153,306 299,261 310,751
--------- --------- --------- ---------
Gross Profit 34,235 46,769 81,800 91,588
Operating Expenses:
Selling, general and administrative expenses 34,490 32,301 67,731 59,223
Amortization of intangibles 6,713 6,625 13,505 13,146
Merger expenses -- -- -- 69,046
--------- --------- --------- ---------
Total operating expenses 41,203 38,926 81,236 141,415
--------- --------- --------- ---------
Operating Income (Loss) (6,968) 7,843 564 (49,827)
Interest Expense, Net of Interest Income 14,654 13,895 29,183 23,804
--------- --------- --------- ---------
Loss Before Income Taxes (21,622) (6,052) (28,619) (73,631)
Provision (Benefit) for Income Taxes -- 573 -- (9,889)
--------- --------- --------- ---------
Net Loss $ (21,622) $ (6,625) $ (28,619) $ (63,742)
--------- --------- --------- ---------
Other Comprehensive Loss, Net of Tax :
Foreign Currency Translation Adjustments (15) (284) (328) (284)
Pension Liability Adjustment (259) -- (259) --
--------- --------- --------- ---------
Comprehensive Loss $ (21,896) $ (6,909) $ (29,206) $ (64,026)
========= ========= ========= =========
Pro Forma Information - See Note 3:
Pro Forma Net Loss $ -- $ (6,625) $ -- $ (7,645)
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
11
<PAGE> 13
DecisionOne Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six months ended
December 31,
--------------------------
1998 1997
-------- ---------
<S> <C> <C>
Operating Activities:
Net loss $(28,619) $ (63,742)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization of repairable parts 39,657 38,789
Amortization of intangibles 13,505 13,146
Depreciation 7,116 7,822
Changes in assets and liabilities, net of effects of acquisitions 9,260 (25,570)
-------- ---------
Net cash provided by (used in) operating activities 40,919 (29,555)
Investing Activities:
Capital expenditures (12,299) (5,336)
Repairable spare parts purchases, net (43,348) (41,459)
Acquisitions of companies and contracts (2,377) (6,269)
Proceeds from sales of assets 14,108 --
-------- ---------
Net cash used in investing activities (43,916) (53,064)
Financing Activities:
Capital contributions -- 349
Payment of dividends to Parent -- (244,000)
Loan from (made to) Parent (7,491) (71,189)
Net proceeds from borrowings 32,355 394,393
Other, net (609) (399)
-------- ---------
Net cash provided by financing activities 24,255 79,154
-------- ---------
Net change in cash and cash equivalents 21,258 (3,465)
Cash and cash equivalents, beginning of period 5,205 10,877
-------- ---------
Cash and cash equivalents, end of period $ 26,463 $ 7,412
======== =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
12
<PAGE> 14
DECISIONONE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 1998 AND 1997
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
DecisionOne Corporation (a wholly-owned subsidiary of DecisionOne Holdings
Corp., herein called "Holdings") and Subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the United States Securities
and Exchange Commission and, therefore, do not include all information and
footnotes necessary for presentation of financial position, results of
operations and cash flows required by generally accepted accounting principles.
The June 30, 1998 balance sheet was derived from the Company's audited
consolidated financial statements. The information furnished reflects all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair summary of the financial position,
results of operations and cash flows. The results of operations for the three
and six month periods ended December 31, 1998 and 1997 are not necessarily
indicative of the operating results to be expected for the full fiscal year. The
financial statements should be read in conjunction with the audited consolidated
financial statements of the Company and notes thereto filed with the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998.
Certain reclassifications have been made in order to conform with the December
31, 1998 presentation.
NOTE 2: MERGER, RECAPITALIZATION AND PRO FORMA INFORMATION
On August 7, 1997, the Company and Holdings consummated a merger with Quaker
Holding Co. ("Quaker"), an affiliate of DLJ Merchant Banking Partners II, L.P.
("DLJMB"). The merger, which was recorded as a recapitalization for accounting
purposes as of the consummation date, occurred pursuant to an Agreement and Plan
of Merger between the Company, Holdings and Quaker dated May 4, 1997, as amended
(the "Merger Agreement").
In accordance with the terms of the Merger Agreement, which was formally
approved by Holdings' shareholders on August 7, 1997, Quaker merged with and
into Holdings, and the holders of approximately 94.7% of shares of Holdings'
common stock outstanding immediately prior to the merger received $23 in cash in
exchange for each of these shares. Holders of approximately 5.3% of shares of
Holdings' common stock outstanding immediately prior to the merger retained such
shares in the merged Company, as determined based upon shareholder elections and
stock proration factors specified in the Merger Agreement. Immediately following
the merger, continuing shareholders owned approximately 11.9% of shares of
outstanding Holdings' common stock. The aggregate value of the merger
transaction was approximately $940 million, including refinancing of the
Company's revolving credit facility.
In connection with the merger, Holdings raised $85 million through the public
issuance of senior discount debentures (the "11 1/2% Notes"), in addition to
publicly issued senior subordinated notes for approximately $150 million (the "9
3/4 % Notes") by the Company. The Company also
13
<PAGE> 15
entered into a new syndicated credit facility (the "New Credit Facility")
providing for term loans of $470 million and revolving loans of up to $105
million. The proceeds of the senior discount notes, senior subordinated notes,
the initial borrowings under the New Credit Facility and the purchase of
approximately $225 million of Company common stock by Quaker were used to
finance the payments of cash to cash-electing shareholders, to pay the holders
of stock options and stock warrants canceled or converted, as applicable, in
connection with the merger, to repay the Company's existing revolving credit
facility and to pay expenses incurred in connection with the merger.
As a result of the merger, the Company incurred various expenses, totaling $69.0
million on a pre-tax basis, in connection with consummating the transaction.
These costs consisted primarily of compensation costs, underwriting discounts
and commissions, professional and advisory fees and other expenses. In addition
to these expenses, the Company and Holdings also incurred approximately $22.3
million of capitalized debt issuance costs (of which approximately $18.9 million
were incurred by the Company) associated with the merger financing. These costs
are being charged to interest expense over the terms of the related debt
instruments.
The following summarized unaudited pro forma information for the six month
period ended December 31, 1997, assumes that the merger had occurred on July 1,
1997. The pro forma results have been prepared for comparative purposes only and
do not purport to be indicative of the results of operations which actually
would have resulted had the merger occurred as of July 1, 1997 or which may
result in the future. Historical earnings per share data is not presented
because it would not be meaningful.
<TABLE>
<CAPTION>
(IN THOUSANDS)
SIX MONTHS ENDED
DECEMBER 31,
1997
---------
<S> <C>
PRO FORMA INCOME STATEMENT INFORMATION:
Revenues ........................................ $ 402,339
Operating Income ................................ 19,219
Loss from Continuing Operations Before Income Tax
Benefit ....................................... (8,176)
Net Loss ........................................ (7,645)
</TABLE>
The pro forma net loss for the six month period ended December 31, 1997 reflects
(1) a net increase in interest expense of approximately $3.6 million
attributable to additional financing incurred in connection with the merger, net
of the repayment of the Company's existing revolving credit facility, (2) the
elimination of the non-recurring merger expenses of approximately $69.0 million
and (3) the elimination of the net tax benefit related to these adjustments of
approximately $9.4 million, including the effect of valuation allowances against
certain deferred tax assets.
14
<PAGE> 16
NOTE 3: RESTRUCTURING PLAN
The Company has experienced declining trends in revenues, earnings and EBITDA
for the three and six-month periods ended December 31, 1998 compared to the
corresponding periods ended December 31, 1997. The declining trends principally
result from lower sales of new service contracts, higher contract erosion, and
minimal growth from acquisitions.
On January 28, 1999, the Company announced a corporate restructuring plan
("Restructuring Plan") intended to restore revenue growth and improve financial
performance. The Restructuring Plan includes the following key components: (i)
focusing on all aspects of the Company's operations - from sales through service
delivery - on providing information technology support services to three
customer groups: large corporate customers (also known as "enterprise
accounts"), medium sized accounts (also known as the "middle market"), and
alliance customers (including OEMs, software publishers, systems integrators,
distributors and resellers, etc.); (ii) a cost-reduction program designed to
reduce the Company's cost structure by $40 million annually upon full
implementation, including a reduction in force of more than 500 employees; and
(iii) financial structure changes, including an additional $7.3 million
investment in the form of senior unsecured notes in DecisionOne Corporation by
DLJMB, and the Company's agreement with its lenders to waive financial covenants
in the Company's credit agreement through July 29, 1999.
NOTE 4: DEBT
During the three months ended March 31, 1998, the Company sought and obtained
amendments to the New Credit Facility to revise certain financial performance
measurements. The amended New Credit Facility contains various terms and
covenants which, among other things, place certain restrictions on the Company's
ability to pay dividends and incur additional indebtedness, and which require
the Company to meet certain minimum financial performance measurements,
including Adjusted EBITDA targets which increase over time. As of December 31,
1998, the Company obtained a waiver of certain financial covenants in the
amended New Credit Facility until January 28, 1999 and on January 27, 1999, the
Company entered into a Waiver of Financial Covenants (the "Waiver Agreement")
pursuant to which the Company's senior lenders agreed to waive financial
covenants in the amended New Credit Facility through July 29, 1999. These
waivers cover the quarters ending December 31, 1998, March 31, 1999 and June
30, 1999. Without these waivers, the Company would not be in compliance with
certain financial covenants under the amended New Credit Facility. The Waiver
Agreement requires the Company, among other things, to meet certain additional
financial covenants as of March 31, 1999, limits the additional borrowings
available to the Company under its revolver to $10 million, and generally,
requires that interest payments on loans must be made monthly. In connection
with the Waiver Agreement, the Company incurred waiver fees of approximately
$4.3 million, which will be amortized as interest expense from January 1999 to
July 1999.
15
<PAGE> 17
On January 27, 1999, Holdings' principal shareholder, DLJMB, and certain of its
affiliates, made an additional $7.3 million investment in the form of unsecured
14% Senior Notes due 2006 in DecisionOne Corporation. The proceeds of the 14%
Notes were used for general corporate purposes.
Management believes the Company will meet the additional March 31, 1999
financial covenants contained in the Waiver Agreement. The Company anticipates
that it will engage in discussions with its lenders regarding additional
amendments or waivers under, or a potential restructuring of, the amended New
Credit Facility by July 29, 1999. However, the Company has not engaged in any
such discussions and does not have any agreement with any lenders participating
in the amended New Credit Facility with respect to any amendments, waivers or
restructuring beyond July 29, 1999. If the Company is unable to obtain
amendments, waivers or a restructuring beyond July 29, 1999, amounts outstanding
under the amended New Credit Facility could be declared due and payable because
of the resulting defaults. The Company has therefore classified all amounts
outstanding under the amended New Credit Facility as current as of December 31,
1998. If amounts outstanding under the amended New Credit Facility were declared
to be due and payable because of a default, holders of the 9 3/4% Notes would be
permitted to declare such notes to be immediately due and payable. The Company
has therefore classified all amounts outstanding under the 9 3/4% Notes as
current as of December 31, 1998.
In connection with any further amendments or waivers under, or restructuring of,
the amended New Credit Facility, the Company could be required to restructure
its operations, sell assets, and/or issue additional capital or debt securities.
Any issuance of equity securities would likely be highly dilutive to existing
shareholders. Furthermore, any increase in the Company's debt service
requirements or any further reduction in amounts available for borrowings under
the amended New Credit Facility could significantly affect the Company's ability
to fund capital expenditures, acquisitions, and working capital. Management
believes that it can be successful in renegotiating the amended New Credit
Facility. However, there can be no assurance that the amended New Credit
Facility will be renegotiated on terms acceptable to the Company. Currently, the
Company does not have in place any alternative sources of liquidity if the
Company cannot reach agreement in respect of the amended New Credit Facility
beyond July 29, 1999.
NOTE 5: EMPLOYEE SEVERANCE
During the quarter ended December 31, 1998, the Company recorded a $3.5 million
charge, included in selling, general and administrative expenses, for estimated
future severance costs in accordance with SFAS No. 112, Employers' Accounting
for Postemployment Benefits, which reflects the actuarially determined benefit
costs for the separation of employees who are entitled to benefits under
pre-existing separation pay plans, including employees separated under the
Restructuring Plan (see Note 3 above).
16
<PAGE> 18
NOTE 6: COMPREHENSIVE INCOME (LOSS)
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, which established standards for reporting and
disclosure of comprehensive income, effective July 1, 1998. Total comprehensive
income (loss) for the three months ended December 31, 1998 and 1997 was ($21.9)
million and ($6.9) million, respectively. Total comprehensive income (loss) for
the six months ended December 31, 1998 and 1997 was ($29.2) million and ($64.0)
million, respectively. Total comprehensive income (loss) includes net income
(loss), foreign currency translation gains (losses) and pension liability
adjustments for the periods presented.
NOTE 7: INCOME TAXES
The ultimate realization of net deferred tax assets is dependent upon the
generation of future taxable income during the periods in which the temporary
differences become deductible. Net deferred tax assets as of December 31, 1998
were approximately $24.4 million and are included in other assets in the
accompanying balance sheet.
During the three and six month periods ended December 31, 1998, the Company
recorded additional net deferred tax assets of approximately $7.4 million and
$10.2 million, respectively, principally due to the accumulation of additional
temporary differences. The Company recorded a corresponding increase to the
valuation allowance, due principally to the length of the period during which
the anticipated tax benefits are expected to be realized.
17
<PAGE> 19
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
The following discussion should be read in conjunction with the audited
Consolidated Financial Statements of DecisionOne Holdings Corp. and
Subsidiaries, the audited Consolidated Financial Statements of DecisionOne
Corporation and Subsidiaries, and the respective Notes thereto, filed with these
registrants' Annual Report on Form 10-K for the fiscal year ended June 30, 1998.
Item 2, and 3 are presented with respect to both registrants noted above. (As
used within Item 2, and 3, the term "Company" refers to DecisionOne Holdings
Corp. and its wholly-owned subsidiaries, including DecisionOne Corporation, and
the term "Holdings" refers to DecisionOne Holdings Corp.)
The information herein contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 that involve a
number of risks and uncertainties. A number of factors could cause actual
results, performance, achievements of the Company, or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward looking statements. These factors include,
but are not limited to, the significant indebtedness of the Company; the
Company's ability to renegotiate the amended New Credit Facility; the ability of
the Company to achieve the Restructuring Plan; the ability to attract and retain
qualified personnel; the competitive environment in the computer maintenance and
technology support services industry in general and in the Company's specific
market areas; changes in prevailing interest rates and the availability of and
terms of financing to fund the cash needs of the Company; inflation; changes in
costs of goods and services; economic conditions in general and in the Company's
specific market areas; demographic changes; changes in or failure to comply with
federal, state and/or local government regulations; liability and other claims
asserted against the Company; changes in operating strategy or development
plans; labor disturbances; changes in the Company's acquisition and capital
expenditure plans; and other factors referenced in "Risk Factors" in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998. In
addition, such forward looking statements are necessarily dependent upon
assumptions, estimates and dates that may be incorrect or imprecise and involve
known and unknown risks, uncertainties and other factors. Accordingly, any
forward looking statements included herein do not purport to be predictions of
future events or circumstances and may not be realized. Forward looking
statements can be identified by, among other things, the use of forward-looking
terminology such as "believes", "expects", "may", "will", "should", "seeks",
"pro forma", "anticipates", "intends" or the negative of any thereof, or other
variations thereon or comparable terminology, or by discussions of strategy or
intentions. Given these uncertainties, readers are cautioned not to place undue
reliance on such forward looking statements. The Company disclaims any
obligations to update any such factors or to publicly announce the results of
any revisions to any of the forward looking statements contained herein to
reflect future events or developments.
18
<PAGE> 20
BUSINESS OVERVIEW
Founded in 1969, the Company began operations as a provider of key punch
machines under the tradename "Decision Data". During the 1980s, its operations
expanded to include the sale of midrange computer hardware and related
maintenance services. During fiscal 1993, the Company decided to focus on
providing computer maintenance and support services and sold its computer
hardware products business.
Since the beginning of fiscal 1993, the Company has established a major
presence in the computer maintenance and technology support services industry
through the acquisition and integration of assets and contracts of over 40
complementary businesses. Significant acquisitions included IDEA Servcom, Inc.
("Servcom"), certain assets and liabilities of which were acquired in August
1994 for cash consideration of approximately $29.5 million, and Bell Atlantic
Business Systems Services, Inc. ("BABSS"), which was acquired in October 1995
for cash consideration of approximately $250.0 million. In addition, certain
assets of the U.S. computer service business of Memorex Telex were acquired in
November 1996 for cash consideration of approximately $24.4 million, after
certain purchase price adjustments. These acquisitions were accounted for as
purchase transactions.
At the time of its acquisition by the Company, BABSS was among the largest
independent, multivendor service organizations servicing end-user organizations
and original equipment manufacturers. Prior to the acquisition of BABSS, the
Company had higher gross margins than BABSS principally because approximately
30% of the Company's revenues in fiscal 1995 were attributable to higher margin
contracts involving systems that can be serviced by a limited number of service
providers ("proprietary systems"), whereas BABSS had limited revenues from
proprietary systems.
The Company's primary source of revenues is contracted services for
multivendor computer maintenance and technology support services, including
hardware support, end-user and software support, network support and other
support services. Approximately 90% of the Company's revenues during the three
and six month periods ended December 31, 1998 were derived from contracts
covering a broad spectrum of computer services. These contracts typically have a
stipulated monthly fee over a fixed initial term (typically one year) and
continue thereafter unless canceled by either party. Such contracts generally
provide that customers may eliminate certain equipment and services from the
contract upon notice to the Company. In addition, the Company enters into
per-incident arrangements with its customers. Per-incident contracts can cover a
range of bundled services for computer maintenance or support services or for a
specific service, such as network support or equipment relocation services.
Another form of per-incident service revenues includes time and material
billings for services as needed, principally maintenance and repair, provided by
the Company.
Furthermore, the Company derives additional revenues from the repair of
hardware and components at the Company's logistics services and depot repair
facilities. Pricing of the Company's services is based on various factors
including equipment failure rates, cost of repairable parts and labor expenses.
The Company customizes its contracts to the individual customer based generally
on the nature of the customer's requirements, the term of the contract and the
services that are provided.
19
<PAGE> 21
The Company experiences reductions in revenue when customers replace
equipment being serviced with new equipment covered under a manufacturer's
warranty, discontinue the use of equipment being serviced due to obsolescence,
choose to use a competitor's services or move technical support services
in-house. The Company must more than offset this revenue "reduction" to grow its
revenues and seeks revenue growth from two principal sources: internally
generated sales from its direct and indirect sales force and the acquisition of
contracts and assets of other service providers. The acquisition of contracts
and assets has generally provided the Company with an opportunity to realize
economies of scale because the Company generally does not increase its costs
related to facilities, personnel and consumable and repairable parts in the same
proportion as increases in acquired revenues. Any failure to consummate
acquisitions, enter into new contracts or add additional services and equipment
to existing contracts, or any increase in erosion could have a material adverse
effect on the Company's profitability. The Company did not complete any
acquisitions during the second quarter and it may be difficult for the Company
to finance acquisitions pending renegotiation of its amended New Credit
Facility.
MERGER AND RECAPITALIZATION
On August 7, 1997, the Company consummated a merger with Quaker Holding
Co. ("Quaker"), an affiliate of DLJ Merchant Banking Partners II, L.P.
("DLJMB"). The Merger, which has been recorded as a recapitalization as of the
consummation date for accounting purposes, occurred pursuant to an Agreement and
Plan of Merger among the Company and Quaker dated May 4, 1997, as amended (the
"Merger Agreement").
In accordance with the terms of the Merger Agreement, which was approved
by the Company's shareholders on August 7, 1997, Quaker merged with and into the
Company, and the holders of approximately 94.7% of shares of Holdings' common
stock outstanding immediately prior to the Merger received $23 in cash in
exchange for each of these shares. Holders of approximately 5.3% of shares of
Holdings' common stock outstanding immediately prior to the Merger retained such
shares in the merged Company, as determined based upon shareholder elections and
stock proration factors specified in the Merger Agreement. The aggregate value
of the Merger was approximately $940 million, including refinancing of
DecisionOne Corporation's revolving credit facility.
The Company incurred various expenses, aggregating approximately $69.0
million on a pre-tax basis, in connection with consummating the Merger. These
costs consisted primarily of compensation costs, underwriting discounts and
commissions, professional and advisory fees and other expenses. This one-time
charge is reflected in the accompanying unaudited Condensed Consolidated
Statements of Operations and Comprehensive Income (Loss) of the Company and of
DecisionOne Corporation and Subsidiaries for the six months ended December 31,
1997. In addition to these expenses, the Company also incurred $22.3 million of
capitalized debt issuance costs associated with financing incurred in connection
with the Merger (the "Merger Financing"). These costs are being charged to
interest expense over the terms of the related debt instruments (see "Liquidity
and Capital Resources").
20
<PAGE> 22
RESULTS OF OPERATIONS
The following discussion of results of operations is presented with
respect to the Company and with respect to DecisionOne Corporation and
Subsidiaries for the three and six month periods ended December 31, 1998 and
1997.
The following tables set forth, for the three and six month periods ended
December 31, 1998 and 1997, respectively, certain operating data of the Company
and of DecisionOne Corporation and Subsidiaries:
<TABLE>
<CAPTION>
DECISIONONE HOLDINGS CORP. DECISIONONE CORPORATION
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 185,017 $ 200,075 $ 185,017 $ 200,075
Gross Profit 34,235 46,769 34,235 46,769
Operating Income (Loss) (6,968) 7,843 (6,968) 7,843
Net Loss (2) $ (25,649) $ (10,718) $ (21,622) $ (6,625)
========= ========= ========= =========
OTHER DATA:
EBITDA (1) (2) $ 25,030 $ 40,128 $ 25,030 $ 40,128
Less: Amortization of repairable parts (20,763) (20,364) (20,763) (20,364)
--------- --------- --------- ---------
Adjusted EBITDA (1) 4,267 19,764 4,267 19,764
Net cash provided by operating activities 25,439 19,542 25,432 19,498
Net cash used in investing activities (28,864) (29,400) (28,864) (29,400)
Net cash provided by financing activities 28,198 7,642 20,007 10,663
</TABLE>
<TABLE>
<CAPTION>
DECISIONONE HOLDINGS CORP. DECISIONONE CORPORATION
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 381,061 $ 402,339 $ 381,061 $ 402,339
Gross Profit 81,800 91,588 81,800 91,588
Operating Income (Loss) 564 (49,827) 564 (49,827)
Net Loss (2) $ (36,641) $ (68,345) $ (28,619) $ (63,742)
========= ========= ========= =========
OTHER DATA:
EBITDA (1) (2) $ 64,543 $ 81,137 $ 64,543 $ 81,137
Less: Amortization of repairable parts (39,657) (38,789) (39,657) (38,789)
--------- --------- --------- ---------
Adjusted EBITDA (1) 24,886 42,348 24,886 42,348
Net cash provided by (used in)
operating activities 40,934 (28,372) 40,919 (29,555)
Net cash used in investing activities (43,916) (53,064) (43,916) (53,064)
Net cash provided by financing activities 31,746 79,154 24,255 79,154
</TABLE>
21
<PAGE> 23
(1) "EBITDA" represents income (loss) from continuing operations before interest
expense, interest income, income taxes (benefit), depreciation, amortization of
intangibles, amortization of repairable parts, amortization of discounts and
capitalized expenditures related to indebtedness, merger expenses (approximately
$69.0 million for the six month period ended December 31, 1997), and incremental
charges related to the Company's ongoing service delivery re-engineering program
(approximately $1.0 million and $1.5 million for the three month periods ended
December 31, 1998 and 1997, respectively, and approximately $3.7 million and
$2.2 million for the six month periods ended December 31, 1998 and 1997,
respectively.) "Adjusted EBITDA" represents EBITDA reduced by the amortization
of repairable parts. Adjusted EBITDA is presented because it is relevant to
certain covenants contained in debt agreements entered into by the Company in
connection with the Merger, and because the Company believes that Adjusted
EBITDA is a more consistent indicator of the Company's ability to meet its debt
service, capital expenditure and working capital requirements.
(2) Net loss and EBITDA includes $3.5 million for employee severance charges,
which were determined under a pre-existing separation pay plan and $0.8 million
for Restructuring Plan related consulting fees for the three and six month
periods ended December 31, 1998.
Overview and Restructuring Plan
The Company has experienced declining trends in revenues, earnings and
EBITDA for the three and six-month periods ended December 31, 1998 compared to
the corresponding periods ended December 31, 1997. The declining trends
principally result from lower sales of new service contracts, higher contract
erosion, and minimal acquisition growth.
On January 28, 1999, the Company announced a corporate restructuring plan
("Restructuring Plan") intended to restore revenue growth and improve financial
performance. The Restructuring Plan includes the following key components: (i)
focusing on all aspects of the Company's operations - from sales through service
delivery - on providing information technology support services to three
customer groups: large corporate customers (also known as "enterprise
accounts"), medium sized accounts (also known as the "middle market"), and
alliance customers (including OEMs, software publishers, systems integrators,
distributors and resellers, etc.); (ii) a cost-reduction program designed to
reduce the Company's cost structure by $40 million annually upon full
implementation, including a reduction in force of more than 500 employees; and
(iii) financial structure changes, including DLJMB's additional $7.3 million
investment in the form of senior unsecured notes in DecisionOne Corporation, and
the Company's agreement with its lenders to waive financial covenants in the
Company's credit agreement through July 29, 1999 (see "Liquidity and Capital
Resources" for additional details).
Operating income (loss) was ($7.0) million and $7.8 million for the three
months ended December 31, 1998 and 1997, respectively. Operating loss for the
three months ended December 31, 1998 included $3.5 million for employee
severance charges and $1.8 million for incremental re-engineering and
Restructuring Plan related consulting fees. Operating income for the three
months ended December 31, 1997 included $1.5 million for incremental
re-engineering consulting fees. Excluding these charges, operating income (loss)
was ($1.7) million and $9.3 million for the three months ended December 31, 1998
and 1997, respectively.
Operating income (loss) was $0.6 million and ($49.8) million for the six
months ended December 31, 1998 and 1997, respectively. Operating income for the
six months ended December 31, 1998 included $3.5 million for employee severance
charges and $4.5 million for incremental re-engineering and Restructuring Plan
related consulting fees. Operating loss for the
22
<PAGE> 24
six months ended December 31, 1997 included $69.0 million of merger expenses and
$2.2 million for incremental re-engineering consulting fees. Excluding these
charges, operating income was $8.6 million and $21.4 million for the six months
ended December 31, 1998 and 1997, respectively.
EBITDA was $25.0 million and $64.5 million for the three and six months
ended December 31, 1998 compared to $40.1 million and $81.1 million for the
three and six months ended December 31, 1997. Adjusted EBITDA was $4.3 million
and $24.9 million for the three and six months ended December 31, 1998 compared
to $19.8 million and $42.3 million for the three and six months ended December
31, 1997.
Three and Six Month Periods Ended December 31, 1998 Compared to Three
and Six Month Periods Ended December 31, 1997
Revenues: Revenues decreased by $15.1 million, or 7.5%, from $200.1
million for the three months ended December 31, 1997 to $185.0 million for the
three months ended December 31, 1998. Maintenance contract-based revenues
decreased by $17.0 million as a result of equipment cancellations exceeding
sales of new contracts. This decrease was partially offset by an increase in
per-incident and other non-contract revenues of $1.9 million.
