<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
PETERSEN PUBLISHING COMPANY, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2721 95-4597937
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
---------------
PETERSEN CAPITAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2721 95-4608878
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
---------------
PETERSEN HOLDINGS, L.L.C.
(EXACT NAME OF REGISTRANT A SPECIFIED IN ITS CHARTER)
DELAWARE 2721 95-4597939
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
---------------
6420 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90048
TELEPHONE: (213) 782-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
---------------
NEAL VITALE, PRESIDENT Copy to:
PETERSEN PUBLISHING COMPANY, L.L.C. DENNIS M. MYERS
6420 WILSHIRE BOULEVARD KIRKLAND & ELLIS
LOS ANGELES, CALIFORNIA 90048 200 EAST RANDOLPH DRIVE
TELEPHONE: (213) 782-2000 CHICAGO, ILLINOIS 60601
(NAME, ADDRESS, INCLUDING ZIP CODE, (312) 861-2000
AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/8% Series B Senior
Subordinated Notes due
2006................. $100,000,000 100% $100,000,000 $30,303
- -------------------------------------------------------------------------------
Guarantees of Series B
Senior Subordinated
Notes due 2006....... $100,000,000 (2) (2) None
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
(2)No further fee is payable pursuant to Rule 457(n).
---------------
THE REGISTRANTS HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 17, 1996
PROSPECTUS
JANUARY , 1997
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
OFFER TO EXCHANGE ITS 11 1/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006 FOR
ANY AND ALL OF ITS OUTSTANDING 11 1/8% SERIES A SENIOR SUBORDINATED NOTES DUE
2006
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997,
UNLESS EXTENDED.
Petersen Publishing Company, L.L.C., a Delaware limited liability company
(the "Company"), and Petersen Capital Corp., a Delaware corporation ("Capital"
and, together with the Company, the "Issuers"), hereby offer (the "Exchange
Offer"), upon the terms and conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of their Series B 11 1/8%
Senior Subordinated Notes due 2006 (the "New Notes"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of their outstanding 11 1/8% Senior Subordinated Notes due
2006 (the "Old Notes"), of which $100,000,000 principal amount is outstanding.
The form and terms of the New Notes are the same as the form and term of the
Old Notes (which they replace), except that the New Notes will bear a Series B
designation and will have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and will not
contain certain provisions relating to an increase in the interest rate which
were included in the terms of the Old Notes in certain circumstances relating
to the timing of the Exchange Offer. The New Notes will evidence the same debt
as the Old Notes (which they replace) and will be issued under and be entitled
to the benefits of the Indenture, dated as of November 15, 1996 (the
"Indenture"), between the Issuers and United States Trust Company of New York,
as trustee. The Old Notes and the New Notes are sometimes referred to herein
collectively as the "Notes." See "The Exchange Offer" and "Description of the
Notes."
The Issuers will be jointly and severally liable for all payments due under
the New Notes. Interest on the Notes will be paid semi-annually on November 15
and May 15 of each year, commencing on May 15, 1997. The Notes will mature on
November 15, 2006 and will not be subject to any sinking fund requirement. The
Notes will be redeemable by the Issuers, in whole or in part, at any time on or
after November 15, 2001, at the redemption prices set forth herein, plus
accrued and unpaid interest to the redemption date. Prior to November 15, 1999,
the Issuers, at their option, may redeem in the aggregate up to 25% of the
original principal amount of the Notes at 111.125% of the aggregate principal
amount so redeemed plus accrued and unpaid interest to the redemption date with
the Net Proceeds (as defined herein) of one or more Public Equity Offerings (as
defined herein), provided that at least $75.0 million of the principal amount
of the Notes originally issued remains outstanding immediately after the
occurrence of any such redemption and that any such redemption occurs within 90
days following the closing of any such Public Equity Offering. See "Description
of the Notes--Optional Redemption."
The Notes will be general unsecured obligations of the Issuers, subordinated
in right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Issuers and senior in right of payment to any subordinated
indebtedness of the Issuers. As of August 31, 1996, after giving effect to the
Transactions (as defined herein) and the Initial Offering (as defined herein),
the Company would have had $200.0 million aggregate principal amount of Senior
Indebtedness outstanding. In addition, the Company would have had $60.0 million
of additional borrowing availability under the Senior Credit Facility (as
defined herein). See "Capitalization" and "Description of the Notes." The
Company's pro forma earnings were insufficient to cover pro forma fixed charges
by $44.4 million for the year ended November 30, 1995 and $27.7 million for the
nine
(Cover continued on following page)
-----------
SEE "RISK FACTORS," BEGINNING ON PAGE 18, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
(Cover page continued)
months ended August 31, 1996. See "Unaudited Pro Forma Financial Data." The
Company's equity securities are held 99.9% by Petersen Holdings, L.L.C.
("Holdings") and 0.1% by BrightView Communications Group, Inc. ("BrightView").
Capital is a wholly owned subsidiary of the Company and will not have
substantial operations or assets of any kind and will not have any revenues.
The New Notes will be unconditionally guaranteed, on an unsecured senior
subordinated basis by Holdings and certain future Restricted Subsidiaries (as
defined herein), if any, of Holdings or the Company. The Company is a limited
life entity that will continue in existence until December 31, 2016 or
dissolution prior thereto as determined under the LLC Agreement (as defined
herein). See "Limited Liability Company Agreement."
In the event of a Change of Control (as defined herein), holders of the
Notes will have the right to require the Issuers to purchase their Notes at
101% of the aggregate principal amount thereof plus accrued and unpaid
interest to the purchase date. See "Description of the Notes--Change of
Control Offer." In addition, the Issuers are obligated in certain instances to
make offers to repurchase the Notes at a purchase price in cash equal to 100%
of the principal amount thereof plus accrued and unpaid interest to the date
of repurchase with the net cash proceeds of certain asset sales. See
"Description of the Notes--Certain Covenants--Limitation on Certain Asset
Sales."
The Issuers will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on 1997, unless
extended by the Issuers in their sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Old Notes were sold by the Issuers on November 25, 1996 to the
Initial Purchasers (as defined herein) in a transaction not registered under
the Securities Act in reliance upon an exemption under the Securities Act (the
"Initial Offering"). The Initial Purchasers subsequently placed the Old Notes
with qualified institutional buyers in reliance upon Rule 144A under the
Securities Act. Accordingly, the Old Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The New Notes are being
offered hereunder in order to satisfy the obligations of the Issuers under the
Registration Rights Agreement (as defined herein) entered into by the Issuers
in connection with the Initial Offering. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Issuers believe
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Issuers within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes. See "The Exchange Offer-Resale of the New
Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of marketmaking activities or other
trading activities. The Issuers have agreed that, for a period of 180 days
after the Expiration Date, they will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale;
provided, however, the Issuers and the Guarantor (as defined herein) have no
obligation to amend or supplement this Prospectus unless one of them has
received written notice from a Participating Broker-Dealer of their prospectus
delivery requirements under the Exchange Act within five business days
following consummation of the Exchange Offer. See "Plan of Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
ii
<PAGE>
(Cover page continued)
There has not previously been any public market for the Old Notes or the New
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. See "Risk Factors-Absence of a Public Market Could Adversely Affect
the Value of Notes." Moreover, to the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected.
The New Notes will be available initially only in book-entry form and the
Issuers expect that the New Notes issued pursuant to this Exchange Offer will
be issued in the form of a Global Note (as defined herein), which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Note representing the New Notes will be shown on, and
transfers thereof will be effected through, records maintained by the DTC and
its participants. After the initial issuance of the Global Note, New Notes in
certified form will be issued in exchange for the Global Note only under the
limited circumstances set forth in the Indenture. See "Description of the
Notes-Book-Entry; Delivery and Form."
All of the titles of the Company's publications referenced herein are
trademarks of the Company.
iii
<PAGE>
AVAILABLE INFORMATION
The Issuers and Holdings have filed with the Commission a Registration
Statement on Form S-4 (the "Exchange Offer Registration Statement," which term
shall encompass all amendments, exhibits, annexes and schedules thereto)
pursuant to the Securities Act, and the rules and regulations promulgated
thereunder, covering the New Notes being offered hereby. This Prospectus does
not contain all the information set forth in the Exchange Offer Registration
Statement. For further information with respect to the Issuers and the
Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Exchange Offer Registration Statement, reference is
made to the exhibit for a more complete description of the document or matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Exchange Offer Registration Statement, including the
exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the Commission at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Issuers and Holdings will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The obligation of
the Issuers and Holdings to file periodic reports and other information with
the Commission will be suspended if the Notes are held of record by fewer than
300 holders as of the beginning of any fiscal year of the Issuers and Holdings
other than the fiscal year in which the Exchange Offer Registration Statement
is declared effective. The Issuers have agreed that, whether or not they are
required to do so by the rules and regulations of the Commission, for so long
as any of the Notes remain outstanding, they will furnish to the holders of
the Notes and file with the Commission (unless the Commission will not accept
such a filing) (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 Issuers were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Issuers' certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Issuers were required to file such reports. In addition, for so long as any of
the Notes remain outstanding, the Issuers have agreed to furnish to the
holders of the Notes or any prospective transferee of any such holder, upon
their request the information required to be delivered by Rule 144A(d)(4)
under the Securities Act.
iv
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT CAPTION OR
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
----------------------- ----------------------
<S> <C>
1.Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back Inside Front Cover Page; Outside Back Cover
Cover Pages of Prospectus..... Page
3.Risk Factors, Ratio of Earnings
to Fixed Charges and Other Summary; The Investors; Selected Historical
Information................... Financial Data; Unaudited Pro Forma
Financial Data
4.Terms of the Transaction........ Outside Front Cover Page; Summary;
Description of the Notes; The Exchange
Offer; Certain Federal Income Tax
Consequences
5.Pro Forma Financial
Information................... Unaudited Pro Forma Financial Data
6.Material Contracts with the
Company Being Acquired........ Inapplicable
7.Additional Information
Required...................... Inapplicable
8.Interests of Named Experts and
Counsel....................... Legal Matters; Experts
9.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Inapplicable
10.Information with Respect to S-3
Registrants................... Inapplicable
11.Incorporation of Certain
Information by Reference...... Inapplicable
12.Information with Respect to S-3
or S-2 Registrants............ Inapplicable
13.Incorporation of Certain
Information by Reference...... Inapplicable
14.Information with Respect to
Registrants other than S-3 or Outside Front Cover Page; Summary; Risk
S-2 Registrants............... Factors; The Transactions; The Investors;
Use of Proceeds; Capitalization; Unaudited
Pro Forma Financial Data; Selected
Historical Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Security Ownership of
Certain Beneficial Owners and Management;
Limited Liability Company Agreement;
Description of Senior Credit Facility;
Description of the Notes
15.Information with Respect to S-3
Companies..................... Inapplicable
16.Information with Respect to S-3
or S-2 Companies.............. Inapplicable
17.Information with Respect to
Companies Other than S-3 or S-
2 Companies................... Inapplicable
18.Information if Proxies, Consents
or Authorizations are to be
Solicited..................... Inapplicable
19.Information if Proxies, Consents
or Authorizations are not to Management; Security Ownership of Certain
be Solicited or in an Exchange Beneficial Owners and Management; Certain
Offer......................... Transactions
</TABLE>
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. All references to fiscal years in this Prospectus
refer to years ended November 30. On September 30, 1996, the Company acquired
substantially all of the publishing assets and assumed certain liabilities of
Petersen Publishing Company (the "Acquisition"). Unless the context otherwise
requires: (i) the term "Petersen" refers to the historical operations of the
publishing division of Petersen Publishing Company prior to the Acquisition;
(ii) the term "Company" refers to Petersen Publishing Company, L.L.C. and its
predecessors and subsidiaries; (iii) the term "Issuers" collectively refers to
Petersen Publishing Company, L.L.C. and Petersen Capital Corp., a wholly owned
subsidiary of the Company; (iv) the term "Holdings" refers to Petersen
Holdings, L.L.C., which owns 99.9% of the Company's equity securities and (v)
the term "BrightView" refers to BrightView Communications Group, Inc., which
owns 0.1% of the Company's equity securities.
THE COMPANY
The Company is a leading publisher of special-interest magazines. The
Company's diverse portfolio currently contains a total of 73 publications,
including 22 monthly publications, 9 bi-monthly publications and 42 singe issue
or annual publications. According to Media Market Research Institute, the
Company's magazines reach over 40 million readers each month. The Company's
nationally-recognized magazines include (i) Motor Trend, which is recognized as
a leading authority on new domestic and foreign automobiles and has a current
monthly circulation of approximately 1.0 million, (ii) 'TEEN, which has the
largest circulation of any of the Company's magazines with a current monthly
circulation of over 1.3 million and (iii) Hot Rod, which is one of the largest
circulation automotive magazines in the world with a current monthly
circulation of over 810,000. The Company's other core publications are well-
known in their respective markets and include Guns & Ammo, Skin Diver, 4 Wheel
& Off-Road, Car Craft, Petersen's Hunting, Motorcyclist, Sport Truck, Circle
Track & Racing Technology ("Circle Track"), Photographic and Dirt Rider. Eight
of the Company's 13 core publications ranked first in their respective markets
based on annual circulation in 1995.
The Company's principal sources of revenues are from advertising and
circulation. The Company had net revenues of $213.6 million and $168.8 million
for fiscal 1995 and the nine months ended August 31, 1996, respectively.
Circulation revenues are generated from both subscription and newsstand sales.
For fiscal 1995, approximately 58% of the Company's revenues were from
advertising, 38% were from circulation (including 20% from subscription sales
and 18% from newsstand sales) and 4% were from other sources.
In fiscal 1995, the Company's 13 core publications each generated a minimum
of approximately $1.0 million of profit contribution and, in the aggregate,
generated over $55.2 million of the Company's profit contribution. During the
same period, no single publication accounted for more than 15% of the Company's
net revenues or 28% of profit contribution. As a result of such
diversification, the Company believes that it is not dependent on any single
publication and is less susceptible to shifts in advertising spending across
industry sectors. The Company's core publications collectively average over 30
years in publication and have developed nationally-recognized branded titles
within each of their respective markets. By using its core publications as a
platform for launching new spin-off publications, the Company has been able to
develop a portfolio of highly-specialized publications covering a wide variety
of interests. The Company believes that its reputation as a high-quality
publisher and its significant market presence have historically enabled its new
publications to gain market share more rapidly in their respective special-
interest segments.
Substantially all of the Company's magazines target special-interest
enthusiasts. By doing so, the Company is able to deliver a solid core audience
to its advertisers on a consistent basis and create an opportunity for its
advertisers to efficiently reach their target audience. Due to the special-
interest nature of the Company's
1
<PAGE>
magazines, readers not only value their specialized editorial content but also
rely on such magazines as a catalogue of products in the relevant topic area.
This catalogue aspect makes the Company's magazines an essential advertising
medium for many of the Company's advertisers. Certain of the Company's
advertisers rely on the Company's publications as their primary source of media
advertising. As compared to general-interest magazines, the Company believes
that its advertising revenues are less susceptible to changes in general
economic conditions due to the diversity of its publications, the special-
interest nature of its editorial content and the endemic nature of its
advertiser base. In addition, the Company has a diverse advertiser base, with
its top 25 advertisers accounting for only 32.6% and 32.9% of the Company's
advertising revenues during fiscal 1995 and the nine months ended August 31,
1996, respectively.
In addition to offering its advertisers targeted advertising within
individual magazines, the Company can offer its advertisers the ability to
reach a large audience by advertising across the Company's large portfolio of
magazines. Management believes this capability was not fully developed by
Petersen's prior management. In particular, the Company believes that many of
its publications provide its advertisers with unique access to the adult male
(ages 18 to 34) and young female (ages 12 to 19) markets. The Company believes
that, in the aggregate, its publications reach more adult males than those of
any other magazine publisher and reach over one-third of all young females in
the United States. The adult male market is particularly attractive to
advertisers due to its size and overall purchasing power, while the young
female market provides advertisers with the opportunity to establish brand
recognition during the formative stages of this important consumer group's
buying patterns.
The following table sets forth certain information regarding the Company's 13
core publications for its fiscal year ended November 30, 1995:
<TABLE>
<CAPTION>
NET TOTAL CIRCULATION
MAGAZINE TITLE REVENUES(A) CIRCULATION(B) RANK(B)(C)
-------------- --------------------- --------------------- -----------
(AMOUNTS IN MILLIONS) (COPIES IN THOUSANDS)
<S> <C> <C> <C>
Motor Trend......... $31.3 950.6 2 of 4
'TEEN............... 24.1 1,311.8 3 of 3
Hot Rod............. 19.7 810.2 1 of 2
Guns & Ammo......... 13.6 570.8 1 of 2
Skin Diver.......... 13.3 229.0 1 of 2
4 Wheel & Off-Road.. 12.0 367.7 1 of 2
Car Craft........... 9.8 389.7 1 of 1
Petersen's Hunting.. 7.3 331.2 1 of 1
Motorcyclist........ 6.8 239.6 2 of 2
Sport Truck......... 6.2 192.1 1 of 2
Circle Track........ 6.0 131.6 2 of 2
Photographic........ 5.7 217.5 3 of 3
Dirt Rider.......... 5.4 160.8 1 of 3
</TABLE>
- --------
(a) Includes advertising, circulation and other revenues for the year ended
November 30, 1995.
(b) Based on the average circulation for each publication for the year ended
December 31, 1995.
(c) Includes only national publications that are tracked by industry analysts
and does not include small regional publications and newsletters
The Company completed the Acquisition on September 30, 1996. The Company's
investors pursued the Acquisition because they believed it offered an
attractive opportunity to: (i) acquire a diverse portfolio of profitable
magazines with significant growth potential; (ii) bring together a skilled and
experienced management team, consisting of the Company's new senior managers
and Petersen's existing publishers and editorial staff; (iii) apply
professional management techniques to the Company's portfolio and improve its
operating results by
2
<PAGE>
increasing circulation and advertising revenues and reducing operating costs
and (iv) further develop the Company's brand-name franchises with limited
additional capital investment. Management believes that opportunities exist to
achieve each of these results both in the near term and on a going-forward
basis.
BUSINESS AND OPERATING STRATEGY
The Company's core publications collectively average over 30 years in
publication and have developed nationally-recognized branded titles in each of
their respective markets. The Company believes that the enthusiast nature of
its readership provides it with a loyal subscriber base and enables it to
deliver a solid core audience to its advertisers on a consistent basis. As a
result, management believes that the Company maintains a number of significant
competitive advantages.
Historically, Petersen expanded primarily by introducing special-interest
magazines to serve niche audiences in areas in which its founder had a personal
interest. In pursuing such expansion, Petersen maintained a consistent focus on
the high-quality editorial content of its magazines. However, Petersen was
organized into six distinct publishing groups that essentially operated
independently from one another and were focused primarily on editorial
development and advertising revenue generation rather than overall
profitability. As a result, management believes that Petersen did not fully
realize all available operating synergies.
The Company's new management team has significant experience in the magazine
publishing industry. Based upon such experience, management has developed a
detailed business and operating strategy for the Company, primarily comprising
operating policies and procedures that have proven successful in their prior
experience and are widely practiced throughout the publishing industry. The
Company's business and operating strategy is primarily designed to leverage off
of its nationally-recognized brand names and improve the profitability of the
Company. The key elements of this strategy include:
REORGANIZE OPERATING STRUCTURE. Following the Acquisition, new management
reorganized several operating areas of the Company to facilitate a more
integrated and unified approach to circulation, production and advertising
sales, while retaining independent editorial direction of its magazines. The
Company's circulation operations, which include such functions as subscription
marketing and planning, fulfillment and newsstand distribution, were previously
organized by magazine group and managed by generalists focused on each magazine
group. Circulation operations have been reorganized on a functional basis
across all of the Company's publications and will be managed by specialists
within each function. Certain of these functions are being relocated to New
York in order to take advantage of expertise not readily available elsewhere.
In addition, the Company's production activities are being centralized across
all of its publications rather than by magazine group. The Company's national
advertising sales management is being relocated from Los Angeles to New York to
be in closer proximity to national advertising accounts. Similarly, management
of the young women's titles is being moved to New York to increase the
visibility of such magazines among advertisers in the fashion and cosmetic
industries.
IMPLEMENT OPERATING IMPROVEMENTS. Management has identified and has
substantially implemented operating improvements that are expected to result in
significant cost savings. These measures include the following:
. REDUCE OPERATING COSTS. At the time of the Acquisition, management
identified certain cost reduction measures, including: (i) savings in
personnel and related net lease costs; (ii) lower utilization of
temporary employees and services; (iii) the consolidation of one or more
of the Company's regional sales offices; (iv) tighter purchasing
procedures and controls and (v) reductions in the Company's travel and
entertainment expenditures. A substantial number of these cost reduction
measures have been completed, including personnel reductions expected to
result in annualized cost savings of approximately $4.9 million.
3
<PAGE>
. RESTRUCTURE VENDOR RELATIONSHIPS. Immediately following the Acquisition,
management commenced an extensive review of the Company's significant
vendor relationships, including its printing, paper supply, fulfillment
and newsstand distribution arrangements. Based on that review and
meetings with certain of such vendors, management believes that there
are opportunities to enhance these relationships and to improve the
economic terms of such arrangements for the Company. Although no
definitive agreements have been executed, the Company believes that it
will be successful in achieving more favorable terms with many of its
vendors.
. IMPROVE PERFORMANCE OF CERTAIN PUBLICATIONS. Management believes that it
can improve the Company's profitability by implementing changes designed
to eliminate or significantly reduce the losses currently being
generated by certain of the Company's publications. The Company has five
magazines (Sassy, Sport, Petersen's Golfing, Bicycle Guide and Mountain
Biker) that collectively accounted for negative profit contribution of
$7.6 million and $5.2 million for fiscal 1995 and the nine months ended
August 31, 1996, respectively. In December 1996, the Company completed
the process of merging Sassy into 'TEEN, thereby eliminating the losses
being generated by Sassy. Sassy generated negative profit contribution
of $4.7 million and $2.9 million for fiscal 1995 and the nine months
ended August 31, 1996, respectively. While the remaining magazines
collectively are expected to break even or be marginally profitable in
fiscal 1997, in the event such magazines continue to generate losses,
management expects to take one or more of the following actions: (i)
discontinue or sell such magazines; (ii) merge such magazines with the
Company's existing magazines or (iii) enter into strategic partnerships
with third parties. Management expects that a final decision with
respect to each magazine will be made by the end of fiscal 1997.
INCREASE CIRCULATION AND ADVERTISING REVENUES. Management believes that there
are significant opportunities to increase circulation and advertising revenues.
The Company has historically focused on the newsstand distribution channel and
has relied heavily upon agency subscription sales in managing its circulation
operations. Management believes that it can increase subscription revenues by
instituting programs designed to increase the number of readers who buy
subscriptions directly from the Company. For example, the Company has begun to
develop a database of its over 32 million current or former subscribers that
will allow it to cross-sell its other publications to such subscribers. In
addition, management intends to increase the newsstand and subscription prices
on certain of its publications in order to bring such prices in line with
competitive publications.
Management believes that it can increase the Company's advertising revenues
by adopting a more unified approach to advertising sales, which will focus on
enhancing the ability of the Company's advertisers to purchase advertising
space across all of the Company's magazines that reach their target markets. In
addition, management intends to increase the Company's advertiser base by
targeting new advertisers and advertisers in other industry categories. Such
advertisers include, among others, manufacturers of men's apparel, footwear and
accessories and alcoholic beverages. The Company has also implemented a new
commission sales policy designed to provide more effective incentives to the
Company's advertising sales force. Prior management's policy did not provide
additional incentives to sales personnel once they had reached their annual
sales target, which often occurred prior to the conclusion of Petersen's fiscal
year. In addition, by designing the database described above with the
capability of identifying specific segments within each of its markets, the
Company believes it can offer its advertisers increased value and thus generate
additional advertising revenues.
ESTABLISH PERFORMANCE-BASED INCENTIVES. The significant equity interests held
by the Company's senior management provide such executives with an incentive to
maximize the Company's overall profitability. In addition, to provide
incentives to the Company's existing management and assist management in
implementing the new business strategy, the Company plans to adopt new
compensation arrangements designed to reward managers and other participating
employees based upon the Company's operating performance.
4
<PAGE>
Develop Ancillary Revenue Sources. The Company was historically operated as a
traditional consumer magazine company deriving substantially all of its
revenues from advertising and circulation sales. On an industry-wide basis,
management estimates that consumer magazine publishers currently derive
approximately 10% to 20% of their revenues from ancillary revenue sources while
the Company currently derives only about 4% of its revenues from such sources.
In recent months, the Company has begun to explore the ancillary revenue
opportunities afforded by its well-established brand names. For example, the
Company has recently entered into licensing agreements relating to the use of
its Motor Trend and Hot Rod brand names for weekly television shows on The
Nashville Network (TNN) and its Guns & Ammo brand name for a weekly television
show on ESPN. In addition, because the editorial content of many of its
magazines would also appeal to readers outside of the United States, management
believes that significant opportunities exist to establish international
licensing agreements, particularly in Asia, Australia, Great Britain and
Western Europe. The Company believes that there are significant opportunities
to increase revenues by leveraging off the editorial content and the
nationally-recognized brand names of the Company's existing publications
through licensing arrangements, strategic joint ventures, retail alliances,
subscriber list rentals, affinity group marketing and electronic publishing.
Establish New Titles. The Company has successfully expanded its magazine
portfolio by launching new publications to serve niche audiences in related
markets and by making selective acquisitions of existing magazine titles.
Thirteen of the Company's 31 current monthly and bimonthly titles were launched
or acquired by the Company since 1990. The Company plans to continue to develop
and launch new special-interest magazines and acquire existing magazines that
will complement and enhance its existing portfolio.
THE TRANSACTIONS
The Acquisition. The Company completed the Acquisition on September 30, 1996.
The aggregate purchase price of the Acquisition, which is subject to certain
working capital adjustments, was $450.0 million, plus the assumption of certain
ongoing liabilities incurred in the ordinary course of business. The Company
expects to receive approximately $4.0 million from Petersen as a result of the
working capital adjustment.
The Financing Plan. The Initial Offering was part of a plan designed to
enable the Company to finance the Acquisition and to provide additional
liquidity. In connection with the Acquisition, the Company: (i) borrowed $200.0
million under a $260.0 million senior credit facility (the "Senior Credit
Facility"); (ii) borrowed $100.0 million under a bridge financing facility (the
"Bridge Financing Facility") and (iii) received equity contributions of $165.3
million from an investor group led by Willis Stein & Partners, L.P. ("Willis
Stein"). The Acquisition, the borrowings under the Senior Credit Facility and
the Bridge Financing Facility and the equity contributions are collectively
referred to herein as the "Transactions." The Company applied the net proceeds
of the Initial Offering to repay the Bridge Financing Facility.
The following table sets forth the sources and uses of funds in the
Acquisition (dollars in thousands):
<TABLE>
<S> <C>
SOURCES:
Senior Credit Facility(a)(b)(c).................................. $200,000
Bridge Financing Facility(b)..................................... 100,000
Equity contributions(b).......................................... 165,300
--------
Total sources.................................................. $465,300
========
USES:
Acquisition consideration(c)..................................... $450,000
Fees and expenses(d)............................................. 15,300
--------
Total uses..................................................... $465,300
========
</TABLE>
5
<PAGE>
- --------
(a) On a pro forma basis, as of August 31, 1996, the Company would have had
$60.0 million of additional borrowing availability under the Senior Credit
Facility.
(b) First Union National Bank of North Carolina ("FBNC") and Canadian Imperial
Bank of Commerce ("CIBC"), affiliates of First Union Capital Makers Corp.
and CIBC Wood Gundy Securities Corp., the initial purchasers under the
Initial Offering (the "Initial Purchasers"), are the agents and principal
lenders under the Senior Credit Facility. First Union Corporation and CIBC
were the lenders under the Bridge Financing Facility. First Union
Investors, Inc. and CIBC WG Argosy Merchant Fund 2, L.L.C., both affiliates
of the Initial Purchasers, provided a portion of the equity financing in
connection with the Acquisition.
(c) Does not reflect the working capital adjustment of approximately $4.0
million expected to be paid to the Company by Petersen in connection with
the Acquisition. The proceeds therefrom will be used to reduce borrowings
under the Senior Credit Facility.
(d) Includes estimated fees and expenses related to the Transactions and the
Initial Offering (including the Initial Purchasers' discount). To the
extent such fees are less than estimated, the remainder will be applied to
working capital.
THE INVESTORS
The Company's investors (the "Investors") include the following: Willis
Stein; First Union Investors, Inc.; CIBC WG Argosy Merchant Fund 2, L.L.C.;
Chase Equity Associates, L.P.; BankAmerica Investment Corporation; certain
other limited partners of Willis Stein; Robert E. Petersen, Petersen's founder
and the Company's Chairman Emeritus; and certain members of the Company's
senior management, including Messrs. D. Claeys Bahrenburg, Neal Vitale, James
D. Dunning, Jr., Laurence H. Bloch and Stuart Karu (the "Management
Investors"). The Management Investors have significant experience in managing
media-related companies and in managing leveraged acquisitions. The Company's
controlling investor, Willis Stein, is a private investment fund with committed
capital of approximately $343.0 million. The principals of Willis Stein were
formerly with Continental Illinois Venture Corporation ("CIVC"), where they
managed CIVC's investments in a number of media-related companies as well as
other investments.
THE ISSUERS
Petersen Publishing Company, L.L.C. is a Delaware limited liability company.
The Company's equity securities are held 99.9% by Holdings and 0.1% by
BrightView. BrightView is the managing member of Holdings and as such controls
the policies and operations of Holdings and of the Company. The Company was
organized in September 1996 for the principal purpose of completing the
Acquisition. Petersen's origins date back to 1948, when its founder, Robert E.
Petersen, first began publishing and selling a specialized newsletter entitled
Hot Rod. The Company's principal executive offices are located at 6420 Wilshire
Boulevard, Los Angeles, California 90048 and its telephone number is (213) 782-
2000.
Petersen Capital Corp., a wholly owned subsidiary of the Company, was
incorporated in Delaware for the purpose of serving as a co-issuer of the Notes
in order to facilitate the Initial Offering. Capital will not have substantial
operations or assets of any kind and will not have any revenues. As a result,
prospective purchasers of Notes should not expect Capital to participate in
servicing the interest or principal obligations of the Notes.
6
<PAGE>
THE INITIAL OFFERING
NOTES....................... The Old Notes were sold by the Issuers on
November 25, 1996 to the Initial Purchasers
pursuant to a Purchase Agreement, dated November
20, 1996 (the "Purchase Agreement"). The Initial
Purchasers subsequently resold the Old Notes to
qualified institutional buyers pursuant to Rule
144A under the Securities Act.
REGISTRATION RIGHTS Pursuant to the Purchase Agreement, the Issuers
AGREEMENT................... and the Initial Purchasers entered into a
Registration Rights Agreement, dated as of
November 25, 1996 (the "Registration Rights
Agreement"), which grants the holders of the Old
Notes certain exchange and registration rights.
The Exchange Offer is intended to satisfy such
exchange rights which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED.......... $100,000,000 aggregate principal amount of 11
1/8% Series B Senior Subordinated Notes due 2006
of the Issuers.
THE EXCHANGE OFFER.......... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, $100,000,000 aggregate
principal amount of Old Notes are outstanding.
The Issuers will issue the New Notes to holders
on or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Issuers believe that New
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Issuers within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such New Notes are acquired in the
ordinary course of such holder's business and
that such holder does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
New Notes. Each holder accepting the Exchange
Offer is required to represent to the Issuers in
the Letter of Transmittal that, among other
things, the New Notes will be acquired by the
holder in the ordinary course of business and the
holder does not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such New
Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of market-
making activities or other trading activities may
be a statutory underwriter. Each Participating
Broker-Dealer that receives New Notes for its own
account pursuant to the
7
<PAGE>
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in
connection with resale of New Notes received in
exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a
result of market-making activities or other
trading activities. The Issuers have agreed that,
for a period of 180 days after the Expiration
Date, they will make this Prospectus available to
any Participating Broker-Dealer for use in
connection with any such resale; provided,
however, the Issuers and the Guarantor (as
defined herein) have no obligation to amend or
supplement this Prospectus unless one of them has
received written notice from a Participating
Broker-Dealer of their prospectus delivery
requirements under the Exchange Act within five
business days following consummation of the
Exchange Offer. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the New
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an exemption therefrom,
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such instance
may result in such holder incurring liability
under the Securities Act for which the holder is
not indemnified by the Issuers.
EXPIRATION DATE............. 5:00 p.m., New York City time, on , 1997
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
ACCRUED INTEREST ON THE NEW
NOTES AND THE OLD NOTES....
Each New Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the New Notes. Such interest
will be paid with the first interest payment on
the New Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance
of the New Notes.
CONDITIONS TO THE EXCHANGE The Exchange Offer is subject to certain
OFFER....................... customary conditions, which may be waived by the
Issuers. See "The Exchange Offer--Conditions."
PROCEDURES FOR TENDERING Each holder of Old Notes wishing to accept the
OLD NOTES................... Exchange Offer must complete, sign and date the
accompanying Letter of
8
<PAGE>
Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or an
Agent's Message in connection with a book entry
transfer, together with the Old Notes and any
other required documentation to the Exchange
Agent (as defined) at the address set forth
herein. By executing the Letter of Transmittal,
each holder will represent to the Issuers that,
among other things, the New Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such New Notes, whether or not such
person is the holder, that neither the holder nor
any such other person (i) has any arrangement or
understanding with any person to participate in
the distribution of such New Notes, (ii) is
engaging or intends to engage in the distribution
of such New Notes, or (iii) is an "affiliate," as
defined under Rule 405 of the Securities Act, of
the Issuers. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "--Procedures
for Tendering."
UNTENDERED OLD NOTES........ Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have
any further exchange rights and such Old Notes
will continue to be subject to certain
restrictions on transfer. Accordingly, the
liquidity of the market for such Old Notes could
be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE...................
The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Issuers, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States
to a foreign person pursuant to the requirements
of Rule 904 under the Securities Act, or (iv)
pursuant to an effective registration statement
under the Securities Act. See "The Exchange
Offer--Consequences of Failure to Exchange."
SHELF REGISTRATION If any holder of the Old Notes (other than any
STATEMENT................... such holder which is an "affiliate" of the
Issuers within the meaning of Rule 405 under the
Securities Act) is not eligible under applicable
securities laws to participate in the Exchange
Offer, and such holder has provided information
regarding such holder and the distribution of
such holder's Old Notes to the Issuers for use
therein, the Issuers has agreed to register the
Old Notes on a shelf registration statement (the
"Shelf Registration Statement") and use its best
efforts to cause it to be declared effective by
the Commission as promptly as practical on or
after the consummation of the Exchange Offer. The
Issuers has agreed to maintain the effectiveness
of the Shelf Registration Statement for, under
certain circumstances, a maximum of three years,
to cover resales of the Old Notes held by any
such holders.
9
<PAGE>
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS..........
Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time.
The Issuers will keep the Exchange Offer open for
not less than twenty days in order to provide for
the transfer of registered ownership.
GUARANTEED DELIVERY Holders of Old Notes who wish to tender their Old
PROCEDURES................. Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date.
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF NEW NOTES......
The Issuers will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
USE OF PROCEEDS............. There will be no cash proceeds to the Issuers
from the exchange pursuant to the Exchange Offer.
EXCHANGE AGENT.............. United States Trust Company of New York.
THE NEW NOTES
GENERAL..................... The form and terms of the New Notes are the same
as the form and terms of the Old Notes (which
they replace) except that (i) the New Notes bear
a Series B designation, (ii) the New Notes have
been registered under the Securities Act and,
therefore, will not bear legends restricting the
transfer thereof, and (iii) the holders of New
Notes will not be entitled to certain rights
under the Registration Rights Agreement,
including the provisions providing for an
increase in the interest rate on the Old Notes in
certain
10
<PAGE>
circumstances relating to the timing of the
Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. See "The
Exchange Offer--Purpose and Effect of the
Exchange Offer." The New Notes will evidence the
same debt as the Old Notes and will be entitled
to the benefits of the Indenture. See
"Description of the Notes." The Old Notes and the
New Notes are referred to herein collectively as
the "Notes."
ISSUERS..................... The New Notes will be joint and several
obligations of Petersen Publishing Company,
L.L.C. and Petersen Capital Corp.
MATURITY DATE............... November 15, 2006.
INTEREST PAYMENT DATES...... Interest will accrue on the New Notes from the
date of issuance (the "Issue Date") and will be
payable semiannually on each November 15 and
commencing May 15, 1997.
OPTIONAL REDEMPTION......... The Notes will be redeemable at the option of the
Issuers, in whole or in part, at any time on or
after November 15, 2001, at the redemption prices
set forth herein, plus accrued and unpaid
interest to the redemption date. Prior to
November 15, 1999, the Issuers, at their option,
may redeem in the aggregate up to 25% of the
original principal amount to the Notes at
111.125% of the aggregate principal amount so
redeemed plus accrued and unpaid interest to the
redemption date with the Net Proceeds of one or
more Public Equity Offerings, provided that at
least $75.0 million of the principal amount of
Notes originally issued remain outstanding
immediately after the occurrence of any
redemption and that any such redemption occurs
within 90 days following the closing of any such
Public Equity Offering.
RANKING..................... The Notes will be general unsecured obligations
of the Issuers, subordinated in right of payment
to all existing and future Senior Indebtedness of
the Issuers and senior in right of payment to any
subordinated indebtedness of the Issuers. As of
August 31, 1996, after giving effect to the
Transactions and the Initial Offering, the
Company would have had $200.0 million aggregate
principal amount of Senior Indebtedness
outstanding. In addition, the Company would have
had $60.0 million of additional borrowing
availability under the Senior Credit Facility.
GUARANTEES.................. The Notes will be unconditionally guaranteed, on
an unsecured senior subordinated basis, as to the
payment of principal, premium, if any, and
interest, jointly and severally (the
"Guarantees"), by Holdings and by all direct and
indirect domestic Restricted Subsidiaries of
Holdings and the Company having either assets or
stockholders' equity in excess of $5,000 (the
"Guarantors"). The Guarantees will be
subordinated to all Senior Indebtedness of the
11
<PAGE>
respective Guarantors. See "Description of the
Notes--Certain Covenants--Limitation on Creation
of Subsidiaries."
CHANGE OF CONTROL........... In the event of a Change of Control, holders of
the New Notes will have the right to require the
Issuers to purchase their New Notes at 101% of
the aggregate principal amount thereof plus
accrued and unpaid interest to the purchase date.
See "Description of the Notes--Change of Control
Offer."
ASSET SALE PROCEEDS......... The Issuers will be obligated in certain
instances to make offers to repurchase the Notes
at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid
interest to the date of repurchase with the net
cash proceeds of certain asset sales. See
"Description of the Notes--Certain Covenants--
Limitation on Certain Asset Sales."
COVENANTS................... The Indenture contains covenants for the benefit
of the holders of the Notes that, among other
things, restrict the ability of the Company and
any Restricted Subsidiaries (as defined herein)
to: (i) incur additional Indebtedness; (ii) pay
dividends and make distributions; (iii) issue
stock of subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create
liens; (vii) enter into transactions with
affiliates; (viii) enter into sale-leaseback
transactions; (ix) merge or consolidate the
Company or any Guarantors and (x) transfer and
sell assets. The Indenture provides for
restrictions on the ability of BrightView and
Holdings to incur additional Indebtedness. These
covenants are subject to a number of important
exceptions, including the allowance of Permitted
Tax Distributions (as defined herein) as a result
of the Company's status as a limited liability
company. See "Description of the Notes-- Certain
Covenants."
RISK FACTORS
Prospective investors should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data included
in this Prospectus before tendering the Old Notes in exchange for New Notes.
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following tables present summary historical financial data for each of
the five years in the period ended November 30, 1995 that have been derived
from the audited financial statements of Petersen. The statements of income and
divisional equity and statements of cash flows for each of the three years in
the period ended November 30, 1995 and the notes thereto appear elsewhere in
this Prospectus. The summary historical statement of operations balance sheet
data as of and for the nine months ended August 31, 1996 and the summary
historical statement operations data for the nine months ended August 31, 1995
of Petersen have been derived from unaudited financial statements, which, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for the
unaudited interim periods. Results for the months ended August 31, 1996 are not
necessarily indicative of results that may be expected for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED NOVEMBER 30, AUGUST 31,
------------------------------------------------ ------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING
DATA:
Net revenues............ $179,357 $180,503 $186,322 $201,967 $213,615 $160,234 $168,812
Production, selling and
other direct costs..... 144,280 135,250 141,562 149,182 171,112 127,305 133,034
-------- -------- -------- -------- -------- -------- --------
Gross Profit............ 35,077 45,253 44,760 52,785 42,503 32,929 35,778
General and
administrative
expenses............... 32,089 32,328 35,604 33,267 28,145 20,109 20,920
-------- -------- -------- -------- -------- -------- --------
Operating income........ 2,988 12,925 9,156 19,518 14,358 12,820 14,858
Interest income, net.... (1,429) (856) (317) (476) (549) (335) (306)
Gain on sale of assets.. -- -- -- -- -- -- (1,554)
-------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes....... 4,417 13,781 9,473 19,994 14,907 13,155 16,718
Provision for income
taxes(a)............... 125 267 251 698 549 304 393
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 4,292 $ 13,514 $ 9,222 $ 19,296 $ 14,358 $ 12,851 $ 16,325
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Depreciation and
amortization........... $ 4,496 $ 3,381 $ 3,137 $ 3,118 $ 3,439 $ 2,389 $ 2,449
Capital expenditures.... 4,018 1,419 4,739 2,866 4,423 3,069 695
EBITDA (b).............. 7,484 16,306 12,293 22,636 17,797 15,209 17,307
EBITDA margin........... 4.2% 9.0% 6.6% 11.2% 8.3% 9.5% 10.3%
</TABLE>
<TABLE>
<CAPTION>
AS OF
AUGUST 31, 1996
---------------
<S> <C>
BALANCE SHEET DATA:
Working capital................................................. $ 2,284
Total assets.................................................... 57,492
Total debt...................................................... --
Total equity.................................................... 4,323
</TABLE>
- --------
(a) Consists of state and local income taxes. As a subchapter S corporation
under the Internal Revenue Code of 1986, as amended (the "Code"), Petersen
has not been subject to U.S. federal income taxes or most state income
taxes. Instead, such taxes have been paid by Petersen's stockholder.
Petersen has paid dividends to its stockholder in respect of such tax
liabilities.
(b) "EBITDA" is defined as income before interest, income taxes, depreciation
and amortization and gain on sale of assets. EBITDA is not a measure of
performance under generally accepted accounting principles ("GAAP"). While
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance GAAP or as a measure of profitability
or liquidity, management understands that EBITDA is customarily used in
evaluating magazine publishing companies.
13
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
The following summary pro forma statement of operations data of the Company
give effect to, among other things, the Transactions and the Initial Offering,
as if they had occurred at the beginning of each of the periods presented. The
following unaudited pro forma condensed balance sheet data of the Company give
effect to, among other things, the Transactions and the Initial Offering, as if
they had occurred on August 31, 1996. Certain management assumptions and
adjustments relating to Transactions and the Initial Offering are described in
the accompanying notes hereto. The pro forma information should be read in
conjunction with the financial statements of Petersen and the notes thereto, as
November 30, 1995 and 1994 and for each of the three years in the period ended
November 30, 1995, appearing elsewhere in this Prospectus. This pro forma
information is not necessarily indicative of the results that would have
occurred had the Transactions and the Initial Offering been completed on the
dates indicated or the Company's actual or future results or financial
position. The summary pro forma statement of operations, balance sheet and
other data should be read in conjunction with the information contained in the
financial statements of Petersen and the notes thereto, "Unaudited Pro Forma
Financial Data," "Selected Historical Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATING DATA:
Net revenues.............................. $213,615 $168,812
Production, selling and other direct
costs.................................... 167,905 129,721
-------- --------
Gross profit.............................. 45,710 39,091
General and administrative expenses....... 23,781 17,821
Amortization of intangible assets......... 31,549 23,662
-------- --------
Operating loss............................ (9,620) (2,392)
Interest expense(a)....................... 34,815 26,851
Gain on sale of assets.................... -- (1,554)
-------- --------
Loss before provision for income taxes.... (44,435) (27,689)
Provision for income taxes(b)............. -- --
-------- --------
Net loss.................................. $(44,435) $(27,689)
======== ========
OTHER DATA:
Depreciation and amortization............. $ 34,988 $ 26,111
Capital expenditures...................... 4,423 695
EBITDA(c)(d).............................. 25,368 23,719
EBITDA margin............................. 11.9% 14.1%
</TABLE>
<TABLE>
<CAPTION>
AS OF
AUGUST 31, 1996
---------------
<S> <C>
BALANCE SHEET DATA:
Working capital (deficiency)(e)................................. $(25,570)
Total assets.................................................... 525,152
Total debt(f)................................................... 300,000
Total equity.................................................... 162,082
</TABLE>
- --------
(a) Includes amortization of deferred financing costs related to the financing
of the Acquisition in the amount of $4.4 million for the year ended
November 30, 1995 and $4.0 million for the nine months ended August 31,
1996.
(footnotes continued on next page)
14
<PAGE>
(b) As a limited liability company under the Code, the Company is not subject
to U.S. federal income taxes or most state income taxes. Instead, such
taxes will be paid by the Company's equity holders. The Company is likely
to make distributions to its equity holders in respect of such tax
liabilities.
(c) "EBITDA" is defined as income before interest, income taxes, depreciation
and amortization and gain on sale of assets. EBITDA is not a measure of
performance under GAAP. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP,
or as a measure of profitability or liquidity, management understands that
EBITDA is customarily used in evaluating magazine publishing companies.
(d) Pro forma EBITDA, as presented, reflects the following pro forma
adjustments and does not reflect additional anticipated cost savings
related to management's business and operating strategy, which is currently
being implemented:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Historical EBITDA...................... $17,797 $17,307
Pro forma adjustments:
Replacement of executive
management(1)....................... 3,713 2,585
Lease modifications(2)............... 72 322
October 1996 personnel
reductions(3)....................... 3,786 2,989
Cost of excess space(4).............. -- 516
------- -------
Pro forma EBITDA....................... $25,368 $23,719
======= =======
</TABLE>
The Company's management believes the following additional adjustments are
relevant to evaluating the future operating performance of Company. The
following additional adjustments, which eliminate the impact of certain
nonrecurring charges and reflect the estimated impact of management's
business and operating strategy, are based on estimates and assumptions
made and believed to be reasonable by the Company and are inherently
uncertain and subject to change. The following calculation should not be
viewed as indicative of actual or future results. The following table
reflects the effects of these items:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Pro forma EBITDA....................... $25,368 $23,719
Additional adjustments:
Consolidation of Sassy(5)............ 4,699 2,928
Reorganization of loss-producing
magazine titles(6).................. 2,947 2,226
Nonrecurring software development
costs(7)............................ 4,026 1,589
Prior personnel reductions(8)........ 3,689 1,385
Excess paper costs(9)................ 1,417 4,792
Other estimated cost savings(10)..... 1,111 737
------- -------
Total pro forma adjustments........ 17,889 13,657
------- -------
Adjusted pro forma EBITDA.............. $43,257 $37,376
======= =======
Ratio of total debt to adjusted
annualized pro forma EBITDA(11)....... 5.9x
Ratio of adjusted pro forma EBITDA to
pro forma cash interest expense(12)... 1.7x
</TABLE>
--------
(1) Represents: (i) compensation and benefits paid to Mr. Petersen,
Petersen's Chairman and founder, and Mr. Waingrow, Petersen's former
President, net of compensation to be paid to the Company's new
management team; (ii) travel and entertainment expenses attributable to
Messrs. Petersen and Waingrow and (iii) compensation and benefits paid
to certain support personnel and professional consultants working
primarily for Messrs. Petersen and Waingrow. See "Unaudited Pro Forma
Financial Data."
15
<PAGE>
(2) Represents amounts paid in the periods presented for rent with respect
to certain properties owned by Mr. Petersen over amounts payable in
future periods pursuant to new leases negotiated in connection with the
Acquisition. See "Unaudited Pro Forma Financial Data."
(3) In connection with the Acquisition, the Company developed and has
substantially implemented a restructuring plan, which includes the
termination of certain employees in various corporate and operating
positions. Amounts shown represent the savings related to the
elimination of these salaries and related costs, as if such changes had
occurred as of the beginning of the periods presented. See "Unaudited
Pro Forma Financial Data."
(4) As a result of personnel reductions and certain other operational
consolidations, the Company will have excess space under lease. The
Company estimates that the rental costs allocable to such space were
$516,000 for the nine months ended August 31, 1996.
(5) In December 1996, the Company completed the process of merging Sassy
into 'TEEN, thereby eliminating the losses being generated by Sassy. In
addition to the cost savings related to the Sassy personnel who will be
part of the planned reduction in personnel (for which the costs are
included in Note (3) above), the Company expects that the remaining
costs of Sassy, net of related revenues, which are summarized below,
will be eliminated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues............................... $ 3,852 $ 4,794
Costs and expenses..................... 8,551 7,722
------- -------
Total.................................. $(4,699) $(2,928)
======= =======
</TABLE>
(6) Represents losses incurred by Petersen's Golfing, Sport, Bicycle Guide
and Mountain Biker during the periods presented. While these magazines
collectively are expected to break even or be marginally profitable in
fiscal 1997, in the event such magazines continue to generate losses,
management expects to take one or more of the following actions: (i)
discontinue or sell such magazines; (ii) merge such magazines with the
Company's existing magazines or (iii) enter into strategic partnerships
with third parties. Management expects that a final decision with
respect to each magazine will be made by the end of fiscal 1997.
(7) In February 1992, Petersen engaged a consulting firm to design and
install systems and related software for use in its operations. The
systems and software principally related to an electronic magazine
layout system, an advertising rate and circulation modeling system and
an automated pre-press operating system. These systems were never fully
implemented by Petersen, were replaced by commercially available
systems and were ultimately abandoned during fiscal 1996. Petersen
subsequently initiated litigation against the consulting firm. Petersen
incurred costs of $4.0 million during the year ended November 30, 1995
and $1.6 million during the nine months ended August 31, 1996 related
to the consulting agreement, including an accrual of $0.8 million
during the nine months ended August 31, 1996 related to the resulting
litigation, which remains the responsibility of Petersen.
(8) Prior to the Acquisition, Petersen reduced its number of employees in
accordance with a plan to reduce costs. The costs of payroll, benefits
and severance related to these employee reductions that are estimated
to be not recurring were $3.7 million during the year ended November
30, 1995 and $1.4 million during the nine months ended August 31, 1996.
(9) Paper prices rose significantly during the latter part of 1995, and in
response, Petersen purchased a large supply of 32 lb. paper in December
1995 at prices ranging from $0.61 to $0.66 per pound in anticipation of
additional price increases and supply shortages continuing for the
remainder of 1995 and 1996. Petersen purchased enough paper to meet all
of its production requirements through September 1996. In May 1996,
paper prices returned to historical levels of approximately $0.50 per
pound. According to Resource Information Systems, Inc., the median
price for a comparable grade of paper to that used by Petersen was
approximately $0.50 per pound over the last 20 years (as adjusted for
inflation). If Petersen had purchased paper at this price, production,
selling and other direct costs would have been reduced by $1.4 million
and $4.8 million in the year ended November 30, 1995 and the nine
months ended August 31, 1996, respectively. Following the Acquisition,
the Company entered into an oral agreement with a vendor to secure
sufficient paper to meet its projected raw materials needs through the
end of fiscal 1997 at or below current market prices. While there can
be no assurances, the Company expects that such agreement will be
finalized by the end of 1996.
(10) Represents the estimate of the reduced levels of travel and
entertainment expenses which will be incurred by the Company due to
fewer employees and new travel and entertainment policies to be
implemented by the Company.
(11) Reflects the receipt by the Company of a working capital adjustment of
approximately $4.0 million expected to be paid to the Company by
Petersen in connection with the Acquisition. Such proceeds will be
applied to reduce borrowings under the Senior Credit Facility.
(footnotes continued on next page)
16
<PAGE>
(12) Excludes amortization of deferred financing costs related to the
financing of the Acquisition in the amount of $4.0 million for the
nine months ended August 31, 1996.
(e) The Company has a pro forma working capital deficiency of $25.6 million as
of August 31, 1996 as a result of Petersen retaining all cash and cash
equivalents pursuant to the terms of the Acquisition. Pro Forma current
liabilities used to calculate this amount include $27.0 million of unearned
subscription revenues, net.
(f) Does not give effect to the receipt by the Company of a working capital
adjustment of approximately $4.0 million expected to be paid to the Company
by Petersen in connection with the Acquisition. Such proceeds will be used
to reduce borrowings under the Senior Credit Facility.
17
<PAGE>
RISK FACTORS
This Prospectus including the documents incorporated by reference herein,
contains certain forward-looking statements. While the Issuers believe these
statements are reasonable, prospective investors should be aware that actual
results could differ materially from those projected by such forward-looking
statements as a result of the risk factors set forth below or other factors.
Prospective investors should consider carefully the following factors as well
as the other information and data included in this Prospectus tendering Old
Notes in exchange for New Notes. The Issuers caution the reader, however, that
this list of factors may not be exhaustive and that these or other factors
could have an adverse effect on the Company's ability to service its
indebtedness, including principal and interest payments on the Notes.
SUBSTANTIAL LEVERAGE
The Company incurred significant debt in connection with the Transactions.
As of August 31, 1996, after giving pro forma effect to the Transactions and
the Initial Offering, the Company would have had outstanding indebtedness of
$300.0 million. The Company's pro forma earnings were insufficient to cover
pro forma fixed charges by $44.4 million for the year ended November 30, 1995
and $27.7 million for the nine months ended August 31, 1996. The Company's
leveraged financial position poses substantial consequences to holders of the
Notes, including the risks that: (i) a substantial portion of the Company's
cash flow from operations will be dedicated to the payment of interest on the
Notes and the payment of principal and interest under the Senior Credit
Facility and other indebtedness; (ii) the Company's leveraged position may
impede its ability to obtain financing in the future for working capital,
capital expenditures and general corporate purposes and (iii) the Company's
highly leveraged financial position may make it more vulnerable to economic
downturns and may limit its ability to withstand competitive pressures. Based
upon the successful implementation of management's business and operating
strategy, the Company believes that it will have sufficient capital to carry
on its business and will be able to meet its scheduled debt service
requirements. However, there can be no assurance that the future cash flow of
the Company will be sufficient to meet the Company's obligations and
commitments. In addition, the Senior Credit Facility contemplates that all
borrowings thereunder will become due by 2004. If the Company is unable to
generate sufficient cash flow from operations in the future to service its
indebtedness and to meet its other commitments, the Company will be required
to adopt one or more alternatives, such as refinancing or restructuring its
indebtedness, selling material assets or operations or seeking to raise
additional debt or equity capital. There can be no assurance that any of these
actions could be effected on a timely basis or on satisfactory terms or that
these actions would enable the Company to continue to satisfy its capital
requirements. In addition, the terms of existing or future debt agreements,
including the Indenture and the Senior Credit Facility, may prohibit the
Company from adopting any of these alternatives. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Description of Senior Credit Facility" and "Description
of the Notes."
FULL IMPLEMENTATION OF BUSINESS AND OPERATING STRATEGY
Following the Acquisition, the Company employed a new senior management team
and adopted a refined business and operating strategy. See "Business--Business
and Operating Strategy." This business and operating strategy includes the
implementation of certain operating improvements and the adoption of new
circulation and advertising strategies. There can be no assurance that the
Company will be able to fully implement this new business and operating
strategy or that the anticipated results of this strategy, including the
reduction of certain operating expenses, will be realized. In addition, after
gaining experience with the Company's operations under its new strategy, the
Company and the new senior management team may decide to alter or discontinue
certain aspects of this strategy. Implementation of this strategy could also
be affected by a number of factors beyond the Company's control, such as
operating difficulties, increased operating costs, regulatory developments,
general economic conditions or increased competition. Any such failure to
implement this strategy could have a material adverse effect on the Company's
ability to service its indebtedness, including principal and interest payments
on the Notes.
18
<PAGE>
The Company has reflected on a pro forma basis for the year ended November
30, 1995 and the nine months ended August 31, 1996 the anticipated benefits
from the operating improvements and cost reduction measures included in
management's business and operating strategy. These adjustments are based on a
number of estimates and assumptions that, while considered reasonable by the
Company, should not be viewed as indicative of the results that would have
occurred had the Company's business and operating strategy been implemented on
the dates indicated or the Company's actual or future results or financial
position. Prospective investors are cautioned not to place undue reliance on
these adjustments. See "Unaudited Pro Forma Financial Data."
SUBORDINATION OF NOTES
The Notes will be unsecured and subordinated to the prior right of payment
of all existing and future Senior Indebtedness of the Issuers, including
obligations under the Senior Credit Facility. The indebtedness under the
Senior Credit Facility will also become due prior to the time the principal
obligations under the Notes become due. Subject to certain limitations, the
Indenture will permit the Issuers to incur additional Senior Indebtedness. See
"Description of the Notes--Certain Covenants--Limitation on Additional
Indebtedness." As a result of the subordination provisions contained in the
Indenture, in the event of a liquidation or insolvency, the assets of the
Issuers will be available to pay obligations on the Notes only after all
Senior Indebtedness has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes then
outstanding. The holders of any indebtedness of the Company's subsidiaries
(other than Capital and Restricted Subsidiaries guaranteeing the Notes, if
any) will be entitled to payment of their indebtedness from the assets of such
subsidiaries prior to the holders of any general unsecured obligations of the
Issuers, including the New Notes. In addition, substantially all of the assets
of the Issuers and their subsidiaries will or may in the future be pledged to
secure other indebtedness of the Issuers. See "Description of Senior Credit
Facility" and "Description of the Notes."
RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITY AND THE INDENTURE
The agreements governing the outstanding indebtedness of the Company impose
certain operating and financial restrictions on the Company. The Senior Credit
Facility requires the Company to maintain specified financial ratios and
tests, among other obligations, including a maximum leverage ratio, a minimum
interest coverage ratio and a minimum fixed charge coverage ratio, each as
defined in the Senior Credit Facility. In addition, the Senior Credit Facility
restricts, among other things, the Company's ability to: (i) declare dividends
or redeem or repurchase capital stock; (ii) prepay, redeem or purchase debt;
(iii) incur liens and engage in sale leaseback transactions; (iv) make loans
and investments; (v) issue more debt; (vi) amend or otherwise alter debt and
other material agreements; (vii) make capital expenditures; (viii) engage in
mergers, acquisitions and asset sales; (ix) transact with affiliates and (x)
alter its lines of business. A failure to comply with the restrictions
contained in the Senior Credit Facility could lead to an event of default
thereunder which could result in an acceleration of such indebtedness. Such an
acceleration would constitute an event of default under the Indenture relating
to the Notes. In addition, the Indenture restricts, among other things, the
Company's ability to: (i) incur additional indebtedness; (ii) pay dividends
and make distributions; (iii) issue stock of subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create liens; (vii) enter into
transactions with affiliates; (viii) enter into sale-leaseback transactions;
(ix) merge or consolidate the Company or any Guarantors and (x) transfer and
sell assets. A failure to comply with the restrictions in the Indenture could
result in an event of default under the Indenture. See "Description of Senior
Credit Facility" and "Description of the Notes."
RISKS ASSOCIATED WITH FLUCTUATIONS IN PAPER COSTS AND POSTAL RATES
The Company's principal raw material is paper. The Company used 69.6
million, 76.0 million and 84.4 million pounds of commodity grade paper in its
fiscal years ended November 30, 1993, 1994 and 1995, respectively, resulting
in a total cost of paper during such periods of $29.0 million, $30.5 million
and $39.3 million, respectively. While paper prices have increased by an
average of less than 1% annually since 1989, certain commodity grades have
shown considerable price volatility during that period, including the
commodity grade used by the Company. Paper prices rose sharply during the
latter part of 1995, and in response, Petersen
19
<PAGE>
purchased a large supply of 32 lb. paper in December 1995 at prices ranging
from $0.61 to $0.66 per pound in anticipation of additional price increases
and supply shortages continuing for the remainder of 1995 and 1996. Petersen
purchased enough paper to meet all of its production requirements through
September 1996. The price of such paper subsequently returned to historical
levels of approximately $0.50 per pound in May 1996. The increase in paper
prices in late 1995 and Petersen's large purchase at such increased prices
materially adversely affected Petersen's production, selling and other direct
costs for year ended November 30, 1995 and the nine months ended August 31,
1996. These events increased Petersen's production, selling and other direct
costs by approximately $1.4 million and $4.8 million for the year ended
November 30, 1995 and the nine months ended August 31, 1996, respectively
(assuming Petersen would have otherwise been able to purchase paper during
these periods at the 20-year median price of approximately $0.50 per pound (as
adjusted for inflation)).
Following the Acquisition, the Company entered into an oral agreement with a
vendor to secure sufficient paper to meet its projected raw material needs
through the end of 1997 at or below current market prices. While there can be
no assurances, the Company expects that such agreement will be finalized by
the end of 1996.
The profitability of the Company's magazine publishing operations is also
affected by the cost of postage and could be materially adversely affected if
there is an increase in postal rates and the increase is not passed through to
the consumer. The last postal rate increase occurred in February 1995. Future
fluctuations in paper prices or postal rates could have a material adverse
effect on the Company's ability to service its indebtedness, including
principal and interest payments on the Notes and could have an effect on
quarterly comparisons of the results of operations and financial condition of
the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview" and "Business--Raw Materials."
IMPORTANCE OF CERTAIN PUBLICATIONS
Certain of the Company's publications have historically represented a
significant portion of the Company's net revenues and profit contribution, and
the Company expects that such publications will continue to do so in the
future. In the aggregate, Motor Trend, 'TEEN and Hot Rod accounted for 35.2%
and 57.0% of the Company's net revenues and profit contribution, respectively,
for the year ended November 30, 1995 and 34.3% and 54.5%, respectively, for
the nine months ended August 31, 1996. In addition, the Company derived
approximately 17.9% and 20.6% of its advertising revenues from automotive
manufacturers of original equipment and aftermarket parts, respectively, in
fiscal 1995. As compared to industry standards, the Company believes it has a
diversified portfolio of special-interest publications and is not dependent on
any single publication; however, a significant decline in the performance of
any of these publications or in the advertising spending of the automotive
industry could have a material adverse effect on the Company's ability to
service its indebtedness, including principal and interest payments on the
Notes, and could have an effect on quarterly comparisons of the results of
operations and financial condition of the Company.
CYCLICALITY OF REVENUE
The Company's principal sources of revenues from the publication of its
magazines are derived from advertising and circulation. Circulation revenues
are generated from both subscription and newsstand sales. For the year ended
November 30, 1995, approximately 58% of the Company's revenues were from
advertising, 38% were from circulation (including 20% from subscription sales
and 18% from newsstand sales) and 4% were from other sources. Advertising
revenues of the Company, as well as those of the consumer magazine industry in
general, are cyclical and dependent upon general economic conditions.
Historically, increases in advertising revenues have corresponded with
economic recoveries while decreases, as well as changes in advertising mix,
have corresponded with general economic downturns and regional and local
economic recessions. As compared to general-interest magazines, the Company
believes that its advertising revenues are less susceptible to changes in
general economic conditions due to the diversity of its publications, the
special-interest nature of its editorial content and the endemic nature of its
advertiser base. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview--Cyclicality of Advertising
Revenue" and "Business--Industry Overview."
20
<PAGE>
COMPETITION
The consumer magazine publishing business is highly competitive. The Company
principally competes for advertising and circulation revenues with publishers
of other special-interest consumer magazines with similar editorial content as
those published by the Company. Certain of such competitors are larger and
have greater financial resources than the Company. In addition to other
special-interest magazines, the Company also competes for advertising revenues
with general-interest magazines and other forms of media, including broadcast
and cable television, radio, newspaper, direct marketing and electronic media.
There can be no assurance that the Company will be able to compete effectively
with such other forms of advertising in the future. See "Business--
Competition."
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its senior management
team. In connection with the Acquisition, the Company retained the services of
certain key employees to serve as senior executives of the Company, including
D. Claeys Bahrenburg, Neal Vitale, Richard Willis and the Company's existing
executive publishers, all of whom have significant experience in the magazine
publishing industry. Messrs. Bahrenburg, Vitale and Willis are each expected
to enter into an employment agreement with the Company, which will provide for
their continued employment for a five year term. See "Management--Employment
Contracts." Although the Company believes it could replace such key employees
in an orderly fashion should the need arise, the loss of such key personnel
could have a material adverse effect on the Company. The Company will not
maintain key person insurance for any of its officers, employees or directors.
See "Management--Directors, Executive Officers and Key Employees."
CONTROLLING EQUITYHOLDER
The Company's equity securities are held 99.9% by Holdings and 0.1% by
BrightView. BrightView is the managing member of Holdings and as such controls
the policies and operations of Holdings and of the Company. See "Limited
Liability Company Agreement." Under the terms of a Securityholders Agreement
(as defined herein), all of the stockholders of BrightView have agreed to vote
their shares in favor of those individuals designated by Willis Stein to serve
on the Board of Directors of BrightView and granted Willis Stein the right to
vote their shares on all significant corporate changes. As a result, Willis
Stein has the ability to control the policies and operations of the Company.
Circumstances may occur in which the interests of Willis Stein, as the
principal equity holder of the Company, could be in conflict with the
interests of the holders of the Notes. In addition, the equity investors may
have an interest in pursuing acquisitions, divestitures or other transactions
that, in their judgment, could enhance their equity investment, even though
such transactions might involve risks to the holders of the Notes. See
"Security Ownership of Certain Beneficial Owners and Management."
LIMITATIONS ON CHANGE OF CONTROL
In the event of a Change of Control, the Issuers will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any,
thereon to the repurchase date. Certain events involving a Change of Control
may result in an event of default under the Senior Credit Facility or other
indebtedness of the Issuers that may be incurred in the future. Moreover, the
exercise by the holders of the Notes of their right to require the Issuers to
repurchase the Notes will cause an event of default under the Senior Credit
Facility or such other indebtedness, even if the Change of Control does not.
The Issuers' obligations under this provision of the Indenture could delay,
deter or prevent a sale of the Company which might otherwise be advantageous
to holders of Notes. Finally, there can be no assurance that the Issuers will
have the financial resources necessary to repurchase the Notes upon a Change
of Control. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Description
of the Notes--Change of Control Offer."
21
<PAGE>
RISK OF FRAUDULENT TRANSFER
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if the Company, at
the time it issued the Notes: (i) incurred such indebtedness with intent to
hinder, delay or defraud creditors or (ii)(a) received less than reasonably
equivalent value or fair consideration for incurring such indebtedness and
(b)(1) was solvent at the time of incurrence, (2) was rendered insolvent by
reason of such incurrence (and the application of the proceeds thereof), (3)
was engaged or was about to engage in a business or transaction for which the
assets remaining with the Company constituted unreasonably small capital to
carry on its businesses or (4) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they mature, then, in
each case, a court of competent jurisdiction could void, in whole or in part,
the Notes, or, in the alternative, subordinate the Notes to existing and
future indebtedness of the Company. The measure of insolvency for purposes of
the foregoing will vary depending upon the law applied in such case.
Generally, however, the Company would be considered insolvent if the sum of
its debts, including contingent liabilities, was greater than all of its
assets at fair valuation or if the present fair saleable value of its assets
was less than the amount that would be required to pay the probable liability
on its existing debts, including contingent liabilities, as they become
absolute and matured.
Management believes that, for purposes of the U.S. Bankruptcy Code and state
fraudulent transfer or conveyance laws, the Notes are being issued without the
intent to hinder, delay or defraud creditors and for proper purposes and in
good faith and that the Company, after the issuance of the Notes and the
application of the proceeds thereof, will be solvent, will have sufficient
capital for carrying on its business and will be able to pay its debts as they
mature. There can be no assurance, however, that a court passing on such
questions would agree with management's view.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF THE NOTES
The Old Notes were issued to, and the Issuers believe are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
New Notes by holders who are entitled to participate in this Exchange Offer.
The holders of Old Notes (other than any such holder that is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act) who are
not eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Issuers are required to file a Shelf Registration
Statement with respect to such Old Notes. The New Notes will constitute a new
issue of securities with no established trading market. The Issuers do not
intend to list the New Notes on any national securities exchange or seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Initial Purchasers have advised the Issuers
that they currently intend to make a market in the New Notes, but they are not
obligated to do so and may discontinue such market making at any time. In
addition, such market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer and the pendency of the Shelf Registration Statement. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Notes or as to the liquidity of the trading market for the New Notes.
If a trading market does not develop or is not maintained, holders of the New
Notes may experience difficulty in reselling the New Notes or may be unable to
sell them at all. If a market for the New Notes develops, any such market may
be discontinued at any time.