Revenues decreased by $21.2 million, or 5.3%, from $402.3 million for the
six months ended December 31, 1997 to $381.1 million for the six months ended
December 31, 1998. Maintenance contract-based revenues decreased by $31.3
million as a result of equipment cancellations exceeding sales of new contracts.
This decrease was partially offset by an increase in per-incident and other
non-contract revenues of $10.1 million. Per-incident and other non-contract
revenues are subject to periodic fluctuation depending upon customer demand for
such services.
The Restructuring Plan is intended, in part, to restore revenue growth by
increasing the Company's focus on selected customers within its enterprise,
middle market, and alliance groups. While the Company expects these actions to
result in revenue growth from current levels, the timing of such revenue growth,
if any, is uncertain. The Company currently believes it is likely that its
revenues will further decline in the next fiscal quarter compared to the second
quarter ended December 31, 1998 and to the comparable quarter ended March 31,
1998.
Gross Profit: As a percentage of revenue, gross profit declined from 23.4%
for the three months ended December 31, 1997 to 18.5% for the three months ended
December 31, 1998. The gross profit percentage declined from 22.8% for the six
months ended December 31, 1997 to 21.5% for the six months ended December 31,
1998. The Company's re-engineering initiatives and variable cost reductions
related to revenue declines have resulted in lower costs of $2.5 million and
$11.5 million for the three and six-month periods ended December 31, 1998,
respectively, compared to the corresponding 1997 periods. The lower costs are
not proportionate to the revenue reductions due to the fixed nature of much of
the Company's cost structure and the fact that certain variable cost reduction
actions typically trail revenue declines.
23
<PAGE> 25
Management expects to further reduce costs in the next fiscal quarter as a
result of Restructuring Plan initiatives. The Company has reduced its workforce
and streamlined operations by consolidating from seven to four service regions.
However, future gross profit performance is difficult to predict and
improvements therein will largely depend upon the Company's ability to generate
revenue growth.
Selling, General and Administrative Expenses: Selling, general and
administrative ("SG&A") expenses increased by $2.2 million, or 6.8%, from $32.3
million for the three months ended December 31, 1997 to $34.5 million for the
three months ended December 31, 1998. Included in SG&A expenses for the quarter
ended December 31, 1998 were employee severance costs under a pre-existing
separation pay plan of $3.5 million and $0.8 million of Restructuring
Plan-related consulting fees. Also included in SG&A expenses for the quarters
ended December 31, 1998 and 1997 were incremental consulting fees incurred in
connection with the Company's re-engineering efforts of $1.0 million and $1.5
million, respectively (see "Liquidity and Capital Resources" for additional
information with respect to these expenditures). Excluding these costs, SG&A
declined by $1.6 million principally due to a reduction in commissions and
incentives.
SG&A expenses increased by $8.5 million, or 14.4%, from $59.2 million for
the six months ended December 31, 1997 to $67.7 million for the six months ended
December 31, 1998. Included in SG&A expenses for the six months ended December
31, 1998 were employee severance costs under a pre-existing separation pay plan
of $3.5 million and $0.8 million of Restructuring Plan-related consulting fees.
Also included in SG&A expenses for the six months ended December 31, 1998 and
1997 were incremental consulting fees incurred in connection with the Company's
re-engineering efforts of $3.7 million and $2.2 million, respectively (see
"Liquidity and Capital Resources" for additional information with respect to
these expenditures). Excluding these costs, SG&A increased by $2.7 million
principally due to increases in employment costs, provision for uncollectible
receivables, and sales and use taxes.
Management expects to lower SG&A costs in the next fiscal quarter as a
result of Restructure Plan initiatives.
Merger Expenses: In connection with the Merger, which was consummated on
August 7, 1997, the Company incurred a one-time pre-tax charge of $69.0 million,
comprised of expenses directly related to the Merger transaction (see "Merger
and Recapitalization" for additional information with respect to these Merger
expenses).
Amortization of Intangibles: Amortization of intangible assets increased
by $0.4 million, or 3.1%, from $13.1 million for the six months ended December
31, 1997 to $13.5 million for the six months ended December 31, 1998. This
increase was attributable principally to the amortization of intangibles
resulting from the acquisition of the service contracts of complementary
businesses subsequent to December 31, 1997.
Interest Expense: The Company's interest expense, net of interest income,
increased by $0.3 million, or 1.6%, from $18.4 million for the three months
ended December 31, 1997 to $18.7 million for the three months ended December 31,
1998. Net interest expense increased by $7.0 million, or 23.2%, from $30.2
million for the six months ended December 31, 1997 to $37.2 million for the six
months ended December 31, 1998. This increase is due principally to the
Company's significantly increased average borrowings as a result of the Merger,
which was
24
<PAGE> 26
consummated on August 7, 1997. Average borrowings were approximately $756.8
million for the six months ended December 31, 1998, as compared to approximately
$650.0 million for the six months ended December 31, 1997 (see Note 2 to the
Company's unaudited Condensed Consolidated Financial Statements for the three
and six month periods ended December 31, 1998).
With respect to DecisionOne Corporation, consolidated interest expense,
net of interest income, increased by $0.8 million, or 5.8%, from $13.9 million
for the three months ended December 31, 1997 to $14.7 million for the three
months ended December 31, 1998. Net interest expense increased by $5.4 million,
or 22.7%, from $23.8 million for the six months ended December 31, 1997 to $29.2
million for the six months ended December 31, 1998. This increase is principally
attributable to significantly increased average borrowings as a result of the
Merger. Average borrowings for DecisionOne Corporation, on a consolidated basis,
were $661.9 million for the six months ended December 31, 1998, as compared to
$578.4 million for the six months ended December 31, 1997.
Consolidated net interest expense for DecisionOne Corporation during the
three and six month periods ended December 31, 1998 was lower than the
aforementioned net interest expense for the Company, primarily due to interest
incurred with respect to approximately $85.0 million of 11-1/2% Senior Discount
Debentures issued by Holdings in connection with the Merger and interest income
on a $59.1 million parent company loan receivable held by DecisionOne
Corporation (see "Liquidity and Capital Resources").
The Company and DecisionOne Corporation anticipate that its interest
expense will increase in the next quarter due to the additional $7.3 million
indebtedness incurred on January 27, 1999 and as a result of the amortization of
the $4.3 million waiver fee incurred under the Waiver Agreement (see "Liquidity
and Capital Resources").
Income Taxes: The $69.0 million of non-recurring expenses incurred in
consummating the Merger and certain other charges recorded by the Company in
fiscal 1998 resulted in significant additional tax loss carryforwards and
carrybacks. Net anticipated tax assets of approximately $ 25.4 million have been
reflected in the Company's December 31, 1998 consolidated balance sheet. The
anticipated net deferred tax assets have been reduced significantly, by a
valuation allowance for financial reporting purposes, due primarily to
management's projections of future taxable income and the length of the period
during which the anticipated tax benefits are expected to be realized.
The Company expects that its tax provision (benefit) in future periods
will reflect effective tax rates which vary significantly from enacted statutory
tax rates principally as a result of additional unrecognized tax benefits on
newly-arising net deferred tax assets. Future effective tax rates may also be
subject to volatility as a result of valuation allowance changes which arise
from differences between management's projections of future taxable income,
newly-arising net deferred tax assets and reversals of net deferred tax assets
and corresponding actual results.
25
<PAGE> 27
LIQUIDITY AND CAPITAL RESOURCES
Financing and Leverage
The Company incurred substantial indebtedness in connection with the
Merger. As of December 31, 1998 and June 30, 1998, the Company had outstanding
debt of approximately $781.3 million and $744.3 million, respectively. As of
December 31, 1998 and June 30, 1998, the Company had available cash on hand of
approximately $35.2 million and $6.4 million, respectively. The Company's
significant debt service obligations could, under certain circumstances
including those described below, have material consequences to security holders
of the Company. See "Risk Factors" included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1998.
In connection with the Merger, Holdings received proceeds of $85 million
from the issuance of 11 1/2% Senior Discount Debentures due 2008 (the "11 1/2%
Notes"), and DecisionOne Corporation issued $150 million of 9 3/4% Senior
Subordinated Notes due 2007 (the "9 3/4% Notes"). DecisionOne Corporation also
entered into a new syndicated credit facility providing for term loans of $470
million and revolving loans of up to $105 million (the "New Credit Facility").
The proceeds of the 11 1/2% Notes (which were issued with attached warrants),
the 9 3/4% Notes, the initial borrowings under the New Credit Facility and the
purchase of approximately $225 million of Holdings common stock by DLJMB and
other institutional investors were used to finance the payments of cash to
cash-electing shareholders, to pay the holders of stock options and stock
warrants canceled or converted, as applicable, in connection with the Merger, to
repay DecisionOne Corporation's existing revolving credit facility and to pay
expenses incurred in connection with the Merger. (See Note 2 to the Company's
unaudited Condensed Consolidated Financial Statements for additional
information.)
During the three months ended March 31, 1998, the Company sought and
obtained amendments to the New Credit Facility to revise certain financial
performance measurements. The amended New Credit Facility contains various
terms and covenants which, among other things, place certain restrictions on
the Company's ability to pay dividends and incur additional indebtedness, and
which require the Company to meet certain minimum financial performance
measurements, including Adjusted EBITDA targets which increase over time. As of
December 31, 1998, the Company obtained a waiver of certain financial covenants
in the amended New Credit Facility until January 28, 1999 and on January 27,
1999, the Company entered into a Waiver of Financial Covenants (the "Waiver
Agreement") pursuant to which the Company's senior lenders agreed to waive
financial covenants in the amended New Credit Facility through July 29, 1999.
These waivers cover the quarters ending December 31, 1998, March 31, 1999 and
June 30, 1999. Without these waivers, the Company would not be in compliance
with certain financial covenants under the amended New Credit Facility. The
Waiver Agreement requires the Company, among other things, to meet certain
additional financial covenants as of March 31, 1999, limits the additional
borrowings available to the Company under its revolver to $10 million, and
generally, requires that interest payments on loans must be made monthly. In
connection with the Waiver Agreement, the Company incurred waiver fees of
approximately $4.3 million, which will be amortized as interest expense from
January 1999 to July 1999.
26
<PAGE> 28
On January 27, 1999, Holdings' principal shareholder, DLJMB, and certain
of its affiliates, made an additional $7.3 million investment in the form of
unsecured 14% Senior Notes due 2006 in DecisionOne Corporation. The proceeds of
the 14% Notes were for general corporate purposes.
Management believes the Company will meet the additional March 31, 1999
financial covenants contained in the Waiver Agreement. The Company anticipates
that it will engage in discussions with its lenders regarding additional
amendments or waivers under, or a potential restructuring of, the amended New
Credit Facility by July 29, 1999. However, the Company has not engaged in any
such discussions and does not have any agreement with any lenders participating
in the amended New Credit Facility with respect to any amendments, waivers or
restructuring beyond July 29, 1999. If the Company is unable to obtain
amendments, waivers or a restructuring beyond July 29, 1999, amounts outstanding
under the amended New Credit Facility could be declared due and payable because
of the resulting defaults. The Company has therefore classified all amounts
outstanding under the amended New Credit Facility as current as of December 31,
1998. If amounts outstanding under the amended New Credit Facility were declared
to be due and payable because of a default, holders of the 11 1/2% Notes and the
9 3/4% Notes would be permitted to declare such notes to be immediately due and
payable. The Company has therefore classified all amounts outstanding under the
11 1/2% Notes and the 9 3/4% Notes as current as of December 31, 1998.
In connection with any further amendments or waivers under, or
restructuring of, the amended New Credit Facility, the Company could be required
to restructure its operations, sell assets, and/or issue additional capital or
debt securities. Any issuance of equity securities would likely be highly
dilutive to existing shareholders. Furthermore, any increase in the Company's
debt service requirements or any further reduction in amounts available for
borrowings under the amended New Credit Facility could significantly affect the
Company's ability to fund capital expenditures, acquisitions, and working
capital. Management believes that it can be successful in renegotiating the
amended New Credit Facility. However, there can be no assurance that the amended
New Credit Facility will be renegotiated on terms acceptable to the Company.
Currently, the Company does not have in place any alternative sources of
liquidity if the Company cannot reach agreement in respect of the amended New
Credit Facility beyond July 29, 1999.
The Company currently anticipates that its operating cash flow, together
with the additional $10 million of borrowings available under the amended New
Credit Facility, will be sufficient to meet its anticipated future operating
expenses and capital expenditures and to service its debt requirements as they
become due through July 29, 1999. However, the Company's ability to make
scheduled payments of principal and interest on, or to refinance, its debt
obligations and to satisfy its other obligations will depend upon many factors,
including its future operating performance, which will be affected by general
economic, financial, competitive, legislative, regulatory, business and other
factors beyond its control and its ability to achieve the Restructuring Plan, to
obtain amendments or waivers under, or a restructuring of, the amended New
Credit Facility and to attract alternative sources of liquidity. See "Risk
Factors" included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998.
The interest rate applicable to outstanding borrowings under the amended
New Credit Facility as of December 31, 1998, varies, at the Company's option,
based upon LIBOR (plus applicable margins not to exceed 3.0%, as amended) or the
Prime Rate (plus applicable margin not to exceed 1.75%). As of December 31,
1998, the weighted average interest rate applicable to
27
<PAGE> 29
loans under the New Credit Facility was 8.23%. Any additional borrowings up to
the $10 million limit will be subject to an annual interest rate of Prime plus
4.0%.
The Company has received notification from Nasdaq that it does not meet
the requirement for continued listing on the Nasdaq National Market with respect
to the market value of the public float of Company common stock. Therefore, it
is expected that, on or about March 1, 1999, the stock will be listed on the
Nasdaq SmallCap Market.
Financial Condition:
Cash flow from operating activities for the six months ended December 31,
1998 was approximately $40.9 million. These funds, together with borrowings
under the revolver, provided the required capital to fund repairable part
purchases and capital expenditures of approximately $55.6 million during the six
months ended December 31, 1998, as well as the acquisition of contracts and
assets of complementary businesses for approximately $2.4 million during this
period.
The Company incurred approximately $4.3 million and $6.7 million in
incremental expenditures for information systems and related re-engineering
initiatives during the three and six months ended December 31, 1998,
respectively, and has budgeted to incur an additional $3.3 million through June
30, 1999. The initiatives being funded include the following: (i) enhancements
to the Company's service entitlement process which will ensure that customers
are billed for all work performed; (ii) improvements to the Company's dispatch
system and field engineer data collection, technical support tools and service
delivery processes, all of which are designed to increase productivity; (iii)
enhancements to the Company's help desk and central dispatch systems to provide
an integrated support solution to the customer base; and (iv) improvements to
the Company's field inventory tracking system which will facilitate increased
transfer of consumable and repairable parts among field locations and reduce
purchases of repairable parts. There can be no assurance that the fiscal 1999
budgeted amounts will be so expended by the Company, nor when these amounts will
be so expended.
The Company, or certain businesses as to which it is alleged that the
Company is a successor, have been identified as potentially responsible parties
in respect of three waste disposal sites that have been identified by the U.S.
Environmental Protection Agency as Superfund sites. In addition, the Company
received a notice several years ago that it may be a potentially responsible
party in respect of a fourth site, but has not received any other communication
in respect of that site. The Company has estimated that its share of the costs
of the cleanup of one of the sites will be approximately $500,000, which has
been accrued for in the accompanying condensed consolidated balance sheets as of
December 31, 1998 and June 30, 1998. Complete information as to the scope of
required cleanup at these sites is not yet available and, therefore,
management's evaluation may be affected as further information becomes
available. However, in light of information currently available to management,
including information regarding assessments of the sites to date and the nature
of involvement of the Company's predecessor at the sites, it is management's
opinion that the Company's potential additional liability, if any, for the cost
of cleanup of these sites will not be material to the consolidated financial
position, results of operations or liquidity of the Company.
28
<PAGE> 30
YEAR 2000 COMPLIANCE
This Year 2000 disclosure is being designated as a Year 2000 Readiness
Disclosure statement under the Year 2000 Readiness and Disclosure Act of 1998.
As is the case with most other businesses, the Company is in the process
of evaluating and addressing the Year 2000 readiness of both its information
technology systems and its non-information technology systems (collectively
referred to as "Systems"). Such Year 2000 readiness efforts are designed to
identify, address and resolve issues that may be created by computer programs
written to use two digits rather than four to define the applicable year. Any of
the Company's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. If this situation
occurs, the potential exists for System failure or miscalculations by computer
programs, which could cause disruption of operations.
The Company has completed an assessment of both its information technology
systems and its non-information technology systems. The Company has four mission
critical information technology systems, two of which have been remediated and
are Year 2000 ready and have been placed into service. Remediation has begun on
the other two mission critical information technology systems and is expected to
be complete by August 1999. The Company has identified approximately 70
non-mission critical information technology systems, which the Company plans to
remediate using in-house personnel or through certifications and/or upgrades
from its vendors. Subsequently, the Company expects all of the systems to be
compliance tested by in-house personnel. The Company believes it is
approximately 50% complete with the above remediation processes and believes it
will be 100% complete by August 1999. The Company has commenced remediation of
its non-information technology systems and expects to have such remediation
complete by June 1999.
The Company has also initiated communications with all of its significant
business partners via a Vendor Readiness Survey to determine their plans to
comply with Year 2000. All responses are evaluated as received to determine if
additional action is required to determine the compliance of the business
partner.
The Company has engaged a consulting firm to assess the Company's
processes in place to achieve Year 2000 readiness. The Company also has in place
a Year 2000 Steering Committee, which meets regularly and periodically reports
the progress of Year 2000 readiness to the Company's executive management and
the Board of Directors.
The Company's approach to addressing Year 2000 readiness is to minimize
the possibility of any Year 2000-related interruptions or miscalculations.
Worst-case Year 2000 scenarios include the interruption of certain aspects of
the Company's business as a result of information technology systems failure or
the failure of the Company's business partners. Any such failure could have an
impact on future results; consequently, the Company is in the process of
formulating contingency plans.
The Company's approach to contingency planning is to employ a combination
of existing disaster recovery plans and the development of additional plans as
needed. Because the Company has elected to remediate its mission critical legacy
systems as opposed to replacing them, during a worst-case scenario, the Company
would invoke the disaster recovery plan the
29
<PAGE> 31
Company has developed under its standard operating procedures. The Company has
scheduled a test of the disaster recovery plan at an off-site facility in March,
1999. In addition, the Company's highest priority legacy system, the service
delivery system, has always had a back-up system residing on a different
platform. This back-up system has always stored four-digit year dates and is
used when the primary system is taken off line for maintenance. This system is
in the process of being tested for Year 2000 readiness. To gain a greater degree
of confidence that all other systems will function properly, the Company has
elected to conduct an integrated system test once all remediation work is
completed. The Company expects to conduct this test at an off-site facility
specially developed for Year 2000 testing.
The Company believes that additional contingency plans may need to be
developed relating to its suppliers. In June, 1998, the Company began the
process of surveying its vendors, suppliers, and key business associates to
determine their level of Year 2000 readiness. Responses to these inquiries
continue to be received, reviewed and assessed. The Company expects to identify
which of its vendors, suppliers, and business associates are mission-critical
and to develop alternate means as necessary. The Company plans to identify
mission-critical vendors and to establish related contingency planning by
September, 1999. In the meantime, the Company plans to continue to monitor the
need for additional contingency planning.
As of December 31, 1998 the Company incurred costs of approximately $3.3
million and expects to incur approximately $4.0 million thereafter to remediate
or upgrade all of the Company's Systems. This represents approximately 9.2% of
the Company's information technology budget. No significant information
technology projects have been deferred due to the Company's Year 2000 efforts.
The future remediation and upgrade costs to be incurred are based on
management's best estimates, which were derived using assumptions of future
events including the continued availability of resources and the reliability of
third party modification plans. There can be no assurance that this estimate
will be achieved and actual results may be materially different. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel with appropriate skills and the
ability to locate and correct all non-compliant Systems.
The Company is aware of the potential for claims against it and other
companies for damages for products and services that were not Year 2000
compliant. Although the Company believes it is taking adequate measures to
address Year 2000 issues, the Company is uncertain how it may be affected by
litigation given the evolving nature of such litigation. The Company believes,
however, that it does not have material exposure to liability for such claims.
While the Company does not believe that the Year 2000 matters presented in
this discussion will have a material impact on its business, financial condition
or results of operations, it is uncertain whether or to what extent the Company
may be affected by such matters, given the forward-looking nature of the Year
2000 issues.
30
<PAGE> 32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company uses its revolving credit facility, term loans, senior
discount debentures, and senior subordinated notes to finance a significant
portion of its operations. These on-balance sheet financial instruments, to the
extent they provide for variable rates of interest, expose the Company to
interest rate risk resulting from changes in LIBOR or the prime rate. The
Company uses off-balance sheet interest rate swap and collar agreements to
partially hedge interest rate exposure associated with on-balance sheet
financial instruments. All of the Company's derivative financial instrument
transactions are entered into for non-trading purposes. The terms and
characteristics are matched with the underlying on-balance instruments, subject
to the terms of the New Credit Facility.
To the extent that the Company's financial instruments expose the Company
to interest rate risk and market risk, they are presented in the table below.
The table presents principal cash flows and related interest rates by year of
maturity for the Company's revolving credit facility, term loans, senior
discount debentures, and senior subordinated notes in effect at December 31,
1998 and, in the case of the senior discount notes, exclude the potential
exercise of the redemption feature. For interest rate swaps and collars, the
table presents notional amounts and the related reference interest rates by year
of maturity. Fair values included herein have been determined based on (1)
management's estimates of indicative market prices for the term loans, the
revolver, senior discount debentures, and senior subordinated notes and (2)
estimates obtained from dealers to settle interest rate swap and collar
agreements.
<TABLE>
<CAPTION>
Fiscal Year of Maturity Fair Value
------------------------------------------------------------------------ Total Due at Dec. 31,
Interest Rate Sensitivity 1999 2000 2001 2002 2003 Thereafter At Maturity 1998
- ------------------------- ---- ---- ---- ---- ---- ---------- ----------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt:
Fixed Rate -- -- -- -- -- $ 298,400 $298,400 $ 106,100
Average Interest Rate -- -- -- -- -- 10.6% -- --
Variable Rate $ 5,275 $ 19,325 $ 36,875 $ 49,062 $73,438 $ 345,924 $529,899 $ 397,424
Average Interest Rate 8.0% 8.0% 7.9% 7.9% 7.9% 8.4% -- --
Interest Rate Instruments:
Variable to Fixed Swaps -- $ 75,000 -- -- -- -- $ 75,000 $ (600)
Average Pay Rate -- 5.9% -- -- -- -- -- --
Average Receive Rate -- 5.7% -- -- -- -- -- --
Collars: -- $ 25,000 $ 75,000 -- -- -- $100,000 $ (1,090)
Average Cap Rate -- 5.8% 6.7% -- -- -- -- --
Average Floor Rate -- 5.7% 5.7% -- -- -- -- --
</TABLE>
31
<PAGE> 33
DECISIONONE HOLDINGS CORP. AND SUBSIDIARIES
DECISIONONE CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable
Item 2. Changes in Securities and Use of Proceeds.
Not applicable
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Stockholders was held on December 10,
1998. At the meeting, the stockholders of the Company (i) approved the
authorization of an additional 250,000 shares of Company common stock
for issuance under the DecisionOne Holdings Corp. 1997 Management
Incentive Plan, with 10,533,371 votes for approval, 176,673 votes
against and 68 votes withheld, and (ii) elected the following to the
Board of Directors of the Company:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Peter T. Grauer 10,709,013 1,099
Stephen J. Felice 10,709,013 1,099
Lawrence M.v.D. Schloss 10,708,513 1,599
Kirk B. Wortman 10,709,013 1,099
</TABLE>
Item 5. Other Information.
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Description of Document
4.1 Indenture, dated as of January 27, 1999, relating to 14%
Senior Notes due 2006 of DecisionOne Corporation
4.2 Form of Note relating to 14% Senior Notes due 2006 of
DecisionOne Corporation
32
<PAGE> 34
10 Waiver of Financial Covenants
27.1 Financial data schedule - DecisionOne Holdings Corp.
27.2 Financial data schedule - DecisionOne Corporation
(b) Reports on Form 8-K
On February 10, 1999, DecisionOne Holdings Corp. and DecisionOne
Corporation filed a Form 8-K, reporting a delay in implementing the
previously reported change in their fiscal year end from June 30 to
December 31. Each company's current fiscal year end will end on June
30, 1999.
33
<PAGE> 35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
DecisionOne Holdings Corp.
--------------------------
DATE: February 16, 1999 /s/ Thomas J. Fitzpatrick
--------------------------
Thomas J. Fitzpatrick
Executive Vice President and
Chief Financial Officer
DecisionOne Corporation
-----------------------
DATE: February 16, 1999 /s/ Thomas J. Fitzpatrick
-----------------------------------------
Thomas J. Fitzpatrick
Executive Vice President and
Chief Financial Officer
34
<PAGE> 1
EXECUTION COPY
- -------------------------------------------------------------------------------
DECISIONONE CORPORATION
14% SENIOR NOTES DUE 2006
AND
14% SERIES B SENIOR NOTES DUE 2006
------------------------
INDENTURE
Dated as of January 27, 1999
------------------------
------------------------
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions ..................................................... 1
SECTION 1.02. Other Definitions ............................................... 20
SECTION 1.03. Incorporation by Reference of Trust Indenture Act ............... 21
SECTION 1.04. Rules of Construction ........................................... 21
SECTION 1.05. Compliance Certificates and Opinions ............................ 22
SECTION 1.06. Form of Documents Delivered to Trustee .......................... 22
SECTION 1.07. Acts of Holders ................................................. 23
ARTICLE 2
THE NOTES
SECTION 2.01. Form and Dating ................................................. 24
SECTION 2.02. Execution and Authentication .................................... 25
SECTION 2.03. Registrar and Paying Agent ...................................... 26
SECTION 2.04. Paying Agent to Hold Money in Trust ............................. 26
SECTION 2.05. Lists of Holders of the Notes ................................... 27
SECTION 2.06. Transfer and Exchange ........................................... 27
SECTION 2.07. Special Provisions for Transfers Prior to Registration .......... 28
SECTION 2.08. Replacement Notes ............................................... 29
SECTION 2.09. Outstanding Notes ............................................... 29
SECTION 2.10. Treasury Notes .................................................. 29
SECTION 2.11. Temporary Notes ................................................. 29
SECTION 2.12. Cancellation .................................................... 30
SECTION 2.13. Defaulted Interest .............................................. 30
SECTION 2.14. Record Date ..................................................... 30
SECTION 2.15. CUSIP Number .................................................... 30
SECTION 2.16. Computation of Interest ......................................... 30
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. Election to Redeem; Notice to Trustee ........................... 31
SECTION 3.02. Selection by Trustee of Notes to Be Redeemed .................... 31
SECTION 3.03. Notice of Redemption ............................................ 31
SECTION 3.04. Effect of Notice of Redemption .................................. 32
SECTION 3.05. Deposit of Redemption Price ..................................... 32
SECTION 3.06. Notes Payable on Redemption Date ................................ 33
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3.07. Notes Redeemed in Part .......................................... 33
SECTION 3.08. Optional Redemption ............................................. 33
SECTION 3.09. Mandatory Redemption ............................................ 34
SECTION 3.10. Offer to Purchase by Application of Excess Proceeds ............. 34
SECTION 3.11. Restrictions on Redemption ...................................... 36
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Principal, Premium and Interest ...................... 36
SECTION 4.02. Maintenance of Office as Agency ................................. 37
SECTION 4.03. Money for Payments to Be Held in Trust .......................... 37
SECTION 4.04. Reports ......................................................... 39
SECTION 4.05. Statement as to Compliance; Notice of Default ................... 39
SECTION 4.06. Payment of Taxes and Other Claims ............................... 40
SECTION 4.07. Stay, Extension, Usury Laws ..................................... 40
SECTION 4.08. Corporate Existence ............................................. 40
SECTION 4.09. Offer to Repurchase upon Change of Control ...................... 41
SECTION 4.10. Asset Sales ..................................................... 43
SECTION 4.11. Limitation on Restricted Payments ............................... 44
SECTION 4.12. Limitation on Incurrence of Indebtedness and Issuance of
Preferred Stock .......................................................... 50
SECTION 4.13. Transactions with Affiliates .................................... 53
SECTION 4.14. Dividend and Other Payment Restrictions Affecting Subsidiaries .. 54
SECTION 4.15. Limitations on Guarantees of Indebtedness by Restricted
Subsidiaries ............................................................. 55
SECTION 4.16. Limitation on Liens ............................................. 56
SECTION 4.17. Sale and Leaseback Transactions ................................. 56
SECTION 4.18. Sales of Accounts Receivables ................................... 56
ARTICLE 5
SUCCESSORS
SECTION 5.01. Merger, Consolidation, or Sale of All or Substantially All Assets 57
SECTION 5.02. Successor Corporation Substituted ............................... 58
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default and Notice Thereof ............................ 59
SECTION 6.02. Acceleration .................................................... 60
SECTION 6.03. Other Remedies .................................................. 61
SECTION 6.04. Waiver of Past Defaults ......................................... 61
SECTION 6.05. Control by Majority ............................................. 61
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 6.06. Limitation on Suits .............................................. 61
SECTION 6.07. Rights of Holders of Notes to Receive Payment .................... 61
SECTION 6.08. Collection Suit by Trustee ....................................... 62
SECTION 6.09. Trustee May File Proofs of Claim ................................. 62
SECTION 6.10. Priorities ....................................................... 62
SECTION 6.11. Undertaking for Costs ............................................ 63
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee ................................................ 63
SECTION 7.02. Rights of Trustee ................................................ 64
SECTION 7.03. Individual Rights of Trustee ..................................... 66
SECTION 7.04. Trustee's Disclaimer ............................................. 66
SECTION 7.05. Notice of Defaults ............................................... 66
SECTION 7.06. Reports by Trustee to Holders of the Notes ....................... 66
SECTION 7.07. Compensation and Indemnity ....................................... 67
SECTION 7.08. Replacement of Trustee ........................................... 68
SECTION 7.09. Successor Trustee by Merger, Etc. ................................ 69
SECTION 7.10. Eligibility; Disqualification .................................... 69
SECTION 7.11. Preferential Collection of Claims Against the Company ............ 69
SECTION 7.12. Rights of Holders with Respect to Time Method and Place .......... 69
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Defeasance or Covenant Defeasance ............... 69
SECTION 8.02. Legal Defeasance and Discharge ................................... 70
SECTION 8.03. Covenant Defeasance .............................................. 70
SECTION 8.04. Conditions to Defeasance or Covenant Defeasance .................. 71
SECTION 8.05. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions...................................... 72
SECTION 8.06. Repayment to Company ............................................. 73
SECTION 8.07. Reinstatement .................................................... 73
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. Without Consent of Holders of Notes .............................. 74
SECTION 9.02. With Consent of Holders of Notes ................................. 75
SECTION 9.03. Compliance with TIA .............................................. 77
SECTION 9.04. Revocation and Effect of Consents ................................ 77
SECTION 9.05. Notation on or Exchange of Notes ................................. 77
SECTION 9.06. Trustee to Sign Amendments, Etc. ................................. 77
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE 10
SATISFACTION AND DISCHARGE
SECTION 10.01. Satisfaction and Discharge of Indenture ......................... 78
SECTION 10.02. Application of Trust Money ...................................... 78
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Conflict of Any Provision of Indenture with TIA ................. 79
SECTION 11.02. Notices ......................................................... 79
SECTION 11.03. Communication by Holders of Notes with Other Holders of Notes.... 80
SECTION 11.04. Certificate and Opinion as to Conditions Precedent .............. 81
SECTION 11.05. Legal Holidays .................................................. 81
SECTION 11.06. No Personal Liability of Directors, Officers, Employees and
Stockholders .............................................................. 81
SECTION 11.07. Governing Law ................................................... 82
SECTION 11.08. No Adverse Interpretation of Other Agreements ................... 82
SECTION 11.09. Successors and Assigns .......................................... 82
SECTION 11.10. Severability .................................................... 82
SECTION 11.11. Counterpart Originals ........................................... 82
SECTION 11.12. Table of Contents, Headings, Etc. ............................... 82
</TABLE>
<PAGE> 6
PAGE
----
v
<PAGE> 7
EXHIBITS
A Form of Note
B Form of Supplemental Indenture to be Delivered by Guarantors
<PAGE> 8
CROSS-REFERENCE TABLE(1)
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1)............................................... 7.10
(a)(2)............................................... 7.10
(a)(3)............................................... N.A.
(a)(4)............................................... N.A.
(a)(5)............................................... 7.10
(b).................................................. 7.10
(c).................................................. N.A.
311 (a).................................................. 7.11
(b).................................................. 7.11
(c).................................................. N.A.
312 (a).................................................. 2.05
(b).................................................. 11.03
(c).................................................. 11.03
313 (a).................................................. 7.06
(b)(1)............................................... N.A.
(b)(2)............................................... 7.06; 7.07
(c).................................................. 7.06; 11.02
(d).................................................. 7.06
314 (a).................................................. N.A.
(b).................................................. N.A.
(c)(1)............................................... N.A.
(c)(2)............................................... N.A.
(c)(3)............................................... N.A.
(d).................................................. N.A; 1.05
(e)..................................................
(f).................................................. N.A.
315 ..................................................... 1.07
316 (a) (last sentence).................................. N.A.
(a)(1)(A)............................................ N.A.
(a)(1)(B)............................................ N.A.
(a)(2)............................................... N.A.
(b).................................................. N.A.
317 (a)(1)............................................... N.A.
(a)(2)............................................... N.A.
</TABLE>
- --------
(1) This Cross-Reference Table is not part of the Indenture.
<PAGE> 9
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
(b).................................................. N.A.
318 (a).................................................. N.A.
(b).................................................. N.A.
(c).................................................. 11.01
</TABLE>
N.A. means not applicable.
<PAGE> 10
INDENTURE, dated as of January 27, 1999 between DecisionOne Corporation, a
Delaware corporation (the "COMPANY"), and State Street Bank and Trust Company,
as trustee (the "TRUSTEE"). The Company and the Trustee agree as follows for the
benefit of each other party and for the equal and ratable benefit of the Holders
of the Company's 14% Senior Notes due 2006 and the 14% Series B Senior Notes due
2006 which may be exchanged for the 14% Senior Notes due 2006:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS. Set forth below are certain defined terms used
in this Indenture.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means any newly created, Wholly Owned
Subsidiary of the Company (i) which is formed solely for the purpose of, and
which engages in no activities other than activities in connection with,
financing accounts receivable of the Company and/or its Restricted Subsidiaries,
(ii) which is designated by the Board of Directors of the Company as an Accounts
Receivables Subsidiary pursuant to a Board Resolution set forth in an Officers
Certificate and delivered to the Trustee, (iii) that has total assets at the
time of such designation with a book value not exceeding $500,000 plus the
reasonable fees and expenses required to establish such Accounts Receivable
Subsidiary and any accounts receivable financing, (iv) no portion of
Indebtedness or any other obligation (contingent or otherwise) of which (a) is
at any time recourse to or obligates the Company or any Restricted Subsidiary of
the Company in any way, other than pursuant to (I) representations and covenants
entered into in the ordinary course of business in connection with the sale of
accounts receivable to such Accounts Receivable Subsidiary or (II) any guarantee
of any such accounts receivable financing by the Company or any Restricted
Subsidiary that is permitted to be incurred pursuant to the covenant described
in Section 4.12 hereof, or (b) subjects any property or asset of the Company or
any Restricted Subsidiary of the Company, directly or indirectly, contingently
or otherwise, to the satisfaction thereof, other than pursuant to (I)
representations and covenants entered into in the ordinary course of business in
connection with sales of accounts receivable or (II) any guarantee of any such
accounts receivable financing by the Company that is permitted to be incurred
pursuant to the covenant described in Section 4.12 hereof, (v) with which
neither the Company nor any Restricted Subsidiary of the Company has any
contract, agreement, arrangement or understanding other than contracts,
agreements, arrangements and understandings entered into in the ordinary course
of business in connection with sales of accounts receivable in accordance with
the covenant described in Section 4.18 hereof and fees payable in the ordinary
course of business in connection with servicing accounts receivable and (vi)
with
<PAGE> 11
respect to which neither the Company nor any Restricted Subsidiary of the
Company has any obligation (a) to subscribe for additional shares of Capital
Stock or other Equity Interests therein or make any additional capital
contribution or similar payment or transfer thereto other than in connection
with the sale of accounts receivable to such Accounts Receivable Subsidiary in
accordance with the covenant described in Section 4.18 hereof or (b) to maintain
or preserve the solvency or any balance sheet term, financial condition, level
of income or results of operations thereof.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person merges
with or into or becomes 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 or assumed in connection with the acquisition
of any asset used or useful in a Permitted Business acquired by such Person.
"ADJUSTED CONSOLIDATED NET INCOME" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus , to
the extent deducted in calculating Consolidated Net Income, the sum of (i) 100%
of the aggregate amortization of intangibles plus, with respect to the Company,
up to $25.0 million arising from any write off of intangibles reflected on the
Company's balance sheet as of March 31, 1997 for such period of such Person and
its Restricted Subsidiaries less any tax benefit recorded by such Person as a
result of such amortization, (ii) 100% of non-cash compensation expense for such
period incurred by such Person and its Restricted Subsidiaries related to stock
options or other Equity Interests granted to the employees or directors of such
Person and its Restricted Subsidiaries, (iii) expenses and charges of the
Company related to the Merger which are paid, taken or otherwise accounted for
within 90 days of the consummation of the Merger and (iv) 100% of any loss
realized in connection with the extinguishment of Indebtedness pursuant to the
Intercompany Loan.
"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.
"AGENT" means any Registrar, Paying Agent or co registrar.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition
of any assets (including, without limitation, by way of a sale and leaseback)
other than (A) in the
2
<PAGE> 12
ordinary course of business or (B) sales of accounts receivables to the Accounts
Receivables Subsidiary in accordance with Section 4.18 hereof (provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole will be governed by
Section 4.09 hereof and/or Section 5.01 hereof and not by the provisions of
Section 4.10 hereof); and (ii) the issue by any Restricted Subsidiary of the
Company of any Equity Interests of such Restricted Subsidiary and the sale by
the Company or any of its Restricted Subsidiaries of Equity Interests of any of
the Company's Subsidiaries, in the case of clauses (i) and (ii), whether in a
single transaction or series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (1) a transfer of assets by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, (2) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (3) a
Restricted Payment that is permitted by Section 4.11 hereof, (4) the sale and
leaseback of any assets within 90 days of the acquisition of such assets, (5)
foreclosures on assets and (6) a disposition of Cash Equivalents in the ordinary
course of business will not be deemed to be Asset Sales.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar foreign, federal
or state law for the relief of debtors.
"BOARD OF DIRECTORS" means the board of directors of the Company or any
duly authorized committee of such board of directors.
"BOARD RESOLUTION" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"BUSINESS" shall have the meaning assigned to such term in Article 11,
Rule 11.01(d) of Regulation S-X, promulgated pursuant to the Securities Act, as
such regulation is in effect on the date of this Indenture.
"BUSINESS DAY" means any day other than a Legal Holiday.
3
<PAGE> 13
"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 EQUIVALENTS" means (i) Government Securities, (ii) any certificate
of deposit maturing not more than 365 days after the date of acquisition issued
by, or time deposit of, an Eligible Institution or any lender under the Credit
Facility, (iii) commercial paper maturing not more than 365 days after the date
of acquisition of an issuer (other than an Affiliate of the Company) with a
rating, at the time as of which any investment therein is made, of A-3 (or
higher) according to S&P or P-2 (or higher) according to Moody's or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments, (iv) any bankers
acceptances or money market deposit accounts issued by an Eligible Institution
and (v) any fund investing exclusively in investments of the types described in
clauses (i) through (iv) above.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) any
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation) in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as defined in Section 13(d) of the Exchange Act) or
"group" (as defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other
than the Principals and their Related Parties; (ii) the adoption of a plan for
the liquidation or dissolution of the Company; (iii) the Company consolidates
with, or merges with or into, another "person" (as defined above) or "group" (as
defined above) in a transaction or series of related transactions in which the
Voting Stock of the Company is converted into or exchanged for cash, securities
or other property, other than any transaction where (A) the outstanding Voting
Stock of the Company is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee corporation and (B) either
(1) the "beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) of
the Voting Stock of the Company immediately prior to such transaction own,
directly or indirectly through one or more Subsidiaries, not less than a
majority of the total Voting Stock of the surviving or transferee corporation
immediately after such transaction or (2) if, immediately prior to such
transaction the Company is a direct or indirect Subsidiary of any other Person
(such other Person, the "Holding Company"), then the beneficial owners (as
defined above) of
4
<PAGE> 14
the Voting Stock of such Holding Company immediately prior to such transaction
own, directly or indirectly through one or more Subsidiaries, not less than a
majority of the Voting Stock of the surviving or transferee corporation
immediately after such transaction; (iv) the consummation of any transaction or
series of related transactions (including, without limitation, by way of merger
or consolidation) the result of which is that any "person" (as defined above) or
"group" (as defined above) other than the Principals and their Related Parties
becomes the "beneficial owner" (as defined above) of more than 50% of the voting
power of the Voting Stock of the Company or any Holding Company of the Company
or (v) the first day on which a majority of the members of the Board of
Directors of the Company or any Holding Company of the Company are not
Continuing Directors.
"CLOSING DATE" means the closing date of the sale and original issuance of
the Notes under this Indenture.
"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 and its Restricted Subsidiaries for
such period, plus, to the extent deducted in computing Consolidated Net Income,
(i) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (ii) Fixed Charges of such Person for
such period, (iii) depreciation and amortization (including amortization of
goodwill and other intangibles) and all other non-cash charges (excluding any
such non-cash charge to the extent that it represents (x) an accrual of or
reserve for cash charges in any future period, (y) amortization of a prepaid
cash expense that was paid in a prior period or (z) amortization attributable to
rotable inventory which has been capitalized in accordance with GAAP) of such
Person and its Restricted Subsidiaries for such period, (iv) any net loss
realized in connection with any Asset Sale and any extraordinary or
non-recurring loss, in each case, on a consolidated basis determined in
accordance with GAAP and (v) expenses and charges of the Company related to the
Merger which are paid, taken or otherwise accounted for within 90 days of the
consummation of the Merger. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, the Fixed Charges of, and the
depreciation and amortization and other non-cash charges of, a Restricted
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 Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of: (a) the interest expense of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP (including amortization of original issue discount, non-cash interest
payments, the interest component of all payments associated with Capital Lease
Obligations, imputed interest
5
<PAGE> 15
with respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers acceptance
financings, and net payments, if any, pursuant to Hedging Obligations; provided,
however, that in no event shall any amortization of deferred financing costs be
included in Consolidated Interest Expense) and (b) consolidated capitalized
interest of such Person and its Restricted Subsidiaries for such period, whether
paid or accrued.
"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, however, that (i) the Net Income or 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 to the referent Person or a Restricted Subsidiary thereof in
cash, (ii) 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, (iii) the cumulative effect of a change in accounting principles shall
be excluded, and (iv) 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 (which
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.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of the Company or any Holding Company of the Company
who (i) was a member of such Board of Directors immediately after consummation
of the Merger, including the Offering and the application of the net proceeds
thereof, 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 or any
successor Continuing Directors appointed by such Continuing Directors (or their
successors).
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"CREDIT FACILITY" means that certain Credit Agreement, dated as of August
7, 1997, by and among the Company, DLJ Capital Funding, Inc., as Syndication
Agent, NationsBank of Texas, N.A., as Administrative Agent, BankBoston, N.A., as
Documentation Agent, 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,
6
<PAGE> 16
refinanced from time to time, including any agreement extending or shortening
the maturity of or refinancing or refunding all or any portion of the
Indebtedness thereunder or increasing the amount that may be borrowed under such
agreement or any successor agreement, whether or not among the same parties.
"CREDIT FACILITY OBLIGATIONS" means all Obligations of the Company
outstanding under the Credit Facility and all Hedging Obligations payable to a
lender under the Credit Facility or any of its affiliates, including, without
limitation, in each case, 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.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"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 PREFERRED STOCK" means preferred stock of the Company (other
than Disqualified Stock) that is issued for cash (other than to a Restricted
Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company, on the issuance date thereof, the
cash proceeds of which are excluded from the calculation set forth in clause (c)
of Section 4.11 hereof.
"DISQUALIFIED STOCK" means, with respect to any Person, 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,
is exchangeable for Indebtedness (except to the extent exchangeable at the
option of such Person subject to the terms of any debt instrument to which such
Person is a party), or is redeemable at the option of the Holder thereof, in
whole or in part, on or prior to August 1, 2007; provided, however, that if such
Capital Stock is issued to any plan for the benefit of employees of the Company
or its Subsidiaries or by any such plan to such employees, such Capital Stock
shall not constitute Disqualified Stock solely because it may be required to be
repurchased by the Company in order to satisfy applicable statutory or
regulatory obligations.
"ELIGIBLE INSTITUTION" means a commercial banking institution that has
combined capital and surplus not less than $100.0 million or its equivalent in
foreign currency, whose short term debt is rated A-3 or higher according to S&P
or P-2 or higher according to Moody's or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments.
7
<PAGE> 17
"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).
"EQUITY OFFERING" means any (i) issuance of common stock or preferred
stock by the Company (other than to Holdings and other than Disqualified Stock)
or Holdings (other than Disqualified Stock) that is registered pursuant to the
Securities Act, other than issuances registered on Form S-8 under the Securities
Act and issuances registered on Form S-4 under the Securities Act, and (ii) any
private issuance of common stock or preferred stock by the Company (other than
to Holdings and other than Disqualified Stock) or Holdings (other than
Disqualified Stock), excluding, in the case of clauses (i) and (ii) above,
issuances of common stock pursuant to employee benefit plans of Holdings or the
Company or otherwise as compensation to employees of the Company or Holdings.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"EXCHANGE NOTES" means the 14% Series B Senior Notes due 2006 to be issued
pursuant to this Indenture in connection with the offer to exchange Exchange
Notes for the Initial Notes that may be made by the Company pursuant to the
Registration Rights Agreement.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Credit Facility) in
existence on August 7, 1997 until such amounts are repaid.
"FAIR MARKET VALUE" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, guarantees, redeems or
repays any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but on or 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
8
<PAGE> 18
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee, redemption or repayment 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. For purposes of making the
computation referred to above, (i) the Consolidated Cash Flow of the Company
shall include (a) the Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for the latest four-quarter period for which consolidated internal
financial statements of the Company are available as derived from such financial
statements plus or minus (b) with respect to any Business or Qualified Contracts
that have been acquired by the Company or any of its Restricted Subsidiaries,
including through mergers or consolidations, after the first day of the
applicable four-quarter period and prior to the Calculation Date, the result of
(1) the Consolidated Cash Flow of such Business or Qualified Contracts for the
most recent three-month period prior to such acquisition for which internal
financial statements in respect of such acquired Business or Qualified Contracts
are available times four multiplied by (2) a fraction the numerator of which is
365 minus the number of days during the relevant four quarter period for which
the results of operations of such Business or Qualified Contracts were included
in clause (a) of this sentence and the denominator of which is 365, (ii) the
acquisition of any Business or Qualified Contracts that has been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions after the first
day of the applicable four quarter period and on or prior to the Calculation
Date shall give pro forma effect to financing transactions (including the
incurrence of Acquired Debt) in connection with the acquisition of such Business
or Qualified Contracts, as if such acquisition had occurred at the beginning of
the applicable reference period, and (iii) the Consolidated Cash Flow and
expenses attributable to discontinued operations as determined in accordance
with GAAP, and operations, Businesses and Qualified Contracts disposed of prior
to the Calculation Date shall be excluded. For purposes of the foregoing clause
(i), the Consolidated Cash Flow attributable to any Business or Qualified
Contracts acquired by the Company or any Restricted Subsidiary of the Company
shall be calculated utilizing the actual revenues attributable to such Business
or Qualified Contracts for the applicable period and the expenses that would
have been attributable to such Business or Qualified Contracts had the Company
acquired such Business or Qualified Contracts at the beginning of the applicable
three month period, as determined in good faith by the Company, taking into
account the Company's historical expenses in connection with the provision of
similar services for similar equipment under similar contracts. If since the
beginning of the applicable four-quarter period any Person (that subsequently
becomes a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made or
engaged in any Investment, disposition of operations, Businesses or Qualified
Contracts, or merger or consolidation, or shall have discontinued any operations
or acquired any Business or Qualified Contracts that would have required
adjustment pursuant to this definition had such Person been a Restricted
Subsidiary at the time of such Investment, disposition, merger, consolidation,
discontinued operation or
9
<PAGE> 19
acquisition, then "Consolidated Cash Flow" shall be calculated giving pro forma
effect thereto for such period as if such Investment, acquisition, disposition,
merger, consolidation or discontinued operation had occurred at the beginning of
the applicable four-quarter period.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the Consolidated Interest Expense of such Person for
such period and (ii) any interest expense on Indebtedness of another Person that
is guaranteed by the referent 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 (iii) the product of
(a) all cash dividend payments of the Company and any Guarantor on any series of
preferred stock of the Company or such Guarantor 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.
"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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect on the date of this
Indenture; provided, however, that all reports and other financial information
provided by the Company to the Holders, the Trustee and/or the Commission shall
be prepared in accordance with GAAP, as in effect on the date of such report or
other financial information.
"GOVERNMENT SECURITIES" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"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.
"GUARANTOR" means any Restricted Subsidiary that shall have guaranteed,
pursuant to a supplemental indenture and the requirements therefor set forth in
this Indenture, the payment of all principal of, and interest and premium, if
any, on, the Notes and all other amounts payable under the Notes or this
Indenture, which guarantee shall be pari passu with or senior to all other
Indebtedness of such Restricted Subsidiary.
10
<PAGE> 20
"GUARANTOR CREDIT FACILITY OBLIGATIONS" means, with respect to any
Guarantor, all Obligations of such Guarantor outstanding under the Credit
Facility and all Hedging Obligations payable to a lender under the Credit
Facility or any of its affiliates, including, without limitation, in each case,
interest accruing subsequent to the filing of, or which would have accrued but
for the filing of, a petition in bankruptcy, whether or not such interest is an
allowable claim in such bankruptcy proceeding.
"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 or foreign exchange rates.
"HOLDER" means a Person in whose name a Note is registered.
"HOLDINGS" means DecisionOne Holdings Corp., a Delaware corporation, the
corporate parent of the Company, or its successors.
"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 representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable, or representing any Hedging Obligations, 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), the maximum fixed repurchase price of Disqualified
Stock issued by such Person and the liquidation preference of preferred stock
issued by such Person, in each case, if held by any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company, and, to the
extent not otherwise included, the guarantee by such Person of any indebtedness
of any other Person; provided that Indebtedness shall not include the pledge by
the Company of the Capital Stock of an Unrestricted Subsidiary of the Company to
secure Non-Recourse Debt of such Unrestricted Subsidiary.
"INDENTURE" means this Indenture, as amended or supplemented from time to
time.
"INITIAL NOTES" means the 14% Senior Notes due 2006 issued pursuant to
this Indenture.
"INITIAL SALE" means (i) the first transaction after the commencement of
any accounts receivable financing arrangement in which accounts receivable are
sold by the
11
<PAGE> 21
Company and/or its Restricted Subsidiaries to an Accounts Receivable Subsidiary
and (ii) the first transaction following any amendment to any such arrangement
pursuant to which the class of eligible receivables to be purchased pursuant to
such arrangement is expanded in which such expanded class of accounts receivable
are sold by the Company and/or its Restricted Subsidiaries to an Accounts
Receivable Subsidiary.
"INTERCOMPANY NOTE" means the note issued by Holdings to the Company on
August 7, 1997 to evidence the loan by the Company to Holdings of $59,100,000 of
the proceeds of the Offerings which proceeds, together with dividends to
Holdings, funded the Merger consideration and costs and expenses in connection
therewith.
"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), 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, and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; provided that an acquisition of assets, Equity
Interests or other securities by the Company for consideration consisting of
common equity securities of the Company shall not be deemed to be an Investment.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.11 hereof.
"INVESTORS' AGREEMENT" means the investors' agreement, dated as of August
7, 1997, among Holdings, DLJ Merchant Banking Partners II, L.P. and affiliated
funds, a limited number of institutional investors and certain members of
management of Holdings and the Company, as amended from time to time.
"LEGAL HOLIDAY" means a Saturday, Sunday or a day on which banking
institutions in the City of New York, the city in which the principal corporate
trust office of the Trustee is located, or at a place of payment are authorized
by law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday.
"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
12
<PAGE> 22
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest).
"MANAGEMENT LOANS" means one or more loans by the Company or Holdings to
officers and/or directors of the Company and any of its Restricted Subsidiaries
to finance the purchase by such officers and directors of common stock of
Holdings; provided, however, that the aggregate principal amount of all such
Management Loans outstanding at any time shall not exceed $10.0 million.
"MERGER" means the merger of Quaker Holdings Corp., a Delaware
corporation, with and into Holdings, with Holdings continuing as the surviving
corporation, which merger was consummated on August 7, 1997.
"MOODY'S" means Moody's Investor Services, Inc.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, 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 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), and (iii) with respect to the Company, the
after-tax amount of any interest income with respect to the Intercompany Note.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness of the Company or any Restricted Subsidiary referred to
in clause (a) of the second paragraph of Section 4.10 hereof) secured by a Lien
on the asset or assets that are the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare
13
<PAGE> 23
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (ii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock (other than the stock of an Unrestricted Subsidiary pledged by the
Company to secure debt of such Unrestricted Subsidiary) or assets of the Company
or any of its Restricted Subsidiaries; provided, however, that in no event shall
Indebtedness of any Unrestricted Subsidiary fail to be Non-Recourse Debt solely
as a result of any default provisions contained in a guarantee thereof by the
Company or any of its Restricted Subsidiaries if the Company or such Restricted
Subsidiary was otherwise permitted to incur such guarantee pursuant to this
Indenture.
"NOTES" means, collectively, the Initial Notes and, when and if issued as
provided in the Registration Rights Agreement, the Exchange Notes.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the offering and sale of the Subordinated Notes by the
Company pursuant to a prospectus, dated as of July 30, 1997, contained or
incorporated in the Subordinated Notes Registration Statement.