If a public trading market develops for the New Notes, future trading prices
of such securities will depend on many factors including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the New Notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Issuers of such
Old Notes, a properly completed and duly executed Letter of
22
<PAGE>
Transmittal and all other required documents. Therefore, holders of the Old
Notes desiring to tender such Old Notes in exchange for New Notes should allow
sufficient time to ensure timely delivery. The Issuers are under no duty to
give notification of defects or irregularities with respect to the tenders of
Old Notes for exchange. Old Notes that are not tendered or are tendered but
not accepted will, following the consummation of the Exchange Offer, continue
to be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may be deemed to have received restricted
securities, and if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected. See "The Exchange Offer."
23
<PAGE>
THE TRANSACTIONS
The Acquisition. The Company completed the Acquisition on September 30,
1996. The aggregate purchase price of the Acquisition, which is subject to
certain working capital adjustments, was $450.0 million, plus the assumption
of certain ongoing liabilities incurred in the ordinary course of business.
The Company expects to receive approximately $4.0 million from Petersen as a
result of the working capital adjustment.
The Financing Plan. The Initial Offering was part of a plan designed to
enable the Company to finance the Acquisition and to provide for additional
liquidity. In connection with the Acquisition, the Company: (i) borrowed
$200.0 million under the $260.0 million Senior Credit Facility; (ii) borrowed
$100.0 million under the Bridge Financing Facility and (iii) received equity
contributions of $165.3 million from an investor group led by Willis Stein.
See "Use of Proceeds."
The borrowings under the Senior Credit Facility consist of a $100.0 million
Tranche A Loan (as defined herein) and a $100.0 million Tranche B Loan (as
defined herein), maturing on December 31, 2002 and September 30, 2004,
respectively. The Revolving Credit Facility (as defined herein) provides for
borrowings in the maximum principal amount of $60.0 million. The Tranche A
Loan amortizes gradually prior to maturity; the Tranche B Loan is payable
primarily in two balloon payments due in 2003 and 2004. The Revolving Credit
Facility becomes due in full on December 31, 2002. See "Description of Senior
Credit Facility."
The following table sets forth the sources and uses of funds in the
Acquisition (dollars in thousands):
<TABLE>
<S> <C>
SOURCES:
Senior Credit Facility(a)(b)(c)..................................... $200,000
Bridge Financing Facility(b)........................................ 100,000
Equity contributions(b)............................................. 165,300
--------
Total sources..................................................... $465,300
========
USES:
Acquisition consideration(c)........................................ $450,000
Fees and expenses(d)................................................ 15,300
--------
Total uses........................................................ $465,300
========
</TABLE>
- --------
(a) On a pro forma basis, as of August 31, 1996, the Company would have had
$60.0 million of additional borrowing availability under the Senior Credit
Facility.
(b) FBNC and CIBC, affiliates of the Initial Purchasers, are the agents and
principal lenders under the Senior Credit Facility. First Union
Corporation and CIBC are the lenders under the Bridge Financing Facility.
First Union Investors, Inc. and CIBC WG Argosy Merchant Fund 2, L.L.C.,
both affiliates of the Initial Purchasers, provided a portion of the
equity financing in connection with the Acquisition.
(c) Does not reflect the working capital adjustment of approximately $4.0
million expected to be paid to the Company by Petersen in connection with
the Acquisition. The proceeds therefrom will be used to reduce borrowings
under the Senior Credit Facility.
(d) Includes estimated fees and expenses related to the Transactions and the
Initial Offering (including the Initial Purchasers' discount). To the
extent that such fees are less than estimated, the remainder will be
applied to working capital.
24
<PAGE>
THE INVESTORS
The Investors pursued the Acquisition because they believed it offered an
attractive opportunity to: (i) acquire a diverse portfolio of profitable
magazines with significant growth potential; (ii) bring together a skilled and
experienced management team, consisting of the Company's new senior managers
and Petersen's existing publishers and editorial staff; (iii) apply
professional management techniques to the Company's portfolio to improve its
operating results by increasing circulation and advertising revenues and
reducing operating costs and (iv) further develop the Company's brand-name
franchises with limited additional capital investment. Management believes
that opportunities exist to achieve each of these results both in the near
term and on a going-forward basis. The Investors include the following: Willis
Stein; First Union Investors, Inc.; CIBC WG Argosy Merchants Fund 2, L.L.C.;
Chase Equity Associates, L.P.; BankAmerica Investment Corporation, certain
other limited partners of Willis Stein; Robert E. Petersen, Petersen's founder
and the Company's Chairman Emeritus and the Management Investors. Under the
terms of a Securityholders Agreement, Willis Stein has the right to designate
each member of the Board of BrightView and thus controls the affairs and
policies of the Company. See "Security Ownership of Certain Beneficial Owners
and Management" and "Limited Liability Company Agreement."
Willis Stein is a private investment fund with committed capital of
approximately $343.0 million. The principals of Willis Stein were formerly
with CIVC, where they managed CIVC's investments in a number of media-related
companies as well as other investments. The Management Investors have
significant experience in managing media-related companies and in managing
leveraged acquisitions. Mr. Bahrenburg has served as President of the Magazine
Publishing Division of The Hearst Corporation ("Hearst") and as Publisher of
both House Beautiful and Cosmopolitan. Mr. Vitale has served in a variety of
managerial positions at Cahners Publishing Company, a division of Reed
Elsevier, Inc. Such positions included Vice President of Consumer Publishing,
Vice President/General Manager of Variety, and, most recently, Group Vice
President, Entertainment, where he was responsible for the publication of
Variety, Daily Variety, Broadcasting & Cable, Moving Pictures International,
On Production and Tradeshow Week. Mr. Dunning currently serves as the Chairman
and Chief Executive Officer of TransWestern Publishing Company, L.P.
("TransWestern"), the largest independent publisher of yellow pages in the
United States, and was formerly Chairman of SRDS Media Information, L.P.
("SRDS"), a media information and database publisher. Earlier in his career,
Mr. Dunning served as Executive Vice President of Ziff Communications and as
President of Rolling Stone Magazine. Mr. Bloch is Vice Chairman and Chief
Financial Officer of TransWestern and was formerly a director of SRDS. Mr.
Karu is a director of TransWestern and was formerly interim Chief Executive
Officer and a director of SRDS. See "Management."
USE OF PROCEEDS
The Company incurred $100.0 million of indebtedness under the Bridge
Financing Facility pending the issuance and sale of the Old Notes. The Company
applied the net proceeds of the Initial Offering to repay the Bridge Financing
Facility. Affiliates of the Initial Purchasers were the lenders under the
Bridge Financing Facility. The Bridge Financing Facility was used to finance a
portion of the Acquisition.
The Exchange Offer is intended to satisfy certain of the Issuers'
obligations under the Registration Rights Agreement. The Issuers will not
receive any cash proceeds from the issuance of the New Notes offered hereby.
In consideration for issuing the New Notes contemplated in this Prospectus,
the Issuers will receive Old Notes in like principal amount, the form and
terms of which are the same as the form and terms of the New Notes (which
replace the Old Notes), except as described herein.
25
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of August 31, 1996 pro forma to give effect to the Transactions and
the Initial Offering. The Old Notes surrendered in exchange for the New Notes
will be retired and canceled and cannot be reissued. Accordingly, issuance of
the New Notes will not result in any increase or decrease in the indebtedness
of the Issuers or the Guarantor. As such, no effect has been given to the
Exchange Offer in this capitalization table. The information in this table
should be read in conjunction with "Unaudited Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and accompanying notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AUGUST 31, 1996
PRO FORMA
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Total debt:
Senior Credit Facility(a)(b)........................... $200,000
Notes.................................................. 100,000
--------
Total debt........................................... 300,000
Total equity............................................. 165,082
--------
Total capitalization..................................... $465,082
========
</TABLE>
- --------
(a) Current borrowings under the Senior Credit Facility consist of $200.0
million of term loans. The Senior Credit Facility also provides for a
Revolving Credit Facility in the maximum principal amount of $60.0
million. See "Description of Senior Credit Facility." On a pro forma
basis, as of August 31, 1996, the Company would have had $60.0 million of
additional borrowing availability under the Revolving Credit Facility.
(b) Does not reflect the working capital adjustment of approximately $4.0
million expected to be paid to the Company by Petersen in connection with
the Acquisition. The proceeds therefrom will be used to reduce borrowings
under the Senior Credit Facility.
26
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated financial data (the
"Unaudited Pro Forma Financial Data") of the Company have been derived by the
application of pro forma adjustments to the historical financial statements of
Petersen for the periods indicated. The adjustments are described in the
accompanying notes.
The Unaudited Pro Forma Financial Data give effect to the Transactions and
the Initial Offering as if the Transactions and the Initial Offering had
occurred as of August 31, 1996, for purposes of the balance sheet data, and as
of the beginning of each period presented, for purposes of the statement of
operations data. The Unaudited Pro Forma Financial Data do not give effect to
any transactions other than the Transactions and the Initial Offering and
those discussed in the accompanying notes. The Unaudited Pro Forma Financial
Data are provided for informational purposes only and do not purport to
represent the results of operations or financial position of the Company had
the Transactions and the Initial Offering in fact occurred on such dates, nor
do they purport to be indicative of the financial position or results of
operations as of any future date or for any future period.
The Acquisition was accounted for using the purchase method of accounting.
The total cost of the Acquisition will be allocated to the tangible and
intangible assets acquired and liabilities assumed based upon their respective
fair values as of the time the Acquisition was consummated. The excess of
purchase cost over the historical basis of the net assets acquired has not
been allocated in the accompanying Unaudited Pro Forma Financial Data. The pro
forma adjustments are based upon available information and upon certain
assumptions that management believes are reasonable. The actual allocation of
purchase cost, however, and the resulting effect on income from operations may
differ significantly from the pro forma amounts included herein.
Following the Acquisition, the Company employed a new senior management team
and adopted a refined business and operating strategy. This business and
operating strategy includes the implementation of certain operating
improvements and the adoption of new circulation and advertising strategies.
The Unaudited Pro Forma Financial Data reflects certain of the cost reduction
measures and operating improvements that are part of management's business and
operating strategy and implemented in connection with the Acquisition. The
Company's management believes that the successful implementation of its
business and operating strategy will result in further cost savings and
operating improvements. These additional adjustments are set forth in Note (i)
to the Unaudited Pro Forma Financial Data. There can be no assurance that the
Company will be able to fully implement its new business and operating
strategy or that the anticipated results of this strategy, including the
reduction of certain operating expenses, will be realized. See "Risk Factors--
Full Implementation of Business and Operating Strategy."
The Old Notes surrendered in exchange for the New Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the New Notes will
not result in any increase or decrease in the indebtedness of the Issuers or
the Guarantor. As such, no effect has been given to the Exchange Offer in the
Unaudited Pro Forma Financial Data.
The Unaudited Pro Forma Financial Data and accompanying notes should be read
in conjunction with the financial statements and accompanying notes thereto
and the other financial information included elsewhere in this Prospectus.
27
<PAGE>
PETERSEN PUBLISHING COMPANY, L.L.C.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1995
-----------------------------------
PETERSEN PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.............................. $213,615 $ -- $213,615
Production, selling and other direct
costs.................................... 171,112 (72)(a) 167,905
(3,135)(b)
-------- -------- --------
Gross profit.............................. 42,503 3,207 45,710
General and administrative expenses....... 28,145 (3,713)(c) 23,781
(651)(b)
Amortization of purchase cost to be
allocated................................ -- 31,549 (d) 31,549
-------- -------- --------
Operating income (loss)................... 14,358 (23,978) (9,620)
Interest Income........................... (549) 549 (e) --
Interest expense.......................... -- 34,815 (f) 34,815
-------- -------- --------
Income (loss) before provision for income
taxes.................................... 14,907 (59,342) (44,435)
Provision for income taxes................ 549 (549)(g) --
-------- -------- --------
Net income (loss)......................... $ 14,358 $(58,793) $(44,435)
======== ======== ========
OTHER DATA:
Depreciation and amortization............. $ 3,439 $ 34,988
Capital expenditures...................... 4,423 4,423
EBITDA(h)(i).............................. 17,797 25,368
EBITDA margin............................. 8.3% 11.9%
Ratio of earnings to fixed charges(j)..... 9.2x --
Earnings available to cover fixed
charges(j)............................... $ 16,724 --
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data.
28
<PAGE>
PETERSEN PUBLISHING COMPANY, L.L.C.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED AUGUST 31, 1996
-------------------------------------------
PETERSEN PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ 168,812 $ -- $ 168,812
Production, selling and other
direct costs.................... 133,034 (322)(a) 129,721
(2,475)(b)
(516)(k)
----------- ----------- -----------
Gross profit..................... 35,778 3,313 39,091
General and administrative
expenses........................ 20,920 (2,585)(c) 17,821
(514)(b)
Amortization of purchase cost to
be allocated.................... -- 23,662 (d) 23,662
----------- ----------- -----------
Operating income (loss).......... 14,858 (17,250) (2,392)
Interest Income.................. (306) 306 (e) --
Interest expense................. -- 26,851 (f) 26,851
Gain on sale of assets........... (1,554) -- (1,554)
----------- ----------- -----------
Income (loss) before provision
for income taxes................ 16,718 (44,407) (27,689)
Provision for income taxes....... 393 (393)(g) --
----------- ----------- -----------
Net income (loss)................ $ 16,325 $ (44,014) $ (27,689)
=========== =========== ===========
OTHER DATA:
Depreciation and amortization.... $ 2,449 $ 26,111
Capital expenditures............. 695 695
EBITDA(h)(i)..................... 17,307 23,719
EBITDA margin.................... 10.3% 14.1%
Ratio of earnings to fixed
charges(j)...................... 10.6x --
Earnings available to cover fixed
charges(j)...................... $ 18,465 --
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data.
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
(a) In connection with the Acquisition, the pre-existing lease agreement
between Petersen and Mr. Petersen was assumed by the Company with certain
modifications to rental rates. This adjustment reflects the impact of the
lease modifications as if they were effective as of the beginning of the
periods presented.
(b) In connection with the Acquisition, the Company developed and has
substantially implemented a restructuring plan, which included the
termination of certain employees in various corporate and operating
positions. The savings related to the elimination of these salaries and
related costs, as if such changes had occurred as of the beginning of the
periods presented, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Production, selling and other direct
costs................................ $3,135 $2,475
General and administrative............ 651 514
------ ------
Total................................. $3,786 $2,989
====== ======
</TABLE>
(c) Reflects the net savings in payroll, benefits, and other related expenses
resulting from the replacement of Petersen's executive management by the
Company's new executive management as if such changes had occurred as of
the beginning of the periods presented as follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Elimination of Petersen's executive
management cost....................... $6,323 $4,543
Cost of consulting contract with former
executive of Petersen................. (200) (150)
New executive management cost.......... (2,410) (1,808)
------ ------
Total.................................. $3,713 $2,585
====== ======
</TABLE>
The cost of new management is based on the Employment Agreements (as
defined herein) to be entered into between the Company and each of Messrs.
Bahrenburg and Vitale and other estimated expenses associated with new
management, including director fees and salaries of Holdings' officers.
(d) The Acquisition was accounted for under the purchase method of accounting.
Under purchase method accounting, the total purchase price will be
allocated to the tangible and intangible assets acquired and liabilities
assumed by the Company based upon their respective fair values as of the
acquisition date based upon valuations and other studies that are not yet
available. A preliminary allocation of the purchase price has been made to
major categories of assets and liabilities for purposes of the pro forma
financial statements based upon available information and assumptions that
the Company's management believes are reasonable. However, such amounts
are subject to change and final amounts may differ substantially. Assuming
the pro forma remaining purchase costs to be allocated are $476.2 million
(as adjusted to give effect to the receipt by the Company of a $4.0
million working capital adjustment) and such amount is amortized over 15
years, the resulting amortization is $31.7 million for the year ended
November 30, 1995 and $23.8 million for the nine months ended August 31,
1996.
(e) Reflects elimination of interest income attributable to cash and
investments retained by Petersen.
(f) Reflects the interest expense on the indebtedness incurred by the Company
in connection with the Transactions and the Initial Offering, as if the
Transactions and the Initial Offering had been consummated as of the
beginning of the periods presented, based on the borrowings and their
rates expected to be in effect at the offering date as follows:
30
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
RATE AMOUNT NOVEMBER 30, 1995 AUGUST 31, 1996
------ -------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Senior Credit Facility:
Unused revolver
commitment........... 0.500% $ 60,000 $ 300 $ 225
Tranche A Loan(1)..... 9.000 100,000 9,000 6,750
Tranche B Loan(1)..... 9.500 100,000 9,500 7,125
Notes................... 11.125 100,000 11,125 8,344
------- -------
29,925 22,444
Amortization of deferred
financing costs........ 4,369 4,017
Imputed interest on
account rent for excess
space.................. 521 390
------- -------
Total interest expense.. $34,815 $26,851
======= =======
</TABLE>
--------
(1) The Company has entered into a swap agreement with a bank providing for
a fixed base rate of 6.23% in lieu of a floating LIBOR rate covering
$150.0 million of the loans under the Senior Credit Facility through
October 7, 1997, after which the amount is reduced to $100.0 million
through October 7, 1999.
(g) Eliminates the provisions for income taxes since the Company is a limited
liability company and will not be subject to the certain state income
taxes to which Petersen was subject.
(h) "EBITDA" is defined as income before interest, income taxes, depreciation
and amortization and gain on sale of assets. EBITDA is not a measure of
performance under GAAP. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance with
GAAP, or as a measure of profitability or liquidity, management
understands that EBITDA is customarily used in evaluating magazine
publishing companies.
(i) Pro forma EBITDA, as presented, includes the effects of the pro forma
adjustments and does not reflect additional anticipated cost savings
related to management's business and operating strategy, which is
currently being implemented. The Company's management believes the
following additional adjustments are relevant to evaluating the future
operating performance of the Company. The following additional
adjustments, which eliminate the impact of certain nonrecurring charges
reflect the estimated impact of management's business and operating
strategy, are based on estimates and assumptions made and believed to be
reasonable by the Company and are inherently uncertain and subject to
change. The following calculation should not be viewed as indicative of
actual or future results. The following table reflects the effect of
certain of these items:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Pro forma EBITDA....................... $25,368 $23,719
Additional adjustments:
Consolidation of Sassy(1)............ 4,699 2,928
Reorganization of loss-producing
magazine title(2)................... 2,947 2,226
Nonrecurring software development
costs(3)............................ 4,026 1,589
Prior personnel reductions(4)........ 3,689 1,385
Excess paper costs(5)................ 1,417 4,792
Other estimated cost savings(6)...... 1,111 737
------- -------
Total additional adjustments....... 17,889 13,657
------- -------
Adjusted pro forma EBITDA.............. $43,257 $37,376
======= =======
Radio of total debt to adjusted
annualized pro forma EBITDA........... 5.9x
Ratio of adjusted pro forma EBITDA to
pro forma cash interest expense(7).... 1.7x
</TABLE>
31
<PAGE>
--------
(1) In December 1996, the Company completed the process of merging Sassy
into 'TEEN, thereby eliminating the losses being generated by Sassy. In
addition to the cost savings related to the Sassy personnel who were
part of the reduction in personnel (for which the costs are included in
a pro forma adjustment (see Note (b)), the Company expects that the
remaining costs of Sassy, net of related revenues, which are summarized
below, will be eliminated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, 1995 AUGUST 31, 1996
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues............................... $ 3,852 $ 4,794
Costs and expenses..................... 8,551 7,722
------- -------
Total.................................. $(4,699) $(2,928)
======= =======
</TABLE>
(2) Represents losses incurred by Petersen's Golfing, Sport, Bicycle Guide
and Mountain Biker during the periods presented. While these magazines
collectively are expected to break even or be marginally profitable in
fiscal 1997, in the event such magazines continue to generate losses,
management expects to take one or more of the following actions: (i)
discontinue or sell such magazines; (ii) merge such magazines with the
Company's existing magazines or (iii) enter into strategic partnerships
with third parties. Management expects that a final decision with
respect to each magazine will be made by the end of fiscal 1997.
(3) In February 1992, Petersen engaged a consulting firm to design and
install systems and related software for use in its operations. The
systems and software principally related to an electronic magazine
layout system, an advertising rate and circulation modeling system and
an automated pre-press operating system. These systems were never
implemented by Petersen, were replaced by commercially available
systems and were ultimately abandoned during fiscal 1996. Petersen
subsequently initiated litigation against the consulting firm. Petersen
incurred costs of $4.0 million during the year ended November 30, 1995
and $1.6 million during the nine months ended August 31, 1996 related
to the consulting agreement, including an accrual of $0.8 million
during the nine months ended August 31, 1996 related to the resulting
litigation, which remains the responsibility of Petersen.
(4) Prior to the Acquisition, Petersen reduced its number of employees in
accordance with a plan to reduce costs. The costs of payroll, benefits
and severance related to these in employee reductions that are
estimated to be not recurring were $3.7 million during the year ended
November 30, 1995 and $1.4 million during the nine months ended August
31, 1996.
(5) Paper prices rose significantly during the latter part of 1995, and in
response, Petersen purchased a large supply of 32 lb. paper supply in
December 1995 at prices ranging from $0.61 to $0.66 per pound in
anticipation of additional price increases and supply shortages
continuing for the remainder of 1995 and 1996. Petersen purchased
enough paper to meet all of its production requirements through
September 1996. In May 1996, paper prices returned to historical levels
of approximately $0.50 per pound. According to Resource Information
Systems, Inc., the median price for a comparable grade of paper to that
used by Petersen was approximately $0.50 per pound over the last 20
years (as adjusted for inflation). If Petersen had purchased paper at
this price, production, selling and other direct costs would have been
reduced by $1.4 million and $4.8 million in the year ended November 30,
1995 and the nine months ended August 31, 1996, respectively. Following
the Acquisition, the Company entered into an oral agreement with a
vendor to secure sufficient paper to meet its projected raw material
needs through the end of fiscal 1997 at or below current market prices.
While there can be no assurances, the Company expects that such
agreement will be finalized by the end of 1996.
(6) Represents the estimate of the reduced levels of travel and
entertainment expenses which will be incurred by the Company due to
fewer employees and new travel and entertainment policies to be
implemented by the Company.
(7) Excludes amortization of deferred financing costs related to the
financing of the Acquisition in the amount of $4.0 million for the nine
months ended August 31, 1996.
(j) Earnings used in computing the pro forma ratio of earnings to fixed
charges consist of pro forma income before provision for income taxes plus
pro forma fixed charges. Pro forma fixed charges consist of: (i) interest
expense, including amortization of debt issuance costs and (ii) the
implied interest element of pro forma rent expense. Pro forma earnings
were insufficient to cover pro forma fixed charges by $44.4 million for
the year ended November 30, 1995 and $27.7 million for the nine months
ended August 31, 1996.
(k) As a result of personnel reductions and certain other operational
consolidations, the Company will have excess space under lease. The amount
shown is the Company's estimate of the rental costs which would have been
charged to accrued liabilities for excess rental space recorded in the
allocation of purchase price if the consolidations had occurred at the
beginning of the periods presented.
32
<PAGE>
PETERSEN PUBLISHING COMPANY, L.L.C.
UNAUDITED PRO FORMA BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1996
-----------------------------------------------
ASSETS AND
PETERSEN LIABILITIES TRANSACTION COMPANY
HISTORICAL RETAINED(A) ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS(B)
Current assets
Cash and cash equivalents..... $19,195 $(19,195) $465,300 (c) $ --
(450,000)(d)
(15,300)(e)
Short-term investments........ 55 (55) -- --
Accounts receivable, net...... 17,914 -- -- 17,914
Inventories................... 10,232 -- (1,086)(g) 9,146
Prepaid expenses and other
current assets............... 678 -- -- 678
------- -------- -------- --------
Total current assets............ 48,074 (19,250) (1,086) 27,738
Property and equipment, net..... 5,342 -- -- 5,342
Investments..................... 334 (334) -- --
Goodwill, net................... 2,952 (2,952) -- --
Purchase costs to be
allocated(b)................... -- -- 450,000 (d) 480,233
1,033 (e)
15,766 (f)
13,434 (g)
Deferred financing costs........ -- -- 14,011 (e)
(2,962)(h) 11,049
Other assets.................... 790 -- -- 790
------- -------- -------- --------
Total Assets.................... $57,492 $(22,536) $490,196 $525,152
======= ======== ======== ========
LIABILITIES AND EQUITY(B)
Current liabilities:
Accounts payable.............. $ 6,651 $ (835) $ -- $ 5,816
Accrued payroll and related
costs........................ 5,639 -- 4,700 (g) 10,339
Customer incentive bonuses.... 5,672 -- -- 5,672
Unearned subscription
revenues, net................ 26,987 -- -- 26,987
Other accrued expenses and
current liabilities.......... 841 (291) 3,944 (g) 4,494
------- -------- -------- --------
Total current liabilities....... 45,790 (1,126) 8,644 53,308
Unearned subscription revenues,
net............................ 5,981 -- -- 5,981
Deferred state income taxes..... 1,321 (1,321) -- --
Other noncurrent liabilities.... 77 -- 3,704 (g) 3,781
Senior Credit Facility.......... -- -- 200,000 (c) 200,000
Notes........................... -- -- 100,000 (c) 100,000
------- -------- -------- --------
Total liabilities............... 53,169 (2,447) 312,348 363,070
Divisional equity............... 4,323 (20,089) 15,766 (f) --
Stockholders' equity............ -- -- 165,300 (c) 162,082
(2,962)(h)
(256)(e)
------- -------- -------- --------
Total Liabilities and Equity.... $57,492 $(22,536) $490,196 $525,152
======= ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data.
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET DATA
(a) Reflects the assets and liabilities to be retained by Petersen.
(b) The Acquisition was accounted for under the purchase method of accounting.
Under purchase method accounting, the total purchase price will be
allocated to the tangible and intangible assets acquired and liabilities
assumed by the Company based upon their respective fair values as of the
acquisition date based upon valuations and other studies that are not yet
available. A preliminary allocation of the purchase price has been made to
major categories of assets and liabilities for purposes of the pro forma
financial statements based upon available information and assumptions that
the Company's management believes are reasonable. However, such amounts
are subject to change and final amounts may differ substantially.
(c) Reflects the capitalization of the Company as if the Transactions and the
Initial Offering had occurred as of August 31, 1996 (dollars in
thousands):
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Senior Credit Facility (1)....................................... $200,000
Notes............................................................ 100,000
Equity contributions............................................. 165,300
--------
Total sources.................................................. $465,300
========
</TABLE>
--------
(1) Does not include the estimated payment by Petersen to the Company for a
purchase price adjustment of $4.0 million to reflect the actual level
of working capital on the closing date of the Acquisition. Such
proceeds therefrom will be used to reduce borrowings under the Senior
Credit Facility.
(d) Reflects the purchase price of the Acquisition.
(e) Reflects the estimated professional fees and expenses related to the
Transactions and the Initial Offering and the allocation thereof between
deferred financing costs, stockholder's equity and the costs of the
Acquisition to be allocated.
(f) Reflects the excess of liabilities over assets acquired from Petersen
which is added to the purchase price to be allocated.
(g) To accrue for severance costs related to the October 1996 personnel
reductions and for the estimated net future costs of excess space under
long-term leases which the Company intends to sublease and sales taxes
related to the Acquisition and the adjustment of the book value of the
Company's inventory.
(h)Reflects the write-off of deferred financing costs upon repayment of the
Bridge Financing Facility.
34
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following tables present selected historical financial data for each of
the five years in the period ended November 30, 1995 that have been derived
from the audited financial statements of Petersen. The statements of income
and retained earnings and statements of cash flows for each of the three years
in the period ended November 30, 1995 and the notes thereto appear elsewhere
in this Prospectus. The selected historical statement of operations and
balance sheet data of Petersen as of and for the nine months ended August 31,
1995 and 1996 have been derived from unaudited financial statements, which, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for
the unaudited interim periods. Results for the nine months ended August 31,
1996 are not necessarily indicative of results that may be expected for the
entire year.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED NOVEMBER 30, ENDED AUGUST 31,
------------------------------------------------ ------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues:
Advertising............ $101,208 $102,399 $105,101 $116,608 $123,410 $ 92,062 $ 99,108
Newsstand.............. 35,191 34,499 37,507 40,048 39,889 29,768 30,967
Subscriptions.......... 39,508 39,300 39,820 40,710 41,963 31,559 31,666
Other.................. 3,450 4,305 3,894 4,601 8,353 6,845 7,071
-------- -------- -------- -------- -------- -------- --------
Net revenues......... 179,357 180,503 186,322 201,967 213,615 160,234 168,812
Production, selling and
other direct costs..... 144,280 135,250 141,562 149,182 171,112 127,305 133,034
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 35,077 45,253 44,760 52,785 42,503 32,929 35,778
General and
administrative
expenses............... 32,089 32,328 35,604 33,267 28,145 20,109 20,920
-------- -------- -------- -------- -------- -------- --------
Operating income........ 2,988 12,925 9,156 19,518 14,358 12,820 14,858
Interest income, net.... (1,429) (856) (317) (476) (549) (335) (306)
Gain on sale of assets.. -- -- -- -- -- -- (1,554)
-------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes....... 4,417 13,781 9,473 19,994 14,907 13,155 16,718
Provision for income
taxes(a)............... 125 267 251 698 549 304 393
-------- -------- -------- -------- -------- -------- --------
Net income........... $ 4,292 $ 13,514 $ 9,222 $ 19,296 $ 14,358 $ 12,851 $ 16,325
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Depreciation and
amortization........... $ 4,496 $ 3,381 $ 3,137 $ 3,118 $ 3,439 $ 2,389 $ 2,449
Capital expenditures.... 4,018 1,419 4,739 2,866 4,423 3,069 695
EBITDA(b)............... 7,484 16,306 12,293 22,636 17,797 15,209 17,307
EBITDA margin........... 4.2% 9.0% 6.6% 11.2% 8.3% 9.5% 10.3%
Ratio of earnings to
fixed charges.......... 3.6x 9.2x 6.8x 12.8x 9.2x 11.1x 10.6x
Earnings available to
cover fixed
charges(c)............. $ 6,137 $ 15,457 $ 11,120 $ 21,684 $ 16,724 $ 14,463 $ 18,465
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficiency)........... $(10,588) $ 1,591 $ (3,629) $(11,027) $ 5,760 $ 2,284
Total assets............ 56,396 50,973 46,792 55,264 66,808 57,492
Total debt.............. -- -- -- -- -- --
Total equity (capital
deficiency)............ 4,626 4,126 (1,553) 361 8,627 4,323
</TABLE>
- --------
(a) Consists of state and local income taxes. As a subchapter S corporation
under the Code, Petersen has not been subject to U.S. federal income taxes
or most state income taxes. Instead, such taxes have been paid by
Petersen's stockholder. Petersen has periodically paid dividends to its
stockholder in respect of such tax liabilities.
(b) "EBITDA" is defined as income before interest, income taxes, depreciation
and amortization and gain on sale of assets. EBITDA is not a measure of
performance under GAAP. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance GAAP,
or as a measure of profitability or liquidity, management understands that
EBITDA is customarily used in evaluating magazine publishing companies.
(c) Earnings used in computing the ratio of earnings to fixed charges consist
of income before provision for income taxes plus fixed charges. Fixed
charges consist of the implied interest element of rent expense for all
periods presented except for the nine months ended August 31, 1996 for
which fixed charges also included interest expense of $152,917.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company. The Company is a leading publisher of special-interest
magazines. The Company's diverse portfolio currently contains a total of 73
publications, including 22 monthly publications, 9 bi-monthly publications and
42 single issue or annual publications. The Company operates primarily within
the expanding special-interest segment of the consumer magazine publishing
market. Over the last decade, special-interest publications targeted to niche
audiences have enjoyed significant growth and are now estimated to account for
approximately one quarter of the overall consumer magazine market in terms of
total advertising and circulation spending. The Company had net revenues of
$213.6 million and $168.8 million for the year ended November 30, 1995 and the
nine months ended August 31, 1996, respectively.
Sources of Revenue. The Company's principal sources of revenues from the
publication of its magazines are derived from advertising and circulation.
Circulation revenues are generated from both subscription and newsstand sales.
For fiscal 1995, approximately 58% of the Company's revenues were from
advertising, 38% were from circulation (including 20% from subscription sales
and 18% from newsstand sales) and 4% were from other sources. Advertising
revenues of the Company, as well as those of the consumer magazine industry in
general, are cyclical and dependent upon general economic conditions.
Historically, increases in advertising revenues have corresponded with
economic recoveries while decreases, as well as changes in advertising mix,
have corresponded with general economic downturns and regional and local
economic recessions. As compared to general-interest magazines, the Company
believes that its advertising revenues are less susceptible to changes in
general economic conditions due to the diversity of its publications, the
special-interest nature of its editorial content and the endemic nature of its
advertiser base. See "Business--Industry Overview" and "Risk Factors--
Cyclicality of Revenues."
Potential Operating Improvements. As part of its business and operating
strategy, the Company has identified and is in the process of implementing
certain cost reduction measures and operating improvements that are expected
to result in annual cost savings when compared to Petersen's recent operating
history. The following table sets forth certain expenses incurred by Petersen
in each of the past three fiscal years and the nine-month periods ended August
31, 1995 and 1996, which the Company believes will not recur in future periods
as a result of such cost reduction measures and operating improvements. See
"Business--Business and Operating Strategy." Certain of these adjustments are
reflected in the Company's unaudited pro forma financial data. See "Unaudited
Pro Forma Financial Data." Unless otherwise noted, amounts shown have not been
adjusted to reflect additional expenses which the Company expects to incur in
future periods, including additional professional fees, interest expense,
depreciation and amortization and other expenses. In addition, while the
Company believes the following expenses will not recur in future periods,
there can be no assurance that the Company will not incur other expenses
similar to the expenses described below in future periods. The following
calculation should not be viewed as indicative of future results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED NOVEMBER 30, AUGUST 31,
--------------------------- -----------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Compensation of senior
management(a)................... $ 12,273 $ 9,450 $ 3,713 $ 1,660 $ 2,585
Personnel reductions(b).......... 5,927 6,192 7,181 5,124 4,374
Excess travel and entertainment
expenses(c)..................... 917 1,036 1,111 801 737
Renegotiation of lease with
stockholder and sublease
revenues to be realized(d)...... 52 65 72 54 838
Elimination of excess paper
costs(e)........................ -- -- 1,417 310 4,792
Reduced software development
costs(f)........................ 2,475 3,507 4,026 2,953 1,589
Reorganization of loss-producing
magazine title(g)............... (170) 1,707 7,646 5,040 5,154
Reduced retirement plan
contributions(h)................ 2,001 2,271 294 -- --
-------- -------- -------- -------- --------
Total nonrecurring expenses.... $ 23,475 $ 24,228 $ 25,460 $ 15,942 $ 20,069
======== ======== ======== ======== ========
</TABLE>
36
<PAGE>
(footnotes from previous page)
- --------
(a) Represents: (i) compensation and benefits paid to Mr. Petersen, Petersen's
Chairman and founder, and Mr. Waingrow, Petersen's former President, net
of compensation to be paid to the Company's new management team; (ii)
travel and entertainment expenses attributable to Messrs. Petersen and
Waingrow and (iii) compensation and benefits paid to certain support
personnel and professional consultants working primarily for Messrs.
Petersen and Waingrow. See "Unaudited Pro Forma Financial Data."
(b) Represents compensation, related benefits and severance paid to certain
former Petersen personnel who were terminated as part of cost reduction
programs by Petersen and to employees terminated in October 1996 as part
of the Company's personnel reduction program, net of the Company's
estimate of a normal level of severance costs after the personnel
reduction program is complete. See "Unaudited Pro Forma Financial Data."
(c) Represents the Company's estimate of travel and entertainment expenses
incurred by Petersen in excess of such expenses to be incurred by the
Company after implementation of new travel and expense policies and
personnel reduction.
(d) Represents amounts paid in the periods presented for rent with respect to
certain properties owned by Mr. Petersen over amounts payable in future
periods pursuant to new leases negotiated in connection with the
Acquisition and the Company's estimate of the rental costs which would
have been charged to accrued liabilities for excess rental space recorded
in the allocation of purchase price if the consolidations had occurred at
the beginning of the periods presented. See "Unaudited Pro Forma Financial
Data."
(e) See "--Paper Prices" and "Unaudited Pro Forma Financial Data."
(f) See "--Software Consulting Expenses" and "Unaudited Pro Forma Financial
Data."
(g) Represents losses incurred by Sassy, Petersen's Golfing, Sport, Bicycle
Guide and Mountain Biker during the periods presented. In December 1996,
the Company completed the process of merging Sassy into 'TEEN, thereby
eliminating the losses being generated by Sassy. While the remaining
magazines collectively are expected to break even or be marginally
profitable in fiscal 1997, in the event such magazines continue to
generate losses, management expects to take one or more of the following
actions: (i) discontinue or sell such magazines; (ii) merge such magazines
with the Company's existing magazines or (iii) enter into strategic
partnerships with third parties. Management expects that a final decision
with respect to each magazine will be made by the end of fiscal 1997.
(h) The Company will not continue making contributions to Petersen's
retirement plan and intends to establish a new defined contribution plan
for which the estimated annual cost is $1.0 million annually.
Paper Prices. The Company's principal raw material is paper. The Company
used 69.6 million, 76.0 million and 84.4 million pounds of commodity grade
paper in its fiscal years ended November 30, 1993, 1994 and 1995,
respectively, resulting in a total cost of paper during such periods of $29.0
million, $30.5 million and $39.3 million, respectively. While paper prices
have increased by an average of less than 1% annually since 1989, certain
commodity grades have shown considerable price volatility during that period,
including the commodity grade used by the Company. Paper prices rose sharply
during the latter part of 1995, and in response, Petersen purchased a large
supply of 32 lb. paper in December 1995 at prices ranging from $0.61 to $0.66
per pound in anticipation of additional price increases and supply shortages
continuing for the remainder of 1995 and 1996. Petersen purchased enough paper
to meet all of its production requirements through September 1996. The price
of such paper subsequently returned to historical levels of approximately
$0.50 per pound in May 1996. The increase in paper prices in late 1995 and
Petersen's large purchase at such increased prices materially adversely
affected Petersen's production, selling and other direct costs for year ended
November 30, 1995 and the nine months ended August 31, 1996, respectively.
These events increased Petersen's production, selling and other direct costs
by approximately $1.4 million and $4.8 million for the year ended November 30,
1995 and for the nine months ended August 31, 1996, respectively (assuming
Petersen would have otherwise been able to purchase paper during these periods
at the 20-year median price of approximately $0.50 per pound (as adjusted for
inflation)).
Following the Acquisition, the Company entered into an oral agreement with a
vendor to secure sufficient paper to meet its projected raw material needs
through the end of fiscal 1997 at or below current market prices. While there
can be no assurances, the Company expects that such agreement will be
finalized by the end of 1996. No assurance can be given, however, that future
fluctuations in paper prices after 1997 will not have a material adverse
effect on the results of operations and financial condition of the Company.
See "Risk Factors--Risks Associated with Fluctuations in Paper Costs and
Postal Rates" and "Business--Raw Materials."
Software Consulting Expenses. During the three year period ended November
30, 1995, Petersen engaged a consulting firm to design and install systems and
related software for use in its operations. The systems and software
principally related to an electronic magazine layout system, an advertising
rate and circulation modeling system and an automated pre-press operating
system. Petersen incurred total expenses of $2.5 million, $3.5
37
<PAGE>
million and $4.0 million in each of the three years in the period ended
November 30, 1995, respectively, with respect to this project. These systems
were never completed satisfactorily. Petersen subsequently purchased and
installed commercially available systems to perform such functions at a cost
of less than $175,000. Petersen is currently engaged in litigation over the
matter with the consulting firm and accrued $0.8 million in the nine months
ended August 31, 1996 related to such litigation, which remains the
responsibility of Petersen.
Purchase Accounting Effects. The Acquisition was accounted for using the
purchase method of accounting. As a result, the Acquisition will prospectively
effect the Company's results of operations in certain significant respects.
The aggregate pro forma acquisition cost (including the assumption of ongoing
liabilities incurred in the ordinary course of business and estimated
transaction expenses of $15.3 million) of approximately $480.2 million will be
allocated to the tangible and intangible assets acquired and liabilities
assumed by the Company based upon their respective fair values as of the
acquisition date based upon valuations and other studies that are not yet
available. The preliminary allocation of the purchase price of the assets
acquired in the Acquisition is estimated to result in annual depreciation and
amortization expense of approximately $35.0 million per year. The Company's
historical annual depreciation and amortization expense over the past five
years has been less than $4.5 million per year. In addition, due to the
effects of the increased borrowing of the Company to finance the Acquisition,
the Company's interest expense will increase significantly in the periods
following the Acquisition.
Provision for Income Taxes. Prior to the Acquisition, Petersen was operated
as a subchapter S corporation under the Code. As a result, it did not incur
federal and state income taxes (except with respect to certain states) and,
accordingly, no discussion of income taxes is included in "Results of
Operations" below. Federal and state income taxes (except with respect to
certain states) with respect to Petersen's income during such periods were
incurred and paid directly by Petersen's stockholder. Petersen made periodic
distributions to its stockholder in respect of such tax liability. As a
limited liability company, the Company will also not incur federal and state
income taxes (except with respect to certain states). Federal and state income
taxes (except with respect to certain states) with respect to the Company's
income during future periods will be incurred and paid directly by the
Company's equity holders. Pursuant to the terms of its limited liability
company agreement, the Company will make distributions to its equity holders
in respect of such tax liabilities in future periods.
38
<PAGE>
RESULTS OF OPERATIONS
The following table summarizes Petersen's historical results of operations
as a percentage of revenue for the years ended November 30, 1993, 1994 and
1995 and for the nine month periods ended August 31, 1995 and 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED NOVEMBER 30, AUGUST 31,
---------------------------- ------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Net revenues:
Advertising............... 56.4% 57.7% 57.8% 57.5% 58.7%
Newsstand................. 20.1 19.9 18.7 18.6 18.3
Subscriptions............. 21.4 20.1 19.6 19.7 18.8
Other..................... 2.1 2.3 3.9 4.2 4.2
-------- -------- -------- -------- --------
Total net revenues...... 100.0 100.0 100.0 100.0 100.0
Production, selling and
other direct costs......... 76.0 73.9 80.1 79.4 78.8
-------- -------- -------- -------- --------
Gross profit................ 24.0 26.1 19.9 20.6 21.2
General and administrative
expenses................... 19.1 16.4 13.2 12.6 12.4
-------- -------- -------- -------- --------
Operating income............ 4.9% 9.7% 6.7% 8.0% 8.8%
======== ======== ======== ======== ========
OTHER DATA:
EBITDA...................... 6.6% 11.2% 8.3% 9.5% 10.3%
</TABLE>
Nine Months Ended August 31, 1996 Compared to Nine Months Ended August 31,
1995
Total revenues for the nine months ended August 31, 1996 increased by $8.6
million, or 5.4%, to $168.8 million from $160.2 million for the nine months
ended August 31, 1995. Of this increase, advertising revenue accounted for
$7.0 million, supplemented by a $1.2 million increase in newsstand revenue and
a $0.1 million increase in subscription revenue. The increase in advertising
revenues was due principally to an overall increase in the Company's
advertising rates and higher advertising revenues generated by Motor Trend,
'TEEN and All About You! The increase in newsstand revenue was due principally
to increased sales of 'TEEN and All About You!
Production, selling and other direct costs for the nine months ended August
31, 1996 increased by $5.7 million, or 4.5%, to $133.0 million from $127.3
million for the nine months ended August 31, 1995, primarily as a result of
increased paper costs and incremental production costs. Production, selling
and other direct costs decreased as a percent of revenues over the same period
to 78.8% of revenues for the 1996 period from 79.4% of revenues for the 1995
period. See "--Overview--Paper Prices."
General and administrative expenses for the nine months ended August 31,
1996 increased by $0.8 million, or 4.0%, to $20.9 million from $20.1 million
for the nine months ended August 31, 1995, primarily as a result of an accrual
of $0.8 million for expenses relating to litigation against the software
consultant described in "--Overview--Software Consulting Expenses." General
and administrative expenses decreased as a percent of revenues over the same
period to 12.4% of revenues for the 1996 period from 12.6% of revenues for the
1995 period.
Operating income for the nine months ended August 31, 1996 increased by $2.1
million, or 15.9%, to $14.9 million from $12.8 million for the nine months
ended August 31, 1995, for the reasons stated above.
Year Ended November 30, 1995 Compared to Year Ended November 30, 1994
Total revenues for the year ended November 30, 1995 increased by $11.6
million, or 5.8%, to $213.6 million from $202.0 million for the year ended
November 30, 1994. Of this increase, advertising revenue
39
<PAGE>
accounted for $6.8 million, partially offset by a $0.2 million decrease in
newsstand revenue and supplemented by a $1.3 million increase in subscription
revenue. The increase in advertising revenue was principally due to the
Company's acquisition of Sassy in December 1994.
Production, selling and other direct costs for the year ended November 30,
1995 increased by $21.9 million, or 14.7%, to $171.1 million from $149.2
million for the year ended November 30, 1994, primarily as a result of the
cost of launching new magazine titles, additional costs associated with the
publication of Sassy and increases in paper prices and postal rates.
Production, selling and other direct costs increased as a percent of revenues
over the same period to 80.1% of revenues for the 1995 period from 73.9% of
revenues for the 1994 period due principally to the same causes. See "--
Overview--Paper Prices."
General and administrative expenses for the year ended November 30, 1995
decreased by $5.2 million, or 15.4%, to $28.1 million from $33.3 million for
the year ended November 30, 1994, primarily as a result of lower compensation
expense for Mr. Petersen. General and administrative expenses decreased as a
percent of revenues over the same period to 13.2% of revenues for the 1995
period from 16.4% of revenues for the 1994 period.
Operating income for the year ended November 30, 1995 decreased by $5.1
million, or 26.4%, to $14.4 million from $19.5 million for the year ended
November 30, 1994, for the reasons stated above.
Year Ended November 30, 1994 Compared to Year Ended November 30, 1993
Total revenues for the year ended November 30, 1994 increased by $15.7
million, or 8.4%, to $202.0 million from $186.3 million for the year ended
November 30, 1993. Of this increase, advertising revenue accounted for $11.5
million, supplemented by a $2.5 million increase in newsstand revenue and a
$0.9 million increase in subscription revenue. The increase in advertising
revenue was due primarily to the launch of Mountain Biker, 5.0 Liter Mustang,
Hot Rod Bikes, Mustang & Fords and Custom Classic Trucks and the acquisition
of Bicycle Guide.
Production, selling and other direct costs for the year ended November 30,
1994 increased by $7.6 million, or 5.4%, to $149.2 million from $141.6 million
for the year ended November 30, 1993, primarily as a result of incremental
production costs from the launch of new magazines. Production, selling and
other direct costs decreased as a percent of revenues over the same period to
73.9% of revenues for the 1994 period from 76.0% of revenues for the 1993
period principally due to a new printing contract with more favorable terms.
General and administrative expenses for the year ended November 30, 1994
decreased by $2.3 million. or 6.6%, to $33.3 million from $35.6 million for
the year ended November 30, 1993, primarily as a result of the completion of
start-up activities for new magazine titles, partially offset by increased
compensation expense for Mr. Petersen. General and administrative expenses
decreased as a percent of revenues over the same period to 16.4% of revenues
for the 1994 period from 19.1% of revenues for the 1993 period.
Operating income for the year ended November 30, 1994 increased by $10.3
million, or 113.2%, to $19.5 million from $9.2 million for the year ended
November 30, 1993, for the reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES
Historical Cash Flows from Operating Activities. Net cash provided by
operations was $24.8 million for the nine months ended August 31, 1996
compared to $3.0 million for the nine months ended August 31, 1995. Of this
difference, $18.0 million relates to changes in inventory levels and $3.5
million relates to increased net income. Net cash provided by operations
decreased to $9.6 million for the year ended November 30, 1995 from $27.1
million for the year ended November 30, 1994. This decrease resulted
principally from a $10.6 million increase in inventories and a $4.9 million
decrease in net income. The increase in net cash provided by operations to
$27.1 million for the year ended November 30, 1994 from $10.7 million for the
year ended November 30, 1993 was primarily due to a $10.1 million increase in
net income and a $6.9 million change in balance in accounts payable.
40
<PAGE>
Historical Cash Flows from Investing Activities. Net cash provided by
investing activities was $5.1 million for the nine months ended August 31,
1996, including $2.5 million in proceeds from the sale of its Viking Color
pre-press operations, compared to $3.6 million for the nine months ended
August 31, 1995. Net cash provided by (used in) investing activities was $2.3
million, $(14.5) million and $(30,000) in the years ended November 30, 1995,
1994 and 1993, respectively. The changes were primarily due to the purchase
and sale of marketable securities with cash. See "Capital Expenditures" below
for the level of capital expenditures.
Historical Cash Flow from Financing Activities. Net cash used in financing
activities, which was comprised solely of distributions of Petersen's S
corporation earnings to its stockholder and changes in advances to other
divisions of Petersen, were $20.6 million, $5.1 million, $6.1 million, $17.4
million and $14.9 million for the nine months ended August 31, 1996 and 1995
and the years ended November 30, 1995, 1994 and 1993, respectively.
Financing Activities Relating to the Acquisition. The Initial Offering was
part of a plan designed to enable the Company to finance the Acquisition and
to provide for additional liquidity. In connection with the Acquisition, the
Company: (i) borrowed $200.0 million under the $260.0 million Senior Credit
Facility; (ii) borrowed $100.0 million under the Bridge Financing Facility and
(iii) received equity contributions of $165.3 million from an investor group
led by Willis Stein. The Company used the proceeds from the Initial Offering
to repay the Bridge Financing Facility. See "The Transactions."
The borrowings under the Senior Credit Facility consist of a $100.0 million
Tranche A Loan and a $100.0 million Tranche B Loan, maturing on December 31,
2002 and September 30, 2004, respectively. The Revolving Credit Facility
provides for borrowings in the maximum principal amount of $60.0 million. The
Tranche A Loan amortizes gradually prior to maturity; the Tranche B Loan is
payable primarily in two balloon payments due in 2003 and 2004. The Revolving
Credit Facility becomes due in full on December 31, 2002. The Senior Credit
Facility contains customary provisions with respect to security, covenants
(including financial covenants) and events of default. See "Description of
Senior Credit Facility."
Capital Expenditures. The Company's operations are not capital intensive.
Capital expenditures were $0.7 million and $3.1 million in the nine months
ended August 31, 1996 and 1995, respectively, and $4.4 million, $2.9 million
and $4.7 million in the fiscal years ended November 30, 1995, 1994 and 1993,
respectively.
Liquidity. The Company's principal sources of funds following the
Acquisition are anticipated to be cash flows from operating activities and
borrowings under the Senior Credit Facility. Based upon the successful
implementation of management's business and operating strategy, the Company
believes that these funds will provide the Company with sufficient liquidity
and capital resources for the Company to meet its current and future financial
obligations, including the payment of principal and interest on the Notes, as
well as to provide funds for the Company's working capital, capital
expenditures and other needs. No assurance can be given, however, that this
will be the case. The Company's future operating performance and ability to
service or refinance the Notes and to repay, extend or refinance the Senior
Credit Facility will be subject to future economic conditions and to
financial, business and other factors, many of which are beyond the Company's
control. See "Risk Factors."
In the event of a Change of Control, the Company will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and Additional Interest, if any,
thereon to the repurchase date. Certain events involving a Change of Control
will result in an event of default under the Senior Credit Facility or other
indebtedness of the Company that may be incurred in the future. Moreover, the
exercise by the holders of the Notes of their right to require the Company to
repurchase the Notes may cause an event of default under the Senior Credit
Facility or such other indebtedness, even if the Change of Control does not.
Finally, there can be no assurance that the Company will have the financial
resources necessary to repurchase the Notes upon a Change of Control. See
"Risk Factors--Change of Control" and "Description of the Notes--Change of
Control Offer."
INFLATION
The Company believes that inflation has not had a material impact on its
results of operations for three years ended November 30, 1995.
41
<PAGE>
BUSINESS
The Company is a leading publisher of special-interest magazines. The
Company's diverse portfolio currently contains a total of 73 publications,
including 22 monthly publications, 9 bimonthly publications and 42 single
issue or annual publications. According to Media Market Research Institute,
the Company's magazines reach over 40 million readers each month. The
Company's nationally-recognized magazines include: (i) Motor Trend, which is
recognized as a leading authority on new domestic and foreign automobiles and
has a current monthly circulation of approximately 1.0 million; (ii) 'TEEN,
which has the largest circulation of any of the Company's magazines with a
current monthly circulation of over 1.3 million and (iii) Hot Rod, which is
one of the largest circulation automotive magazines in the world with a
current monthly circulation of over 810,000. The Company's other core
publications are well-known in their respective markets and include Guns &
Ammo, Skin Diver, 4 Wheel & Off-Road, Car Craft, Petersen's Hunting,
Motorcyclist, Sport Truck, Circle Track, Photographic and Dirt Rider. Eight of
the Company's 13 core publications ranked first in their respective markets
base on annual circulation in 1995.
The Company's principal sources of revenues are from advertising and
circulation. The Company had net revenues of $213.6 million and $168.8 million
for fiscal 1995 and the nine months ended August 31, 1996, respectively.
Circulation revenues are generated from both subscription and newsstand sales.
For fiscal 1995, approximately 58% of the Company's revenues were from
advertising, 38% were from circulation (including 20% from subscription sales
and 18% from newsstand sales) and 4% were from other sources.
In fiscal 1995, the Company's 13 core publications each generated a minimum
of approximately $1.0 million of profit contributions and, in the aggregate,
generated over $55.2 million of the Company's profit contribution. During the
same period, no single publication accounted for more than 15% of the
Company's net revenues or 28% of profit contribution. As a result of such
diversification, the Company believes that it is not dependent on any single
publication and is less susceptible to shifts in advertising spending across
industry sectors. The Company's core publications collectively average over 30
years in publication and have developed nationally-recognized branded titles
within each of their respective markets. By using its core publications as a
platform for launching new "spin-off" publications, the Company has been able
to develop a portfolio of highly-specialized publications covering a wide
variety of interests. The Company believes that its reputation as a high-
quality publisher and its significant market presence has historically enabled
its new publications to gain market share more rapidly in their respective
special-interest segments.
Substantially all of the Company's magazines target special-interest
enthusiasts. By doing so, the Company is able to deliver a solid core audience
to its advertisers on a consistent basis and create an opportunity for its
advertisers to efficiently reach their target audience. Due to the special-
interest nature of the Company's magazines, readers not only value their
specialized editorial content but also rely on such magazines as a catalogue
of products in the relevant topic area. This catalogue aspect makes the
Company's magazines an essential advertising medium for many of the Company's
advertisers. Certain of the Company's advertisers rely on the Company's
publications as their primary source of media advertising. As compared to
general-interest magazines, the Company believes that its advertising revenues
are less susceptible to changes in general economic conditions due to the
diversity of its publications, the special-interest nature of its editorial
content and the endemic nature of its advertiser base. In addition, the
Company has a diverse advertiser base, with its top 25 advertisers accounting
for only 32.6% and 32.9% of the Company's advertising revenues during fiscal
1995 and the nine months ended August 31, 1996, respectively.
In addition to offering its advertisers targeted advertising within
individual magazines, the Company can offer its advertisers the ability to
reach a large audience by advertising across the Company's large portfolio of
magazines. Management believes this capability was not fully developed by
Petersen's prior management. In particular, the Company believes that many of
its publications provide its advertisers with unique access to the adult male
(ages 18 to 34) and young female (ages 12 to 19) markets. The Company believes
that, in the aggregate, its publications reach more adult males than those of
any other magazine publisher and reach over one-third of all young females in
the United States. The adult male market is particularly attractive to
advertisers
42
<PAGE>
due to its size and overall purchasing power, while the young female market
provides advertisers with the opportunity to establish brand recognition
during the formative stages of this important consumer group's buying
patterns.
The following table sets forth certain information regarding the Company's
13 core publications for its fiscal year ended November 30, 1995:
<TABLE>
<CAPTION>
NET TOTAL CIRCULATION
MAGAZINE TITLE REVENUES(A) CIRCULATION(B) RANK(B)(C)
-------------- --------------------- --------------------- -----------
(AMOUNTS IN MILLIONS) (COPIES IN THOUSANDS)
<S> <C> <C> <C>
Motor Trend......... $31.3 950.6 2 of 4
'TEEN............... 24.1 1,311.8 3 of 3
Hot Rod............. 19.7 810.2 1 of 2
Guns & Ammo......... 13.6 570.8 1 of 2
Skin Diver.......... 13.3 229.0 1 of 2
4 Wheel & Off-Road.. 12.0 367.7 1 of 2
Car Craft........... 9.8 389.7 1 of 1
Petersen's Hunting.. 7.3 331.2 1 of 1
Motorcyclist........ 6.8 239.6 2 of 2
Sport Truck......... 6.2 192.1 1 of 2
Circle Track........ 6.0 131.6 2 of 3
Photographic........ 5.7 217.5 3 of 3
Dirt Rider.......... 5.4 160.8 1 of 3
</TABLE>
- --------
(a) Includes advertising, circulation and other revenues for the year ended
November 30, 1995.
(b)Based on the average circulation for each publication for the year ended
December 31, 1995.
(c) Includes only national publications, that are tracked by industry analysts
and does not include small regional publications and newsletters.
The Company completed the Acquisition on September 30, 1996. The Investors
pursued the Acquisition because they believed it offered an attractive
opportunity to: (i) acquire a diverse portfolio of profitable magazines with
significant growth potential; (ii) bring together a skilled and experienced
management team, consisting of the Company's new senior managers and
Petersen's existing publishers and editorial staff; (iii) apply professional
management techniques to the Company's portfolio and improve its operating
results by increasing circulation and advertising revenues and reducing
operating costs and (iv) further develop the Company's brand-name franchises
with limited additional capital investment. Management believes that
opportunities exist to achieve each of these results both in the near term and
on a going-forward basis.
INDUSTRY OVERVIEW
The consumer magazine market includes both general-interest and special-
interest publications. General-interest magazines are characterized by broad-
based editorial content and readership, while special-interest magazines have
a more narrow editorial focus and subject-selective readership. The Company
operates primarily within the expanding special-interest segment of the
consumer magazine publishing market. The Company typically derives
approximately 80% of its publication revenues from special-interest magazines
with the balance coming from its general-interest publications, which include
'TEEN, All About You! and Sport. Over the last decade, special-interest
publications targeted to niche audiences have enjoyed significant growth and
are now estimated to account for approximately one quarter of the overall
consumer magazine market in terms of total advertising and circulation
spending. In recent years, special-interest magazines have generally exhibited
stronger growth in both advertising and circulation spending as compared to
general-interest magazines. For example, based on a representative survey of
111 general-interest and 115 special-interest magazines compiled by Veronis,
Suhler & Associates, advertising and circulation spending on special-interest
publications have grown at compound annual rates of 8.1% and 2.7%,
respectively, as compared to 5.6% and 1.3%, respectively, for general-
43
<PAGE>
interest publications during the period from 1990 to 1995. In addition,
because special-interest magazines target enthusiasts, publishers are
generally able to charge a higher cover price as compared to general-interest
magazines. Based on the survey noted above, the average price of a special-
interest magazine was $2.08 in 1995, nearly 50% higher than the $1.41 average
price of a general-interest magazine. For much the same reason, the Company
believes that readers of special-interest magazines are less price-sensitive
than readers of general-interest magazines.
Circulation revenues are generated from subscription and newsstand sales. On
an industry-wide basis, approximately 18% of consumer magazines are currently
distributed through newsstand sales and 82% are distributed through
subscription sales. Over the last fifteen years, the aggregate number of
consumer magazines distributed through newsstand sales has declined in
relation to the number distributed through subscription sales. The Company
believes that this decline is primarily the result of decreased newsstand
sales of general-interest magazines while newsstand sales of special-interest
magazines have remained relatively constant. Due to increases in newsstand
cover prices, the amount of circulation revenue generated from newsstand sales
by special-interest magazines has grown over the last decade. According to the
survey noted above, the average price per copy for special-interest magazines
increased at a compound annual growth rate of 2.6% for the period from 1990 to
1995. In addition, the Company believes that newsstand sales offer an
economically attractive vehicle for launching new magazines, attracting more
affluent subscribers and generating timely feedback about its editorial
content. For both the year ended November 30, 1995 and the nine months ended
August 31, 1996, approximately 49% of the Company's circulation revenues were
derived from newsstand sales and 51% were derived from subscription sales. See
"--Sources of Revenue."
In general, magazine publishers generate the majority of their revenues from
the sale of advertising. Advertising revenues, however, tend to be cyclical
and dependent upon general economic conditions. Historically, increases in
advertising revenues have corresponded with economic recoveries while
decreases have corresponded with general economic downturns. As compared to
general-interest magazines, the Company believes that its advertising revenues
are less susceptible to changes in general economic conditions due to the
diversity of its publications, the special-interest nature of its editorial
content and the endemic nature of its advertiser base.
Industry sources estimate that total advertising spending for special-
interest publications increased by approximately 13% in 1995. According to the
Publishers Information Bureau, the top ten categories of industries ranked by
consumer magazine advertising expenditures in 1995 were automotive and
automotive accessories (15%), mail order and direct response (11%), toiletries
and cosmetics (10%), computers, office equipment and stationery (10%),
business and consumer services (9%), food and food products (8%), apparel,
footwear and accessories (7%), drugs and remedies (6%), travel, hotels and
resorts (5%) and cigarettes, tobacco and accessories (4%). The automotive
industry has traditionally accounted for the largest percentage of total
advertising expenditures in the consumer magazine industry. During the period
from 1990 to 1995, advertising spending by the automotive industry increased
at a compound annual growth rate of 8.2%.
In recent years, consumer magazine publishers have increasingly sought to
diversify their earnings and more effectively utilize their existing
publications by developing non-traditional revenue streams. In general,
magazine publishers have sought to expand the use of their magazines'
editorial content across different media formats and to capitalize on their
existing brand names. On an industry-wide basis, the Company estimates that
consumer magazine publishers currently derive approximately 10% to 20% of
their net revenues from ancillary revenue sources, such as licensing
arrangements, subscriber list rentals, joint ventures and new forms of media.
The Company believes that its portfolio of special-interest magazines provides
unique opportunities to develop ancillary revenues due to the special-interest
nature of such magazines' editorial content and the enthusiast nature of their
readership.
BUSINESS AND OPERATING STRATEGY
The Company's core publications collectively average over 30 years in
publication and have developed nationally-recognized branded titles in each of
their respective markets. The Company believes that the enthusiast
44
<PAGE>
nature of its readership provides it with a loyal subscriber base and enables
it to deliver a solid core audience to its advertisers on a consistent basis.
As a result, management believes that the Company maintains a number of
significant competitive advantages.
Historically, Petersen expanded primarily by introducing special-interest
magazines to serve niche audiences in areas in which its founder had a
personal interest. In pursuing such expansion, Petersen maintained a
consistent focus on the high-quality editorial content of its magazines.
However, Petersen was organized into six distinct publishing groups that
essentially operated independently from one another and were focused primarily
on editorial development and advertising revenue generation rather than
overall profitability. As a result, management believes that Petersen did not
fully realize all available operating synergies.
The Company's new management team has significant experience in the magazine
publishing industry, Based upon such experience, management has developed a
detailed business and operating strategy for the Company, primarily comprising
operating policies and procedures that have proven successful in their prior
experience and are widely practiced throughout the publishing industry. The
Company's business and operating strategy is primarily designed to leverage
off of its nationally-recognized brand names and improve the profitability of
the Company. The key elements of this strategy include:
REORGANIZE OPERATING STRUCTURE. Following the Acquisition, new management
reorganized several operating areas of the Company to facilitate a more
integrated and unified approach to circulation, production and advertising
sales, while retaining independent editorial direction of its magazines. The
Company's circulation operations, which include such functions as subscription
marketing and planning, fulfillment and newsstand distribution, were
previously organized by magazine group and managed by generalists focused on
each magazine group. Circulation operations have been reorganized on a
functional basis across all of the Company's publications and will be managed
by specialists within each function. Certain of these functions are being
relocated to New York in order to take advantage of expertise not readily
available elsewhere. In addition, the 's production activities are being
centralized across all of its publications rather than by magazine Company
group. The Company's national advertising sales management is being relocated
from Los Angeles to New York to be in closer proximity to national advertising
accounts. Similarly, management of the young women's titles is being moved to
New York to increase the visibility of such magazines among advertisers in the
fashion and cosmetic industries.
IMPLEMENT OPERATING IMPROVEMENTS. Management has identified and has
substantially implemented operating improvements that are expected to result
in significant cost savings. These measures include the following:
. REDUCE OPERATING COSTS. At the time of the Acquisition, management
identified certain cost reduction measures including: (i) savings in
personnel and related net lease costs; (ii) lower utilization of
temporary employees and services; (iii) the consolidation of one or more
of the Company's regional sales offices; (iv) tighter purchasing
procedures and controls and (v) reductions in the Company's travel and
entertainment expenditures. A substantial number of these cost reduction
measures have been completed, including personnel reductions expected to
result in annualized cost savings of approximately $4.9 million.
. RESTRUCTURE VENDOR RELATIONSHIPS. Immediately following the Acquisition,
management commenced an extensive review of the Company's significant
vendor relationships, including its printing, paper supply, fulfillment
and newsstand distribution arrangements. Based on that review and
meetings with certain of such vendors, management believes that there are
opportunities to enhance these relationships and to improve the economic
terms of such arrangements for the Company. Although no definitive
agreements have been executed, the Company believes that it will be
successful in achieving more favorable terms with many of its vendors.
. IMPROVE PERFORMANCE OF CERTAIN PUBLICATIONS. Management believes that it
can improve the Company's profitability by implementing changes designed
to eliminate or significantly reduce the losses
45
<PAGE>
currently being generated by certain of the Company's publications. The
Company has five magazines (Sassy, Sport, Petersen's Golfing, Bicycle
Guide and Mountain Biker) that collectively accounted for a negative
profit contribution of $7.6 million and $5.2 million for fiscal 1995 and
the nine months ended August 31, 1996, respectively. In December 1996, the
Company completed the process of merging Sassy into 'TEEN, thereby
eliminating the losses being generated by Sassy. Sassy generated negative
profit contribution of $4.7 million and $2.9 million for fiscal 1995 and
the nine months ended August 31, 1996, respectively. While the remaining
magazines collectively are expected to break even or be marginally
profitable in fiscal 1997, in the event such magazines continue to
generate losses, management expects to take one or more of the following
actions: (i) discontinue or sell such magazines; (ii) merge such magazines
with the Company's existing magazines or (iii) enter into strategic
partnerships with third parties. Management expects that a final decision
with respect to each magazine will be made by the end of fiscal 1997.
INCREASE CIRCULATION AND ADVERTISING REVENUES. Management believes that
there are significant opportunities to increase circulation and advertising
revenues. The Company has historically focused on the newsstand distribution
channel and has relied heavily upon agency subscription sales in managing its
circulation operations. Management believes that it can increase subscription
revenues by instituting programs designed to increase the number of readers
who buy subscriptions directly from the Company. For example, the Company has
begun to develop a database of its over 32 million current or former
subscribers that will allow it to cross-sell its other publications to such
subscribers. In addition, management intends to increase the newsstand and
subscription prices on certain of its publications in order to bring such
prices in line with competitive publications.
Management believes that it can increase the Company's advertising revenues
by adopting a more unified approach to advertising sales, which will focus on
enhancing the ability of the Company's advertisers to purchase advertising
space across all of the Company's magazines that reach their target markets.
In addition, management intends to increase the Company's advertiser base by
targeting new advertisers and advertisers in other industry categories. Such
advertisers include, among others, manufacturers of men's apparel, footwear
and accessories and alcoholic beverages. The Company has also implemented a
new commission sales policy designed to provide more effective incentives to
the Company's advertising sales force. Prior management's policy did not
provide additional incentives to sales personnel once they had reached their
annual sales target, which often occurred prior to the conclusion of
Petersen's fiscal year. In addition, by designing the database described above
with the capability of identifying specific segments within each of its
markets, the Company believes it can offer its advertisers increased value and
thus generate additional advertising revenues.
ESTABLISH PERFORMANCE-BASED INCENTIVES. The significant equity interests
held by the Company's new senior management provide such executives with an
incentive to maximize the Company's overall profitability. In addition, to
provide incentives to the Company's existing management and assist new
management in implementing the new business strategy, the Company plans to
adopt new compensation arrangements designed to reward managers and other
participating employees based upon the Company's operating performance.
DEVELOP ANCILLARY REVENUE SOURCES. The Company was historically operated as
a traditional consumer magazine company deriving substantially all of its
revenues from advertising and circulation sales. On an industry-wide basis,
management estimates that consumer magazine publishers currently derive
approximately 10% to 20% of their revenues from ancillary revenue sources
while the Company currently derives only about 4% of its revenues from such
sources. In recent months, the Company has begun to explore the ancillary
revenue opportunities afforded by its well-established brand names. For
example, the Company has recently entered into licensing agreements relating
to the use of its Motor Trend and Hot Rod brand names for weekly television
shows on The Nashville Network (TNN) and its Guns & Ammo brand name for a
weekly television show on ESPN. In addition, because the editorial content of
many of its magazines would also appeal to readers outside of the United
States, management believes that significant opportunities exist to establish
international licensing agreements, particularly in Asia, Australia, Great
Britain and Western Europe. The Company believes that there
46
<PAGE>
are significant opportunities to increase revenues by leveraging off the
editorial content and the nationally-recognized brand names of the Company's
existing publications through licensing arrangements, strategic joint
ventures, retail alliances, subscriber list rentals, affinity group marketing
and electronic publishing.
ESTABLISH NEW TITLES. The Company has successfully expanded its magazine
portfolio by launching new publications to serve niche audiences in related
markets and by making selective acquisitions of existing magazine titles.
Thirteen of the Company's 31 current monthly and bimonthly titles were
launched or acquired by the Company since 1990. The Company plans to continue
to develop and launch new special-interest magazines and acquire existing
magazines that will complement and enhance its existing portfolio.
SOURCES OF REVENUE
Substantially all of the Company's revenues are derived from advertising and
circulation sales, with lesser amounts derived from other sources such as
subscriber list rentals. Circulation revenues are generated from both
subscription and newsstand sales. The following table sets forth the sources
and amounts of the Company's revenues for the fiscal years ended November 30,
1993, 1994 and 1995 and the nine months ended August 31, 1996 (dollars in
millions):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NOVEMBER 30, NINE MONTHS
---------------------------------------- ENDED
1993 1994 1995 AUGUST 31, 1996
------------ ------------ ------------ ----------------
SOURCES OF REVENUE AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------------------ ------ ----- ------ ----- ------ ----- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising............. $105.1 56.4% $116.6 57.7% $123.4 57.8% $ 99.1 58.7%
Newsstand............... 37.5 20.1 40.1 19.9 39.9 18.7 31.0 18.3
Subscriptions........... 39.8 21.4 40.7 20.1 42.0 19.6 31.7 18.8
Other................... 3.9 2.1 4.6 2.3 8.3 3.9 7.0 4.2
------ ----- ------ ----- ------ ----- -------- -------
Total................. $186.3 100.0% $202.0 100.0% $213.6 100.0% $ 168.8 100.0%
====== ===== ====== ===== ====== ===== ======== =======
</TABLE>
Advertising. Advertising sales accounted for approximately 58% and
approximately 59% of the Company's net revenues for fiscal 1995 and the nine
months ended August 31, 1996, respectively. The Company's advertising rates
and rate structures vary among the Company's publications and are based, among
other things, on the circulation of the particular publication and the size
and location of the advertisement in the publication. The Company's
advertising rates for a full-page advertisement ranged from $1,390 to $24,295
in fiscal 1995. The Company's top 25 advertisers accounted for only 32.6% and
32.9% of the Company's advertising revenues during fiscal 1995 and the nine
months ended August 31, 1996, respectively. As compared to general interest
magazines, the Company believes that its advertising revenues are less
susceptible to changes in general economic conditions due to the diversity of
its publications, the special-interest nature of its editorial content and the
endemic nature of the Company's advertiser base.
The Company's advertising revenues are principally derived from large and
small manufacturers of products endemic to the editorial content of the
Company's magazines, such as aftermarket automotive parts, hunting equipment,
recreational firearms, bicycles and bicycle accessories, diving equipment and
photographic equipment and supplies. Such manufacturers utilize the Company's
magazines to efficiently advertise their specialized products to the Company's
enthusiast readership. In addition to revenues from endemic advertising, the
Company also derives a portion of its advertising revenues from well-known
national manufacturers of consumer products that do not directly relate to the
editorial content of the Company's magazines, such as liquor, cosmetics,
financial products and apparel. The Company derives the largest portion of its
advertising revenues from the automotive industry, which has traditionally
accounted for the largest percentage of total advertising expenditures in the
consumer magazine industry. For fiscal 1995, the Company derived approximately
17.9% and 20.6% of its advertising revenues from automotive manufacturers of
original equipment and aftermarket parts, respectively.
47
<PAGE>
Newsstand. Newsstand distribution accounted for approximately 19% of the
Company's net revenues for both fiscal 1995 and the nine months ended August
31, 1996. As compared to the industry average, the Company typically has a
greater percentage of revenues derived from newsstand sales due to the
Company's historic focus on the newsstand distribution channel and the
significant number of single issue or annual publications, which are sold
exclusively through newsstands. The Company generally receives between 40% and
50% of the cover price from an individual magazine sold through a newsstand
with the balance of such cover price going to such magazine's distributor,
wholesaler and retailer.
Subscriptions. Subscription sales accounted for approximately 20% and
approximately 19% of the Company's net revenues for fiscal 1995 and the nine
months ended August 31, 1996, respectively. Subscriptions to the Company's
magazines are generally sold either directly by the Company or by an
independent subscription agent, such as Publishers' Clearinghouse. Such agents
remit a percentage of the subscription price to the Company, ranging from 0%
to 75%. In certain instances, the subscription agent receives a fee from the
Company in addition to retaining the entire subscription price. In the
aggregate, the Company receives approximately 10% to 15% of the total price of
subscriptions sold through agents. The Company has historically sold its
subscriptions using a variety of techniques including direct reply
subscription cards, direct mail and television advertisements.
Other Revenue Sources. The Company was historically operated as a
traditional consumer magazine company deriving substantially all of its
revenues from advertising and circulation sales. On an industry-wide basis,
management estimates that consumer magazine publishers currently derive
approximately 10% to 20% of their revenues from ancillary revenue sources
while the Company currently derives only about 4% of its revenues from
ancillary sources. These additional revenues are derived primarily from
subscriber list rentals and sponsorship of special events, such trade shows
and outdoor festivals that relate to the editorial content of the Company's
magazines. In recent months, the Company has begun to explore the ancillary
revenue opportunities afforded to it as a result of its well-established brand
names. For example, the Company has recently entered into licensing agreements
relating to the use of its Motor Trend and Hot Rod brand names for weekly
television shows on The Nashville Network (TNN) and its Guns & Ammo brand name
for a weekly television show on ESPN.
The Company believes that there are significant opportunities to increase
revenues by leveraging off the editorial content and the nationally-recognized
brand names of the Company's existing publications. With the growth of
electronic publishing, the Company believes that there will be increased
opportunities to utilize the editorial content of the Company's publications
across different formats. The Company has already established a web-site on
the Internet for Motor Trend and Bicycle Guide, and expects to establish a
'TEEN web-site in the next twelve to twenty-four months. The Company believes
that electronic publishing offers opportunities to generate additional
revenues through increased advertising sales, access fees and additional
subscription sales.
The Company also believes that significant opportunities exist to generate
additional revenues through affinity group marketing programs pursuant to
which the Company would attempt to sell complementary products or services
directly to its subscribers. Through such programs, the Company will seek to
increase its sales to a typical subscriber from a single magazine subscription
to a variety of related products and services. The Company believes that its
special-interest publications will provide an attractive platform through
which to pursue such programs. The Company also intends to enter into
licensing arrangements with manufacturers for the use of the Company's
nationally-recognized brand names.
Because the editorial content of many of its magazines would also appeal to
readers outside the United States, management believes that significant
opportunities exist to establish international licensing agreements,
particularly in Asia, Australia, Great Britain and Western Europe. Other areas
that the Company believes it can develop additional revenue streams include
developing business-to-business publications, sponsoring trade shows,
generating additional subscriber list rentals and entering into strategic
joint ventures. As a result of its large number of publications, the Company
has a subscriber list that includes over 32 million names of current or former
subscribers. The Company is currently developing a database that includes such
names and believes that it can increase list rental income by marketing such
subscriber list database to a broad group of potential users.
48
<PAGE>
PUBLICATIONS
For fiscal 1995, the Company's portfolio included 22 monthly, 7 bimonthly
and 44 single issue or annual publications. The following table sets forth
certain information relating to the Company's current portfolio of monthly and
bimonthly publications:
<TABLE>
<CAPTION>
AVERAGE CIRCULATION FOR THE YEAR
ENDED DECEMBER 31, 1995 YEAR OF
---------------------------------------- FREQUENCY OF INTRODUCTION
NEWSSTAND SUBSCRIPTION TOTAL PUBLICATION OR ACQUISITION
----------- -------------- ------------ ------------ --------------
(COPIES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Motor Trend............. 163.8 786.8 950.6 Monthly 1949
'TEEN................... 386.6 925.2 1,311.8 Monthly 1957
Sassy................... 98.7 623.4 722.1 Monthly 1994
All About You!.......... 251.4 13.7 265.1 Bi-Monthly 1995
Hot Rod................. 141.3 668.9 810.2 Monthly 1948
Car Craft............... 297.2 92.5 389.7 Monthly 1953
4 Wheel & Off-Road...... 129.9 237.8 367.7 Monthly 1978
Sport Truck............. 81.7 110.4 192.1 Monthly 1991
Chevy High Performance.. 71.6 69.3 140.9 Monthly 1987
Circle Track............ 41.9 89.7 131.6 Monthly 1982
Rod & Custom............ 41.4 64.8 106.2 Monthly 1955
5.0 Liter Mustang....... 43.6 18.8 62.4 Monthly(b) 1994
Mustang & Fords......... 50.7 54.9 105.6 Bi-Monthly 1994
Custom Classic Trucks... 43.0 33.8 76.8 Bi-Monthly 1994
Hot Rod Bikes........... 39.0 34.9 73.9 Bi-Monthly(c) 1994
Kit Car................. 37.9 19.1 57.0 Bi-Monthly 1983
Skin Diver.............. 27.9 201.1 229.0 Monthly 1951
Photographic............ 43.9 173.6 217.5 Monthly 1972
Motorcyclist............ 77.4 162.2 239.6 Monthly 1971
Dirt Rider.............. 48.4 112.4 160.8 Monthly 1982
Bicycle Guide........... 19.3 87.8 107.1 10 Issues Per Year 1993
Sport Rider............. 69.0 32.2 101.2 Bi-Monthly 1993
Mountain Biker.......... 33.7 43.5 77.2 10 Issues Per Year 1994
Guns & Ammo............. 134.8 436.0 570.8 Monthly 1958
Handguns................ 63.3 106.0 169.3 Monthly 1987
Petersen's Hunting...... 40.3 290.9 331.2 Monthly 1973
Petersen's Bowhunting... 39.0 99.9 138.9 8 Issues Per Year 1988
Sport................... 105.4 648.8 754.2 Monthly 1988
Petersen's Golfing...... 36.7 121.3 158.0 Monthly 1994
</TABLE>
- --------
(a) The Company has scheduled the launch of Super Street and 4x4 Power as
monthly publications in fiscal 1996. These publications have no
significant operating history and therefore have not been included in the
table.
(b) This publication was converted to a monthly publication from a bimonthly
publication in October 1996.
(c) Scheduled to become a monthly publication in January 1997.
The Company also publishes a wide variety of single issue publications,
annuals, hard cover books and technical volumes. These publications generally
provide more in-depth coverage of topics addressed in the Company's monthly
and bimonthly magazines. Examples of such single issue publications include
Motor Trend New Car Buyer's Guide, Hot Rod Annual, Car Craft Drag Racing,
Chevy High Performance Special, Guns & Ammo Annual, Firearms for Law
Enforcement, Photo Buyer's Guide and Motorcycle Buyer's Guide. By utilizing
portions of the editorial content previously appearing in its monthly and
bimonthly publications, the Company is able to generate additional revenues in
a cost-effective manner through such publications. In addition, the Company
utilizes single issue publications as a means of developing and testing new
publications. Many of the
49
<PAGE>
Company's current monthly and bimonthly publications were first introduced as
single issue publications. The Company published 42 single issue publications
in fiscal 1996.
The following sets forth a brief description of each of the Company's 13
core publications:
Motor Trend is the Company's flagship publication and is recognized as a
leading authority on new domestic and foreign automobiles. Founded by the
Company in 1949, Motor Trend provides comprehensive information and guidance
to new car buyers as well as car and truck enthusiasts. Motor Trend typically
tests more than 200 new cars, trucks, minivans and sport utility vehicles
annually, which the Company believes is more than any other competitive
publication. Many of these tests are conducted in the context of multi-vehicle
comparison tests, which provide the reader with detailed technical and driving
analysis in an easy-to-understand format. Motor Trend's annual automotive
industry awards (Car of the Year, Import Car of the Year and Truck of the
Year) are widely regarded as the most prestigious in the industry.
For fiscal 1995, Motor Trend generated approximately 15% of the Company's
net revenues. In July 1996, the Company established a Motor Trend web-site on
the Internet, which currently contains approximately 30% of the editorial
content of the monthly edition. The Company believes that the Internet offers
the Company additional opportunities to generate revenues through increased
advertising sales, access fees and additional subscription sales. The Company
has also licensed the use of the Motor Trend brand name in connection with a
weekly television show for The Nashville Network (TNN). For fiscal 1996, the
Company expects to publish six Motor Trend buyer's guides. Motor Trend
competes for circulation on the basis of the nature and quality of its
editorial content. Motor Trend's principal competitors are Car and Driver,
Road & Track and Automobile.
'TEEN has the largest circulation of any of the Company's magazines. 'TEEN's
editorial content covers a broad range of topics relevant to girls aged 12 to
19, including fashion, beauty, entertainment and a wide variety of
contemporary issues. 'TEEN places a strong emphasis on the development of
self-esteem and self-confidence among its readers. 'TEEN principally competes
with Seventeen and YM (Young & Modern). For fiscal 1995, 'TEEN generated
approximately 11% of the Company's net revenues.
As part of its business strategy, management intends to make a number of
changes to 'TEEN designed to increase its appeal to both readers and
advertisers, including a refocusing of the editorial content of 'TEEN to
attract more readers in their late teens in an effort to increase advertising
revenues from the cosmetic and fashion apparel industries. In addition,
management intends to improve 'TEEN's cover layout and artwork and upgrade the
paper grade used for its production. 'TEEN's management is being moved to New
York to increase its visibility among advertisers in the fashion and cosmetic
industries.
Hot Rod was the first magazine launched by the Company's founder in 1948.
Hot Rod is dedicated to the sport of "hot rodding" and primarily focuses on
high performance and personalized vehicles. Hot Rod's editorial content covers
all aspects of the performance industry and features the latest trends,
performance cars and trucks, custom built street rods as well as racing
vehicles of all types. Hot Rod's comprehensive coverage includes in-depth
product testing, technical articles, editorial commentary, road tests, engine
buildups and photo stories on project cars. Hot Rod is the dominant
publication in its targeted market. The Company has licensed the use of the
Hot Rod brand name in connection with a weekly television show for The
Nashville Network (TNN). For fiscal 1995, Hot Rod generated approximately 9%
of the Company's net revenues.
Guns & Ammo is edited for the sportsman with a keen interest in the
practical applications of sporting firearms, with an emphasis on their safe
and proper use. Guns & Ammo features information on current production of
sporting arms and their use, as well as technical and semi-technical articles
on all facets of sport shooting. As active participants, the editors of Guns &
Ammo share the interests of their readers, and each issue of the magazine
delivers a well-balanced editorial mix that includes hunting, shooting,
reloading, antique and modem arms, ballistics and arms legislation. Natural
resource protection and environmental preservation as well
50
<PAGE>
as in-depth reviews of new products and new trends represent other major
editorial issues covered by internationally renowned experts. Guns & Ammo
principally competes with Shooting Times. The Company has licensed the use of
the Guns & Ammo brand name in connection with a weekly television show for
ESPN. For fiscal 1995, Guns & Ammo generated approximately 6% of the Company's
net revenues.
Skin Diver was introduced by the Company in 1951 and is the largest diving
magazine in the world in terms of annual circulation. The magazine's editorial
focus involves three basic categories: (i) diving news and diving safety and
educational issues; (ii) dive product performance reviews and (iii) local and
overseas dive travel. Skin Diver provides information on scuba diving
equipment, snorkeling, underwater photography, shipwreck exploration, marine
life, organized diving events, scuba education and dive travel. With global
coverage of dive travel activities, Skin Diver features in every issue dive
resorts, live-aboard dive boats and attractions in over 70 countries and
islands around the world. All topics are covered by an internal staff and
contributing editors who are among the most experienced and well trained
divers in the world. Skin Diver is the only national publication that focuses
primarily on skin diving and competes on a limited basis with Rodale's Scuba
Diving. For fiscal 1995, Skin Diver generated approximately 6% of the
Company's net revenues.
4 Wheel & Off-Road is widely considered the leading magazine among truck
enthusiasts. Established in 1978, 4 Wheel & Off-Road is dedicated to the four-
wheel drive enthusiast and industry. 4 Wheel & Off-Road is aimed at people
who: (i) are considering the purchase of a new four-wheel drive vehicle; (ii)
want to accessorize and improve their vehicle or (iii) frequently utilize
their four-wheel drives for enjoyment, many times in a competitive setting. 4
Wheel & Off-Road is regarded as a prominent source of the latest and most
accurate technical articles, including tests of new products and step-by-step
installation of popular accessories such as suspension lifts and engine
modifications. In addition to a strong technical base, 4 Wheel & Off-Road also
features monthly articles which cover the nation's most unique truck and off-
road events. 4 Wheel & Off-Road principally competes with Four Wheeler. For
fiscal 1995, 4 Wheel & Off-Road generated approximately 6% of the Company's
net revenues.
Car Craft is the most comprehensive do-it-yourself street performance
magazine currently in production in the United States. Established in 1953,
Car Craft is devoted to knowledgeable enthusiasts interested in obtaining
maximum legal performance from modified street machines and racing vehicles.
Car Craft features informative monthly articles, including technical how-to-
articles, in-depth testing of new performance cars and information regarding
new performance technology. Car Craft does not currently face competition from
any other national publication. For fiscal 1995, Car Craft generated
approximately 5% of the Company's net revenues.
Petersen's Hunting ("Hunting") is the only U.S. publication devoted entirely
to the sport of recreational hunting. Every issue contains instructional and
entertaining articles for the true hunting enthusiast. Hunting presents in-
depth coverage of the various hunting disciplines: big and small game,
waterfowl, upland game, guns and loads and foreign hunting. Monthly
departments focus on the more specialized aspects of the sport and its
equipment, including game management, vehicles, gun dogs, optics, handloading,
bowhunting and firearms. Editorial coverage also includes conservation and
ecological issues, the critical roles played in these areas by the hunter and
the manufacturer, and basic where-to and how-to information for all types of
recreational hunting. Hunting competes indirectly with American Hunter and, to
a lesser extent, with North American Hunter and Sports Afield. For fiscal
1995, Hunting generated approximately 3% of the Company's net revenues.
Motorcyclist is the only U.S. publication that is dedicated exclusively to
street motorcycles. The magazine's editorial focus is on the practical aspects
of owning, maintaining and riding a street motorcycle. Motorcyclist is written
for the serious enthusiast, offering the most authoritative road tests in the
industry along with information on how to improve and modify the reader's
current motorcycles. Regular features include maintenance and performance-
improvement articles and safety information such as helmet comparisons and
riding-techniques. Motorcyclist principally competes with Cycle World. For
fiscal 1995, Motorcyclist generated approximately 3% of the Company's net
revenues.
51
<PAGE>
Sport Truck is a full-service magazine that strives to keep its readers
informed of every aspect concerning the street truck marketplace, covering the
entire range of pickup and sport utility vehicles. Sport Truck provides both
step-by-step and technical articles, which detail the customizing process and
provide complete coverage of the product. Sport Truck's editorial focus is on
the latest trucks on the market as well as prototypes, including both domestic
and import models. Sport Truck's principal competition is from Truckin'
magazine. For fiscal 1995, Sport Truck generated approximately 3% of the
Company's net revenues.
Circle Track is the leading technical magazine for oval-track racers, fans
and enthusiasts. Circle Track provides a special emphasis on how-to technical
articles, in-depth discussions of engine, chassis and racing technology,
descriptive car features, behind-the-scenes event coverage and action
photography. Circle Track was introduced in 1982 and currently competes with
Stock Car Racing. For fiscal 1995, Circle Track generated approximately 3% of
the Company's net revenues.
Photographic magazine is a how-to guide dedicated to increasing photographic
knowledge, skill and enjoyment for both amateurs and professionals.
Photographic is edited for all levels of photography, blends equipment
coverage with reports on photography techniques, workshops, schools, photo
travel and contests. Each issue includes exciting travel features that
encourage readers to test and improve their photography skills. Each issue
also includes segments on outdoor and action photography as well as
information on travel destinations and helpful information on how to best take
advantage of the photographic opportunities travel brings. Photographic was
introduced in 1972 and principally competes with American Photo and Popular
Photography. For fiscal 1995, Photographic generated approximately 3% of the
Company's net revenues.
Dirt Rider is the world's largest dirt riding publication in terms of
circulation and covers all aspects of off-road motorcycling. Dirt Rider offers
readers full coverage of off-road motorcycling including new motorcycle
evaluations, technical information, riding tips and the latest in riding
accessories in an easy-to-read format. The editorial content focuses on
accurate and insightful reviews of the latest machinery and aftermarket
products from the off-road riding industry. Dirt Rider principally competes
with Dirt Bike and Motocross Action. For fiscal 1995, Dirt Rider generated
approximately 3% of the Company's net revenues.
PRODUCTION AND DISTRIBUTION
The Company employs a staff of professionals that oversees the production,
printing, distribution and fulfillment of its magazines. Through the use of
state-of-the-art production equipment, economies of scale in printing
contracts and efficiencies in subscription solicitation and fulfillment, the
Company is able to effectively produce and distribute all of its publications.
The Company's production system for both graphics and editing is state-of-the
art. Approximately 60 employees of the Company are engaged in the production
and distribution of the Company's publications.
In an effort to reduce production costs, the Company sold all of its assets
relating to its pre-press operations to World Color Press, Inc. ("World
Color") for approximately $2.5 million in February 1996. At the same time, the
Company entered into an agreement with World Color pursuant to which World
Color agreed to provide the Company's color separation, pre-press and related
service requirements with respect to most of the Company's publications for
the term of the agreement. Under the agreement, the Company is generally
required to use World Color for at least 85% of its pre-press and related
service requirements. This agreement with World Color expires on February 28,
2001.
A majority of the Company's magazines, including Motor Trend, Hot Rod,
'TEEN, 4 Wheel & Off-Road, Car Craft, Circle Track, Skin Diver, Guns & Ammo
and Hunting, are printed by World Color pursuant to an agreement that expires
on December 31, 1998. The Company's remaining magazines including All About
You! and Sport Rider, are printed by Johnson & Hardin Printing ("J&H"),
pursuant to an agreement that expires on December 31, 1997. The Company
believes that its relationships with its printers are good. However, should
the Company need to change printers, it is confident that other printers of
similar quality could be engaged on the
52
<PAGE>
same or better terms. The Company believes that its high volume of printing
with World Color and J&H enables it to receive favorable printing rates.
The newsstand distribution of the Company's magazines is handled exclusively
by Warner Publisher Services, Inc. ("Warner") pursuant to a distribution
agreement. Such agreement will remain in effect until December 31, 1997,
subject to automatic 90-day extensions thereafter unless either party delivers
a termination notice. Warner distributes the Company's publications through a
network of marketing representatives to domestic independent wholesalers as
well as to other channels of distribution. Warner also provides the Company
with other services, including management information and promotional and
specialty marketing services. Warner's marketing representatives solicit
national, regional and local retailers in an effort to expand the number of
retail outlets for the Company titles.
The Company's subscriptions are serviced by Neodata Services, Inc.
("Neodata"), which performs the following services for the Company: receiving,
verifying, balancing and depositing payments from subscribers; maintaining
master files on all subscribers by magazine; issuing bills and renewal notices
to subscribers; issuing labels, packaging and mailing magazines as directed by
the Company and furnishing various reports to monitor all aspects of the
subscription operations.
Immediately following the Acquisition, management commenced an extensive
review of the Company's significant vendor relationships, including its
printing, paper supply, fulfillment and newsstand distribution arrangements.
Based on that review and subsequent meetings with certain of such vendors,
management believes that there are opportunities to enhance these
relationships and to improve the economic terms of such arrangements for the
Company. Although no definitive agreements have been executed, the Company
believes that it will be successful in either amending its existing agreements
or entering into new agreements on more favorable terms with many of its
vendors.
RAW MATERIALS
The Company's principal raw material is paper. The Company used 69.6
million, 76.0 million and 84.4 million pounds of commodity grade paper in its
fiscal years ended November 30, 1993, 1994 and 1995, respectively, resulting
in a total cost of paper during such periods of $29.0 million, $30.5 million
and $39.3 million, respectively. While paper prices have increased by an
average of less than 1% annually since 1989, certain commodity grades have
shown considerable price volatility during that period, including the
commodity grade used by the Company. Paper prices rose sharply during the
later part of 1995, and in response, Petersen purchased a large supply of 32
lb. paper in December 1995 at prices ranging from $0.61 to $0.66 per pound in
anticipation of additional price increases and supply shortages continuing for
the remainder of 1995 and 1996. Petersen purchased enough paper to meet all of
its production requirements through September 1996. The price of such paper
subsequently returned to historical levels of approximately $0.50 per pound in
May 1996. The increase in paper prices in late 1995 and Petersen's large
purchase at such increased prices materially adversely affected Petersen's
production, selling and other direct costs for year ended November 30, 1995
and the nine months ended August 31, 1996. These events increased Petersen's
production, selling and other direct costs by approximately $1.4 million and
$4.8 million for the year ended November 30, 1995 and the nine months ended
August 31, 1996, respectively (assuming Petersen would have otherwise been
able to purchase paper during these periods at the 20-year median price of
approximately $0.50 per pound (as adjusted for inflation)).
Following the Acquisition, the Company entered into an oral agreement with a
vendor to secure sufficient paper to meet its projected raw material needs
through the end of fiscal 1997 at or below current market prices. While there
can be no assurances, the Company expects that such agreement will be
finalized by the end of 1996. No assurance can be given, however, that future
fluctuations in paper prices after 1997 will not have a material adverse
effect on the results of operations and financial condition of the Company.
See "Risk Factors--Paper Price Volatility and Postal Prices" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."
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<PAGE>
COMPETITION
The magazine publishing business is highly competitive. The Company
principally competes for advertising and circulation revenues with publishers
of other special-interest consumer magazines with similar editorial content
with those published by the Company. Such competitors include: K-III
Communications Company, which publishes Seventeen, Automobile and Truckin';
Hachette Filipacchi Magazines, Inc., which publishes Road and Track, Car &
Driver, Popular Photography and Cycle World; Gruner & Jahr Printing and
Publishing Company, which publishes YM (Young & Modern); Rodale Press Inc.,
which publishes Bicycling and Rodale's Scuba Diving and The Times Mirror
Company, which publishes Outdoor Life, Field & Stream and Golf Magazine.
Certain of the Company's competitors are larger and have greater financial
resources than the Company. Most of the Company's magazines face competition
within each of their respective markets from one to three other publications.
The Company believes that it competes with other special-interest publications
based on the nature and quality of its magazines' editorial content. Eight of
the Company's 13 core publications ranked first in their respective markets
based on annual circulation in 1995.
In addition to other special-interest magazines, the Company also competes
for advertising revenues with general-interest magazines and other forms of
media, including broadcast and cable television, radio, newspaper, direct
marketing and electronic media. In competing with general-interest magazines
and other forms of media, the Company relies on its ability to reach a
targeted segment of the population in a cost-effective manner.
INTELLECTUAL PROPERTY
The Company believes that it has developed strong brand name awareness
within each of its magazines' targeted markets. As a result, the Company
regards its branded magazine titles and logos to be valuable assets. The
Company has registered numerous trademarks, service marks and logos used in
its publishing business in the United States and foreign countries in which
the Company conducts business. In addition, each one of the Company's
publications is protected under Federal copyright laws. In connection with the
Acquisition, the Company entered into a license agreement with Mr. Petersen
pursuant to which it was granted an exclusive license to use the Petersen name
in perpetuity. The Company believes that it owns or licenses all the
intellectual property rights necessary to conduct its business.
PROPERTIES
The Company publishes its magazines and houses its corporate and
administrative staff at its headquarters located at 6420 Wilshire Boulevard,
Los Angeles, California. Information relating to the Company's corporate
headquarters and other regional sales offices is set forth in the following
table:
<TABLE>
<CAPTION>
LOCATION ADDRESS SQUARE FOOTAGE TERM EXPIRATION DESCRIPTION OF USE
-------- ------- -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Los Angeles............. 6420 Wilshire Boulevard 209,475 11/30/09 Headquarters
Los Angeles............. 8480 Sunset Boulevard 2,300 month-to-month Photo Studio
New York................ 437 Madison Avenue 25,000 8/31/04 Sales Office
Chicago................. 815 North LaSalle Street 10,000 9/30/05 Sales Office
Detroit................. 333 Fort Street 9,346 6/30/97 Sales Office
Atlanta................. Five Concourse Parkway 3,524 4/30/98 Sales Office
Dallas(a)............... 800 West Airport Freeway 2,929 12/31/97 Sales Office
</TABLE>
- --------
(a) Such sales office was closed pursuant to management's business and
operating strategy. The Company intends to sublease the property to a
suitable tenant at its earliest opportunity.
The Company intends to consolidate one or more of the regional sales offices
listed above as part of its business and operating strategy. The Company
leases space used for its corporate headquarters, photo studio and Chicago
regional sales office from Mr. Petersen. See "Certain Transactions."
54
<PAGE>
EMPLOYEES
As of October 31, 1996, the Company employed approximately 543 full-time
employees, none of whom are members of a union. After the Acquisition, the
Company initiated a restructuring plan which included the termination of
certain employees in various corporate and operating positions. The Company
believes that its relations with its employees are satisfactory.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. Management does not believe that the outcome of any
of the matters in which it is currently involved will have a material adverse
effect on the financial condition or results of operations of the Company.
55
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information (ages as of August 31,
1996) with respect to the persons who are members of the Board of Directors
(the "Board") of BrightView or executive officers or key employees of the
Company or Holdings. BrightView controls the policies and operations of the
Company. See "Limited Liability Company Agreement." Willis Stein has the
ability to designate all of the members of the Board of BrightView pursuant to
the Securityholders Agreement. See "Security Ownership of Certain Beneficial
Owners and Management--Securityholders Agreement."
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES
---- --- --------------------
<S> <C> <C>
D. Claeys Bahrenburg.... 49 Chief Executive Officer and Director
Neal Vitale............. 43 President, Chief Operating Officer and Director
Richard S. Willis....... 36 Executive Vice President--Chief Financial Officer
Michael Borchetta....... 31 Vice President--Circulation
Jay N. Cole............. 56 Executive Publisher
John Dianna............. 54 Executive Publisher
Ken Elliott............. 56 Executive Publisher
Lee Kelly............... 54 Executive Publisher
Richard P. Lague........ 52 Executive Publisher
Paul J. Tzimoulis....... 58 Executive Publisher
James D. Dunning, Jr. .. 49 Director, Chairman and Chief Executive Officer of Holdings
Laurence H. Bloch....... 42 Director and Vice Chairman of Holdings
Avy H. Stein............ 42 Director
Daniel H. Blumenthal.... 33 Director
Stuart Karu............. 49 Director
Robert E. Petersen...... 69 Chairman Emeritus
</TABLE>
D. Claeys Bahrenburg has served as the Chief Executive Officer of the
Company and a Director of BrightView and Capital since the Acquisition. From
1989 to 1995, Mr. Bahrenburg served as President of Hearst's Magazine
Publishing Division, the largest publisher of monthly magazines in the world.
Prior to that time, he served as Executive Vice President and Group Publishing
Director at Hearst from 1986 to 1989, where his responsibilities included
overseeing 12 publications, new magazine development and brand development.
From 1981 to 1986, Mr. Bahrenburg held the position of Publisher of both House
Beautiful and Cosmopolitan.
Neal Vitale has served as the President and Chief Operating Officer of the
Company and a Director of BrightView and Capital since the Acquisition. From
1989 to 1996, Mr. Vitale was employed by Cahners Publishing Company
("Cahners"), a division of Reed Elsevier, Inc. and a leading business-to-
business publisher, in a variety of managerial capacities, including Vice
President of Consumer Publishing; Vice President/General Manager of Variety
and, most recently, as Group Vice President, Entertainment, where he was
responsible for the publication of Variety, Daily Variety, Broadcasting &
Cable, Moving Pictures International, On Production and Tradeshow Week. From
1984 to 1989, Mr. Vitale was a partner at McNamee Consulting Company, Inc., a
management consulting firm specializing in publishing and direct marketing.
Richard S. Willis has served as Executive Vice President--Chief Financial
Officer of the Company and Capital since the Acquisition. Prior to the end of
1996, Mr. Willis is expected to be elected as a director of BrightView. Prior
to the Acquisition, Mr. Willis served as the Vice President, Finance of
Petersen since October
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1995. From 1993 to 1995, Mr. Willis served as the Executive Vice President and
Chief Financial Officer of two divisions of World Color and from 1990 to 1993
as the Chief Financial Officer and Secretary of Aster Publishing Company. From
1987 to 1990, Mr. Willis served as the Chief Financial Officer and Vice
President of Finance and Administration of the consumer magazine group of
Cowles Media Company. Prior thereto, Mr. Willis held various financial and
managerial positions with Capital Cities/ABC, including the Chief Financial
Officer of its consumer magazine division. Mr. Willis is not affiliated with
Willis Stein.
Michael Borchetta has served as Vice President--Circulation of the Company
since the Acquisition. Prior to joining the Company, Mr. Borchetta served as
Circulation Director of Cahners since 1989. Mr. Borchetta has also held
positions with Act III Communications and Cowles Media Company.
Jay N. Cole currently serves as an Executive Publisher of the Company. Mr.
Cole served with Petersen for over nine years, most recently as Vice
President--Executive Publisher. Mr. Cole has primary responsibility for the
publication of 'TEEN and All About You!
John Dianna currently serves as an Executive Publisher of the Company. Mr.
Dianna served with Petersen for over 27 years, most recently as Vice
President--Executive Publisher. Mr. Dianna is primarily responsible for the
publication of Hot Rod, 4 Wheel & Off-Road, Car Craft, Sport Truck, Circle
Track and related publications.
Ken Elliott currently serves as an Executive Publisher of the Company. Mr.
Elliott served with Petersen for over 22 years, most recently as Vice
President--Executive Publisher. Mr. Elliott is primarily responsible for the
publications of Guns & Ammo, Hunting, Bowhunting and related publications.
Lee Kelly currently serves as an Executive Publisher of the Company. Mr.
Kelly served with Petersen for over 20 years, most recently as Vice
President--Executive Publisher. Mr. Kelly is primarily responsible for the
publication of Motor Trend, Sport and related publications.
Richard P. Lague currently serves as an Executive Publisher of the Company.
Mr. Lague served with Petersen for approximately 20 years, most recently as
Vice President--Executive Publisher. Mr. Lague is primarily responsible for
the publications of Motorcyclist and motorcycle related publications, Bicycle
Guide and Mountain Biker.
Paul J. Tzimoulis currently serves as an Executive Publisher of the Company.
Mr. Tzimoulis served with Petersen for over 25 years, most recently as Vice
President--Executive Publisher. Mr. Tzimoulis is responsible for the
publication of Skin Diver and Photographic.
James D. Dunning, Jr. has served as the Chairman and Chief Executive Officer
of Holdings and a Director of BrightView and Capital since the Acquisition.
Since 1992, Mr. Dunning has been Chairman and Chief Executive Officer of
TransWestern, the largest independent publisher of yellow pages in the United
States and is currently Chairman and Chief Executive Officer of The Dunning
Group. Mr. Dunning was formerly Chairman of SRDS, a media information and
database publisher. From 1987 to 1992, Mr. Dunning was Chairman, Chief
Executive Officer and President of Multi-Local Media Information Group, Inc.
("MLM"), a yellow pages and database company. From 1985 to 1986, he served as
Executive Vice President of Ziff Communications, a consumer and trade
publisher. From 1982 to 1984, he was Senior Vice President and Director of
Corporate Finance at Thomson McKinnon Securities, Inc. ("Thomson McKinnon"),
an investment banking firm. Mr. Dunning served as President of Rolling Stone
Magazine from 1977 to 1982.
Laurence H. Bloch has served as the Vice Chairman of Holdings and a Director
of BrightView and Capital since the Acquisition. Mr. Bloch also serves as Vice
Chairman and Chief Financial Officer TransWestern, which he joined in 1993.
From 1990 to 1992, Mr. Bloch was Senior Vice President and Chief Financial
Officer of Lanxide Corporation, a materials technology company. Between 1980
and 1990, Mr. Bloch was an investment banker, initially with Thomson McKinnon
and later as a Managing Director of Smith Barney. Mr. Bloch is a director of
TransWestern and was formerly a director of SRDS and MLM.
57
<PAGE>
Avy H. Stein has served as a Director of BrightView and Capital since the
Acquisition. Mr. Stein has been a Managing Director of Willis Stein since its
inception in 1994. Prior to that time, he served as a Managing Director of
CIVC, a venture capital investment firm, from 1989 to 1994. Prior to his
tenure at CIVC, Mr. Stein served as a special consultant for mergers and
acquisitions to the Chief Executive Officer of NL Industries, Inc.; as the
Chief Executive Officer and principal shareholder of Regent Corporation; as
President of Cook Energy Corporation and as an attorney with Kirkland & Ellis,
a national law firm. Mr. Stein also serves as a director of TransWestern and
Tremont Corporation.
Daniel H. Blumenthal has served as a Director of BrightView and Capital
since the Acquisition. Mr. Blumenthal has been a Managing Director of Willis
Stein since its inception in 1994. Prior to that time, he served as Vice
President of CIVC from 1993 to 1994, and as a corporate tax attorney with
Latham & Watkins, a national law firm, from 1988 to 1993.
Stuart Karu has served as a Director of BrightView and Capital since the
Acquisition. Mr. Karu currently is a private investor. During 1995, Mr. Karu
served as the interim Chief Executive Officer of SRDS. Mr. Karu was formerly
Chief Executive Officer and principal shareholder of Henry S. Kaufman, Inc., a
national advertising agency. Mr. Karu serves as a director of TransWestern and
was formerly a director of SRDS and MLM.
Robert E. Petersen has served as the Chairman Emeritus of the Company since
the Acquisition. Mr. Petersen founded Petersen in 1948 and served as its
Chairman and Chief Executive Officer prior to the Acquisition.
Directors of BrightView are currently elected by its stockholders to serve
during the ensuing year or until a successor is duly elected and qualified.
Executive officers of the Company are designated by the Managing Member to
serve until their respective successors shall be duly designated and
qualified. Executive officers of Capital are designated by its board of
directors to serve until their respective successors shall be duly designated
and qualified. There are no family relationships among the executive officers
of the Issuers or the directors of BrightView or Capital.
COMPENSATION OF DIRECTORS
The Company is a limited liability company that is indirectly controlled by
BrightView. See "Limited Liability Company Agreement." Each of the Directors
of BrightView (other than Messrs. Bahrenburg and Vitale) will be paid annual
compensation of $35,000, plus reimbursement for out-of-pocket expenses
incurred in connection with attending Board meetings.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of executive officers of the Company will be determined by
the Board of BrightView. The following Summary Compensation Table includes
individual compensation information for the Chief Executive Officer and each
of the four other most highly compensated executive officers of Petersen in
the year ended December 31, 1995 (collectively, the "Named Executive
Officers") for services rendered in all capacities to Petersen during the year
ended December 31, 1995. There were no stock options exercised during
Petersen's last fiscal year nor were there any options outstanding at the end
of Petersen's last fiscal year.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITION AT PETERSEN SALARY BONUS COMPENSATION(A)
- --------------------------------------- ---------- ---------- ---------------
<S> <C> <C> <C>
Robert E. Petersen(b).................... $1,500,000 $2,000,000 $4,052
Chairman of the Board
Frederick R. Waingrow(c)................. 925,000 600,000 5,731
President
John Dianna.............................. 214,750 35,000 5,731
Vice President, Executive Publisher
Peter F. Clancy(d)....................... 196,500 40,000 5,731
Senior Vice President, Marketing & Sales
Nigel P. Heaton(d)....................... 178,750 32,500 5,731
Vice President, Circulation Marketing
Development
</TABLE>
- --------
(a)Reflects contribution by Petersen on behalf of such person under Petersen's
retirement plan.
(b)Mr. Petersen resigned as Chairman of Petersen upon consummation of the
Acquisition.
(c)Mr. Waingrow resigned as President of Petersen upon consummation of the
Acquisition.
(d)No longer employed by the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board intends to establish two standing committees: (i) an Audit
Committee and (ii) a Compensation Committee. The Board may also establish
other committees to assist in the discharge of its responsibilities.
The Audit Committee shall review and, as it shall deem appropriate,
recommend to the Board internal accounting and financial controls for the
Company and accounting principles and auditing practices and procedures to be
employed in the preparation and review of financial statements of the Company.
The Audit Committee shall make recommendations to the board concerning the
engagement of independent public accountants to audit the annual financial
statements of the Company and the scope of the audit to be undertaken by such
accountants. Ernst & Young LLP presently serves as the independent auditors of
the Company. The Company expects that three or four Directors will be
appointed to the Audit Committee.
The Compensation Committee shall review and, as it deems appropriate,
recommend to the Board policies, practices and procedures relating to the
compensation of managerial employees and the establishment and administration
of employee benefit plans. The Compensation Committee shall have and exercise
all authority under any employee stock option plans of the Company as the
committee therein specified (unless the Board resolution appoints any other
committee to exercise such authority), and shall otherwise advise and consult
with the officers of the Company as may be requested regarding managerial
personnel policies. The Company expects that three or four Directors will be
appointed to the Compensation Committee.
EMPLOYMENT AGREEMENTS
The Company expects that Messrs. Bahrenburg, Vitale and Willis will each
enter into an Executive Securities Purchase and Employment Agreement (the
"Employment Agreements") with BrightView, Holdings and the Company. The
Employment Agreements will provide for the continued employment of Mr.
Bahrenburg as the Chief Executive Officer of the Company, Mr. Vitale as the
President of the Company and Mr. Willis as the Chief Financial Officer of the
Company until December 31, 2001 unless terminated earlier as provided in the
respective Employment Agreement. The Employment Agreements of Messrs.
Bahrenburg, Vitale and Willis will provide for: (i) an annual base salary of
$500,000, $300,000, and $200,000 respectively (subject to annual increases
based on the consumer price index); (ii) annual bonuses based on the
achievement of certain EBITDA targets of up to half their base salary and
(iii) a deferred bonus payable upon the first to occur of: (a) a sale of
59
<PAGE>
the Company or (b) the fifth anniversary of the date of such agreements. Each
executive's employment may be terminated by the Company at any time with cause
or without cause. If such executive is terminated by the Company with cause or
resigns other than for good reason, the executive will be entitled to his base
salary and fringe benefits until the date of termination, but will not be
entitled to any unpaid bonus. Messrs. Bahrenburg, Vitale and Willis will be
entitled to their base salary and fringe benefits and any accrued bonus for a
period of twelvemonths following their in the event such executive is
terminated without cause or resigns with good reason. The Employment
Agreements will also provide each executive with customary fringe benefits and
vacation periods. "Cause" will be generally defined in the Employment
Agreements to mean: (i) the commission of a felony or a crime involving moral
turpitude; (ii) the commission of any other act or omission involving
dishonesty, disloyalty or fraud; (iii) the substantial and repeated failure to
perform duties as reasonably directed by the Board or Chairman of Holdings;
(iv) gross negligence or willful misconduct with respect to the Company or any
subsidiary; (v) any other material breach of the Employment Agreement or
Company policy established by the Board, which breach, if curable, is not
cured within 15 days after written notice thereof to the executive or (vi) the
failure by the Company to generate a minimum level of EBITDA in any fiscal
year. "Good Reason" will be defined to mean the occurrence, without such
executive's consent, of any of the following: (i) the assignment to the
executive of any significant duties materially inconsistent with the
executive's status as a senior executive officer of the Company or a
substantial adverse alteration in the nature or status of the executive's
responsibilities; (ii) a reduction by the Company in the executive's annual
base salary as in effect on the date hereof, except for across-the-board
salary reductions similarly affecting all senior executives of the Company or
(iii) the Board requires the executive to relocate from the New York area in
the case of Mr. Bahrenburg and the Los Angeles area in the case of Messrs.
Vitale and Willis. The Employment Agreements will also provide for the
purchase by Messrs. Bahrenburg, Vitale and Willis of preferred equity
securities of Holdings ("Preferred Units"), common equity securities of
Holdings ("Common Units") and common stock of BrightView ("Common Stock") for
a combination of cash and notes. See "Certain Transactions." The Company
expects such Employment Agreements to be finalized over the next 30 days.
Messrs. Dunning and Bloch will each receive an annual salary of $100,000 per
annum for serving as Chairman and Vice Chairman of Holdings, respectively.
Beginning in 1998, each will also be entitled, subject to approval of the
Board to receive an annual bonus upon the Company achieving certain financial
targets.
In connection with the Acquisition, the Company entered into an employment
agreement with Robert E. Petersen pursuant to which Mr. Petersen agreed to
serve as Chairman Emeritus of the Company for a five-year period in exchange
for annual compensation of $200,000 per annum. Under such agreement, Mr.
Petersen has agreed to, among other things, act as a public spokesperson and
representative of the Company at public functions and participate in
significant meetings of the key executives of the Company concerning marketing
and sales strategies, important personnel decisions and similar activities so
required by the Chairman of the Board. The employment agreement entitles Mr.
Petersen to certain fringe benefits and perquisites and severance payments
equal to his annual salary for the remaining unexpired term of the agreement
in the event he is terminated by the Company without cause or suffers a
"constructive termination," which is defined to include (i) the relocation of
Mr. Petersen from the Company's current principal executive office; (ii) any
material breach of the employment agreement by the Company or (iii) the
assignment of Mr. Petersen to a significantly lower position in the Company in
terms of his responsibility, authority and status.
60
<PAGE>
CERTAIN TRANSACTIONS
The Company is party to a lease with a trust controlled by Mr. Petersen and
his wife pursuant to which the Company leases office space for its corporate
headquarters. The lease expires on November 30, 2009. In connection with the
Acquisition, the lease was amended to provide for lease payments of $341,951
for each monthly period ending before November 30, 1996. For each fiscal year
thereafter, the monthly lease payments will be increased at an annual rate of
approximately 1.75%.
On October 1, 1996, the Company entered into a lease with Mr. Petersen with
respect to the Company's office space located at 815 North LaSalle Street in
Chicago, Illinois. The lease expires on September 30, 2005 and provides for
monthly lease payments of: (i) $16,500 for the period from October 1, 1996 to
September 30, 1999; (ii) $17,500 for the period from October 1, 1999 to
September 30, 2002 and (iii) $18,500 from October 1, 2002 through the end of
the term of the lease.
Pursuant to his Employment Agreement, Mr. Bahrenburg will purchase 20 shares
of Common Stock at a price of $500.00 per share, 2,200 Class A Units at a
price of $4.50 per unit and 2,200 Preferred Units at a price of $445.50 per
unit. Mr. Bahrenburg will pay for these securities with promissory notes in
the aggregate amount of $1,000,000. Of this amount, $200,000 will become due
and payable on March 1, 1997 and $800,000 will become due and payable on the
earlier to occur of: (i) December 31, 2001; (ii) the termination of
Mr. Bahrenburg's employment with the Company or (iii) a sale of the Company.
Such promissory notes will bear interest at a rate equal to the Company's
weighted average cost of borrowing as determined by the Board. Mr.
Bahrenburg's obligations under such notes will be secured by a pledge of the
securities purchased therewith. In addition, pursuant to the Employment
Agreement, the Company and Holdings will issue to Mr. Bahrenburg 5,150.708
Class A Units, 625 Class B Units and 625 Class C Units for no additional
consideration. The securities issued to Mr. Bahrenburg without consideration
will vest ratably over a period of five years.
Pursuant to his Employment Agreement, Mr. Vitale will purchase 15 shares of
Common Stock at a price of $500.00 per share, 1,650 Class A Units at a price
of $4.50 per unit and 1,650 Preferred Units at a price of $445.50 per unit.
Mr. Vitale will pay for these securities with promissory notes in the
aggregate amount of $750,000. Such promissory notes will bear interest at a
rate equal to the Company's weighted average cost of borrowing as determined
by the Board and will become due and payable on the earlier to occur of:
(i) December 31, 2001; (ii) the termination of Mr. Vitale's employment with
the Company or (iii) a sale of the Company. Mr. Vitale's obligations under
such notes will be secured by a pledge of the securities purchased therewith.
In addition, pursuant to the Employment Agreement, the Company and Holdings
will issue to Mr. Vitale 5,150.708 Class A Units, 625 Class B Units and 625
Class C Units for no additional consideration. The securities to be issued to
Mr. Vitale without consideration will vest ratably over a period of five
years.
Pursuant to his Employment Agreement, Mr. Willis will purchase 4 shares of
Common Stock at a price of $500.00 per share, 440 Class A Units at a price of
$4.50 per unit and 440 Preferred Units at a price of $445.50 per unit. Mr.
Willis will pay for these securities with promissory notes in the aggregate
amount of $200,000. Such promissory notes will bear interest at a rate equal
to the Company's weighted average cost of borrowing as determined by the Board
and will become due and payable on the earlier to occur of: (i) December 31,
2001; (ii) the termination of Mr. Willis' employment with the Company or (iii)
a sale of the Company. Mr. Willis' obligations under such notes will be
secured by a pledge of the securities purchased therewith. In addition,
pursuant to the Employment Agreement, the Company and Holdings will issue to
Mr. Willis 1,030.142 Class A Units, 125 Class B Units and 125 Class C Units
for no additional consideration. The securities to be issued to Mr. Willis
without consideration will vest ratably over a period of five years.
The securities to be issued to Messrs. Bahrenburg, Vitale and Willis
pursuant to the Employment Agreements will be subject to repurchase by
Holdings or BrightView in the event such executive leaves the Company's employ
under certain circumstances. If such executive is terminated by the Company
with cause or resigns without good reason (each as defined in their respective
employment agreements), the purchase price for any unvested securities will be
the lesser of their original cost or their fair market value and the purchase
price
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<PAGE>
for any vested securities will be the fair market value of such securities. If
such executive is terminated by the Company without cause or resigns with good
reason, the Company can only repurchase such executive's unvested securities,
at a price equal to the lesser of their original cost or their fair market
value.
In connection with the Acquisition, Messrs. Bahrenburg, Dunning, Bloch and
Karu, Willis Stein, Petersen Properties Company, BankAmerica Investment
Corporation and others entered into a securities purchase agreement (the
"Securities Purchase Agreement") with Holdings and BrightView pursuant to
which they purchased Preferred Units and Common Units of Holdings and Common
Stock of BrightView for cash. The following table sets forth the securities
purchased by such persons and the aggregate consideration paid for such
securities:
<TABLE>
<CAPTION>
HOLDINGS
----------------- BRIGHTVIEW
DIRECTOR, EXECUTIVE OFFICER OR CLASS A PREFERRED COMMON AGGREGATE
10% OWNER UNITS UNITS STOCK CONSIDERATION
------------------------------ ------- --------- ---------- -------------
<S> <C> <C> <C> <C>
D. Claeys Bahrenburg........... 1,100 1,100 10 $ 500,000
James D. Dunning, Jr.(a)....... 4,620 4,620 42 2,100,000
Laurence H. Bloch(a)........... 2,200 2,200 20 1,000,000
Stuart Karu(a)................. 2,200 2,200 20 1,000,000
Willis Stein & Partners,
L.P. ......................... 110,000 110,000 1,000 50,000,000
Petersen Properties Company.... 55,000 55,000 500 25,000,000
BankAmerica Investment Corpora-
tion.......................... 44,000 44,000 400 20,000,000
</TABLE>
- --------
(a) Pursuant to the Securities Purchase Agreement, Holdings and BrightView
also issued to Messrs. Dunning, Bloch and Karu the following securities:
Mr. Dunning--8,241.133 Class A Units, 1,000 Class B Units and 1,000 Class
C Units; Mr. Bloch--6,180.850 Class A Units, 750 Class B Units and 750
Class C Units and Mr. Karu--4,120.567 Class A Units, 500 Class B Units and
500 Class C Units.
As part of its business strategy, the Company plans to adopt new
compensation arrangements designed to reward managers and other participating
employees based on the Company's operating performance. In connection with
such compensation arrangements, the Company expects to issue up to 11,331
Class A Units, 1,375 Class B Units and 1,375 Class C Units to certain members
of management of other key employees of the Company. The Company has made no
final determination with respect to when such equity securities will be issued
or to whom, if at all.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's equity securities are held 99.9% by Holdings and 0.1% by
BrightView. The following table sets forth certain information regarding the
beneficial ownership of the equity securities of Holdings and BrightView by:
(i) each of the Directors of BrightView and the executive officers of the
Company; (ii) all Directors and executive officers as a group and (iii) each
owner of more than 5% of any class of equity securities of Holdings or
BrightView ("5% Owners"). The following table includes the securities to be
issued to certain executive officers of the Company under the Employment
Agreements. The equity ownership of Holdings for the persons listed below
includes those interests owned indirectly through BrightView. Unless otherwise
noted, the address for each executive officer of the Company and the Directors
of BrightView is c/o the Company, 6420 Wilshire Boulevard, Los Angeles,
California 90048. All of Capital's issued and outstanding capital stock is
owned by the Company.
<TABLE>
<CAPTION>
HOLDINGS BRIGHTVIEW
------------------------------------ --------------------
SHARES OF PERCENT OF
COMMON PERCENT PREFERRED PERCENT COMMON VOTING
UNITS(A) OF CLASS UNITS OF CLASS STOCK(B) POWER(C)
-------- -------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS:
D. Claeys
Bahrenburg(d).......... 8,481 2.1% 3,300 * 30 1.4%
Neal Vitale(e).......... 6,816 1.7 1,655 * 15 *
Richard S. Willis(f).... 1,474 * 444 * 4 *
James D. Dunning,
Jr.(g)................. 12,903 3.1 4,662 1.2% 42 2.0
Laurence H. Bloch(h).... 8,401 2.0 2,220 * 20 *
Avy H. Stein(i)......... 111,000 26.9 111,000 29.7 1,000 46.6(c)
Daniel H.
Blumenthal(i).......... 111,000 26.9 111,000 29.7 1,000 46.6(c)
Stuart Karu (j)......... 6,341 1.5 2,220 * 20 *
All Directors and
executive officers as a
group (8 persons)...... 155,415 37.7 125,541 33.5 1,131 52.7
5% OWNERS:
Willis Stein & Partners,
L.P.(k)................ 111,000 26.9 111,000 29.7 1,000 46.6(c)
Robert E. Petersen(l)... 55,500 13.5 55,500 14.8 500 23.3
BankAmerica Investment
Corporation(m)......... 44,400 10.7 44,400 11.9 400 --
Chase Equity Associates,
L.P.(n)................ 33,300 8.1 33,300 8.9 300 --
Allstate Insurance
Company(o)............. 33,300 8.1 33,300 8.9 300 14.0
First Union Investors,
Inc.(p)................ 27,750 6.7 27,750 7.4 250 --
CIBC WG Argosy Merchant
Fund 2, L.L.C.(q)...... 27,750 6.7 27,750 7.4 250 --
</TABLE>
- --------
*Represents less than one percent.
(a) The Common Units represent the common equity of Holdings and consist of
Class A Units, Class B Units and Class C Units. Holders of Class B Units
and Class C Units are entitled to share in any distribution on a pro rata
basis with the holders of Class A Units, but only if the holders of the
Preferred Units and the Class A Units have achieved an internal rate of
return on their total investment of 30% in the case of Class B Units and
35% in the case of Class C Units. All Common Units listed in the table
represent Class A Units unless otherwise noted. See "Limited Liability
Company Agreement."
(b) BrightView has two classes of outstanding common stock, the Class A Common
Stock and the Class B Common Stock, which are identical in all respects
except that the Class B Common Stock is nonvoting and is convertible to
Class A Common Stock upon the occurrence of certain events. The Class B
Common Stock was issued in order to comply with certain regulatory
requirements imposed upon the holders, which are affiliates of bank
holding companies. All shares listed in the table represent Class A Common
Stock unless otherwise noted.
(c) Under the terms of the Securityholders Agreement, all of the stockholders
of BrightView have agreed to vote their shares in favor of those
individuals designated by Willis Stein to serve on the Board of BrightView
until such time as BrightView consummates a Qualified IPO (as defined
below). Willis Stein also has the right to vote such stockholders shares
on all significant corporate changes, such as a merger, consolidation or
sale of the Company. As a result, Willis Stein has the ability to control
the policies and operations of the Company.
(d) Includes 5,151 Class A Units, which are subject to vesting in equal
installments over a five-year period. Does not include 625 Class B Units
and 625 Class C Units owned by Mr. Bahrenburg.
(e) Includes 5,151 Class A Units, which are subject to vesting in equal
installments over a five-year period. Does not include 625 Class B Units
and 625 Class C Units owned by Mr. Vitale.
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<PAGE>
(f) Includes 1,030 Class A Units, which are subject to vesting in equal
installments over a five-year period. Does not include 125 Class B Units
and 125 Class C Units owned by Mr. Willis.
(g) Does not include 1,000 Class B Units and 1,000 Class C Units owned by Mr.
Dunning.
(h) Does not include 750 Class B Units and 750 Class C Units owned by Mr.
Bloch.
(i) Includes 110,000 Common Units and 110,000 Preferred Units of Holdings and
1,000 shares of the Class A Common Stock of BrightView beneficially owned
by Willis Stein. Such persons disclaim beneficial ownership of all such
interests beneficially owned by Willis Stein. Such person's address is c/o
Willis Stein, 227 West Monroe Street, Suite 4300, Chicago, Illinois 60606.
(j) Does not include 500 Class B Units and 500 Class C Units owned by Mr.
Karu.
(k) Willis Stein's interest in Holdings and BrightView are owned through
Petersen Investment Corp. The address of Willis Stein and Petersen
Investment Corp. is 227 West Monroe Street, Suite 4300, Chicago, Illinois
60606.
(l) Mr. Petersen's interest in Holdings and BrightView are owned through
Petersen Properties Company.
(m) Such person's address is c/o BankAmerica Investment Corporation ("BIC"),
231 S. LaSalle Street, Chicago, Illinois 60697. Such person holds Class B
Common Stock of BrightView. Also includes securities held by an affiliate
of BIC.
(n) Such person's address is 380 Madison Avenue, 12th Floor, New York, New
York 10017-2951. Such person holds Class B Common Stock of BrightView.
(o) Such person's address is 3075 Sanders Road, Suite G5D, Northbrook,
Illinois 60062-7127.
(p) Such person's address is c/o First Union Capital Partners, Inc., One First
Union Center, 301 S. College Street, 5th Floor, Charlotte, North Carolina
28288. Such person holds Class B Common Stock of BrightView.
(q) Such person's address is 425 Lexington Avenue, 3rd Floor, New York, New
York 10017. Such person holds Class B Common Stock of BrightView.
SECURITYHOLDERS AGREEMENT
At the time of the Acquisition, BrightView, Holdings, Petersen Investment
Corp. and the Investors entered into a securityholders agreement (the
"Securityholders Agreement"), providing for: (i) the composition of the Board
of BrightView; (ii) restrictions on the transfer of equity securities of
Holdings, BrightView and Petersen Investment Corp. (the "Equity Securities");
(iii) registration rights relating to the Equity Securities, (iv) obligations
of the Investors upon a sale of the Company and (v) preemptive rights in favor
of the non-Willis Stein Investors in connection with issuances of equity to
Willis Stein. Under the terms of the Securityholders Agreement, all of the
stockholders of BrightView have agreed to vote their shares in favor of those
individuals designated by Willis Stein to serve on the Board of Directors of
BrightView until such time as BrightView consummates an initial public
offering of its equity securities resulting in the receipt by BrightView of at
least $75.0 million of gross proceeds and which indicates a market
capitalization of BrightView without giving effect to any issuances of equity
securities following its initial capitalization of at least $330.0 million (a
"Qualified IPO"). Willis Stein also has the right to control the vote on any
significant corporate changes, such as a merger, consolidation or sale of the
Company until the occurrence of a Qualified IPO. The Securityholders Agreement
generally restricts the transfer of Equity Securities, other than in a public
sale. Any proposed transfer of Equity Securities is subject to a right of
first refusal in favor of BrightView or the other Investors and "tag-along"
rights in favor of the other Investors. All of the Investors have agreed that
Willis Stein (through BrightView) may control the circumstances under which a
sale of the Company may take place, and that each Investor will consent to
such transaction on the terms negotiated by Willis Stein. Willis Stein may
also control the circumstances under which a public offering of Holdings' or
BrightView's equity securities may take place. The Securityholders Agreement
provides for up to four demand registrations in favor of Willis Stein, two
demand registrations in favor of a majority of the non-Willis Stein Investors
at such time as BrightView is eligible to use a short-form registration
statement and unlimited "piggyback" registrations in favor of the Investors.
LIMITED LIABILITY COMPANY AGREEMENT
The Company and Holdings are each limited liability companies organized
under the Delaware Limited Liability Company Act (the "LLC Act"). The Company
is governed by a limited liability company agreement between Holdings and
BrightView. The Company's equity securities are held 99.9% by Holdings and
0.1% by BrightView. Holdings is the Company's managing member and as such
controls the policies and operations of the Company. Holdings is governed by a
limited liability company agreement (the "LLC Agreement") among Willis Stein
(through Petersen Investment Corp.), Mr. Petersen, certain members of the
Company's management and the Investors (collectively the "Members"). The LLC
Agreement governs the relative rights and duties of the Members.
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<PAGE>
BrightView is Holdings' managing member and as such controls the policies
and operations of Holdings and of the Company through Holdings. BrightView was
appointed as managing member pursuant to the LLC Agreement and may not be
removed. In the event of BrightView's resignation as managing member, a new
managing member will be appointed by Willis Stein (through Petersen Investment
Corp.).
The ownership interests of the Members in Holdings consist of Preferred
Units and Common Units. The Preferred Units are entitled to a preferred yield
of 12.0% per annum, compounded quarterly, and an aggregate liquidation
preference of $163.5 million (net of any prior repayments of Preferred Units)
plus any accrued and unpaid preferred yield (collectively, the "Preference
Amount") on any liquidation or other distribution by Holdings. The Common
Units represent the common equity of Holdings and consist of Class A Units,
Class B Units and Class C Units. After payment of the Preference Amount,
holders of Class A Units are entitled to share in any remaining proceeds of
any liquidation or other distribution by Holdings pro rata according to the
number of Class A Units held. After the holders of the Preferred Units and
Class A Units have received an internal rate of return of 30% on their total
investment, holders of Class B Units will be entitled to participate with the
holders of Class A Units in any subsequent distributions. Similarly, after the
holders of the Preferred Units and Class A Units have received an internal
rate of return of 35% on their total investment, holders of Class C Units will
be entitled to participate with the holders of Class A Units and the holders
of Class B Units in any subsequent distributions. The Class B Units and Class
C Units were issued to members of management to provide them with equity
incentives. The LLC Agreement grants BrightView broad authority in
establishing the magnitude and terms of management's equity participation in
the Company.
Both the Senior Credit Facility and the Indenture generally limit the
Company's ability to pay cash distributions to Holdings and BrightView other
than distributions in amounts approximately equal to the income tax liability
of such members of the Company (or, in the case of Holdings, the income tax
liability it would have had if it were required to pay income taxes) resulting
from the taxable income of the Company ("Tax Distributions"). Tax
Distributions will be based on the approximate highest combined tax rate that
applies to any one of the members of the Company.
The LLC Agreement, and therefore Holdings' existence, will continue in
effect until the earlier to occur of: (i) December 3, 2026; (ii) a unanimous
vote to that effect of its Members; (iii) a resolution to that effect of the
managing member; (iv) the incapacity or expulsion of the managing member or
any other event under the LLC Act which terminates Holdings unless the Members
vote within 90 days to continue Holdings' existence or (v) the entry of a
decree of judicial dissolution under the LLC Act. Other than as described in
(iv) above, the death, retirement, resignation, expulsion, incapacity,
bankruptcy or dissolution of a Member will not cause a dissolution of
Holdings. The Company's limited liability company agreement contains similar
terms governing the Company's continued existence.
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DESCRIPTION OF SENIOR CREDIT FACILITY
In connection with the Acquisition, the Company entered into the Senior
Credit Facility, among FBNC and CIBC (together, the "Lenders") and the
Company, pursuant to which the Lenders will lend to the Company up to $260.0
million in senior secured credit facilities, such amount to be allocated
among: (i) a revolving credit facility up to $60.0 million (the "Revolving
Credit Facility"); (ii) a tranche A term loan in an aggregate principal amount
of $100.0 million (the "Tranche A Loan") and (iii) a tranche B term loan in an
aggregate principal amount of $100.0 million (the "Tranche B Loan" and
together with the Tranche A Loan, the "Term Loans").
Repayment. Commitments under the Revolving Credit Facility will not be
reduced until maturity on December 31, 2002 and the Term Loans will be
amortized on a quarterly basis commencing on March 31, 1997 based on the
following schedule:
<TABLE>
<CAPTION>
TRANCHE A TRANCHE B
LOAN LOAN
DATE AMORTIZATION AMORTIZATION
---- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1997............................................... $ 0 $ 1,000
1998............................................... 10,000 1,000
1999............................................... 15,000 1,000
2000............................................... 20,000 1,000
2001............................................... 25,000 1,000
2002............................................... 30,000 1,000
2003............................................... 0 40,000
2004............................................... 0 54,000
-------- --------
Total............................................ $100,000 $100,000
======== ========
</TABLE>
Security; Guaranty. The Revolving Credit Facility and Term Loans will be
secured by a first priority lien on substantially all of the properties and
assets of the Company and its respective domestic subsidiaries, owned now or
acquired later, including a pledge of all of the shares of the Company's
respective existing and future domestic subsidiaries and 65% of the shares of
their respective existing and future foreign subsidiaries. The Revolving
Credit Facility and Term Loans are guaranteed by BrightView, Holdings and all
of the Company's future domestic subsidiaries.
Interest. At the Company's option, the interest rates per annum applicable
to the Revolving Credit Facility and the Tranche A Loan will be a fluctuating
rate of interest measured by reference either to: (i) LIBOR plus the
applicable borrowing margin or (ii) the published prime rate of the Agent Bank
(the "ABR") plus the applicable borrowing margin. The applicable borrowing
margin for the Revolving Credit Facility and the Tranche A Loan will range
from 1.375% to 2.750% for LIBOR based borrowings and 0.125% to 1.500% for ABR
based borrowings. The applicable borrowing margin for the Tranche B Loan will
be equal to that of the Revolving Credit Facility and Tranche A Loan plus
0.50%; provided, however, that the applicable margin for the Tranche B Loan
will not be less than 2.625% for LIBOR based borrowings and 1.375% for ABR
based borrowings.
Fees. The Company has agreed to pay certain fees with respect to the Senior
Credit Facility including: (i) upfront facility fees; (ii) agent and
arrangement fees and (iii) commitment fees of 0.50% per annum on the unused
portion of the Revolving Credit Facility until the Company's Leverage Ratio
(as defined in the Senior Credit Facility) is less than or equal to 4:1 and
0.375% per annum thereafter.
Use of Proceeds. The entire amount of the Term Loans were made available to
the Company at the time of the Acquisition. The Revolving Credit Facility will
be made available to finance certain permitted acquisitions, working capital
requirements and general corporate purposes of the Company.
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Prepayments; Reduction of Commitments. Term Loans are required to be prepaid
and commitments under the Revolving Credit Facility are required to be
permanently reduced with: (i) 75% of excess cash flow, which percentage may be
reduced under certain circumstances; (ii) 100% of the net cash proceeds of all
non-ordinary-course asset sales or other dispositions of the property by the
Company and its subsidiaries (including insurance and condemnation proceeds),
subject to limited exceptions, (iii) 100% of the net proceeds of issuances of
debt obligations of the Company and its subsidiaries, subject to limited
exceptions and (iv) 75% of the net proceeds of issuances of equity securities
of the Company. Such mandatory prepayments and commitment reductions will
first be allocated pro rata among the Term Loan and second to commitments
under the Revolving Credit Facility. Within the Term Loans prepayments with
proceeds from asset sales will be applied pro rata to the remaining
amortization payments under each such Term Loan and proceeds from debtor
equity issuances will be applied to amortization payments in inverse order at
maturity. Voluntary prepayments will be permitted in whole or in part, at the
option of the Company, in minimum principal amounts of $3.0 million or any
greater multiple of $1.0 million, without premium or penalty.