"OFFERINGS" means the Offering and the concurrent offering by Quaker
Holding Co., a Delaware corporation, of units consisting of 11 1/2% Senior
Discount Debentures due 2008 and warrants to purchase shares of common stock of
Holdings pursuant to a prospectus, dated as of July 30, 1997, contained or
incorporated in a Registration Statement on Form S-1 (No. 333-28539) filed with
the Commission on June 5, 1997 and all exhibits, schedules and amendments
thereto.
"OFFICER" means the Chairman of the Board, the President, any Vice
President or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be the Chairman of the
Board, the President, a Vice President or the Secretary of the Company that
meets the requirements set forth in Section 1.05 hereof.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee, in form and
substance satisfactory to the Trustee. Each such opinion shall include the
statements provided for in TIA Section 314(e) to the extent applicable.
"PARI PASSU INDEBTEDNESS" means Indebtedness of the Company or any
Guarantor that ranks pari passu in right of payment to the Notes or any
Subsidiary
14
<PAGE> 24
Guarantee, other than Indebtedness under Credit Facility Obligations
or Guarantor Credit Facility Obligations.
"PERMITTED BUSINESS" means the equipment maintenance or support services
business or any business reasonably ancillary or related thereto.
"PERMITTED INVESTMENTS" means (i) Investments in the Company or in a
Restricted Subsidiary of the Company, (ii) Investments in cash or Cash
Equivalents, (iii) Investments by the Company or any Restricted Subsidiary of
the Company in a Person if, as a result of such Investment, (a) such Person
becomes a Restricted Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company, (iv) Investments in accounts and notes receivable
acquired in the ordinary course of business, (v) any non-cash consideration
received in connection with an Asset Sale that complies with Section 4.10
hereof, (vi) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case, incurred in the ordinary course of business, (vii) any guarantees
permitted to be made pursuant to Section 4.12 hereof, (viii) Investments in any
Accounts Receivable Subsidiary made in connection with the formation of Accounts
Receivable Subsidiary or received in consideration of sales of accounts
receivable, in each case, in accordance with Section 4.18 hereof, (ix) the
Intercompany Note and (x) the Management Loans.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accredit value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses and premiums incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity date at least
as late as 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 Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iv) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is Pari Passu Indebtedness,
such Permitted Refinancing Indebtedness has a final maturity date on or later
than the final maturity date of, and is
15
<PAGE> 25
subordinated or pari passu in right of payment to, the Notes on terms at least
as favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded and (v) such Indebtedness is incurred either by the Company
or by the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PRINCIPALS" means DLJ Merchant Banking, Partners II, L.P., DLJ Offshore
Partners II, C.V., DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., DLJ
Merchant Banking Partners II-A, L.P., DLJ Diversified Partners-A, L.P., DLJ
Millennium Partners, L.P., DLJ Millennium Partners-A, L.P., DLJ EAB Partners,
L.P., UK Investment Plan 1997 Partners and DLJ First ESC, L.P. and each of their
respective Affiliates.
"QUALIFIED CONTRACT" means any contract for the provision of computer
maintenance and/or technology support services with respect to which the Company
and its Restricted Subsidiaries have not received notice that the counterparty
to such contract intends to terminate such contract prior to the expiration of
its term or not to renew such contract at the end of its term.
"QUALIFIED PROCEEDS" means any of the following or any combination of the
following: (i) cash, (ii) Cash Equivalents, (iii) assets that are used or useful
in a Permitted Business and (iv) the Capital Stock of any Person engaged in a
Permitted Business if, in connection with the receipt by the Company or any
Restricted Subsidiary of the Company of such Capital Stock, (a) such Person
becomes a Restricted Subsidiary of the Company or any Restricted Subsidiary of
the Company or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Restricted Subsidiary of the Company.
"RECEIVABLES FEES" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any receivables financing permitted pursuant to
Section 4.18 hereof.
"REGISTRATION" means a registration of the Notes under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the Closing Date between the Company and the initial holders of the
Notes, as such agreement may be amended, modified or supplemented from time to
time.
16
<PAGE> 26
"RELATED PARTY" means, with respect to the Principals, (i) any controlling
stockholder or partner of any Principal on the date of this Indenture, or (ii)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding (directly or
through one or more Subsidiaries) a 51% or more controlling interest of which
consist of the Principals and/or such other Persons referred to in the
immediately preceding clauses (i) or (ii).
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
officer in the Corporate Trust Office of the Trustee and also means, with
respect to a particular corporate trust matter, any other officer or employee to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"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 of
this Indenture.
"SPECIFIED AGREEMENTS" means the Investors' Agreement and the Tax Sharing
Agreement.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or any
Guarantor which is expressly by its terms subordinated in right of payment to
the Notes or any Subsidiary Guarantee.
"SUBORDINATED NOTES" means the Company's 9 3/4% senior subordinated notes
due 2007 issued in compliance with that certain indenture, dated as of August 7,
1997, between the Company and State Street Bank and Trust Company, as trustee.
"SUBORDINATED NOTES REGISTRATION STATEMENT" means the Registration
Statement (No. 333-28411) on Form S-1 relating to the Subordinated Notes filed
with the Commission on June 3, 1997 and all exhibits, schedules and amendments
thereto.
"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 Voting Stock is at the time owned or controlled, directly or
indirectly, by such Person or one or
17
<PAGE> 27
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 one or more Subsidiaries of such
Person (or any combination thereof); provided, however, that the Accounts
Receivable Subsidiary and its Subsidiaries shall not be deemed Subsidiaries of
the Company or any of its other Subsidiaries.
"SUBSIDIARY GUARANTEE" means any guarantee of the obligations of the
Company under this Indenture and the Notes by any Person in accordance with the
provisions of this Indenture pursuant to a supplemental indenture substantially
in the form attached hereto as Exhibit B.
"TAX SHARING AGREEMENT" means the tax sharing agreement, if any, between
the Company and Holdings, as amended from time to time.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TREASURY RATE" means, as of any redemption date, the yield to maturity as
of such redemption date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has then most recently become publicly
available (not more than ten or less than two Business Days) prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the
period from the redemption date to August 1, 2002; provided that if no United
States Treasury security is available with such a constant maturity for which a
closing yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the closing
yields of United States Treasury securities for which such yields are given,
except that if the period from the redemption date to August 1, 2002 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"TRUSTEE" means the party named as such above unless and until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means such successor.
"UNRESTRICTED SUBSIDIARY" means 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: (i) has no Indebtedness other than
Non-Recourse Debt; (ii) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are
18
<PAGE> 28
not Affiliates of the Company; (iii) is a Person with respect to which neither
the Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels, of operating results; and (iv) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company 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 Section 4.11 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.12 hereof, the Company shall be in
default of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under Section 4.12 hereof and (ii) no Default or Event
of Default would be in existence following such designation.
"VOTING STOCK" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding principal amount of such Indebtedness into (ii) the total of the
product 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.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all 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 or by such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
19
<PAGE> 29
"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 or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined
Term in Section
- ---- ----------
<S> <C>
"ACT"................................. 1.07
"AFFILIATE TRANSACTION"............... 4.13
"ASSET SALE OFFER".................... 3.09
"CHANGE OF CONTROL OFFER"............. 4.09
"CHANGE OF CONTROL PAYMENT"........... 4.09
"CHANGE OF CONTROL PAYMENT DATE"...... 4.09
"COVENANT DEFEASANCE"................. 8.03
"EVENT OF DEFAULT".................... 6.01
"EXCESS PROCEEDS"..................... 4.10
"FINANCIER"........................... 4.18
"GUARANTEED DEBT"..................... 4.15
"INCUR"............................... 4.12
"LEGAL DEFEASANCE".................... 8.02
"OFFER AMOUNT"........................ 3.09
"OFFER PERIOD"........................ 3.09
</TABLE>
20
<PAGE> 30
<TABLE>
<CAPTION>
Defined
Term in Section
- ---- ----------
<S> <C>
"PAYING AGENT"........................ 2.03
"PAYMENT DEFAULT"..................... 6.01
"PERMITTED DEBT"...................... 4.12
"PURCHASE DATE"....................... 3.09
"PROMISSORY NOTE"..................... 4.18
"REGISTRAR"........................... 2.03
"RESTRICTED PAYMENTS"................. 4.11
"SECURITIES ACT LEGEND"............... 2.01
"SUCCESSOR COMPANY"................... 5.01
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE"or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Notes means the Company and any successor obligors upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
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SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections
or rules adopted by the Commission from time to time.
SECTION 1.05. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application
or request by the Company to the Trustee to take any action under any provision
of this Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture (including any covenant compliance with which constitutes a condition
precedent) relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion (other than the certificates required by
Section 4.05(a) hereof) with respect to compliance with a condition or covenant
provided for in this Indenture shall comply with the provisions of TIA 314(e)
and shall include:
(a) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he or she
has made such examination or investigation as is necessary to enable him or her
to express an
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informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.06. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representation
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.07. ACTS OF HOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to TIA Section 315) conclusive in favor
of the Trustee and the Company, if made in the manner provided in this Section.
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(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner that the Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by a register kept by the
Registrar.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Notwithstanding TIA Section 316(c),
any such record date shall be the record date specified in or pursuant to such
Board Resolution, which shall be a date not more than 30 days prior to the first
solicitation of Holders generally in connection therewith and no later than the
date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for the purposes of determining
whether Holders of the requisite proportion of Notes then outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the Notes
then outstanding shall be computed as of such record date; provided that no such
request, demand, authorization, direction, notice, consent, waiver or other Act
by the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than six
months after the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holder of any Note shall bind every future Holder of the
same Note or the Holder of every Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or the Company
in reliance thereon, whether or not notation of such action is made upon such
Note.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto, the terms
of which are incorporated in and made a part of this Indenture. The Notes may
have notations, legends or endorsements approved as to form by the Company and
required by law, stock
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exchange rule, agreements to which the Company is subject, or usage. Each Note
shall be dated the date of its authentication. The Notes shall be issuable in
registered form, without coupons, and only in denominations of $1,000 and
integral multiples thereof.
Unless and until a Note is exchanged for a new Note not bearing such
legend in accordance with Section 2.07, each Note shall bear the legend (the
"SECURITIES ACT LEGEND") set forth below on the face thereof:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF DECISIONONE
CORPORATION (THE "COMPANY") THAT (i) SUCH SECURITY MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a)(1)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144, OR IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF
THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT AND (b) IN
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<PAGE> 35
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (ii) THE HOLDER SHALL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OR
ANY SECURITY ISSUED UPON EXCHANGE OR EXERCISE HEREOF OF
THE RESALE RESTRICTIONS SET FORTH IN (i) ABOVE."
Notwithstanding the foregoing, the Exchange Notes shall not bear the Securities
Act Legend.
SECTION 2.02. EXECUTION AND AUTHENTICATION. One Officer of the Company
shall sign the Notes for the Company by manual or facsimile signature. The
Company's seal shall be reproduced on the Notes and may be in facsimile form.
If an Officer of the Company whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature of the Trustee shall be conclusive evidence that the
Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by an
Officer of the Company, authenticate Initial Notes for original issue up to
$7,300,000 and shall authenticate Exchange Notes for original issue in the
aggregate principal amount of up to $7,300,000; provided that such Exchange
Notes shall be issuable only upon the valid surrender for cancellation of
Initial Notes of a like aggregate principal amount in accordance with the
Registration Rights Agreement. The aggregate principal amount of Notes
outstanding at any time shall not exceed such amount except as provided in
Section 2.08 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company.
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SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain (i)
an office or agency where Notes may be presented for registration of transfer or
for exchange (including any co-registrar, the "REGISTRAR") and (ii) an office or
agency where Notes may be presented for payment ("PAYING AGENT") within the City
of and the State of New York or, at the option of the Company, payment of
interest may be made by check mailed to the Holders at their respective
addresses set forth in the register of Holders; provided that all payments with
respect to Notes represented by one or more permanent global Notes will be paid
by wire transfer of immediately available funds to the account of the Depository
Trust Company or any successor thereto. The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company may appoint one or
more co-Registrars and one or more additional paying agents. The term Paying
Agent includes any additional paying agent. The Company may change any Paying
Agent, Registrar or co-Registrar without prior notice to any Holder. The Company
shall notify the Trustee in writing and the Trustee shall notify the Holders of
the name and address of any Agent not a party to this Indenture. The Company may
act as Paying Agent, Registrar or co-Registrar. The Company shall enter into an
appropriate agency agreement with any Agent not a party to this Indenture, which
shall be subject to any obligations imposed by the provisions of the TIA. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to
give the foregoing notice, the Trustee shall act as such, and shall be entitled
to appropriate compensation in accordance with Section 7.07 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall
require each Paying Agent other than the Trustee to agree in writing that the
Paying Agent shall hold in trust for the benefit of the Holders or the Trustee
all money held by the Paying Agent for the payment of principal of, premium, if
any, and interest on the Notes, and shall notify the Trustee of any Default by
the Company in making any such payment. While any such Default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee
and to account for any funds disbursed. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company) shall have no further
liability for the money delivered to the Trustee. If the Company acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent.
SECTION 2.05. LISTS OF HOLDERS OF THE NOTES. The Trustee shall preserve in
as current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Holders and shall otherwise comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least seven (7) Business
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Days before each interest payment date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Holders, including the
aggregate principal amount of the Notes held by each thereof, and the Company
shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE. When Notes are presented to the
Registrar with a request to register the transfer or to exchange them for an
equal principal amount of Notes of other denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met; provided, however, that any Note presented or surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instruction of transfer in form satisfactory to the Registrar and
the Trustee duly executed by the Holder thereof or by his attorney duly
authorized in writing. To permit registrations of transfer and exchanges, the
Company shall issue and the Trustee shall authenticate Notes at the Registrar's
request, subject to such rules as the Trustee may reasonably require.
Neither the Company nor the Registrar shall be required to (i) issue,
register the transfer of or exchange Notes during a period beginning at the
opening of business on a Business Day fifteen (15) days before the day of any
selection of Notes for redemption or purchase under Section 3.01 hereof and
ending at the close of business on the day of selection, (ii) register the
transfer of or exchange any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part or (iii)
register the transfer or exchange of a Note between a record date and the next
succeeding interest payment date.
No service charge shall be made to any Holder for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 2.11, 3.06 or 9.05 hereof, which shall be paid by the Company).
Prior to due presentment to the Trustee for registration of the transfer
of any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such Note
for the purpose of receiving payment of principal of, premium, if any, and
interest on such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and none of the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
SECTION 2.07. SPECIAL PROVISIONS FOR TRANSFERS PRIOR TO REGISTRATION.
Unless and until a Note is issued or sold pursuant to an effective Registration:
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(a) Upon the transfer, exchange or replacement of Notes bearing the
Securities Act Legend, the Registrar shall deliver only Notes that bear the
Securities Act Legend unless there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act; and
(b) Upon the transfer, exchange or replacement of Notes not bearing the
Securities Act Legend, the Registrar shall deliver Notes that do not bear the
Securities Act Legend.
By its acceptance of any Note bearing the Securities Act Legend, each
Holder of such Note acknowledges the restrictions on transfer of such Note set
forth in this Indenture and in the Securities Act Legend and agrees that it will
transfer such Note only in accordance herewith and therewith. In connection with
any transfer of Notes, each Holder agrees by its acceptance of the Notes to
furnish the Registrar or the Company such certifications, legal opinions or
other information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided that
the Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to this Section 2.07. The Company shall
have the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable
written notice to the Registrar.
SECTION 2.08. REPLACEMENT NOTES. If any mutilated Note is surrendered to
the Trustee, or the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Note and the ownership
thereof, the Company shall issue and the Trustee, upon the written order of the
Company signed by an Officer of the Company, shall authenticate a replacement
Note if the Trustee's requirements for replacements of Notes are met. If
required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the reasonable judgment of the Trustee and the
Company to protect the Company, the Trustee, each Agent and each authenticating
agent from any loss which any of them may suffer if a Note is replaced. The
Company and the Trustee may charge for their expenses in replacing a Note.
Every replacement Note is an additional Obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and ratably
with all other Notes duly issued hereof.
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SECTION 2.09. OUTSTANDING NOTES. The Notes outstanding at any time are all
the Notes authenticated by the Trustee except for those cancelled by it, those
delivered to it for cancellation and those described in this Section 2.09 as not
outstanding. If a Note is replaced pursuant to Section 2.08 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser. If the principal amount of any
Note is considered paid under Section 4.01 hereof, it ceases to be outstanding
and interest on it ceases to accrue. Subject to Section 2.10 hereof, a Note does
not cease to be outstanding because the Company or an Affiliate of the Company
holds the Note.
SECTION 2.10. TREASURY NOTES. In determining whether the Holders of the
required principal amount of Notes have concurred in any direction, waiver or
consent, Notes owned by the Company or any Affiliate of the Company (other than
any Principal or any Affiliate of a Principal until the first date when no
Principal or Affiliate of a Principal is a Holder) shall be considered as though
not outstanding, except that for purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Responsible Officer of the Trustee knows to be so owned shall be
so considered. Notwithstanding the foregoing, Notes that are to be acquired by
the Company or an Affiliate of the Company pursuant to an exchange offer, tender
offer or other agreement shall not be deemed to be owned by such entity until
legal title to such Notes passes to such entity.
SECTION 2.11. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Company may prepare and upon the written order of the Company
signed by an Officer of the Company the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company and the Trustee consider appropriate
for temporary Notes. Without unreasonable delay, the Company shall prepare and
the Trustee, as soon as practicable upon receipt of the written order of the
Company signed by an Officer of the Company, shall authenticate definitive Notes
in exchange for temporary Notes. Until such exchange, temporary Notes shall be
entitled to the same rights, benefits and privileges as definitive Notes.
SECTION 2.12. CANCELLATION. The Company at any time may deliver Notes to
the Trustee for cancellation. The Registrar and Paying Agent shall forward to
the Trustee any Notes surrendered to them for registration of transfer, exchange
or payment. The Trustee shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation. Subject to Section
2.08 hereof, the Company may not issue new Notes to replace Notes that it has
redeemed or paid or that have been delivered to the Trustee for cancellation.
All cancelled Notes held by the Trustee shall be destroyed and certification of
their destruction delivered to the Company, unless by a written order, signed by
an Officer of the Company, the Company shall direct that cancelled Notes be
returned to it.
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SECTION 2.13. DEFAULTED INTEREST. If the Company defaults in a payment of
interest on the Notes, the Company shall pay the defaulted interest in any
lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date,
which date shall be at the earliest practicable date but in all events at least
five (5) Business Days prior to the payment date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Company shall fix or cause
to be fixed each such special record date and payment date, and shall, promptly
thereafter, notify the Trustee of any such date. At least fifteen (15) days
before the special record date, the Company (or the Trustee, in the name of and
at the expense of the Company) shall mail to Holders, at their addresses as they
appear on the register of Notes maintained by the Registrar, a notice that
states the special record date, the related payment date and the amount of such
interest to be paid.
SECTION 2.14. RECORD DATE. The record date for purposes of determining the
identity of Holders entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA Section 316(c).
SECTION 2.15. CUSIP NUMBER. The Company in issuing the Notes may use a
"CUSIP" number and, if it does so, the Trustee shall use the CUSIP number in
notices of redemption or exchange as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Notes and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company will promptly notify the Trustee of any change in the CUSIP
number.
SECTION 2.16. COMPUTATION OF INTEREST. Interest on the Notes will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the
Company to redeem any Notes pursuant to Section 3.08 shall be evidenced by a
Board Resolution. In case of any redemption at the election of the Company, the
Company shall, at least 45 but not more than 60 days prior to the redemption
date fixed by it (unless a shorter notice period shall be satisfactory to the
Trustee for its convenience), notify the Trustee pursuant to an Officers'
Certificate of (i) such redemption date, (ii) the principal amount of Notes to
be redeemed and (iii) the clause of this Indenture pursuant to which the
redemption shall occur.
SECTION 3.02. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED. If less than
all of the Notes are to be redeemed at any time, selection of Notes for
redemption will be made
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by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not so listed, on a pro rata basis, by lot or by such other method as the
Trustee deems fair and appropriate, provided that no Notes with a principal
amount of $1,000 or less shall be redeemed in part.
The Trustee shall promptly notify the Company and the Registrar in writing
of the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Notes shall relate, in the case of any
Note redeemed or to be redeemed only in part, to the portion of the principal
amount of such Note which has been or is to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. Subject to the provisions of Section
3.10 hereof, notice of redemption shall be mailed by first class mail, postage
prepaid, at least 30 but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed.
All notices of redemption shall state:
(a) the redemption date;
(b) the redemption price;
(c) if less than all Notes then outstanding are to be redeemed, the
identification (and, in the case of a Note to be redeemed in part, the principal
amount) of the particular Notes to be redeemed;
(d) that on the redemption date the redemption price will become due and
payable upon each such Note or portion thereof, and that (unless the Company
shall default in payment of the redemption price) interest thereon shall cease
to accrue on or after said date;
(e) the place or places where such Notes are to be surrendered for payment
of the redemption price;
(f) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
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(g) the CUSIP number, if any, relating to such Notes, and
(h) in the case of a Note to be redeemed in part, the principal amount of
such Note to be redeemed and that after the redemption date upon surrender of
such Note, a new Note or Notes in the aggregate principal amount equal to the
unredeemed portion thereof will be issued.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company or, at its request, by the Trustee in the
name and at the expense of the Company; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officer's Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is
mailed in accordance with Sections 3.03, 3.10 or 4.09 hereof, Notes called for
redemption become irrevocably due and payable on the redemption date at the
redemption price. A notice of redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to 11:00 a.m. on any
redemption date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 4.03 hereof) an amount of money in same day
funds (or New York Clearing House funds if such deposit is made prior to the
applicable redemption date) sufficient to pay the redemption price of, and
accrued interest on, all the Notes or portions thereof which are to be redeemed
on that date.
SECTION 3.06. NOTES PAYABLE ON REDEMPTION DATE. Notice of redemption
having been given as aforesaid, the Notes so to be redeemed shall, on the
redemption date, become due and payable at the redemption price therein
specified and from and after such date (unless the Company shall default in the
payment of the redemption price and accrued interest) such Notes shall cease to
bear interest. Upon surrender of any such Note for redemption in accordance with
said notice, such Note shall be paid by the Company at the redemption price
together with accrued interest to the redemption date. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal thereof (and premium, if any, thereon) shall, until paid, bear
interest from the redemption date at the rate borne by such Note.
SECTION 3.07. NOTES REDEEMED IN PART. Any Note which is to be redeemed
only in part shall be surrendered at the office or agency of the Company
maintained for such purpose pursuant to Section 4.02 hereof (with, if the
Company, the Registrar or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company, the
Registrar or the Trustee duly executed by, the Holder
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<PAGE> 43
thereof or his attorney duly authorized in writing), and a new Note in principal
amount equal to the unpurchased or unredeemed portion will be issued as soon as
practicable in the name of the Holder thereof upon cancellation of the original
Note. On and after the purchase or redemption date, unless the Company defaults
in payment of the purchase or redemption price, interest shall cease to accrue
on Notes or portions thereof purchased or called for redemption.
SECTION 3.08. OPTIONAL REDEMPTION. (a) Except as described in this Section
3.08, the Notes will not be redeemable at the Company's option. At any time
prior to August 1, 2002, the Company may, at its option, redeem the Notes, in
whole but not in part, upon not less than 30 nor more than 60 days' prior
written notice, in cash at a redemption price equal to (i) the present value at
such time of the optional redemption price of such Note at August 1, 2002
(107.00% of the principal amount of the Notes being redeemed), computed by
discounting, on a semi-annual basis, using a discount rate equal to the Treasury
Rate plus 50 basis points, plus (ii) accrued and unpaid interest, to the date of
redemption.
At any time on or after August 1, 2002, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' prior written notice, in cash at the redemption prices
(expressed as percentages of principal amount) set forth below, together with
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve month period beginning on August 1 of each of the
years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2002............................ 107.00%
2003............................ 104.67%
2004............................ 102.33%
2005 and thereafter............. 100.00%
</TABLE>
Notwithstanding the foregoing, the Company may, at its option, on any one
or more occasions, redeem the original aggregate principal amount of Notes at a
redemption price equal to 114.00% of the principal amount thereof, plus accrued
and unpaid interest thereon, to the redemption date, with the net cash proceeds
of one or more Equity Offerings by (i) the Company or (ii) Holdings to the
extent the net cash proceeds thereof are contributed to the Company as a capital
contribution to the common equity of the Company; provided that any such
redemption shall occur within 90 days of the date of the closing of each such
Equity Offering.
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<PAGE> 44
(b) Any redemption pursuant to this Section 3.08 shall be made pursuant to
the provisions of Sections 3.01 through 3.07 hereof.
SECTION 3.09. MANDATORY REDEMPTION. Except as set forth under Sections
4.09 and 4.10 hereof, the Company shall not be required to make mandatory
redemption or sinking fund payments with respect to the Notes.
SECTION 3.10. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the
event that, pursuant to Section 4.10 hereof, the Company shall be required to
commence an offer to all Holders to purchase Notes (an "ASSET SALE OFFER"), it
shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "OFFER PERIOD"). No later than five
Business Days after the termination of the Offer Period (the "PURCHASE DATE"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "OFFER AMOUNT") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer.
If the Purchase Date is on or after an interest payment record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.10
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
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<PAGE> 45
(e) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
Option of Holder to Elect Purchase on the reverse of the Note completed, or
transfer by book entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice not later
than the third Business Day preceding the end of the Offer Period;
(f) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the third Business Day preceding the end of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(g) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book entry transfer).
On or before 12:00 p.m. (New York City time) on each Purchase Date, the
Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the aggregate purchase price with respect to a
principal amount of Notes equal to the Offer Amount, together with accrued and
unpaid interest thereon to the Purchase Date, to be held for payment in
accordance with the terms of this Section 3.10. On the Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis
to the extent necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, (ii) deliver or cause the Paying Agent or
depositary, as the case may be, to deliver to the Trustee Notes so accepted and
(iii) deliver to the Trustee an Officers Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.10. The Company, the depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than three Business
Days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, plus any accrued and unpaid interest, thereon to the
Purchase Date, and the Company shall promptly issue a new Note, and the Trustee,
upon written request from the Company shall authenticate and mail or deliver
such new
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<PAGE> 46
Note to such Holder, equal in principal amount to any unpurchased portion of the
Note surrendered. Any Note not so accepted shall be promptly mailed or delivered
by the Company to the Holder thereof. The Company shall send a notice to each
Holder stating the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.10, any purchase
pursuant to this Section 3.10 shall be made pursuant to the provisions of
Sections 3.01 through 3.07 hereof.
SECTION 3.11. RESTRICTIONS ON REDEMPTION. By its acceptance of any Note,
each Holder of such Note acknowledges that an "Event of Default" may occur under
the Credit Facility if the Company voluntarily redeems all or any portion of the
Notes, and each Holder hereby agrees that it shall not accept the redemption
price in respect of any voluntary redemption at any time while such redemption
would cause "Event of Default" thereunder.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
shall pay or cause to be paid the principal of, premium, if any, and interest on
the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the date due if the
Paying Agent, if other than the Company or a Subsidiary thereof, (i) holds as of
11:00 a.m. Eastern Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due and (ii) in the case of any
such payment in respect of a voluntary redemption by the Company, is not
prohibited from paying such money to the Holders pursuant to the terms of this
Indenture or the Notes.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.02. MAINTENANCE OF OFFICE AS AGENCY. The Company will maintain,
in The City of New York, an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of
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<PAGE> 47
any change in the location of any such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices or
agencies (in or outside of The City of New York) where the Notes may be
presented or surrendered for any or all such purposes, and may from time to time
rescind such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.