Covenants. The Senior Credit Facility contains covenants restricting the
ability of the Company and its subsidiaries to, among other things: (i)
declare dividends or redeem or repurchase capital stock; (ii) prepay, redeem
or purchase debt; (iii) incur liens and engage in sale-leaseback transactions;
(iv) make loans and investments; (v) issue more debt; (vi) amend or otherwise
alter debt and other material agreements; (vii) make capital expenditures;
(viii) engage in mergers, acquisitions and asset sales; (ix) transact with
affiliates and (x) alter its lines of the business. The Company must also make
certain customary indemnifications of the Lenders and their agents and will
also be required to comply with financial covenants with respect to: (i) a
maximum leverage ratio; (ii) a minimum interest coverage ratio and (iii) a
minimum fixed charge coverage ratio. The Senior Credit Facility also contains
certain customary affirmative covenants.
Events of Default. Events of default under the Senior Credit Facility
include: (i) the Company's failure to pay principal or interest when due; (ii)
the Company's material breach of any covenant, representation or warranty
contained in the loan documents; (iii) customary cross-default provisions;
(iv) events of bankruptcy, insolvency or dissolution of the Company or its
subsidiaries; (v) the levy of certain judgments against the Company, its
subsidiaries, or their assets; (vi) certain adverse events under ERISA plans
of the Company or its subsidiaries; (vii) the actual or asserted invalidity of
security documents or guarantees of the Company or its subsidiaries and (viii)
a change of control of the Company.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Issuers on November 25, 1996 to
the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes to qualified institutional buyers
in reliance on Rule 144A under the Securities Act. As a condition to the
Purchase Agreement, the Issuers entered into the Registration Rights Agreement
with the Initial Purchaser pursuant to which the Issuers have agreed, for the
benefit of the holders of the Old Notes, at the Issuers' cost, to use their
best efforts to (i) file the Exchange Offer Registration Statement within 45
days after the date of the original issue of the Old Notes with the Commission
with respect to the Exchange Offer for the New Notes; (ii) use their best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 135 days after the date of the
original issuance of the Old Notes and (iii) unless the Exchange Offer would
not be permitted by applicable law or Commission policy, commence the Exchange
Offer and use their best efforts to issue on or prior to 45 days after the
date on which the Exchange Offer Registration Statement was declared effective
by the Commission (the "Exchange Offer Effectiveness Date"). Upon the Exchange
Offer Registration Statement being declared effective, the Issuers will offer
the New Notes in exchange for surrender of the Old Notes. The Issuers will
keep the Exchange Offer open for not less than 20 days (or longer if required
by applicable law) after the date on which notice of the Exchange Offer is
mailed to the holders of the Old Notes. For each Old Note surrendered to the
Issuers pursuant to the Exchange Offer, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Interest on each Old Note will accrue from the last interest payment
date on which interest was paid on the Old Note surrendered in exchange
therefor or, if no interest has been paid on such Old Note, from the date of
its original issue. Interest on each New Note will accrue from the date of its
original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes will in general be
freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Old Notes who is an "affiliate"
of the Issuers or who intends to participate in the Exchange Offer for the
purpose of distributing the New Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Issuers in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act, and (v)
the holder or any such other person acknowledges that if such holder or any
other person participates in the Exchange Offer for the purpose of
distributing the New Notes it must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale of
the New Notes and cannot rely on those no-action letters. As indicated above,
each Participating Broker-Dealer that receives a New Note for its own account
in exchange for Old Notes must acknowledge that it (i) acquired the Old Notes
for its own account as a result of market-making activities or other trading
activities, (ii) has not entered into any arrangement or understanding with
the Issuers or any "affiliate" of the Issuers (within the meaning of Rule 405
under the Securities Act) to distribute the New Notes to be received in the
Exchange Offer and (iii) will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes. For a
description of the procedures for resales by Participating Broker-Dealers, see
"Plan of Distribution."
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<PAGE>
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Issuers to effect such an
Exchange Offer, or if for any other reason the Exchange Offer is not
consummated within 195 days of the date of the original issuance of the Old
Notes, the Issuers will (i) file the Shelf Registration Statement Registration
Statement covering resales of the Old Notes; (ii) use their reasonable best
efforts to cause the Shelf Registration Statement Registration Statement to be
declared effective under the Securities Act and (iii) use their reasonable
best efforts to keep effective the Shelf Registration Statement until the
earlier of three years after its effective date. The Issuers will, in the
event of the filing of the Shelf Registration Statement, provide to each
applicable holder of the Old Notes copies of the prospectus which is a part of
the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resale of the Old Notes. A holder of the
Old Notes that sells such Old Notes pursuant to the Shelf Registration
Statement permit generally will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each
holder of the Old Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on
the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Old Notes included in the
Shelf Registration Statement and to benefit from the provisions set forth in
the following paragraph.
The Registration Rights Agreement provides that (i) the Issuers will file an
Exchange Offer Registration Statement with the Commission on or prior to 45
days after the date of the original issue of the Old Notes with the
Commission, (ii) the Issuers will use their best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or prior
to 135 days after the after the date of the original issue of the Old Notes,
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Issuers will commence the Exchange Offer and use their
best efforts to issue on or prior to 45 days after the Exchange Offer
Effectiveness Date, New Notes in exchange for all Old Notes tendered prior
thereto in the Exchange Offer and (iv) if obligated to file the Shelf
Registration Statement, the Issuers will use their best efforts to file the
Shelf Registration Statement with the Commission in a timely fashion. If (a)
the Issuers fail to file any of the Registration Statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness, or (c)
the Issuers fail to consummate the Exchange Offer within 45 days of the
effectiveness of the Exchange Offer Registration Statement, or (d) the Shelf
Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the period
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), the sole remedy
available to holders of the Old Notes will be the immediate assessment of
Additional Interest as follows: the per annum interest rate on the Old Notes
will increase by 0.5% and the per annum interest rate will increase by an
additional 0.25% for each subsequent 90-day period during which the
Registration Default remains uncured, up to a maximum additional interest rate
of 2.0% per annum in excess of 11 1/8% per annum. All Additional Interest will
be payable to holders of the Old Notes in cash on each November 15 and May 15,
commencing with the first such date occurring after any such Additional
Interest commences to accrue, until such Registration Default is cured. After
the date on which such Registration Default is cured, the interest rate on the
Old Notes will revert to 11 1/8% per annum.
Holders of Old Notes will be required to make certain representations to the
Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Additional Investors set forth above.
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The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Issuers will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the New Notes will
not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange
Offer, all of which rights will terminate when the Exchange Offer is
terminated. The New Notes will evidence the same debt as the Old Notes and
will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Old Notes were outstanding. The Issuers have fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, the Limited Liability Company Act of
Delaware or the Indenture in connection with the Exchange Offer. The Issuers
intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Issuers.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Fees and Expenses.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Issuers, in their sole discretion, extend the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
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In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of Old
Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on May
15, 1997. Interest on the Old Notes accepted for exchange will cease to accrue
upon issuance of the New Notes.
Interest on the New Notes is payable semi-annually on each May 15 and
November 15, commencing on May 15, 1997.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Old Notes, Letter of Transmittal or an Agent's Message in connection with
a book-entry transfer and other required documents must be completed and
received by the Exchange Agent at the address set forth below under "Exchange
Agent" prior to 5:00 p.m., New York City time, on the Expiration Date.
Delivery of the Old Notes may be made by book-entry transfer in accordance
with the procedures described below. Confirmation of such bookentry transfer
must be received by the Exchange Agent prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry transfer, which states that such Book-Entry
Transfer Facility has received an express acknowledgment from the participant
in such Book-Entry Transfer Facility tendering the Notes that such participant
has received and agrees to be bound by the terms of the Letter of Transmittal
and that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal, each holder will make to the Issuers
the representations set forth above in the third paragraph under the heading
"--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will
constitute agreement between such holder and the Issuers in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
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COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the Book-Entry Transfer Facility for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee and all
other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Issuers in their sole discretion, which
determination will be final and binding. The Issuers reserve the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Issuers' acceptance of which would, in the opinion of counsel for the
Issuers, be unlawful. The Issuers also reserve the right in their sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Issuers' interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Issuer shall determine. Although the Issuers
intend to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Issuer, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be
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returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution,
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility), and all other documents required by the Letter of
Transmittal are received by the Exchange Agent upon five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"); (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case
of Old Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited); (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuers,
whose determination shall be final and binding on all parties. Any Old Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no New Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuers, might materially impair
the ability of the Issuers to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any of their subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Issuers, might materially impair the ability of the Issuers
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval the
Issuers shall, in their reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuers determine in their reasonable discretion that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration
of the Exchange Offer, subject, however, to the rights of holders to withdraw
such Old Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By Mail: By Overnight Courier:
United States Trust Company of New United States Trust Company of New
York York
P.O. Box 844 Cooper Station 770 Broadway
New York, New York 10276-0844 New York, New York 10003
Attention: Corporate Trust Attention: Corporate Trust
Operations Operations
(registered or certified mail
recommended)
By Hand:
Facsimile Transmission: (212)
United States Trust Company of New 420-6152
York
111 Broadway Confirm by Telephone: (800) 548-6565
New York, New York 10006
Attention: Lower Level Corporate
Trust Window
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
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The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Issuers (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a
person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Issuers), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
RESALE OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder or other person who receives New Notes, whether
or not such person is the holder (other than a person that is an "affiliate"
of the Issuers within the meaning of Rule 405 under the Securities Act) who
receives New Notes in exchange for Old Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, will be allowed to resell the New Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the New Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires New Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that
receives New Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution
of the New
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<PAGE>
Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act, and (v)
the holder or any such other person acknowledges that if such holder or other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
Notes and cannot rely on those no-action letters. As indicated above, each
Participating Broker-Dealer that receives a New Note for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. For a description of the
procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
DESCRIPTION OF THE NOTES
The New Notes will be issued under an Indenture, dated as of November 15,
1996 among the Issuers, the Guarantors stated therein and United States Trust
Company of New York, as trustee (the "Trustee"). The terms of the New Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") as in effect on the date of the Indenture. The form and terms of the New
Notes are the same as the form and terms of the Old Notes (which they replace)
except that (i) the New Notes bear a Series B designation, (ii) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, and (iii) the holders of New Notes
will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, which rights will terminate when the Exchange Offer is
consummated. The New Notes are subject to all such terms, and holders of the
New Notes are referred to the Indenture and the Trust Indenture Act for a
statement of them. The following is a summary of the material terms and
provisions of the New Notes. This summary does not purport to be a complete
description of the New Notes and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the New Notes and the Indenture
(including the definitions contained therein). A copy of the Indenture has
been filed as an exhibit to the Exchange Offer Registration Statement of which
this Prospectus forms a part. See "Available Information." Definitions
relating to certain capitalized terms are set forth under "-- Certain
Definitions" and throughout this description. Capitalized terms that are used
but not otherwise defined herein have the meanings assigned to them in the
Indenture and such definitions are incorporated herein by reference. The Old
Notes and the New Notes are sometimes referred to herein collectively as the
"Notes."
GENERAL
The Notes will be limited in aggregate principal amount to $100,000,000. The
Notes will be general unsecured obligations of the Issuers, subordinated in
right of payment to Senior Indebtedness of the Issuers and senior in right of
payment to any current or future subordinated indebtedness of the Issuers. The
Notes will be joint and several obligations of the Issuers.
The Notes will be unconditionally guaranteed, on a senior subordinated
basis, as to payment of principal, premium, if any, and interest, jointly and
severally, by the Guarantors (including each Restricted Subsidiary which
guarantees payment of the Notes pursuant to the covenant described under
"Limitation on Creation of Subsidiaries").
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on November 15, 2006. The Notes will bear interest at
a rate of 11 1/8% per annum from the date of original issuance until maturity.
Interest is payable semi-annually in arrears on each May 15 and November 15,
commencing May 15, 1997, to holders of record of the Notes at the close of
business on the immediately preceding May 1 and November 1, respectively.
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OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Issuers, in whole or in
part, at any time on or after November 15, 2001 at the following redemption
prices (expressed as a percentage of principal amount), together, in each
case, with accrued interest to the redemption date, if redeemed during the
twelve-month period beginning on November 15, of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 105.563%
2002........................................................... 103.708%
2003........................................................... 101.854%
2004 and thereafter............................................ 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the aggregate up to
25% of the original principal amount of Notes at any time and from time to
time prior to November 15, 1999 at a redemption price equal to 111.125% of the
aggregate principal amount so redeemed plus accrued interest to the redemption
date out of the Net Proceeds of one or more Public Equity Offerings; provided
that at least $75.0 million of the principal amount of Notes originally issued
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the closing of any
such Public Equity Offering.
In the event of redemption of fewer than all of the Notes, the Trustee shall
select, if the Notes are listed on a national securities exchange, in
accordance with the rules of such exchange or, if the Notes are not so listed,
either on a pro rata basis or by lot or in such other manner as it shall deem
fair and equitable the Notes to be redeemed; provided, that if a partial
redemption is made with the proceeds of a Public Equity Offering, selection of
the Notes or portion thereof for redemption will be made by the Trustee on a
pro rata basis, unless such method is prohibited. The Notes will be redeemable
in whole or in part upon not less than 30 nor more than 60 days' prior written
notice, mailed by first class mail to a holder's last address as it shall
appear on the register maintained by the Registrar of the Notes. On and after
any redemption date, interest will cease to accrue on the Notes or portions
thereof called for redemption unless the Issuers shall fail to redeem any such
Note.
SUBORDINATION
The indebtedness represented by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated in right of payment to the
prior indefeasible payment and satisfaction in full in cash of all existing
and future Senior Indebtedness of the Issuers. As of August 31, 1996, after
giving pro forma effect to the Transactions and the Initial Offering, the
principal amount of outstanding Senior Indebtedness of the Issuers, on a
consolidated basis, would have been $200.0 million. In addition, the Issuers
would have had $60.0 million of undrawn commitments available under the
Revolving Credit Facility.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation. arrangement, reorganization or other similar case
or proceeding in connection therewith, relative to the Issuers or to their
creditors, as such, or to their assets, whether voluntary or involuntary, or
any liquidation, dissolution or other winding-up of the Issuers, whether
voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or any general assignment for the benefit of creditors or other
marshalling of assets or liabilities of the Issuers (except in connection with
the merger or consolidation of the Issuers or its liquidation or dissolution
following the transfer of substantially all of their assets, upon the terms
and conditions permitted under the circumstances described under "--Mergers,
Consolidations or Sale of Assets") (all of the foregoing referred to herein
individually as a "Bankruptcy Proceeding" and collectively as "Bankruptcy
Proceedings"), the holders of Senior Indebtedness of the Issuers will be
entitled to receive payment and satisfaction in full in cash of all amounts
due on or in respect of all Senior Indebtedness of the Issuers before the
holders of the Notes are entitled to receive or retain any payment or
distribution of any kind on account of the Notes. In the event that,
notwithstanding the foregoing, the Trustee or any holder of Notes receives any
payment or distribution of assets of the Issuers of any kind, whether in cash,
property or securities, including, without limitation, by way of set-off
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or otherwise, in respect of the Notes before all Senior Indebtedness of the
Issuers is paid and satisfied in full in cash, then such payment or
distribution will be held by the recipient in trust for the benefit of holders
of Senior Indebtedness and will be immediately paid over or delivered to the
holders of Senior Indebtedness or their representative or representatives to
the extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of Senior
Indebtedness. By reason of such subordination, in the event of liquidation or
insolvency, creditors of the Issuers who are holders of Senior Indebtedness
may recover more, ratably, than other creditors of the Issuers, and creditors
of the Issuers who are not holders of Senior Indebtedness or of the Notes may
recover more, ratably, than the holders of the Notes.
No payment or distribution of any assets or securities of the Issuers or any
Restricted Subsidiary of any kind or character (including, without limitation.
cash, property and any payment or distribution which may be payable or
deliverable by reason of the payment of any other Indebtedness of the Issuers
being subordinated to the payment of the Notes by the Issuers) may be made by
or on behalf of the Issuers or any Restricted Subsidiary, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of the
Notes, and neither the Trustee nor any holder or owner of any Notes shall take
or receive from the Issuers or any Restricted Subsidiary, directly or
indirectly in any manner, payment in respect of all or any portion of Notes
following the delivery by the representative of the holders of Designated
Senior Indebtedness (the "Representative") to the Trustee of written notice of
the occurrence of a Payment Default, and in any such event, such prohibition
shall continue until such Payment Default is cured, waived in writing or
ceases to exist. At such time as the prohibition set forth in the preceding
sentence shall no longer be in effect, subject to the provisions of the
following paragraph, the Issuers shall resume making any and all required
payments in respect of the Notes, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness, no payment or distribution of any assets of the Issuers of any
kind may be made by the Issuers, including, without limitation, by way of set-
off or otherwise, on account of the Notes, or for on account of the purchase,
redemption, defeasance or other acquisition of Notes, and neither the Trustee
nor any holder or owner of Notes shall take or receive from the Issuers or any
Restricted Subsidiary, directly or indirectly in any manner, payment in
respect of all or any portion of the Notes for a period (a "Payment Blockage
Period") commencing on the date of receipt by the Trustee of written notice
from the Representative of such Non-Payment Event of Default unless and until
(subject to any blockage of payments that may then be in effect under the
preceding paragraph) the earliest of (x) more than 179 days shall have elapsed
since receipt of such written notice by the Trustee, (y) such NonPayment Event
of Default shall have been cured or waived in writing or shall have ceased to
exist or such Designated Senior Indebtedness shall have been paid in full or
(z) such Payment Blockage Period shall have been terminated by written notice
to the Issuers or the Trustee from such Representative, after which, in the
case of clause (x), (y) or (z), the Issuers shall resume making any and all
required payments in respect of the Notes, including any missed payments.
Notwithstanding any other provision of the Indenture, in no event shall a
Payment Blockage Period commenced in accordance with the provisions of the
Indenture described in this paragraph extend beyond 179 days from the date of
the receipt by the Trustee of the notice referred to above (the "Initial
Blockage Period"). Any number of additional Payment Blockage Periods may be
commenced during the Initial Blockage Period; provided, however, that no such
additional Payment Blockage Period shall extend beyond the Initial Blockage
Period. After the expiration of the Initial Blockage Period, no Payment
Blockage Period may be commenced until at least 180 consecutive days have
elapsed from the last day of the Initial Blockage Period. Notwithstanding any
other provision of the Indenture, no event of default with respect to
Designated Senior Indebtedness (other than a Payment Default) which existed or
was continuing on the date of the commencement of any Payment Blockage Period
initiated by the Representative shall be, or be made, the basis for the
commencement of a second Payment Blockage Period initiated by the
Representative, whether or not within the Initial Blockage Period, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
Each Guarantee will, to the extent set forth in the Indenture, be
subordinated in fight of payment to the prior payment in full of all Senior
Indebtedness of the respective Guarantor, including obligations of such
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Guarantor with respect to the Senior Credit Facility (including any guarantee
thereof), and will be subject to the fights of holders of Designated Senior
Indebtedness of such Guarantor to initiate blockage periods, upon terms
substantially comparable to the subordination of the Notes to all Senior
Indebtedness of the Issuers.
If the Issuers or any Guarantor fails to make any payment on the Notes or
any Guarantee, as the case may be, when due or within any applicable grace
period, whether or not on account of payment blockage provisions. such failure
would constitute an Event of Default under the Indenture and would enable the
holders of the Notes to accelerate the maturity thereof. See "--Events of
Default."
A holder of Notes by his acceptance of Notes agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf. to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purpose.
CERTAIN COVENANTS
The Indenture will contain, among other things, the following covenants.
Except as otherwise specified, all of the covenants described below will
appear in the Indenture.
Limitation on Additional Indebtedness
The Issuers will not, and will not permit any Restricted Subsidiary of the
Issuers to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness) unless (a) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the ratio of the total Indebtedness of the Issuers and their
Restricted Subsidiaries (excluding any Indebtedness owed to a Restricted
Subsidiary by any other Restricted Subsidiary or the Issuers and any
Indebtedness owed to the Issuers by any Restricted Subsidiary) to the Issuers'
EBITDA (determined on a pro forma basis for the last four fiscal quarters of
the Issuers for which financial statements are available at the date of
determination) is less than 6.0 to 1; provided, however, that if the
Indebtedness which is the subject of a determination under this provision is
Acquired Indebtedness, or Indebtedness incurred in connection with the
simultaneous acquisition of any Person, business, property or assets, then
such ratio shall be determined by giving effect to (on a pro forma basis, as
if the transaction had occurred at the beginning of the four-quarter period)
both the incurrence or assumption of such Acquired Indebtedness or such other
Indebtedness by the Issuers and the inclusion in the Issuers' EBITDA of the
EBITDA of the acquired Person, business, property or assets and any pro forma
expense and cost reductions calculated on a basis consistent with Regulation
S-X under the Securities Act as in effect and as applied as of the date
hereof, and (b) no Default or Event of Default shall have occurred and be
continuing at the time or as a consequence of the incurrence of such
Indebtedness.
Neither BrightView nor Holdings will, directly or indirectly, incur or
remain or become directly or indirectly liable with respect to any
Indebtedness except that BrightView and Holdings (a) may guarantee (i) the
Notes hereunder, (ii) the indebtedness of the Company under the Senior Credit
Facility and the other Credit Documents (as defined in the Senior Credit
Facility) and (iii) any Indebtedness of the Company or any Restricted
Subsidiary permitted to be incurred under the immediately preceding paragraph
and (b) may incur Indebtedness in an aggregate principal amount not exceeding
$5,000,000 outstanding at any time issued to repurchase their Capital Stock
from former management employees in connection with their termination or
departure (provided that such Indebtedness is subordinated in right and time
of payment to (i) and (ii) of (a) above).
Notwithstanding the foregoing, the Issuers and their Restricted Subsidiaries
may incur Permitted Indebtedness.
Limitation on Restricted Payments
The Issuers will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted
Payment;
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(b) immediately after giving pro forma effect to such Restricted Payment,
the Issuers could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant set forth under "Limitation on
Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 50% of the cumulative Consolidated Net
Income of the Company subsequent to the Issue Date (or minus 100% of any
cumulative deficit in Consolidated Net Income during such period) plus (2)
100% of the aggregate Net Proceeds and the fair market value of securities
or other property received by the Company from the issue or sale, after the
Issue Date, of Capital Stock (other than Disqualified Capital Stock or
Capital Stock of the Company issued to any Subsidiary of the Company) of
the Company or any Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable for Capital Stock (other
than Disqualified Capital Stock) of the Company which has been so converted
or exercised or exchanged, as the case may be, plus (3) without duplication
of any amounts included in clause (1) and (2) above, 100% of the aggregate
net proceeds of any equity contribution received by the Company from a
holder of the Company's Capital Stock. For purposes of determining under
this clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the retirement of any shares of Capital Stock of the Company
or subordinated Indebtedness by conversion into, or by or in exchange for,
shares of Capital Stock (other than Disqualified Capital Stock), or out of,
the Net Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of Capital Stock of the Company
(other than Disqualified Capital Stock), (iii) the redemption or retirement of
Indebtedness of the Issuers subordinated to the Notes in exchange for, by
conversion into, or out of the Net Proceeds of, a substantially concurrent
sale or incurrence of Indebtedness (other than any Indebtedness owed to a
Subsidiary) of the Issuers that is contractually subordinated in right of
payment to the Notes to at least the same extent as the subordinated
Indebtedness being redeemed or retired, (iv) the retirement of any shares of
Disqualified Capital Stock by conversion into, or by exchange for, shares of
Disqualified Capital Stock, or out of the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of other shares of
Disqualified Capital Stock, (v) if no Event of Default listed in clauses (i),
(ii) or (vi) under "Events of Default" shall have occurred and be continuing,
or would result from any such distribution, Permitted Tax Distributions or
(vi) dividend payments or other distributions of cash by the Company in an
amount not in excess of (y) $1,000,000 per fiscal year solely for the purpose
of paying fees and expenses of BrightView and Holdings, including directors'
fees, less (z) the amount of any management, advisory, consulting and similar
fees, paid by the Company to Willis Stein and its Affiliates during such
fiscal year.
Not later than the date of making any Restricted Payment, the Issuers shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Limitation on Restricted Payments" were computed,
which calculations may be based upon the Issuer's latest available financial
statements, and that no Default or Event of Default exists and is continuing
and no Default or Event of Default will occur immediately after giving effect
to any Restricted Payments.
Limitation on Other Senior Subordinated Debt
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness (other than the Notes and the Guarantees, as the case may be)
that is both (i) subordinate in right of payment to any Senior Indebtedness of
the Issuers or their Restricted Subsidiaries, as the case may be, and (ii)
senior in right of payment to the Notes and the Guarantees, as the case may
be. For purposes of this covenant, Indebtedness is deemed to be senior in
right of payment to the Notes and the Guarantees, as the case may be, if it is
not explicitly subordinate in right of payment to Senior Indebtedness
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at least to the same extent as the Notes and the Guarantees, as the case may
be, are subordinate to Senior Indebtedness.
Limitations on Investments
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with the
"Limitation on Restricted Payments" covenant, after the Issue Date.
Limitations on Liens
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or assets of the Issuers or any Restricted Subsidiary or any shares of stock
or debt of any Restricted Subsidiary which owns property or assets, now owned
or hereafter acquired, unless (i) if such Lien secures Indebtedness which is
pari passu with the Notes, then the Notes are secured on an equal and ratable
basis with the obligations so secured until such time as such obligation is no
longer secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to the Lien
granted to the Holders of the Notes to the same extent as such subordinated
Indebtedness is subordinated to the Notes.
Limitation on Transactions with Affiliates
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with
any Affiliate (including entities in which the Issuers or any of its
Restricted Subsidiaries own a minority interest) or holder of 10% or more of
the Issuers' Common Stock (an "Affiliate Transaction"), other than
transactions existing on the date hereof and described elsewhere in this
Prospectus, or extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction entered into prior to the Issue Date if such extension,
renewal, waiver or other modification is more disadvantageous to the Holders
in any material respect than the original agreement as in effect on the Issue
Date unless (i) such Affiliate Transaction is between or among the Issuers and
their Wholly-Owned Subsidiaries or (ii) the terms of such Affiliate
Transaction are fair and reasonable to the Issuers or such Restricted
Subsidiary, as the case may be, and the terms of such Affiliate Transaction
are at least as favorable as the terms which could be obtained by the Issuers
or such Restricted Subsidiary, as the case may be, in a comparable transaction
made on an arm's-length basis between unaffiliated parties. In any Affiliate
Transaction involving an amount or having a value in excess of $1.0 million
which is not permitted under clause (i) above, the Issuers must obtain a
resolution of the Board of Directors certifying that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $3.0 million which are not permitted under clause (i) above, the
Issuers must obtain a written opinion as to the fairness of such a transaction
from an independent investment banking firm.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "Limitations on Restricted
Payments" contained herein (ii) any transaction, approved by the Board of
Directors of the Issuers, with an officer or director of the Issuers or of any
Subsidiary in his or her capacity as officer or director entered into in the
ordinary course of business (iii) transactions permitted by the Indenture
under the provision "Merger, Consolidation or Sale of Assets" or (iv)
transactions after the date of the Indenture that are expressly contemplated
by the Securities Purchase Agreement and the Securityholders Agreement
(including any registration rights described therein) and are not prohibited
by any other provision of this Indenture or the Notes; provided, that the
aggregate management, advisory, consulting and similar fees paid by the
Company to Willis Stein and its Affiliates pursuant to the Securities Purchase
Agreement or otherwise shall not exceed (y) $1,000,000 during any fiscal year
less (z) the amount of any distributions made by the Company during such
fiscal year pursuant to clause (vi) of the second paragraph under "--
Limitation on Restricted Payments," and provided further, that any such fees
may accrue but shall not be paid by the Company at any time after the
occurrence and during the continuance of a Default or Event of Default.
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Limitation on Creation of Subsidiaries
The Issuers shall not create or acquire, nor permit any of their Restricted
Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted
Subsidiary that is acquired or created in connection with the acquisition by
the Company of a media related business or asset or (ii) an Unrestricted
Subsidiary; provided, however, that each Restricted Subsidiary acquired or
created pursuant to clause (i) shall at the time it has either assets or
stockholders' equity in excess of $5,000 have evidenced its guarantee with
such documentation satisfactory in form and substance to the Trustee relating
thereto as the Trustee shall require, including, without limitation, a
supplement or amendment to the Indenture and opinions of counsel as to the
enforceability of such guarantee, pursuant to which such Restricted Subsidiary
shall become a Guarantor. As of the Issue Date, the Company will have no
Subsidiaries, other than Capital, and Capital will have no Subsidiaries. See
"--General."
Limitation on Certain Asset Sales
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Issuers or such
Restricted Subsidiary, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's Board of Directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the
form of cash or Temporary Cash Investments and (iii) the Asset Sale Proceeds
received by the Company or such Restricted Subsidiary are applied (a) first,
to the extent the Company elects, or is required, to prepay, repay or purchase
debt under any then existing Senior Indebtedness of the Company or any
Restricted Subsidiary within 180 days following the receipt of the Asset Sale
Proceeds from any Asset Sale, provided that any such repayment shall result in
a permanent reduction of the commitments thereunder in an amount equal to the
principal amount so repaid; (b) second, to the extent of the balance of Asset
Sale Proceeds after application as described above, to the extent the Company
elects, to an investment in assets (including Capital Stock or other
securities purchased in connection with the acquisition of Capital Stock or
property of another person) used or useful in businesses similar or ancillary
to the business of the Company or such Restricted Subsidiary as conducted at
the time of such Asset Sale, provided that such investment occurs or the
Company or a Restricted Subsidiary enters into contractual commitments to make
such investment, subject only to customary conditions (other than the
obtaining of financing), on or prior to the 181st day following receipt of
such Asset Sale Proceeds (the "Reinvestment Date") and Asset Sale Proceeds
contractually committed are so applied within 270 days following the receipt
of such Asset Sale Proceeds: and (c) third, if on the Reinvestment Date with
respect to any Asset Sale, the Available Asset Sale Proceeds exceed $5.0
million, the Issuers shall apply an amount equal to such Available Asset Sale
Proceeds to an offer to repurchase the Notes, at a purchase price in cash
equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase (an "Excess Proceeds Offer"). If
an Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Available Asset Sale Proceeds not required to repurchase Notes.
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the Reinvestment Date, a notice to the
Holders stating, among other things: (1) that such Holders have the right to
require the Issuers to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than
60 days from the date such notice is mailed; (3) the instructions, determined
by the Issuers, that each Holder must follow in order to have such Notes
repurchased and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Notes.
Limitation on Preferred Stock of Subsidiaries
The Issuers will not permit any Restricted Subsidiary to issue any Preferred
Stock (except Preferred Stock to the Company or a Restricted Subsidiary) or
permit any Person (other than the Company or a Subsidiary) to hold any such
Preferred Stock unless the Company or such Restricted Subsidiary would be
entitled to incur or
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assume Indebtedness under the first paragraph of the covenant described under
"Limitation on Additional Indebtedness" in the aggregate principal amount
equal to the aggregate liquidation value of the Preferred Stock to be issued.
Limitation on Capital Stock of Subsidiaries
The Issuers will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Subsidiary (other than under the Senior
Credit Facility or a successor facility or under the terms of any Designated
Senior Indebtedness) or (ii) permit any of their Subsidiaries to issue any
Capital Stock, other than to the Issuers or a wholly-owned Subsidiary of the
Issuers. The foregoing restrictions shall not apply to an Asset Sale made in
compliance with "Limitation on Certain Asset Sales" or the issuance of
Preferred Stock in compliance with the covenant described under "Limitation on
Preferred Stock of Subsidiaries." In no event will the Company sell, pledge,
hypothecate or otherwise convey or dispose of any Capital Stock of Capital or
will Capital issue any of its Capital Stock.
Limitation on Sale and Lease-Back Transactions
The Issuers will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined by a board resolution of the
Company and (ii) the Issuers could incur the Attributable Indebtedness in
respect of such Sale and Lease-Back Transaction in compliance with the
covenant described under "Limitation on Additional Indebtedness."
Payments for Consent
Neither the Issuers nor any of their Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to
such consent. waiver or agreement.
CHANGE OF CONTROL OFFER
Within 20 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof plus any accrued and
unpaid interest to the Change of Control Payment Date (as hereinafter defined)
(such applicable purchase price being hereinafter referred to as the "Change
of Control Purchase Price") in accordance with the procedures set forth in
this covenant.
Within 20 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(ii) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days from the date such
notice is mailed (the "Change of Control Payment Date"));
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
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(v) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date.
(vi) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(vii) 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, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(viii) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price
for such Notes, and the Issuers shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
The Indenture requires that if the Senior Credit Facility is in effect, or
any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to
holders described in the preceding paragraph, but in any event within 20 days
following any Change of Control, the Issuers on a joint and several basis
covenant to (i) repay in full all obligations under or in respect of the
Senior Credit Facility or offer to repay in full all obligations under or in
respect of the Senior Credit Facility and repay the obligations under or in
respect of the Senior Credit Facility of each lender who has accepted such
offer or (ii) obtain the requisite consent under the Senior Credit Facility to
permit the repurchase of the Notes as described above. The Issuers must first
comply with the covenant described in the preceding sentence before they shall
be required to purchase Notes in the event of a Change of Control; provided
that the Issuers' failure to comply with the covenant described in the
preceding sentence constitutes an Event of Default described in clause (iii)
under "Events of Default" below if not cured within 60 days after the notice
required by such clause. As a result of the foregoing, a holder of the Notes
may not be able to compel the Issuers to purchase the Notes unless the Issuers
are able at the time to refinance all of the obligations under or in respect
of the Senior Credit Facility or obtain requisite consents under the Senior
Credit Facility. Failure by the Issuers to make a Change of Control Offer when
required by the Indenture constitutes a default under the Indenture and, if
not cured within 60 days after notice, constitutes an Event of Default.
The Indenture provides that, (A) if either Issuer or any Subsidiary thereof
has issued any outstanding (i) Indebtedness that is subordinated in right of
payment to the Notes or (ii) Preferred Stock, and such Issuer or Subsidiary is
required to make a change of control offer or to make a distribution with
respect to such subordinated Indebtedness or Preferred Stock in the event of a
change of control, the Issuers shall not consummate any such offer or
distribution with respect to such subordinated Indebtedness or Preferred Stock
until such time as the Issuers shall have paid the Change of Control Purchase
Price in full to the holders of Notes that have accepted the Issuers' Change
of Control Offer and shall otherwise have consummated the Change of Control
Offer made to holders of the Notes and (B) the Issuers will not issue
Indebtedness that is subordinated
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in right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under the
Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Issuers to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Issuers will comply with the requirements of
Rule 14e-1 as then in effect with respect to such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither of the Issuers nor any Guarantor will, consolidate with, merge with
or into. or transfer all or substantially all of its assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions), to any Person unless (in the case of the Company or any
Guarantor): (i) the Company or such Guarantor, as the case may be, shall be
the continuing Person, or the Person (if other than the Company or such
Guarantors) formed by such consolidation or into which the Company or such
Guarantors, as the case may be, is merged or to which the properties and
assets of the Company or such Guarantor, as the case may be, are transferred
shall be a corporation (or, in the case of the Company or Holdings, a
corporation or a limited liability company) organized and existing under the
laws of the United States or any State thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all of the obligations of
the Company or such Guarantor, as the case may be, under the Notes and the
Indenture, and the obligations under the Indenture shall remain in full force
and effect; provided, that at any time the Company or its successor is a
limited liability company, there shall be a co-issuer of the Notes that is a
corporation; (ii) immediately before and immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis the Consolidated Net Worth of the
Company or the surviving entity as the case may be is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
series of transactions and (iv) immediately after giving effect to such
transaction on a pro forma basis the Company or such Person could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under the covenant set forth under "Limitation on Additional Indebtedness,"
provided that Holdings may merge into the Company, the Company may merge into
Holdings and Holdings or the Company may merge into BrightView without
complying with this clause (iv).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this provision and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
GUARANTEES
The Notes are guaranteed on a senior subordinated basis by the Guarantors.
All payments pursuant to the Guarantees by the Guarantors are subordinated in
right of payment to the prior payment in full of all Senior Indebtedness of
the Guarantor, to the same extent and in the same manner that all payments
pursuant to the Notes are subordinated in right of payment to the prior
payment in full of all Senior Indebtedness of the Issuers.
The obligations of each Guarantor are limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Senior
Indebtedness) and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment
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or distribution under a Guarantee shall be entitled to a contribution from
each other Guarantor in a pro rata amount based on the Adjusted Net Assets of
each Subsidiary Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under "Limitation on Certain Asset Sales," or the Guarantor
merges with or into or consolidates with, or transfers all or substantially
all of its assets to, the Company or another Guarantor in a transaction in
compliance with "Merger, Consolidation or Sale of Assets," and such Guarantor
has delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that all conditions precedent herein provided for
relating to such transaction have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes;
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by either of the Issuers or any Guarantor in the observance
or performance of any other covenant in the Notes or the Indenture for 60
days after written notice from the Trustee or the holders of not less than
25% in aggregate principal amount of the Notes then outstanding;
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $1,000,000 or more with respect to any Indebtedness of
the Issuers or any Restricted Subsidiary thereof, or the acceleration of
any such Indebtedness aggregating $1,000,000 or more which default shall
not be cured, waived or postponed pursuant to an agreement with the holders
of such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed for
the payment of money in excess of $1,000,000 shall be rendered against
either of the Issuers or any Restricted Subsidiary thereof, and shall not
be discharged for any period of 60 consecutive days during which a stay of
enforcement shall not be in effect; and
(vi) certain events involving bankruptcy, insolvency or reorganization of
either of the Issuers or any Restricted Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if
any, or interest on the Notes) if the Trustee considers it to be in the best
interest of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest to the date of
acceleration and such amounts shall become immediately due and payable or if
there are any amounts outstanding under or in respect of the Senior Credit
Facility, such amounts shall become due and payable upon the first to occur of
an acceleration of amounts outstanding under or in respect of the Senior
Credit Facility or five business days after receipt by the Company and the
representative of the holders of Senior Indebtedness under or in respect of
the Senior Credit Facility, of notice of the acceleration of the Notes;
provided, however, that after such acceleration but before a judgment or
decree based on acceleration is obtained by the Trustee, the holders of a
majority in aggregate principal amount of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than nonpayment of accelerated principal, premium or interest, have been
cured or waived as provided in the Indenture. In case an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization
shall occur, the principal,
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premium and interest amount with respect to all of the Notes shall be due and
payable immediately without any declaration or other act on the part of the
Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
subject to certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a continuing
Event of Default and unless also the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request and
offered reasonable indemnity to the Trustee to institute such proceeding as a
trustee, and unless the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted on such Note on or after the respective due dates expressed in such
Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Issuers may elect either (a) to defease and
be discharged from any and all obligations with respect to the Notes (except
for the obligations to register the transfer or exchange of such Notes, to
replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain
an office or agency in respect of the Notes and to hold monies for payment in
trust) ("defeasance") or (b) to be released from their obligations with
respect to the Notes under certain covenants contained in the Indenture and
described above under "Certain Covenants" ("covenant defeasance"), upon the
deposit with the Trustee (or other qualifying trustee), in trust for such
purpose, of money and/or U.S. Government Obligations which through the payment
of principal and interest in accordance with their terms will provide money,
in an amount sufficient to pay the principal of, premium, if any, and interest
on the Notes, on the scheduled due dates therefor or on a selected date of
redemption in accordance with the terms of the Indenture. Such a trust may
only be established if, among other things, the Issuers have delivered to the
Trustee an Opinion of Counsel (as specified in the Indenture) (i) to the
effect that neither the trust nor the Trustee will be required to register as
an investment company under the Investment Company Act of 1940, as amended,
and (ii) describing either a private ruling concerning the Notes or a
published ruling of the Internal Revenue Service, to the effect that holders
of the Notes or persons in their positions will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit, defeasance
and discharge and will be subject to federal income tax on the same amount and
in the same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred.
MODIFICATION OF INDENTURE
From time to time, the Issuers, the Guarantors and the Trustee may, without
the consent of holders of the Notes, amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes, including providing
for uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
adversely affect the rights of any holder. The Indenture contains provisions
permitting the Issuers, the Guarantors and the Trustee, with the consent of
holders of at least a majority in principal amount of the outstanding Notes,
to modify or supplement the Indenture or the Notes, except that no such
modification shall, without the consent of each holder affected thereby, (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes; (ii) reduce the rate of
or change the time for payment of interest on any Note; (iii) reduce the
principal of or premium on or change the stated maturity of any Note; (iv)
make any Note payable in money other than that stated in the Note or change
the place of payment from New York, New York; (v) change the amount or time of
any payment required by the Notes or reduce the premium payable upon any
redemption of Notes, or change the time before which no such redemption may be
made; (vi) waive a default in the payment of the principal of, interest on, or
redemption payment with respect to any Note; (vii) take any other action
otherwise prohibited by
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the Indenture to be taken without the consent of each holder affected thereby
or (viii) affect the ranking of the Notes or the Guarantee in a manner adverse
to the Holders.
REPORTS TO HOLDERS
So long as the Issuers are subject to the periodic reporting requirements of
the Exchange Act, they will continue to furnish the information required
thereby to the Commission and to the holders of the Notes. The Indenture
provides that even if the Company is entitled under the Exchange Act not to
furnish such information to the Commission or to the holders of the Notes, it
will nonetheless continue to furnish such information to the Commission and
holders of the Notes.
COMPLIANCE CERTIFICATE
The Issuers will deliver to the Trustee on or before 100 days after the end
of the Issuers' fiscal year and on or before 50 days after the end of each the
first, second and third fiscal quarters in each year an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default
that has occurred. If they do, the certificate will describe the Default or
Event of Default and its status.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Indenture. During the existence of an
Event of Default, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange the Notes in accordance with
the Indenture. The Registrar under such Indenture 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 Indentures. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any
Note for a period of 15 days before selection of the Notes to be redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other capitalized terms
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities), but excluding liabilities under the Guarantee, of such Guarantor
at such date and (y) the present fair salable value of the assets of such
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the obligations
of such Subsidiary under the Guarantee), excluding Indebtedness in respect of
the Guarantee, as they become absolute and matured.
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"Affiliate" of any specified Person means any other Person which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the 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, means 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.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction
or series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary of the Issuers, (b) all or substantially
all of the assets of the Issuers or of any Restricted, Subsidiary thereof, (c)
real property or (d) all or substantially all of the assets of any magazine or
publishing property, or part thereof, owned by the Issuers or any Restricted
Subsidiary thereof, or a division, line of business or comparable business
segment of the Issuers or any Restricted Subsidiary thereof; provided that
Asset Sales shall not include (i) sales, leases, conveyances, transfers or
other dispositions to the Company or to a Restricted Subsidiary or to any
other Person if after giving effect to such sale, lease, conveyance, transfer
or other disposition such other Person becomes a Restricted Subsidiary or (ii)
the sale or other disposition of any or all right, title and interest of the
Company and its Subsidiaries in and to the assets and properties (other than
cash) directly associated with the Scheduled Titles, and the sale or other
disposition of any Investments made by the contribution of any of the
Scheduled Titles to a joint venture, partnership or other Person (which may be
a Subsidiary) as permitted by clause (xii) of the definition of Permitted
Investments.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Issuers or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such
Asset Sale, (b) payment of all brokerage commissions, underwriting and other
fees and expenses related to such Asset Sale, (c) provision for minority
interest holders in any Restricted Subsidiary as a result of such Asset Sale
and (d) deduction of appropriate amounts to be provided by the Issuers or a
Restricted Subsidiary as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Issuers or a Restricted Subsidiary after such Asset Sale,
including, without limitation, pension and other post employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale, and (ii) promissory notes and other non-cash consideration
received by the Issuers or any Restricted Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of (i) the fair value of
the property subject to such arrangement (as determined by the Board of
Directors) and (ii) the present value of the notes (discounted at a rate of
10%, compounded annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale and
Lease-Back Transaction (including any period for which such lease has been
extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied
in accordance with clauses (iii)(a) or (iii)(b), and which has not yet been
the basis for an Excess Proceeds Offer in accordance with clause (iii)(c), of
the first paragraph of "Certain Covenants--Limitation on Certain Asset Sales".
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Debt shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
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A "Change of Control" means the occurrence of one or more of the following
events: (i) Holdings and BrightView collectively shall cease to own all of the
outstanding Capital Stock of the Company; (ii) prior to a Qualified IPO, (x)
Holdings shall cease to be the managing member of the Company or shall
otherwise cease to have the sole right and authority to exercise control over
the management of the Company, (y) BrightView shall cease to be the managing
member of Holdings or shall otherwise cease to have the sole right and
authority to exercise control over the management of Holdings; or (z) Willis
Stein shall cease to have the power (regardless of whether such power is
exercised) to elect a majority of the Board of Directors of BrightView and
(iii) in connection with or subsequent to a Qualified IPO, any Person or group
of Persons acting in concert as a partnership or other group (other than the
Permitted Holders) shall, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, have become,
after the date hereof, the "beneficial owner" (within the meaning of such term
under Rule 13d-3 under the Exchange Act) of securities of Holdings or
BrightView or such successor entity representing 20% or more of the combined
voting power of the then outstanding securities of Holdings or BrightView or
such successor entity, as the case may be, ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors, managers or other members of its governing body.
"Commodity Hedge Agreement" shall mean any option, hedge or other similar
agreement or arrangement designed to protect against fluctuations in commodity
or materials prices.
"Common Stock" of any Person means all Capital Stock of such Person that s
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, Redeemable Dividends, whether paid or accrued,
on Preferred Stock of Subsidiaries of such Person, imputed interest included
in Capitalized Lease Obligations, all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred
payment obligation, amortization of discount or premium, if any, and all other
non-cash interest expense (other than interest amortized to cost of sales))
plus, without duplication, all net capitalized interest for such period and
all interest incurred or paid under any guarantee of Indebtedness (including a
guarantee of principal, interest or any combination thereof) of any Person,
plus the amount of all dividends or distributions paid on Disqualified Stock
(other than dividends paid or payable in shares of Capital Stock of the
Company).
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP minus
Permitted Tax Distributions (to the extent such Permitted Tax Distributions
are made)" provided, however, that (a) the Net Income of any Person (the
"other Person") in which the Person in question or any of its Subsidiaries has
less than a 100% interest (which interest does not cause the net income of
such other Person to be consolidated into the net income of the Person in
question in accordance with GAAP) shall be included only to the extent of the
amount of dividends or distributions paid to the Person in question or the
Subsidiary, (b) the Net Income of any Subsidiary of the Person in question
that is subject to any restriction or limitation on the payment of dividends
or the making of other distributions (other than pursuant to the Notes or the
Indenture) shall be excluded to the extent of such restriction or limitation,
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the Person in question
or any of its Subsidiaries other than in the ordinary course of business shall
be excluded and (d) extraordinary gains and losses (including any related tax
effects on the Issuers) shall be excluded.
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"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholder's equity of such Person less the amount of such
stockholder's equity attributable to Disqualified Capital Stock of such Person
and its Subsidiaries, as determined in accordance with GAAP.
"Designated Senior Indebtedness" as to the Company or any Guarantor, as the
case may be, means any Senior Indebtedness (a) under the Senior Credit
Facility, or (b) which at the time of determination exceeds $25 million in
aggregate principal amount (or accreted value in the case of Indebtedness
issued at a discount) outstanding or available under a committed facility, and
(i) which is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" by such Person and (ii) as to
which the Trustee has been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or a
Restricted Subsidiary thereof which, by its term (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary
of the Company and (ii) any Preferred Stock of the Company, with respect to
either of which, under the terms of such Preferred Stock, by agreement or
otherwise, such Restricted Subsidiary or the Company is obligated to pay
current dividends or distributions in cash during the period prior to the
maturity date of the Notes; provided, however, that Preferred Stock of the
Company or any Restricted Subsidiary thereof that is issued with the benefit
of provisions requiring a change of control offer to be made for such
Preferred Stock in the event of a change of control of the Company or
Restricted Subsidiary, which provisions have substantially the same effect as
the provisions of the Indenture described under "Change of Control," shall not
be deemed to be Disqualified Capital Stock solely by virtue of such
provisions.
"EBITDA " means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision
for taxes for such period based on income or profits to the extent such income
or profits were included in computing Consolidated Net Income and any
provision for taxes utilized in computing net loss under clause (i) hereof,
plus (iii) Consolidated Interest Expense for such period (but only including
Redeemable Dividends in the calculation of such Consolidated Interest Expense
to the extent that such Redeemable Dividends have not been excluded in the
calculation of Consolidated Net Income), Plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
Consolidated Net Income for such period, plus (vii) to the extent not already
included in Consolidated Net Income, all special management compensation
earned or accrued prior to the Issue Date to the extent paid or accrued in
such Period, plus (viii) Permitted Tax Distributions minus (b) all non-cash
items increasing Consolidated Net Income for such period, all for such Person
and its Subsidiaries determined in accordance with GAAP, except that with
respect to the Issuers each of the foregoing items shall be determined on a
consolidated basis with respect to the Issuers and their Restricted
Subsidiaries only; provided, however, that, for purposes of calculating EBITDA
during any fiscal quarter, cash income from a particular Investment of such
Person shall be included only (x) if cash income has been received by such
Person with respect to such Investment during each of the previous four fiscal
quarters, or (y) if the cash income derived from such Investment is
attributable to Temporary Cash Investments.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles consistently applied
as in effect on the date of the Indenture.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such person (and "incurrence," "incurred,"
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"incurrable," and "incurring" shall have meanings correlative to the
foregoing); provided that a change in GAAP that results in an obligation of
such Person that exists at such time becoming Indebtedness shall not be deemed
an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed (provided, however, that if such obligation or obligations
shall not have been assumed, the amount of such indebtedness shall be deemed
to be the lesser of the principal amount of the obligation or the fair market
value of the pledged property or assets), (iii) guarantees of items of other
Persons which would be included within this definition for such other Persons
(whether or not such items would appear upon the balance sheet of the
guarantor), (iv) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction (provided
that in the case of any such letters of credit, the items for which such
letters of credit provide credit support are those of other Persons which
would be included within this definition for such other Persons), (v) in the
case of the Issuers, Disqualified Capital Stock of the Issuers or any
Restricted Subsidiary thereof, and (vi) obligations of any such Person under
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such Interest Rate Agreement obligations would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP). The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided (i) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at
such time as determined in conformity with GAAP and (ii) that Indebtedness
shall not include any liability for federal, state, local or other taxes.
Notwithstanding any other provision of the foregoing definition, any trade
payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business shall not be deemed to be
"Indebtedness" of the Company or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Interest Rate Agreement" shall mean any interest or foreign currency rate
swap, cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Investments" means, directly or indirectly, any advance, account receivable
(other than an account receivable arising in the ordinary course of business
or acquired as part of the assets acquired by the Issuers in connection with
an acquisition of assets which is otherwise permitted by the terms of the
Indenture), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others
or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the
acquisition, by purchase or otherwise, of all or substantially all of the
business or assets or stock or other evidence of beneficial ownership of, any
Person or the making of any investment in any Person. Investments shall
exclude (i) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices and (ii) the repurchase of securities
of any Person by such Person.
"Issue Date" means the date the Notes are first issued by the Issuers and
authenticated by the Trustee under the Indenture.
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"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same
economic effect as any of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Company or BrightView, the aggregate net proceeds received by the Company or
BrightView, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the board of
directors, at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into shares of Capital Stock of the Company which is not Disqualified Stock,
the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount
required to be paid by the holder to the Company upon such exchange, exercise,
conversion or surrender, less any and all payments made to the holders, e.g.,
on account of fractional shares and less all expenses incurred by the Company
in connection therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entities one or more Persons to accelerate
the maturity of any Designated Senior Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Permitted Holders" means, collectively, Neal Vitale and each Person who
purchased Capital Stock of Holdings, BrightView or Petersen Investment Corp.
pursuant to the Securities Purchase Agreement.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with the Senior Credit Facility in an amount not to
exceed $260 million less any mandatory prepayments actually made thereunder
(to the extent, in the case of payments of revolving credit indebtedness,
that the corresponding commitments have been permanently reduced) or
scheduled payments actually made thereunder;
(ii) Indebtedness under the Notes and the Guarantees;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(iv) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(v) Interest Rate Agreements;
(vi) Refinancing Indebtedness;
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(vii) Indebtedness under Commodity Hedge Agreements entered into in the
ordinary course of business consistent with reasonable business
requirements and not for speculation;
(viii) Indebtedness of the type described in, and secured by Liens of the
type described in, clauses (ix) and (xix) of the definition of Permitted
Liens;
(ix) Indebtedness consisting of guarantees made in the ordinary course of
business by the Company or any of its Subsidiaries of obligations of the
Issuers or any of their Subsidiaries, which obligations are otherwise
permitted under this Agreement;
(x) Contingent Obligations of the Company or its Subsidiaries in respect
of customary indemnification and purchase price adjustment obligations
incurred in connection with an Asset Sale; provided that the maximum
assumable liability in respect of all such obligations shall at no time
exceed the gross proceeds actually received by the Company and its
Subsidiaries in connection with such Asset Sale; and
(xi) Purchase Money Indebtedness of the Company and its Subsidiaries and
any refinancings, renewals or replacements of any such Purchase Money
Indebtedness (subject to the limitations on the principal amount thereof
set forth in this clause (iv)), and other Indebtedness that is unsecured
(other than Indebtedness specified in clauses (i) through (x) above), which
Purchase Money Indebtedness and other unsecured Indebtedness shall not
exceed $10 million in the aggregate at any time.
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary thereof, in
the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted Subsidiary thereof,
in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company, (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 thereof or (c) such businesses or assets are owned by
the Company or a Restricted Subsidiary;
(iv) an Investment that is made by the Company or a Restricted Subsidiary
thereof in the form of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Issuers or Restricted Subsidiary solely as partial
consideration for the consummation of an Asset Sale that is otherwise
permitted under the covenant described under "Limitation on Sale of
Assets";
(v) Investments consisting of (a) purchases and acquisitions of
inventory, supplies, materials and equipment, or (b) licenses or leases of
intellectual property and other assets, in each case in the ordinary course
of business;
(vi) Investments consisting of loans and advances to employees for
reasonable travel, relocation and business expenses in the ordinary course
of business, extensions of trade credit in the ordinary course of business,
and prepaid expenses incurred in the ordinary course of business;
(vii) without duplication, Investments consisting of Indebtedness
permitted pursuant to clause (iv) under the definition of Permitted
Indebtedness;
(viii) Investments existing on the date of this Indenture;
(ix) Investments of the Company under Interest Rate Agreements;
(x) Investments under Commodity Hedge Agreements entered into in the
ordinary course of business consistent with reasonable business
requirements and not for speculation;
(xi) Investments consisting of endorsements for collection or deposit in
the ordinary course of business;
(xii) Investments consisting of the contribution by the Company to
partnerships, joint ventures or other Persons (including Subsidiaries) of
the Scheduled Titles in exchange for equity interests in such Persons,
provided that all such Investments are made within 365 days after the date
hereof,
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(xiii) Investments consisting of the licensing of publication titles and
other assets pursuant to joint marketing arrangements with other Persons;
and
(xiv) Investments (other than Investments specified in clauses (i)
through (xiii) above) in an aggregate amount, as valued at the time each
such Investment is made, not exceeding $5 million for all such Investments
from and after the date hereof.
"Permitted Liens" means (i) Liens on property or assets of, or any shares of
stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries;
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries,
(ii) Liens securing Refinancing Indebtedness; provided that any such Lien does
not extend to or cover any Property, shares or debt other than the Property,
shares or debt securing the Indebtedness so refunded, refinanced or extended,
(iii) Liens in favor of the Issuers or any of their Restricted Subsidiaries,
(iv) Liens securing industrial revenue bonds, (v) Liens to secure Purchase
Money Indebtedness that is otherwise permitted under the Indenture, provided
that (a) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost (including sales and excise taxes, installation and delivery charges and
other direct costs of, and other direct expenses paid or charged in connection
with, such purchase or construction) of such Property, (b) the principal
amount of the Indebtedness secured by such Lien does not exceed 100% of such
costs, and (c) such Lien does not extend to or cover any Property other than
such item of Property and any improvements on such item, (vi) statutory liens
or landlords', carriers', warehouseman's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course
of business which do not secure any Indebtedness and with respect to amounts
not yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor, (vii) other
Liens securing obligations incurred in the ordinary course of business which
obligations do not exceed $5 million in the aggregate at any one time
outstanding, (viii) any extensions, substitutions, replacements or renewals of
the foregoing, (ix) Liens for taxes, assessments or governmental charges that
are being contested in good faith by appropriate proceedings, (x) Liens
securing Capital Lease Obligations permitted to be incurred under clause (v)
of the definition of "Permitted Indebtedness," provided that such Lien does
not extend to any property other than that subject to the underlying lease,
(xi) Liens securing Designated Senior Indebtedness, (xii) Liens existing on
the date of this Indenture, (xiii) Liens imposed by law, such as Liens of
carriers, warehousemen, mechanics, materialmen and landlords, and other
similar Liens incurred in the ordinary course of business for sums not
constituting borrowed money that are not overdue for a period of more than
thirty (30) days or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with GAAP (if so required), (xiv) Liens incurred in the ordinary
course of business in connection with worker's compensation, unemployment
insurance or other forms of government insurance or benefits, or to secure the
performance of letters of credit, bids, tenders, statutory obligations, surety
and appeal bonds, leases, government contracts and other similar obligations
(other than obligations for borrowed money) entered into in the ordinary
course of business, (xv) any attachment or judgment Lien not constituting an
Event of Default under the Indenture that is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established
in accordance with GAAP (if so required), (xvi) Liens arising from the filing,
for notice purposes only, of financing statements in respect of operating
leases, (xvii) Liens arising by operation of law in favor of depositary banks
and collecting banks, incurred in the ordinary course of business, (xviii)
Liens consisting of restrictions on the transfer of securities pursuant to
applicable federal and state securities laws (xix) interests of lessors and
licensors under leases and licenses to which the Issuers or any of their
Restricted Subsidiaries is a party and (xx) with respect to any real property
occupied by the Company or any of their Restricted Subsidiaries, all
easements, rights or way, licenses and similar encumbrances on title that do
not materially impair the use of such property of its intended purposes.
"Permitted Tax Distributions" means, subject to the limitations set forth in
clause (v) of the second paragraph under "Certain Covenants-Limitation on
Restricted Payments," distributions by the Company to Holdings and BrightView
from time to time in an amount approximately equal to the income tax liability
of
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such member of the Company (but in the case of Holdings and for so long as
Holdings is treated as a passthrough entity for taxation purposes, to the
income tax liability that Holdings would have if it were required to pay
income taxes) resulting from the taxable income of the Company (after taking
into account all of the Company's prior tax losses, to the extent such losses
have not previously been deemed to reduce the taxable income of the Company
and thereby reduce distributions for taxes in accordance herewith), such
distribution for taxes shall be based on the approximate highest combined tax
rate that applies to any one of the members of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Public Equity Offering" means a public offering by BrightView of shares of
its Common Stock (however designated and whether voting or non-voting) and any
and all rights, warrants or options to acquire such Common Stock; provided,
however, that in connection with any such Public Equity Offering the net
proceeds of such Public Equity Offering are contributed to the Company as
common equity.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified IPO " shall have the meaning given to such term in the
Securityholders Agreement.
"Redeemable Dividend" means, for any dividend or distribution with regard to
Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to
the issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company outstanding on the Issue Date or other
Indebtedness permitted to be incurred by the Company or its Restricted
Subsidiaries pursuant to the terms of the Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Notes to at least
the same extent as the Indebtedness being refunded, refinanced or extended, if
at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
maturity date of the Notes has a weighted average life to maturity at the time
such Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to
the maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid
interest, if any, and premiums owed, if any, not in excess of preexisting
prepayment provisions on such Indebtedness being refunded, refinanced or
extended and (c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness, and (v) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly-Owned Subsidiary of the Company.
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"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Restricted Subsidiary of the Company or any payment made
to the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company or any Restricted Subsidiary of the Company (other than
(x) dividends or distributions payable solely in Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Stock), and (y) in the case of
Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the
purchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company or any of its Restricted Subsidiaries (other than
Capital Stock owned by the Company or a Wholly-Owned Subsidiary of the
Company, excluding Disqualified Stock), (iii) the making of any principal
payment on, or the purchase, defeasance, repurchase, redemption or other
acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness
which is subordinated in right of payment to the Notes other than subordinated
Indebtedness acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of acquisition, (iv) the making of any Investment or
guarantee of any Investment in any Person other than a Permitted Investment,
(v) any designation of a Restricted Subsidiary as an Unrestricted Subsidiary
on the basis of the Investment by the Issuers therein and (vi) forgiveness of
any Indebtedness of an Affiliate of the Issuers (other than a Restricted
Subsidiary) to the Issuers or a Restricted Subsidiary. For purposes of
determining the amount expended for Restricted Payments, cash distributed or
invested shall be valued at the face amount thereof and property other than
cash shall be valued at its fair market value.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to
such action (and treating any Acquired Indebtedness as having been incurred at
the time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Additional Indebtedness" covenant.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal Property, which Property has been or
is to be sold or transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.
"Scheduled Titles" shall refer to the following publications: Sassy, Sport,
Petersen's Golfing, Mountain Biker, Bicycle Guide, Custom Classic Trucks, Pro
Basketball, Pro Baseball, Pro Football, Pro Hockey, College Basketball,
College Football, Super Street, VW Custom & Classic, Event Scene, Hot Rod
Bikes, 4x4 Power and Family Photo.
"Securities Purchase Agreement" means the Securities Purchase Agreement,
dated as of September 30, 1996, among Holdings, Petersen Investment Corp.,
BrightView, Petersen, Willis Stein and the Purchasers named therein.
"Senior Credit Facility" means the Credit Agreement, dated as of September
30, 1996, among the Company, the lenders listed therein and FBNC, as
administrative agent, and CIBC, as documentation agent, together with the
documents related thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
adding Subsidiaries of the Issuers as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
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"Senior Indebtedness" means the principal of and premium, if any, and
interest (including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowable claim in such
proceeding) on, and any and all other fees, expense reimbursement obligations
and other amounts due pursuant to the terms of all agreements, documents and
instruments providing for, creating, securing or evidencing or otherwise
entered into in connection with (a) a Indebtedness of the Company owed to
lenders under the Senior Credit Facility, (b) all obligations of the Company
with respect to any Interest Rate Agreement, (c) all obligations of the
Company to reimburse any bank or other person in respect of amounts paid under
letters of credit, acceptances or other similar instruments, (d) all other
Indebtedness of the Company which does not provide that it is to rank pari
passu with or subordinate to the Notes and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements
to, any of the Senior Indebtedness described above. Notwithstanding anything
to the contrary in the foregoing, Senior Indebtedness will not include (i)
Indebtedness of the Company to any of its Subsidiaries, (ii) Indebtedness
represented by the Notes, (iii) any Indebtedness which by the express terms of
the agreement or instrument creating, evidencing or governing the same is
junior or subordinate in right of payment to any item of Senior Indebtedness,
(iv) any trade payable arising from the purchase of goods or materials or for
services obtained in the ordinary course of business and (v) Indebtedness
(other than that described in clause (a) above) incurred in violation of the
Indenture.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise or if in accordance with generally accepted accounting principles
such entity is consolidated with the first-named Person for financial
statement purposes.
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in certificates of deposit issued by
a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000 and rated at least A by
Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc.,
maturing within 365 days of purchase; or (iii) Investments not exceeding 365
days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding clauses (i) and
(ii).
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the
Company; provided that a Subsidiary organized or acquired after the Issue Date
may be so classified as an Unrestricted Subsidiary only if such classification
is in compliance with the covenant set forth under "Limitation on Restricted
Payments." The Trustee shall be given prompt notice by the Company of each
resolution adopted by the managing member of the Company under this provision,
together with a copy of each such resolution adopted.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Company.
BOOK ENTRY, DELIVERY AND FORM
The New Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Global
Note"). The Global Note will be deposited upon issuance with the Trustee, as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case
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for credit to an account of a direct or indirect participant as described
below. Notes sold to Accredited Investors may be represented by the Global
Note or, if such an investor may not hold an interest in the Global Note, a
certificated Note.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial Interests in the Global Note may not be exchanged for
Notes in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Notes for Certificated Notes."
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the principal
amount of the Global Note and (ii) ownership of such interests in the Global
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or
by the Participants and the Indirect Participants (with respect to other
owners of beneficial interests in the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of
a person having beneficial interests in a Global Note to pledge such interests
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Notes, see "--Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respects of the principal of (and premium, if any) and interest
on the Global Note registered in the name of DTC or its nominee will be
payable to DTC or its nominee in its capacity as the registered holder under
the Indenture. Under the terms of the Indenture, the Company and the Trustee
will treat the persons in whose names the Notes, including the Global Note,
are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or
will have any responsibility or liability for (i) any aspect or accuracy of
DTC's records or any Participant's or Indirect Participant's records relating
to or payments made on account of beneficial ownership interests in the Global
Note, or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Note, or (ii) any other matter relating to
the actions and practices of DTC or any of its Participants or Indirect
Participants.
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DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants
to whose account with DTC interests in the Global Notes are credited and only
in respect of such portion of the aggregate principal amount of the Notes as
to which such Participant or Participants has or have given such direction.
However, if any of the events described under "--Exchange of Book Entry Notes
for Certificated Notes" occur, DTC reserves the right to exchange the Global
Notes for Notes in certificated form, and to distribute such Notes to its
Participants.
The information in this section concerning DTC, and its book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among accountholders in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company, the Trustee
nor any agent of the Company or Trustee will have any responsibility for the
performance by DTC, or its respective accountholders, indirect participants or
accountholders of their respective obligations under the rules and procedures
governing their operations.
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act; (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be
continuing a Default or an Event of Default with respect to the Notes. In all
cases, certificated Notes delivered in exchange for any Global Note or
beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary
view, and no ruling from the Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conditions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) may be subject to special rules
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not discussed below. The Issuers recommend that each holder consult such
holder's own tax advisor as to the particular tax consequences of exchanging
such holder's Old Notes for New Notes, including the applicability and effect
of any state, local or foreign tax laws.
The Issuers believe that the exchange of Old Notes for New Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the New Notes will not be considered to differ materially in
kind or extent from the Old Notes. Rather, the New Notes received by a holder
will be treated as a continuation of the Old Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to
holders exchanging Old Notes for New Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Issuers have agreed
that for a period of 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any Participating Broker-
Dealer for use in connection with any such resale; provided, however, the
Issuers and the Guarantor have no obligation to amend or supplement this
Prospectus unless one of them has received written notice from a Participating
Broker-Dealer of their prospectus delivery requirements under the Exchange Act
within five business days following consummation of the Exchange Offer. In
addition, until , 1997 (90 days after the commencement of the Exchange
Offer), all dealers effecting transactions in the New Notes, whether or not
participating in this distribution, may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sales of the New Notes by
Participating Broker Dealers. New Notes received by Participating Broker-
Dealers for their own account pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such New Notes. Any Participating Broker-Dealer that resells the New Notes
that were received by it for its own account pursuant to the Exchange Offer
and any broker or dealer that participates in a distribution of such New Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
LEGAL MATTERS
The validity of the issuance of the New Notes will be passed upon for the
Issuers by Kirkland & Ellis, Chicago, Illinois (a partnership which includes
professional corporations). Certain partners of Kirkland & Ellis are limited
partners of Willis Stein.
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INDEPENDENT AUDITORS
The financial statements of the publishing division of Petersen Publishing
Company at November 30, 1994 and 1995 and for each of the three years in the
period ended November 30, 1995 appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The Issuers and Holdings were formed in September 1996 to effect the
Acquisition and, prior thereto, did not have any assets or liabilities or
conduct any operations. The latest period for which financial information is
included herein is as of and for the nine months ended August 31, 1996. As a
result, separate financial statements of the Issuers and Holdings have not
been included herein.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PETERSEN PUBLISHING COMPANY PUBLISHING DIVISION
Report of Ernst & Young LLP, Independent Auditors................... F-2
Balance Sheets at November 30, 1994 and 1995........................ F-3
Statements of Income and Divisional Equity for the years ended
November 30, 1993, 1994 and 1995................................... F-4
Statements of Cash Flows for the years ended November 30, 1993, 1994
and 1995........................................................... F-5
Notes to Financial Statements....................................... F-6
Unaudited Condensed Balance Sheet at August 31, 1996................ F-11
Unaudited Condensed Statements of Income and Divisional Equity for
the nine months ended August 31, 1995 and 1996..................... F-12
Unaudited Condensed Statements of Cash Flows for the nine months
ended August 31, 1995 and 1996..................................... F-13
Notes to Unaudited Condensed Financial Statements................... F-14
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Petersen Publishing Company
We have audited the accompanying balance sheets of Petersen Publishing
Company, Publishing Division, as of November 30, 1994 and 1995, and the
related statements of income and divisional equity, and cash flows for each of
the three years in the period ended November 30, 1995. Our audits also
included the financial statement schedule listed in Item 21(b) of this
Registration Statement. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Petersen Publishing
Company, Publishing Division, at November 30, 1994 and 1995, and the results
of its operations and its cash flows for each of the three years in the period
ended November 30, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Los Angeles, California
February 7, 1996
F-2
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------
1994 1995
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 4,183 $ 9,938
Short-term investments...................................... 2,000 3,744
Accounts receivable, less allowance for doubtful accounts of
$2,132 in 1994 and $2,220 in 1995.......................... 19,238 18,535
Inventories................................................. 9,501 21,347
Other prepaid expenses and current assets................... 1,129 1,213
------- -------
Total current assets...................................... 36,051 54,777
Property and equipment, net................................... 6,457 7,784
Investments................................................... 8,513 --
Goodwill, net of accumulated amortization of $812 in 1994 and
$1,127 in 1995............................................... 3,553 3,210
Other assets.................................................. 690 1,037
------- -------
Total assets.............................................. $55,264 $66,808
======= =======
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable............................................ $ 8,231 $10,436
Accrued payroll and related costs........................... 6,718 6,116
Customer incentives payable................................. 4,849 5,204
Current portion of unearned subscription revenues, net of
deferred subscription acquisition costs of $34,996 in 1994
and $38,161 in 1995........................................ 24,394 26,669
Other accrued expenses and current liabilities.............. 2,886 592
------- -------
Total current liabilities................................. 47,078 49,017
Unearned subscription revenues, net of deferred subscription
acquisition costs of $29,194 in 1994 and $31,834 in 1995..... 6,548 7,183
Deferred state income taxes................................... 915 1,321
Other noncurrent liabilities.................................. 362 660
------- -------
Total liabilities......................................... 54,903 58,181
Commitments and contingencies
Divisional equity............................................. 361 8,627
------- -------
Total liabilities and divisional equity................... $55,264 $66,808
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
STATEMENTS OF INCOME AND DIVISIONAL EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net revenues:
Advertising................................... $105,101 $116,608 $123,410
Newsstand..................................... 37,507 40,048 39,889
Subscriptions................................. 39,820 40,710 41,963
Other......................................... 3,894 4,601 8,353
-------- -------- --------
Total net revenues.......................... 186,322 201,967 213,615
Production, selling and other direct costs...... 141,562 149,182 171,112
-------- -------- --------
Gross profit.................................... 44,760 52,785 42,503
General and administrative expenses............. 35,604 33,267 28,145
-------- -------- --------
Income from operations.......................... 9,156 19,518 14,358
Interest income, net............................ (317) (476) (549)
-------- -------- --------
Income before provision for income taxes........ 9,473 19,994 14,907
Provision for state income taxes................ 251 698 549
-------- -------- --------
Net income...................................... 9,222 19,296 14,358
Divisional equity (capital deficiency) at
beginning of year.............................. 4,126 (1,553) 361
Distribution of S corporation earnings.......... -- (26,400) (3,391)
Net change in advances to other divisions of the
Company........................................ (14,901) 9,018 (2,701)
-------- -------- --------
Divisional equity (capital deficiency) at end of
year........................................... $ (1,553) $ 361 $ 8,627
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 9,222 $ 19,296 $ 14,358
Adjustments to reconcile net cash provided by
operating activities:
Depreciation and amortization................. 3,137 3,118 3,439
Allowance for doubtful accounts............... 740 825 900
Deferred state income taxes................... -- 416 406
Changes in operating assets and liabilities:
Accounts receivable........................... (2,711) (1,758) (197)
Inventories................................... (796) (1,204) (11,846)
Other prepaid expenses and current assets..... (389) (162) (84)
Other assets.................................. (22) 385 (255)
Accounts payable.............................. (4,828) 2,116 2,205
Accrued payable and related costs............. 3,123 842 (602)
Customer incentives payable................... 25 830 355
Unearned subscription revenues, net........... 1,964 1,542 2,910
Other accrued expenses and current
liabilities.................................. 959 1,111 (2,294)
Other noncurrent liabilities.................. 256 (298) 298
-------- -------- --------
Net cash provided by operating activities....... 10,680 27,059 9,593
INVESTING ACTIVITIES
Purchases of property and equipment............. (4,739) (2,866) (4,423)
Purchases of magazines.......................... (1,850) (1,300) --
Sales of (payments for) investments--net........ 6,559 (10,312) 6,677
-------- -------- --------
Net cash (used in) provided by investing
activities..................................... (30) (14,478) 2,254
FINANCING ACTIVITIES
Distribution of S corporation earnings.......... -- (26,400) (3,391)
Net change in advances to other divisions of the
Company........................................ (14,901) 9,018 (2,701)
-------- -------- --------
Net cash used in financing activities........... (14,901) (17,382) (6,092)
-------- -------- --------
Increase (decrease) in cash and cash
equivalents.................................... (4,251) (4,801) 5,755
Cash and cash equivalents at beginning year..... 13,235 8,984 4,183
-------- -------- --------
Cash and cash equivalents at end of year........ $ 8,984 $ 4,183 $ 9,938
======== ======== ========
Supplemental information:
Income taxes paid............................. $ 563 $ 342 $ 263
Interest received............................. 364 350 741
Interest paid................................. -- -- --
</TABLE>
See accompanying notes.
F-5
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Petersen Publishing Company (the "Petersen Company") is a California
corporation which is wholly-owned by the R.E. & M.M. Petersen Living Trust.
The Publishing Division of the Petersen Company ("Petersen") is engaged in the
publishing business with revenues generated primarily from the publication of
various special interest magazines and the sale of related advertising,
principally within the United States. The Petersen Company's other major
division, which is excluded from these financial statements, rents and manages
commercial real estate properties and operates ranch properties.
The Petersen Company has elected to be taxed as an S corporation for federal
and state income tax purposes.
Cash Equivalents
Cash equivalents consist primarily of debt instruments with maturities of
three months or less at the acquisition date.
Inventories
Inventories consist of paper held at a printing company and are stated at
the lower of cost, which approximates the first-in, first-out method, or
market.
Deferred Subscription Acquisition Costs
Deferred subscription acquisition costs consist primarily of agency
commissions paid to obtain subscriptions and are amortized over the life of
the related subscriptions.
Depreciation and Amortization
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets ranging from 3 to 5 years except for leasehold
improvements which are amortized over the lesser of 10 years or the life of
the lease.
Goodwill
Goodwill is amortized using the straight-line method over its useful life of
15 years and resulted from the acquisitions of Sport, Bicycle Guide, and Sassy
during fiscal years 1988, 1993, and 1994, respectively.
Income Taxes
The Petersen Company has elected to be taxed as an S corporation for federal
and state income tax purposes. As such, the Petersen Company is not subject to
U.S. federal income taxes or most state income taxes. Petersen reports the
state income taxes to which it is subject under the liability method as
required by Statement No. 109, "Accounting for Income Taxes," issued by the
Financial Accounting Standards Board ("FASB"). Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
F-6
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Advertising revenue, net of provisions for related rebates and discounts, is
recognized at the "onsale" date of the publication containing the
advertisement. Subscription revenue is deferred and recognized pro rata as
fulfilled over the terms of such subscriptions and is recorded net of related
agency commissions. Sales of magazines intended for retail distribution on
newsstands are recorded at the time such publications are available for sale
by distributors to the public and are reduced by an estimated provision for
returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenues
No customer accounted for over 10% of Petersen's revenues. Petersen's
activities occur principally in the United States and revenues from outside
the United States are less than 10% of Petersen's revenues.
Advertising Expenses
Petersen expenses the costs of advertising as incurred. Advertising expense
for the years ended November 30, 1993, 1994 and 1995, were (in thousands)
$437, $495 and $732, respectively.
General and Administrative Expenses
General and administrative expenses incurred by the Petersen Company were
allocated between Petersen and the Real Estate Division with the Real Estate
Division's portion equal to 3% of that Division's revenue which, in the
opinion of Petersen's management, approximates the portion of such expenses
which apply to the Real Estate Division.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
the following methods and assumptions were used by Petersen in estimating its
fair value disclosures for financial instruments:
Cash and Cash equivalents: The carrying amounts reported in the balance
sheets approximate its fair value.
Short-term investments: The carrying amounts reported in the balance sheets
approximate their fair value based upon quoted market prices.
F-7
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------
1994 1995
------ -------
<S> <C> <C>
Paper....................................................... $5,461 $16,330
Magazines in process........................................ 4,040 5,017
------ -------
$9,501 $21,347
====== =======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------
1994 1995
------- -------
<S> <C> <C>
Buildings................................................. $ 342 $ 518
Office furniture and fixtures............................. 11,817 14,164
Machinery and equipment................................... 4,699 6,447
------- -------
16,858 21,129
Less accumulated depreciation and amortization............ 10,401 13,345
------- -------
$ 6,457 $ 7,784
======= =======
</TABLE>
5. NOTES PAYABLE
As of November 30, 1995, the Petersen Company had $3,000,000 available under
an unsecured revolving line of credit (the "Agreement"). Subsequent to
November 30, 1995, the Company renegotiated the terms of the Agreement
increasing the amount available under the line to $10,000,000 and borrowed
$10,000,000. The Agreement matures on December 27, 1996 and provides for
interest at a fluctuating rate equal to the London Inter-bank Offered Rate
plus 1.0% and is payable quarterly. The Agreement contains certain financial
and nonfinancial covenants. The borrowings were repaid in full during 1996
(unaudited).
6. INCOME TAXES
The liability for federal income taxes of an S corporation is the obligation
of the Petersen Company's stockholder. Therefore, no provision or liability
for federal income taxes is included in the accompanying financial statements.
The provision for income taxes is comprised of California franchise taxes at a
rate of 1.5%, which is the rate applicable to taxable income of S
corporations, and provisions for income taxes in certain other states in which
Petersen has operations.
F-8
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
State:
Current....................................... $ 251 $ 282 $ 143
Deferred...................................... -- 416 406
-------- -------- --------
$ 251 $ 698 $ 549
======== ======== ========
</TABLE>
A reconciliation of the provision for income taxes computed by applying the
federal statutory rate of 34% to income before income taxes and the reported
provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Income tax provision computed at statutory
federal income tax rate.................. $ 3,221 $ 6,798 $ 5,068
State income taxes........................ 251 698 549
Effect of S Corporation election.......... (3,221) (6,798) (5,068)
-------- -------- --------
Total provision......................... $ 251 $ 698 $ 549
======== ======== ========
</TABLE>
Petersen had deferred tax assets and liabilities as follows (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------
1994 1995
------- -------
<S> <C> <C>
Deferred tax asset:
Accrued liabilities................................... $ 226 $ 220
Deferred tax liabilities:
Subscription acquisition costs........................ (1,141) (1,541)
------- -------
Total deferred income tax liability................. $ (915) $(1,321)
======= =======
</TABLE>
7. PROFIT-SHARING RETIREMENT PLAN
The Petersen Company has a profit-sharing retirement plan (the "Plan") for
employees, which has been qualified for tax exempt status by the Internal
Revenue Service. Under the Plan, the Petersen Company may, at its discretion,
make annual contributions for all eligible employees not to exceed 15% of
their aggregate annual compensation. Petersen's contributions to the Plan for
the years ended November 30, 1993, 1994 and 1995 were (in thousands) $3,001,
$3,271 and $1,294, respectively.
8. COMMITMENTS AND CONTINGENCIES
Leases
Rent expense through November 30, 1994 includes amounts charged by the
Petersen Company's Real Estate Division to Petersen for the use of various
office facilities owned by the Petersen Company which were used by Petersen
for its principal operating and corporate headquarters. As of that date, the
Petersen Company sold its corporate headquarters building, which was first
occupied by Petersen in March 1993, to its stockholder and
F-9
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
subsequent thereto Petersen's rent for this facility has been paid to the
Petersen Company's stockholder in accordance with a lease which had an initial
term of 15 years and expires November 30, 2009.
In addition to the annual rentals, certain of the leases include renewal
options and require payments of real estate taxes, insurance and other
expenses.
Rent expense is as follows (in thousands):
<TABLE>
<CAPTION>
REAL ESTATE
DIVISION OR
SHAREHOLDER OTHERS TOTAL
----------- ------ ------
<S> <C> <C> <C>
Year ended November 30:
1993........................................... $3,651 $1,290 $4,941
1994........................................... 3,939 1,130 5,069
1995........................................... 3,875 1,575 5,450
</TABLE>
At November 30, 1995, minimum future annual rentals under long-term leases
are as follows (in thousands):
<TABLE>
<CAPTION>
SHAREHOLDER OTHERS TOTAL
----------- ------ -------
<S> <C> <C> <C>
1996.......................................... $ 4,596 $1,127 $ 5,723
1997.......................................... 4,676 1,109 5,785
1998.......................................... 4,758 910 5,668
1999.......................................... 4,841 853 5,694
2000.......................................... 4,926 853 5,779
Thereafter to 2009............................ 48,399 3,549 51,948
------- ------ -------
$72,196 $8,401 $80,597
======= ====== =======
</TABLE>
Contingencies
Petersen is a party to various legal actions and disputes arising in the
ordinary course of business. Management believes, based on the advice of
counsel, that any resulting liabilities from these actions will not have a
material adverse effect on the financial position of Petersen.
9. EVENT SUBSEQUENT TO NOVEMBER 30, 1995 (UNAUDITED)
In February 1996, Petersen sold all of its assets relating to its pre-press
operations for approximately $2,500,000 in cash resulting in a gain of
$1,554,000.
On August 15, 1996, the Petersen Company entered into an asset purchase
agreement to sell substantially all of the assets of Petersen to BrightView
Communications Group, Inc. for approximately $450 million plus assumption of
liabilities. The acquisition was consummated on September 30, 1996.
F-10
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
UNAUDITED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31,
1996
----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $19,195
Short-term investments............................................ 55
Accounts receivable, less allowance for doubtful accounts of
$2,326........................................................... 17,914
Inventories....................................................... 10,232
Other prepaid expenses and current assets......................... 678
-------
Total current assets............................................ 48,074
Property and equipment, net......................................... 5,342
Investments......................................................... 334
Goodwill, net of accumulated amortization of $1,526................. 2,952
Other assets........................................................ 790
-------
Total assets.................................................... $57,492
=======
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable.................................................. $ 6,651
Accrued payroll and related costs................................. 5,639
Customer incentives payable....................................... 5,672
Current portion of unearned subscription revenues, net of deferred
subscription acquisition costs of $44,165........................ 26,987
Other accrued expenses and current liabilities.................... 841
-------
Total current liabilities....................................... 45,790
Unearned subscription revenues, net of deferred subscription
acquisition costs of $36,842....................................... 5,981
Deferred state income taxes......................................... 1,321
Other noncurrent liabilities........................................ 77
-------
Total liabilities............................................... 53,169
Commitments and contingencies
Divisional equity................................................... 4,323
-------
Total liabilities and divisional equity......................... $57,492
=======
</TABLE>
See accompanying notes to unaudited condensed financial statements.
F-11
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
UNAUDITED CONDENSED STATEMENTS OF INCOME AND DIVISIONAL EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
AUGUST 31,
------------------
1995 1996
-------- --------
<S> <C> <C>
Net revenues:
Advertising.............................................. $ 92,062 $ 99,108
Newsstand................................................ 29,768 30,967
Subscriptions............................................ 31,559 31,666
Other.................................................... 6,845 7,071
-------- --------
Total net revenues..................................... 160,234 168,812
Production, selling and other direct costs................. 127,305 133,034
-------- --------
Gross profit............................................... 32,929 35,778
General and administrative expenses........................ 20,109 20,920
-------- --------
Income from operations..................................... 12,820 14,858
Interest income, net....................................... (335) (306)
Gain on sale of assets..................................... -- (1,554)
-------- --------
Income before provision for income taxes................... 13,155 16,718
Provision for state income taxes........................... 304 393
-------- --------
Net income................................................. 12,851 16,325
Divisional equity at beginning of period................... 361 8,627
Distribution of S corporation earnings..................... (3,300) (19,450)
Net change in advances to other divisions of the Company... (1,804) (1,179)
-------- --------
Divisional equity at end of period......................... $ 8,108 $ 4,323
======== ========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
F-12
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
AUGUST 31,
-------------------
1995 1996
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 12,851 $ 16,325
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,389 2,449
Allowance for doubtful accounts........................ 675 450
Gain on sale of assets................................. -- (1,554)
Changes in operating assets and liabilities:
Accounts receivable.................................. 2,445 171
Inventories.......................................... (6,924) 11,115
Other prepaid expenses and current assets............ 27 535
Other assets......................................... (263) 310
Accounts payable..................................... (1,958) (3,785)
Accrued payroll and related costs.................... (1,733) (477)
Customer incentives payable.......................... (286) 468
Unearned subscription revenues, net.................. (2,330) (883)
Other accrued expenses and current liabilities....... (2,122) 248
Other noncurrent liabilities......................... 224 (583)
-------- ---------
Net cash provided by operating activities................ 2,995 24,789
INVESTING ACTIVITIES
Purchases of property and equipment...................... (3,069) (695)
Proceeds from sale of assets............................. -- 2,500
Sales of investments--net................................ 6,668 3,292
-------- ---------
Net cash provided by investing activities................ 3,599 5,097
FINANCING ACTIVITIES
Proceeds from bank borrowing............................. -- 10,000
Repayment of bank borrowing.............................. -- (10,000)
Distribution of S Corporation earnings................... (3,300) (19,450)
Net change in advances to other divisions of the
Company................................................. (1,804) (1,179)
-------- ---------
Net cash used in financing activities.................... (5,104) (20,629)
-------- ---------
Increase in cash and cash equivalents.................... 1,490 9,257
Cash and cash equivalents at beginning of period......... 4,183 9,938
-------- ---------
Cash and cash equivalents at end of period............... $ 5,673 $ 19,195
======== =========
</TABLE>
See accompanying notes to unaudited condensed financial statements.
F-13
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION
Petersen Publishing Company (the "Petersen Company") is a California
corporation which is wholly-owned by the R.E. & M.M. Petersen Living Trust.
The Publishing Division of the Petersen Company ("Petersen") is engaged in the
publishing business with revenues generated primarily from the publication of
various special-interest magazines and the sale of related advertising,
principally within the United States. The Petersen Company's other major
division, which is excluded from these financial statements, rents and manages
commercial real estate properties and operates ranch properties.
The Company has elected to be taxed as an S corporation for federal and
state income tax purposes.
Significant Accounting Policies
See Note 1 to the Notes to Financial Statements appearing elsewhere herein
for a summary of Petersen's significant accounting policies.
2. INVENTORIES
Inventories consist of (dollars in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
1996
----------
<S> <C>
Paper........................................................... $ 5,115
Magazines in process............................................ 5,117
-------
$10,232
=======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of (dollars in thousands):
<TABLE>
<CAPTION>
AUGUST 31,
1996
----------
<S> <C>
Buildings and improvements...................................... $ 366
Office furniture and fixtures................................... 12,030
Machinery and equipment......................................... 6,189
-------
18,585
Less accumulated depreciation and amortization.................. 13,243
-------
$ 5,342
=======
</TABLE>
4. NOTES PAYABLE
As of November 30, 1995, the Petersen Company had $3,000,000 available under
an unsecured revolving line of credit (the "Agreement"). Subsequent to
November 30, 1995, the Petersen Company renegotiated the terms of the
Agreement increasing the amount available under the line to $10,000,000 and
borrowed $10,000,000. The Agreement matures on December 27, 1996 and provides
for interest at a fluctuating rate equal to the London Inter-bank Offered Rate
plus 1.0% and is payable quarterly. The Agreement contains certain financial
and nonfinancial covenants. The borrowings were repaid in full during the nine
months ended August 31, 1996.
F-14
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
5. PROFIT-SHARING RETIREMENT PLAN
The Petersen Company has a profit-sharing retirement plan (the "Plan") for
employees, which has been qualified for tax exempt status by the Internal
Revenue Service. Under the Plan, the Petersen Company may, at its discretion,
make annual contributions for all eligible employees not to exceed 15% of
their aggregate annual compensation. Petersen's contributions to the Plan for
the nine months ended August 31, 1995 and 1996 were (in thousands) $975 and
$971, respectively.
6. COMMITMENTS AND CONTINGENCIES
Leases
Petersen leases its headquarters building from a stockholder of the Petersen
Company in accordance with a lease which expires November 30, 2009. In
addition, Petersen leases various office facilities from the company and
others. In addition to the annual rentals, certain of the leases include
renewal options and require payments of real estate taxes, insurance and other
expenses.
Rent expense is as follows (dollars in thousands):
<TABLE>
<CAPTION>
REAL ESTATE
DIVISION OR
SHAREHOLDER OTHERS TOTAL
----------- ------ ------
<S> <C> <C> <C>
Nine months ended August 31:
1995............................................ $2,778 $1,145 $3,923
1996............................................ 3,400 1,381 4,781
</TABLE>
Contingencies
Petersen is a party to various legal actions and disputes arising in the
ordinary course of business. Management believes, based on the advice of
counsel, that any resulting liabilities from these actions will not have a
material adverse effect on the financial position of Petersen.
7. SALES OF CERTAIN ASSETS
In February 1996, the Petersen Company sold all of its assets relating to
its pre-press operations for approximately $2,500,000 in cash, resulting in a
gain of $1,554,000.
On August 15, 1996, the Petersen Company entered into an asset purchase
agreement to sell substantially all of the assets of Petersen to BrightView
Communications Group, Inc. for approximately $450 million, plus the assumption
of certain liabilities. The acquisition was consummated on September 30, 1996.
F-15
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... iii
Summary.................................................................. 1
Risk Factors............................................................. 18
The Transactions......................................................... 24
The Investors............................................................ 25
Use of Proceeds.......................................................... 25
Capitalization........................................................... 26
Unaudited Pro Forma Financial Data....................................... 27
Selected Historical Financial Data....................................... 36
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 37
Business................................................................. 43
Management............................................................... 57
Certain Transactions..................................................... 62
Security Ownership of Certain Beneficial Owners and Management........... 64
Limited Liability Company Agreement...................................... 66
Description of Senior Credit Facility.................................... 67
The Exchange Offer....................................................... 69
Description of the Notes................................................. 77
Certain Federal Income Tax Consequences.................................. 101
Plan of Distribution..................................................... 102
Legal Matters............................................................ 102
Index to Financial Statements............................................ F-1
Independent Auditors..................................................... F-2
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OFFER), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
----------------
PROSPECTUS
----------------
$100,000,000
PETERSEN PUBLISHING
COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
OFFER TO EXCHANGE THEIR
11 1/8% SERIES B SENIOR
SUBORDINATED NOTES
DUE 2006
FOR ANY AND ALL OF THEIR
OUTSTANDING 11 1/8%
SENIOR SUBORDINATED NOTES
DUE 2006
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company. The Company is a limited liability company organized under the
laws of the State of Delaware. Section 18-108 of the Delaware Limited
Liability Company Act provides that, subject to such standards and
restrictions, if any, as are set forth in its limited liability company
agreement, a limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever.
Article V of the Company's Limited Liability Company Agreement ("Article V")
provides, among other things, that each natural person, partnership (whether
general or limited), limited liability company, trust, estate, association,
corporation, custodian, nominee or any entity in its own or any representative
capacity ("Person"), who was or is made a party or is threatened to be made a
party to or is involved in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or arbitrative (a
"Proceeding"), or any appeal in such a Proceeding or any inquiry or
investigation that could lead to such a Proceeding, by reason of the fact that
such Person, or a Person of which he is the legal representative, is or was a
Member, Managing Member or Officer shall be indemnified by the Company to the
fullest extent permitted by applicable law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar
taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, reasonable attorneys' fees) actually incurred
by such Person in connection with such Proceeding, appeal, inquiry or
investigation, and indemnification under Article V shall continue as to a
Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity hereunder.
Article V also provides that the right to indemnification conferred in
Article V shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a Person of the type entitled to be
indemnified under Article V who was, is or is threatened to be, made a named
defendant or respondent in a Proceeding in advance of the final disposition of
the Proceeding and without any determination as to the Person's ultimate
entitlement to indemnification; provided, however, that the payment of such
expenses incurred by any such Person in advance of the final disposition of a
Proceeding shall be made only upon delivery to the Company of a written
affirmation by such Person of his or her good faith belief that he has met the
standard of conduct necessary for indemnification under Article V and a
written undertaking, by or on behalf of such Person, to repay all amounts so
advanced if it shall ultimately be determined that such indemnified Person is
not to be indemnified under Article V or otherwise.
Article V also provides that the Company may purchase and maintain
insurance, at its expense, to protect itself and any Member, Officer or agent
of the Company who is or was serving at the request of the Company as a
manager, director, officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of a foreign or domestic limited liability
company, corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise against any expense, liability or
loss, whether or not the Company would have the power to indemnify such Person
against such expense, liability or loss under Article V.
The Company intents to obtain insurance policies covering all of its
Directors and officers against certain liabilities for actions taken in such
capacities, including liabilities under the Securities Act of 1933.
Capital. Capital is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware, inter
alia, ("Section 145") provides that a Delaware corporation may indemnify any
persons who were, are or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action
II-1
<PAGE>
by or in the right of such corporation), by reason of the fact that such
person is or was an officer, director, employee or agent of such corporation,
or is or was serving at the request of such corporation as a director, officer
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, were or are threatened
to be made, a party to any threatened, pending or completed action or suit by
or in the right of the corporation by reasons of the fact that such person was
a director, officer, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, provided
such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
Capital's Certificate of Incorporation provides that, to the fullest extent
permitted by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended, a director of Capital shall not be liable
to Capital or its stockholders for monetary damages for a breach of fiduciary
duty as a director.
Article V of the By-laws of Capital ("Article V") provides, among other
things, that each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
he, or a person of whom he is the legal representative, is or was a director
or officer, of the corporation or is or was serving at the request of Capital
as a director, officer, employee, fiduciary, or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by Capital to the fullest extent which it is
empowered to do so by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits Capital to provide
broader indemnification rights than said law permitted the corporation to
provide prior to such amendment) against all expense, liability and loss
(including attorneys' fees actually and reasonably incurred by such person in
connection with such proceeding) and such indemnification shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, Capital shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the board of directors of Capital.
Article V also provides that persons who are not covered by the foregoing
provisions of Article V and who are or were employees or agents of Capital, or
who are or were serving at the request of Capital as employees or agents of
another corporation, partnership, joint venture, trust or other enterprise,
may be indemnified to the extent authorized at any time or from time to time
by the board of directors.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Article V further provides that Capital may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director,
officer, employee, fiduciary, or agent of Capital or was serving at the
request of Capital as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
II-2
<PAGE>
capacity, whether or not Capital would have the power to indemnify such person
against such liability under Article V.
All of Capital's directors and officers will be covered by insurance
policies intended to be obtained by Capital against certain liabilities for
actions taken in such capacities, including liabilities under the Securities
Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<C> <S>
2.1 Asset Purchase Agreement, dated as of August 15, 1996, by and
between BrightView Communications Group, Inc. ("BrightView") and
Petersen Publishing Company (the "Seller"), as amended by the
Letter Agreement, dated as of September 30, 1996, by and among the
Seller, BrightView, the Company and the Guarantor.+
3.1 Limited Liability Company Agreement, dated as of September 30,
1996, by and among the Company and the Investors.*
3.2 Certificate of Formation of the Company.
3.3 Certificate of Incorporation of Capital.
3.4 By-Laws of Capital.
3.5 Certificate of Formation of Holdings
4.1 Indenture, dated as of November 15, 1996, by and among the Company,
Capital, Holdings and certain restricted subsidiaries, as
guarantors and United States Trust Company of New York, as
trustee.
4.2 Forms of 11 1/8% Senior Subordinated Notes and Series B 11 1/8%
Senior Subordinated Notes.*
4.3 Securities Purchase Agreement, dated November 20, 1996, by and
among the Company, Capital , the guarantor named therein and the
Initial Purchasers.
4.4 Credit Agreement, dated as of September 30, 1996, by and among the
Company, the Lenders named therein, First Union National Bank of
North Carolina ("First Union"), as Administrative Agent and
Syndication Agent and CIBC, Inc., as Documentation Agent.*
4.5 Pledge and Security Agreement, dated as of September 30, 1996, by
and between the Company and First Union, as Administrative Agent.*
4.6 Pledge and Security Agreement, dated as of September 30, 1996, by
and among BrightView, the Guarantor and First Union, as
Administrative Agent.*
4.7 Guaranty, dated as of September 30, 1996, by and among BrightView,
the Guarantor and First Union, as Administrative Agent.*
4.8 Senior Subordinated Credit Agreement, dated as of September 30,
1996, among the Company, the guarantors named therein, the Lenders
named therein and First Union, as Agent.*
4.9 Registration Rights Agreement, dated as of November 25, 1996, by
and among the Company, the guarantor named therein and First Union
and CIBC Wood Gundy Securities Corp., as Initial Purchasers.*
5.1 Opinion of Kirkland & Ellis.*
10.1 License Agreement, dated as of August 15, 1996, by and between
Robert E. Petersen, BrightView and the Seller.
10.2 Employment Agreement, dated as of August 15, 1996, by and between
BrightView and Robert E. Petersen.
10.3 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, the Guarantor, the
Company and D. Claeys Bahrenburg.*
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.4 Executive Securities Purchase and Employment Agreement, dated as
of September 30, 1996, by and among BrightView, the Guarantor,
the Company and Neal Vitale.*
10.5 Executive Securities Purchase and Employment Agreement, dated as
of September 30, 1996, by and among BrightView, the Guarantor,
the Company and Richard S. Willis.*
10.6 Securities Purchase Agreement, dated as of September 30, 1996,
made by and among the Guarantor, Petersen Investment Corp.,
BrightView, the Seller, Willis Stein & Partners, L.P., and the
other Persons set forth on Schedule A thereto.*
10.7 Securityholders Agreement, dated as of September 30, 1996, among
Petersen Investment Corp., the Guarantor, BrightView and the
other parties thereto.*
10.8 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of BrightView in the amount of $8,000.*
10.9 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of BrightView in the amount of $2,000.*
10.10 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $891,000.*
10.11 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $99,000.*
10.12 Promissory Note, dated as of September 30, 1996, from Neal Vitale
in favor of BrightView in the amount of $7,500.*
10.13 Promissory Note, dated as of September 30, 1996, from Neal Vitale
in favor of Holdings in the amount of $742,500.*
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed
Charges.*
21.1 Subsidiaries of the Company and Capital.
23.1 Consent of Ernst & Young L.L.P.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).*
24.1 Powers of Attorney (included in Part I to the Registration
Statement).
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- --------
* To be filed by amendment.
+ The Company agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to such agreement upon request by the
Commission.
(B) FINANCIAL STATEMENT SCHEDULES.
Schedule II--Petersen Publishing Company, L.L.C.--Valuation and Qualifying
Accounts.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-4
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall
be deemed to be the initial bonafide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering; and
(4) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(5) The registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 20 or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other
II-5
<PAGE>
equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(9) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PETERSEN
PUBLISHING COMPANY, L.L.C. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM
S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN THE CITY OF LOS ANGELES, STATE OF CALIFORNIA ON DECEMBER 16, 1996.
PETERSEN PUBLISHING COMPANY, L.L.C.
/s/ D. Claeys Bahrenburg
By: _________________________________
D. Claeys Bahrenburg
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard S. Willis, Daniel H. Blumenthal and
Bradley J. Shisler and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this registration
statement (and any registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, for the offerings which this
Registration Statement relates), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATES
/s/ D. Claeys Bahrenburg Chief Executive December 16,
- ------------------------------------- Officer and 1996
D. CLAEYS BAHRENBURG Director of
BrightView*
(Principal
Executive Officer)
/s/ Richard S. Willis Executive Vice December 16,
- ------------------------------------- President--Chief 1996
RICHARD S. WILLIS Financial Officer
(Principal
Financial and
Accounting Officer)
/s/ Neal Vitale Director of December 16,
- ------------------------------------- BrightView* 1996
NEAL VITALE
II-7
<PAGE>
SIGNATURE CAPACITY DATES
/s/ James D. Dunning, Jr. Director of December 16,
- ------------------------------------- BrightView* 1996
JAMES D. DUNNING, JR.
/s/ Laurence H. Bloch Director of December 16,
- ------------------------------------- BrightView* 1996
LAURENCE H. BLOCH
/s/ Avy H. Stein Director of December 16,
- ------------------------------------- BrightView* 1996
AVY H. STEIN
/s/ Daniel H. Blumenthal Director of December 16,
- ------------------------------------- BrightView* 1996
DANIEL H. BLUMENTHAL
/s/ Stuart Karu Director of December 16,
- ------------------------------------- BrightView* 1996
STUART KARU
- --------
* BrightView is the Managing Member of Petersen Holdings, L.L.C., which is in
turn the Managing Member of Petersen Publishing Company, L.L.C.
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PETERSEN CAPITAL
CORP. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LOS
ANGELES, STATE OF CALIFORNIA ON DECEMBER 16, 1996.
Petersen Capital Corp.
/s/ James D. Dunning, Jr.
By: _________________________________
James D. Dunning, Jr.
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard S. Willis, Daniel H. Blumenthal and
Bradley J. Shisler and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this registration
statement (and any registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, for the offerings which this
Registration Statement relates), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATES
/s/ James D. Dunning, Jr. Chairman and December 16,
- ------------------------------------- Director (Principal 1996
JAMES D. DUNNING, JR. Executive Officer)
/s/ Richard S. Willis Chief Financial December 16,
- ------------------------------------- Officer (Principal 1996
RICHARD S. WILLIS Financial and
Accounting Officer)
/s/ Neal Vitale Director December 16,
- ------------------------------------- 1996
NEAL VITALE
II-9
<PAGE>
SIGNATURE CAPACITY DATES
/s/ D. Claeys Bahrenburg Director December 16,
- ------------------------------------- 1996
D. CLAEYS BAHRENBURG
/s/ Laurence H. Bloch Director December 16,
- ------------------------------------- 1996
LAURENCE H. BLOCH
/s/ Avy H. Stein Director December 16,
- ------------------------------------- 1996
AVY H. STEIN
/s/ Daniel H. Blumenthal Director December 16,
- ------------------------------------- 1996
DANIEL H. BLUMENTHAL
/s/ Stuart Karu Director December 16,
- ------------------------------------- 1996
STUART KARU
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PETERSEN
HOLDINGS, L.L.C. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF LOS ANGELES, STATE OF CALIFORNIA ON DECEMBER 16, 1996.
Petersen Holdings, L.L.C.
/s/ James D. Dunning, Jr.
By: _________________________________
James D. Dunning, Jr.
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard S. Willis, Daniel H. Blumenthal and
Bradley J. Shisler and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this registration
statement (and any registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, for the offerings which this
Registration Statement relates), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATES
/s/ James D. Dunning, Jr. Chairman and December 16,
- ------------------------------------- Director of 1996
JAMES D. DUNNING, JR. BrightView*
(Principal
Executive Officer)
/s/ Laurence H. Bloch Chief Financial December 16,
- ------------------------------------- Officer and 1996
LAURENCE H. BLOCH Director of
BrightView*
(Principal
Financial and
Accounting Officer)
/s/ Neal Vitale Director of December 16,
- ------------------------------------- BrightView* 1996
NEAL VITALE
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<PAGE>
SIGNATURE CAPACITY DATES
/s/ D. Claeys Bahrenburg Director of December 16,
- ------------------------------------- BrightView* 1996
D. CLAEYS BAHRENBURG
/s/ Avy H. Stein Director of December 16,
- ------------------------------------- BrightView* 1996
AVY H. STEIN
/s/ Daniel H. Blumenthal Director of December 16,
- ------------------------------------- BrightView* 1996
DANIEL H. BLUMENTHAL
/s/ Stuart Karu Director of December 16,
- ------------------------------------- BrightView* 1996
STUART KARU
- --------
* BrightView is the Managing Member of Petersen Holdings, L.L.C.
II-12
<PAGE>
EXHIBITS
- --------
2.1 Asset Purchase Agreement, dated as of August 15, 1996, by and between
BrightView Communications Group, Inc. ("BrightView") and Petersen
Publishing Company (the "Seller"), as amended by the Letter Agreement,
dated as of September 30, 1996, by and among the Seller, BrightView,
the Company and the Guarantor.+
3.1 Limited Liability Company Agreement, dated as of September 30, 1996,
by and among the Company and the Investors.*
3.2 Certificate of Formation of the Company.
3.3 Certificate of Incorporation of Capital.
3.4 By-Laws of Capital.
4.1 Indenture, dated as of November 15, 1996, by and among the Company,
Capital, Holdings and certain restricted subsidiaries, as guarantors
and United States Trust Company of New York, as trustee.
4.2 Forms of 11-1/8% Senior Subordinated Notes and Series B 11-1/8% Senior
Subordinated Notes*.
4.3 Securities Purchase Agreement, dated November 20, 1996, by and among
the Company, Capital, the guarantor named therein and the Initial
Purchasers.
4.4 Credit Agreement, dated as of September 30, 1996, by and among the
Company, the Lenders named therein, First Union National Bank of North
Carolina ("First Union"), as Administrative Agent and Syndication
Agent and CIBC, Inc., as Documentation Agent.*
4.5 Pledge and Security Agreement, dated as of September 30, 1996, by and
between the Company and First Union, as Administrative Agent.*
4.6 Pledge and Security Agreement, dated as of September 30, 1996, by and
among BrightView, the Guarantor and First Union, as Administrative
Agent.*
4.7 Guaranty, dated as of September 30, 1996, by and among BrightView, the
Guarantor and First Union, as Administrative Agent.*
4.8 Senior Subordinated Credit Agreement, dated as of September 30, 1996,
among the Company, the guarantors named therein, the Lenders named
therein and First Union, as Agent.*
4.9 Registration Rights Agreement, dated as of November 25, 1996, by and
among the Company, the guarantor named therein and First Union and
CIBC Wood Gundy Securities Corp., as Initial Purchasers.*
5.1 Opinion of Kirkland & Ellis.*
10.1 License Agreement, dated as of August 15, 1996, by and between Robert
E. Petersen, BrightView and the Seller.
10.2 Employment Agreement, dated as of August 15, 1996, by and between
BrightView and Robert E. Petersen.
10.3 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, the Guarantor, the
Company and D.Claeys Bahrenburg.*
<PAGE>
10.4 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, the Guarantor, the
Company and Neal Vitale.*
10.5 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, the Guarantor, the
Company and Richard S. Willis.*
10.5 Securities Purchase Agreement, dated as of September 30, 1996, made by
and among the Guarantor, Petersen Investment Corp., BrightView, the
Seller, Willis Stein & Partners, L.P., and the other Person set forth
on Schedule A thereto.*
----------
10.7 Securityholders Agreement, dated as of September 30, 1996, among
Petersen Investment Corp., the Guarantor, BrightView and the other
parties thereto.*
10.8 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Bright View in the amount of $8,000.*
10.9 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of BrightView in the amount of $2,000*
10.10 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $891,000.*
10.11 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $99,000.*
10.12 Promissory Note, dated as of September 30, 1996, from Neal Vitale in
favor of BrightView in the amount of $7,500.*
10.13 Promissory Note, dated as of September 30, 1996, from Neal Vitale in
favor of Holdings in the amount of $742,5000.*
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed
Charges.*
21.1 Subsidiaries of the Company and Capital.
23.1 Consent of Ernst & Young L.L.P.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).*
24.1 Powers of Attorney (included in Part I to the Registration Statement).
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
- ----------
* To be filed by amendment.
+ The Company agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to such agreement upon request by the
Commission
<PAGE>
ASSET PURCHASE AGREEMENT
dated as of
August 15, 1996
by and between
BRIGHTVIEW COMMUNICATIONS GROUP, INC.
and
PETERSEN PUBLISHING COMPANY
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
SALE OF ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED TRANSACTIONS ................. 1
<S> <C> <C>
1.1 Purchase and Sale of Assets...................................... 1
1.2 Assumed Liabilities and Excluded Liabilities..................... 6
1.3 Amount Payable at Closing........................................ 7
1.4 Allocation of Purchase Price..................................... 8
1.5 Determination of Working Capital as of the
Closing.......................................................... 8
1.6 Deposit.......................................................... 10
ARTICLE II
CLOSING............................ 10
2.1 Closing Date..................................................... 10
2.2 Items to be Delivered at the Closing By Seller................... 10
2.3 Items to be Delivered at the Closing by Buyer.................... 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER......................... 12
3.1 Organization and Related Matters................................. 12
3.2 Financial Statements; No Other Liabilities....................... 12
3.3 Inventories...................................................... 13
3.4 Notes and Accounts Receivable.................................... 13
3.5 Taxes............................................................ 13
3.6 Material Contracts............................................... 14
3.7 Absence of Certain Developments.................................. 14
3.8 Title; Condition of Assets....................................... 15
3.9 Leases........................................................... 15
3.10 Intangible Property.............................................. 16
3.11 Authorization; No Conflicts...................................... 16
3.12 Legal Proceedings and Certain Labor Matters...................... 17
3.13 Insurance........................................................ 18
3.14 Permits.......................................................... 18
3.15 Compliance with Law; Environmental Compliance.................... 18
3.16 Employee Benefits................................................ 18
</TABLE>
i
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<TABLE>
<S> <C> <C>
3.17 Bank Accounts, Powers, etc....................................... 19
3.18 No Brokers or Finders............................................ 20
3.19 Circulation...................................................... 20
3.20 Employees........................................................ 20
3.21 Barter........................................................... 20
3.22 Affiliate Transactions........................................... 20
3.23 Customer, Advertiser, Subscriber and Mailing
Lists............................................................ 20
3.24 Closing Date..................................................... 21
3.25 Health and Welfare Plans......................................... 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER.......................... 21
4.1 Organization and Related Matters................................. 21
4.2 Authorization; No Conflicts...................................... 21
4.3 No Brokers or Finders............................................ 22
4.4 Legal Proceedings................................................ 22
4.5 WARN Act......................................................... 22
4.6 Disclaimer of Representations and Warranties..................... 22
ARTICLE V
COVENANTS WITH RESPECT TO CONDUCT OF SELLER
PRIOR TO CLOSING...................... 23
5.1 Access........................................................... 23
5.2 Conduct of Business.............................................. 23
5.3 Permits and Approvals............................................ 24
5.4 Government Filings............................................... 25
5.5 Sales and Transfer Taxes......................................... 25
5.6 Insurance Policies............................................... 26
ARTICLE VI
ADDITIONAL CONTINUING COVENANTS.............. 26
6.1 Seller's Post-Closing Access..................................... 26
6.2 Rights to Petersen Intangible Property........................... 26
6.3 WARN Act......................................................... 27
6.4 Affiliate Agreements............................................. 27
6.5 Directorship..................................................... 27
6.6 Barter Bank...................................................... 27
6.7 Certain Employee Matters......................................... 27
6.8 Hart-Scott-Rodino Act Filings.................................... 29
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
6.9 Further Transfers; Transition Assistance;
Accounts Receivables............................................. 30
6.10 Exclusivity...................................................... 31
6.11 Covenant Not to Compete or Solicit............................... 31
6.12 Covenant Relating to Leases...................................... 32
ARTICLE VII
GENERAL CONDITIONS OF PURCHASE.............. 33
7.1 No Orders; Legal Proceedings..................................... 33
7.2 Approvals........................................................ 33
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER.............. 33
8.1 Representations and Warranties and Covenants of
Seller........................................................... 33
8.2 No Material Adverse Change....................................... 34
8.3 Receipt of Closing Deliveries and Releases of
Encumbrances..................................................... 34
8.4 Third Party Consents............................................. 34
8.5 Amendment and Restatement of Leases.............................. 34
8.6 Delivery of Opinion of Seller's Counsel.......................... 35
8.7 Petersen License; Change of Seller's Name........................ 35
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER............ 35
9.1 Representations and Warranties and Covenants of
Buyer............................................................ 35
9.2 Employment of Petersen........................................... 35
9.3 Delivery of Opinion of Buyer's Counsel........................... 35
9.4 Receipt of Closing Deliveries and Release of
Encumbrances..................................................... 35
ARTICLE X
TERMINATION OF OBLIGATIONS; SURVIVAL.............. 36
10.1 Termination of Agreement......................................... 36
10.2 Effect of Termination............................................ 36
10.3 Limited Survival of Representations and
Warranties....................................................... 37
</TABLE>
iii
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<TABLE>
<S> <C> <C>
10.4 Effect of Closing Over Known Unsatisfied
Conditions or Breached Covenants................................. 37
10.5 Notice of Breach of Representations or
Warranties....................................................... 37
ARTICLE XI
INDEMNIFICATION........................ 38
11.1 Obligations of Seller............................................ 38
11.2 Obligations of Buyer............................................. 38
11.3 Procedure........................................................ 38
11.4 Mitigation; Limitations on Indemnification....................... 39
11.5 Remedies Exclusive............................................... 40
ARTICLE XII
TAX MATTERS AND INSURANCE................... 41
12.1 Tax Returns; Audits.............................................. 41
12.2 Wage Reporting................................................... 41
12.3 Insurance Matters................................................ 42
ARTICLE XIII
PUBLICITY/CONFIDENTIALITY................... 43
13.1 Publicity and Reports............................................ 43
13.2 Confidentiality.................................................. 43
ARTICLE XIV
DEFINITIONS.......................... 44
14.1 General Provisions............................................... 44
14.2 Specific Provisions.............................................. 45
ARTICLE XV
GENERAL............................ 51
15.1 Amendments; Waivers.............................................. 51
15.2 Exhibits and Schedules; Integration.............................. 51
15.3 Best Efforts..................................................... 52
15.4 Governing Law.................................................... 52
15.5 No Assignment.................................................... 52
15.6 Headings......................................................... 52
15.7 Counterparts..................................................... 52
</TABLE>
iv
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<TABLE>
<S> <C> <C>
15.8 Parties in Interest............................................. 52
15.9 Notices......................................................... 52
15.10 Expenses........................................................ 54
15.11 Attorneys' Fees................................................. 54
15.12 Representation By Counsel; Interpretation....................... 54
15.13 Severability.................................................... 54
15.14 Dispute Resolution; Agreement to Arbitrate...................... 54
</TABLE>
v
<PAGE>
EXHIBITS
A - Reconciliation Statement
B - Bill of Sale and Assignment
C - Lease Assignment and Assumption Agreement
D - Copyright Assignment
E - Trademark Assignment
F - Assumption Agreement
G - Form of License Agreement
H - 1. Form of O'Melveny & Myers Opinion
2. Form of Opinion of Robert Gottlieb, Esq.
I - Form of Kirkland & Ellis Opinion
J - Form of Employment Agreement
K - Special Power of Attorney
L - Company Plan Assumption Agreement
vi
<PAGE>
SCHEDULES
<TABLE>
Disclosure Schedule
<S> <C> <C>
Schedule 1.1(a)(i) - Real Property Leases
Schedule 1.1(a)(iii) - Motor Vehicles
Schedule 1.1(a)(xiv) - Information Services Systems and Software
Schedule 1.1(a)(xix) - Publications Constituting Purchased Assets
Schedule 1.1(b)(xi) - Amounts Due From Petersen or Any of Petersen's
Affiliates
Schedule 1.1(b)(xvi) - Awards and Mementos
Schedule 1.1(b)(xvii) - Works of Art and Antiques
Schedule 1.4 - Fair Market Value of the Purchased Assets
Schedule 3.1(a) - Qualifications And Good Standing
Schedule 3.2(a) - Accounting Principles
Schedule 3.2(b) - Debts, Liabilities and Obligations
Schedule 3.5 - Tax Matters
Schedule 3.6 - Material Contracts
Schedule 3.7 - Certain Development Since June 30, 1996
Schedule 3.10(a) - Intangible Property
Schedule 3.10(b) - Absence of Right to Use and Assign
Intangible Property
Schedule 3.11 - Seller's Approvals and Permits
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C> <C>
Schedule 3.12 - Legal Proceedings and Certain Labor
Matters
Schedule 3.13 - Insurance
Schedule 3.16(a) - Employer Benefits
Schedule 3.16(b) - Employer Benefits Compliance
Schedule 3.17 - Bank Accounts
Schedule 3.19 - Circulation
Schedule 3.21 - Barter
Schedule 4.2 - Buyer's Approvals and Permits
Schedule 6.4(a) - Affiliate Agreements that Terminate
at Closing
Schedule 6.4(b) - Affiliate Agreements that Remain in
Effect Post-Closing
Schedule 6.7(c) - Employees Entitled to Severance
Upon Termination
Schedule 6.12 - Form of Chicago Lease
Schedule 14.2(a) - Material Facilities Leases
</TABLE>
viii
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of August 15, 1996 by and between
BRIGHTVIEW COMMUNICATIONS GROUP, INC., a Delaware corporation ("Buyer"), and
PETERSEN PUBLISHING COMPANY, a California corporation ("Seller").
W I T N E S S E T H
WHEREAS, Seller owns all of the assets used in connection with its
publishing business (as further defined in Section 14.2 below, the "Business");
WHEREAS, Seller desires to sell, and Buyer desires to buy, the Purchased
Assets (as defined in Section 1.1(a) below) on the terms and conditions
hereinafter set forth;
WHEREAS, Seller desires to convey, and Buyer desires to assume, the Assumed
Liabilities (as defined in Section 1.2 below) on the terms and conditions
hereinafter set forth;
WHEREAS, Seller has invited Buyer to perform, and Buyer has performed, all
necessary due diligence and business investigations with respect to Seller, the
Purchased Assets and the Assumed Liabilities, with the intention that Buyer form
its own conclusions regarding the condition and value of the business, property,
liabilities, contracts and related matters of Seller pursuant to the parties'
express intention that the sale of the Purchased Assets and the transfer of the
Assumed Liabilities be without representation or warranty by Seller, express or
implied, except as specifically set forth herein;
WHEREAS, The R.E. & M.M. Petersen Living Trust (the "Petersen Trust")
currently owns all of the outstanding capital stock of Seller; and
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and intending to be legally bound, Buyer and Seller do hereby
agree as follows:
1
<PAGE>
ARTICLE I
SALE OF ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED TRANSACTIONS
1.1 Purchase and Sale of Assets.
(a) Purchased Assets. Subject to the terms and conditions of this
Agreement, on the Closing Date, Seller shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, all
of the assets, properties, rights and contracts owned by Seller free and clear
of all Encumbrances and restrictions of whatever nature, other than Permitted
Encumbrances and other than Encumbrances to the extent arising from or securing
Assumed Liabilities (the "Purchased Assets"), except the assets specifically
identified in Section 1.1(b) (the "Excluded Assets"). The Purchased Assets
shall include, without limitation, the following:
(i) All leasehold interests in real property held by Seller and
used primarily in connection with the Business, including those set forth
as listed on Schedule 1.1(a)(i).
(ii) All fixtures and improvements attached to any leasehold
interest used primarily in connection with the Business.
(iii) All machinery, apparatus, furniture, materials, supplies
and other equipment of every type owned or leased by Seller and used
primarily in connection with the Business, and those motor vehicles set
forth on Schedule 1.1(a)(iii).
(iv) All of Seller's accounts receivable arising from the
conduct of the Business as of the date hereof ("Accounts Receivable"),
together with any additions thereto received or generated by Seller, and
subject to any reductions therefrom incurred by Seller, in operating the
Business in the ordinary course after the date hereof through the Closing
Date.
(v) All inventory of goods, including all editorial material,
manuscripts, notes and drafts, merchandise, office supplies, paper and
other raw materials,
2
<PAGE>
work in progress and finished products held for sale (the "Inventory") and
other tangible personal property, including all trade fixtures, computers
and related software, tooling, molds, dies and furniture, used primarily in
connection with the Business as of the date hereof, together with any
additions thereto received or generated by Seller, and subject to any
reductions therefrom incurred by Seller, in operating the Business in the
ordinary course after the date hereof through the Closing Date.
(vi) Except as set forth in Section 1.1(b), all of Seller's
rights and interests arising under or in connection with any Contracts to
which Seller is a party and which relate primarily to the Business.
(vii) Except as set forth in Section 1.1(b)(xx) below, all
assets and licenses owned by, and other rights and interests of, Seller in
connection with the production, promotion or distribution of any television
programs, radio programs and other media programming, if any, including,
without limitation, "Motor Trend TV," "Hot Rod Magazine TV," and "Guns &
Ammo Presents: 'The American Shooter.'"
(viii) All rights and interests to any Internet site that is
maintained by Seller as of the date hereof and that relates to the
Business.
(ix) All of Seller's rights to organize, produce, control and
promote the Events, including without limitation, "Miss Teenage America"
and "The Great Model Search."
(x) All demonstrations, stands, exhibits and related equipment
used in connection with the Events.
(xi) The "Hot Rod Roadshow," which consists of an 18-wheel
tractor and trailer rig, a similarly painted van and the booths, racks,
demonstration areas and related equipment into which the trailer may be
converted for purposes of conducting Events, and all related assets owned
by Seller.
(xii) All transferable Permits relating primarily to the
Business.
3
<PAGE>
(xiii) Except for prepaid insurance, all of Seller's prepaid
expenses arising from the conduct of the Business as of or prior to the
date hereof including advances to Retained Employees (collectively,
"Prepaid Expenses"), together with any additions thereto and subject to any
reductions therefrom made or accrued by Seller in operating the Business in
the ordinary course after the date hereof through the Closing Date.
(xiv) Except as set forth in Section 1.1(b), the information
services systems and software used primarily in the Business, including
without limitation, those set forth on Schedule 1.1(a)(xiv) hereto.
(xv) Seller's books of account relating to the Business.
(xvi) All of Seller's tickets, licenses, passes and other
rights to skyboxes, suites and other seats to any stadiums or other venues
for any entertainment events, including without limitation professional
sporting, race car and raceway events.
(xvii) All of Seller's sales and subscription data, subscription
lists, customer lists, advertiser lists, information and records relating
to customers, suppliers, advertisers, subscribers, employees, accounts and
referral sources of the Business; mailing lists, and, if any, advertising
matter and all rights thereto used in the Business, whether current,
historical, expired, outdated or otherwise; and all studies, plans, books,
ledgers, files and business records of every kind (including all financial,
business and marketing plans and information) relating primarily to the
Business; in each case whether evidenced in writing, electronic data
(including by computer) or otherwise.
(xviii) Subject to Section 6.2 hereof, all of Seller's Intangible
Property and corporate and trade names used in the Business; all goodwill
associated with the Business; all of Seller's books and records relating
primarily to the Business and its employees.
4
<PAGE>
(xix) All of Seller's rights, in the United States and
worldwide, to publish, sell, distribute and license those publications
published by Seller, including all that are set forth on Schedule
1.1(a)(xix) hereto (the "Publications") and their respective component
elements.
(xx) All lists of contributors, authors, correspondents,
reviewers, photographers, consultants, advisors, illustrators and editors
used in the Business.
(xxi) All inventories of back and current issues of each of the
Publications, except for the single set of bound volumes of back and
current issues held by Petersen.
(xxii) All property reflected in Seller's barter accounts as of
the Closing Date.
(xxiii) All of Seller's choses of action, rights and interests
arising under any insurance policy under which Seller is a beneficiary, but
only to the extent that a claim under such policy would relate to the
Purchased Assets or Assumed Liabilities, in each case to the full extent
assignable under the terms thereof, and all other claims, causes of action,
rights of recovery and rights to indemnification or set-off of any kind to
the extent relating to the Purchased Assets or the Assumed Liabilities.
(b) Excluded Assets. The assets that constitute Excluded
Assets shall include only:
(i) The consideration delivered to Seller pursuant to this
Agreement.
(ii) The assets, properties, rights and contracts owned or
held by Seller and not used primarily in connection with the Business.
(iii) Any inventory or other property sold by Seller in the
ordinary course of business during the period of time from the date hereof
until the Closing Date, to the extent not sold in breach of Section 5.2.
(iv) All fee interests in real property owned by Seller,
including, without limitation, all direct or
5
<PAGE>
indirect rights and interests in duck club and ranch properties, and boat
moorings, water companies and water rights.
(v) Except as set forth in Section 1.1(a)(xxiii), Seller's
insurance policies and related choses in action, rights and interests
pursuant to which Seller is insured or is a beneficiary.
(vi) Any automobiles owned by Seller, whether or not used in
connection with the Business, other than those set forth on Schedule
1.1(a)(iii)
(vii) Any rights to indemnification in favor of Petersen or any
of Seller's other employees, officers or directors; and except as set forth
in Section 1.1(a)(xxiii), any rights of Seller to indemnification,
recovery, or set off of any kind.
(viii) All of Seller's rights and interests to any software
developed for Seller or the Business by Nth Degree.
(ix) Seller's articles of incorporation, non-transferable
franchises, corporate seals, minute books, stock books and other corporate
records relating to the corporate organization and capitalization of Seller
and all income tax records and nontransferable Permits or Permits not
relating primarily to the Business.
(x) Any Tax refund.
(xi) All amounts due from Petersen or any of his Affiliates, to
the extent set forth on Schedule 1.1(b)(xi).
(xii) Cash on hand and in all bank accounts and cash
equivalents.
(xiii) Any goods or other assets on consignment or otherwise held
for third parties.
(xiv) Except as set forth in Section 1.1(a)(xv), all files and
records of Seller that do not relate primarily to the Business; provided
that Buyer shall receive
6
<PAGE>
reasonable access (including after the Closing) to the information therein
that pertains to the Business.
(xv) Goods received by or purchased from Seller in barter
transactions, reflected in Seller's barter accounts prior to the Closing
Date and distributed to the shareholder of Seller pursuant to Section 6.6.
(xvi) Any awards or mementos received by Petersen or any
employee of Seller, and any personal office or boardroom furniture or
fixtures, including, without limitation, any items set forth on Schedule
1.1(b)(xvi) hereto.
(xvii) Any works of art and antiques (other than those held
solely for publication in the Publications or display at Events) owned by
Seller, including, without limitation, any items set forth on Schedule
1.1(b)(xvii) hereto.
(xviii) Any Intangible Property described in Section 6.2 hereof.
(xix) Petersen's single set of bound volumes of back and
current issues of each of the Publications.
(xx) Assets and licenses held by, and other rights and
interests of, Seller relating solely to the production, promotion or
distribution of television programs or music which were produced and aired
prior to or during 1985.
(xxi) Any Note in favor of Seller secured by a mortgage on real
property.
(xxii) All club memberships and hunting licenses held in
Seller's name.
1.2 Assumed Liabilities and Excluded Liabilities. At the Closing,
Buyer shall assume, and agree to pay, perform, fulfill and discharge all debts,
claims, obligations and liabilities of Seller (collectively, the "Assumed
Liabilities"); provided, however, that the Assumed Liabilities shall not include
the following (collectively, the "Excluded Liabilities"):
7
<PAGE>
(i) Any debts, claims, obligations or liabilities to the
extent (A) not arising from the Business or (B) relating to any software
developed for Seller or the Business by Nth Degree.
(ii) Any liability of Seller for Taxes, including Taxes that
could be imposed on account of a disqualification of any employee benefit
plan.
(iii) Any of Seller's liabilities or obligations under this
Agreement or the agreements contemplated hereby.
(iv) Except as contemplated by Sections 1.5, 5.3, 5.5 and 5.6,
any of Seller's liabilities or obligations for expenses or fees incident to
or arising out of the negotiation, preparation, approval or authorization
of this Agreement or the consummation (or preparation for the consummation)
of the transactions contemplated hereby (including all attorneys,'
accountants,' investment banking, financial advisory, and brokerage fees
and expenses).
(v) Except with respect to those plans assumed by Buyer pursuant
to Section 6.7(a), any liability or obligation under or with respect to any
Company Plan or any other employee benefit plan, program, policy or
arrangement presently or formerly maintained or contributed to by any
member of the controlled group of companies (as such term is defined in
Section 414 of the Code) of which Seller is or was a member, or with
respect to which Seller or such controlled group member has any liability.
(vi) Any of Seller's liabilities or obligations for indebtedness
for borrowed money, or guarantees thereof.
(vii) Any liabilities or obligations to the extent related to any
of the Excluded Assets (including under any contracts, leases, commitments
or understandings related thereto or any fee interest in real estate) or
the Excluded Liabilities.
(viii) Any liability or obligation to Petersen, the Petersen
Trust, the Petersen Automotive Museum or any other director, shareholder or
Affiliate of Seller, any individual related by blood or marriage to or
beneficiary of any such
8
<PAGE>
Person or any entity in which any such Person or individual owns any
beneficial interest, except pursuant to the Wilshire Lease or the Chicago
Lease, and except for the obligation to reimburse Petersen for business
expenses (so long as Petersen gives Buyer written notice thereof prior to
the determination of Working Capital pursuant to Section 1.5 and the
calculation thereof is adjusted to include all such amounts).
For purposes of this Section 1.2 and Section 10.5 below, "Seller"
shall be deemed to include all predecessors to Seller and any Person with
respect to which Seller is a successor-in-interest (including by operation of
law, merger, liquidation, consolidation, assignment, assumption or otherwise).
Seller hereby acknowledges that it is retaining the Excluded
Liabilities, and Seller shall pay, discharge and perform all such liabilities
and obligations promptly when due. Buyer hereby acknowledges that it is assuming
the Assumed Liabilities, and Buyer shall pay, discharge and perform all such
liabilities and obligations promptly when due.
1.3 Amount Payable at Closing. The purchase price to be paid to Seller
by Buyer for the Purchased Assets shall be (a) the assumption of the Assumed
Liabilities plus (b) $450,000,000, payable as described in the following
sentence and subject to adjustment as provided in Section 1.5. At the Closing,
Buyer shall (i) assume the Assumed Liabilities, and (ii) pay Seller $450,000,000
(less the amount of the Deposit and Accrued Interest, which shall be retained by
Seller). Such cash purchase price payable at Closing, plus or minus the amounts
paid pursuant to Section 1.5, as finally adjusted pursuant to Section 1.5, is
hereinafter referred to as the Final Purchase Price.
1.4 Allocation of Purchase Price. Buyer and Seller shall negotiate in
good faith to determine the fair market value of the Purchased Assets; provided,
however, that for purposes of this Section 1.4 all accounts receivable shall be
valued at their face value, net of reserves. If the Buyer and Seller are unable
to agree prior to the Closing on such fair market value, Buyer shall secure an
appraisal (the expense of which shall be borne equally by Buyer and Seller) of
the Purchased Assets whose value is disputed as soon as reasonably practicable
following the Closing (a draft as well as final copies of which shall be
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furnished to Seller within ten days after receipt by Buyer), to determine the
fair market value of such Purchased Assets. Buyer and Seller shall mutually
agree upon an appraiser within 30 days after closing to conduct the valuation
contemplated by this Section 1.4. Upon receipt of such appraisal, Buyer and
Seller shall negotiate in good faith based upon such appraisal to determine the
fair market value of the Purchased Assets. If within fifteen Business Days after
their receipt of the appraisal, Buyer and Seller have not agreed on fair market
value, the appraised value of the Purchased Assets whose value is disputed shall
be their fair market value and the other Purchased Assets shall be valued at
their agreed value. After Buyer and Seller so agree on the fair market value of
the Purchased Assets, Buyer and Seller shall set forth such fair market values
on Schedule 1.4 which shall be deemed to be part of this Agreement. For tax
purposes, the Final Purchase Price shall be allocated among the Purchased Assets
consistent with the fair market values thereof set forth on Schedule 1.4 and in
accordance with Section 1060 of the Code. In such case, neither Buyer nor
Seller, nor any of their respective affiliates, shall take any position in any
income tax return or income tax audit which is inconsistent with Schedule 1.4
unless required to do so by applicable law. Buyer and Seller shall exchange
drafts of any information returns required by Section 1060 of the Code, and any
similar state statute that is applicable, at least 60 days prior to filing such
returns and shall discuss in good faith any modification suggested by the
receiving party.
1.5 Determination of Working Capital as of the Closing.
(a) Within 120 days after the Closing Date, Seller shall deliver
to Buyer a balance sheet (the "Statement") of the Purchased Assets and Assumed
Liabilities immediately prior to the opening of business on the Closing Date,
including as a schedule thereto a statement of Working Capital as of such time
(the "Adjustment Schedule"). In connection with the preparation of the Statement
and the Adjustment Schedule, Seller shall take and prepare a physical count of
the Inventory. Seller shall engage the Auditors to observe the physical count of
the Inventory and to audit the Statement, and the fees and expenses of the
Auditors in connection therewith shall be borne equally by Buyer and Seller.
Representatives of Buyer (which may, at Buyer's election, include
representatives of Ernst & Young's Chicago office) shall
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be permitted to observe such physical count. Seller's delivery of the Statement
and the Adjustment Schedule to Buyer shall be certified by the Auditors to the
effect that the Statement and Adjustment Schedule have been prepared based upon
the Agreed Accounting Principles and reviewed by the Auditors in accordance with
this Section 1.5. During the period immediately following Buyer's receipt of the
Statement and the Adjustment Schedule and until the Working Capital is finally
determined pursuant to this Section 1.5, Buyer and its representatives and
agents shall be permitted to review Seller's books and records and working
papers related to Seller's preparation of the Statement and the Adjustment
Schedule and determination of the Working Capital. The Statement and the
Adjustment Schedule shall become final and binding upon the parties 30 days
following Buyer's receipt thereof or, if Buyer so elects, 90 days after the
Closing, unless Buyer gives written notice of its disagreement ("Notice of
Disagreement") to Seller prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If a
timely Notice of Disagreement is received by Seller, then the Statement and the
Adjustment Schedule (as revised in accordance with clause (x) or (y) below)
shall become final and binding upon the parties on the earliest of (x) the date
Buyer and Seller resolve in writing any differences they have with respect to
the matters specified in the Notice of Disagreement or (y) the date all matters
in dispute are finally resolved in writing by the Accounting Firm (as defined
below) pursuant to this Section 1.5. During the 30 days following delivery of a
Notice of Disagreement, Buyer and Seller shall seek in good faith to resolve in
writing any differences which they may have with respect to the matters
specified in the Notice of Disagreement. During such period, Seller shall be
permitted to review Buyer's working papers relating to the Notice of
Disagreement. At the end of such 30-day period, Buyer and Seller shall submit to
a mutually satisfactory independent "big-six" accounting firm other than the
Auditors (the "Accounting Firm") for review and resolution all matters which
remain in dispute which were included in the Notice of Disagreement, and the
Accounting Firm shall make a final determination of Working Capital in
accordance with the guidelines and procedures set forth in this Agreement. If
Buyer and Seller are unable to mutually agree on an Accounting Firm, Buyer and
Seller shall select a "big-six" Accounting Firm by lot (after excluding the
Auditors and one big- six accounting firm selected by each of Buyer and Seller).
The fees and expenses of the Accounting Firm
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shall be shared equally by Buyer and Seller. Working Capital shall then be
determined pursuant to the Statement and the Adjustment Schedule.
(b) If the amount of Working Capital as finally determined pursuant to
Section 1.5(a) is greater than the amount of Working Capital reflected in the
Reconciliation Statement attached hereto as Exhibit A (the "Reconciliation
Statement"), Buyer shall, within three days of such final determination pursuant
to Section 1.5(a) pay to Seller, in immediately available funds, the amount of
such difference, together with interest thereon at the Agreed Rate from the
Closing Date. If the amount of Working Capital as finally determined pursuant
to Section 1.5(a) is less than the amount of Working Capital reflected in the
Reconciliation Statement, Seller shall, within three days of such final
determination pursuant to Section 1.5(a), pay to Buyer, in immediately available
funds, the amount of such difference, together with interest thereon at the
Agreed Rate from the Closing Date.
1.6 Deposit. Immediately following the execution of this Agreement
by both parties, Buyer shall deliver to Seller by wire transfer in immediately
available funds, a deposit in the amount of two million dollars ($2,000,000)
(the "Deposit"), which Seller shall deposit in an interest-bearing account in
Seller's name at a nationally-recognized banking institution. At the Closing,
Seller shall retain the Deposit plus any interest accrued thereon from the date
the Deposit was deposited by Seller ("Accrued Interest"). In the event that
this Agreement is terminated (i) by Seller in accordance with Section 10.1(d) or
(ii) on account of any condition to Closing (over which Buyer has control) not
being satisfied, Buyer agrees that, in addition to any other rights and remedies
available to Seller, Seller shall have the right to retain the Deposit and the
Accrued Interest and Buyer shall have no claim to, or interest in, the Deposit
and the Accrued Interest. In the event that this Agreement terminates for any
other reason, Seller shall promptly refund to Buyer the amount of the Deposit
plus the Accrued Interest. Buyer acknowledges that the retention of the Deposit
by Seller shall not constitute a measure of Seller's damages for any claim for
breach against Buyer brought under this Agreement.
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ARTICLE II
CLOSING
2.1 Closing Date. The Closing of the transaction shall take place at
the offices of O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles,
California, on September 30, 1996 or on such later date that the last to be
satisfied of the conditions specified in Articles VII, VIII, and IX is satisfied
or waived, or at such other location or time as Seller and Buyer may agree.
2.2 Items to be Delivered at the Closing By Seller. At the Closing,
Seller shall deliver or cause to be delivered to Buyer:
(a) A Bill of Sale and Assignment, in substantially the form of
Exhibit B.