SECTION 4.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. If the Company shall
at any time act as its own Paying Agent, it will, on or before each due date of
the principal of, premium, if any, or interest on any of the Notes, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal, premium, if any, or interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided, and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for the Notes,
it will, on or before each due date of the principal of, premium, if any, or
interest on any Notes, deposit with a Paying Agent a sum in same day funds (or
New York Clearing House funds if such deposit is made prior to the date on which
such deposit is required to be made) sufficient to pay the principal, premium,
if any, or interest so becoming due (or at the option of the Company, payment of
interest may be mailed by check to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments with respect to Notes represented by one or more permanent global Notes
will be paid by wire transfer of immediately available funds to the account of
the Depository Trust Company or any successor thereto) such sum to be held in
trust for the benefit of the Persons entitled to such principal, premium or
interest and (unless such Paying Agent is the Trustee) the Company will promptly
notify the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
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<PAGE> 48
(a) hold all sums held by it for the payment of the principal of, premium,
if any, or interest on Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(b) give the Trustee notice of any default by the Company (or any other
obligor upon the Notes) in the making of any payment of principal, premium, if
any, or interest;
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or direct any
Paying Agent to pay, to the Trustee all sums held in trust by the Company or
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such Paying Agent; and,
upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
premium, if any, or interest has become due and payable shall be paid to the
Company at the request of the Company or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense of the Company cause
notice to be promptly sent to each Holder that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 4.04. REPORTS. Whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Trustee and the Holders of Notes (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes
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<PAGE> 49
the financial condition and results of operations of the Company and its
Restricted Subsidiaries and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
SECTION 4.05. STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. (a) The
Company shall deliver to the Trustee, within 90 days after the end of each
fiscal year ending after the date of this Indenture, an Officers' Certificate
stating whether, to such Officers' knowledge, the Company is in compliance with
all covenants and conditions to be complied with by it under this Indenture
(including with respect to any Restricted Payments made during such year, the
basis upon which the calculations required by Section 4.11 hereof were computed,
which calculations may be based on the Company's latest financial statements),
and further stating, as to each Officer signing such certificate, that to the
best of his or her knowledge each entity is not in default in the performance or
observance of any terms, provisions and conditions of this Indenture (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action the
Company is taking or proposes to take with respect thereto) and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal of or interest or premium, if any,
on the Notes is prohibited or if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with respect
thereto. For purposes of this Section 4.05, such compliance shall be determined
without regard to any period of grace or requirement of notice under this
Indenture.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the annual reports delivered
pursuant to Section 4.04(a) hereof shall be accompanied by a written statement
of the Company's independent public accountants (who shall be a firm of
established national reputation) that in making the examination necessary for
certification of such financial statements, nothing has come to their attention
that would lead them to believe that the Company has violated any provisions of
Article Four or Article Five hereof or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(c) The Company shall, within five Business Days, upon becoming aware of
any Default or Event of Default or any default under any document, instrument or
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<PAGE> 50
agreement representing Indebtedness of the Company or any Restricted Subsidiary,
deliver to the Trustee an Officers' Certificate specifying such Default or Event
of Default.
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all material taxes, assessments and governmental charges levied
or imposed upon it or any Subsidiary or upon the income, profits or property of
the Company or any of its Subsidiaries and (b) all material lawful claims for
labor, materials and supplies, which, if unpaid, might by law become a lien upon
the property of the Company or any of its Subsidiaries that could produce a
material adverse effect on the consolidated financial condition of the Company;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and in respect of which appropriate reserves (in the
good faith judgment of management of the Company) are being maintained in
accordance with GAAP.
SECTION 4.07. STAY, EXTENSION, USURY LAWS. The Company and each Guarantor,
if any, covenants (to the extent that it may lawfully do so) that it shall not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law whenever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Company and each Guarantor, if any, (to
the extent that it may lawfully do so) hereby waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
SECTION 4.08. CORPORATE EXISTENCE. Subject to Article Five hereof, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence and that of each Subsidiary of
the Company and the corporate rights (charter and statutory), corporate licenses
and corporate franchises of the Company and its Subsidiaries, except where a
failure to do so, singly or in the aggregate, is not likely to have a materially
adverse effect upon the business, assets, financial conditions or results of
operations of the Company and the Subsidiaries taken as a whole determined on a
consolidated basis in accordance with GAAP; provided that prior to the
occurrence and continuance of an Event of Default, the Company shall not be
required to preserve any such existence (except of the Company), right, license
or franchise if the Board of Directors of the Company shall determine and
deliver to the Trustee an Officers' Certificate to the effect that the
preservation thereof is no longer desirable in the conduct of the business of
the Company or such Subsidiary and that the loss thereof is not disadvantageous
in any material respect to the Holders.
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<PAGE> 51
SECTION 4.09. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the
occurrence of a Change of Control, each Holder of Notes shall have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's 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 thereon to the date of purchase (the "CHANGE OF CONTROL PAYMENT").
(b) Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder of Notes issued under this Indenture, with a copy to the
Trustee, with the following statements and/or information:
(1) a Change of Control Offer is being made pursuant to this Section
4.09 and that all Notes properly tendered pursuant to such Change of
Control Offer will be accepted for payment;
(2) the purchase price and the purchase date, which will be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed, except as may be otherwise required by applicable law (the "CHANGE
OF CONTROL PAYMENT DATE");
(3) any Note not properly tendered will remain outstanding and
continue to accrue interest;
(4) unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control
Payment Date;
(5) Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Notes, with the
form entitled Option of Holder to Elect Purchase on the reverse of the
Notes completed, to the Paying Agent and at the address specified in the
notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date;
(6) Holders will be entitled to withdraw their tendered Notes and
their election to require the Company to purchase such Notes, provided
that the paying agent receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Notes tendered for purchase, and a
statement that such Holder is withdrawing his tendered Notes and his
election to have such Notes purchased; and
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<PAGE> 52
(7) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
(c) Prior to complying with the provisions of this Section 4.09, but in
any event within 30 days following a Change of Control, the Company shall either
repay all outstanding Credit Facility Obligations, or offer to repay in full all
outstanding Credit Facility Obligations and repay the Credit Facility
Obligations with respect to which such offer has been accepted, or obtain the
requisite consents, if any, under all outstanding Credit Facility Obligations to
permit the repurchase of the Notes required by this Section 4.09.
(d) The Company shall 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 or regulations are applicable in connection with the repurchase
of the Notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Indenture, the Company shall comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations described in
this Indenture by virtue thereof.
(e) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(f) The Change of Control provisions described in this Section 4.09 will
be applicable whether or not any other provisions of this Indenture are
applicable.
SECTION 4.10. ASSET SALES. The Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such
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<PAGE> 53
Asset Sale at least equal to the fair market value (evidenced by a Board
Resolution 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 the Company or such
Restricted Subsidiary is in the form of (I) cash or Cash Equivalents or (II)
property or assets that are used or useful in a Permitted Business, or Capital
Stock of any Person primarily engaged in a Permitted Business if, as a result of
the acquisition by the Company or any Restricted Subsidiary thereof, such Person
becomes a Restricted Subsidiary; provided that the amount of (x) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto), of the Company or any Restricted Subsidiary
(other than contingent liabilities and liabilities of the Company that are by
their terms subordinated to the Notes or any guarantee thereof) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the
cash or Cash Equivalents received) within 180 days following the closing of such
Asset Sale, will be deemed to be cash for purposes of this provision; provided
further, that the 75% limitation referred to above shall not apply to any sale,
transfer or other disposition of assets in which the cash portion of the
consideration received therefor, determined in accordance with the foregoing
proviso, is equal to or greater than what the after tax net proceeds would have
been had such transaction complied with the aforementioned 75% limitation.
Within 365 days after the Company's or any Restricted Subsidiary's receipt
of any Net Proceeds from an Asset Sale, the Company or such Restricted
Subsidiary shall apply such Net Proceeds (a) to permanently reduce Indebtedness
under Credit Facility Obligations or Guarantor Credit Facility Obligations (and
to correspondingly reduce commitments with respect thereto), to permanently
reduce Indebtedness of a Restricted Subsidiary that is not a Guarantor or Pari
Passu Indebtedness (provided that if the Company shall so repay Pari Passu
Indebtedness, it will equally and ratably reduce Indebtedness under the Notes if
the Notes are then redeemable or, if the Notes may not be then redeemed, the
Company shall make an offer pursuant to Section 3.10 hereof to purchase at 100%
of the principal amount thereof the amount of Notes that would otherwise be
redeemed) or (b) to an investment in property, capital expenditures or assets
that are used or useful in a Permitted Business, or Capital Stock of any Person
primarily engaged in a Permitted Business if, as a result of the acquisition by
the Company or any Restricted Subsidiary thereof, such Person becomes a
Restricted Subsidiary. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the preceding sentence of this paragraph will be deemed
to constitute "EXCESS PROCEEDS". When the aggregate amount of Excess Proceeds
exceeds $2.5 million, the Company shall be required to make an Asset Sale Offer
to purchase the maximum principal amount of Notes that may be purchased out of
the Excess Proceeds at an offer price in cash in an
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<PAGE> 54
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 Section 3.10 hereof. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
The Company shall 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 Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Indenture relating to such Asset Sale Offer, the Company will comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations described in this Indenture by virtue thereof.
SECTION 4.11. LIMITATION ON RESTRICTED PAYMENTS. The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any other payment or
distribution on account of any Equity Interests of the Company or any of its
Restricted Subsidiaries (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or any Wholly Owned Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company, any of its Restricted Subsidiaries or any other
Affiliate of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary of the Company); (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness of the Company that is subordinated in right of payment
to the Notes, except in accordance with the scheduled mandatory redemption or
repayment provisions set forth in the original documentation governing such
Indebtedness (but not pursuant to any mandatory offer to repurchase upon the
occurrence of any event); 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:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof, and
(b) immediately after giving effect to such transaction on a pro forma
basis, the Company would have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.12 hereof, and
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(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries after
August 7, 1997 (excluding Restricted Payments permitted by clauses (i) (to the
extent that the declaration of any dividend referred to therein reduces amounts
available for Restricted Payments pursuant to this clause (c)), (ii), (iii),
(v), (vi), (vii), (viii), (x), (xi), (xii), (xv), (xvii) and (xviii) of the next
succeeding paragraph), is less than the sum of (1) 50% of the Adjusted
Consolidated Net Income of the Company for the period (taken as one accounting
period) from the beginning of the first calendar month commencing after August
7, 1997 to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Adjusted Consolidated Net Income for such period is a
deficit, minus 100% of such deficit), plus (2) 100% of the Qualified Proceeds
received by the Company since August 7, 1997 from contributions to the Company's
capital or the issue or sale since August 7, 1997 of Equity Interests of the
Company or of convertible debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary of the Company and other than
Designated Preferred Stock, Disqualified Stock or convertible debt securities
that have been converted into Disqualified Stock), plus (3) the amount equal to
the net reduction in Investments in Persons after August 7, 1997 who are not
Restricted Subsidiaries (other than Permitted Investments) resulting from (x)
Qualified Proceeds received as a dividend, repayment of a loan or advance or
other transfer of assets (valued at the fair market value thereof) to the
Company or any Restricted Subsidiary from such Persons, (y) Qualified Proceeds
received upon the sale or liquidation of such Investment and (z) the
redesignation of Unrestricted Subsidiaries (other than any Unrestricted
Subsidiary designated as such pursuant to clause (ix) or (xvi) of the following
paragraph) whose assets are used or useful in, or which is engaged in, one or
more Permitted Businesses as Restricted Subsidiaries (valued (proportionate to
the Company's equity interest in such Subsidiary) at the fair market value of
the net assets of such Subsidiary at the time of such redesignation) not to
exceed, in the case of clauses (x), (y) and (z), the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person,
which amount was a Restricted Payment, plus (4) all cash payments received after
August 7, 1997 by the Company from Holdings with respect to the Intercompany
Note; provided that no proceeds received by the Company from the issue or sale
of any Equity Interests of the Company will be counted in determining the amount
available for Restricted Payments under this clause (c) to the extent such
proceeds were used to redeem, repurchase, retire or acquire any Equity Interests
or Subordinated Indebtedness of the Company pursuant to clauses (ii) and (iv) of
the next succeeding paragraph.
The foregoing provisions shall not prohibit:
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(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
have complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or Subordinated Indebtedness of the
Company or any Guarantor in exchange for, or out of the net proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the Company (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(2) 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 Equity Interests of the Company or Holdings held by any
member of the Company's or any of the Company's Restricted Subsidiaries'
management pursuant to any management equity subscription agreement or
stock option agreement and any dividend to Holdings to fund any such
repurchase, redemption or acquisition; provided that (A) the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed (I) $5.0 million in any calendar year (with
unused amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum (without giving effect to the
following clause (II)) of $10.0 million in any calendar year) plus (II)
the aggregate cash proceeds received by the Company during such calendar
year from any reissuance of Equity Interests by Holdings or the Company to
members of management of the Company and its Restricted Subsidiaries and
(B) no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; provided further that the aggregate
cash proceeds referred to in clause (II) above shall be excluded from
clause (c)(2) of the preceding paragraph;
(v) the payment of dividends or the making of loans or advances by
the Company to Holdings not to exceed $2.0 million in any fiscal year for
costs and expenses incurred by Holdings in its capacity as a holding
company or for services rendered by Holdings on behalf of the Company;
(vi) the payment of dividends by a Restricted Subsidiary on any
class of common stock of such Restricted Subsidiary if (A) such dividend
is paid pro rata to all holders of such class of common stock and (B) at
least 51% of such class of
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common stock is held by the Company or one or more of its Restricted
Subsidiaries;
(vii) the repurchase of any class of common stock of a Restricted
Subsidiary if (A) such repurchase is made pro rata with respect to such
class of common stock and (B) at least 51% of such class of common stock
is held by the Company or one or more of its Restricted Subsidiaries;
(viii) payments to Holdings (A) pursuant to the Tax Sharing
Agreement as in effect on the date of this Indenture and (B) pursuant to
the Tax Sharing Agreement as amended from time to time; provided however,
that in no event shall the amount permitted to be paid pursuant to this
clause (viii) (B) exceed the amount the Company would be required to pay
for income taxes were it to file a consolidated tax return for itself and
its consolidated Restricted Subsidiaries;
(ix) any other Restricted Investment made in a Permitted Business
which, together with all other Restricted Investments made pursuant to
this clause (ix) since August 7, 1997, does not exceed $30.0 million (in
each case, after giving effect to all subsequent reductions in the amount
of any Restricted Investment made pursuant to this clause (ix), either as
a result of (A) the repayment or disposition thereof for cash or (B) as a
result of the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary (valued proportionate to the Company's equity interest in such
Subsidiary at the time of such redesignation) at the fair market value of
the net assets of such Subsidiary at the time of such redesignation), in
the case of clause (A) and (B), not to exceed the amount of such
Restricted Investment previously made pursuant to this clause (ix);
provided that no Default or Event of Default shall have occurred and be
continuing immediately after making such Restricted Investment;
(x) the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Company or any Guarantor issued
after August 7, 1997 in accordance with the covenant described in Section
4.14 hereof; provided that no Default or Event of Default shall have
occurred and be continuing immediately after such declaration or payment;
(xi) 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;
(xii) (A) payments made by the Company in respect of statutory
appraisal rights (and any settlement thereof) and (B) payments made by the
Company to fund the cash consideration payable in the Merger (including
pursuant to statutory appraisal rights and any settlement thereof) to
security holders of Holdings (including without limitation, the Cash
Merger Consideration, the Option Cash
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Proceeds and the Warrant Cash Proceeds (each as defined in the
Subordinated Notes Registration Statement)) and fees and expenses of the
Company and Holdings in connection with the Merger and (C) dividends to
Holdings for any such payments referred to in clause (B);
(xiii) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of Equity Interests of Holdings
outstanding on August 7, 1997 and which were not held by the Principals or
any member of management of Holdings or any Subsidiary of Holdings on
August 7, 1997 (including any Equity Interests issued in respect of such
Equity Interests as a result of a stock split, recapitalization, merger,
combination, consolidation or otherwise, but excluding any Equity
Interests issued pursuant to any management equity plan or stock option
plan or similar agreement), provided that the aggregate Restricted
Payments made under this clause (xiii) shall not exceed $40.0 million,
provided further that notwithstanding the foregoing proviso, the Company
shall be permitted to make Restricted Payments under this clause (xiii)
only if after giving effect thereto, the Company would be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of Section
4.12 hereof; provided that no Default or Event of Default shall have
occurred and be continuing immediately after making such Restricted
Payment;
(xiv) the payment of dividends on the Company's common stock,
following the first public offering of the Company's or Holdings' common
stock after August 7, 1997, of up to 6.0% per annum of (A) the net
proceeds received by the Company from such public offering of its common
stock or (B) the net proceeds received by the Company from such public
offering of Holdings' common stock as common equity or preferred equity
(other than Disqualified Stock), other than, in each case, with respect to
public offerings with respect to the Company's or Holdings common stock
registered on Form S-8; provided that no Default or Event of Default shall
have occurred and be continuing immediately after any such payment of
dividends;
(xv) the declaration and payment of dividends to holders of any
class or series of Designated Preferred Stock issued after August 7, 1997;
provided, however, immediately after the date of issuance of such
Designated Preferred Stock, after giving effect to such issuance on a pro
forma basis, the Company would have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.12 hereof;
(xvi) any other Restricted Payment which, together with all other
Restricted Payments made pursuant to this clause (xvi) since August 7,
1997, does
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not exceed $20.0 million (in each case, after giving effect to all
subsequent reductions in the amount of any Restricted Investment made
pursuant to this clause (xvi) either as a result of (A) the repayment or
disposition thereof for cash or (B) the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary (valued proportionate to the
Company's equity interest in such Subsidiary at the time of such
redesignation) at the fair market value of the net assets of such
Subsidiary at the time of such redesignation), in the case of clause (A)
and (B), not to exceed the amount of such Restricted Investment previously
made pursuant to this clause (xvi) provided that no Default or Event of
Default shall have occurred and be continuing immediately after making
such Restricted Payment;
(xvii) the pledge by the Company of the Capital Stock of an
Unrestricted Subsidiary of the Company to secure Non-Recourse Debt of such
Unrestricted Subsidiary; and
(xviii) distributions or payments of Receivables Fees.
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 designation, all outstanding Investments by the Company
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 Section 4.11. All such outstanding Investments
will be deemed to constitute Restricted Investments in an amount equal to the
greater of (i) the net book value of such Investments at the time of such
designation and (ii) the fair market value of such Investments at the time of
such designation. Such designation will only be permitted if such Restricted
Investment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of (i) all Restricted Payments (other than Restricted Payments
made in cash) shall be the fair market value on the date of the Restricted
Payment of the asset(s) or securities proposed to be transferred or issued by
the Company or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment and (ii) Qualified Proceeds (other than cash) shall be the
fair market value on the date of receipt thereof by the Company of such
Qualified Proceeds. The fair market value of any non-cash Restricted Payment and
Qualified Proceeds shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $20.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section
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4.11 were computed, which calculations shall be based upon the Company's latest
available financial statements.
SECTION 4.12. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK. (i) The Company shall not, and shall 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), (ii) neither the Company nor any
Guarantor will issue any Disqualified Stock and (iii) the Company will not
permit any of the Company's Restricted Subsidiaries that are not Guarantors to
issue any shares of preferred stock; provided, however, that the Company and any
Guarantor may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock, if the Company's Fixed Charge Coverage Ratio for the
Company's most recently ended four fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.00 to 1.00, 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 Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to (collectively, "PERMITTED
DEBT"):
(i) the incurrence by the Company and the Guarantors of Indebtedness
under the Credit Facility; provided that the aggregate principal amount of
all Indebtedness (with letters of credit and bankers' acceptances being
deemed to have a principal amount equal to the maximum amount thereunder
available to be drawn) outstanding under the Credit Facility after giving
effect to such incurrence does not exceed an amount equal to $625.0
million;
(ii) the incurrence by the Company and any Guarantor of Indebtedness
represented by the Notes and the Subsidiary Guarantees;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property used in the business of the
Company or such Restricted Subsidiary, in aggregate principal amount not
to exceed $25.0 million at any time outstanding;
(iv) Existing Indebtedness and Indebtedness evidenced by the
Subordinated Notes;
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(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Indebtedness that was permitted by this Indenture;
(vi) Indebtedness of the Company to a Restricted Subsidiary;
provided that any such Indebtedness is made pursuant to an intercompany
note and is subordinated in right of payment to the Notes; provided
further that any subsequent issuance or transfer of any Capital Stock or
other event which results in any such Restricted Subsidiary ceasing to be
a Restricted Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary)
shall be deemed, in each case, to be an incurrence of such Indebtedness;
(vii) Indebtedness of a Restricted Subsidiary to the Company or
another Restricted Subsidiary; provided that (i) any such Indebtedness is
made pursuant to an intercompany note and (ii) if a Guarantor incurs such
Indebtedness to a Restricted Subsidiary that is not a Guarantor, such
Indebtedness is subordinated in right of payment to the Subsidiary
Guarantee of such Guarantor; provided further that any subsequent issuance
or transfer of any Capital Stock of any Restricted Subsidiary to whom such
Indebtedness is owed or any other event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of any such Indebtedness (except to the Company or
another Restricted Subsidiary) shall be deemed, in each case, to be an
incurrence of such Indebtedness;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging (a) interest rate risk with respect to any floating rate
Indebtedness of such Person that is permitted by the terms of this
Indenture to be outstanding or (b) exchange rate risk with respect to
agreements or Indebtedness of such Person payable denominated in a
currency other than U.S. dollars; provided that such agreements do not
increase the Indebtedness of the obligor outstanding at any time other
than as a result of fluctuations in foreign currency exchange rates or
interest rates or by reason of fees, indemnities and compensation payable
thereunder;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Acquired Debt in an aggregate principal amount at any time
outstanding not to exceed $25.0 million;
(x) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an
aggregate
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principal amount at any time outstanding not to exceed an amount equal to
$35.0 million;
(xi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed
in connection with the disposition of any business, assets or a Restricted
Subsidiary, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a Restricted
Subsidiary for the purpose of financing such acquisition; provided,
however, that (i) such Indebtedness is not reflected on the balance sheet
of the Company or any Restricted Subsidiary (contingent obligations
referred to in a footnote to financial statements and not otherwise
reflected on the balance sheet will not be deemed to be reflected on such
balance sheet for purposes of this clause (i)) and (ii) the maximum
assumable liability in respect of all such Indebtedness shall at no time
exceed the gross proceeds including noncash proceeds (the fair market
value of such noncash proceeds being measured at the time received and
without giving effect to any subsequent changes in value) actually
received by the Company and its Restricted Subsidiaries in connection with
such disposition;
(xii) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business; and
(xiii) any guarantee by a Restricted Subsidiary of the Company of
Credit Facility Obligations, the Subordinated Notes or Pari Passu
Indebtedness of the Company that was permitted to be incurred under this
Indenture; provided that, prior to or concurrently with the issuance of
such guarantee, such Restricted Subsidiary complies with the terms
described in Section 4.15 hereof.
For purposes of determining compliance with this Section 4.12, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest and the accretion of accreted
value will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant.
SECTION 4.13. TRANSACTIONS WITH AFFILIATES. The Company shall not, and
shall 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
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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 the Company
or such Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) if such Affiliate Transaction involves aggregate
payments in excess of $5.0 million, the Company delivers to the Trustee either
(x) a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and such Affiliate Transaction is approved by a majority of the
members of the Board of Directors of the Company or (y) an opinion as to the
fairness to the Holders of the Notes of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; provided, however, that (a) any employment agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, (b) transactions between or among the Company
and/or its Restricted Subsidiaries, (c) transactions between the Company or its
Restricted Subsidiaries on the one hand, and the Underwriter or its Affiliates
on the other hand, involving the provision of financial, consulting or
underwriting services by the Underwriter or its Affiliates, provided that the
fees payable to the Underwriter or its Affiliates do not exceed the usual and
customary fees of the Underwriter and its Affiliates for similar services, (d)
transactions in accordance with the Specified Agreements, as amended; provided
that no such amendment contains any provisions that are materially adverse to
the Holders of the Notes, (e) payment of employee benefits, including bonuses,
retirement plans and stock options, in the ordinary course of business,
consistent with past practice, (f) the payment of reasonable and customary fees
to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary; (g) Restricted Payments
permitted by the provisions of clauses (i), (iv), (v), (vi), (vii), (viii),
(xi), (xii) and (xvii) of the second paragraph of Section 4.11 hereof, (h)
payments and transactions in connection with the Merger and the application of
the net proceeds from the Offerings, including the payment of any fees and
expenses with respect thereto, (i) transactions pursuant to the Intercompany
Note and any forgiveness of Indebtedness thereunder, (j) transactions permitted
by the provisions of Section 4.18 hereof, (k) transactions pursuant to the
Management Loans and (l) the execution and delivery of this Indenture and the
Subsidiary Guarantees. The issuance of the Notes and the payment of the
principal of, and any premium or interest on, the Notes, in each case, shall not
be deemed Affiliate Transactions.
SECTION 4.14. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted
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Subsidiary to: (i) (a) pay dividends or make any other distributions to the
Company 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 the Company or any of its Restricted
Subsidiaries; (ii) make loans or advances to the Company or any of its
Restricted Subsidiaries; or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness, as in
effect on the date of this Indenture; (b) the Credit Facility and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions in the aggregate than those contained in
the Credit Facility, as in effect on August 7, 1997; (c) this Indenture and the
Notes; (d) applicable law or any applicable rule, regulation or order; (e) any
agreement or other instrument of a Person acquired by the Company or any of its
Restricted Subsidiaries, as in effect at the time of such acquisition (but not
created 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; (f)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices; (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) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Subsidiary pursuant to an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary; (i) the Subordinated
Notes, the indenture under which the Subordinated Notes were issued and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions in the aggregate than those contained in
the Subordinated Notes and such indenture, in each case as in effect on August
7, 1997; or (j) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive with respect to such dividend and other
payment restrictions in the aggregate than those contained in the agreements
governing the Indebtedness being refinanced.
SECTION 4.15. LIMITATIONS ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES. (a) The Company shall not permit any Restricted Subsidiary to
guarantee the payment of any Indebtedness of the Company or any Indebtedness of
any other Restricted Subsidiary (in each case, the "GUARANTEED DEBT") unless (i)
if such Restricted Subsidiary is not a Guarantor, such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a Subsidiary Guarantee
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of payment of the Notes by such Restricted Subsidiary, (ii) if the Guaranteed
Debt is by its express terms subordinated in right of payment to the Notes or
the Subsidiary Guarantee (if any) of such Restricted Subsidiary, any such
guarantee of such Restricted Subsidiary with respect to the Guaranteed Debt
shall be subordinated in right of payment to such Restricted Subsidiary's
Subsidiary Guarantee with respect to the Notes substantially to the same extent
as the Guaranteed Debt is subordinated to the Notes or the Subsidiary Guarantee
(if any) of such Restricted Subsidiary, (iii) such Restricted Subsidiary waives
and will not in any manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee, and (iv)
such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to
the effect that (A) such Subsidiary Guarantee of the Notes has been duly
executed and authorized and (B) such Subsidiary Guarantee of the Notes
constitutes a valid, binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy,
insolvency or similar laws (including, without limitation, all laws relating to
fraudulent transfers) and except insofar as enforcement thereof is subject to
general principles of equity.