(b) An Assignment, Assumption and Estoppel Certificate and Agreement
in the form of Exhibit C, with respect to each material Lease, executed and
acknowledged by Seller and each lessor with respect thereto.
(c) A Copyright Assignment, in substantially the form of Exhibit D.
(d) A Trademark Assignment, in substantially the form of Exhibit E.
(e) Such other instruments of transfer necessary or appropriate to
transfer to and vest in Buyer all of Seller's right, title and interest in and
to the Purchased Assets.
(f) Copies of all Permits and Approvals described in Schedule 3.11,
certified resolutions of Seller's board of directors authorizing and approving
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, certified copies of Seller's
certificate of incorporation and bylaws, a short-form certificate of good
standing (certified by an appropriate government official of Seller's
jurisdiction of incorporation as of a date not more than three business days
prior to the Closing Date) and a certificate of the Secretary or Assistant
Secretary of Seller as to the incumbency of the officer(s) of Seller (who shall
not be
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such Secretary or Assistant Secretary) executing this Agreement and the other
agreements contemplated hereby to be executed and delivered by Seller.
(g) All documentation required (pursuant to Treasury Regulation
Section 1.1445-2(b)(2)) to exempt Seller from the withholding requirement of
Section 1445 of the Code, consisting of (a) an affidavit from Seller to Buyer
stating under penalty of perjury that Seller is not a foreign person and
providing Seller's U.S. taxpayer identification number, or (b) a sworn affidavit
of Seller that it is not a "U.S. real property holding corporation," as defined
in Section 897 of the Code or (c) a "qualifying statement" obtained by Seller
from the Internal Revenue Service.
(h) The certificates, consents and other documents referred to herein
as then deliverable by Seller.
(i) The keys to all locks located on or in the Purchased Assets (and
any and all cards, devices or things necessary to access any Purchased Assets).
2.3 Items to be Delivered at the Closing by Buyer.
At the Closing, Buyer shall deliver to Seller:
(a) An Assumption Agreement, in substantially the form of Exhibit E,
pursuant to which Buyer shall assume the Assumed Liabilities.
(b) The amount set forth in Section 1.3.
(c) Such instruments as reasonably requested by any creditor, lessor
or any other person whose consent is required to consummate the transactions
contemplated by this Agreement and to evidence the assumption by Buyer of the
Assumed Liabilities.
(d) The certificates, consents and other documents referred to herein
as then deliverable by Buyer.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise indicated on the Disclosure Schedule, Seller
represents and warrants to Buyer as follows:
3.1 Organization and Related Matters. Seller is a corporation duly
organized, validly existing and in good standing under the laws of California.
The outstanding shares of Seller's capital stock consists of 5,000 shares of
common stock, par value $100 per share, all of which are owned by the Petersen
Trust. Except for such as are included in the Excluded Assets, Seller does not
own or control (directly or indirectly) any stock, partnership interest, joint
venture interest, equity participation or other security of interest in any
other Person. Seller has all necessary corporate power and authority necessary
to execute, deliver and perform this Agreement and to own its properties and
assets and to carry on its businesses as now conducted and is duly qualified or
licensed to do business as a foreign corporation in good standing in the
jurisdictions listed in Schedule 3.1, which constitute all of the jurisdictions
in which the ownership of the Purchased Assets or the conduct of Business
requires it to be so qualified, except for jurisdictions where the failure to be
so qualified does not have a material adverse effect on the Business, taken as a
whole, as currently conducted.
3.2 Financial Statements; No Other Liabilities.
(a) Seller has made available to Buyer balance sheets for Seller at
November 30, 1993, 1994 and 1995 and the related statements of income and cash
flows for the periods then ended, all of which have been audited by the Auditors
whose reports thereon are included with such financial statements. Seller has
also made available to Buyer unaudited balance sheets for Seller, at June 30,
1996 ("Latest Balance Sheet") and the related statements of income and cash
flows for the seven month period then ended ("Latest Financial Statements").
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is consistent with the books and records of Seller and presents
fairly, in all material respects, the financial condition and results of
operations of Seller, in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby
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except as disclosed in the footnotes to the annual statements or as described in
Schedule 3.2(a) hereto; provided, however, that the Latest Financial Statements
are subject to normal year end adjustments (which, individually or in the
aggregate, would not reasonably expected to be material) and lack footnotes and
other presentation items.
(b) Except as set forth on Schedule 3.2(b), Seller has no debts,
liabilities or obligations of any nature (whether accrued, absolute, contingent,
direct, indirect, perfected, inchoate, unliquidated or otherwise, whether due or
to become due) arising out of transactions entered into at or prior to the
Closing, or any transaction, series of transactions, action or inaction at or
prior to the Closing, or any state of facts or condition existing at or prior to
the Closing (regardless of when any such liability or obligation is asserted),
except liabilities and obligations that (i) are included in the Excluded
Liabilities, (ii) arise under Leases or Contracts included in the Purchased
Assets, (iii) are reflected and reserved against on the Latest Balance Sheet in
accordance with GAAP or disclosed in the notes to the most recent audited
statements, (iv) are incurred in the ordinary course of business and consistent
with past practice since the date of the Latest Balance Sheet or (v) arise in
connection with the matters disclosed in Schedules 3.7, 3.10(b), 3.12 or
3.16(b).
3.3 Inventories. The inventories of Seller are properly reflected on
Seller's books and records in accordance with GAAP.
3.4 Notes and Accounts Receivable. All material notes and accounts
receivable of Seller (a) are valid receivables incurred in the ordinary course
of business and (b) are properly reflected on Seller's books and records in
accordance with GAAP.
3.5 Taxes.
(a) Seller has made available to Buyer copies of all federal and all
material state and local income and franchise Tax Returns of Seller for its
taxable years ending in calendar years 1993, 1994 and, if available, 1995. All
Taxes shown as due on such Tax Returns have been paid and, to the knowledge of
Seller, all such Tax Returns are correct and complete in all material respects.
Except as set forth on Schedule 3.5, as of the date
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hereof, there is no taxing authority proceeding or audit pending with respect to
Seller.
(b) Seller currently is, and has at all times since its taxable year
beginning December 1, 1983, qualified to be taxed as an "S corporation" for
federal income tax purposes. The Seller is also taxed as an "S corporation" or
the equivalent thereof in California (since December 1, 1987), Michigan (since
December 1, 1983), New York (since December 1, 1993), Georgia (since December 1,
1993), Ohio (since December 1, 1983) and Illinois (since December 1, 1983).
3.6 Material Contracts. Schedule 3.6 lists, as of the date hereof,
each Contract which is a Material Contract. True copies of all Material
Contracts have been made available to Buyer. Each Material Contract is valid and
subsisting, Seller has duly performed all its obligations under each Material
Contract to which it is a party to the extent that such obligations to perform
have accrued, and no breach or default, or, to Seller's knowledge, alleged
breach or default, or event which would (with the passage of time, notice or
both) constitute a breach or default by Seller thereunder, or, to Seller's
knowledge, any other party or obligor thereunder, has occurred or, assuming that
the requisite Approvals and Permits set forth on Schedule 3.11 are sought and
obtained, as a result of the execution, delivery and performance of this
Agreement will occur, except in each case for such as would not have a material
adverse effect on the Business, taken as a whole.
3.7 Absence of Certain Developments.
(a) Except as set forth on Schedule 3.7, since June 30, 1996 to the
date hereof, there has been no material adverse change in the assets,
liabilities, condition (financial or otherwise), operating results, business or
cash flows of the Business, taken as a whole.
(b) Except in connection with the transactions contemplated hereby
or as set forth on Schedule 3.7, since June 30, 1996 to the date hereof, Seller
has conducted the Business in the ordinary course of business consistent with
past practice, and Seller has not:
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(i) sold, assigned or transferred any of the Purchased Assets
(or assets which, had they been retained by Seller, would be described by
the definition of Purchased Assets), except such sale, assignment or
transfer of inventory in the ordinary course of business consistent with
past practice or which do not have a material adverse effect on the
Business, taken as a whole, or mortgaged, pledged or subjected any of the
Purchased Assets to any material Encumbrance, except for Permitted
Encumbrances;
(ii) made or granted any bonus or any wage, salary or other
compensation increase to any employee, officer, director, consultant or
adviser or made any other material change in terms or employment or
engagement for any employee, officer, director, consultant or adviser,
other than (A) the hiring and firing of employees in the ordinary course of
business (B) any increase or bonus mandated by any of the Company Plans,
(C) any increase or bonus in connection with a promotion in the ordinary
course of business, and (D) annual merit salary increases in the ordinary
course of business consistent with past practice;
(iii) made or granted any material increase in, or amended or
terminated, any existing Company Plan, or material amended or entered into
any new collective bargaining agreement or multiemployer plan;
(iv) made any capital expenditures or commitments therefor such
that the aggregate outstanding amount of unpaid obligations and commitments
with respect thereto shall comprise in excess of $500,000 of Assumed
Liabilities on the Closing Date;
(v) suffered any extraordinary loss, damage, destruction or
casualty loss; or
(vi) committed to any of the foregoing.
(c) Seller has not at any time made or committed to make any unlawful
payments for political contributions or to the knowledge of Seller made any
bribes, kickback payments or other illegal payments.
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3.8 Title; Condition of Assets. Seller has good and marketable title
to all of the Purchased Assets, free and clear of any Encumbrance other than
Permitted Encumbrances, and the Purchased Assets constitute all of the assets
necessary to operate the Business as currently conducted. Seller has all rights,
power and authority to sell, convey, assign, transfer and deliver the Purchased
Assets to Buyer in accordance with the terms of this Agreement. At the Closing,
Seller will convey good and marketable title to all of its real and personal
property included within the Purchased Assets, free and clear of all
Encumbrances other than Permitted Encumbrances. No software developed for Seller
or the Business by Nth Degree is necessary to enable Buyer to operate the
business in the same manner as currently operated by Seller. The buildings,
improvements, fixtures, machinery, equipment and other tangible assets (whether
owned or leased) included in the Purchased Assets are, to the knowledge of
Seller, and except for ordinary wear and tear, in commercially reasonable
condition and repair and are usable in the ordinary course of business and all
such assets have been installed and maintained in accordance with all applicable
laws, regulations and ordinances, except, in each instance, for such
deficiencies and failures as do not have a material adverse effect on the
Business, taken as a whole. None of the property reflected in Seller's barter
accounts is used in the conduct of the Business.
3.9 Leases.
(a) All material leasehold properties that constitute part of the
Purchased Assets held by Seller as lessee are held under valid, binding and
enforceable leases, subject only to such exceptions as are not, individually or
in the aggregate, material to the Business, taken as a whole.
(b) Seller has heretofore made available to Buyer a true, correct
and complete copy of each leasehold interest comprising a portion of the
Purchased Assets (each a "Lease"), together with all material amendments,
modifications, alterations, and other changes thereto.
(c) As of the date hereof, all conditions precedent to the
enforceability of each Lease have been satisfied and, to the knowledge of
Seller, there exists no breach or default, nor state of facts which, with the
passage of time, notice, or both, would
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result in a breach or default on the part of either Seller or the lessor
thereunder.
3.10 Intangible Property. Schedule 3.10(a) sets forth a complete and
correct list of all: (i) patented or registered Intangible Property and pending
patent applications or other applications for registrations of Intangible
Property owned or filed by or on behalf of the Business and (ii) all material
trade names and unregistered trademarks and service marks owned or used by the
Business. The Intangible Property included in the Purchased Assets, together
with the property licensed under the Petersen License, comprises all of the
intellectual property necessary for the operation of the Business as currently
conducted. Except as set forth in Schedule 3.10(b): (i) Seller owns and
possesses all right, title and interest in and to, or has a valid and
enforceable license to use, the Intangible Property necessary for the operation
of the Business as currently conducted subject to such exceptions as do not have
a material adverse effect on the Business, taken as a whole; (ii) to Seller's
knowledge, no claim by any third party contesting the validity, enforceability,
use or ownership of any of such Intangible Property is currently outstanding or
is threatened, subject to such exceptions as do not have a material adverse
effect on the Business, taken as a whole; (iii) Seller has not received any
notices of any infringement or misappropriation by the Business, or conflict
with any third party with respect to the Intangible Property owned by Seller or
used in the Business (including, without limitation, any demand or request that
Seller license any rights from a third party) subject to such exceptions as do
not have a material adverse effect on the Business, taken as a whole; and (iv)
to Seller's knowledge, in the conduct of the Business, Seller is not infringing,
misappropriating or otherwise conflicting with any Intangible Property or other
rights of any third parties, except in each case such as do not have a material
adverse effect on the Business, taken as a whole.
3.11 Authorization; No Conflicts. The execution, delivery and
performance by Seller of this Agreement, the other agreements contemplated
hereby and the transactions contemplated hereby and thereby have been duly and
validly authorized by Seller and no other corporate act or proceeding on the
part of Seller, its Board of Directors or its shareholder is necessary to
authorize the execution, delivery or performance by Seller of this Agreement or
any other agreement contemplated hereby or the
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consummation of the transactions contemplated hereby or thereby. This Agreement,
the Petersen License and each other agreement contemplated hereby or executed in
connection herewith has been duly executed and delivered by Seller (and in the
case of the Petersen License, Petersen) and each constitutes the legally valid
and binding obligation of Seller, enforceable against Seller (and in the case of
the Petersen License, Petersen) in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally. The execution, delivery and performance by
Seller of this Agreement, the Petersen License and each other agreement
contemplated hereby or executed in connection herewith by it and the execution,
delivery and performance by Petersen of the Petersen License and by Petersen of
the Employment Agreement in the form attached hereto as Exhibit J (the
"Employment Agreement"), will not (a) violate, conflict with, result in any
breach of, constitute a default under, result in the termination or acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice (whether upon lapse of time and/or the occurrence of any act
or event or otherwise) under the Seller's Articles of Incorporation or bylaws or
any Material Contract to which Seller (and in the case of the Petersen License
and the Employment Agreement, Petersen) is a party, (b) result in the imposition
of any Encumbrance against the Business, any Purchased Asset or any other
property of Seller (and in the case of the Petersen License and the Employment
Agreement, Petersen), or (c) violate any Law the violation of which would have a
material adverse effect on the Business, taken as a whole. Schedule 3.11 lists,
as of the date hereof, all material Approvals and Permits required to be
obtained by Seller to consummate the purchase and sale of the Purchased Assets.
Except for matters identified on Schedule 3.11, the execution, delivery and
performance of this Agreement by Seller will not require any filing or
registration with, or the issuance of any Approval or Permit by, any third party
or Governmental Entity, except for such actions which, if not accomplished, do
not have a material adverse effect on the Business, taken as a whole, as
currently conducted.
3.12 Legal Proceedings and Certain Labor Matters. Except as listed on
Schedule 3.12 as of the date of this Agreement, there is no Order or Action
pending, or, to the knowledge of Seller, threatened, against or affecting Seller
or
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any of its properties or assets or by which the Purchased Assets are bound (or
the Buyer is bound with respect to the Purchased Assets) that individually or
when aggregated with one or more other such Orders or Actions has, or is
reasonably expected as of the date of this Agreement to have, a material adverse
effect on the Business, taken as a whole, the Purchased Assets, the Assumed
Liabilities or the Seller's ability to perform this Agreement. Except as listed
on Schedule 3.12 as of the date of this Agreement, there is no organized labor
strike, dispute, slowdown or stoppage, or collective bargaining or unfair labor
practice claim pending or, to the knowledge of Seller, threatened, against or
affecting Seller or the Business nor any union or collective bargaining
representation question or issue respecting employees of Seller so pending or
threatened.
3.13 Insurance. Schedule 3.13 lists, as of the date hereof, all
insurance policies currently owned by Seller and in force under which Seller is
insured, that are material to the conduct of the Business, taken as a whole.
Under the terms thereof, Seller is insured with reputable insurers against all
risks normally insured against by companies in similar lines of business. All of
such insurance policies, to the extent Seller is insured thereby, are in full
force and effect and Seller is not in material default thereunder.
3.14 Permits. Seller holds all Permits that are required by any
Governmental Entity to conduct its Business as now conducted and operate the
Purchased Assets as they are now operated, and all such Permits are valid and in
full force and effect, except, in each case, for such as do not, if not held,
valid or in force, have a material adverse effect on the Business, taken as a
whole, as currently conducted. To Seller's knowledge, Seller is in compliance
with the terms and conditions of such Permits and has received no notices that
it is in violation of any of the terms or conditions of such Permits except for
such failures in compliance and violations as do not have a material adverse
effect on the Business, taken as a whole, as currently conducted. To Seller's
knowledge, no loss of any Permit that is material to the Business, taken as a
whole, is threatened or pending other than pursuant to expiration in accordance
with the terms thereof.
3.15 Compliance with Law; Environmental Compliance. Seller has
conducted its businesses in accordance with applicable
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Law, except for such failures as do not have a material adverse effect on the
Business, taken as a whole, as currently conducted. There has not been any
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substance in connection with the conduct of the Business in violation
of any Environmental Law which has created any liability of Seller having a
material adverse effect on the Business, taken as a whole. To Seller's
knowledge, there has been no discharge, release or disposal of any Hazardous
Substance on, under or from the Real Property subject to the Leases or
previously owned or operated in the Business having a material adverse effect on
the Business, taken as a whole.
3.16 Employee Benefits. Schedule 3.16(a) sets forth, as of the date
hereof, a complete list of all material Employee Pension Benefit Plans (as
defined in Section 3(2) of ERISA), Employee Welfare Benefit Plans (as defined in
Section 3(1) of ERISA) and any other material employee benefit arrangements
maintained by Seller or to which Seller contributes (collectively, the "Company
Plans"). No such Company Plan is subject to Title IV of ERISA. Except as
described in Schedule 3.16(b), with respect to each Company Plan, to Seller's
knowledge:
(a) such Company Plan, to the extent it is subject to any
requirements under ERISA, complies therewith, except for any non-compliance
which would not be reasonably likely to have a material adverse effect on
the Business, taken as a whole;
(b) all contributions payable by Seller which are due, if any, to
such Company Plan and all benefits payable by Seller which are due, if any,
with respect to each Company Plan have been paid in full;
(c) Each such Company Plan that is an Employee Pension Benefit
Plan that is intended to meet the requirements of a "qualified plan" under
Section 401(a) of the Code has received a favorable determination letter
from the IRS with respect to the Tax Reform Act of 1986 within the remedial
amendment period;
(d) Seller has made available to Buyer complete copies of the
current plan documents, if any, and summary plan
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descriptions, if applicable, with respect to each Company Plan, together
with copies of any and all amendments thereof adopted through the date of
this Agreement, the most recent determination letter received from the IRS,
and the most recent Form 5500 Annual Report with all attachments, in each
instance if required under ERISA;
(e) there is no pending or threatened legal action, proceeding
or, to Seller's knowledge, investigation against a Company Plan or the
assets of any of the trusts under a Company Plan that would be reasonably
likely to have a material adverse effect on the Business, taken as a whole;
and
(f) there have been no non-exempt "prohibited transactions"
within the meaning of Section 406 of ERISA and Section 4975 of the Code or
breaches of fiduciary duty with respect to a Company Plan that would be
reasonably likely to have a material adverse effect on the Business, taken
as a whole.
3.17 Bank Accounts, Powers, etc. Schedule 3.17 lists, as of the date
of this Agreement, each bank, trust company, savings institution, brokerage
firm, mutual fund or other financial institution with which Seller has an
account or safe deposit box and the names and identification of all Persons
authorized to draw thereon or to have access thereto.
3.18 No Brokers or Finders. No agent, broker, finder, or investment
or commercial banker, or other Person or firm engaged by or acting on behalf of
Seller or any of its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this Agreement
is or will be entitled to any brokerage or finder's or similar fee or other
commission as a result of this Agreement or such transactions, except for
Goldman, Sachs & Co., as to which Seller shall have full responsibility.
3.19 Circulation. Accurate and fair copies of the two most recent
six-month audit reports issued by the Audit Bureau of Circulations ("ABC") with
respect to each Publication, the circulation of which is audited by ABC, are
attached to Schedule 3.19 hereto. To Seller's knowledge, each such audit report
is accurate and fair in all material respects.
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3.20 Employees. Seller is not a party to or bound by any written or
oral contract with any labor union or collective bargaining agreement. Seller is
not aware that it has any labor relations problems (including, without
limitation, any union organization activities, threatened or actual strikes or
work stoppages or material grievances) that are reasonably expected to have
adverse monetary consequences for the Business in excess of $500,000 in the
aggregate.
3.21 Barter. Schedule 3.21 sets forth all obligations of Seller with
respect to the Business which arise therefrom or relate thereto to the extent
such obligations exceed $250,000 alone or in the aggregate.
3.22 Affiliate Transactions. Contracts, arrangements and transactions
between Seller and any Seller Affiliate (including use by Seller of assets in
which any Seller Affiliate has any interest) in effect with respect to the
period included in any financial statements described in Section 3.2(a) were, in
the aggregate, on terms no more favorable to Seller than terms available to
Seller from unrelated third parties, except to the extent that such contracts,
arrangements and transactions did not have the effect of increasing revenues or
decreasing expenses of Seller in any material respect. For purposes hereof,
"Seller Affiliate" means Petersen or any other officer, director, shareholder or
Affiliate of Seller, any individual related by blood or marriage to any such
Person or any entity in which any such Person or individual owns any significant
beneficial interest.
3.23 Customer, Advertiser, Subscriber and Mailing Lists. Seller has
maintained and currently possesses all subscriber lists, customer lists,
advertiser lists and mailing lists used in connection with the conduct of the
Business as currently conducted, including all such lists necessary to continue
the operation of the Business consistent with current practice, and all of such
lists are in such condition as required in connection with the operation of the
Business, as currently conducted.
3.24 Closing Date. All of the representations and warranties of
Seller in this Article III and elsewhere in this Agreement and all information
delivered in any schedule, attach ment or exhibit hereto or in any certificate
delivered by Seller,
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the Petersen Trust or Petersen to Buyer are true and correct in all material
respects on the date of this Agreement and will be true and correct in all
material respects on the Closing Date; provided, however, that until the date
which is the second Business Day preceding the Closing, Seller shall be
permitted to update the Disclosure Schedule to reflect any changes in facts or
circumstances, or events, actions or failures to act, that occur after the date
hereof. Such updated disclosure shall not, however, relieve Seller of any
liability arising from the inaccuracy of a representation and warranty made as
of the date hereof.
3.25 Health and Welfare Plans. Seller has paid, or will have paid, the
premiums on all of its health and welfare insurance plans for all periods up to
the Closing, and, to the Seller's knowledge, with respect to any policies where
premiums would be adjusted in future periods to reflect loss experience in
excess of the insurer's reserves for claims, the insurer's reserves are adequate
to cover related claims exposure. Except for liabilities that will be reflected
in Working Capital as of the Closing, such health and welfare insurance plans
are not subject to any uninsured liabilities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization and Related Matters. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Buyer has all necessary corporate power and
authority to execute, deliver and perform this Agreement and to carry on its
business as now being conducted.
4.2 Authorization; No Conflicts. The execution, delivery and
performance of this Agreement by Buyer has been duly and validly authorized by
the Board of Directors of Buyer and by all other necessary corporate action on
the part of Buyer. This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and
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equitable principles relating to or limiting creditors' rights generally. The
execution, delivery and performance of this Agreement by Buyer will not (a)
violate, or constitute a breach or default (whether upon lapse of time and/or
the occurrence of any act or event or otherwise) under, the charter documents or
by-laws of Buyer, (b) violate, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or otherwise) under any
Contract to which Buyer is a party, (c) result in the imposition of any
Encumbrance against any material asset or property of Buyer or its Affiliates,
or (d) violate any Law the violation of which would have a material adverse
effect on Buyer's ability to perform its obligations under this Agreement.
Schedule 4.2 lists, as of the date hereof, all material Approvals and Permits
required to be obtained by Buyer to consummate the purchase and sale of the
Purchased Assets. Except for matters identified on Schedule 4.2, the execution,
delivery and performance of this Agreement by Buyer will not require any
material filing or registration with, or the issuance of any material Approval
or Permit by, any third party or Governmental Entity.
4.3 No Brokers or Finders. No agent, broker, finder or investment or
commercial banker, or other Person or firms engaged by or acting on behalf of
Buyer or its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this Agreement
is or will be entitled to any broker's or finder's or similar fees or other
commissions as a result of this Agreement or such transactions.
4.4 Legal Proceedings. There is no Order or Action pending or, to the
knowledge of Buyer, threatened, against or affecting Buyer or any of its
properties or assets that individually or when aggregated with one or more other
Actions has or, if determined adversely to the interest of Buyer, might
reasonably be expected to have, a material adverse effect on Buyer's ability to
perform this Agreement.
4.5 WARN Act. Buyer is not planning or contemplating, and has not
made or taken, any decisions or actions concerning Seller after the Closing that
would require the service of notice under the Worker Adjustment and Retraining
Act of 1988 (the "WARN Act").
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4.6 Disclaimer of Representations and Warranties. Buyer acknowledges
and agrees that the purchase and sale of the Purchased Assets hereunder shall be
without representation or warranty by Seller, express or implied, except as
specifically set forth in Article III or in any certificates delivered in
connection herewith at the Closing.
ARTICLE V
COVENANTS WITH RESPECT TO CONDUCT OF SELLER
PRIOR TO CLOSING
5.1 Access. Commencing upon the execution hereof by Seller, Seller
shall afford, and cause its officers, directors, employees, attorneys,
accountants and other agents to afford, to Buyer and its representatives (which
term shall be deemed to include its independent accountants, counsel and
lenders, and their respective counsel and advisors) reasonable access during
normal business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of their respective businesses, to all
of Seller's respective properties, facilities, books, records, operating
instructions and procedures, personnel, business, financial, legal, tax,
compensation and other data and information concerning the Business and its
affairs and operations, and all other information with respect to the Business
as Buyer may request, for the purposes of familiarizing Buyer and its
representatives with the Business, the Purchased Assets and the Assumed
Liabilities, obtaining any necessary Approvals of or Permits for the
transactions contemplated by this Agreement or otherwise consummating the
transactions contemplated hereby.
5.2 Conduct of Business. Seller agrees that, prior to the Closing,
it will not without the prior written consent of Buyer (which consent shall not
be unreasonably withheld):
(a) conduct the Business in any manner except in the ordinary course
consistent with past practice (including, without limitation, maintaining the
level and amount of subscription and other sales promotion expenditures,
programs and activities in the ordinary course of the business):
(b) terminate or fail to use its commercially reasonable efforts to
renew or preserve any Permits material to
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the conduct of the Business or otherwise fail to use commercially reasonable
efforts to preserve intact its business organization and goodwill, fail to use
its commercially reasonable efforts to keep available the services of its
officers and employees, or fail to use commercially reasonable efforts to
maintain satisfactory relationships with material brokers, distributors,
suppliers, customers, advertisers, subscribers and others having material
business relationships with the Business;
(c) enter into, amend or modify any employment or severance agreement
or arrangement with any employee (other than the hiring and firing of employees
in the normal course of business) or grant any increase in any rate of pay
benefits (whether salary or bonus) to or for, or commit to pay any special bonus
to, any salaried employee, or grant any general or uniform increase in the rates
of pay to or benefits for, or commit to pay any special bonus to, any employee
compensated based upon an hourly rate (an "Hourly Employee") or any class
thereof, or (ii) grant any increase in any rate of pay (whether salary or bonus)
or benefits to or for, commit to pay any special bonus to, any Hourly Employee,
except in each case for (A) any increase or bonus mandated by any of the Company
Plans, (B) any increase or bonus in connection with a promotion and consistent
with prior practices, and (C) annual merit salary increases in the ordinary
course of business consistent with past practice;
(d) fail to use commercially reasonable efforts to: (i) maintain the
Purchased Assets in adequate operating condition and repair; (ii) maintain
insurance reasonably comparable to that in effect on the date of the Latest
Balance Sheet; (iii) maintain Inventory, supplies and spare parts at customary
operating levels consistent with past practices; and (iv) in the event of a
casualty, loss or damage to any of such Purchased Assets prior to the Closing
Date for which Seller is insured, either repair or replace such Purchased
Assets, or, if Buyer agrees, transfer the proceeds of such insurance to Buyer;
(e) fail in any material respect to maintain its books, accounts and
records in accordance with past custom and practice as used in the preparation
of the Latest Balance Sheet and the financial statements described in Section
3.2 above;
(f) enter into any new, or amend or terminate any existing, material
contracts, agreements or commitments relating
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to the Business other than any advertising contract entered into in the normal
course of business or any contract that obligates Seller to pay amounts, and
otherwise exposes Seller to liabilities, less than $250,000 in the aggregate;
(g) institute any material change in the conduct of the Business; or
(h) agree to or make any commitment to take any actions prohibited by
this Section 5.2.
5.3 Permits and Approvals. Seller and Buyer shall cooperate and
endeavor to obtain, and will promptly prepare, all registrations, filings and
applications, requests and notices preliminary to, all Approvals and Permits
identified on Schedule 3.11 or Schedule 4.2. Seller shall bear all out-of-
pocket costs, expenses incurred or fees paid to third parties or Governmental
Entities set forth on Schedule 3.11 in order to obtain such Approvals and
Permits; provided, however, that Buyer and Seller shall each bear half of any
fees paid or expenses incurred by either party in connection with any and all
filings or proceedings required under the Hart-Scott-Rodino Act. To the extent
that the Approval of a third party with respect to any Contract is required for
the assignment of such Contract or to avoid a loss of contractual benefits
thereunder in connection with the transactions contemplated by this Agreement
but is not obtained prior to the Closing Date, this Agreement shall not be
deemed to constitute an assignment of any such Contract, and Buyer shall assume
no obligations or liabilities under any such Contract. Seller shall use its best
efforts to advise Buyer promptly in writing with respect to any Contract which
Seller knows or has substantial reason to believe will or may not be subject to
assignment to Buyer hereunder. Without in any way limiting Seller's obligation
to obtain consents and waivers necessary for the sale, transfer, assignment and
delivery of the Purchased Assets, including all Contracts, to Buyer hereunder,
if any such consent is not obtained or if such assignment is not permitted
irrespective of consent and the Closing hereunder is consummated, Seller shall
cooperate with Buyer in good faith to develop an alternative arrangement to
ensure that Buyer obtains the benefits of each such Contract, subject to Buyer
bearing the costs thereof, consistent with the economic results intended by this
Agreement including enforcement for the benefit of Buyer of any and all rights
of Seller against any other party arising out
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of any breach or cancellation of any such Contract by such other party and, if
requested by Buyer, acting as an agent on behalf of Buyer or as Buyer shall
otherwise reasonably require.
Buyer shall bear the costs of obtaining any non-governmental
Approvals, if the party from whom such Approval is required has refused to grant
such Approval because of Buyer's anticipated credit quality.
5.4 Government Filings. Buyer and Seller shall make any and all
filings required under the Hart-Scott-Rodino Act (in accordance with Section 6.8
hereof) and any other Law requiring filings with any Governmental Entity with
respect to the transactions contemplated hereby. Seller and Buyer shall furnish
each other such necessary information and reasonable assistance as the other may
reasonably request in connection with its preparation of necessary filings or
submissions under the provisions of such Laws. Seller and Buyer will
immediately supply to each other copies of all correspondence, filings or
communications, including file memoranda evidencing telephonic conferences, by
such party or its Affiliates with any Governmental Entity or members of its
staff, with respect to the transactions contemplated by this Agreement and any
related or contemplated or inconsistent transactions, except for documents filed
pursuant to Item 4(c) of the Hart-Scott Rodino Notification and Report Form or
communications regarding the same.
5.5 Sales and Transfer Taxes. Buyer and Seller shall each pay 50% of
all real and personal property transfer taxes, if any, and all sales, use and
other similar taxes, if any, imposed on or in connection with the purchase, sale
or transfer of the Purchased Assets to, and the assumption of the Assumed
Liabilities by, Buyer pursuant to this Agreement. Seller will, at its own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, sales, use, and other similar taxes and fees, and, if
required by applicable law, Buyer will, and will cause its affiliates to, join
in the execution of any such Tax Returns and other documentation.
5.6 Insurance Policies. Prior to the Closing, Seller shall use its
commercially reasonable efforts to cause Buyer to be named an additional insured
party under each of Seller's insurance policies covering the Business and any
insured period which includes the Closing Date, but only in respect of the
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Purchased Assets and Assumed Liabilities for periods prior to the Closing, and
shall promptly provide Buyer with evidence thereof; provided, however, that
Seller reserves the right to terminate any such policies after the Closing Date
upon 90 days prior notice to Buyer; and provided further that Buyer shall
reimburse Seller for any increased premiums or other costs resulting from the
addition of Buyer as an additional insured to such insurance policies.
ARTICLE VI
ADDITIONAL CONTINUING COVENANTS
6.1 Seller's Post-Closing Access. Buyer and Seller shall fully
cooperate with the other party, as and to the extent reasonably requested by the
other party, at the other party's sole expense, to make available to the other
party such assistance and financial, Tax and other information (including the
Books and Records) in connection with (a) any audit or other investigation by
any taxing authority or any required reports or submissions (including any Tax
Returns or other statutory reporting obligations of Seller) to Governmental
Entities with respect to Seller relating to any period (or portion thereof)
ending on or before the Closing Date, and (b) matters relating to insurance
coverage of Seller, third-party litigation, claims, proceedings and
investigations involving Seller, if any. Buyer and Seller shall preserve such
information and the Books and Records for at least three years after the Closing
Date, and thereafter to dispose thereof only after it shall have given the other
party 90 days' prior written notice of such impending disposition and the
opportunity (at the other party's expense) to remove and retain such information
and the Books and Records. Any information obtained pursuant to this Section 6.1
or pursuant to any other section hereof providing for the sharing of information
or the review of any Tax Return or other schedule relating to Taxes shall be
subject to Section 13.2.
6.2 Rights to Petersen Intangible Property. Buyer acknowledges and
agrees that it shall not have, and Buyer shall not acquire pursuant to this
Agreement, any rights of ownership or use whatsoever with respect to the names
and Marks "Petersen," "Petersen Publishing Company" and any derivatives thereof
(even if used in the Publications or included in masthead or other designations
of the Publication name); provided, however, that
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Seller, Petersen and Buyer shall deliver at Closing a perpetual, royalty-free
license to use the names "Petersen," "Petersen Publishing Company" and
derivatives thereof in connection with the Business and the Publications and
ancillary and related businesses (including, among other things, any future
publications of Buyer) upon the terms of the license attached as Exhibit G
hereto (the "Petersen License"). Seller agrees that, effective as of the Closing
and except as otherwise contemplated by the Petersen License, it shall
immediately cease and desist from any use of any such Intangible Property.
6.3 WARN Act. Buyer agrees that it will not take any action which
causes the notice provisions of the WARN Act to be applicable to the
transactions contemplated by this Agreement.
6.4 Affiliate Agreements.
(a) Termination. Buyer and Seller acknowledge and agree that all of
the contracts, agreements and other arrangements, whether written or oral,
described on Schedule 6.4(a), between Seller on the one hand, and Petersen or
any of his Affiliates (other than Seller or the Petersen Trust) on the other
hand, shall be terminated as of the Closing without further payment by or
obligation of either such party thereto to the other.
(b) Honor Continuing Agreements. Subject to Section 6.12, Buyer
agrees to honor from and after the Closing all obligations owing to Petersen or
his Affiliates pursuant to the terms of the leases and agreements listed on
Schedule 6.4(b). Buyer further agrees that it shall not attempt to better or
otherwise re-negotiate the express terms of any lease or agreement listed on
Schedule 6.4(b).
6.5 Directorship. At Seller's request, Buyer shall cause each of
Petersen and Margaret McNally Petersen to be appointed as a director of the
Buyer promptly following the Closing and to be nominated by Buyer for re-
election as a director in the slate of directors recommended by management of
Buyer, if he should so desire, or she should so desire, respectively, at Buyer's
next- ensuing meeting of stockholders at which directors, or the class of
directors to which he is appointed, stand for election.
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6.6 Barter Bank. Notwithstanding anything to the contrary in Section
5.2, at any time prior to the Closing, Petersen may cause the Seller to
distribute to Petersen or the Petersen Trust any goods received by Seller in
barter transactions (or proceeds thereof) and that are not used in the conduct
of the Business.
6.7 Certain Employee Matters.
(a) Benefits - Generally. Buyer shall indemnify Seller for all
claims for severance arising from Buyer's termination of Retained Employees.
Buyer will offer employment to each of Seller's employees who is employed with
respect to the Business. Each such employee who becomes employed by Buyer shall
be referred to herein as a "Retained Employee", and all such employees who
become so employed by Buyer shall be referred to herein collectively as the
"Retained Employees". For the benefit of all Retained Employees, Buyer shall
continue to maintain through December 31, 1996 all health and welfare plans of
Seller. Subject to the foregoing sentence, Buyer shall employ each Retained
Employee at a total compensation level, including wages, salary and benefits,
which is substantially equivalent in the aggregate to or greater than that
provided to such Retained Employee by Seller with respect to the previous year;
provided that, notwithstanding the foregoing, Buyer may modify such compensation
level at any time subsequent to the Closing Date. Nothing in this Agreement
shall limit Buyer's ability to terminate the employment of any Retained Employee
at any time after the Closing and for any reason, including without cause;
provided, however, that in addition to any severance payments that might be
payable to any Retained Employee so terminated, Buyer shall also pay to any such
Retained Employee an amount equal to any accrued and unpaid bonuses owing to
such Retained Employee.
(b) Company Plans. Subject to the fourth sentence of Section 6.7(a)
and otherwise notwithstanding any other provision of this Agreement, on and
after the Closing Date Seller shall retain the sponsorship of all Company Plans
and all assets of and liabilities attributable to the Company Plans, including
any obligations, liabilities or commitments with respect to the Retained
Employees arising under Part 6 of Title I of ERISA and Section 4980B of the Code
relating to any qualifying event occurring on or before the Closing Date. Buyer
shall have no
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right, title, interest, obligation, duty or liability with respect to the
Company Plans or any other "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA) that is maintained or contributed to by (or
required to be maintained or contributed to by) any person or entity that,
together with Seller, is at any time treated as a single employer under Section
414 of the Code (each such employee pension benefit plan, an "ERISA Affiliate
Plan"), and Seller shall indemnify and hold Buyer harmless against all claims,
suits, damages, losses, costs and expenses arising out of any liabilities,
obligations or commitments with respect to the Company Plans and the ERISA
Affiliate Plans.
(c) Benefit Arrangements for Retained Employees. As of the Closing
Date, Seller shall vest, if so required in accordance with the terms thereof,
all Retained Employees in all benefits accrued through the Closing Date under
any Company Plan that is intended to be qualified within the meaning of Section
401(a) of the code. Effective as of the Closing Date and through July 31, 1997,
Buyer shall provide to and on behalf of the Retained Employees such employee
benefit plans, programs and compensation as it deems appropriate to fulfill its
obligation under Section 6.7(a).
(d) Mutual Cooperation. Subject to applicable privacy laws, Seller
shall provide promptly to Buyer, at Buyer's request, any information or copies
of personnel records (including addresses, dates of birth, dates of hire and
dependent information) relating to the Retained Employees or relating to the
service of Retained Employees with Seller (and predecessors of Seller, as
applicable) prior to the Closing Date. Seller and Buyer shall each cooperate
with the other and shall provide to the other such documentation, information
and assistance as is reasonably necessary to effect the provisions of this
Section 6.7.
(e) Severance. If, after the Closing, the employment of any employee
who is identified on Schedule 6.7(e) hereto is terminated, Buyer shall
supplement any severance payments otherwise due to such terminated employee or,
if no such severance payments are due to the employee, make severance payments,
in either case such that the terminated employee shall receive, in a lump sum,
severance payments at least equal to 18 months of such employee's then current
base salary (or base
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salary for the year preceding Closing, if greater); provided, however, that
Buyer shall not be obligated to make any such payments to any employee whose
employment is (i) terminated by the employee (except in the case of Constructive
Termination Without Cause by the employee) or (ii) terminated by Buyer on
account of a material breach of the employee's duties (which duties shall not be
more demanding than the level of performance required of the employee as of the
date hereof). For purposes of this Section 6.7(e), "Constructive Termination
Without Cause" means the occurrence of any of the following events without the
express written consent of the employee: (i) relocation from his principal
office as of the date hereof (other than to an office in the same metropolitan
area), (ii) any material breach by Buyer of the terms of the employee's
employment or (iii) the assignment to the employee of a significantly lower
position in the organization in terms of his responsibility, authority and
status, requiring the employee to perform services not commensurate with the
employee's ability, experience and qualifications, in any such case other than
as a result of disability or retirement.
(f) Profit Sharing Plan. Buyer shall contribute $1,300,000 to the
Seller Profit Sharing Plan with respect to the period ending November 30, 1996.
Buyer agrees that it shall not amend the plan to expand the coverage of the plan
unless it increases such contribution to the plan in proportion to such
inclusion or expansion.
6.8 Hart-Scott-Rodino Act Filings.
(a) Buyer and Seller shall each promptly make or cause to be made the
filings required of such party under the Hart-Scott-Rodino Act in accordance
with Section 5.4 hereof and, as soon as reasonably practicable and after
consultation with the other party, provide to the appropriate Governmental
Entity any documentary material or other information that may be necessary in
order to satisfy any request under the Hart-Scott-Rodino Act for additional
information or otherwise to obtain any governmental approval; (b) Buyer and
Seller shall each use its best efforts to resolve any objections that are
asserted by any person under the antitrust or other laws with respect to the
transactions contemplated by this Agreement and to avoid the entry of, or have
vacated or terminated, any order, decree, judgment or ruling of any Governmental
Entity restraining or
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preventing the consummation of the transactions contemplated by this Agreement
and any proceedings that might result in such entry; and (c) Buyer shall commit
(by consent decree or otherwise) to sell, divest, hold separate or dispose of
such assets or businesses of Buyer or the Business as may be necessary in order
to obtain any needed consents or approvals or to avoid the entry of any such
order, decree, judgment or ruling or proceeding that might result in such entry.
6.9 Further Transfers; Transition Assistance; Accounts Receivables.
(a) Seller shall execute and deliver such further instruments of
conveyance and transfer and take such additional action as Buyer may reasonably
request to effect, consummate, confirm or evidence the transfer to Buyer of the
Purchased Assets, the assumption by Buyer of the Assumed Liabilities and the
conduct by Buyer of the Business (including with respect to obtaining and
maintaining all licenses, permits, authorizations, accreditations and consents
necessary or desirable in connection therewith), and Seller shall execute such,
documents as may be reasonably requested to assist Buyer in preserving or
perfecting its rights in the Purchased Assets and its ability to conduct the
Business. Following the Closing, Seller agrees to cooperate with Buyer and to
provide Buyer with all information and documentation reasonably necessary to
permit the preparation and filing of all federal, state, local and other tax
returns with respect to the Business; provided that Buyer shall reimburse the
other party for such other party's reasonable out-of-pocket expenses in
connection therewith.
(b) Seller agrees that subsequent to the Closing it shall refer all
customer, advertiser or subscriber inquiries with respect to the Business to
Buyer.
(c) Seller shall promptly forward to Buyer any and all proceeds from
accounts receivable relating to the Business that are received by Seller but are
for the account of Buyer, and for the period ending at the last of the sixth
full calendar month after the Closing, shall furnish Buyer with a reasonably
detailed monthly accounting with respect to any payments made to Seller under
this Section 6.9(c), which accountings shall be subject to audit by Buyer (which
audits shall contain normal auditing procedures and techniques).
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6.10 Exclusivity. Seller shall not, directly or indirectly, through
any officer, director, employee, agent, affiliate or otherwise (including
through any investment banker, attorney or accountant retained by any of the
foregoing), solicit, initiate or encourage the submission of any proposal or
offer from any person or entity (including any of such person's or entity's
officers, directors, employees, agents or other representatives) relating to any
acquisition, direct or indirect, of all or a significant part of the assets used
in the Business (other than sales of Inventory in the ordinary course of
business consistent with past practice) or any other similar extraordinary
transaction of any kind relating to the Business (including any merger or sale
of substantially all of the stock of Seller), or participate in any discussions
or negotiations regarding, or furnish to any other person or entity any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage any effort or attempt by any other
person or entity to do or seek to do any of the foregoing. Seller shall
immediately cease and cause to be terminated any and all discussions and
negotiations with third parties regarding any of the foregoing. Seller shall
promptly notify Buyer if any proposal with respect to the foregoing is made.
6.11 Covenant Not to Compete or Solicit.
(a) Seller agrees that, and agrees that it shall cause Petersen, for a
period of three years following the Closing Date, to ensure that no affiliate of
either Seller or Peterson, directly or indirectly, either for itself or himself
or through any other person, partnership, corporation or entity shall (i) engage
in, participate in, or permit its or his name to be used by any enterprise
engaging in or participating in, the business of publishing, printing,
distributing or selling magazines in the United States, Canada, Mexico, Korea or
elsewhere in the world, or otherwise in the conduct of any business competing
with the Business, induce or attempt to induce any employee of the Seller or any
subsidiary (other than Petersen's assistants) to leave the employ of the Seller
or such subsidiary, (ii) hire or solicit the hiring of any person who was a
Retained Employee (other than Petersen's secretaries or personal assistants), or
(iii) induce or attempt to induce any customer, advertiser, subscriber,
supplier, licensee or other business relation of Seller who becomes a customer,
advertiser, subscriber, supplier, licensee or
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other business relation of Buyer to cease doing business with Buyer. For
purposes of this Agreement, the term "participate" includes any direct or
indirect interest in any enterprise, whether as a stockholder, partner, joint
venturer, franchiser, franchisee or otherwise (other than ownership of less than
five percent (5%) of the stock of a publicly held corporation without any other
material participation therein). Each of Seller and Petersen agrees that this
covenant is reasonably designed to protect Buyer's substantial investment and is
reasonable with respect to its duration, geographical area and scope.
(b) If, at the time of enforcement of any of the provisions of this
Section 6.11, a court determines that the restrictions stated herein are
unreasonable under the circumstances then existing, then the parties hereto
agree that the maximum period, scope or geographical area reasonable under the
circumstances shall be substituted for the stated period, scope or area. The
parties further agree that such court shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope or geographical
area permitted by law.
(c) If Seller or Petersen or any of its or his affiliates (the
"Restricted Persons") breaches, or threatens to commit a breach of, any of the
provisions of this Section 6.11 (the "Restrictive Covenants"), Buyer shall have
the right and remedy to have the Restrictive Covenants specifically enforced by
any court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
Buyer and that money damages would not provide an adequate remedy to Buyer. Such
rights and remedies shall be independent of the others and severally
enforceable, and shall be in addition to, and not in lieu of, any other rights
and remedies available to Buyer at law or in equity.
6.12 Covenant Relating to Leases.
At or prior to the Closing, Seller shall, and shall cause the Peterson
Trust to, (i) amend the lease described on Schedule 6.4(b) with respect to the
Wilshire Property (the "Wilshire Lease") so that Section 4 of such lease reads
in its entirety as follows:
4.1 For the period commencing with the Closing (as defined in
the Asset Purchase Agreement dated August 15,
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1996, to which Lessee is a party) and ending November 30, 1996, an amount
equal to Three Hundred Forty-One Thousand Nine Hundred Fifty-One Dollars
($341,951) per month.
4.2 For the period commencing December 1, 1996 and ending
November 30, 1997, an amount equal to Three Hundred Forty-Seven Thousand
Nine Hundred Twenty-One Dollars ($347,921) per month.
4.3 For the period commencing December 1, 1997 and ending
November 30, 1998, an amount equal to Three Hundred Fifty-Three Thousand
Nine Hundred Ninety-Two Dollars ($353,992) per month.
4.4 For the period commencing December 1, 1998 and ending
November 30, 1999, an amount equal to Three Hundred Sixty Thousand One
Hundred Eighty-Five Dollars ($360,185) per month.
4.5 For the period commencing December 1, 1999 and ending
November 30, 2009, rent per month shall be increased by 1 3/4% per annum.
and (ii) prepare and execute a written form of the lease described on Schedule
6.4(b) with respect to the property located at 815 N. LaSalle St., Chicago
Illinois (the "Chicago Lease"), in the form attached hereto as Schedule 6.12.
The amendment and lease referred to in clauses (i) and (ii) above, respectively,
are to be effective as of the Closing.
ARTICLE VII
GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect the Closing shall be subject
to the following conditions:
7.1 No Orders; Legal Proceedings. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity,
nor shall any Action have been instituted and remain pending by any Governmental
Entity at what would otherwise be the Closing Date, which prohibits or restricts
or would (if successful) prohibit or restrict the transactions contemplated by
this Agreement.
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7.2 Approvals. To the extent required by applicable Law, all Permits
and Approvals required to be obtained from any Governmental Entity in connection
with the sale of the Purchased Assets hereunder or Buyer's ownership or
operation of the Business following the Closing shall have been received or
obtained, or shall have been transferred to Buyer, on or prior to the Closing
Date, except those which, if not obtained or so transferred, would not have
total adverse monetary consequences in excess of 1.5% of the Final Purchase
Price, and any applicable waiting period under the Hart-Scott-Rodino Act shall
have expired or been terminated.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to effect the Closing shall be subject to the
following conditions except to the extent waived in writing by Buyer:
8.1 Representations and Warranties and Covenants of Seller. The
representations and warranties of Seller herein contained shall be true in all
material respects at the Closing Date with the same effect as though made at
such time, Seller shall have in all material respects performed all obligations
and complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date, and Seller
shall have delivered to Buyer a certificate of Seller dated as of the Closing
Date to such effect; provided, however, that in the event that (i) one or more
representations or warranties of Seller is untrue or partially untrue at the
Closing, but (ii) such fact does not have, or cannot reasonably be expected to
have, total adverse monetary consequences to Buyer in excess of 1.5% of the
Final Purchase Price, such fact shall not relieve Buyer of any of its
obligations under this Agreement.
8.2 No Material Adverse Change. Since the date of the Latest Balance
Sheet, there shall not have been, occurred or arisen any change or development
in, or event affecting, the Business, taken as a whole, or any of the Purchased
Assets or Assumed Liabilities that have, or can reasonably be expected to have,
a material adverse effect on the condition (financial or otherwise), operating
results, assets, liabilities, operations or
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business of Seller taken as a whole (but excluding, for such purposes, the
Excluded Assets and Excluded Liabilities), except for changes, developments and
events affecting generally the magazine publishing industry, including, but not
limited to, changes in or affecting interest rates, securities markets, paper
prices, mailing costs, general levels of advertising and advertising rates,
accounting principles, practices or conventions, applicable Laws or comparable
events. For purposes of this Section 8.2, any such adverse changes, developments
or events having, or reasonably expected to have, total adverse monetary
consequences in an amount less than or equal to 1.5% of the Final Purchase Price
shall not be considered to have had a material adverse effect on the Business,
taken as a whole.
8.3 Receipt of Closing Deliveries and Releases of Encumbrances. Seller
shall have delivered to Buyer each of the deliveries required to be delivered
pursuant to Section 2.2 and shall have obtained releases of all material
encumbrances relating to the Purchased Assets (other than the Permitted
Encumbrances).
8.4 Third Party Consents. Seller shall have received or obtained all
third party consents and approvals (including, without limitation, governmental
approvals and permits) that are necessary for Seller to consummate the
transactions contemplated hereby or that are required in order to prevent a
breach of or default under, a termination or modification of, or acceleration of
the terms of, any Contract identified with an asterisk on Schedule 3.6, in each
case on terms reasonably satisfactory to Buyer, and except to the extent the
absence thereof would not have a material adverse effect on the Business, taken
as a whole, as currently conducted or on Buyer's ability to conduct the
Business, taken as a whole, as currently conducted by Seller.
8.5 Amendment and Restatement of Leases. The Wilshire Lease shall
have been amended in accordance with Section 6.12 and not otherwise amended and
shall be in full force and effect, and the Chicago Lease shall have been
executed by the Petersen Trust and delivered to Buyer.
8.6 Delivery of Opinion of Seller's Counsel. Buyer shall have
received from O'Melveny & Myers LLP, special counsel to Seller, and Robert
Gottlieb, Esq., counsel to Seller, opinions in form and substance as set forth
in Exhibits H(1) and H(2),
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respectively, in each case addressed to Buyer and dated as of the Closing. Such
counsel shall also, at Buyer's request, deliver reliance letters in customary
form to the senior secured creditors of Buyer from whom funds are received to
pay the purchase price hereunder.
8.7 Petersen License; Change of Seller's Name. Petersen shall have
executed and delivered to Buyer the Petersen License, and the Petersen License
shall be in full force and effect; Seller shall have amended its certificate of
incorporation to change its name from "Petersen Publishing" to a name which does
not include "Publishing" or any other word relating to publishing,
communications or media, or businesses related thereto, and shall have ceased
using the name "Petersen Publishing" in any of its business activities.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect the Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
9.1 Representations and Warranties and Covenants of Buyer. The
representations and warranties of Buyer herein contained shall be true in all
material respects at the Closing Date with the same effect as though made at
such time, Buyer shall have in all material respects performed all obligations
and complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date, and Buyer
shall have delivered to Seller a certificate of Buyer, dated the Closing Date
and signed by its President to such effect; provided, however, that in the event
that (i) one or more representations or warranties of Buyer is untrue or
partially untrue at the Closing, but (ii) such fact does not have, and can not
reasonably be expected to have, total adverse monetary consequences to Seller in
excess 1.5% of the Final Purchase Price, such fact shall not relieve Seller of
any of its obligations under this Agreement.
9.2 Employment of Petersen. Buyer shall have entered into an
employment contract with Petersen, in the form attached hereto as Exhibit J.
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9.3 Delivery of Opinion of Buyer's Counsel. Seller shall have
received from Kirkland & Ellis, counsel to Buyer, an opinion in form and
substance as set forth in Exhibit I attached hereto, addressed to Seller and
dated the Closing Date.
9.4 Receipt of Closing Deliveries and Release of Encumbrances. Buyer
shall have delivered to Seller each of the deliveries required to be delivered
pursuant to Section 2.3.
ARTICLE X
TERMINATION OF OBLIGATIONS; SURVIVAL
10.1 Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated by this
Agreement shall automatically terminate, without any notice, demand or action by
either party, if the Closing does not occur on or before the close of business
on December 31, 1996 (so long as the party so electing termination is not in
material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement) unless extended by mutual consent in
writing of Buyer and Seller and otherwise may be terminated at any time before
the Closing as follows and in no other manner:
(a) Mutual Consent. By mutual consent in writing of Buyer and
Seller.
(b) Conditions to Buyer's Performance Not Met. By Buyer by
written notice to Seller if any event occurs or condition exists which
would render impossible the satisfaction of one or more conditions to the
obligations of Buyer to consummate the transactions contemplated by this
Agreement as set forth in Articles VII or VIII.
(c) Conditions to Seller's Performance Not Met. By Seller by
written notice to Buyer if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the
obligation of Seller to consummate the transactions contemplated by this
Agreement as set forth in Articles VII or IX.
(d) Material Breach. By Buyer or Seller if there has been a
material misrepresentation or other material breach
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by the other party in its representations, warranties and covenants set
forth herein; provided, however, that (i) in the case of a breach of
covenant the breaching party shall have 10 business days after receipt of
notice from the other party of its intention to terminate this Agreement if
such breach continues, in which to cure such breach and (ii)
misrepresentations by any one party having total adverse monetary
consequences to the other party in an amount less than or equal to 1.5% of
the Final Purchase Price, shall not be considered material for purposes of
this Section 10.1(d).
10.2 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 10.1, all further obligations of the parties
under this Agreement shall terminate; provided that, subject to Section 10.3,
the obligations of the parties contained in (i) Sections 1.6, 13.2, 15.10, 15.11
and 15.14, (ii) the second sentence of Section 5.3 and (iii) the Confidentiality
Agreement, shall survive any such termination, and that a termination under
Section 10.1 shall not relieve either party of any liability for a breach of, or
for any misrepresentation under this Agreement, or be deemed to constitute a
waiver of any available remedy for any such breach or misrepresentation.
10.3 Limited Survival of Representations and Warranties. The
representations and warranties in this Agreement delivered by Buyer or Seller to
the other party in connection with this Agreement shall continue through the
Closing and shall expire as follows:
(i) the representations and warranties in any of Sections 3.5
(Taxes) and 3.16 (Employee Benefits) shall continue through the expiration
of the applicable statute of limitations, with respect to the liabilities
in question;
(ii) all other representations and warranties shall expire six
(6) months after the Closing (with the exception of the first clause of the
first sentence of Section 3.8 (Title; Condition of Assets) which shall
continue unabated); and
(iii) if a claim or notice is given under Article XI with respect
to any representation or warranty prior to the
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applicable expiration date, such claim shall continue indefinitely until it
is finally resolved.
10.4 Effect of Closing Over Known Unsatisfied Conditions or Breached
Covenants. If Buyer or Seller elects to proceed with the Closing aware of any
respect in which any condition in its favor has not been satisfied or any
representation, warranty or covenant by the other has been breached (the "Known
Breach"), the Known Breach shall be deemed to be waived by such party, and such
party shall be deemed to fully release and forever discharge the other party on
account of any and all claims, demands or charges, known or unknown, to the
extent arising from such Known Breach; provided, however, that no waiver of the
Known Breach of a covenant shall be deemed to have occurred if the party aware
of the other's breach so notifies the other prior to Closing.
10.5 Notice of Breach of Representations or Warranties. Seller shall
give prompt notice to Buyer, and Buyer shall give prompt notice to Seller, of
the occurrence, or failure to occur, of any event known to Seller or Buyer, as
the case may be, that would cause any of its representations or warranties
contained in this Agreement to be untrue in any material respect at any time
from the date of this Agreement to the Closing Date; provided that in the case
of Seller, "known" shall mean actual knowledge of any senior executive officer
of Seller after due inquiry.
ARTICLE XI
INDEMNIFICATION
11.1 Obligations of Seller. Subject to the provisions of Section
11.4, from and after the Closing, Seller agrees to indemnify and hold harmless
Buyer from and against any and all Losses (as and when incurred) arising from,
as a result of, or based upon any breach or nonperformance of any of the (a)
representations or warranties (subject to survivability under Section 10.3), or
(b) covenants or agreements, made by Seller in or pursuant to this Agreement,
including in any certificate delivered at the Closing in connection herewith;
provided, however, that Losses as a result of, or based upon or arising from,
any Environmental Law or any violation thereof shall be limited to those in
connection with claims brought by third
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parties (including Governmental Entities) and remediations necessary to comply
with any Environmental Law; and
11.2 Obligations of Buyer. Subject to the provisions of Section
11.4, from and after the Closing, Buyer agrees to indemnify and hold harmless
Seller from and against any Losses (as and when incurred) arising from, as a
result of, or based upon, (a) any breach or nonperformance of any of the
representations or warranties (subject to survivability under Section 10.3), or
(b) covenants or agreements, made by Buyer in or pursuant to this Agreement,
including in any certificate delivered in connection herewith.
11.3 Procedure.
(a) Notice. Any party seeking indemnification of any Loss or
potential Loss arising from a claim asserted by a third party shall give written
notice to the party from whom indemnification is sought. Written notice to the
Indemnifying Party of the existence of a third-party claim shall be given by the
Indemnified Party within 30 days after its receipt of a written assertion of
liability from the third party. The Indemnified Party shall not be foreclosed
from obtaining all of its rights hereunder by any failure to provide timely
notice of the existence of a third party claim to the Indemnifying Party except
if, and then only to the extent that, the Indemnifying Party incurs an out-of-
pocket expense or otherwise has been materially prejudiced as a direct result of
such delay.
(b) Defense. The Indemnifying Party shall be entitled to assume the
defense and control of any action giving rise to an Indemnified Party's claim
for indemnification under Article XI unless (x) the Indemnified Party reasonably
believes an adverse determination with respect to the action, lawsuit,
investigation, proceeding or other claim giving rise to such claim for
indemnification is likely to be materially detrimental to or materially injure
the Indemnified Party's future business prospects or (y) the claim seeks an
injunction or equitable relief against the Indemnified Party that is likely to
have a material adverse effect on the business of the Indemnified Party, taken
as a whole. If the Indemnifying Party assumes the defense of any Indemnifiable
Claim, it shall retain experienced counsel reasonably satisfactory to the
Indemnified Party and the Indemnified Party may participate in the defense of
such claim
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and employ counsel of its choice for such purpose; provided that the fees and
expenses of such separate counsel shall be borne by the Indemnified Party (other
than any fees and expenses of such separate counsel that are incurred prior to
the date the Indemnifying Party effectively assumes control of such defense). If
the Indemnifying Party does not assume such defense, the Indemnified Party may
compromise or settle the claim on behalf of and for the account and risk of the
Indemnifying Party, who shall be bound by the result; provided, however, that
the Indemnifying Party (i) shall be responsible only for the reasonable costs of
defense and (ii) shall be entitled to participate (at its cost and with counsel
of its choice) in the defense of any Action in which the Indemnified Party
retained the defense thereof under clause (x) or (y) of the first sentence of
this Section 11.3(b); and provided further, that the Indemnifying Party shall
not be liable for any settlement or compromise of any such Action of which the
Indemnified Party has retained the defense, that is effected without its prior
written consent (which consent shall not be withheld unreasonably).
(c) Settlement Limitations. Notwithstanding anything in this Section
11.3 to the contrary, the Indemnifying Party shall not, without the written
consent of the Indemnified Party, settle or compromise any third party Action or
permit a default or consent to entry of any judgment unless the claimant and the
Indemnifying Party provide to the Indemnified Party a release from all liability
in respect of the claim. Notwithstanding the foregoing, if a settlement offer
solely for money damages is made by the applicable third party claimant, and the
Indemnifying Party notifies the Indemnified Party in writing of the Indemnifying
Party's willingness to accept the settlement offer and pay the amount called for
by such offer, and the Indemnified Party declines to accept such offer, the
Indemnified Party may continue to contest such claim, free of any participation
by the Indemnifying Party, and the amount of any ultimate liability with respect
to such Indemnifiable Claim that the Indemnifying Party has an obligation to pay
hereunder shall be limited to the lesser of (i) the amount of the settlement
offer that the Indemnified Party declined to accept, or (ii) the aggregate
Losses of the Indemnified Party with respect to such claim. If the Indemnifying
Party makes any payment on any claim, the Indemnifying Party shall be
subrogated, to the extent of such payment, to all rights and remedies of the
Indemnified Party to any insurance benefits (to the extent not used to offset
Losses incurred by the
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Indemnified Party in respect of which the Indemnified Party has not received
indemnity payments from the Indemnifying Party).
11.4 Mitigation; Limitations on Indemnification.
(a) The Indemnified Party shall take all commercially reasonable steps
to mitigate all Losses, including, but not limited to, availing itself of any
reasonable and prudent defenses, limitations, rights of contribution, and claims
against third parties and other rights at Law (it being understood that any out-
of-pocket costs paid to third parties in connection with such mitigation shall
constitute Losses), and shall provide such evidence and documentation of the
nature and extent of any Loss as may be reasonably requested by the Indemnifying
Party.
Notwithstanding any other provision of this Agreement, subject to the
compliance by Buyer with the last sentence of Section 11.4(b), for purposes of
determining whether a representation or warranty of Seller has been breached
under clause (a) in the first sentence of Section 11.1, the representations and
warranties of the Seller shall not be considered to include any of the
materiality qualifiers or standards with respect to any effect of a matter or
circumstance upon the Business.
(b) Any recovery pursuant to Article XI shall be net of (i) any Tax
benefits realized or realizable by the Indemnified Party based on the present
value thereof by reason of such Losses, and (ii) the dollar amount of aggregate
insurance proceeds receivable by the Indemnified Party with respect to such
Losses in excess of the amount of the Basket. Seller shall not be required to
indemnify any Person under Section 11.1 for a breach of a representation or
warranty unless the aggregate of all amounts for which indemnity would otherwise
be payable by Seller exceeds $3,250,000 (the "Basket"), and, in such event,
Seller shall be responsible for the full amount of all Losses. Seller's
indemnity obligations under Section 11.1 for a breach of representation or
warranty shall be limited, in the aggregate, to 15% of the Final Purchase Price.
In addition, for purposes of determining whether the amount of the Basket has
been exceeded, no breach of a representation or warranty which results in losses
of $37,500 or less shall be considered.
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11.5 Remedies Exclusive. The remedies provided for in this Article
XI shall constitute the sole and exclusive remedy for any post-Closing claims
made for breach of this Agreement in connection with the transactions
contemplated hereby, except for claims arising out of any breach of Section
13.2. Except for the remedies against Seller specifically provided for in this
Agreement (and except as to remedies for Actual Fraud, as defined below), none
of Buyer or any of its Affiliates shall have any recourse against Seller or
Petersen in connection with, and Buyer hereby waives and forever releases and
discharge Seller, Petersen and their respective Affiliates from and against, any
and all Losses, directly or indirectly, as a result of, or based upon or arising
from the conduct of the Business and any act or omission with respect to the
Business prior to the Closing. Each party hereby waives any provision of law to
the extent that it would limit or restrict the agreement contained in this
Section 11.5, except with respect to one party's claim against the other for
actual knowing fraud by Seller ("Actual Fraud"). Notwithstanding anything to
the contrary elsewhere in this Agreement, no party or its Affiliates shall seek
or be liable for any punitive or consequential damages, including, but not
limited to loss of business reputation or opportunity relating to any breach or
alleged breach of a representation or warranty set forth in this Agreement;
provided that Buyer may seek, and Seller may be held liable for, consequential
damages in the event of (i) a breach of Seller's obligation to transfer the
Purchased Assets and Assumed Liabilities at Closing pursuant to the terms of
this Agreement; (ii) a breach of Seller's obligations set forth in Section 6.10
or (iii) an intentional breach of any provision of this Agreement if such breach
would reasonably be expected to frustrate the consummation of the sale of the
Purchased Assets and assumption of the Assumed Liabilities contemplated by this
Agreement.
ARTICLE XII
TAX MATTERS AND INSURANCE
12.1 Tax Returns; Audits.
(a) Seller shall file when due all Tax Returns required to be filed by
it, whether relating to periods ending before or after the Closing Date, and
shall have the responsibility for, and sole right to control, compromise, settle
or appeal any Tax audit or other proceeding in connection with
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any matter that pertains to Seller's or Petersen's liability for Taxes. Buyer
shall promptly (and in any event within 15 business days) notify Seller in
writing upon receipt by Buyer of notice of any pending or threatened audits or
assessments relating to Seller's or Petersen's liability for Taxes.
(b) Seller shall have no liability under this Agreement for, and Buyer
will indemnify Seller and Petersen against, (i) any Tax attributable to or
resulting from the ownership of the Purchased Assets or the conduct of the
Business by Buyer after the Closing and (ii) any Tax resulting from a breach of
a representation, warranty or covenant of Buyer under this Agreement.
12.2 Wage Reporting. Buyer acknowledges that, at the Closing, Buyer
will be purchasing substantially all the property used in the Business, and in
connection therewith Buyer will employ individuals who immediately before the
Closing Date were employed in such Business by Seller. Accordingly, pursuant to
IRS Revenue Procedure 84-77, 1984-2 C.B. 753, provided that Seller provides
Buyer with all necessary payroll records, Buyer shall furnish a Form W-2 for the
year ended December 31, 1996 to each transferred employee which shall include
all wage and other compensation paid to, and taxes withheld from, such employee
by Seller during such period, and Seller shall be relieved of the responsibility
to do so.
(a) Employee Withholding Allowance Certificate (Form W-4). In
accordance with IRS Procedure 84-77, Seller shall transfer to Buyer any
Employee Withholding Allowance Certificate (Form W-4) in Seller's
possession for each transferred Employee.
(b) Calculation of "Annual Wage Limitation" for FICA. In
accordance with IRS Regulation (S) 31.3121(a)(1)-1(b), in determining the
"annual wage limitation" of each transferred employee for purposes of the
Federal Income Contribution Act (FICA) for the year ending December 31,
1996, Buyer will include any remuneration received by such employee from
Seller during such period.
12.3 Insurance Matters. With respect to the insurance policies
covered by Section 1.1(a)(xxiii), including those as to
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which Buyer is named an additional insured pursuant to Section 5.6, Buyer and
Seller agree as follows:
(a) Claims. Buyer is entitled to obtain the benefits under
insurance policies held by Seller which are not assigned to Buyer at the
Closing but which relate to (but only to the extent they relate to) the
Purchased Assets or the Assumed Liabilities (the "Subject Policies").
Seller agrees, at Buyer's request, to file claims under the Subject
Policies that relate to the Purchased Assets or Assumed Liabilities
("Claims"); provided, that Seller will have no obligation to file any Claim
after December 31, 2000, or other than to the extent the Special Power of
Attorney to be provided to Buyer as described below is insufficient to
permit Buyer to file any Claim. Seller shall file any such Claim within 30
business days after presentation thereof by Buyer. The form of any such
claims shall be prepared by Buyer. Seller shall have no obligation to
ascertain or advise Buyer of the existence of any insurable claim under the
Subject Policies. After a Claim has been filed, Seller shall not take any
action with respect thereto or compromise or settle any Claim unless
directed to do so by Buyer. Seller shall take all lawful actions in respect
of Claims as are reasonably requested by Buyer, including the prosecution
of Claims against insurers providing the Subject Policies, using counsel
selected by Buyer; but only if Buyer pays any out-of-pocket costs of
Seller, as they are incurred, in connection with the prosecution of Claims.
Buyer shall have the right, as the attorney-in-fact of Seller, to make any
filing and to prosecute, settle or compromise any Claim under a Subject
Policy in the name of and on behalf of Seller. In furtherance thereof,
Seller shall, on the Closing Date, execute a Special Power of Attorney in
the form of Exhibit I hereto.
(b) Assignment of Benefits; Payment. To the extent permitted by
Law and the terms of the relevant Subject Policies, Seller shall, upon
making a Claim requested by Buyer under the Subject Policies, notify the
relevant insurer(s) that it has assigned to Buyer any amounts to be paid by
such insurer(s) pursuant to such Claim and that all payments of insurance
proceeds or benefits relating to such Claim should be paid directly to
Buyer. In addition, Seller shall promptly pay to Buyer all insurance
proceeds (net of
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expenses) received by Seller in respect of Claims under the Subject
Policies.
(c) Preservation of Documents. Seller agrees to preserve all of
its papers, records, correspondence or other documents or materials
comprising or evidencing the existence of the Subject Policies, including
the binders and policies relating to the same until December 31, 2000, and
to provide true, correct and complete copies of the same to Buyer upon
request as promptly as practicable.
(d) No Effect on Seller Rights. The provisions of this Section
12.3 shall not limit or impair the right of Seller and its present or
former Affiliates to file and prosecute claims under any insurance policy
heretofore, now or hereafter maintained by Seller or its present or former
Affiliates, including the Subject Policies. Buyer acknowledges that the
Subject Policies contain coverage limitations that may now or in the future
be exceeded by claims filed by Seller and its present or former Affiliates,
and that Seller has no obligation to reimburse deductibles or allocate or
maintain the availability of any coverage under the Subject Policies for
the benefit of Buyer. Seller will have no responsibility for the accuracy
or completeness of any information submitted by or on behalf of Buyer in
connection with the filing or prosecution of Claims. Buyer hereby agrees to
indemnify and hold Seller harmless from any Losses resulting from or
arising in connection with the filing or prosecution of any Claims
hereunder other than Losses resulting from or arising in connection with
Seller's bad faith; provided, that for purposes of such indemnification,
the parties agree that "Losses" shall not include diminutions in coverage
remaining under policy limits due to the assertion and payment of Claims.
ARTICLE XIII
PUBLICITY/CONFIDENTIALITY
13.1 Publicity and Reports. Seller and Buyer shall coordinate all
publicity relating to the transactions contemplated by this Agreement, and
neither party shall issue any press release, publicity statement or other public
notice relating to the identity of Buyer or the Final Purchase Price (or
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any component thereof) hereunder without consulting with the other party, except
that neither party shall be precluded from making such filings or giving such
notices as may be required by Law or the rules of any stock exchange.
13.2 Confidentiality. All information disclosed by any party or
its representatives, whether before or after the date hereof, in connection with
the transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party or its representatives shall be kept
confidential by such other party and its representatives and shall not be used
by any such Persons other than as contemplated by this Agreement, except to the
extent that such information (i) was known by the recipient when received, (ii)
is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity having
jurisdiction over the parties, (iv) as may otherwise be required by law, (v) was
developed by such party or its representatives independent of any information
which is otherwise confidential pursuant to this Section 13.2 or (vi) to the
extent such duty as to confidentiality is waived in writing by the other party.
If this Agreement is terminated in accordance with its terms, each party shall
return all documents and reproductions thereof received by it or its
representatives from the other party and, in the case of reproductions, all such
reproductions made by the receiving party that include information not within
the exceptions contained in the first sentence of this Section 13.2, unless the
recipients provide assurances satisfactory to the requesting party that such
documents have been destroyed. If the transactions contemplated hereby are
consummated, Seller shall maintain as confidential and shall not use or disclose
(except as required by law or as authorized in writing by Buyer) any material
confidential or proprietary information or materials relating to the Business.
At the Closing, Seller shall assign to Buyer all of its rights under all
confidentiality agreements with prospective bidders entered into in connection
with the process leading to the sale of the Business; provided, however, that
Seller shall have no obligation to obtain consents or approvals from any Person
in connection with such assignments and Seller makes no representation as to the
effectiveness of any such assignment. In addition, Seller shall request the
return or destruction as promptly as possible of all confidential information
delivered to prospective buyers. In the event any party hereto is required by
law to disclose any confidential
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information, such party shall promptly notify each other party in writing, which
notification shall include the nature of the legal requirement and the extent of
the required disclosure, and shall cooperate with each other party to preserve
the confidentiality of such information consistent with applicable law.
ARTICLE XIV
DEFINITIONS
14.1 General Provisions. For all purposes of this Agreement,
except as otherwise expressly provided:
(a) the terms defined in this Article XIV have the meanings
assigned to them in this Article XIV and include the plural as well as the
singular;
(b) all accounting terms used herein have the meanings assigned
to them under generally accepted accounting principles, except to the
extent otherwise provided herein;
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions and to "Exhibits" and "Schedules" are to
the designated Articles, Sections and other subdivisions of the body of
this Agreement and to the Exhibits and Schedules to this Agreement;
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms;
(e) whenever the term "including" is used in this Agreement
(whether or not that term is followed by the phrase "without limitation" or
words of similar effect) in connection with a listing of items within a
particular classification, that listing will be interpreted to be
illustrative only and will not be interpreted as a limitation on, or an
exclusive listing of, the items within that classification;
(f) whenever the phrase "ordinary course of business" is used in
this Agreement, it means the usual and ordinary course of business
consistent with past practice, including with respect to quantity and
frequency; and
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(g) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
14.2 Specific Provisions. As used in this Agreement the following
definitions shall apply:
"Accounts Receivable" has the meaning specified in Section
1.1(a)(iv).
"Action" means any investigation, charge, claim, complaint,
petition, suit or other proceeding, whether civil or criminal, in law or in
equity, by or before any arbitrator or Governmental Entity.
"Affiliate" means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person.
"Agreed Accounting Principles" means the accounting principles,
policies and practices applied in the preparation of Seller's audited financial
statements as of and for the fiscal year ended November 30, 1995 referred to in
Section 3.2(a), without regard to whether with respect to any matter there is
more than one generally accepted accounting principle, or generally accepted
accounting principles would permit or allow for more than one treatment or
approach and without regard to any purchase accounting adjustments arising out
of the consummation of the transactions contemplated hereby (it being understood
that such principles, policies and practices are GAAP as in effect on the date
hereof, except as specified to the contrary in the notes to such audited
financial statements); and except that any provision for deferred Taxes shall be
disregarded.
"Agreed Rate" means, as of the date of any determination of
interest to be made by reference thereto, the interest rate established on such
date by Wells Fargo Bank, N.A. as its "prime" rate, or, if that rate is no
longer established or published, a comparable interest rate.
"Agreement" means this Agreement between Buyer and Seller, as
amended or supplemented together with all Exhibits and Schedules hereto.
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"Approval" means any approval, authorization, consent, qualification
or registration, or any waiver of any of the foregoing, required to be obtained
from any Governmental Entity or any other Person in order to comply with any
applicable law or to prevent a breach or default under, a termination or a
material modification of, or acceleration of the terms of, any material
contract, understanding or arrangement.
"Assumed Liabilities" is defined in Section 1.2.
"Auditors" means Ernst & Young L.L.P., Los Angeles office,
independent public accountants to Seller.
"Books and Records" means all books, ledgers, files, reports,
documents, plans and operating records of or maintained by Seller relating to or
otherwise reasonably required for the operation of the Business.
"Business" means the business, assets and properties, operating as a
going concern, which constitutes Seller's publishing and media businesses and
all related and ancillary businesses, including the production and promotion of
Events; provided, however, that the term Business shall not include any business
conducted by Seller solely with the Excluded Assets and Excluded Liabilities.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Chicago, Illinois or Los Angeles, California.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Plan" is defined in Section 3.16.
"Confidentiality Agreement" is defined in Section 15.2.
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"Contract" means any written or oral agreement, arrangement, bond,
commitment, contract, franchise indemnity, indenture, instrument, lease or
license.
"Deposit" is defined in Section 1.6.
"Disclosure Schedule" means the Disclosure Schedule of even date
herewith delivered by Seller to Buyer which sets forth certain exceptions to the
representations and warranties made by Seller in Article III.
"Employee Pension Benefit Plan" is defined in Section 3.16.
"Employee Welfare Benefit Plan" is defined in Section 3.16.
"Encumbrance" means any charge, mortgage, encumbrance, security
interest or lien, whether imposed by agreement, understanding, law, equity or
otherwise, provided, however, that "Encumbrance" shall not mean any restrictions
on transfer generally arising under any applicable federal or state securities
laws.
"Environmental Laws" means any and all Laws for the purposes of
regulating pollution and protecting the environment in effect as of the Closing
Date.
"Equity Securities" means any capital stock or other equity interest
or any securities convertible into or exchangeable for capital stock or any
other rights, warrants or options to acquire any of the foregoing securities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
"ERISA Affiliate" means any Person other than Seller or any
Subsidiary who is a member of a group which is under common control with
Petersen who together with Petersen is treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the Code.
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"Events" means the exhibits, public events and other promotional
opportunities relating to the Publications including ones that are produced by
Seller's Events & Promotions Department.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" is defined in Section 1.1(b).
"Excluded Liabilities" is defined in Section 1.2.
"Final Purchase Price" is defined in Section 1.3.
"GAAP" means generally accepted accounting principles in the United
States as in effect as of the respective dates of the financial statements
referred to in Section 3.2(a).
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
regulatory body or authority, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the related regulations and published
interpretations.
"Hazardous Substance" means substances that are defined or listed in,
or otherwise classified pursuant to, any applicable Environmental Laws or common
law as "hazardous substances," "hazardous materials," "hazardous wastes" or
"toxic substances."
"Intangible Property" means any trade secret, secret process or know-
how and any and all Marks; provided, however, that "Intangible Property" shall
not mean retail or "shrink-wrap" computer software licenses held by Seller.
"Inventory" is defined in Section 1.1(a)(v).
"IRS" means the Internal Revenue Service or any successor entity.
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"Law" means any constitutional provision, statute, permit, order,
ordinance or other law, rule or regulation, of any Governmental Entity, common
law and any Order.
"Lease" is defined in Section 3.9.
"Loss" means any loss, cost, damage, expense, liability, obligation,
fine or penalty of any kind or nature, including, but not limited to, interest
or other carrying costs, penalties, legal, accounting and other professional
fees and expenses, whether or not arising out of third party claims or paid or
incurred in the investigation, collection, prosecution and defense or settlement
of claims, that may be imposed on or otherwise incurred or suffered by the
specified person; provided, however, that Loss shall not include any
consequential damages, or any cost, damage, expense, liability, obligation or
penalty, that could not reasonably have been foreseen by the parties at the
Closing Date.
"Mark" means any brand name, copyright, patent, service mark,
trademark, tradename, and all registrations or applications for registration of
any of the foregoing.
"Material Contract" means each Contract to which Seller is a party
that (a) is a Material Facilities Lease, (b) by its terms obligates Seller to
pay an amount in excess of $250,000 per year and which cannot be terminated or
cancelled by Seller without liability or penalty upon 30 days' or less prior
notice, (c) limits or restricts Seller from freely competing or conducting its
business in any manner or place, (d) is a credit agreement, note, bond,
mortgage, deed of trust or indenture evidencing any indebtedness of Seller for
borrowed money, is a guaranty by Seller, or is an interest rate swap agreement
or other derivative, (e) contains a right or obligation, other than pursuant to
any Company Plan or Lease, of any Affiliate, officer or director, of Petersen or
Seller, from or to Seller, (f) is a contract with any labor union, (g) is an
agreement, arrangement or understanding (oral or written) with any officer,
stockholder or other insider or affiliate of Seller (other than for employment
on customary terms), (h) is an employment contract providing for payments in
excess of $100,000, other than Seller's severance policy previously disclosed to
Buyer, or (i) represents a contract upon which the Business is substantially
dependent or
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which is otherwise material to the Business; provided, however, that "Material
Contract" shall not mean any of the Company Plans.
"Material Facilities Leases" means each of the real property leasehold
interests of Seller used in the Business and listed on Schedule 14.2(a).
"Order" means any decree, injunction, judgment, order, ruling or writ.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Permitted Encumbrance" means any Encumbrance that:
(i) is a lien in respect of an Assumed Liability of a landlord,
carrier, warehouseman, mechanic, materialman, or any other statutory lien
arising in the ordinary course of business;
(ii) is a lien for Taxes not yet due or being contested in good
faith;
(iii) with respect to the right of a lessee to use any property
leased from Seller pursuant to a Lease disclosed on a schedule hereto or
not required by this Agreement to be so disclosed, arises solely with
respect to such leased property by the terms of the applicable lease;
(iv) with respect to the right of Seller to use any property
leased to Seller pursuant to a Lease disclosed on a schedule hereto or not
required by this Agreement to be so disclosed, arises solely with respect
to such leased property by the terms of the applicable lease;
(v) is an Assumed Liability that is a purchase money security
interest arising in the ordinary course of business;
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(vi) with respect to interests in any partnership or trust, is an
Assumed Liability and arises by the terms of the applicable partnership
agreement or trust agreement (provided that such partnership or trust
agreement is described on a schedule hereto or not required by this
Agreement to be so disclosed), and not on account of a breach thereof; or
(vii) with respect to any Material Contract disclosed on a
schedule hereto, or any Contract which is not a Material Contract and not
otherwise required to be disclosed on a schedule hereto, is an Assumed
Liability and arises by the terms of the applicable Contract, and not on
account of a breach thereof.
"Person" means an association, a corporation, a limited liability
company, an individual, a partnership, a trust or any other entity or
organization, including a Governmental Entity.
"Petersen" means Robert E. Petersen, Chairman of the Board and founder
of Seller.
"Petersen Trust" means the R.E. & M. M. Petersen Living Trust.
"Petersen License" is defined in Section 6.2.
"Publications" is defined in Section 1.1(a)(xix).
"Purchased Assets" is defined in Section 1.1(a).
"Real Property" means interests in real property, appurtenances
thereto, and rights in connection therewith, owned or held by Seller, as the
case may be.
"Reconciliation Principles" mean the accounting principles described
on the Reconciliation Statement as adjustments to Seller's current assets and
current liabilities (as set forth on the Latest Balance Sheet) required to
remove assets not included in Purchased Assets and liabilities not included in
the Assumed Liabilities.
"Reconciliation Statement" means the statement of Working Capital at
June 30, 1996 attached hereto as Exhibit A.
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"Tax" means any (A) foreign, federal, state, county or local income,
sales and use, excise, franchise, real and personal property, transfer, gross
receipt, capital stock, production, business and occupation, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity, any interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof, and any Loss in connection with the determination,
settlement or litigation of any Tax liability or other tax, of any kind
whatsoever; (B) liability of Seller for the payment of any amounts of the type
described in clause (A) arising as a result of being (or ceasing to be) a member
of any Affiliated Group (or being included (or required to be included) in any
Tax Return relating thereto); and (C) liability of Seller for the payment of any
amounts of the type described in clause (A) as a result of any express or
implied obligation to indemnify or otherwise assume or succeed to the liability
of any other person, other than an Assumed Liability.
"Tax Return" means a report, return or other information required to
be supplied to a Governmental Entity with respect to Taxes.
"WARN Act" is defined in Section 4.5.
"Working Capital" means the amount, if any, by which the current
assets included in Purchased Assets (excluding cash and cash equivalents) exceed
the current liabilities included in the Assumed Liabilities, as determined in
accordance with the Agreed Accounting Principles, the Reconciliation Principles
and Section 1.5.
ARTICLE XV
GENERAL
15.1 Amendments; Waivers. This Agreement and any Exhibit or Schedule
attached hereto may be amended only by agreement in writing of both parties. No
waiver of any provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the party to be
bound and then only to the specific purpose, extent and instance so provided,
except as provided in Section 10.4.
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15.2 Exhibits and Schedules; Integration. Each Exhibit and Schedule
delivered pursuant to the terms of this Agreement shall be in writing and shall
constitute a part of this Agreement, although such Exhibits and Schedules need
not be attached to each copy of this Agreement. This Agreement, together with
such Exhibits and Schedules, constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings of the parties in connection therewith, except for
the confidentiality agreement dated June 3, 1996 by and between Goldman, Sachs &
Co., as agent for Seller, and Willis Stein & Partners, L.P. (the
"Confidentiality Agreement").
15.3 Best Efforts. Subject to Section 5.3, each party will use its
best efforts to cause all conditions to its obligations hereunder to be timely
satisfied, to the end that the transactions contemplated by this Agreement shall
be effected substantially in accordance with its terms as soon as reasonably
practicable.
15.4 Governing Law. This Agreement, the legal relations between the
parties and any Action, whether contractual or non- contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and performed in such State and without regard to conflicts of
law doctrines.
15.5 No Assignment. Neither this Agreement nor any rights or
obligations under it are assignable, except that Buyer may assign all or any
portion of its rights and obligations hereunder to any wholly-owned subsidiary
of Buyer, and may assign all or any portion of its rights hereunder to one or
more of its lenders, so long as Buyer remains liable with respect to its
liabilities and obligations hereunder.
15.6 Headings. The descriptive headings of the Articles, Sections
and subsections of this Agreement are for convenience only and do not constitute
a part of this Agreement.
15.7 Counterparts. This Agreement and any amendment hereto or any
other agreement or document delivered pursuant hereto may be executed in one or
more counterparts and by
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different parties in separate counterparts. All of such counterparts shall
constitute one and the same agreement or other document and shall become
effective unless otherwise provided therein when one or more counterparts have
been signed by each party and delivered to the other party.
15.8 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of each party, and (except as contemplated by Section 11.5)
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
15.9 Notices. Any notice or other communication hereunder must be
given in writing and (a) delivered in person, (b) transmitted by telex, telefax
or telecommunications mechanism provided that any notice so given is also mailed
or sent as provided in clause (c), or (c) mailed by certified or registered
mail, postage prepaid, receipt requested or sent by reputable overnight courier
as follows:
If to Buyer, addressed to:
BrightView Communications Group, Inc.
c/o Willis Stein & Partners, L.P.
227 West Monroe Street
Suite 4300
Chicago, Illinois 60606
Telecopy: (312) 422-2418
Attn: Avy H. Stein
Daniel H. Blumenthal
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telecopy: (312) 861-2200
Attn: John A. Weissenbach, Esq.
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If to Seller or Petersen, addressed to:
Petersen Publishing Company
6420 Wilshire Blvd.
Los Angeles, CA 90048
Telecopy: (213) 782-2734
Attn: Robert E. Petersen
With copies to:
O'Melveny & Myers LLP
400 S. Hope St.
Los Angeles, CA 90071
Telecopy: (213) 669-6407
Attn: C. James Levin, Esq.
and:
Robert J. Gottlieb, Esq.
617 N. Maple Drive
Beverly Hills, CA 90218
Telecopy: (213) 782-2855
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, on the
Business Day on which it is transmitted (or if not transmitted on a Business
Day, then on the first Business Day following the date of such transmission) to
the applicable number specified in (or pursuant to) this Section 15.9 and an
appropriate answerback is received, (ii) if given by mail or courier or any
other means, when actually delivered.
15.10 Expenses. Except as otherwise provided herein, Seller and
Buyer shall each pay their own expenses incident to the negotiation, preparation
and performance of this Agreement and the transactions contemplated hereby,
including, but not limited to, the fees, expenses and disbursements of their
advisers.
15.11 Attorneys' Fees. In the event of any Action by any party
arising under or out of, in connection with or in respect of this Agreement,
including any participation in
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bankruptcy proceedings to enforce against a party a right or claim in such
proceedings, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and expenses incurred in such Action. Attorneys' fees incurred in
enforcing any judgement in respect of this Agreement are recoverable as a
separate item. The parties intend that the preceding sentence be severable from
the other provisions of this Agreement, survive any judgment and, to the maximum
extent permitted by law, not be deemed merged into such judgment.
15.12 Representation By Counsel; Interpretation. Seller and Buyer
each acknowledge that each party to this Agreement has been represented by
counsel in connection with this Agreement and the transactions contemplated by
this Agreement. Accordingly, any rule of Law or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intent of Buyer and Seller.
15.13 Severability. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any Governmental Entity,
the remaining provisions of this Agreement shall remain in full force and effect
provided that the essential terms and conditions of this Agreement for both
parties remain valid, binding and enforceable. To the extent permitted by Law,
the parties hereby to the same extent waive any provision of Law that renders
any provision hereof prohibited or unenforceable in any respect.
15.14 Dispute Resolution; Agreement to Arbitrate. Except to the
extent that any specific dispute resolution mechanism has been otherwise
provided for with respect to any specific provision of this Agreement (unless
such mechanism has been pursued to its conclusion and either the dispute in
question remains unresolved or the resolution reached by such process has not
been honored), in the event that any dispute arises between Buyer and Seller
with respect to this Agreement or the transactions contemplated hereby, the
following procedures shall apply.
(a) The parties will attempt in good faith to resolve any
dispute, controversy or claim under, arising out of,
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relating to or in connection with this Agreement, including, but not
limited to, the negotiation, execution, interpretation, construction,
performance, non-performance, breach, termination, validity, scope,
coverage or enforceability of this Agreement or any alleged fraud in
connection therewith, promptly by negotiations between representatives of
the parties. If any such dispute, controversy or claim should arise, duly
authorized representatives of Buyer and Seller will meet at least once and
will attempt to resolve the matter. Either representative may request the
other to meet again within 14 days thereafter, at a mutually agreed time
and place. If the matter has not been resolved within 30 days after the
first meeting of the representatives (which period may be extended by
mutual agreement), the parties will attempt in good faith to resolve the
controversy or claim in accordance with the Center for Public Resources
Model Procedure for Mediation of Business Disputes.
(b) If the matter has not been resolved pursuant to the foregoing
procedures within 60 days after the first meeting (which period may be
extended by mutual agreement), the matter shall be resolved, at the request
of either party, by arbitration conducted in accordance with the provisions
of the Federal Arbitration Act (9 U.S.C. (S)(S)1-16) and in accordance with
the Center for Public Resources Rules for Non- Administered Arbitration of
Business Disputes, by one arbitrator mutually selected by the parties. If
the parties are unable to agree on the selection of an arbitrator, they
shall select an arbitrator through the procedures established by the Center
for Public Resources Rules for Non-Administered Arbitration of Business
Disputes. The arbitration of such issues, including the determination of
any amount of damages suffered by any party hereto by reason of the acts or
omissions of any party, shall be final and binding upon the parties, except
that the arbitrator shall not be empowered to act as amiable compositeur or
authorized to award punitive damages with respect to any such claim,
dispute or controversy. No party shall seek any punitive damages relating
to any matters under, arising out of, in connection with or relating to
this Agreement. Equitable remedies shall be available in any such
arbitration. The parties intend that this agreement to arbitrate be valid,
binding, enforceable and irrevocable.
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The substantive law of the State of California shall apply to any such
arbitration proceedings. The place of any such arbitration shall be Los
Angeles, California. Judgment upon the award rendered by the arbitrators
may be entered by any court having jurisdiction thereof.
(c) Notwithstanding the provisions of this Section 15.14, either
party may seek injunctive or other equitable relief to maintain the status
quo before any court of competent jurisdiction in connection with any
claim, dispute or controversy arising out of this Agreement.
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IN WITNESS WHEREOF, each of Buyer and Seller has caused this Agreement
to be executed by its duly authorized representative as of the date first above
written.
BUYER:
BRIGHTVIEW COMMUNICATIONS GROUP, INC.,
a Delaware corporation
By:__________________________
Name:________________________
Title:_______________________
SELLER:
PETERSEN PUBLISHING COMPANY,
a California corporation
By:__________________________
Name: Robert E. Peterson
Title: Chairman of the Board
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FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (this "Amendment"), dated
as of September 30, 1996, amends that certain Asset Purchase Agreement (the
"Agreement"), dated as of August 15, 1996, by and between BrightView
Communications Group, Inc., a Delaware corporation ("Buyer"), and Petersen
Publishing Company, a California corporation ("Seller"). Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Agreement.
RECITALS
WHEREAS, Buyer and Seller desire to amend the Agreement to reflect certain
changes; and
WHEREAS, Section 15.1 of the Agreement requires that any amendment of the
Agreement be executed in writing by both parties; and
WHEREAS, effective as of the Closing, (i) Buyer will assign to Petersen
Holdings, L.L.C., a Delaware limited liability company ("Holdings"), all of
Buyer's rights under the Agreement and (ii) Holdings will assign all such rights
to Petersen Publishing Company, L.L.C., a Delaware limited liability company
("Operating Company"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, Buyer and Seller agree as follows:
SECTION 1. AMENDMENTS TO AGREEMENT.
1.1 Section 6.7(a) of the Agreement is hereby amended so that the
following clause is added to end of such Section:
"provided further that notwithstanding any provision to the contrary in the
Seller Profit Sharing Plan, any Retained Employee so terminated prior to
the end of the 1996 Plan Year shall be entitled to any contributions to
which the Retained Employee otherwise would have been entitled under the
Seller Profit Sharing Plan had the Retained Employee remained employed by
Buyer through the end of the 1996 Plan Year (as defined in the Seller
Profit Sharing Plan)."
<PAGE>
1.2 Section 6.7(f) of the Agreement is hereby amended by deleting the
second sentence thereof.
1.3 Section 12.3 of the Agreement is hereby amended so that there are no
brackets surrounding the phrase "including those as to which Buyer is named an
additional insured pursuant to Section 5.6."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective immediately upon its execution.
SECTION 3. SURVIVAL OF ASSET PURCHASE AGREEMENT. Except as otherwise
amended herein, the Agreement shall remain in full force and effect pursuant to
the terms and conditions set forth therein.
SECTION 4. MISCELLANEOUS.
4.1 EXECUTION IN COUNTERPARTS. This Amendment may be executed in multiple
counterparts in accordance with Section 15.7 of the Agreement.
4.2 HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
4.3 GOVERNING LAW. This Amendment shall be construed according to the
laws of the State of California as more fully set forth in Section 15.4 of the
Agreement.
2
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
BUYER:
BRIGHTVIEW COMMUNICATIONS GROUP, INC.,
a Delaware corporation
By: ______________________________
Its: _________________________
SELLER:
PETERSEN PUBLISHING COMPANY,
a California corporation
By: ______________________________
Its: _________________________
HOLDINGS:
PETERSEN HOLDINGS, L.L.C.,
a Delaware limited liability company
By: ________________________________
Its: ___________________________
OPERATING COMPANY:
PETERSEN PUBLISHING COMPANY, L.L.C.,
a Delaware limited liability company
By: _________________________________
Its: ____________________________
3
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CERTIFICATE OF FORMATION
OF
PETERSEN PUBLISHING COMPANY, L.L.C.
The undersigned, being duly authorized to execute and file this
Certificate of Formation for the purpose of forming a limited liability company
pursuant to the Delaware Limited Liability Company Act, 6 Del. C. (S)(S) 18-101,
et seq., does hereby certify as follows:
FIRST
The name of the limited liability company is Petersen Publishing
Company, L.L.C. (the "Company").
SECOND
The Company's registered office in the State of Delaware is located at
1013 Centre Road, in the City of Wilmington, County of New Castle, 19805. The
registered agent of the Company for service of process at such address is
Corporation Service Company.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Formation as of the 18th day of September, 1996.
_____________________________
THADDINE G. GOMEZ,
AN AUTHORIZED PERSON
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PETERSEN CAPITAL CORP.
ARTICLE ONE
The name of the corporation is Petersen Capital Corp.
ARTICLE TWO
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
19805. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
The total number of shares of stock which the corporation has
authority to issue is one thousand (1,000) shares of Common Stock, par value one
cent ($0.01) per share.
ARTICLE FIVE
The name and mailing address of the sole incorporator are as follows:
NAME MAILING ADDRESS
---- ---------------
Thaddine G. Gomez 200 East Randolph Drive
Suite 5700
Chicago, Illinois 60601
<PAGE>
ARTICLE SIX
The corporation is to have perpetual existence.
ARTICLE SEVEN
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.
ARTICLE EIGHT
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINE
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TEN
The corporation expressly elects not to be governed by (S)203 of the
General Corporation Law of the State of Delaware.
ARTICLE ELEVEN
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
<PAGE>
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is my act and deed and the facts stated herein are true,
and accordingly have hereunto set my hand on the 29th day of October, 1996.
___________________________________
Thaddine G. Gomez
Sole Incorporator
<PAGE>
BY-LAWS
OF
PETERSEN CAPITAL CORP.
A Delaware corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be located at 1013 Centre Road, Wilmington,
Delaware, County of New Castle 19805. The name of the corporation's registered
agent at such address shall be Corporation Service Company. The registered
office and/or registered agent of the corporation may be changed from time to
time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall
be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall deter mine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual
<PAGE>
meeting or for any special meeting called by the board of directors. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal executive office of the corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the
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<PAGE>
adjourned meeting shall be given to each stockholder of record entitled to vote
at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of common stock
held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corpora-
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<PAGE>
tion's principal place of business, or an officer or agent of the corporation
having custody of the book or books in which proceedings of meetings of the
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested
provided, however, that no consent or consents delivered by certified or
registered mail shall be deemed delivered until such consent or consents are
actually received at the registered office. All consents properly delivered in
accordance with this section shall be deemed to be recorded when so delivered.
No written consent shall be effective to take the corporate action referred to
therein unless, within sixty (60) days of the earliest dated consent delivered
to the corporation as required by this section, written consents signed by the
holders of a sufficient number of shares to take such corporate action are so
recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Any action taken pursuant to such written consent
or consents of the stockholders shall have the same force and effect as if taken
by the stockholders at a meeting thereof.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the first board shall be eleven (11). Thereafter, the
number of directors shall be established from time to time by resolution of the
board. The directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote in
the election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Any director may resign at any time upon written
notice to the corporation.
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<PAGE>
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at
the request of the president on at least twenty-four (24) hours notice to each
director, either personally, by telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are
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<PAGE>
absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by
the board of directors and shall consist of a president, one or more vice-
presidents, secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable, except that the offices of president and secretary shall be filled as
expeditiously as possible.
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<PAGE>
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president shall be elected annually by the board of directors at
the first meeting of the board of directors held after each annual meeting of
stockholders or as soon thereafter as conveniently may be. The president shall
appoint other officers to serve for such terms as he or she deems desirable.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The President. The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he is present; subject to the powers of the
board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these by-laws.
Section 7. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors
or by the president, shall, in the absence or disability of the president, act
with all of the powers and be subject to all the restrictions of the president.
The vice-presidents shall also perform such other duties and have such other
powers as the board of directors, the president or these by-laws may, from time
to time, prescribe.
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<PAGE>
Section 8. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these by-
laws may, from time to time, prescribe; and shall have custody of the corporate
seal of the corporation. The secretary, or an assistant secretary, shall have
authority to affix the corporate seal to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors, the president, or secretary may, from
time to time, prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and the board of directors, at its regular meeting
or when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six (6) years) in such sums and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the president or
treasurer may, from time to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
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<PAGE>
Section 11. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in Section 2 hereof, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article V shall be a contract right and, subject to Sections 2
and 5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corpor ation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
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<PAGE>
the request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty (30) days, the right to indemnification
or advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents
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may be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obliga tions then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates
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<PAGE>
shall cease to be such officer or officers of the corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization, and other matters as
the corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate or certificates, and record the transaction on its books. The board
of directors may appoint a bank or trust company organized under the laws of the
United States or any state thereof to act as its transfer agent or registrar, or
both in connection with the transfer of any class or series of securities of the
corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by
the board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall
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apply to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
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Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or
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restrict the powers of guaranty or warranty of the corporation at common law or
under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
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ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the by-laws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
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CERTIFICATE OF FORMATION
OF
PETERSEN HOLDINGS, L.L.C.
The undersigned, being duly authorized to execute and file this Certificate
of Formation for the purpose of forming a limited liability company pursuant to
the Delaware Limited Liability Company Act, 6 Del. C. (S)(S) 18-101, et seq.,
does hereby certify as follows:
FIRST
The name of the limited liability company is Petersen Holdings, L.L.C. (the
"Company").
SECOND
The Company's registered office in the State of Delaware is located at 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805. The
registered agent of the Company for service of process at such address is
Corporation Service Company.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Formation as of the 18th day of September, 1996.
_____________________________
THADDINE G. GOMEZ,
AN AUTHORIZED PERSON
<PAGE>
EXHIBIT 4.1
================================================================================
PETERSEN PUBLISHING COMPANY, L.L.C.
and PETERSEN CAPITAL CORP.,
as ISSUERS,
PETERSEN HOLDINGS, L.L.C.
and
CERTAIN RESTRICTED SUBSIDIARIES,
as Guarantors
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
____________________
INDENTURE
Dated as of November 15, 1996
____________________
$100,000,000
11 1/8% Senior Subordinated Notes due 2006
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
---------------------
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- --------- ---------
<S> <C>
310(a)(1)............................................... 7.10
(a)(2)............................................... 7.10
(a)(3)............................................... N.A.
(a)(4)............................................... N.A.
(b) ................................................ 7.08; 7.10;
12.02
(b)(1)............................................... 7.10
(b)(9)............................................... 7.10
(c) ................................................ N.A.
311(a) ................................................ 7.11
(b) ................................................ 7.11
(c) ................................................ N.A.
312(a) ................................................ 2.05
(b) ................................................ 12.03
(c) ................................................ 12.03
313(a) ................................................ 7.06
(b)(1)............................................... 7.06
(b)(2)............................................... 7.06
(c) ................................................ 12.02
(d) ................................................ 7.06
314(a) ................................................ 4.02; 4.04
12.02
(b) ................................................ N.A.
(c)(1)............................................... 12.04; 12.05
(c)(2)............................................... 12.04; 12.05
(c)(3)............................................... N.A.
(d) ................................................ N.A.
(e) ................................................ 12.05
(f) ................................................ N.A.
315(a) ................................................ 7.01; 7.02
(b) ................................................ 7.05; 12.02
(c) ................................................ 7.01
(d) ................................................ 6.05; 7.01;
7.02
(e) ................................................ 6.11
316(a) (last sentence).................................. 12.06
(a)(1)(A)............................................ 6.05
(a)(1)(B)............................................ 6.04
(a)(2)............................................... 8.02
(b) ................................................ 6.07
(c) ................................................ 8.04
317(a)(1)............................................... 6.08
(a)(2)............................................... 6.09
(b) ................................................ 7.12
318(a) ................................................ 12.01
</TABLE>
N.A. means Not Applicable
____________________
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions............................................ 1
Section 1.02. Other Definitions...................................... 25
Section 1.03. Incorporation by Reference of Trust Indenture Act...... 26
Section 1.04. Rules of Construction.................................. 27
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture............. 27
Section 2.01A. Depository Procedures.................................. 29
Section 2.01B. Exchanges of Book-Entry Notes for Certificated
Notes................................................ 33
Section 2.01C. Exchange between Regulation S Notes and Rule 144A
Notes and other Notes................................ 33
Section 2.02. Execution and Authentication........................... 34
Section 2.03. Registrar and Paying Agent............................. 35
Section 2.04. Paying Agent to Hold Money in Trust.................... 36
Section 2.05. Noteholder Lists....................................... 36
Section 2.06. Transfer and Exchange.................................. 37
Section 2.07. Replacement Notes...................................... 38
Section 2.08. Outstanding Notes...................................... 38
Section 2.09. Temporary Notes........................................ 39
Section 2.10. Cancellation........................................... 39
Section 2.11. Defaulted Interest..................................... 39
Section 2.12. Deposit of Moneys...................................... 40
Section 2.13. CUSIP Number........................................... 40
Section 2.14. Book-Entry Provisions for Global Notes................. 40
Section 2.15. Special Transfer Provisions............................ 42
Section 2.16. Computation of Interest................................ 44
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee..................................... 44
Section 3.02. Selection by Trustee of Notes to Be Redeemed........... 44
Section 3.03. Notice of Redemption................................... 45
Section 3.04. Effect of Notice of Redemption......................... 46
Section 3.05. Deposit of Redemption Price............................ 46
Section 3.06 Notes Redeemed in Part................................. 47
</TABLE>
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ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes....................................... 47
Section 4.02. SEC Reports............................................ 47
Section 4.03. Waiver of Stay, Extension or Usury Laws................ 48
Section 4.04. Compliance Certificate................................. 49
Section 4.05. Taxes.................................................. 50
Section 4.06. Limitation on Additional Indebtedness.................. 50
Section 4.07. Limitation on Preferred Stock of Restricted
Subsidiaries.......................................... 51
Section 4.08. Limitation on Capital Stock of Restricted
Subsidiaries.......................................... 51
Section 4.09. Limitation on Restricted Payments...................... 52
Section 4.10. Limitation on Certain Asset Sales...................... 53
Section 4.11. Limitation on Transactions with Affiliates............. 56
Section 4.12. Limitations on Liens................................... 57
Section 4.13. Limitations on Investments............................. 58
Section 4.14. Limitation on Creation of Subsidiaries................. 58
Section 4.15. Limitation on Other Senior Subordinated Debt........... 58
Section 4.16. Limitation on Sale and Lease-Back Transactions......... 58
Section 4.17. Payments for Consent................................... 59
Section 4.18. Corporate Existence.................................... 59
Section 4.19. Change of Control...................................... 59
Section 4.20. Maintenance of Office or Agency........................ 62
Section 4.21. Maintenance of Properties; Insurance; Books and
Records; Compliance with Law.......................... 63
Section 4.22. Further Assurance to the Trustee....................... 63
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of
Assets................................................ 64
Section 5.02. Successor Person Substituted........................... 65
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default...................................... 65
Section 6.02. Acceleration........................................... 67
Section 6.03. Other Remedies......................................... 68
</TABLE>
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Section 6.04. Waiver of Past Defaults and Events of Default.......... 68
Section 6.05. Control by Majority.................................... 68
Section 6.06. Limitation on Suits.................................... 69
Section 6.07. Rights of Holders to Receive Payment................... 69
Section 6.08. Collection Suit by Trustee............................. 70
Section 6.09. Trustee May File Proofs of Claim....................... 70
Section 6.10. Priorities............................................. 71
Section 6.11. Undertaking for Costs.................................. 71
Section 6.12. Restoration of Rights and Remedies..................... 71
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee...................................... 72
Section 7.02. Rights of Trustee...................................... 73
Section 7.03. Individual Rights of Trustee........................... 74
Section 7.04. Trustee's Disclaimer................................... 74
Section 7.05. Notice of Defaults..................................... 74
Section 7.06. Reports by Trustee to Holders.......................... 75
Section 7.07. Compensation and Indemnity............................. 75
Section 7.08. Replacement of Trustee................................. 76
Section 7.09. Successor Trustee by Consolidation, Merger, Etc........ 78
Section 7.10. Eligibility; Disqualification.......................... 78
Section 7.11. Preferential Collection of Claims Against Company...... 78
Section 7.12. Paying Agents.......................................... 78
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders............................. 79
Section 8.02. With Consent of Holders................................ 79
Section 8.03. Compliance with Trust Indenture Act.................... 81
Section 8.04. Revocation and Effect of Consents...................... 81
Section 8.05. Notation on or Exchange of Notes....................... 82
Section 8.06. Trustee to Sign Amendments, etc........................ 82
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture................................. 83
Section 9.02. Legal Defeasance....................................... 83
Section 9.03. Covenant Defeasance.................................... 84
Section 9.04. Conditions to Defeasance or Covenant Defeasance........ 84
</TABLE>
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Section 9.05. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions......... 87
Section 9.06. Reinstatement.......................................... 87
Section 9.07. Moneys Held by Paying Agent............................ 88
Section 9.08. Moneys Held by Trustee................................. 88
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee.............................................. 89
Section 10.02. Execution and Delivery of Guarantees................... 90
Section 10.03. Limitation of Guarantee................................ 91
Section 10.04. Additional Guarantors.................................. 91
Section 10.05. Release of Guarantor................................... 91
Section 10.06. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness................................... 92
Section 10.07. Payment Over of Proceeds upon Dissolution, etc.,
of a Guarantor........................................ 92
Section 10.08. Suspension of Guarantee Obligations When Guarantor
Senior Indebtedness in Default........................ 94
Section 10.09. Subrogation to Rights of Holders of Guarantor Senior
Indebtedness.......................................... 96
Section 10.10. Guarantee Subordination Provisions Solely to Define
Relative Rights....................................... 97
Section 10.11. Application of Certain Article 11 Provisions........... 97
ARTICLE 11
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness............... 98
Section 11.02. Payment Over of Proceeds upon Dissolution, etc......... 98
Section 11.03. Suspension of Payment When Senior Indebtedness in
Default............................................... 100
Section 11.04. Trustee's Relation to Senior Indebtedness.............. 102
Section 11.05. Subrogation to Rights of Holders of Senior
Indebtedness.......................................... 102
Section 11.06. Provisions Solely to Define Relative Rights............ 103
Section 11.07. Trustee to Effectuate Subordination.................... 103
</TABLE>
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Section 11.08. No Waiver of Subordination Provisions.................. 104
Section 11.09. Notice to Trustee...................................... 105
Section 11.10. Reliance on Judicial Order or Certificate of
Liquidating Agent..................................... 106
Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights...................... 106
Section 11.12. Article Applicable to Paying Agents.................... 106
Section 11.13. No Suspension of Remedies.............................. 107
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls........................... 107
Section 12.02. Notices................................................ 107
Section 12.03. Communications by Holders with Other Holders........... 109
Section 12.04. Certificate and Opinion as to Conditions Precedent..... 109
Section 12.05. Statements Required in Certificate and Opinion......... 109
Section 12.06. When Treasury Notes Disregarded........................ 110
Section 12.07. Rules by Trustee and Agents............................ 110
Section 12.08. Business Days; Legal Holidays.......................... 110
Section 12.09. Governing Law.......................................... 110
Section 12.10. No Adverse Interpretation of Other Agreements.......... 111
Section 12.11. No Recourse Against Others............................. 111
Section 12.12. Successors............................................. 111
Section 12.13. Multiple Counterparts.................................. 112
Section 12.14. Table of Contents, Headings, etc....................... 112
Section 12.15. Separability........................................... 112
EXHIBITS
- --------
Exhibit A. Form of 144A Security...................................... A-1
Exhibit B. Form of Regulation S Security.............................. B-1
Exhibit C. Form of Legend for Global Securities....................... C-1
Exhibit D. Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors........... D-1
</TABLE>
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Exhibit E. Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S.................. E-1
</TABLE>
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INDENTURE, dated as of November 15, 1996, among PETERSEN PUBLISHING
COMPANY, L.L.C., a Delaware limited liability company (the "Company"), and
PETERSEN CAPITAL CORP., a Delaware corporation ("Capital" and, together with the
Company, jointly and severally, the "Issuers"), the Guarantors (as hereinafter
defined) and United States Trust Company of New York, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's 11 1/8% Senior
Subordinated Notes due 2006 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Additional Interest" means additional interest on the Notes which the
Issuers and the Guarantors, jointly and severally, agree to pay to the Holders
pursuant to Section 4 of the Registration Rights Agreement.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser
of the amount by which (x) the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities), but excluding liabilities under the Guarantee, of such Guarantor
at such date and (y) the present fair salable value of the assets of such
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities and after giving effect to any collection
from any Subsidiary of such Guarantor in respect of the obligations of such
Subsidiary under the Guarantee), excluding Indebtedness in respect of the
Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the
<PAGE>
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terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means 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 agent for service of
notices and demands.
"Asset Sale" means the sale, transfer or other disposition (other than
to the Company or any of its Restricted Subsidiaries) in any single transaction
or series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary of the Issuers, (b) all or substantially
all of the assets of the Issuers or of any Restricted Subsidiary thereof, (c)
real property or (d) all or substantially all of the assets of any magazine or
publishing property, or part thereof, owned by the Issuers or any Restricted
Subsidiary thereof, or a division, line of business or comparable business
segment of the Issuers or any Restricted Subsidiary thereof; provided that Asset
--------
Sales shall not include (i) sales, leases, conveyances, transfers or other
dispositions to the Company or to a Restricted Subsidiary or to any other Person
if after giving effect to such sale, lease, conveyance, transfer or other
disposition such other Person becomes a Restricted Subsidiary or (ii) the sale
or other disposition of any or all right, title and interest of the Company and
its Subsidiaries in and to the assets and properties (other than cash) directly
associated with the Scheduled Titles, and the sale or other disposition of any
Investments made by the contribution of any of the Scheduled Titles to a joint
venture, partnership or other Person (which may be a Subsidiary) as permitted by
clause (xii) of the definition of Permitted Investments.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Issuers or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Issuers or a Restricted Subsidiary as
a reserve, in accordance with GAAP, against any liabilities associated with the
assets
<PAGE>
-3-
sold or disposed of in such Asset Sale and retained by the Issuers or a
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other non-cash consideration received by the Issuers or any Restricted
Subsidiary from such Asset Sale or other disposition upon the liquidation or
conversion of such notes or non-cash consideration into cash.
"Attributable Indebtedness" in respect of a Sale and Lease-Back
Transaction means, as at the time of determination, the greater of (i) the fair
value of the property subject to such arrangement (as determined by the Board of
Directors) and (ii) the present value of the notes (discounted at a rate of 10%,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale and Lease-Back
Transaction (including any period for which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale,
the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clause (iii)(a) or (iii)(b) of Section 4.10(a) and
which have not been the basis for an Excess Proceeds Offer in accordance with
clause (iii)(c) of Section 4.10(a).
"Board of Directors" with respect to any person means, (i) at any time
such Person is a limited liability company, the board of directors of its
managing member or, if such managing member is a limited liability company, the
board of directors of such managing member's managing member, and (ii) otherwise
the board of directors of such Person or any committee authorized to act
therefor.
"Board Resolution" means a copy of a resolution certified pursuant to
an Officers' Certificate to have been duly adopted by the Board of Directors of
an Issuer or a Guarantor, as appropriate, and to be in full force and effect,
and delivered to the Trustee.
"BrightView" means BrightView Communications Group, Inc., a Delaware
corporation.
"Capital" means the party named as such in the first paragraph of this
Indenture until a successor replaces such party
<PAGE>
-4-
pursuant to Article 5 of this Indenture and thereafter means the successor.
"Capital Stock" means, with respect to any Person, any and all shares
or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means (i) direct obligations of the United States
of America or any agency thereof, or obligations guaranteed or insured by the
United States of America, provided that in each case such obligations mature
--------
within one year from the date of acquisition thereof, (ii) certificates of
deposit maturing within one year from the date of creation thereof issued by any
U.S. national or state banking institution having capital, surplus and undivided
profits aggregating at least $250,000,000 and at the time of investment rated at
least A-1 by S&P and P-1 by Moody's, (iii) commercial paper with a maturity of
180 days or less issued by a corporation (except an Affiliate of the Company)
organized under the laws of any state of the United States or the District of
Columbia and at the time of investment rated at least A-1 by S&P or at least P-1
by Moody's and (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by an agency thereof and backed by the
full faith and credit of the United States of America, in each case maturing
within one year from the date of acquisition; provided that the terms of such
--------
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency and (v) tax-exempt auction rate
securities and municipal preferred stock, in each case, subject to reset no more
than 35 days after the date of acquisition and having a rating of at least AA by
S&P or AA by Moody's at the time of investment.
"Change of Control" means the occurrence of one or more of the
following events: (i) Holdings and BrightView collectively shall cease to own
all of the outstanding Capital
<PAGE>
-5-
Stock of the Company; (ii) prior to a Qualified IPO, (x) Holdings shall cease to
be the managing member of the Company or shall otherwise cease to have the sole
right and authority to exercise control over the management of the Company; (y)
BrightView shall cease to be the managing member of Holdings or shall otherwise
cease to have the sole right and authority to exercise control over the
management of Holdings; or (z) Willis Stein shall cease to have the power
(regardless of whether such power is exercised) to elect a majority of the Board
of Directors of BrightView; or (iii) in connection with or subsequent to a
Qualified IPO, any Person or group of Persons acting in concert as a partnership
or other group (other than the Permitted Holders) shall, as a result of a tender
or exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become, after the date hereof, the "beneficial owner" (within
the meaning of such term under Rule 13d-3 under the Exchange Act) of securities
of Holdings or BrightView or such successor entity representing 20% or more of
the combined voting power of the then outstanding securities of Holdings or
BrightView or such successor entity, as the case may be, ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors, managers or other members of its governing body.
"Commodity Hedge Agreement" shall mean any option, hedge or other
similar agreement or arrangement designed to protect against fluctuations in
commodity or materials prices.
"Common Stock" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces such party pursuant to Article 5 of this
Indenture and thereafter means the successor.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Subsidiaries on a consolidated
basis (including, but not limited to, Redeemable Dividends, whether paid or
accrued, on Subsidiary Preferred Stock, imputed interest included in Capitalized
Lease Obligations, all commissions, discounts and other fees and charges owed
with
<PAGE>
-6-
respect to letters of credit and bankers' acceptance financing, the net
costs associated with hedging obligations, amortization of other financing fees
and expenses, the interest portion of any deferred payment obligation,
amortization of discount or premium, if any, and all other non-cash interest
expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Capital Stock (other than
dividends paid or payable in shares of Capital Stock of the Company).
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP, minus
-----
Permitted Tax Distributions (to the extent such Permitted Tax Distributions are
made); provided, however, that (a) the Net Income of any Person (the "other
-------- -------
Person") in which the Person in question or any of its Subsidiaries has less
than a 100% interest (which interest does not cause the net income of such other
Person to be consolidated into the net income of the Person in question in
accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Subsidiary, (b)
the Net Income of any Subsidiary of the Person in question that is subject to
any restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Notes or this Indenture) shall be
excluded to the extent of such restriction or limitation, (c) (i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
and (d) extraordinary gains and losses (including any related tax effects on the
Issuers) shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any
date, the consolidated stockholder's equity of such Person less the amount of
such stockholder's equity attributable to Disqualified Capital Stock of such
Person and its Subsidiaries, as determined in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the
<PAGE>
-7-
date of execution of this Indenture is located at United States Trust Company of
New York, 114 West 47th Street, New York, New York 10036.
"Default" means any event that is, or with the passing of time or
giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Issuers, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness," as to the Company or any Guarantor,
as the case may be, means any Senior Indebtedness (a) under the Senior Credit
Facility or (b) which at the time of determination exceeds $25 million in
aggregate principal amount (or accreted value in the case of Indebtedness issued
at a discount) outstanding or available under a committed facility, and (i)
which is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" by such Person and (ii) as to
which the Trustee has been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of
the Company and (ii) any Preferred Stock of the Company, with respect to either
of which, under the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary or the Company is obligated to pay current dividends
or distributions in cash during the period prior to the maturity date of the
Notes; provided, however, that Preferred Stock of the Company or any Restricted
-------- -------
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of the Company or such Restricted Subsidiary, which provisions
have substantially the same effect as the provisions
<PAGE>
-8-
described in Section 4.19, shall not be deemed to be Disqualified Capital Stock
solely by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal to (a)
the sum of (i) Consolidated Net Income for such period, plus (ii) the provision
for taxes for such period based on income or profits to the extent such income
or profits were included in computing Consolidated Net Income and any provision
for taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period (but only including Redeemable
Dividends in the calculation of such Consolidated Interest Expense to the extent
that such Redeemable Dividends have not been excluded in the calculation of
Consolidated Net Income), plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net
Income for such period, plus (vii) to the extent not already included in
Consolidated Net Income, all special management compensation earned or accrued
prior to the Issue Date to the extent paid or accrued in such Period, plus
(viii) Permitted Tax Distributions minus (b) all non-cash items increasing
Consolidated Net Income for such period, all for such Person and its
Subsidiaries determined in accordance with GAAP, except that with respect to the
Issuers each of the foregoing items shall be determined on a consolidated basis
with respect to the Issuers and their Restricted Subsidiaries only; provided,
--------
however, that, for purposes of calculating EBITDA during any fiscal quarter,
- -------
cash income from a particular Investment of such Person shall be included only
(x) if cash income has been received by such Person with respect to such
Investment during each of the previous four fiscal quarters, or (y) if the cash
income derived from such Investment is attributable to Temporary Cash
Investments.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States as of the date hereof.
"Guarantee" means the guarantee of the Obligations of the Issuers with
respect to the Notes by each Guarantor pursuant to the terms of Article 10
hereof.
"Guarantor" means Holdings and each Restricted Subsidiary of the
Issuers that hereafter becomes a Guarantor
<PAGE>
-9-
pursuant to Section 10.04, and "Guarantors" means such entities, collectively.
"Guarantor Senior Indebtedness" means the principal of and premium, if
any, and interest (including, without limitation, interest accruing or that
would have accrued but for the filing of a bankruptcy, reorganization or other
insolvency proceeding whether or not such interest constitutes an allowable
claim in such proceeding) on, and any and all other fees, expense reimbursement
obligations, indemnities and other amounts due pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with, (a) any Guarantor's
direct incurrence of any Indebtedness or its guarantee of all Indebtedness of
the Company or any Restricted Subsidiaries, in each case, owed to lenders under
the Senior Credit Facility, (b) all obligations of such Guarantor with respect
to any Interest Rate Agreement, (c) all obligations of such Guarantor to
reimburse any bank or other person in respect of amounts paid under letters of
credit, acceptances or other similar instruments, (d) all other Indebtedness of
such Guarantor which does not provide that it is to rank pari passu with or
---- -----
subordinate to the Guarantees and (e) all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any of the
Guarantor Senior Indebtedness described above. Notwithstanding anything to the
contrary in the foregoing, Guarantor Senior Indebtedness will not include (i)
Indebtedness of such Guarantor to any of its Subsidiaries, (ii) Indebtedness
represented by the Guarantees, (iii) any Indebtedness which by the express terms
of the agreement or instrument creating, evidencing or governing the same is
junior or subordinate in right of payment to any item of Guarantor Senior
Indebtedness, (iv) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business or (v)
Indebtedness incurred in violation of this Indenture, except if such
Indebtedness was incurred under the Senior Credit Facility based on financial
information and certificates provided by responsible officers of the Company and
relied on in good faith by the lenders thereunder in which event such
Indebtedness shall be deemed to have been incurred in compliance with this
Indenture and constitute Guarantor Senior Indebtedness.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Holdings" means Petersen Holdings, L.L.C., a Delaware limited
liability company.
<PAGE>
-10-
"incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
--------
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a Lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed (provided, however, that if such obligation or obligations
-------- -------
shall not have been assumed, the amount of such Indebtedness shall be deemed to
be the lesser of the principal amount of the obligation or the fair market value
of the pledged property or assets), (iii) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor), (iv)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (provided that in the case of
--------
any such letters of credit, the items for which such letters of credit provide
credit support are those of other Persons which would be included within this
definition for such other Persons), (v) in the case of the Issuers, Disqualified
Capital Stock of the Issuers or any Restricted Subsidiary thereof, and (vi)
obligations of any such Person under any Interest Rate Agreement applicable to
any of the foregoing (if and to the extent such Interest Rate Agreement
obligations would
<PAGE>
-11-
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided (i)
--------
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) that Indebtedness shall not
include any liability for federal, state, local or other taxes. Notwithstanding
any other provision of the foregoing definition, any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business shall not be deemed to be "Indebtedness" of the Company or
any Restricted Subsidiary for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Indenture" means this Indenture as amended, restated or supplemented
from time to time.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3) or
(7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Interest Rate Agreement" shall mean any interest or foreign currency
rate swap, cap, collar, option, hedge, forward rate or other similar agreement
or arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business or acquired as part of the assets acquired by the Issuers in connection
with an acquisition of assets which is otherwise permitted by the terms of this
Indenture), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
<PAGE>
-12-
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and (ii) the repurchase of securities of any Person by such Person.
"Issue Date" means the date the Notes are first issued by the Issuers
and authenticated by the Trustee under this Indenture.
"Issuer Request" means any written request signed in the names of each
of the Issuers by the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer or the Treasurer of each of the Issuers
and attested to by the Secretary or any Assistant Secretary of each of the
Issuers.
"Issuers" means the parties named as such in the first paragraph of
this Indenture until a successor replaces such parties pursuant to Article 5 of
this Indenture and thereafter means the successor and any other obligor on the
Notes.
"Lien" means, with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Maturity Date" means November 15, 2006.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Company or BrightView, the aggregate net proceeds received by the Company or
BrightView, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property
<PAGE>
-13-
(valued at the fair market value thereof, as determined in good faith by the
Board of Directors, at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into shares of Capital Stock of the Company which is not Disqualified Capital
Stock, the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount required
to be paid by the holder to the Company upon such exchange, exercise, conversion
or surrender, less any and all payments made to the holders, e.g., on account of
---
fractional shares and less all expenses incurred by the Company in connection
therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Notes" means the securities that are issued under this Indenture, as
amended or supplemented from time to time pursuant to this Indenture.
"Obligations" means, with respect to any Indebtedness, any principal,
premium, interest, penalties, fees, indemnifications, reimbursements, damages
and other expenses payable under the documentation governing such Indebtedness.
"Offering" means the offering of the Notes as described in the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated November,
1996 pursuant to which the Notes were offered.
"Officer", with respect to any Person (other than the Trustee) means
the Chief Executive Officer, the President, any Vice President and the Chief
Financial Officer, the Treasurer or the Secretary of such Person, or any other
officer designated by the Board of Directors of such Person, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer of such Person that
shall comply with applicable provisions of this Indenture and delivered to the
Trustee.
<PAGE>
-14-
"Opinion of Counsel" means a written opinion reasonably satisfactory
in form and substance to the Trustee from legal counsel which counsel is
reasonably acceptable to the Trustee stating the matters required by Section
12.05 and delivered to the Trustee.
"Payment Default" means any default, whether or not any requirement
for the giving of notice, the lapse of time or both, or any other condition to
such default becoming an Event of Default has occurred, in the payment of
principal of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Permitted Holders" means, collectively, Neal Vitale and each Person
who purchased Capital Stock of Holdings, BrightView or Petersen Investment Corp.
pursuant to the Securities Purchase Agreement.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with the Senior Credit Facility in an amount not to
exceed $260,000,000, less any mandatory prepayments actually made
thereunder (to the extent, in the case of payments of revolving credit
indebtedness, that the corresponding commitments have been permanently
reduced) or scheduled payments actually made thereunder;
(ii) Indebtedness under the Notes and the Guarantees;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of this Indenture;
(iv) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(v) Interest Rate Agreements;
(vi) [Intentionally blank];
(vii) Refinancing Indebtedness;
(viii) Indebtedness under Commodity Hedge Agreements entered into in the
ordinary course of business consistent
<PAGE>
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with reasonable business requirements and not for speculation;
(ix) Indebtedness of the type described in, and secured by Liens of
the type described in, clauses (ix) and (xix) of the definition of
Permitted Liens;
(x) Indebtedness consisting of guarantees made in the ordinary course
of business by the Company or any of its Subsidiaries of obligations of the
Issuers or any of their Subsidiaries, which obligations are otherwise
permitted under this Indenture;
(xi) Contingent Obligations of the Company or its Subsidiaries in
respect of customary indemnification and purchase price adjustment
obligations incurred in connection with an Asset Sale; provided that the
--------
maximum assumable liability in respect of all such obligations shall at no
time exceed the gross proceeds actually received by the Company and its
Subsidiaries in connection with such Asset Sale; and
(xii) Purchase Money Indebtedness of the Company and its Subsidiaries
and any refinancings, renewals or replacements of any such Purchase Money
Indebtedness (subject to the limitations on the principal amount thereof
set forth in this clause (xii), and other Indebtedness that is unsecured
(other than Indebtedness specified in clauses (i) through (x) above), which
Purchase Money Indebtedness and other unsecured Indebtedness shall not
exceed $10,000,000 in the aggregate at any time.
"Permitted Investments" means, for any Person, Investments made on or
after the date of this Indenture consisting of:
(i) Investments by the Company or by a Restricted Subsidiary
thereof, in the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company, (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,
<PAGE>
-16-
the Company or a Restricted Subsidiary thereof or (c) such business or
assets are owned by the Company or a Restricted Subsidiary;
(iv) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to the Issuers or a Restricted Subsidiary solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted by Section 4.10;
(v) Investments consisting of (a) purchases and acquisitions of
inventory, supplies, materials and equipment, or (b) licenses or leases of
intellectual property and other assets in each case in the ordinary course
of business;
(vi) Investments consisting of loans and advances to employees for
reasonable travel, relocation and business expenses in the ordinary course
of business, extensions of trade credit in the ordinary course of business,
and prepaid expenses incurred in the ordinary course of business;
(vii) without duplication, Investments consisting of Indebtedness
permitted pursuant to clause (iv) of the definition of Permitted
Indebtedness;
(viii) Investments existing on the date of this Indenture;
(ix) Investments of the Company under Interest Rate Agreements;
(x) Investments under Commodity Hedge Agreements entered into in the
ordinary course of business consistent with reasonable business
requirements and not for speculation;
(xi) Investments consisting of endorsements for collection or deposit
in the ordinary course of business;
(xii) Investments consisting of the contribution by the Company
to partnerships, joint ventures or other Persons (including Subsidiaries)
of the Scheduled Titles in exchange for equity interests in such Persons,
provided that all such Investments are made within 365 days after the date
--------
hereof;
<PAGE>
-17-
(xiii) Investments consisting of the licensing of publication titles and
other assets pursuant to joint marketing arrangements with other Persons;
and
(xiv) Investments (other than Investments specified in clauses (i)
through (xiii) above) in an aggregate amount, as valued at the time each
such Investment is made, not exceeding $5,000,000 for all such Investments
from and after the date hereof.
"Permitted Liens" means (i) Liens on property or assets of, or any
shares of stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries;
provided that such Liens are not incurred in connection with, or in
- --------
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries, (ii)
Liens securing Refinancing Indebtedness; provided that any such Lien does not
--------
extend to or cover any Property, shares or debt other than the Property, shares
or debt securing the Indebtedness so refunded, refinanced or extended, (iii)
Liens in favor of the or any of their Restricted Subsidiaries, (iv) Liens
securing industrial revenue bonds, (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under this Indenture; provided that (a)
--------
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item, (vi) statutory liens or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor, (vii) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $5,000,000 in the aggregate
at any one time outstanding, (viii) any extensions, substitutions, replacements
or renewals of the foregoing, (ix) Liens for taxes, assessments or governmental
charges that are being contested in
<PAGE>
-18-
good faith by appropriate proceedings, (x) Liens securing Capitalized Lease
Obligations permitted to be incurred under clause (v) of the definition of
"Permitted Indebtedness"; provided that such Lien does not extend to any
--------
property other than that subject to the underlying lease, (xi) Liens securing
Designated Senior Indebtedness, (xii) Liens existing on the date of this
Indenture, (xiii) Liens imposed by law, such as Liens of carriers, warehousemen,
mechanics, materialmen and landlords, and other similar Liens incurred in the
ordinary course of business for sums not constituting borrowed money that are
not overdue for a period of more than thirty (30) days or that are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP (if so required), (xiv)
Liens incurred in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other forms of government insurance or
benefits, or to secure the performance of letters of credit, bids, tenders,
statutory obligations, surety and appeal bonds, leases, government contracts and
other similar obligations (other than obligations for borrowed money) entered
into in the ordinary course of business, (xv) any attachment or judgment Lien
not constituting an Event of Default under this Indenture that is being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP (if so required), (xvi)
Liens arising from the filing, for notice purposes only, of financing statements
in respect of operating leases, (xvii) Liens arising by operation of law in
favor of depositary banks and collecting banks, incurred in the ordinary course
of business, (xviii) Liens consisting of restrictions on the transfer of
securities pursuant to applicable federal and state securities laws, (xix)
interests of lessors and licensors under leases and licenses to which the or any
of their Restricted Subsidiaries is a party, and (xx) with respect to any real
property occupied by the or any of their Restricted Subsidiaries, all easements,
rights or way, licenses and similar encumbrances on title that do not materially
impair the use of such property of its intended purposes.
"Permitted Tax Distributions" means, subject to the limitations set
forth in clause (v) of the second paragraph of Section 4.09, distributions by
the Company to Holdings and BrightView from time to time in an amount
approximately equal to the income tax liability of such member of the Company
(but in the case of Holdings and for so long as Holdings is treated as a pass-
through entity for taxation purposes, to the income tax liability that Holdings
would have if it were required to pay income taxes) resulting from the taxable
income of the Company (after taking into account all of the Company's prior tax
losses,
<PAGE>
-19-
to the extent such losses have not previously been deemed to reduce the
taxable income of the Company and thereby reduce distributions for taxes in
accordance herewith); such distribution for taxes shall be based on the
approximate highest combined tax rate that applies to any one of the members of
the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth on Exhibit A.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means a public offering by BrightView of
shares of its Common Stock (however designated and whether voting or non-voting)
and any and all rights, warrants or options to acquire such Common Stock;
provided, however, that in connection with any such Public Equity Offering the
- -------- -------
net proceeds of such Public Equity Offering are contributed to the Company as
common equity.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A promulgated under the Securities Act.
"Qualified IPO" shall have the meaning given to such term in the
Securityholders Agreement.
<PAGE>
-20-
"Redeemable Dividend" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be redeemed
means the date fixed for such redemption pursuant to the terms of the Notes.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances
or extends any Indebtedness of the Company outstanding on the Issue Date or
other Indebtedness permitted to be incurred by the Company or its Restricted
Subsidiaries pursuant to the terms of this Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Notes to at least
the same extent as the Indebtedness being refunded, refinanced or extended, if
at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the maturity
date of the Notes has a weighted average life to maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded, refinanced or extended and (c)
the amount of customary fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness, and (v) such Refinancing Indebtedness is incurred
by the same Person that initially incurred the Indebtedness being refunded,
refinanced or extended, except that the Company may incur Refinancing
Indebtedness to refund, refinance or extend Indebtedness of any Wholly-Owned
Subsidiary of the Company.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of November 25, 1996 among the Issuers, Holdings and First
Union Capital Markets Corp. and CIBC Wood Gundy Securities Corp., as Initial
Purchasers.
<PAGE>
-21-
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Responsible Officer" when used with respect to the Trustee, means an
officer or assistant officer assigned to the corporate trust department of the
Trustee (or any successor group of the Trustee) or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Restricted Subsidiary of the Company or any payment made
to the direct or indirect holders (in their capacities as such) of Capital Stock
of the Company or any Restricted Subsidiary of the Company (other than (x)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), and (y) in the case of
Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Company or any of its Restricted Subsidiaries (other than Capital Stock
owned by the Company or a Wholly-Owned Subsidiary of the Company, excluding
Disqualified Capital Stock), (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Notes other than subordinated Indebtedness acquired in
anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity (in each case due within one year of the date of
acquisition), (iv) the making of any Investment or guarantee of any Investment
in any Person other than a Permitted Investment, (v) any designation of a
Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the
Investment by the Issuers therein and (vi) forgiveness of any Indebtedness of an
Affiliate of the Issuers (other than a Restricted Subsidiary) to the Issuers or
a Restricted Subsidiary. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other
<PAGE>
-22-
than cash shall be valued at its fair market value determined by the Company's
Board of Directors.
"Restricted Security" has the meaning set forth in Rule 144(a)(3)
promulgated under the Securities Act; provided that the Trustee shall be
--------
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
"Restricted Subsidiary" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), the Issuers could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.06.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary of
the Company of any real or tangible personal Property, which Property has been
or is to be sold or transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.
"S&P" means Standard & Poor's Corporation and its successors.
"Scheduled Titles" shall refer to the following publications: Sassy,
-----
Sport, Petersen's Golfing, Mountain Biker, Bicycle Guide, Custom Classic Trucks,
- ----- ------------------ -------------- ------------- ---------------------
Pro Basketball, Pro Baseball, Pro Football, Pro Hockey, College Basketball,
- -------------- ------------ ------------ ---------- ------------------
College Football, Super Street, VW Custom & Classic, Event Scene, Hot Rod Bikes,
- ---------------- ------------ ------------------- ----------- -------------
4x4 Power and Family Photo.
- --------- ------------
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
-23-
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of September 30, 1996, among Holdings, Petersen Investment
Corp., BrightView, Petersen, Willis Stein and the Purchasers named therein.
"Securityholders Agreement" means the Securityholders Agreement, dated
as of September 30, 1996, among Holdings, Petersen Investment Corp., BrightView
and the Investors named therein.