(b) Notwithstanding the foregoing and the other provisions of this
Indenture, any Subsidiary Guarantee by a Restricted Subsidiary of the Notes
shall provide by its terms that it shall be automatically and unconditionally
released and discharged upon (i) any sale, exchange or transfer, to any Person
not an Affiliate of the Company, of all of the Company's Capital Stock in, or
all or substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release or
discharge of the guarantee which resulted in the creation of such Subsidiary
Guarantee, except a discharge or release by or as a result of payment under such
guarantee.
SECTION 4.16. LIMITATION ON LIENS. The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or suffer to exist any Lien that secures obligations under any Pari Passu
Indebtedness or Subordinated Indebtedness of the Company or any asset or
property now owned or hereafter acquired by the Company or any of its Restricted
Subsidiaries, or any income or profits therefrom or assign or convey any right
to receive income therefrom, unless the Notes or the Subsidiary Guarantees, as
applicable, are equally and ratably secured with the Pari Passu Indebtedness or
Subordinated Indebtedness so secured until such time as such Pari Passu
Indebtedness or Subordinated Indebtedness is no longer secured by a Lien;
provided, that in any case involving a Lien securing Subordinated Indebtedness,
such Lien is subordinated to the Lien securing the Notes or the Subsidiary
Guarantees, as applicable, to the same extent that such Subordinated
Indebtedness is subordinated to the Notes or the Subsidiary Guarantees, as
applicable.
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SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS. The Company shall not, and
shall not permit any of its Restricted Subsidiaries to, enter into any sale and
leaseback transaction; provided that the Company and any Guarantor may enter
into a sale and leaseback transaction if (i) the Company or such Guarantor could
have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.12 hereof and
(b) incurred a Lien to secure such Indebtedness pursuant to the covenant
described in Section 4.16 hereof, (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as determined
in good faith by the Board of Directors and set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject of
such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the proceeds of such
transaction are applied in compliance with, Section 4.10 hereof.
SECTION 4.18. SALES OF ACCOUNTS RECEIVABLES. The Company may, and any of
its Restricted Subsidiaries may, sell at any time and from time to time,
accounts receivable to any Accounts Receivable Subsidiary; provided that (i) the
aggregate consideration received in each such sale is at least equal to the
aggregate fair market value of the receivables sold, as determined by the Board
of Directors of the Company in good faith, (ii) no less than 80% of the
consideration received in each such sale consists of either cash or a promissory
note (a "PROMISSORY NOTE") which is subordinated to no Indebtedness or
obligation other than the financial institution or other entities providing the
financing to the Accounts Receivable Subsidiary with respect to such accounts
receivable (the "FINANCIER") and the remainder of such consideration consists of
an Equity Interest in such Accounts Receivable Subsidiary; provided further that
the Initial Sale will include all accounts receivable of the Company and/or its
Restricted Subsidiaries that are party to such arrangements that constitute
eligible receivables under such arrangements, (iii) the cash proceeds received
from the Initial Sale less reasonable and customary transaction costs will be
deemed to be Net Proceeds and will be applied in accordance with the second
paragraph of Section 4.10 hereof, and (iv) the Company and its Restricted
Subsidiaries will sell all accounts receivable that constitute eligible
receivables under such arrangements to the Accounts Receivable Subsidiary no
less frequently than on a weekly basis.
The Company (i) will not permit any Accounts Receivable Subsidiary to sell
any accounts receivable purchased from the Company or any of its Restricted
Subsidiaries to any other person except on an arm's length basis and solely for
consideration in the form of cash or Cash Equivalents, (ii) will not permit the
Accounts Receivable Subsidiary to engage in any business or transaction other
than the purchase, financing and sale of accounts receivable of the Company and
its Restricted Subsidiaries and activities incidental thereto, (iii) will not
permit any Accounts Receivable Subsidiary to incur Indebtedness in an amount in
excess of 97% of the book value of such Accounts
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Receivable Subsidiary's total assets, as determined in accordance with GAAP,
(iv) will, at least as frequently as monthly, cause the Accounts Receivable
Subsidiary to remit to the Company as payment for additional receivables or on
the Promissory Notes or as a dividend, all available cash or Cash Equivalents
not held in a collection account pledged to a Financier, to the extent not
applied to pay or maintain reserves for reasonable operating expenses of the
Accounts Receivable Subsidiary or to satisfy reasonable minimum capital
requirements based on then current market practices of rating agencies in
similar transactions involving receivables of a similar type and quality, as
determined by the Board of Directors of the Company in good faith and (v) will
not, and will not permit any of its Subsidiaries to, sell accounts receivable to
any Accounts Receivable Subsidiary upon (1) the occurrence of an Event of
Default with respect to the Company and its Restricted Subsidiaries and (2) the
occurrence of certain events of bankruptcy or insolvency with respect to such
Accounts Receivable Subsidiary.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY ALL
ASSETS. The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving entity), 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 Person unless (i) the Company is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made assumes all the obligations of the Company under
the Notes and this Indenture pursuant to a supplemental indenture in form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; (iv) the Company or the
Person formed by or surviving any such consolidation or merger, or to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made will, at the time of such transaction after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.12 hereof and (v) each Guarantor, if any, unless it
is the other party to the transactions described above, shall have by
supplemental indenture confirmed that its Subsidiary Guarantee shall apply to
such Person's obligations under this Indenture and the Notes. The foregoing
clause (iv) will not prohibit (a) a
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merger between the Company and a Wholly Owned Subsidiary of a Wholly Owned
Subsidiary of Holdings created for the purpose of holding the Capital Stock of
the Company, (b) a merger between the Company and a Wholly Owned Restricted
Subsidiary or (c) a merger between the Company and an Affiliate incorporated
solely for the purpose of reincorporating the Company in another State of the
United States so long as, in each case, the amount of Indebtedness of the
Company and its Restricted Subsidiaries is not increased thereby.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or
merger, or any sale, assignment, transfer, lease or conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company) and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof;
provided, further, that solely for purposes of computing Consolidated Net Income
for purposes of clause (c) of the first paragraph of Section 4.11 hereof, the
Consolidated Net Income of any Person other than the Company or any of its
Restricted Subsidiaries shall be included only for periods subsequent to the
effective time of such consolidation or merger, sale, assignment, transfer,
lease or conveyance or other disposition of assets.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT AND NOTICE THEREOF. Each of the following
constitutes an Event of Default:
(a) default which continues for 30 days in the payment when due of
interest on the Notes;
(b) default in payment when due of principal or premium, if any, on the
Notes at maturity, upon redemption or otherwise;
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(c) failure by the Company or any Guarantor for 30 days after receipt of
notice from the Trustee or Holders of at least 30% in principal amount of the
Notes then outstanding to comply with the provisions of Sections 3.10, 4.09,
4.10, 4.11, 4.12, 4.17 or Article 5 hereof;
(d) failure by the Company or any Guarantor for 60 days after notice from
the Trustee or the Holders of at least 30% in principal amount of the Notes then
outstanding to comply with its other agreements in this Indenture or the Notes;
(e) 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 the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date of this Indenture, which default (i) is caused by a failure to
pay Indebtedness at its stated final maturity (after giving effect to any
applicable grace period provided in such Indebtedness) (a "PAYMENT DEFAULT") or
(ii) results in the acceleration of such Indebtedness prior to its stated final
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 $20.0 million or more;
(f) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $20.0 million (net of any amounts with
respect to which a reputable and creditworthy insurance company has acknowledged
liability in writing), which judgments are not paid, discharged or stayed within
60 days after their entry;
(g) the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary pursuant to or within the meaning of the Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief against it in an
involuntary case;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
(v) generally is not paying its debts as they become due;
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(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or for all or substantially
all of the property of the Company or any of its Restricted Subsidiaries
that is a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
and
(i) the termination of any Subsidiary Guarantee for any reason not
permitted by this Indenture, or the denial of any Guarantor or any Person acting
on behalf of any Guarantor of such Guarantor's obligations under its respective
Subsidiary Guarantee.
SECTION 6.02. ACCELERATION. If any Event of Default occurs and is
continuing, the Holders of at least 30% in principal amount of the then
outstanding Notes may direct the Trustee to declare all the Notes to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default specified in clause (g) or clause (h) of Section 6.01 hereof, any Holder
may direct the Trustee to declare all outstanding Notes to be due and payable
without further action or notice. Holders of the Notes may not enforce this
Indenture or the Notes except as provided in this Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal, premium, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
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SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate principal amount of the Notes then outstanding, by notice to the
Trustee, may on behalf of the Holders of all of the Notes waive any existing
Default or Event of Default and its consequences under this Indenture, except a
continuing Default or Event of Default in the payment of interest or premium on,
or principal of, the Notes. The Trustee may withhold from Holders of the Notes
notice of any continuing Default or Event of Default (except a Default or Event
of Default relating to the payment of principal, premium, if any, or interest)
if it determines that withholding notice is in such Holders interest.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in aggregate
principal amount of the then outstanding Notes may direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee or exercising any trust or power conferred on it. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of other
Holders of Notes or that may result in the incurrence of liability by the
Trustee. The Trustee may take any other action which it deems proper which is
not inconsistent with any such direction.
SECTION 6.06. LIMITATION ON SUITS. No Holder of a Note will have any right
to institute any proceeding with respect to this Indenture or for any remedy
hereunder, unless (i) such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default with respect to the Notes, (ii)
the Holders of at least 30% in aggregate principal amount of the Notes then
outstanding shall have made written request to the Trustee to institute such
proceeding and, if requested by the Trustee, provided reasonable indemnity to
the Trustee, with respect to such proceeding and (iii) the Trustee shall not
have received from the Holders of a majority in aggregate principal amount of
the Notes then outstanding a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Note to receive payment of principal, premium, if any, and interest on any
Note, on or after the respective due dates expressed in any Note, or to bring
suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified
in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against the Company for the whole amount of principal of, premium, if any,
and interest remaining unpaid on the Notes and interest on overdue principal
and, to the extent lawful, interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
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reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized
to file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and the Holders of the Notes allowed in any
judicial proceedings relative to the Company (or any other obligor upon the
Notes), its creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee, as
administrative expenses associated with any such proceeding and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to
this Article Six, it shall pay out such money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and, if any, and
interest, respectively;
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Third: without duplication, to the Holders for any other Obligations
owing to the Holders under this Indenture and the Notes; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit
by Holders of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture,
provided, that the Trustee shall examine the
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certificates and opinions to determine whether or not they conform to the
requirements of this Indenture, but need not verify the contents thereof.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.04 or 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c), (e) and (f) of this Section 7.01 and Section 7.02 hereof.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture unless
the Holders shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection from liability
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in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the Trustee under
Section 4.04 is for informational purposes only and the Trustee's receipt of the
foregoing shall not constitute constructive notice of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
(i) The Trustee shall not be charged with knowledge of any Defaults or
Events of Default unless either (1) a Trust Officer of the Trustee shall have
actual knowledge of such Default or Event of Default or (2) written notice of
such Default or Event of Default shall have been given to the Trustee by any
Holder or by the Company or any other obligor on the Notes or any holder of
Credit Facility Obligations or Guarantor Credit Facility Obligations or any
representative thereof.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee may become the
owner or pledgee of Notes and may otherwise deal with the Company with the same
rights it would have if it were not Trustee. However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the
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Commission for permission to continue as trustee or resign. Any Agent may do the
same with like rights and duties. The Trustee is also subject to Sections 7.10
and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Indenture
or the Notes, it shall not be accountable for the Company's use of the proceeds
from the Notes or any money paid to the Company or upon the direction of the
Company under any provision of this Indenture, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement or recital herein or
any statement in the Notes or any other document furnished or issued in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs
and is continuing and if it is actually known to the Trustee, the Trustee shall
mail to Holders of Notes a notice of the Default or Event of Default within 90
days after such Default or Event of Default becomes known to the Trustee. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days
after each May 15 beginning with the May 15 following the date of this
Indenture, and for so long as Notes remain outstanding, the Trustee shall mail
to the Holders of the Notes a brief report dated as of such reporting date that
complies with TIA Section 313(a) (but if no event described in TIA Section
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA Section
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company. Commencing at the time this Indenture is
qualified under the TIA, a copy of each report at the time of its mailing to
Holders shall be filed with the Commission and each stock exchange on which the
Notes are listed in accordance with TIA Section 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee, from time to time as may be agreed upon between them, reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable
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disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company and any Guarantor shall jointly and severally indemnify the
Trustee and its agents, employees, officers, directors and shareholders for, and
hold same harmless against, any and all losses, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company (including this Section
7.07) and defending itself against any claim (whether asserted by the Company or
any Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereof, except to the extent any such
loss, liability or expense may be attributable to its negligence or bad faith.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. At the Trustee's sole discretion, the
Company shall defend the claim and the Trustee shall reasonably cooperate in the
defense at the Company's expense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company and any Guarantor under this Section 7.07
shall survive the resignation or removal of the Trustee and/or the satisfaction
and discharge or termination of this Indenture.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the resignation or removal
of the Trustee and/or the satisfaction and discharge or termination of this
Indenture.
When the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in Section 6.01(g) or (h) hereof, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08.
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The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof,
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10
hereof, such Holder of a Note may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business
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(including the trust created by this Indenture) to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a
Trustee hereunder that is a corporation organized and doing business under the
laws of the United States of America or of any state thereof that is authorized
under such laws to exercise corporate trustee power, that is subject to
supervision or examination by federal or state authorities and that has, or is a
wholly owned subsidiary of a bank holding company that has, a combined capital
and surplus of at least $100 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY. The
Trustee is subject to TIA Section 311(a), excluding any creditor relationship
listed in TIA Section 311(b). A Trustee who has resigned or been removed shall
be subject to TIA Section 311(a) to the extent indicated therein.
SECTION 7.12. RIGHTS OF HOLDERS WITH RESPECT TO TIME METHOD AND PLACE.
Subject to the limitations of this Article 7, a majority in principal amount of
the outstanding Notes issued hereunder shall have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the Trustee.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The
Company may, at its option by Board Resolution, at any time, with respect to the
Notes, elect to have either Section 8.02 or Section 8.03 hereof be applied to
all Notes and Subsidiary Guarantees then outstanding upon compliance with the
conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.02, the
Company and the Guarantors, if any, shall, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, be deemed to have been discharged
from their respective obligations with respect to all Notes and Subsidiary
Guarantees then outstanding on the date the conditions set forth below are
satisfied ("LEGAL DEFEASANCE"). For this purpose such defeasance means that the
Company and any Guarantor shall be deemed to have paid and
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discharged the entire indebtedness represented by the Notes and any Subsidiary
Guarantees outstanding, which shall thereafter be deemed to be outstanding only
for the purposes of Section 8.05 and the other Sections of this Indenture
referred to in clauses (i) and (ii) of this Section 8.02, and to have satisfied
all its other obligations under such Notes, Subsidiary Guarantees and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due or on the redemption date, as the case may be, solely from
amounts deposited with the Trustee as provided in Section 8.04 hereof, (ii) the
Company's obligations with respect to the Notes under Sections 2.03, 2.04, 2.05,
2.06, 2.08, 2.11, 4.02 and 4.03 hereof, (iii) the rights, powers, trusts,
duties, indemnities and immunities of the Trustee and the Company's obligations
in connection therewith and (iv) this Section 8.02.
SECTION 8.03. COVENANT DEFEASANCE. Upon the Company's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03, the Company
and each Guarantor shall be released from its obligations under the covenants
contained in Article Five and in Sections 4.04, 4.09, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.16, 4.17 and 4.18 with respect to the outstanding Notes and
Subsidiary Guarantees, if any, on and after the date the conditions set forth
below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes and the
Subsidiary Guarantees, if any, shall thereafter be deemed to be not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes and Subsidiary Guarantees, if
any, shall not be deemed outstanding for financial accounting purposes). For
this purpose, such Covenant Defeasance means that, with respect to the
outstanding Notes and Subsidiary Guarantees, if any, the Company and any
Guarantor may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.01(c) hereof, but, except as
specified above, the remainder of this Indenture and such Notes and Subsidiary
Guarantees, if any, shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section
8.03, Sections 6.01(d) through 6.01(f) and Section 6.01(i) shall not constitute
Events of Default.
SECTION 8.04. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The
following shall be the conditions to application of either Section 8.02 or
Section 8.03 hereof to the outstanding Notes and Subsidiary Guarantees:
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(i) the Company shall have irrevocably deposited with the Trustee, in
trust, for the benefit of the Holders of the Notes and without retaining any
legal interest in the corpus of such trust, 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 due on the
outstanding Notes on the stated maturity thereof or on the applicable optional
redemption date, as the case may be, and the Company must specify whether the
Notes are being defeased to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has been
published by, the United States Internal Revenue Service a ruling or (B) since
the Closing Date, there has been a change in the applicable U.S. federal income
tax law, in either case to the effect that, and based thereon such Opinion of
Counsel in the United States shall confirm that, subject to customary
assumptions and exclusions, the Holders of the outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such Legal Defeasance and will be subject to U.S. federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that, subject to customary assumptions and exclusions,
the Holders of the outstanding Notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such Covenant Defeasance and
will be subject to such U.S. 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) or, insofar as Events
of Default set forth in Section 6.01(g) and (h), at any time in the period
ending on the 91st day after the date of such deposit (it being understood that
this condition shall not be satisfied until the expiration of such period);
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or a Guarantor, if
any, is a party or by which the Company or a Guarantor, if any, is bound;
(vi) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that, as of the date of such opinion and subject to customary
assumptions and exclusions (which assumptions and exclusions shall not relate to
the operation of Section
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547 of the United States Bankruptcy Code or any analogous New York State law
provision or related judicial decisions), after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, and that the Trustee has a perfected security interest in such
trust funds for the ratable benefit of the Holders;
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding any creditors of the
Company or a Guarantor, if any;
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which Opinion of
Counsel may be subject to customary assumptions and exclusions) each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, have been complied with; and
(ix) the Trustee shall have received such other documents and assurances
as the Trustee shall reasonably require.
SECTION 8.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last
paragraph of Section 4.03 hereof, all money and Government Securities (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.05, the "Trustee") pursuant to
Section 8.04 hereof in respect of the Notes then outstanding shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or Government Securities
deposited pursuant to Section 8.04 hereof or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the Notes then outstanding.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time at the Company's
request any money or Government Securities held by it as provided in Section
8.04 hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under
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Section 8.04(i) hereof), are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY. Subject to Section 7.07 hereof the
Trustee shall promptly pay to the Company, after written request by the Company
therefor, any money held at such time in excess of the amounts required to pay
any of the Company's Obligations then owing with respect to the Notes.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest, if any, on any Note and remaining unclaimed for one year after such
principal, and premium, if any, or interest, if any, have become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT. If the Trustee or Paying Agent is unable to
apply any United States dollars or Government Securities in accordance with
Section 8.02 hereof or Section 8.03 hereof, as the case may be, by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the Company's and any
Guarantor's obligations under this Indenture, the Notes and the Subsidiary
Guarantees, if any, shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 hereof or Section 8.03 hereof, as the case may
be, until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 hereof or Section 8.03 hereof, as the
case may be; provided, however, that if the Company or any Guarantor makes any
payment of principal of (or premium, if any) or interest on any Note following
the reinstatement of its obligations, the Company or any Guarantor shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
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SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section
9.02 hereof, without the consent of any Holder of Notes, the Company, a
Guarantor (with respect to a Subsidiary Guarantee to which it is a party or this
Indenture) and the Trustee may amend or supplement this Indenture, or Notes or
the Subsidiary Guarantees:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to comply with Article 5 hereof;
(d) to provide for the assumption of the Company's or any Guarantor's
obligations to the Holders of the Notes in the case of a merger, consolidation,
sale, assignment, transfer, lease or other conveyance or other disposition of
assets;
(e) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not, in the opinion of
counsel, adversely affect the legal rights hereunder of any such Holder;
(f) to add covenants for the benefit of the Holders or to surrender any
right or power conferred upon the Company;
(g) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act;
(h) to allow any Guarantor to guarantee the Notes; or
(i) to provide for the issuance and authorization of the Exchange Notes in
compliance with this Indenture and the Registration Rights Agreement.
Upon the written request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental indenture, and
upon receipt by the Trustee of an Officer's Certificate and an Opinion of
Counsel, the Trustee shall join with the Company and the Guarantors, if any, in
the execution of any amended or supplemental indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below
in this Section 9.02, this Indenture, the Notes and a Subsidiary Guarantee, if
any, issued
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hereunder may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or a
tender offer or exchange offer for, the Notes), and, subject to Sections 6.02,
6.04 and 6.07 hereof, any existing default or compliance with any provision of
this Indenture, the Notes or the Subsidiary Guarantees may be waived with the
consent of the Holders of a majority in principal amount of the outstanding
Notes (including, without limitation, consents obtained in connection with a
purchase of, or a tender offer or exchange offer for, the Notes).
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
an Officer's Certificate and an Opinion of Counsel, the Trustee shall join with
the Company and any Guarantor in the execution of such amended or supplemental
indenture unless such amended or supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.
The consent of the Holders is not necessary under this Section 9.02 to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture, the Notes or the Subsidiary Guarantees, if any. However, without the
consent of each Holder affected, an amendment or waiver may not (with respect to
any Note or Subsidiary Guarantee held by a non-consenting Holder):
(i) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any
Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to Sections 4.09 and 4.10 hereof);
(iii) reduce the rate of interest on any Note;
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(iv) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of such Notes and a waiver of the payment
default that resulted from such acceleration) or in respect of a covenant
or a provision contained herein or in any Subsidiary Guarantee which
cannot be amended or modified without the consent of all Holders;
(v) make any Note payable in money other than that stated in such
Notes;
(vi) make any change in Section 6.04 or Section 6.07 hereof;
(vii) waive a redemption or repurchase payment with respect to any
Note (other than a payment required by Sections 3.10, 4.09 or 4.10
hereof);
(viii) except as provided under Article 8 and the relevant
Subsidiary Guarantee, release a Guarantor from its obligations under its
Subsidiary Guarantee, or make any change in a Subsidiary Guarantee that
would adversely affect the Holders; or
(ix) make any change in the foregoing amendment and waiver
provisions of this Article 9.
Notwithstanding the foregoing, any amendment or waiver to Section 4.09
hereof will require the consent of the Holders of at least two-thirds in
aggregate principal amount of the Notes then outstanding if such amendment would
adversely affect the rights of Holders of Notes.
SECTION 9.03. COMPLIANCE WITH TIA. Every amendment or supplement to this
Indenture or the Notes shall be set forth in an amended or supplemental
indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder of a Note is
a continuing consent by the Holder of a Note and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note. However,
any such Holder of a Note or subsequent Holder of a Note may revoke the consent
as to its Note if the Trustee receives written notice of revocation before the
date the waiver, supplement or amendment becomes effective. An amendment,
supplement or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may, but shall
not be required to, place an appropriate notation about an amendment, supplement
or waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any
amended or supplemental indenture authorized pursuant to this Article Nine if
the amendment or supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. The Company may not sign an amendment
or supplemental indenture until the Board of Directors approves it. In signing
or refusing to sign any amended or supplemental indenture the Trustee shall be
entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon an Officers' Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture, that it is not inconsistent herewith,
and that it will be valid and binding upon the Company and the Guarantors, if
any, in accordance with its terms.
ARTICLE 10
SATISFACTION AND DISCHARGE
SECTION 10.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall be discharged and will cease to be of further effect as to all Notes
issued hereunder, when either
(a) all such Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid and Notes for whose
payment money has theretofore been deposited in trust and thereafter repaid to
the Company) have been delivered to the Trustee for cancellation; or
(b) (i) all such Notes not theretofore delivered to such Trustee for
cancellation have become due and payable by reason of the making of a notice of
redemption or otherwise or will become due and payable within one year and the
Company or a Guarantor, if any, has irrevocably deposited or caused to be
deposited with such Trustee as trust funds in trust an amount of money
sufficient to pay and discharge the entire Indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation for principal, premium, if
any, and accrued interest to the date of maturity or redemption;
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(ii) no Default or Event of Default with respect to this Indenture
or the Notes shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any
other instrument to which the Company or a Guarantor, if any, is a party
or by which the Company or a Guarantor, if any, is bound;
(iii) the Company or a Guarantor, if any, has paid or caused to be
paid all sums payable by it under this Indenture; and
(iv) the Company has delivered irrevocable instructions to the
Trustee under this Indenture to apply the deposited money toward the
payment of such Notes at maturity or the redemption date, as the case may
be.
In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
SECTION 10.02. APPLICATION OF TRUST MONEY. Subject to the provisions of
the last paragraph of Section 4.03 hereof, all money deposited with the Trustee
pursuant to Section 10.01 hereof shall be held in trust and applied by it, in
accordance with the provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to Persons entitled thereto, of the
principal (and premium, if any) and interest for whose payment such money has
been deposited with the Trustee.
If the Trustee or Paying Agent is unable to apply any money or Government
Securities in accordance with Section 10.01 hereof by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no such deposit had occurred pursuant to Section 10.01
hereof; provided that if the Company has made any payment of principal of,
premium, if any, or interest on any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or Government Securities held
by the Trustee or Paying Agent.
ARTICLE 11
MISCELLANEOUS
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SECTION 11.01. CONFLICT OF ANY PROVISION OF INDENTURE WITH TIA. If any
provision of this Indenture limits, qualifies, or conflicts with the duties
imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES. Any notice or communication by the Company, any
Guarantor or the Trustee to the others is duly given if in writing and delivered
in Person or mailed by first class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery,
to the others' address:
If to the Company or any Guarantor:
DecisionOne Corporation
50 East Swedesford Road,
Frazer, Pennsylvania 19355
Attention: Thomas M. Molchan, Esq.
Facsimile: (610) 296-6000
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Lawrence E. Wieman, Esq.
Facsimile: (212) 450-4800
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square, 225 Asylum Street, 23rd Floor
Hartford, CT 06103
Attention: Elizabeth Hammer, Corporate Trust Administration
Facsimile: (860) 244-1889
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
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<PAGE> 90
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA Section
312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 1.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 1.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 11.05. LEGAL HOLIDAYS. In any case where any interest payment
date, any date established for payment of defaulted interest pursuant to Section
2.13 hereof, or any maturity date with respect to any Note shall not be a
Business Day, then (notwithstanding any other provisions of this Indenture, the
Notes or any Subsidiary Guarantee) payment of interest or principal (and
premium, if any) need not be made on such date but may be made on the next
succeeding Business Day with the same force and effect as if made on the
interest payment date or date established for payment of defaulted interest
pursuant to Section 2.13 hereof or the maturity date, as applicable, and no
interest shall accrue with respect to such payment for the period
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from and after such interest payment date or date established for payment of
defaulted interest pursuant to Section 2.13 or maturity date, as the case may
be, to the next succeeding Business Day.
SECTION 11.06. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS. No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, if any, shall have any liability for any obligations
of the Company or the Guarantors, if any, under the Notes, the Subsidiary
Guarantees, if any, or this Indenture or for any claim based on, in respect of,
or by reason of such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
SECTION 11.07. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE SUBSIDIARY
GUARANTEES, IF ANY, SHALL BE, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW
RULES THEREOF.
SECTION 11.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Indenture may not be used to interpret any other indenture, loan or debt
agreement of the Company or its Subsidiaries or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture by the Company shall bind its respective successors and assigns,
whether so expressed or not. All covenants and agreements in this Indenture by
the Trustee shall bind its respective successors and assigns, whether so
expressed or not.
SECTION 11.10. SEVERABILITY. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.11. COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 11.12. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents,
Cross-Reference Table and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part
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of this Indenture and shall in no way modify or restrict any of the terms or
provisions hereof.
[Signatures on following page]
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<PAGE> 93
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed in New York, New York as of the day and year first above written.
DECISIONONE CORPORATION
Dated: By: ______________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY
Dated: By: ______________________________
Name:
Title:
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<PAGE> 94
EXHIBIT A
(Face of Note)
[LEGEND IF REQUIRED UNDER SECTION 2.07 OF THE INDENTURE:]
["THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
DECISIONONE CORPORATION (THE "COMPANY") THAT (i) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a)(1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144, OR IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL, IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT AND (b) IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (ii) THE HOLDER SHALL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OR
ANY SECURITY ISSUED UPON EXCHANGE OR EXERCISE HEREOF OF THE RESALE RESTRICTIONS
SET FORTH IN (i) ABOVE."]
[LEGEND IF NOTE IS ISSUED IN GLOBAL FORM]
[Unless and until it is exchanged in whole or in part for Notes in definitive
form, this Note may not be transferred except as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. The Depository
Trust Company shall act as the Depositary until a successor shall be appointed
by the Company. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is
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<PAGE> 95
registered in the name of Cede & Co. or such other name as may be requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or
such other entity as may be requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.]
[14% Senior Notes] [14% Series B Senior Notes] due 2006
No. Cusip No:
DECISIONONE CORPORATION
promises to pay to ______________ or registered assigns, the principal sum of
$_________________ (_______________________________ Dollars) on August 1, 2006.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof and as more fully specified in the Indenture, which
further provisions shall for all purposes have the same effect as if set forth
at this place.
DECISIONONE CORPORATION
By: ______________________________
Name:
Title:
This is one of the 14% Senior
Notes due 2006 referred to
in the within mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: _____________________________
Authorized Signature
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<PAGE> 96
(Back of Note)
[14% Senior Notes] [14% Series B Senior Notes] due 2006
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below.
(1) Interest. DecisionOne Corporation, a Delaware corporation (the
"COMPANY"), promises to pay interest on the principal amount of this Note at 14%
per annum from January 27, 1999 until August 1, 2006. The Company shall pay
interest semi-annually in arrears on February 1 and August 1 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"INTEREST PAYMENT DATE"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
Closing Date; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be August 1, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate equal to the per annum rate on the Notes then in effect; it
shall pay interest (including post petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30 day months.
(2) Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on January 15 and July 15 next preceding the Interest Payment
Date, even if such Notes are cancelled after such record date and on or before
such Interest Payment Date, except as provided in Section 2.13 of the Indenture
with respect to defaulted interest. The Notes will be payable as to principal,
premium, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; provided that
all payments with respect to Notes represented by one or more permanent global
Notes will be paid by wire transfer of immediately available funds to the
account of the Depository Trust Company or any successor thereto. Such payment
shall be in such coin or currency of the United Sates of America as at the time
of payment is legal tender for payment of public and private debts.
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(3) Paying Agent and Registrar. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
(4) Indenture. The Company issued the Notes under an Indenture dated as of
January 27, 1999 (the "INDENTURE") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Section 77aaa - Section 77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The Notes are general unsecured obligations of the Company limited
to $7,300,000 in aggregate principal amount.
(5) Optional Redemption. Except as described in Section 3.08 of the
Indenture, the Notes will not be redeemable at the Company's option. At any time
prior to August 1, 2002, the Company may, at its option, redeem the Notes, in
whole but not in part, upon not less than 30 nor more than 60 days' prior
written notice, in cash at a redemption price equal to (i) the present value at
such time of the optional redemption price of such Note at August 1, 2002
(107.00% of the principal amount of the Notes being redeemed), computed by
discounting, on a semi-annual basis, using a discount rate equal to the Treasury
Rate plus 50 basis points, plus (ii) accrued and unpaid interest, to the date of
redemption.
At any time on or after August 1, 2002, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' prior written notice, in cash at the redemption prices
(expressed as percentages of principal amount) set forth below, together with
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve month period beginning on August 1 of each of the
years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2002............................ 107.00%
2003............................ 104.67%
2004............................ 102.33%
2005 and thereafter............. 100.00%
</TABLE>
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Notwithstanding the foregoing, the Company may, at its option, on any one
or more occasions, redeem the original aggregate principal amount of Notes at a
redemption price equal to 114.00% of the principal amount thereof, plus accrued
and unpaid interest thereon, to the redemption date, with the net cash proceeds
of one or more Equity Offerings by (i) the Company or (ii) Holdings to the
extent the net cash proceeds thereof are contributed to the Company as a capital
contribution to the common equity of the Company; provided that any such
redemption shall occur within 90 days of the date of the closing of each such
Equity Offering.
(6) Mandatory Redemption. Other than as set forth in paragraph 8, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
(7) Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes may be redeemed in
part but only in whole multiples of $1,000. On and after the redemption date
interest ceases to accrue on Notes or portions thereof called for redemption.
(8) Repurchase at Option of Holders. (a) Upon the occurrence of a Change of
Control, the Company shall make an offer (a "CHANGE OF CONTROL OFFER") to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
the Notes at a price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase (the
"CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder of Notes issued under the
Indenture, with a copy to the Trustee, containing the information set forth in
Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to
purchase may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse side of this Note.
(b) Within 365 days after the Company's or any Restricted
Subsidiary's receipt of any Net Proceeds from an Asset Sale, the Company or such
Restricted Subsidiary shall apply such Net Proceeds (a) to permanently reduce
Indebtedness under Credit Facility Obligations or Guarantor Credit Facility
Obligations (and to correspondingly reduce commitments with respect thereto), to
permanently reduce Indebtedness of a Restricted Subsidiary that is not a
Guarantor or Pari Passu Indebtedness (provided that if the Company shall so
repay Pari Passu Indebtedness, it will equally and ratably reduce Indebtedness
under the Notes if the Notes are then redeemable or, if the Notes may not be
then redeemed, the Company shall make an offer pursuant to Section 3.10 of the
Indenture to purchase at 100% of the principal
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<PAGE> 99
amount thereof the amount of Notes that would otherwise be redeemed) or (b) to
an investment in property, capital expenditures or assets that are used or
useful in a Permitted Business, or Capital Stock of any Person primarily engaged
in a Permitted Business if, as a result of the acquisition by the Company or any
Restricted Subsidiary thereof, such Person becomes a Restricted Subsidiary. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the preceding sentence of this paragraph will be deemed to constitute "Excess
Proceeds". When the aggregate amount of Excess Proceeds exceeds $2.5 million,
the Company shall be required to make an Asset Sale Offer to purchase the
maximum principal amount of 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 Section 3.10 of the Indenture. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
(9) Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. Neither the
Company nor the Registrar need exchange or register the transfer of any Note or
portion of a Note selected for redemption. Also, neither the Company nor the
Registrar need exchange or register the transfer of any Notes for a period of 15
days before a selection of Notes to be redeemed.
(10) Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
(11) Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture, the Notes or any Subsidiary Guarantee may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes, and, subject to the terms of the Indenture and any
applicable Subsidiary Guarantee, any existing default (other than a default in
the payment of the principal of, premium, if any, or interest on, the Notes) or
compliance with any provision of the Indenture, the Notes or any Subsidiary
Guarantee may be waived with the consent of the Holders of a majority in
principal amount of the then
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<PAGE> 100
outstanding Notes. Without the consent of any Holder, the Indenture, the Notes
and any Subsidiary Guarantee may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to comply with Article 5 of the
Indenture, to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of the Notes, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to add
covenants for the benefit of the Holders or to surrender any right or power
conferred upon the Company, to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the TIA, to
add a Guarantor under the Indenture, or to provide for the appointment of a
successor trustee in compliance with the requirements of Section 7.08 of the
Indenture.
(12) Defaults and Remedies. Each of the following constitutes an "Event of
Default": (a) default which continues for 30 days in the payment when due of
interest on the Notes; (b) default in payment when due of principal or premium,
if any, on the Notes at maturity, upon redemption or otherwise; (c) failure by
the Company or any Guarantor for 30 days after receipt of notice from the
Trustee or Holders of at least 30% in principal amount of the Notes then
outstanding to comply with the provisions of Sections 3.10, 4.09, 4.10, 4.11,
4.12, 4.17 or Article 5 of the Indenture; (d) failure by the Company or any
Guarantor for 60 days after notice from the Trustee or the Holders of at least
30% in principal amount of the Notes then outstanding to comply with its other
agreements in the Indenture or the Notes; (e) 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 the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (i) is caused by a failure to pay Indebtedness at its stated final
maturity (after giving effect to any applicable grace period provided in such
Indebtedness) (a "PAYMENT DEFAULT") or (ii) results in the acceleration of such
Indebtedness prior to its stated final 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 $20.0 million or more; (f) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $20.0 million (net of any amounts with respect to which
a reputable and creditworthy insurance company has acknowledged liability in
writing), which judgments are not paid, discharged or stayed within 60 days
after their entry; (g) certain events of bankruptcy with respect to the Company
or any of its Restricted Subsidiaries that is a Significant Subsidiary as
provided in subsections (g) and (h) of Section 6.01 of the Indenture; and (h)
the termination of any
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Subsidiary Guarantee for any reason not permitted by the Indenture, or the
denial of any Guarantor or any Person acting on behalf of any Guarantor of such
Guarantor's obligations under its respective Subsidiary Guarantee.
If an Event of Default occurs and is continuing under the Indenture, the
Trustee or the Holders of at least 30% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising under
clause (g) of the preceding paragraph, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided under the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal, premium, if any, or interest) if it determines that
withholding notice is in their interest. In addition, the Trustee shall have no
obligation to accelerate the Notes if in the best judgment of the Trustee
acceleration is not in the best interest of the Holders of such Notes.
(13) Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company, and may otherwise deal with the Company, as if it were not the
Trustee.
(14) No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under these Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting any of these Notes waives and releases all such liability.
(15) Authentication. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
(16) Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
(17) CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company may cause
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to
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the accuracy of such numbers either as printed on the Notes or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
(18) Governing Law. The internal law of the State of New York shall govern
and be used to construe the terms of this Note.
(19) Acceptance of Restrictions on Redemption. By its acceptance of this
Note, each Holder hereof acknowledges that an "Event of Default" may occur under
the Credit Facility if the Company voluntarily redeems all or any portion of the
Notes, and each Holder hereby agrees that it shall not accept the redemption
price in respect of any voluntary redemption at any time while such redemption
would cause an Event of Default thereunder.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
DecisionOne Corporation
50 East Swedesford Road,
Frazer, Pennsylvania 19355
Attention: General Counsel
Facsimile: (610) 408-3820
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ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- ------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax. I.D. no.)
================================================================================
(Print or type assignee's name, address, and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES PRIOR TO THE DATE OF AN
EFFECTIVE REGISTRATION:]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of an effective Registration or (ii) two
years after the later of the original issuance of this Note or the last date on
which this Note was held by the Company or an Affiliate of the Company, the
undersigned confirms, without utilizing any general solicitation or general
advertising, that:
[CHECK ONE]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
OR
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If neither of the foregoing boxes is checked, the Registrar shall not be
obligated to register this Note in the name of any Person other than the Holder
hereof unless and until the conditions to any such transfer or registration set
forth herein and in Section 2.07 of the Indenture shall have been satisfied.
A-10
<PAGE> 104
Date: _______________ Signature: ___________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a), ABOVE, IS CHECKED:
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:
Your Signature:____________________________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
(Signature must be guaranteed by a financial institution that is a member of the
Securities Transfer Agent Medallion Program ("STAMP"), in accordance with the
Securities Exchange Act of 1934, as amended.)
A-11
<PAGE> 105
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.09 or 4.10 of the Indenture, check the box below:
[ ] Section 4.09 [ ] Section 4.10
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.09 or Section 4.10 of the Indenture, state the
amount you elect to have purchased:
$___________
Date: __________________ Your Signature:________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.:____________________
Signature Guarantee.
A-12
<PAGE> 106
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(2)
The following exchanges of a part of this global Note for Notes in
definitive form have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease Amount of increase this Global Note authorized officer of
Date of Exchange in Principal Amount in Principal Amount following such Trustee
of this Global Note of this Global Note decrease (or increase)
<S> <C> <C> <C> <C>
</TABLE>
- --------
(2) This should be included only if the Note is issued in global form.
A-13
<PAGE> 107
A-14
<PAGE> 108
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE TO BE
DELIVERED BY GUARANTORS
SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE") dated as of
____________________, between _____________________ (the "GUARANTOR"), a
subsidiary of DecisionOne Corporation (or its successor), a company incorporated
under the laws of the State of Delaware (the "COMPANY"), and State Street Bank
and Trust Company, as trustee under the indenture referred to below (the
"TRUSTEE").
W I T N E S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an indenture (the "INDENTURE"), dated as of January 27, 1999, providing for the
issuance of an aggregate principal amount at maturity of $7,300,000 of 14%
Senior Notes due 2006 which may be exchanged for 14% Series B Senior Notes due
2006 (such 14% Senior Notes and 14% Series B Senior Notes, collectively, the
"NOTES");
WHEREAS, Section 4.12 of the Indenture provides that the Company may cause
the Guarantor to execute and deliver to the Trustee a subsidiary guarantee on
the terms and conditions set forth herein;
WHEREAS, Section 4.15 of the Indenture provides that, under certain
circumstances, the Company is required to cause the Guarantor to execute and
deliver to the Trustee a Subsidiary Guarantee on the terms and conditions set
forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
(1) CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(2) INDENTURE PROVISION PURSUANT TO WHICH GUARANTEE IS GIVEN. This
Supplemental Indenture is being executed and delivered pursuant to Sections 4.12
and 4.15 of the Indenture.
B-1
<PAGE> 109
(3) AGREEMENTS TO GUARANTEE. The Guarantor hereby agrees as follows:
(a) The Guarantor, jointly and severally with all other Guarantors,
if any, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and
assigns, regardless of the validity and enforceability of the Indenture,
the Notes and the obligations of the Company under the Indenture and the
Notes, that:
(i) the principal of, premium, if any, and interest on the
Notes shall be promptly paid in full when due, whether at maturity,
by acceleration, redemption or otherwise, and interest on the
overdue principal of, premium, if any, and interest on the Notes, to
the extent lawful, and all other obligations of the Company to the
Holders or the Trustee thereunder shall be promptly paid in full,
all in accordance with the terms thereof; and
(ii) in case of any extension of time for payment or renewal
of any Notes or any of such other obligations, that the same shall
be promptly paid in full when due in accordance with the terms of
the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
Notwithstanding the foregoing, in the event that this Subsidiary Guarantee
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Guarantor under this Supplemental Indenture and its Subsidiary Guarantee shall
be limited to such amount as will not, after giving effect thereto, and to all
other liabilities of the Guarantor, result in such amount constituting a
fraudulent transfer or conveyance.
(4) EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES. (a) To evidence its
Subsidiary Guarantee set forth in this Supplemental Indenture, the Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form of Annex A hereto shall be endorsed by an officer of such Guarantor on each
Note authenticated and delivered by the Trustee after the date hereof.
(b) Notwithstanding the foregoing, the Guarantor hereby agrees that its
Subsidiary Guarantee set forth herein shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
B-2
<PAGE> 110
(c) If an officer whose signature is on this Supplemental Indenture or on
the Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
(d) The delivery of a Note by the Trustee, after the authentication
thereof under the Indenture, shall constitute due delivery of the Subsidiary
Guarantee set forth in this Supplemental Indenture on behalf of the Guarantor.
(e) The Guarantor hereby agrees that its obligations hereunder shall be
unconditional, regardless of the validity, regularity or enforceability of the
Notes or the Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgement against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor.
(f) The Guarantor hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that its Subsidiary Guarantee
made pursuant to this Supplemental Indenture will not be discharged except by
complete performance of the obligations contained in the Notes and the Indenture
or pursuant to Section 5(b) of this Supplemental Indenture.
(g) If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Supplemental Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then, and in every such case, subject to any
determination in such proceeding, the Guarantor, the Trustee and the Holders
shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the Guarantor, the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
(h) The Guarantor hereby waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against the Company or any other
Guarantor as a result of any payment by such Guarantor under its Subsidiary
Guarantee. The Guarantor further agrees that, as between the Guarantors, on the
one hand, and the Holders and the Trustee, on the other hand:
B-3
<PAGE> 111
(i) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six of the Indenture for the purposes
of the Subsidiary Guarantee made pursuant to this Supplemental Indenture,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby; and
(ii) in the event of any declaration of acceleration of such
obligations as provided in Article Six, such obligations (whether or not
due and payable) shall forthwith become due and payable by the Guarantor
for the purpose of the Subsidiary Guarantee made pursuant to this
Supplemental Indenture.
(i) The Guarantor shall have the right to seek contribution from any other
non-paying Guarantor, if any, so long as the exercise of such right does not
impair the rights of the Holders under the Subsidiary Guarantee made pursuant to
this Supplemental Indenture.
(j) The Guarantor covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of the Indenture or this Subsidiary Guarantee; and
the Guarantor (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
(5) GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) Except as set
forth in Articles Four and Five of the Indenture, nothing contained in the
Indenture, this Supplemental Indenture or in the Notes shall prevent any
consolidation or merger of the Guarantor with or into the Company or any other
Guarantor or shall prevent any transfer, sale or conveyance of the property of
the Guarantor as an entirety or substantially as an entirety, to the Company or
any other Guarantor.
(b) Except as set forth in Article Five of the Indenture, upon the sale or
disposition of all of the Capital Stock of the Guarantor by the Company or a
Subsidiary of the Company, or upon the consolidation or merger of the Guarantor
with or into any Person, or the sale of all or substantially all of the assets
of the Guarantor (in each case, other than to an Affiliate of the Company), such
Guarantor shall be deemed automatically and unconditionally released and
discharged from all obligations under this Subsidiary Guarantee without any
further action required on the part of the Trustee or any Holder if no Default
shall have occurred and be continuing;
B-4
<PAGE> 112
provided, that in the event of an Asset Sale (including a sale of the Capital
Stock of the Guarantor), the Net Cash Proceeds therefrom are treated in
accordance with Section 4.10 of the Indenture. Except with respect to
transactions set forth in the preceding sentence, the Company and the Guarantor
covenant and agree that upon any such consolidation, merger or transfer of
assets, the performance of all covenants and conditions of this Supplemental
Indenture to be performed by such Guarantor shall be expressly assumed by
supplemental indenture satisfactory in form to the Trustee, by the corporation
formed by such consolidation, or into which the Guarantor shall have merged, or
by the corporation which shall have acquired such property. Upon receipt of an
Officers Certificate of the Company or the Guarantor, as the case may be, to the
effect that the Company or such Guarantor has complied with the first sentence
of this Section 5(b), the Trustee shall execute any documents reasonably
requested by the Company or the Guarantor, at the cost of the Company or such
Guarantor, as the case may be, in order to evidence the release of such
Guarantor from its obligations under its Guarantee endorsed on the Notes and
under the Indenture and this Supplemental Indenture.
[(6) RELEASES UPON RELEASE OF GUARANTEE OF GUARANTEED INDEBTEDNESS.
Concurrently with the release or discharge of the Guarantor's guarantee of the
payment of [DESCRIBE INDEBTEDNESS THE GUARANTEE OF WHICH GAVE RISE TO THE
DELIVERY OF THIS SUPPLEMENTAL INDENTURE] ("GUARANTEED DEBT") (other than a
release or discharge by or as a result of payment under such guarantee of
Guaranteed Indebtedness), the Guarantor shall be automatically and
unconditionally released and relieved of its obligations under this Supplemental
Indenture and its Subsidiary Guarantee made pursuant to Section 4 of this
Supplemental Indenture. Upon delivery by the Company to the Trustee of an
Officer's Certificate to the effect that such release or discharge has occurred,
the Trustee shall execute any documents reasonably required in order to evidence
the release of the Guarantor from its obligations under this Supplemental
Indenture and its Subsidiary Guarantee made pursuant hereto; provided such
documents shall not affect or impair the rights of the Trustee and Paying Agent
under Section 7.07 of the Indenture.](3)
(7) NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
(8) COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
- --------
(3) To be included if the Supplemental Indenture is executed and delivered
pursuant to Section 4.15 of the Indenture.
B-5
<PAGE> 113
(9) EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not effect the construction hereof.
[Signatures on following page]
B-6
<PAGE> 114
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Date:___________________________ [Guarantor]
By: ____________________________________
Name:
Title:
Date:___________________________ [Guarantor]
By: ____________________________________
Name:
Title:
B-7
<PAGE> 115
ANNEX A TO SUPPLEMENTAL INDENTURE
FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE
Each Guarantor (as defined in the Indenture) has jointly and severally
unconditionally guaranteed (a) the due and punctual payment of the principal of,
premium, if any, and interest on the Notes, whether at stated maturity or an
Interest Payment Date, by acceleration, call for redemption or otherwise, (b)
the due and punctual payment of interest on the overdue principal and premium
of, and interest, to the extent lawful, on the Notes and (c) that in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, the same will be promptly paid in full when due in accordance with
the terms of the extension of renewal, whether at stated maturity, by
acceleration or otherwise.
Notwithstanding the foregoing, in the event that the Subsidiary Guarantee
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability of the
Guarantor under its Subsidiary Guarantee shall be limited to such amount as will
not, after giving effect thereto, and to all other liabilities of the Guarantor,
result in such amount constituting a fraudulent transfer or conveyance.
The Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which the Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual or facsimile signature of one of its authorized officers.
Date:__________________________ [Guarantor]
By: __________________________________
Name:
Title:
B-8
<PAGE> 1
EXHIBIT A
(Face of Note)
[LEGEND IF REQUIRED UNDER SECTION 2.07 OF THE INDENTURE:]
["THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
DECISIONONE CORPORATION (THE "COMPANY") THAT (i) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a)(1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144, OR IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL, IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT AND (b) IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (ii) THE HOLDER SHALL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OR
ANY SECURITY ISSUED UPON EXCHANGE OR EXERCISE HEREOF OF THE RESALE RESTRICTIONS
SET FORTH IN (i) ABOVE."]
[LEGEND IF NOTE IS ISSUED IN GLOBAL FORM]
[Unless and until it is exchanged in whole or in part for Notes in definitive
form, this Note may not be transferred except as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. The Depository
Trust Company shall act as the Depositary until a successor shall be appointed
by the Company. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is
A-1
<PAGE> 2
registered in the name of Cede & Co. or such other name as may be requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or
such other entity as may be requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.]
[14% Senior Notes] [14% Series B Senior Notes] due 2006
No. Cusip No:
DECISIONONE CORPORATION
promises to pay to ______________ or registered assigns, the principal sum of
$_________________ (_______________________________ Dollars) on August 1, 2006.
Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof and as more fully specified in the Indenture, which
further provisions shall for all purposes have the same effect as if set forth
at this place.
DECISIONONE CORPORATION
By: ______________________________
Name:
Title:
This is one of the 14% Senior
Notes due 2006 referred to
in the within mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: _____________________________
Authorized Signature
A-2
<PAGE> 3
(Back of Note)
[14% Senior Notes] [14% Series B Senior Notes] due 2006
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below.
(1) Interest. DecisionOne Corporation, a Delaware corporation (the
"COMPANY"), promises to pay interest on the principal amount of this Note at 14%
per annum from January 27, 1999 until August 1, 2006. The Company shall pay
interest semi-annually in arrears on February 1 and August 1 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"INTEREST PAYMENT DATE"). Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
Closing Date; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be August 1, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate equal to the per annum rate on the Notes then in effect; it
shall pay interest (including post petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30 day months.
(2) Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on January 15 and July 15 next preceding the Interest
Payment Date, even if such Notes are cancelled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.13 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders;
provided that all payments with respect to Notes represented by one or more
permanent global Notes will be paid by wire transfer of immediately available
funds to the account of the Depository Trust Company or any successor thereto.
Such payment shall be in such coin or currency of the United Sates of America as
at the time of payment is legal tender for payment of public and private debts.
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<PAGE> 4
(3) Paying Agent and Registrar. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
(4) Indenture. The Company issued the Notes under an Indenture dated
as of January 27, 1999 (the "INDENTURE") between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Section 77aaa - Section 77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The Notes are general unsecured obligations of the Company limited
to $7,300,000 in aggregate principal amount.
(5) Optional Redemption. Except as described in Section 3.08 of the
Indenture, the Notes will not be redeemable at the Company's option. At any time
prior to August 1, 2002, the Company may, at its option, redeem the Notes, in
whole but not in part, upon not less than 30 nor more than 60 days' prior
written notice, in cash at a redemption price equal to (i) the present value at
such time of the optional redemption price of such Note at August 1, 2002
(107.00% of the principal amount of the Notes being redeemed), computed by
discounting, on a semi-annual basis, using a discount rate equal to the Treasury
Rate plus 50 basis points, plus (ii) accrued and unpaid interest, to the date of
redemption.
At any time on or after August 1, 2002, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' prior written notice, in cash at the redemption prices
(expressed as percentages of principal amount) set forth below, together with
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve month period beginning on August 1 of each of the
years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2002........................................ 107.00%
2003........................................ 104.67%
2004........................................ 102.33%
2005 and thereafter......................... 100.00%
</TABLE>
A-4
<PAGE> 5
Notwithstanding the foregoing, the Company may, at its option, on any
one or more occasions, redeem the original aggregate principal amount of Notes
at a redemption price equal to 114.00% of the principal amount thereof, plus
accrued and unpaid interest thereon, to the redemption date, with the net cash
proceeds of one or more Equity Offerings by (i) the Company or (ii) Holdings to
the extent the net cash proceeds thereof are contributed to the Company as a
capital contribution to the common equity of the Company; provided that any such
redemption shall occur within 90 days of the date of the closing of each such
Equity Offering.
(6) Mandatory Redemption. Other than as set forth in paragraph 8, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
(7) Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes may be redeemed
in part but only in whole multiples of $1,000. On and after the redemption date
interest ceases to accrue on Notes or portions thereof called for redemption.
(8) Repurchase at Option of Holders. (a) Upon the occurrence of a
Change of Control, the Company shall make an offer (a "CHANGE OF CONTROL OFFER")
to repurchase all or any part (equal to $1,000 or an integral multiple thereof)
of the Notes at a price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase (the
"CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control,
the Company shall mail a notice to each Holder of Notes issued under the
Indenture, with a copy to the Trustee, containing the information set forth in
Section 4.09 of the Indenture. Holders of Notes that are subject to an offer to
purchase may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse side of this Note.
(b) Within 365 days after the Company's or any Restricted
Subsidiary's receipt of any Net Proceeds from an Asset Sale, the Company or such
Restricted Subsidiary shall apply such Net Proceeds (a) to permanently reduce
Indebtedness under Credit Facility Obligations or Guarantor Credit Facility
Obligations (and to correspondingly reduce commitments with respect thereto), to
permanently reduce Indebtedness of a Restricted Subsidiary that is not a
Guarantor or Pari Passu Indebtedness (provided that if the Company shall so
repay Pari Passu Indebtedness, it will equally and ratably reduce Indebtedness
under the Notes if the Notes are then redeemable or, if the Notes may not be
then redeemed, the Company shall make an offer pursuant to Section 3.10 of the
Indenture to purchase at 100% of the principal
A-5
<PAGE> 6
amount thereof the amount of Notes that would otherwise be redeemed) or (b) to
an investment in property, capital expenditures or assets that are used or
useful in a Permitted Business, or Capital Stock of any Person primarily engaged
in a Permitted Business if, as a result of the acquisition by the Company or any
Restricted Subsidiary thereof, such Person becomes a Restricted Subsidiary. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the preceding sentence of this paragraph will be deemed to constitute "Excess
Proceeds". When the aggregate amount of Excess Proceeds exceeds $2.5 million,
the Company shall be required to make an Asset Sale Offer to purchase the
maximum principal amount of 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 Section 3.10 of the Indenture. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
(9) Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
Neither the Company nor the Registrar need exchange or register the transfer of
any Note or portion of a Note selected for redemption. Also, neither the Company
nor the Registrar need exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed.
(10) Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
(11) Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Notes or any Subsidiary Guarantee may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Notes, and, subject to the terms of the Indenture
and any applicable Subsidiary Guarantee, any existing default (other than a
default in the payment of the principal of, premium, if any, or interest on, the
Notes) or compliance with any provision of the Indenture, the Notes or any
Subsidiary Guarantee may be waived with the consent of the Holders of a majority
in principal amount of the then
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<PAGE> 7
outstanding Notes. Without the consent of any Holder, the Indenture, the Notes
and any Subsidiary Guarantee may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to comply with Article 5 of the
Indenture, to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of the Notes, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to add
covenants for the benefit of the Holders or to surrender any right or power
conferred upon the Company, to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the TIA, to
add a Guarantor under the Indenture, or to provide for the appointment of a
successor trustee in compliance with the requirements of Section 7.08 of the
Indenture.
(12) Defaults and Remedies. Each of the following constitutes an "Event
of Default": (a) default which continues for 30 days in the payment when due of
interest on the Notes; (b) default in payment when due of principal or premium,
if any, on the Notes at maturity, upon redemption or otherwise; (c) failure by
the Company or any Guarantor for 30 days after receipt of notice from the
Trustee or Holders of at least 30% in principal amount of the Notes then
outstanding to comply with the provisions of Sections 3.10, 4.09, 4.10, 4.11,
4.12, 4.17 or Article 5 of the Indenture; (d) failure by the Company or any
Guarantor for 60 days after notice from the Trustee or the Holders of at least
30% in principal amount of the Notes then outstanding to comply with its other
agreements in the Indenture or the Notes; (e) 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 the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (i) is caused by a failure to pay Indebtedness at its stated final
maturity (after giving effect to any applicable grace period provided in such
Indebtedness) (a "PAYMENT DEFAULT") or (ii) results in the acceleration of such
Indebtedness prior to its stated final 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 $20.0 million or more; (f) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $20.0 million (net of any amounts with respect to which
a reputable and creditworthy insurance company has acknowledged liability in
writing), which judgments are not paid, discharged or stayed within 60 days
after their entry; (g) certain events of bankruptcy with respect to the Company
or any of its Restricted Subsidiaries that is a Significant Subsidiary as
provided in subsections (g) and (h) of Section 6.01 of the Indenture; and (h)
the termination of any
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<PAGE> 8
Subsidiary Guarantee for any reason not permitted by the Indenture, or the
denial of any Guarantor or any Person acting on behalf of any Guarantor of such
Guarantor's obligations under its respective Subsidiary Guarantee.
If an Event of Default occurs and is continuing under the Indenture,
the Trustee or the Holders of at least 30% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising under
clause (g) of the preceding paragraph, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided under the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal, premium, if any, or interest) if it determines that
withholding notice is in their interest. In addition, the Trustee shall have no
obligation to accelerate the Notes if in the best judgment of the Trustee
acceleration is not in the best interest of the Holders of such Notes.
(13) Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company, and may otherwise deal with the Company, as if it were
not the Trustee.
(14) No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under these Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting any of these Notes waives and releases all such liability.
(15) Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
(16) Abbreviations. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
(17) CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company may cause
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to
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<PAGE> 9
the accuracy of such numbers either as printed on the Notes or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
(18) Governing Law. The internal law of the State of New York shall
govern and be used to construe the terms of this Note.
(19) Acceptance of Restrictions on Redemption. By its acceptance of this
Note, each Holder hereof acknowledges that an "Event of Default" may occur under
the Credit Facility if the Company voluntarily redeems all or any portion of the
Notes, and each Holder hereby agrees that it shall not accept the redemption
price in respect of any voluntary redemption at any time while such redemption
would cause an Event of Default thereunder.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
DecisionOne Corporation
50 East Swedesford Road,
Frazer, Pennsylvania 19355
Attention: General Counsel
Facsimile: (610) 408-3820
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<PAGE> 10
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
(Insert assignee's soc. sec. or tax. I.D. no.)
(Print or type assignee's name, address, and zip code)
and irrevocably appoint ______________________________________________ to
transfer this Note on the books of the Company. The agent may substitute another
to act for him.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES PRIOR TO THE DATE OF AN
EFFECTIVE REGISTRATION:]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of an effective Registration or (ii)
two years after the later of the original issuance of this Note or the last date
on which this Note was held by the Company or an Affiliate of the Company, the
undersigned confirms, without utilizing any general solicitation or general
advertising, that:
[CHECK ONE]
/ / (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
OR
/ / (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If neither of the foregoing boxes is checked, the Registrar shall not be
obligated to register this Note in the name of any Person other than the Holder
hereof unless and until the conditions to any such transfer or registration set
forth herein and in Section 2.07 of the Indenture shall have been satisfied.
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<PAGE> 11
Date: _______________ Signature: ____________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a), ABOVE, IS CHECKED:
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:
Your Signature: _______________________________________
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
(Signature must be guaranteed by a financial institution that is a member of the
Securities Transfer Agent Medallion Program ("STAMP"), in accordance with the
Securities Exchange Act of 1934, as amended.)
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<PAGE> 12
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.09 or 4.10 of the Indenture, check the box below:
/ / Section 4.09 / / Section 4.10
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.09 or Section 4.10 of the Indenture, state the
amount you elect to have purchased:
$___________
Date: _________________________ Your Signature: ___________________
(Sign exactly as your name appears
on the Note)
Tax Identification No.:_________
Signature Guarantee.
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<PAGE> 13
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(2)
The following exchanges of a part of this global Note for Notes in
definitive form have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global
in Principal in Principal Note authorized Signature of
Date of Exchange Amount of this Amount of this following such officer of
Global Note Global Note decrease (or Trustee
increase)
<S> <C> <C> <C> <C>
</TABLE>
- --------
(2) This should be included only if the Note is issued in global form.
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<PAGE> 14
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<PAGE> 1
WAIVER OF FINANCIAL COVENANTS
WAIVER dated as of January 27, 1999 (this "Waiver") among DECISIONONE
CORPORATION (the "Borrower") and the financial institutions listed on the
signature pages hereof (collectively, the "Lenders").
WHEREAS, the Borrower, the Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, and BankBoston, N.A., as Administrative Agent and
Documentation Agent, are parties to a Credit Agreement dated as of August 7,
1997 (as amended, amended and restated, substituted or modified, the "Credit
Agreement");
WHEREAS, the Borrower has requested that the Lenders waive certain
financial covenants contained in the Credit Agreement; and
WHEREAS, the Lenders have agreed, subject to the terms and conditions
contained herein, to grant such waivers;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement.
2. WAIVERS. Subject always to compliance by the Borrower with Sections
3.1, 3.2, 5, 6 and 7 hereof, from and after the Effective Date (as defined in
Section 10 hereof) the Lenders hereby waive compliance, as at December 31, 1998,
March 31, 1999, and June 30, 1999, and for the applicable periods then ended,
with each of the covenants contained in Section 7.2.4 of the Credit Agreement
until the date (the "Waiver Termination Date") which is the earliest to occur of
(a) 9:00 a.m. (Boston time) on July 29, 1999 and (b) the Borrower's failure to
comply with any of the terms and conditions of this Waiver, including, without
limitation, any of the undertakings or requirements set forth in Sections 3.1,
3.2, 5, 6 and 7 hereof. On and after the Waiver Termination Date the Borrower
shall be required to comply with each covenant contained in such Section 7.2.4
as of each of December 31, 1998, March 31, 1999 and June 30, 1999 and for the
applicable periods then ended. In addition, the Lenders hereby agree that the
guaranty by the Borrower's Subsidiaries of the Additional Indebtedness (as
defined in Section 10 hereof), which guaranty shall be in form and substance
satisfactory to the Administrative Agent, shall not constitute a violation of
Section 7.2.11 of the Credit Agreement
3. NO SWING LINE LOANS; LIMITATIONS ON NEW REVOLVING LOANS AND LETTERS
OF CREDIT; INTEREST RATES.
3.1. LOANS. The Borrower hereby agrees that from the Effective Date
through the Waiver Termination Date (hereinafter referred to as the "Waiver
Period") it will not borrow any Revolving Loans or Swing Line Loans (with the
Swing Line Commitment Amount being reduced to zero during the Waiver Period) or
request the issuance of any Letters of Credit other than:
(a) Revolving Loans and Letters of Credit outstanding on January 28,
1999;
<PAGE> 2
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(b) Letters of Credit issued to replace any such Letters of Credit that
are expiring or which have expired after the Effective Date ("Replacement
Letters of Credit"), which are in Stated Amounts not exceeding the Stated
Amounts of the expiring or expired Letters of Credit and, if the Replacement
Letter of Credit is a standby Letter of Credit, such Replacement Letter of
Credit replaces a standby Letter of Credit and is being issued not later than
thirty (30) days past the expiry of the standby Letter of Credit being replaced;
(c) Letters of Credit to be issued in the ordinary course of the
Borrower's business ("Incremental Letters of Credit"), which Incremental Letters
of Credit are in Stated Amounts which either (i) do not in the aggregate exceed
the aggregate amount of Revolving Loans repaid after January 29, 1999 or (ii)
are cash collateralized with the Administrative Agent, pursuant to documents in
form and substance satisfactory to the Administrative Agent, by the Borrower in
an amount at least equal to 110% of the Stated Amounts of such Incremental
Letters of Credit;
(d) additional Revolving Loans in an aggregate amount not to exceed
$10,000,000 on the terms and conditions set forth in Section 4 (the "Additional
Credit").
Except as set forth in subsections (a)-(d) above, the Lenders, the Swing Line
Lender and the Issuer shall have no obligation to make Revolving Loans or Swing
Line Loans or issue Letters of Credit during the Waiver Period, and from and
after the Waiver Termination Date the obligations of the Lenders, the Swing Line
Lender and the Issuer to make Revolving Loans and Swing Line Loans and to issue
Letters of Credit shall be subject to the terms and conditions set forth in the
Credit Agreement. The parties hereto hereby acknowledge and agree that the
Borrower shall be permitted to retain the option of having Reimbursement
Obligations (other than those Reimbursement Obligations arising out of any
Incremental Letter of Credit which has been cash collateralized pursuant to
Section 3(c) hereof) convert into Revolving Loans pursuant to Section 2.6.2 of
the Credit Agreement and, so long as the aggregate outstanding Revolving Loans
plus the Stated Amount of all issued and outstanding Letters of Credit (other
than Incremental Letters of Credit which have been cash collateralized pursuant
to Section 3(c) hereof) after giving effect to such conversion do not exceed the
aggregate outstanding Revolving Loans and the Stated Amount of all issued and
outstanding Letters of Credit on the Effective Date, such conversion into
Revolving Loans shall not constitute the Additional Credit.
3.2. INTEREST. The Borrower hereby agrees that, notwithstanding
anything to the contrary contained in the Credit Agreement and regardless of the
Borrower's Leverage Ratio, during the Waiver Period the Applicable Margin on
Loans other than the Additional Credit and the Applicable Commitment Fee shall,
in each case, be the highest applicable rate set forth in the definition of
Applicable Margin or Applicable Commitment Fee, as the case may be, contained in
the Credit Agreement. In addition, upon the occurrence and during the
continuance of any Event of Default (other than from the operation of the
financial covenants contained in Section 7.2.4 of the Credit Agreement during
the term of the Waiver Period), the interest rate applicable to Loans shall be
two percent (2%) per annum above the rate otherwise applicable thereto. During
the Waiver Period (a) interest accrued on each Base Rate Loan shall be payable
on the last day of each month, or, if any such day is not a Business Day, the
next succeeding Business Day, commencing with February 28, 1999, and (b) no LIBO
Rate Loan which is continued as such at the expiration of any Interest Period
ending after January 19, 1999 may have an Interest Period exceeding one (1)
month; provided, however, if any LIBO Rate Loan has an Interest Period expiring
at any time during April, 1999, the Borrower shall, subject to the other
applicable terms and conditions of the Credit Agreement, be permitted to
continue such LIBO Rate Loan as such with an Interest Period of either one (1)
month or two (2) months.
<PAGE> 3
-3-
3.3 EFFECT OF TERMINATION OF WAIVER PERIOD. On and after the Waiver
Termination Date any obligations of the Lenders, the Swing Line Lender and the
Issuer to make Revolving Loans and Swing Line Loans and to issue, extend or
renew Letters of Credit shall be subject to the conditions set forth in the
Credit Agreement, and the Lenders and the Agents shall have all the rights and
remedies set forth in the Credit Agreement.
4. ADDITIONAL CREDIT. The Borrower hereby agrees that any and all
Revolving Loans made after the Effective Date and which constitute Additional
Credit shall, in addition to the terms and conditions set forth in the Credit
Agreement, be made on the following additional terms and conditions:
(a) such Revolving Loans shall consist only of Base Rate Loans and
shall not be permitted to be continued or converted into LIBO Rate Loans at any
time;
(b) notwithstanding the definition of "Applicable Margin" set forth in
the Credit Agreement, such Revolving Loans shall bear interest at a per annum
rate equal to the Base Rate plus four percent (4%), with interest on such
Revolving Loans being paid monthly as set forth in Section 3.2(a) above;
(c) the Borrower shall pay to the Administrative Agent for the ratable
accounts of each of the Lenders with Revolving Credit Commitments a fee, in
cash, of $250,000, which fee shall be due and payable in full (and which fee
shall constitute an Obligation) on the first date on which the Borrower borrows
any Revolving Loans under the Additional Credit; and
(d) such Revolving Loans shall be repaid from the proceeds of
Collateral (as defined in the Security Agreements and the Pledge Agreement) in
the manner set forth in each of (i) the amendment to the Borrower Security
Agreement and Holdings Guaranty and Pledge Agreement and (ii) the Subsidiary
Security Agreement, all as more fully described in Section 10(d) and (e) hereof.
5. FINANCIAL COVENANTS. The Borrower hereby agrees that for the fiscal
quarter ending March 31, 1999, the Borrower shall not:
(a) permit total revenue, as that amount would appear on the Borrower's
consolidated statement of operations as the line item "Revenue", as determined
for such period in accordance with GAAP and in accordance with the Borrower's
past accounting practices, consistently applied, to be less than $160,000,000;
or
(b) permit (i) Adjusted EBITDA plus (ii) the amount deducted in
determining Net Income representing amortization in respect of repairable parts
which have been capitalized in accordance with GAAP plus (iii) the amount
deducted in determining Net Income representing consultant fees paid to the
professional consultant engaged by the Administrative Agent or its agents
pursuant to Section 7(a) hereof plus (iii) the amount deducted in determining
Net Income representing consultant fees paid to McKinsey & Co., to be less than
$15,000,000.
6. FINANCIAL REPORTING. The Borrower hereby agrees that during the
Waiver Period the Borrower shall furnish to each Lender and each Agent the
following:
<PAGE> 4
-4-
(a) as soon as available and in any event not later than May 15, 1999,
the financial information described in Section 7.1.1(a) of the Credit Agreement
and the Compliance Certificate described in Section 7.1.1(c) of the Credit
Agreement for the fiscal quarter ending March 31, 1999;
(b) as soon as available and in any event within 30 days after the end
of each fiscal month, a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal month, consolidated statements of
operations and cash flows for such fiscal month, in each case prepared on a
basis consistent with past practices, and a monthly statement setting forth, in
form reasonably satisfactory to the Administrative Agent, the Borrower's
aggregate new contract bookings and erosions, together with a description of any
material changes to the contracts of the Borrower's top one hundred customers;
and
(c) simultaneously with delivery of the monthly information set forth
in paragraph (b) above, details of any and all variances between the actual
performance of the Borrower and its Subsidiaries depicted in any financial
information delivered under this Section 6 and the projected performance of the
Borrower and its Subsidiaries under the six-month plan presented to the Lenders
at the lender meeting held on January 14, 1999 (the "Plan"), with such details
to be set forth in a manner reasonably satisfactory in form and substance to the
Required Lenders.
All financial information delivered by the Borrower to the Lenders and the
Agents under this Section 6 shall be certified by the president, chief executive
officer, treasurer or chief financial officer of the Borrower.
7. COVENANTS. The Borrower hereby agrees that:
(a) the Borrower shall permit the Administrative Agent or its agents to
engage the services of a professional consultant to, among other things, visit
the Borrower's corporate offices at such times and with such frequency as the
consultant deems appropriate, discuss the Borrower's financial matters with its
officers, examine any of the Borrower's books or other financial records and
advise the Lenders as to the business, operations and financial condition of the
Borrower and its Subsidiaries and the viability of the Plan. All reasonable fees
and expenses of the consultant shall be borne by the Borrower and shall be
included as an Obligation;
(b) on or prior to June 15, 1999, the Borrower shall present to the
Lenders and the Agents the Borrower's business plan to restructure the
Borrower's business operations and capitalization for the period following the
Waiver Period;
(c) the Borrower will use its best efforts to cause, as promptly as is
reasonably practicable following the Effective Date, (i) DecisionOne
Corporation, a corporation incorporated under the laws of Ontario
("DecisionCanada"), to execute and deliver to The Bank of Nova Scotia all
documents, agreements and instruments as are necessary to grant to The Bank of
Nova Scotia a lien which is comparable under Canadian law to a perfected lien on
substantially all of its assets (other than real property and motor vehicles),
subject only to liens or other security interests expressly permitted by the
Credit Agreement, to secure its obligations under a certain Revolving Term
Credit Facility dated February 19, 1998 and (ii) the Letter of Credit issued in
favor of The Bank of Nova Scotia to be amended in order to require The Bank of
Nova Scotia to assign all Indebtedness under such Revolving Term Credit Facility
and all collateral referred to in paragraph (i) hereof to the Administrative
Agent as a condition to drawing such Letter of Credit, with such Indebtedness
and collateral to secure the Obligations;
<PAGE> 5
-5-
(d) the Borrower shall, and shall cause each of its Subsidiaries which
have executed and delivered a Subsidiary Security Agreement, to deliver to the
Administrative Agent, when and to the extent requested by the Administrative
Agent, Mortgages in favor of the Administrative Agent with respect to the
Borrower's or its Subsidiaries' fee interests in real property; and
(e) on or prior to February 8, 1999, the Borrower shall deliver to the
Administrative Agent a fully executed copy of the Tax-Sharing Agreement dated as
of August 7, 1997, or a replacement thereof with an effective date as of August
7, 1997, which, in either case, shall be in form and substance reasonably
satisfactory to the Administrative Agent.
8. WAIVER FEE. The Borrower shall pay, for the pro-rata accounts of the
Lenders, a fully earned waiver fee in the amount of $4,275,000 (the "Waiver
Fee"), which Waiver Fee shall be due and payable on the earliest to occur of:
(a) any date on which all of the Obligations are accelerated and all
Commitments are terminated;
(b) the date on which all of the Obligations are paid in full (or, in
the case of Reimbursement Obligations, are fully cash collateralized) and the
Commitments are reduced to zero and no longer in effect; and
(c) the time of any payments being made on the Additional Indebtedness
(as defined below).
The Borrower hereby agrees that the Waiver Fee shall be included as an
Obligation.
9. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Administrative Agent as of the date hereof:
(a) the Waiver and the Credit Agreement and other Loan Documents, as in
effect on the date hereof, constitute legal, valid and binding obligations of
the Borrower and Holdings (as applicable), and, upon the execution and delivery
by any Subsidiary of any Loan Document, constitutes the legal, valid and binding
obligations of such Subsidiary, enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting generally the enforcement of creditors'
rights;
(b) the security interests and other Liens granted by the Borrower in
favor of the Lenders and the Agents, and, upon the grant of security interests
and other Liens by any Subsidiary, such security interests and liens, constitute
valid and perfected security interests of the Lenders and the Agents, subject
only to liens or other security interests expressly permitted by the Credit
Agreement, in substantially all of the collateral securing the Obligations; and
(c) after giving effect to this Waiver, no Default or Event of Default
exists and is continuing under the Credit Agreement.
10. EFFECTIVENESS. This Waiver shall become effective (the "Effective
Date") only upon the satisfaction of the following conditions on or prior to
January 27, 1999:
<PAGE> 6
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(a) this Waiver shall have been executed and delivered by the Borrower,
Holdings and those Lenders which are required to consent to the Waiver pursuant
to Section 10.1 of the Credit Agreement;
(b) the Administrative Agent shall have received evidence satisfactory
to the Administrative Agent that the Borrower has received, or been tendered to
the satisfaction of the Administrative Agent, at least $7,300,000 in net cash
proceeds from the issuance of unsecured senior indebtedness (the "Additional
Indebtedness"), with the annual interest rate on the Additional Indebtedness not
to exceed 14% per annum, no payments of principal, interest or other amounts
shall be required to be paid (and the holder or holders thereof agreeing not to
accept any prepayments) on the Additional Indebtedness prior to August 1, 1999
and the Additional Indebtedness having their terms and conditions substantially
identical to those terms and conditions contained in the Borrower's Subordinated
Notes (other than the subordination provisions);
(c) the Lenders shall have received a written undertaking, in the form
of Exhibit A attached hereto, from the Borrower not to make any prepayments of
the Additional Indebtedness;
(d) Section 6.1(b) of the Borrower Security Agreement, Section 6.4 of
the Borrower Pledge Agreement and Section 7.4 of the Holdings Guaranty and
Pledge Agreement shall have been amended, pursuant to an amendment in the form
of Exhibit B hereto, to provide that all cash proceeds received by the
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied, after
payment of the Administrative Agent's expenses, to the outstandings on the
Additional Credit before being applied to the other Obligations and the Holdings
Guaranty and Pledge Agreement shall be further amended, pursuant to such
amendment, to (i) restrict Holdings from making any distributions with the
proceeds of any tax refunds which have not otherwise been refunded to the
Borrower and (ii) require Holdings to file, as soon as practicable and in any
event no later than the period required by law, for an applicable tentative
carryback and refund under IRC sec. 6411 and, upon receipt of any such tax
refund, promptly pay over to the Borrower the Borrower's allocable share
thereof;
(e) each domestic Subsidiary of the Borrower that has not previously
done so shall have executed and delivered to the Administrative Agent a
Subsidiary Guaranty, a Subsidiary Security Agreement, and, if applicable, a
Subsidiary Pledge Agreement (regardless of whether such Subsidiary is a Material
Subsidiary), with each such Subsidiary Guaranty, Subsidiary Security Agreement
and Subsidiary Pledge Agreement to have the same provision dealing with the
distribution of collateral proceeds as outlined in paragraph (d) above;
(f) the Borrower and its Subsidiaries shall have taken such action as
the Administrative Agent shall have reasonably requested on or prior to the
Effective Date, including, without limitation, the execution and filing of
Uniform Commercial Code financing statements, the naming of the Administrative
Agent as assignee and loss payee on all insurances and such other actions to
insure for the benefit of the Lenders and the Agents the validity, perfection
and priority of all security interests and other Liens in all existing and
after-acquired assets of the Borrower or any of its Subsidiaries as security for
the Obligations, provided, however, the Administrative Agent shall have the
right in its discretion to waive such condition for any item set forth in this
paragraph (f), in which case the Borrower covenants to and shall cause its
domestic Subsidiaries to, take such action contemplated by such condition on or
prior to February 15, 1999.
<PAGE> 7
-7-
Any failure of the Borrower or any of its Subsidiaries to comply by such date
shall constitute an Event of Default under the Credit Agreement; and
(h) the Administrative Agent shall have received a favorable legal
opinion, satisfactory in form and substance to, the Administrative Agent.
11. INDEMNIFICATION. The Borrower hereby agrees to indemnify the
Administrative Agent and its Affiliates and to hold the Administrative Agent and
its Affiliates harmless from and against any loss, cost or expense incurred or
sustained by the Administrative Agent or such Affiliate in providing payroll and
other cash management services to the Borrower and its Subsidiaries. The parties
hereto further hereby agree that such indemnification obligations shall be
Obligations.
12. COSTS AND EXPENSES. The Borrower hereby agrees that all reasonable
out-of-pocket costs and expenses of the Administrative Agent and its business,
consulting and legal advisors, commercial finance examiners and appraisers shall
be for the account of the Borrower, and the Borrower's obligations to reimburse
the Administrative Agent therefor shall be included as an Obligation.
13. EFFECT OF WAIVER. Except as expressly set forth herein, this Waiver
does not constitute an amendment or waiver of any term or condition of the
Credit Agreement or any other Loan Document, and all such terms and conditions
shall remain in full force and effect and are hereby ratified and confirmed in
all respects. Nothing contained in this Waiver shall be construed to imply a
willingness on the part of the Lenders to grant any similar or other future
waivers of any of the terms and conditions of the Credit Agreement or the other
Loan Documents. Nothing contained herein shall in any way prejudice, impair or
effect any rights or remedies of the Agents and the Lenders under the Credit
Agreement or any other Loan Document. This Waiver shall constitute a Loan
Document.
14. CONSENT BY HOLDINGS. By its signature below, Holdings hereby
consents to this Waiver, and acknowledges that this Waiver shall not alter,
release, discharge or otherwise affect any of its obligations under the Holdings
Guaranty and Pledge Agreement, and hereby ratifies and confirms all of the Loan
Documents to which it is a party.
15. DESIGNATION OF ADMINISTRATIVE AGENT. The Borrower hereby appoints
the Administrative Agent as a representative of the Borrower as contemplated by
Section 10.11 of the Indenture for the Subordinated Notes.
16. GOVERNING LAW. This Waiver shall be governed by and construed in
accordance with the laws of the State of New York.
17. COUNTERPARTS. This Waiver may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
<PAGE> 8
-8-
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment as of the date first set forth above.
DECISIONONE CORPORATION
By:______________________________
Name:
Title:
DECISIONONE HOLDINGS CORP.
By:______________________________
Name:
Title:
BANKBOSTON, N.A.
By:______________________________
Name:
Title:
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<NAME> DECISIONONE CORPORATION
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