"Senior Credit Facility" means the Credit Agreement, dated as of
September 30, 1996, among the Company, the lenders listed therein and First
Union National Bank of North Carolina, as administrative agent, and Canadian
Imperial Bank of Commerce, as documentation agent, together with the documents
related thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including adding Subsidiaries of the as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means the principal of and premium, if any, and
interest (including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowable claim in such
proceeding) on, and any and all other fees, expense reimbursement obligations,
indemnities and other amounts due pursuant to the terms of all agreements,
documents and instruments providing for, creating, securing or evidencing or
otherwise entered into in connection with (a) all Indebtedness of the Company
owed to lenders under the Senior Credit Facility, (b) all obligations of the
Company with respect to any Interest Rate Agreement, (c) all obligations of the
Company to reimburse any bank or other Person in respect of amounts paid under
letters of credit, acceptances or other similar instruments, (d) all other
Indebtedness of the Company which does not provide that it is to rank pari passu
---- -----
with or subordinate to the Notes and (e) all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any of the
Senior Indebtedness described above. Notwithstanding anything to the contrary
in the foregoing, Senior Indebtedness will not include (i) Indebtedness of the
Company to any of its Subsidiaries,
<PAGE>
-24-
(ii) Indebtedness represented by the Notes, (iii) any Indebtedness which by the
express terms of the agreement or instrument creating, evidencing or governing
the same is junior or subordinate in right of payment to any item of Senior
Indebtedness, (iv) any trade payable arising from the purchase of goods or
materials or for services obtained in the ordinary course of business or (v)
Indebtedness incurred in violation of this Indenture, except if such
Indebtedness was incurred under the Senior Credit Facility based on financial
information and certificates provided by responsible officers of the Company and
relied on in good faith by the lenders thereunder, in which event such
Indebtedness shall be deemed to have been incurred in compliance with this
Indenture and constitute Senior Indebtedness.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Temporary Cash Investments" means (i) Investments in marketable
direct obligations issued or guaranteed by the United States of America, or of
any governmental agency or political subdivision thereof, maturing within 365
days of the date of purchase; (ii) Investments in certificates of deposit issued
by a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits at the time of investment totaling more than $500,000,000 and
rated at the time of investment at least A by S&P and A-2 by Moody's maturing
within 365 days of purchase; or (iii) Investments not exceeding 365 days in
duration in money market funds that invest substantially all of such funds'
assets in the Investments described in the preceding clauses (i) and (ii).
<PAGE>
-25-
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.03 hereof).
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; provided that a Subsidiary organized or acquired after
--------
the Issue Date may be so classified as an Unrestricted Subsidiary only if such
classification is in compliance with the covenant set forth in Section 4.09
hereof. The Trustee shall be given prompt notice by the Company of each
resolution adopted by the Board of Directors of the Company under this
provision, together with a copy of each such resolution adopted.
"U.S. Government Obligations" means (a) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
--------
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
<PAGE>
-26-
"Willis Stein" means Willis Stein & Partners, L.P., a Delaware limited
partnership.
Section 1.02. Other Definitions.
-----------------
The definitions of the following terms may be found in the sections
indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction".................. 4.11
"Agent Members".......................... 2.14
"Bankruptcy Law"......................... 6.01
"Business Day"........................... 12.08
"Change of Control Offer"................ 4.19
"Change of Control Payment Date"......... 4.19
"Covenant Defeasance".................... 9.03
"Custodian".............................. 6.01
"Event of Default"....................... 6.01
"Excess Proceeds Offer".................. 4.10
"Global Notes"........................... 2.01
"Guarantee Payment Blockage Period"...... 10.08
"Guarantor Representative................ 10.08
"Initial Blockage Period"................ 11.03
"Initial Guarantee Blockage Period"...... 10.08
"Legal Defeasance"....................... 9.02
"Legal Holiday".......................... 12.08
"Offer Period"........................... 4.10
"Offshore Physical Notes"................ 2.01
"Paying Agent"........................... 2.03
"Payment Blockage Period"................ 11.03
"Physical Notes"......................... 2.01
"Purchase Date".......................... 4.10
"Registrar".............................. 2.03
"Reinvestment Date"...................... 4.10
"Representative"......................... 11.03
"U.S. Physical Notes".................... 2.01
</TABLE>
Section 1.03. Incorporation by Reference of Trust
Indenture Act.
-----------------------------------
Whenever this Indenture refers to a provision of the TIA, the portion
of such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
<PAGE>
-27-
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the , the Guarantors or
any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
Section 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(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) words used herein implying any gender shall apply to every
gender; and
(6) whenever in this Indenture there is mentioned, in any context,
Principal, interest or any other amount payable under or with respect to
any Note, such mention shall be deemed to include mention of the payment of
Additional Interest to the extent that, in such context, Additional
Interest is, was or would be payable in respect thereof.
<PAGE>
-28-
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.
------------------------------------------
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is incorporated in and made part of
this Indenture. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage. The Issuers may use "CUSIP" numbers in
issuing the Notes. The Issuers shall approve the form of the Notes by Board
Resolution. Each Note shall be dated the date of its authentication.
The Notes are being offered and sold to Qualified Institutional Buyers
(as defined) in reliance on Rule 144A ("Rule 144A Notes"). Notes also may be
offered and sold to Institutional Accredited Investors (as defined) in
transactions exempt from registration under the Securities Act not made in
reliance on Rule 144A or Regulation S ("Other Notes") or in offshore
transactions in reliance on Regulation S ("Regulation S Notes").
Rule 144A Notes and Other Notes which may be held in global form,
other than Regulation S Notes initially will be represented by one or more Notes
in registered, global form without interest coupons (collectively, the
"Restricted Global Note"). The Restricted Global Note will be deposited upon
issuance with the Trustee as custodian for The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant as described
below. Regulation S Notes initially will be represented by one or more global
notes in registered, global form without interest coupons (collectively, the
"Regulation S Global Note", and, together with the Restricted Global Note, the
"Global Notes"). Notes sold to Accredited Investors may be represented by the
Restricted Global Note or, if such an investor may not hold an interest in the
Restricted Global Note, a certificated Note bearing the restrictive legend
described under Exhibit A. The Regulation S Global Note will be registered in
the name of DTC or its nominee and deposited with the Trustee as custodian for
DTC. The Regulation S Global Note will be registered in the name of a nominee of
DTC for credit to the accounts of Euroclear System ("Euroclear") and Cedel Bank,
S.A. ("CEDEL"). On or prior to the 40th-day after the later of the commencement
of the offering and the original issue date
<PAGE>
-29-
(such period through and including such 40th day, the "Restricted Period")
beneficial interests in the Regulation S Note may be held only through Euroclear
or CEDEL, as indirect participants in DTC, unless transferred to a person that
takes delivery in the form of an interest in the corresponding Restricted Global
Note in accordance with the certification requirements described below.
Beneficial interests in the Restricted Global Note may not be exchanged for
beneficial interests in the Regulation S Global Note at any time except in the
limited circumstances described below. See Section 2.01C.
Except as set forth below, the Global Notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Notes may not be exchanged
for Notes in certificated form except in the limited circumstances described
below. See Section 2.01B.
Rule 144A Notes and Other Notes (including beneficial interests in the
Restricted Global Note) will be subject to certain restrictions on transfer and
will bear a restrictive legend as described under Exhibit A. In addition,
transfer of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of Euroclear and CEDEL), which may change from
time to time.
The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar.
Section 2.02.A Depository Procedures
---------------------
DTC has advised the Company that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchaser), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
<PAGE>
-30-
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that pursuant to procedures
established by it, (i) upon deposit of the Global Notes, DTC will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Notes and (ii) ownership of such interests in
the Global Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Notes).
Investors in the Restricted Global Note may hold their interests
therein directly through DTC, if they are Participants in such system, or
indirectly through organizations (including Euroclear and CEDEL) which are
Participants in such system. Investors in the Regulation S Global Note must
initially hold their interests therein through Euroclear or CEDEL, if they are
accountholders in such systems, or indirectly through organizations which are
accountholders in such systems. After the expiration of the Restricted Period
(but not earlier), investors may also hold interests in the Regulation S Global
Note through organizations other than Euroclear and CEDEL that are Participants
in the DTC system. Euroclear and CEDEL will hold interests in the Regulation S
Global Note on behalf of their accountholders through their respective
depositors, which in turn will hold such interests in the Regulation S Global
Note customers' securities accounts in their respective names on the books of
DTC. The Chase Manhattan Bank, Brussels office, will initially act as depository
for Euroclear, and Citibank, N.A., will initially act as depository for CEDEL.
All interests in a Global Note, including those held through Euroclear or CEDEL,
may be subject to the procedures and requirements of DTC. Those interests held
through Euroclear or CEDEL may also be subject to the procedures and
requirements of such system.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such persons may be
limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in
<PAGE>
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respect of such interests, may be affected by the lack of a physical certificate
evidencing such interests. For certain other restrictions on the transferability
of the Notes, see Section 2.01B.
Except as described below, owners of interests in the Global Notes
will not have Notes registered in their names, will not receive physical
delivery of Notes in certificated form and will not be considered the registered
owners or holders thereof under the Indenture for any purpose.
Payments in respect of the principal of (and premium, if any) and
interest on a Global Note registered in the name of DTC or its nominee will be
payable to DTC or its nominee in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee will
treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company,
the Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for (i) any aspect or accuracy of DTC's records or
any Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interests in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Notes, or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of
any payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Notes as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
<PAGE>
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Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds. Transfers between
accountholders in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between the accountholders in
DTC, on the one hand, and directly or indirectly through Euroclear or CEDEL
accountholders, on the other hand, will be effected through DTC in accordance
with DTC's rules on behalf of Euroclear or CEDEL, as the case may be, by its
respective depositary; however, such cross-market transactions will require
delivery of instructions to Euroclear or CEDEL, as the case may be, by the
counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
CEDEL, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in DTC, and making or receiving payment in accordance
with normal procedures for same-day fund settlement applicable to DTC. Euroclear
accountholders and CEDEL accountholders may not deliver instructions directly to
the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a
Euroclear or CEDEL accountholders purchasing an interest in a Global Note from a
accountholders in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear or CEDEL) immediately
following the settlement date of DTC. Cash received in Euroclear or CEDEL as a
result of sales of interests in a Global Note by or through a Euroclear or CEDEL
accountholders to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or CEDEL
cash account only as of the business day for Euroclear or CEDEL following DTC's
settlement date.
<PAGE>
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DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if any of the events described under occurs DTC reserves the right to
exchange the Global Notes for (in the case of the Restricted Global Note)
legended Notes in certificated form, and to distribute such Notes to its
Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Regulation S Global Note and in the
Restricted Global Note among accountholders in DTC, and accountholders of
Euroclear and CEDEL, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Company, the Initial Purchasers or the Trustee nor any agent of the
Company or Trustee will have any responsibility for the performance by DTC,
Euroclear or CEDEL or their respective accountholders, indirect participants or
accountholders of their respective obligations under the rules and procedures
governing their operations.
Section 2.01B Exchange of Book-Entry Notes for Certificated Notes
---------------------------------------------------
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear, in the case of the Restricted Global
Note, the restrictive
<PAGE>
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legend referred to in Exhibit A and, in the case of the Regulation S Global
Note, the legend set forth in bold type on the cover of this Offering
Memorandum, in each case, unless the Company determines otherwise in compliance
with applicable law.
Section 2.01C Exchanges between Regulation S Notes and Rule 144A Notes and
-------------------------------------------------- ---------
Other Notes
-----------
Prior to the expiration of the Restricted Period, a beneficial interest in
a Regulation S Global Note may be transferred to a person who takes delivery in
the form of an interest in the corresponding Restricted Global Note only upon
receipt by the Trustee of a written certification from the transferor to the
effect that such transfer is being made (i)(a) to a person whom the transferor
reasonably believes is a Qualified Institutional Buyer in a transaction meeting
the requirements of Rule 144A or (b) pursuant to another exemption from the
registration requirements under the Securities Act which is accompanied by an
opinion of counsel regarding the availability of such exemption and (ii) in
accordance with all applicable securities laws of any state of the United States
or any other jurisdiction.
Beneficial interests in the Restricted Global Note may be transferred to a
person who takes delivery in the form of an interest in the Regulation S Global
Note, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the Trustee a written certificate to the effect
that such transfer is being made in accordance with Rule 903 or 904 of
Regulation S or Rule 144 (if available) and that, if such transfer occurs prior
to the expiration of the Restricted Period, the interest transferred will be
held immediately thereafter through Euroclear or CEDEL.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.
Transfers involving an exchange of a beneficial interest in the Regulation
S Global Note for a beneficial interest in the Restricted Global Note or vice
versa will be effected in DTC by means of an instruction originated by DTC
through the DTC/Deposit Withdraw at Custodian ("DWAC") system. Accordingly, in
<PAGE>
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connection with such transfer, upon notice from DTC through the DWAC system
appropriate adjustments, this is initiated by beneficial holder through
participant through DTC to Trustee, will be made to reflect a decrease in the
principal amount of the Regulation S Global Note and a corresponding increase in
the principal amount of the Restricted Global Note or vice versa, as applicable.
Section 2.03. Execution and Authentication.
----------------------------
The Notes shall be executed on behalf of each Issuer by two Officers
of such Issuer or an Officer and an Assistant Secretary of such Issuer. Such
signature may be either manual or facsimile. The Issuers' seals shall be
impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile
form.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate Notes for
original issue in the aggregate principal amount of $100,000,000 upon an Issuer
Request. The aggregate principal amount of Notes outstanding at any time may
not exceed such amount except as provided in Section 2.07 hereof. Upon receipt
of the Issuer Request and an Officers' Certificate certifying that the
registration statement relating to the exchange offer specified in the
Registration Rights Agreement is effective under the Securities Act and that the
conditions precedent to an exchange thereunder have been met; the Trustee shall
authenticate an additional series of Notes in an aggregate principal amount not
to exceed $100,000,000 for issuance in exchange for all Notes tendered for
exchange pursuant to an exchange offer registered under the Securities Act or
pursuant to a Private Exchange (as defined in the Registration Rights
Agreement). Exchange Notes (as defined in the Registration Rights Agreement) or
Private Exchange Notes (as defined in the Registration Rights Agreement) may
have such distinctive series designation as and such changes in the form thereof
as are specified in the Issuer Request referred to in the preceding sentence.
The Notes shall be issuable only in registered form
<PAGE>
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without coupons and only in denominations of $1,000 and integral multiples
thereof.
The Trustee (at the expense of the Issuers) may appoint an
authenticating agent to authenticate Notes. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same right as an Agent to deal with the
Issuers or an Affiliate.
Section 2.04. Registrar and Paying Agent.
--------------------------
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar"), an office
or agency located in the Borough of Manhattan, City of New York, State of New
York where Notes may be presented for payment ("Paying Agent") and an office or
agency where notices and demands to or upon the Issuers in respect of the Notes
and this Indenture may be served. The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Issuers may have one or more
additional Paying Agents. Neither the Issuers nor any Affiliate may act as
Paying Agent. The Issuers may change any Paying Agent or Registrar without
notice to any Noteholder.
The Issuers shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such Agent and shall
incorporate the provisions of the TIA. The Issuers shall notify the Trustee of
the name and address of any such Agent. If the Issuers fail to maintain a
Registrar or Paying Agent, or agent for service of notices and demands, or fail
to give the foregoing notice, the Trustee shall act as such. The Issuers
initially appoint the Trustee as Registrar, Paying Agent and agent for service
of notices and demands in connection with the Notes.
Section 2.05. Paying Agent to Hold Money in Trust.
-----------------------------------
On or before 10:00 a.m. New York City time on each due date of the
principal of and interest on any Notes, the Issuers shall deposit with the
Paying Agent a sum sufficient to pay such principal and interest so becoming
due. The Issuers at any time may require a Paying Agent to pay all money held
by it to the Trustee and the Trustee, may at any time during the continuance of
any Payment Default, upon written request to a Paying Agent, require such Paying
Agent to forthwith pay to the Trustee all
<PAGE>
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sums so held in trust by such Paying Agent together with a complete accounting
of such sums. Upon doing so, the Paying Agent shall have no further liability
for the money.
Section 2.06. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Issuers shall furnish to
the Trustee at least five Business Days before each Interest Payment Date, and
at such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Noteholders.
Section 2.07. Transfer and Exchange.
---------------------
Subject to Section 2.15, when a Note is presented to the Registrar
with a request to register the transfer thereof, the Registrar shall register
the transfer as requested and, when Notes are presented to the Registrar with a
request to exchange them for an equal principal amount of Notes of other
authorized denominations, the Registrar shall make the exchange as requested
provided that every Note presented or surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Issuers and the Registrar duly executed by
the Holder thereof or his attorney duly authorized in writing. To permit
transfers and exchanges, upon surrender of any Note for registration of transfer
at the office or agency maintained pursuant to Section 2.03 hereof, the Issuers
shall execute and the Trustee shall authenticate Notes at the Registrar's
request. Any exchange or transfer shall be without charge, except that the
Issuers may require payment by the Holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation to a transfer or
exchange, but this provision shall not apply to any exchange pursuant to
Sections 2.09, 3.06 or 8.05 hereof. The Trustee shall not be required to
register transfers of Notes or to exchange Notes for a period of 15 days before
the mailing of notice of redemption of Notes to be redeemed. The Trustee shall
not be required to exchange or register transfers of any Notes called or being
called for redemption in whole or in part, except the unredeemed portion of any
Note being redeemed in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agrees that transfers of the beneficial interests in such Global Note may
be effected only through a book
<PAGE>
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entry system maintained by the Holder of such Global Note (or its agent), and
that ownership of a beneficial interest in the Global Note shall be required to
be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Issuers and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Issuers' or any Guarantor's
compliance with or have any responsibility with respect to the Issuers' or any
Guarantor's compliance with any U.S. Federal or state securities laws.
Section 2.08. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Registrar or the Trustee or
if the Holder of a Note presents evidence to the satisfaction of the Issuers and
the Trustee that the Note has been lost, destroyed or wrongfully taken, the
Issuers shall issue, the Guarantors shall endorse and the Trustee shall
authenticate a replacement Note if the requirements of Section 8-405 of the New
York Uniform Commercial Code as in effect on the date of this Indenture are met.
An indemnity bond may be required by the Issuers or the Trustee that is
sufficient in the judgment of the Issuers and the Trustee to protect the
Issuers, the Trustee or any Agent from any loss which any of them may suffer if
a Note is replaced. In every case of destruction, loss or theft, the applicant
shall also furnish to the Issuers and to the Trustee evidence to their
satisfaction of the destruction, loss or the theft of such Note and the
ownership thereof. The Issuers may charge the Holder for their exceptional out-
of-pocket expenses in replacing a Note and the Trustee may charge the Company
for the Trustee's expenses (including, without limitation, attorneys' fees and
disbursements). Every replacement Note is an additional obligation of the
Issuers.
Section 2.09. Outstanding Notes.
-----------------
Notes outstanding at any time are all Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding and,
to the extent set forth in Sections 9.01 and 9.02, on or after the date on which
the conditions set forth in Sections 9.01 or 9.02 have been
<PAGE>
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satisfied, those Notes theretofore authenticated and delivered by the Trustee
hereunder.
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding until the Issuers and the Trustee receive proof satisfactory to each
of them that the replaced Note is held by a bona fide purchaser.
If a Paying Agent holds on a Redemption Date or Maturity Date money
sufficient to pay the principal of, premium, if any, and accrued interest on
Notes payable on that date, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Subject to Section 12.06, a Note does not cease to be outstanding
solely because the Issuers or an Affiliate holds the Note.
Section 2.010. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Issuers may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form, and shall carry all rights, of definitive Notes but
may have variations that the Issuers consider appropriate for temporary Notes.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes presented to it.
Until such exchange, temporary Notes shall be entitled to the same rights,
benefits and privileges as definitive Notes.
Section 2.10. Cancellation.
------------
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and destroy all Notes surrendered for transfer, exchange, payment
or cancellation and deliver a certificate of destruction to the Issuers.
Subject to Section 2.07 hereof, the Issuers may not issue new Notes to replace
Notes in respect of which they have previously paid all principal, premium and
interest accrued thereon, or delivered to the Trustee for cancellation.
<PAGE>
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Section 2.11. Defaulted Interest.
------------------
If the Issuers default in a payment of interest on the Notes, they
shall pay the defaulted amounts, plus any interest payable on defaulted amounts
pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date. The Issuers shall fix the special record date
and payment date in a manner satisfactory to the Trustee and provide the Trustee
at least 20 days notice of the proposed amount of default interest to be paid,
the special record date and the special payment date. At least 15 days before
the special record date, the Issuers shall mail or cause to be mailed to each
Noteholder at his address as it appears on the Notes register maintained by the
Registrar a notice that states the special record date, the payment date (which
shall be not less than five nor more than ten days after the special record
date), and the amount to be paid. The Company may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements (if
applicable) of any securities exchange on which the Notes may be listed and,
upon such notice as may be required by such exchange, if, after written notice
given by the Company to the Trustee of the proposed payment pursuant to this
sentence, such manner of payment shall be deemed practicable by the Trustee.
Section 2.12. Deposit of Moneys.
-----------------
Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and Maturity Date, the Issuers shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall
be payable at the office of the Paying Agent.
Section 2.13. CUSIP Number.
------------
The Issuers in issuing the Notes may use a "CUSIP" number(s), and if
so, the Trustee shall use the CUSIP number(s) 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(s) printed in the notice or on the Notes, and that reliance may be
<PAGE>
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placed only on the other identification numbers printed on the Notes.
Section 2.14. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit B.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Note, and the Depository may be treated by the Issuers, the Trustee and
any agent of the Issuers or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Issuers, the Trustee or any agent of the Issuers or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfer in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.15. In addition, Physical Notes
shall be transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Issuers that it is
unwilling or unable to continue as Depository for any Global Note and a
successor depositary is not appointed by the Issuers within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Issuers
shall execute, and the Trustee shall upon receipt of
<PAGE>
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an Issuer Order authenticate and make available for delivery, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to
be surrendered to the Trustee for cancellation, and the Issuers shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in writing in exchange for its beneficial interest
in the Global Notes, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.15, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Exhibit A.
(f) The Holder of any Global Note may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture, the Notes or the Guarantees.
Section 2.15. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
---------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note constituting
a Restricted Security, whether or not such Note bears the Private Placement
Legend, if (x) the requested transfer is after November , 1999 or (y) (1)
in the case of a transfer to an Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons), the proposed transferee has
delivered to the Registrar a certificate substantially in the form of
Exhibit C hereto or (2) in the case of a transfer to a Non-U.S. Person
(including a QIB), the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit D hereto, provided, that
--------
in the case of a transfer of a Note bearing the Private Placement Legend
for a Note not bearing the Private Placement Legend, the Registrar has
<PAGE>
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received an Officers' Certificate authorizing such transfer; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Issuers shall execute, the Guarantors shall endorse and the Trustee
shall authenticate and make available for delivery one or more Physical Notes of
like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Issuers and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Issuers and the Registrar in writing, that it is purchasing the 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 QIB within the
meaning of Rule 144A, 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 Issuers as it 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 its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Securities
to be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of instructions given in accordance with the Depository's and
<PAGE>
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the Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global Note
in an amount equal to the principal amount of the Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) it has received the Officers' Certificate required by paragraph
(a)(i)(x) of this Section 2.15, (ii) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Issuers 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 or (iii) such Note has been sold pursuant to an effective registration
statement under the Securities Act and the Trustee has received an Officers'
Certificate from the Issuers to such effect.
(d) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section 2.15.
The Issuers 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 notice to the Registrar.
Section 2.16. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
<PAGE>
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ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
------------------
If the Issuers elect to redeem Notes pursuant to paragraph 6 of the
Notes, (i) at least 45 days prior to the Redemption Date in the case of a
partial redemption, (ii) at least 45 days prior to the Redemption Date in the
case of a total redemption or (iii) during such other period as the Trustee may
agree to (which agreement shall not unreasonably be withheld) the Issuers shall
notify the Trustee in writing of the Redemption Date, the principal amount of
Notes to be redeemed and the redemption price, and deliver to the Trustee an
Officers' Certificate stating that such redemption will comply with the
conditions contained in paragraph 6 of the Notes, as appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
--------------------------------------------
In the event that fewer than all of the Notes are to be redeemed, the
Trustee shall select the Notes to be redeemed, if the Notes are listed on a
national securities exchange, in accordance with the rules of such exchange or,
if the Notes are not so listed, either on a pro rata basis or by lot, or such
other method as it shall deem fair and equitable; provided, however, that if a
-------- -------
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portion thereof for redemption shall be made by the
Trustee on a pro rata basis, unless such a method is prohibited. The Trustee
--- ----
shall promptly notify the Issuers of the Notes selected for redemption and, in
the case of any Notes selected for partial redemption, the principal amount
thereof to be redeemed. The Trustee may select for redemption portions of the
principal of the Notes that have denominations larger than $1,000. Notes and
portions thereof the Trustee selects shall be redeemed in amounts of $1,000 or
whole multiples of $1,000. For all purposes of this Indenture unless the
context otherwise requires, provisions of this Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
--------------------
At least 30 days, and no more than 60 days, before a Redemption Date,
the Issuers shall mail, or cause to be mailed, a notice of redemption by first-
class mail to each Holder of Notes to be redeemed at his or her last address as
the same appears on
<PAGE>
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the registry books maintained by the Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof) and shall state:
(1) the Redemption Date and the amount of premium and accrued interest
to be paid;
(2) the redemption price and the amount of premium and accrued
interest to be paid;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date and upon surrender of such Note, a new Note or Notes in principal
amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(6) that unless the Issuers default in making the redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
Redemption Date;
(7) the provision of paragraph 6 of the Notes pursuant to which the
Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being redeemed.
At the Issuers' written request made at least five Business Days prior
to the date on which notice is to be given, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' sole expense.
Section 3.04. Effect of Notice of Redemption.
------------------------------
Once the notice of redemption described in Section 3.03 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the redemption price, including any premium, plus interest accrued to the
Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid
at the redemption price, including any premium, plus interest accrued to
<PAGE>
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the Redemption Date, provided that if the Redemption Date is after a regular
--------
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date, and provided, further, that if a Redemption Date is a Legal
-------- -------
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 A.M., New York City time, on each Redemption
Date, the Issuers shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the redemption price of and accrued interest on
all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date which have been delivered by the Issuers to
the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Notes called for redemption shall
have been made available in accordance with the preceding paragraph, the Notes
called for redemption will cease to accrue interest and the only right of the
Holders of such Notes will be to receive payment of the redemption price of and,
subject to the first proviso in Section 3.04, accrued and unpaid interest on
such Notes to the Redemption Date. If any Note surrendered for redemption shall
not be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid principal of the Note and any interest
not paid on such unpaid principal, in each case, at the rate and in the manner
provided in the Notes.
Section 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for a Holder a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
<PAGE>
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ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
----------------
The Issuers shall, jointly and severally, pay the principal of and
interest (including all Additional Interest as provided in the Registration
Rights Agreement) on the Notes on the dates and in the manner provided in the
Notes and this Indenture. An installment of principal or interest shall be
considered paid on the date it is due if the Trustee or Paying Agent holds on
that date money designated for and sufficient to pay such installment.
The Issuers shall pay interest on overdue principal (including post-
petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
-----------
(a) The Issuers will file with the SEC all information, documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act, in the case of the Company, whether or not the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and in the
case of Capital, only to the extent subject to such filing requirements. The
Issuers (at their own expense) will file with the Trustee within 15 days after
they file them with the SEC, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Issuers file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Upon qualification of this Indenture under the TIA, the Issuers shall also
comply with the provisions of TIA (S) 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Issuers' compliance with any of their covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
(b) At the Issuers' expense, regardless of whether the Issuers are
required to furnish such reports and other information referred to in paragraph
(a) above to their
<PAGE>
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equityholders pursuant to the Exchange Act, the Company shall cause such reports
and other information to be mailed to the Holders at their addresses appearing
in the register of Notes maintained by the Registrar within 15 days after they
file them with the SEC.
(c) The Issuers shall, upon request, provide to any Holder of Notes or
any prospective transferee of any such Holder any information concerning the
Issuers (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144A under the
Securities Act; provided, however, that the Issuers shall not be required to
-------- -------
furnish such information in connection with any request made on or after the
date which is three years from the later of (i) the date such Note (or any
predecessor Note) was acquired from the Issuers or (ii) the date such Note (or
any predecessor Note) was last acquired from an "affiliate" of the Issuers
within the meaning of Rule 144 under the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Issuers covenant (to the extent that they may lawfully do so) that
they will not at any time insist upon, or plead (as a defense or otherwise) or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Issuers from paying all or any portion of the principal of, premium, if any,
and/or interest on the Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that they may lawfully do so)
the Issuers hereby expressly waive all benefit or advantage of any such law, and
covenant that they 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.
Section 4.04. Compliance Certificate.
----------------------
(a) The Issuers shall deliver to the Trustee, within 100 days after
the end of each fiscal year and on or before 50 days after the end of the first,
second and third quarters of each fiscal year, an Officers' Certificate (one of
the signers on behalf of each of the Issuers of which shall be the principal
executive officer, principal financial officer or principal accounting officer
of such Issuer) stating that a review of the activities of the Issuers and their
Subsidiaries during such fiscal year or fiscal quarter, as the case may be,
has been made
<PAGE>
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under the supervision of the signing Officers with a view to determining whether
the Issuers have kept, observed, performed and fulfilled their obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Issuers have kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and are not in default in the performance or observance of any of the
terms, provisions and conditions hereof (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 they are taking or propose to take
with respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of or interest, if any, on the Notes is prohibited or if such event
has occurred, a description of the event and what action the Issuers are taking
or propose to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.02 above shall be accompanied by a
written statement of the Issuers' 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 which would lead them to believe that the Issuers have violated
any provisions of this Article 4 or Article 5 of this Indenture 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 for any failure to obtain knowledge of any such violation.
(c) The Issuers will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuers are taking or propose to take with
respect thereto.
(d) The Company's fiscal year currently ends on November 30. The
Company will provide notice to the Trustee of any change in its fiscal year.
Section 4.05. Taxes.
-----
The Issuers shall, and shall cause each of their Subsidiaries to, pay
prior to delinquency all material taxes,
<PAGE>
-51-
assessments, and governmental levies except as contested in good faith and by
appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
-------------------------------------
The Issuers shall not, and shall not permit any Restricted Subsidiary
of the Issuers to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) unless (a) after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the ratio
of the total Indebtedness of the Issuers and their Restricted Subsidiaries
(excluding any Indebtedness owed to a Restricted Subsidiary by any other
Restricted Subsidiary or the Issuers and any Indebtedness owed to the Issuers by
any Restricted Subsidiary) to the Issuers' EBITDA (determined on a pro forma
basis for the last four fiscal quarters of the Issuers for which financial
statements are available at the date of determination) is less than 6.0 to 1;
provided, however, that if the Indebtedness which is the subject of a
- -------- -------
determination under this provision is Acquired Indebtedness, or Indebtedness
incurred in connection with the simultaneous acquisition of any Person,
business, property or assets, then such ratio shall be determined by giving
effect to (on a pro forma basis, as if the transaction had occurred at the
beginning of the four-quarter period) both the incurrence or assumption of such
Acquired Indebtedness or such other Indebtedness by the Issuers and the
inclusion in the Issuers' EBITDA of the EBITDA of the acquired Person, business,
property or assets and any pro forma expense and cost reductions calculated on a
basis consistent with Regulation S-X under the Securities Act as in effect and
as applied as of the date hereof, and (b) no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness.
Notwithstanding the foregoing, the Issuers and their Restricted
Subsidiaries may incur Permitted Indebtedness.
Neither BrightView nor Holdings shall, directly or indirectly, incur
or remain or become directly or indirectly liable with respect to any
Indebtedness except that BrightView and Holdings (a) may guarantee (i) the
Notes, (ii) the indebtedness of the Company under the Senior Credit Facility and
the other Credit Documents (as defined in the Senior Credit Facility) and (iii)
any Indebtedness of the Company or any Restricted Subsidiary permitted to be
incurred under the immediately preceding paragraphs and (b) may incur
Indebtedness in an aggregate principal amount not exceeding $5,000,000
outstanding at any time issued to repurchase their Capital Stock
<PAGE>
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from former management employees in connection with their termination or
departure (provided that such Indebtedness is subordinated in right and time of
--------
payment to (i) and (ii) of (a) above).
Section 4.07. Limitation on Preferred Stock of
Restricted Subsidiaries.
--------------------------------
The Issuers shall not permit any Restricted Subsidiary to issue any
Preferred Stock (except Preferred Stock to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Subsidiary) to
hold any such Preferred Stock unless the Company or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under the first paragraph of
Section 4.06 hereof in an aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Section 4.08. Limitation on Capital Stock of Subsidiaries.
-------------------------------------------
The Issuers shall not (i) sell, pledge, hypothecate or otherwise
convey or dispose of any Capital Stock of a Subsidiary (other than under the
Senior Credit Facility or under the terms of any Designated Senior Indebtedness)
or (ii) permit any of their Subsidiaries to issue any Capital Stock, other than
to the Issuers or a Wholly-Owned Subsidiary of the Issuers. The foregoing
restrictions shall not apply to an Asset Sale made in compliance with Section
4.10 hereof or the issuance of Preferred Stock in compliance with Section 4.07
hereof. In no event shall the Company sell, pledge, hypothecate or otherwise
convey or dispose of any Capital Stock of Capital nor shall Capital issue any of
its Capital Stock.
Section 4.09. Limitation on Restricted Payments.
---------------------------------
The Issuers will not make, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
--- -----
Payment, the Issuers could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 4.06 hereof; and
<PAGE>
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(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 50% of the cumulative Consolidated Net
Income of the Company subsequent to the Issue Date (or minus 100% of any
cumulative deficit in Consolidated Net Income during such period) plus (2)
100% of the aggregate Net Proceeds and the fair market value of securities
or other property received by the Company from the issue or sale, after the
Issue Date, of Capital Stock (other than Disqualified Capital Stock or
Capital Stock of the Company issued to any Subsidiary of the Company) of
the Company or any Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable for Capital Stock (other
than Disqualified Capital Stock) of the Company which has been so converted
or exercised or exchanged, as the case may be, plus (3) without duplication
of any amounts included in clauses (1) and (2) above, 100% of the aggregate
net proceeds of any equity contribution received by the Company from a
holder of the Company's Capital Stock. For purposes of determining under
this clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its fair market value determined, in good
faith, by the Issuers' Board of Directors of the Company.
The provisions of this Section 4.09 shall not prohibit: (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture; (ii) the retirement of any shares of Capital Stock
of the Company or subordinated Indebtedness by conversion into, or by or in
exchange for, shares of Capital Stock (other than Disqualified Capital Stock),
or out of, the Net Proceeds of the substantially concurrent sale (other than to
a Subsidiary of the Company) of other shares of Capital Stock of the Company
(other than Disqualified Capital Stock); (iii) the redemption or retirement of
Indebtedness of the Issuers subordinated to the Notes in exchange for, by
conversion into, or out of the Net Proceeds of, a substantially concurrent sale
or incurrence of Indebtedness (other than any Indebtedness owed to a Subsidiary)
of the Issuers that is contractually subordinated in right of payment to the
Notes to at least the same extent as the subordinated Indebtedness being
redeemed or retired; (iv) the retirement of any shares of Disqualified Capital
Stock by conversion into, or by exchange for, shares of Disqualified Capital
Stock, or out of the Net Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other shares of Disqualified
<PAGE>
-54-
Capital Stock; (v) if no Event of Default listed in clause (1),(2),(6) or (7) of
Section 6.01 shall have occurred and be continuing, or would result from any
such distribution, Permitted Tax Distributions; or (vi) dividend payments or
other distributions of cash by the Company in an amount not in excess of (y)
$1,000,000 per fiscal year solely for the purpose of paying fees and expenses of
BrightView and Holdings, including directors' fees, less (z) the amount of any
management, advisory, consulting and similar fees paid by the Company to Willis
Stein and its Affiliates during such fiscal year.
Not later than the date of making any Restricted Payment, the Issuers
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 4.09 were computed, which calculations may
be based upon the Issuers' latest available financial statements, and that no
Default or Event of Default exists and is continuing and no Default or Event of
Default will occur immediately after giving effect to any Restricted Payments.
Section 4.10. Limitation on Certain Asset Sales.
---------------------------------
(a) The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Board of Directors of the Company,
and evidenced by a Board Resolution); (ii) not less than 85% of the
consideration received by the Company or its Subsidiaries, as the case may be,
is in the form of cash or Temporary Cash Investments; and (iii) the Asset Sale
Proceeds received by the Company or such Restricted Subsidiary are applied (a)
first, to the extent the Company elects, or is required, to prepay, repay or
purchase debt under any then existing Senior Indebtedness of the Company or any
Restricted Subsidiary within 180 days following the receipt of the Asset Sale
Proceeds from any Asset Sale; provided that any such repayment shall result in a
permanent reduction of the commitments thereunder in an amount equal to the
principal amount so repaid; (b) second, to the extent of the balance of Asset
Sale Proceeds after application as described above, to the extent the Company
elects, to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another Person) used or useful in businesses similar or ancillary to the
business of the Company or such Restricted Subsidiary as conducted at the time
of such Asset Sale, provided
--------
<PAGE>
-55-
that such investment occurs or the Issuers or a Restricted Subsidiary enters
into contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 181st day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date") and
Asset Sale Proceeds contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds; and (c) third, if, on the
Reinvestment Date with respect to any Asset Sale, the Available Asset Sale
Proceeds exceed $5,000,000, the Issuers shall apply an amount equal to such
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase (an "Excess Proceeds Offer").
(b) If the Issuers are required to make an Excess Proceeds Offer, the
Issuers shall mail, within 30 days following the Reinvestment Date, a notice to
the Holders stating, among other things: (1) that such Holders have the right
to require the Issuers to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date (the "Purchase Date"), which shall be no earlier than 30 days
and not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by the Issuers, that each Holder must follow in order
to have such Notes repurchased; and (4) the calculations used in determining the
amount of Available Asset Sale Proceeds to be applied to the repurchase of such
Notes. The Excess Proceeds Offer shall remain open for a period of 20 Business
Days following its commencement (the "Offer Period"). The notice, which shall
govern the terms of the Excess Proceeds Offer, shall state:
(1) that the Excess Proceeds Offer is being made pursuant to this
Section 4.10 and the length of time the Excess Proceeds Offer will remain
open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will continue
to accrue interest;
(4) that any Note accepted for payment pursuant to the Excess Proceeds
Offer shall cease to accrue interest on and after the Purchase Date and the
deposit of the purchase price with the Trustee;
<PAGE>
-56-
(5) that Holders electing to have a Note purchased pursuant to any
Excess Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Issuers, a depositary, if appointed by the Issuers, or a
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day preceding the Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Issuers, depositary or Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a 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 the Note purchased;
(7) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Available Asset Sale Proceeds, the Issuers shall select
the Notes to be purchased on a pro rata basis (with such adjustments as may
be deemed appropriate by the Issuers so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, Notes
or portions thereof tendered pursuant to the Excess Proceeds Offer, deposit with
the Paying Agent U.S. legal tender sufficient to pay the purchase price plus
accrued interest, if any, on the Notes to be purchased and deliver to the
Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Issuers in accordance with the terms of this
Section 4.10. The Paying Agent shall promptly (but in any case not later than 5
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Note tendered by such Holder and accepted by
the Issuers for purchase, and the Issuers shall promptly issue a new Note, the
guarantors shall endorse the guarantee thereon and the Trustee shall
authenticate and mail or make available for delivery such new 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
<PAGE>
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or delivered by the Issuers to the Holder thereof. The Issuers will publicly
announce the results of the Excess Proceeds Offer on the Purchase Date by
sending a press release to the Dow Jones News Service or similar business news
service in the United States. If an Excess Proceeds Offer is not fully
subscribed, the Issuers may retain that portion of the Available Asset Sale
Proceeds not required to repurchase Notes.
Section 4.11. Limitation on Transactions with Affiliates.
------------------------------------------
(a) The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate (including entities in which the Issuers or any of
its Restricted Subsidiaries own a minority interest) or holder of 10% or more of
the Issuers' Common Stock (an "Affiliate Transaction") other than transactions
existing on the date hereof and described on Schedule 4.11 hereto, or extend,
renew, waive or otherwise modify the terms of any Affiliate Transaction entered
into prior to the Issue Date if such extension, renewal, waiver or other
modification is more disadvantageous to the Holders in any material respect than
the original agreement as in effect on the Issue Date unless (i) such Affiliate
Transaction is between or among the Issuers and their Wholly-Owned Subsidiaries;
or (ii) the terms of such Affiliate Transaction are fair and reasonable to the
Issuers or such Restricted Subsidiary, as the case may be, and the terms of such
Affiliate Transaction are at least as favorable as the terms which could be
obtained by the Issuers or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction involving an amount or having a value in
excess of $1,000,000 which is not permitted under clause (i) above, the Issuers
must obtain a resolution of the Board of Directors certifying that such
Affiliate Transaction complies with clause (ii) above. In transactions with a
value in excess of $3,000,000 which are not permitted under clause (i) above,
the Issuers must obtain a written opinion as to the fairness of such a
transaction from an independent investment banking firm.
(b) The limitations set forth in Section 4.11(a) shall not apply to
(i) any Restricted Payment that is not prohibited by Section 4.09 hereof, (ii)
any transaction, approved by the Board of Directors of the Issuers, with an
officer or director of the Issuers or of any Subsidiary in his or her capacity
as officer or director entered into in the ordinary course of business, (iii)
<PAGE>
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transactions permitted by Section 5.01 hereof or (iv) transactions after the
date of this Indenture that are expressly contemplated by the Securities
Purchase Agreement and the Securityholders Agreement (including any registration
rights described therein) and are not prohibited by any other provision of this
Indenture or the Notes; provided that the aggregate management, advisory,
consulting and similar fees paid by the Company to Willis Stein and its
Affiliates pursuant to the Securities Purchase Agreement or otherwise shall not
exceed (y) $1,000,000 during any fiscal year less (z) the amount of any
distributions made by the Company during such fiscal year pursuant to clause
(vi) of the second paragraph of Section 4.09, and provided, further, that any
such fees may accrue but shall not be paid by the Company at any time after the
occurrence and during the continuance of a Default or Event of Default.
Section 4.12. Limitations on Liens.
--------------------
The Issuers shall not, and shall not permit any of their Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Issuers or any Restricted Subsidiary or any shares of stock or
debt of any Restricted Subsidiary which owns property or assets, now owned or
hereafter acquired, unless (i) if such Lien secures Indebtedness which is pari
----
passu with the Notes, then the Notes are secured on an equal and ratable basis
- -----
with the obligations so secured until such time as such obligation is no longer
secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to the Lien
granted to the Holders of the Notes to the same extent as such subordinated
Indebtedness is subordinated to the Notes.
Section 4.13. Limitations on Investments.
--------------------------
The Issuers shall not, and shall not permit any of their Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with
Section 4.09 hereof, after the Issue Date.
Section 4.14. Limitation on Creation of Subsidiaries.
--------------------------------------
The Issuers shall not create or acquire, nor permit any of their
Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a
Restricted Subsidiary that is acquired or created in connection with the
acquisition by the
<PAGE>
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Company of a media related business or asset, or (ii) an Unrestricted
Subsidiary; provided, however, that each Restricted Subsidiary acquired or
-------- -------
created pursuant to clause (i) shall at the time it has either assets or
stockholder's equity in excess of $5,000 have evidenced its guarantee with such
documentation satisfactory in form and substance to the Trustee relating thereto
as the Trustee shall require, including, without limitation a supplement or
amendment to this Indenture and Opinions of Counsel as to the enforceability of
such guarantee, pursuant to which such Restricted Subsidiary shall become a
Guarantor.
Section 4.15. Limitation on Other Senior Subordinated Debt.
--------------------------------------------
The Issuers shall not, and shall not permit any of their Restricted
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness (other than the Notes and the Guarantees, as the case may be) that
is both (i) subordinate in right of payment to any Senior Indebtedness of the
Issuers or their Restricted Subsidiaries, as the case may be, and (ii) senior in
right of payment to the Notes and the Guarantees, as the case may be. For
purposes of this Section 4.15, Indebtedness is deemed to be senior in right of
payment to the Notes and the Guarantees, as the case may be, if it is not
explicitly subordinate in right of payment to Senior Indebtedness at least to
the same extent as the Notes and the Guarantees, as the case may be, are
subordinate to Senior Indebtedness.
Section 4.16. Limitation on Sale and Lease-Back Transactions.
----------------------------------------------
The Issuers shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined, in good faith, by the Board of
Directors of the Company and (ii) the Issuers could incur the Attributable
Indebtedness in respect of such Sale and Lease-Back Transaction in compliance
with Section 4.06.
Section 4.17. Payments for Consent.
--------------------
Neither the Issuers nor any of their Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all Holders of the Notes which so
<PAGE>
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consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
Section 4.18. Legal Existence.
---------------
Subject to Article 5 hereof, the Issuers shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) their
legal existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Issuers and their Restricted Subsidiaries; provided, however, that the
-------- -------
Issuers shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of their Restricted
Subsidiaries if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Issuers and their Restricted Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
Section 4.19. Change of Control.
-----------------
(a) Within 20 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such occurrence and shall make an
offer to purchase (the "Change of Control Offer") the outstanding Notes at a
purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Change of Control Payment Date (such purchase
price being hereinafter referred to as the "Change of Control Purchase Price")
in accordance with the procedures set forth in this Section 4.19.
If the Senior Credit Facility is in effect, or any amounts are owing
thereunder, at the time of the occurrence of a Change of Control, prior to the
mailing of the notice to Holders described in paragraph (b) below, but in any
event within 20 days following any Change of Control, the Issuers on a joint and
several basis covenant to (i) repay in full all obligations under the Senior
Credit Facility or offer to repay in full all obligations under or in respect of
the Senior Credit Facility and repay the obligations under or in respect of the
Senior Credit Facility of each lender who has accepted such offer or (ii) obtain
the requisite consent under the Senior Credit Facility to permit the repurchase
of the Notes pursuant to this Section 4.19. The Issuers must first comply with
the covenant
<PAGE>
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described in the preceding sentence before they shall be required to purchase
Notes in the event of a Change of Control; provided that the Issuers' failure to
--------
comply with the covenant described in the preceding sentence constitutes an
Event of Default described in clause (3) under Section 6.01 hereof if not cured
within 60 days after the notice required by such clause.
(b) Within 20 days of the occurrence of a Change of Control, the
Company also shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
Section 4.19 and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(ii) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from the
date such notice is mailed (the "Change of Control Payment Date"));
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Issuers default in the payment of the Change
of Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders accepting the offer to have their 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 Note completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the Business Day preceding
the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Notes delivered for purchase,
<PAGE>
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and a statement that such Holder is withdrawing his election to have such
Notes purchased;
(vii) 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, provided that each Note purchased and each such new
--------
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(viii) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers. The Paying Agent shall promptly mail to each
Holder of Notes so accepted payment in an amount equal to the purchase price for
such Notes, and the Issuers shall execute and issue, the Guarantors shall
endorse the Guarantee and the Trustee shall promptly authenticate and mail to
such Holder, a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered; provided that each such new Note shall be issued in an
--------
original principal amount in denominations of $1,000 and integral multiples
thereof.
(c) (i) If either Issuer or any Subsidiary thereof has issued any
outstanding (A) Indebtedness that is subordinated in right of payment to the
Notes or (B) Preferred Stock, and such Issuer or Subsidiary is required to make
a change of control offer or to make a distribution with respect to such
subordinated Indebtedness or Preferred Stock in the event of a change of
control, the Issuers shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Issuers shall have paid the Change of Control Purchase Price in full to the
Holders of Notes that have accepted the Issuers' Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to Holders of
the Notes and (ii) the Issuers will not issue Indebtedness that is subordinated
in right of payment to the Notes or Preferred Stock with change of control
provisions
<PAGE>
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requiring the payment of such Indebtedness or Preferred Stock prior to the
payment of the Notes in the event of a Change in Control under the Indenture.
In the event that a Change of Control occurs and the Holders of Notes
exercise their right to require the Issuers to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Issuers will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
Section 4.20. Maintenance of Office or Agency.
-------------------------------
The Issuers shall maintain an office or agency where Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Issuers in respect of the
Notes and this Indenture may be served. The Issuers shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Issuers 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 address of the Trustee as set forth in Section 12.02.
The Issuers may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations. The
Issuers shall give prompt written notice to the Trustee of such designation or
rescission and of any change in the location of any such other office or agency.
The Issuers hereby initially designate the Corporate Trust Office of
the Trustee set forth in Section 12.02 as such office of the Issuers.
Section 4.21. Maintenance of Properties; Insurance; Books
and Records; Compliance with Law.
-------------------------------------------
(a) The Issuers shall, and shall cause each of their Restricted
Subsidiaries to, at all times cause all properties used or useful in the conduct
of their business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto.
<PAGE>
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(b) The Issuers shall, and shall cause each of their Restricted
Subsidiaries to, maintain insurance (which may include self-insurance) in such
amounts and covering such risks as are usually and customarily carried with
respect to similar facilities according to their respective locations.
(c) The Issuers shall, and shall cause each of their Subsidiaries to,
keep proper books of record and account, in which full and correct entries shall
be made of all financial transactions and the assets and business of the Issuers
and each Subsidiary of the Issuers, in accordance with GAAP consistently applied
to the Issuers and their Subsidiaries taken as a whole.
(d) The Issuers shall and shall cause each of their Subsidiaries to
comply with all statutes, laws, ordinances or government rules and regulations
to which they are subject, non-compliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or financial
condition of the Issuers and their Subsidiaries taken as a whole.
Section 4.22. Further Assurance to the Trustee.
--------------------------------
The Issuers shall, upon the reasonable request of the Trustee, execute
and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the provisions of
this Indenture.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation,
Merger and Sale of Assets.
----------------------------
(a) Neither of the Issuers will, nor will they permit any Guarantor
to, consolidate with, merge with or into, or transfer all or substantially all
of its assets (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless (in the case of the
Company or any Guarantor): (i) the Company or such Guarantor, as the case may
be, shall be the continuing Person, or the Person (if other than the Company or
such Guarantor) formed by such consolidation or into which the Company or such
Guarantor, as the case may be, is merged or to which the properties and assets
of the Company or such Guarantor, as the case may be, are transferred shall be a
corporation (or in the case of the Company or Holdings, a corporation or a
limited liability company)
<PAGE>
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organized and existing under the laws of the United States or any State thereof
or the District of Columbia and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form and substance
satisfactory to the Trustee, all of the obligations of the Company or such
Guarantor, as the case may be, under the Notes and this Indenture, and the
obligations under this Indenture shall remain in full force and effect; provided
--------
that at any time the Company or its successor is a limited liability company
there shall be a co-issuer of the Notes that is a corporation; (ii) immediately
before and immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; (ii) immediately after
giving effect to such transaction or series of transactions on a pro forma basis
the Consolidated Net Worth of the Company or the surviving entity as the case
may be is at least equal to the Consolidated Net Worth of the Company
immediately before such transaction or series of transactions; and (iv)
immediately after giving effect to such transaction on a pro forma basis the
--- -----
Company or such Person could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.06 hereof, provided
--------
that a Holdings may merge into the Company, the Company may merge into Holdings
and Holdings or the Company may merge into BrightView without complying with
this clause (iv).
(b) In connection with any consolidation, merger or transfer of assets
contemplated by this Section 5.01, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this Section 5.01 and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
Section 5.02. Successor Person Substituted.
----------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Guarantor in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Guarantor
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
<PAGE>
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
-----------------
An "Event of Default" occurs if
(1) there is a default in the payment of any principal of, or premium,
if any, on the Notes when the same becomes due and payable at maturity,
upon acceleration, redemption or otherwise, whether or not such payment is
prohibited by the provisions of Article 11 hereof;
(2) there is a default in the payment of any interest on any Note when
the same becomes due and payable and the Default continues for a period of
30 days, whether or not such payment is prohibited by the provisions of
Article 11 hereof;
(3) either of the Issuers or any Guarantor defaults in the observance
or performance of any other covenant in the Notes or this Indenture for 60
days after written notice from the Trustee or the Holders of not less than
25% in the aggregate principal amount of the Notes then outstanding;
(4) there is a default in the payment when due of principal, interest
or premium in an aggregate amount of $1,000,000 or more with respect to any
Indebtedness of either Issuer or any Restricted Subsidiary thereof, or
their is an acceleration of any such Indebtedness aggregating $1,000,000 or
more which default shall not be cured, waived or postponed pursuant to an
agreement with the holders of such Indebtedness within 60 days after
written notice by the Trustee or any Holder, or which acceleration shall
not be rescinded or annulled within 20 days after written notice to the
Issuers of such Default by the Trustee or any Holder;
(5) the entry of a final judgment or judgments which can no longer be
appealed for the payment of money in excess of $1,000,000 against either of
the Issuers or any Restricted Subsidiary thereof and such judgment remains
undischarged, for a period of 60 consecutive days during which a stay of
enforcement of such judgment shall not be in effect;
<PAGE>
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(6) either of the Issuers or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is not paying its debts as they become due; or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against either of the Issuers or any Restricted
Subsidiary in an involuntary case,
(B) appoints a Custodian of either of the Issuers or any
Restricted Subsidiary or for all or substantially all of the property
of either of the Issuers or any Restricted Subsidiary, or
(C) orders the liquidation of either of the Issuers or any
Restricted Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
The Trustee may withhold notice to the Holders of the Notes of any
Default (except in payment of principal or premium, if any, or interest on the
Notes) if the Trustee considers it to be in the best interest of the Holders of
the Notes to do so. The Trustee shall not be charged with knowledge of any
Default, Event of Default, Change of Control or Asset Sale in payment of
Additional Interest unless written notice thereof shall have been given to a
Responsible Officer at the corporate trust office of the Trustee by the Issuers
or any other Person.
<PAGE>
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Section 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default arising under
Section 6.01(6) or (7) with respect to either of the Issuers) occurs and is
continuing, the Trustee by notice to the Issuers, or the Holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may by
written notice to the Issuers and the Trustee declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued but unpaid interest to the date of acceleration and (i) such amounts
shall become immediately due and payable or (ii) if there are any amounts
outstanding under or in respect of the Senior Credit Facility, such amounts
shall become due and payable upon the first to occur of an acceleration of
amounts outstanding under or in respect of the Senior Credit Facility or five
Business Days after receipt by the Company and the Representative of notice of
the acceleration of the Notes; provided, however, that after such acceleration
-------- -------
but before a judgment or decree based on such acceleration is obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
outstanding Notes may rescind and annul such acceleration and its consequences
if all existing Events of Default, other than the nonpayment of accelerated
principal, premium, if any, or interest that has become due solely because of
the acceleration, have been cured or waived and if the rescission would not
conflict with any judgment or decree. No such rescission shall affect any
subsequent Default or impair any right consequent thereto. In case an Event of
Default specified in Section 6.01(6) or (7) with respect to either of the
Issuers occurs, such principal, premium, if any, and interest amount with
respect to all of the Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the Holders of the Notes.
Section 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
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
<PAGE>
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Noteholder 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. No remedy is exclusive of any other remedy. All
available remedies are cumulative.
Section 6.04. Waiver of Past Defaults and Events of Default.
---------------------------------------------
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a
majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee by this Indenture. The Trustee, however, may refuse to
follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another Noteholder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may involve it in personal liability; provided that the
--------
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
-------------------
Subject to Section 6.07 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
<PAGE>
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(2) the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and if requested provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer, and, if requested provision, of
indemnity; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60 day period by the Holders of a majority in
aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal of, or premium, if any, and
interest of the Note (including Additional Interest) on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Issuers or the Guarantors (or any other obligor on the Notes) for the whole
amount of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate set forth in the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
<PAGE>
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Section 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may 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
Noteholders allowed in any judicial proceedings relative to the Issuers or the
Guarantors (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same
after deduction of its charges and expenses to the extent that any such charges
and expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, 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.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest (including Additional Interest, if
any) as to each, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes; and
THIRD: to the Issuers or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
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The Trustee may fix a record date and payment date for any payment to
Noteholders 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 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
pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default actually known to a Responsible Officer of
the Trustee 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 their exercise as a prudent man would exercise or use under
the same circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(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 but, in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty
<PAGE>
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to examine the same to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee 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.
(3) 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, 6.05 or 6.06 hereof.
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights, powers or duties if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity satisfactory to it against such risk or liability is not
reasonably assured to it.
(d) Whether or not therein expressly so provided, paragraphs (a),
(b), (c) and (e) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it in its sole discretion
against any loss, liability, expense or fee.
(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 Issuers or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
<PAGE>
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Section 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably 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.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to the provisions of Section 12.05 hereof. The Trustee shall be
protected and shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion.
(3) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
by it with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with the either of the Issuers or any Guarantor,
or any Affiliates thereof, with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. The Trustee, however,
shall be 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 or any Guarantee,
it shall not be accountable for the Issuers' or any Guarantor's use of the
proceeds from the sale
<PAGE>
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of Notes or any money paid to the Issuers or any Guaranty pursuant to the terms
of this Indenture and it shall not be responsible for any statement in the
Notes, Guarantee or this Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of the
principal of, or 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 determine(s) that withholding the notice is in the interests of the
Noteholders.
Section 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S) 313(a), within 60 days after November of any
year, commencing November , 1997, the Trustee shall mail to each Noteholder a
brief report dated as of such November that complies with TIA (S) 313(a).
The Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also
transmit by mail all reports as required by TIA (S) 313(c) and TIA (S) 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by mail:
(1) to all registered Holders of Notes, as the names and addresses of
such Holders appear on the Registrar's books; and
(2) to such Holder of Notes as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for
that purpose.
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Notes are listed.
The Issuers shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.07. Compensation and Indemnity.
--------------------------
The Issuers and the Guarantors shall pay to the Trustee and Agents
from time to time such compensation as shall be agreed in writing between the
Company and the Trustee for its services hereunder (which compensation shall not
be limited by any
<PAGE>
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provision of law in regard to the compensation of a trustee of an express
trust). The Issuers and the Guarantors shall reimburse the Trustee and Agents
upon request for all reasonable disbursements, expenses and advances incurred or
made by it in connection with its duties under this Indenture, including the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Issuers and the Guarantors shall indemnify each of the Trustee and
any predecessor Trustee for, and hold each of them harmless against, any and all
loss, damage, claim, liability or expense, including without limitation taxes
(other than taxes based on the income of the Trustee or such Agent) and
reasonable attorneys' fees and expenses incurred by each of them in connection
with the acceptance or performance of its duties under this Indenture including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder (including, without limitation, settlement costs). The Trustee
or Agent shall notify the Issuers and the Guarantors in writing promptly of any
claim asserted against the Trustee or Agent for which it may seek indemnity.
However, the failure by the Trustee or Agent to so notify the Issuers and the
Guarantors shall not relieve the Issuers and Guarantors of their obligations
hereunder except to the extent the Issuers and the Guarantors are prejudiced
thereby.
Notwithstanding the foregoing, the Issuers and the Guarantors need not
reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To
secure the payment obligations of the Issuers and the Guarantors 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 such money or property held in trust to
pay principal of and interest on particular Notes. The obligations of the
Issuers and the Guarantors under this Section 7.07 to compensate and indemnify
the Trustee, Agents and each predecessor Trustee and to pay or reimburse the
Trustee, Agents and each predecessor Trustee for expenses, disbursements and
advances shall be joint and several liabilities of the Issuers and each of the
Guarantors and shall survive the satisfaction, discharge and termination of this
Indenture, including any termination or rejection hereof under any bankruptcy
law.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) hereof occurs, the expenses and the
compensation for the services
<PAGE>
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are intended to constitute expenses of administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall include
any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Issuers and the Guarantors
in writing. The Holders of a majority in principal amount of the outstanding
Notes may remove the Trustee by notifying the removed Trustee in writing and may
appoint a successor Trustee with the Issuers' written consent which consent
shall not be unreasonably withheld. The Issuers may remove the Trustee at their
election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property;
(4) the Trustee otherwise becomes incapable of acting; or
(5) a successor corporation becomes successor Trustee pursuant to
Section 7.09 below.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of a majority in principal amount of the outstanding Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
<PAGE>
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, 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. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuers obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger,
Etc.
-------------------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1) and (2) in every respect. The Trustee shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA (S) 310(b), including the provision in (S) 310(b)(1).
Section 7.11. Preferential Collection of Claims Against
Company.
-----------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311 (b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
Section 7.12. Paying Agents.
-------------
The Issuers shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for the payment of
principal of, or premium, if any, or interest
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on, the Notes (whether such sums have been paid to it by the Issuers or by
any obligor on the Notes) in trust for the benefit of Holders of the Notes
or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all
sums so held in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Issuers (or by any obligor on the
Notes) in the payment of any installment of the principal of, premium, if
any, or interest on, the Notes when the same shall be due and payable.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
--------------------------
The Issuers and the Guarantors, when authorized by a Board Resolution
of each of them, and the Trustee may amend, waive or supplement this Indenture
or the Notes without notice to or consent of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not adversely affect the rights of any Noteholder;
(5) to make any other change that does not adversely affect the
rights of any Noteholders hereunder; or
(6) to add a Guarantor.
The Trustee is hereby authorized to join with the Issuers and the
Guarantors in the execution of any supplemental
<PAGE>
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indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations which may be therein contained,
but the Trustee shall not be obligated to enter into any such supplemental
indenture which adversely affects its own rights, duties or immunities under
this Indenture.
Section 8.02. With Consent of Holders.
-----------------------
The Issuers (each when authorized by a Board Resolution), the
Guarantors (each when authorized by a Board Resolution) and the Trustee may
modify or supplement this Indenture or the Notes with the written consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Notes. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Issuers or Guarantors with any provision of this Indenture or
the Notes. Subject to Section 8.04, without the consent of each Noteholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver to this Indenture or the Notes;
(2) reduce the rate of or change the time for payment of interest on
any Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Note;
(4) make any Note payable in money other than that stated in the Note
or change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the Notes or
reduce the premium payable upon any redemption of the Notes in accordance
with Section 3.07 hereof, or change the time before which no such
redemption may be made;
(6) waive a default in the payment of the principal of, or interest
on, or redemption payment with respect to, any Note (including any
obligation to make a Change of Control Offer or, after the ' obligation to
purchase Notes arises thereunder, an Excess Proceeds Offer or modify any of
the provisions or definitions with respect to such offers);
<PAGE>
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(7) make any changes in Sections 6.04 or 6.07 hereof or this sentence
of Section 8.02; or
(8) affect the ranking of the Notes or the Guarantee in a manner
adverse to the Holders.
After an amendment, supplement or waiver under this Section 8.02 or
Section 8.01 becomes effective, the Issuers shall mail to the Holders a notice
briefly describing the amendment, supplement or waiver.
Upon the written request of the Issuers, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee shall
join with the Issuers and the Guarantors in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture, in which case the Trustee may, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
Section 8.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may
revoke the consent as to his Note or portion of a Note, if the Trustee receives
the written notice of revocation before the date the amendment, supplement,
waiver or other action becomes effective.
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The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement, or waiver. If a record date is fixed, then, notwithstanding the
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only such Persons, shall be entitled to
consent to such amendment, supplement, or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date unless the consent of the requisite number of Holders has
been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (8) of Section 8.02 hereof. In that case the
amendment, supplement, waiver or other action shall bind each Holder of a Note
who has consented to it and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note.
Section 8.05. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement, or waiver changes the terms of a Note,
the Trustee (in accordance with the specific written direction of the Issuers)
shall request the Holder of the Note (in accordance with the specific written
direction of the Issuers) to deliver it to the Trustee. In such case, the
Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Issuers or the Trustee so
determines, the Issuers in exchange for the Note shall issue, the Guarantors
shall endorse, and the Trustee shall authenticate a new Note that reflects the
changed terms. 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 8.06. Trustee to Sign Amendments, etc.
-------------------------------
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article 8 if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver 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
<PAGE>
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Opinion of Counsel stating that such amendment, supplement or waiver is
authorized or permitted by this Indenture and is a legal, valid and binding
obligation of the Issuers and Guarantors, enforceable against the Issuers and
Guarantors in accordance with its terms (subject to customary exceptions).
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
----------------------
The Issuers and the Guarantors may terminate their obligations under
the Notes, the Guarantees and this Indenture, except the obligations referred to
in the last paragraph of this Section 9.01, if there shall have been cancelled
by the Trustee or delivered to the Trustee for cancellation all Notes
theretofore authenticated and delivered (other than any Notes that are asserted
to have been destroyed, lost or stolen and that shall have been replaced as
provided in Section 2.07 hereof) and the Issuers have paid all sums payable by
them hereunder or deposited all required sums with the Trustee.
After such delivery the Trustee upon Issuer request shall acknowledge
in writing the discharge of the Issuers' and the Guarantors' obligations under
the Notes, the Guarantees and this Indenture except for those surviving
obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuers in Sections 7.07, 9.05 and 9.06 hereof shall survive.
Section 9.02. Legal Defeasance.
----------------
The Issuers may at their option, by Board Resolution of the Board of
Directors of each of the Issuers, be discharged from then obligations with
respect to the Notes and the Guarantors discharged from their obligations under
the Guarantees on the date the conditions set forth in Section 9.04 below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Issuers shall be deemed to have paid and discharged
the entire indebtedness represented by the Notes and to have satisfied all its
other obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Issuers, shall, subject to
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Section 9.06 hereof, execute instruments in form and substance reasonably
satisfactory to the Trustee and Issuers acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Notes to receive solely
from the trust funds described in Section 9.04 hereof and as more fully set
forth in such Section, payments in respect of the principal of, premium, if any,
and interest on such Notes when such payments are due, (B) the Issuers'
obligations with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06,
2.07, 2.08, 2.09 and 4.20 hereof, (C) the rights, powers, trusts, duties, and
immunities of the Trustee hereunder (including claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof) and (D) this Article 9.
Subject to compliance with this Article 9, the Issuers may exercise their option
under this Section 9.02 with respect to the Notes notwithstanding the prior
exercise of its option under Section 9.03 below with respect to the Notes.
Section 9.03. Covenant Defeasance.
-------------------
At the option of the Issuers, pursuant to a Board Resolution of the
Board of Directors of each of the Issuers, the Issuers and the Guarantors shall
be released from their respective obligations under Sections 4.02 through 4.19
and Section 4.21 hereof, inclusive, and clause (a)(iii) of Section 5.01 hereof
with respect to the outstanding Notes on and after the date the conditions set
forth in Section 9.04 hereof are satisfied (hereinafter, "Covenant Defeasance").
For this purpose, such Covenant Defeasance means that the Issuers and the
Guarantors may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such specified Section or portion
thereof, whether directly or indirectly by reason of any reference elsewhere
herein to any such specified Section or portion thereof or by reason of any
reference in any such specified Section or portion thereof to any other
provision herein or in any other document, but the remainder of this Indenture
and the Notes shall be unaffected thereby.
Section 9.04. Conditions to Defeasance or Covenant
Defeasance.
------------------------------------
The following shall be the conditions to application of Section 9.02
or Section 9.03 hereof to the outstanding Notes:
(1) the Issuers shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 hereof who shall
<PAGE>
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agree to comply with the provisions of this Article 9 applicable to it) as
funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders of the Notes, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than the due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied
by the Trustee (or other qualifying trustee) to pay and discharge, the
principal of, premium, if any, and accrued interest on the outstanding
Notes at the maturity date of such principal, premium, if any, or interest,
or on dates for payment and redemption of such principal, premium, if any,
and interest selected in accordance with the terms of this Indenture and of
the Notes;
(2) no Event of Default or Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit, or shall have
occurred and be continuing at any time during the period ending on the 91st
day after the date of such deposit or, if longer, ending on the day
following the expiration of the longest preference period under any
Bankruptcy Law applicable to the Issuers in respect of such deposit (it
being understood that this condition shall not be deemed satisfied until
the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest for purposes of the TIA with respect
to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute default under any other agreement
or instrument to which the Issuers are a party or by which they are bound;
(5) the Issuers shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance or Covenant
Defeasance, neither the trust nor the Trustee will be required to register
as an investment company under the Investment Company Act of 1940, as
amended;
<PAGE>
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(6) in the case of an election under Section 9.02 above, the Issuers
shall have delivered to the Trustee an Opinion of Counsel stating that (i)
the Issuers have received from, or there has been published by, the
Internal Revenue Service a ruling to the effect that or (ii) there has been
a change in any applicable Federal income tax law with the effect that, and
such opinion shall confirm that, the Holders of the outstanding Notes or
persons in their positions will not recognize income, gain or loss for
Federal income tax purposes solely as a result of such Legal Defeasance and
will be subject to Federal income tax on the same amounts, in the same
manner, including as a result of prepayment, and at the same times as would
have been the case if such Legal Defeasance had not occurred;
(7) in the case of an election under Section 9.03 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such Covenant
Defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(8) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 9.02 above or the Covenant Defeasance under Section 9.03 hereof (as
the case may be) have been complied with;
(9) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Issuers with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company or others;
(10) the Issuers shall have paid or duly provided for payment under
terms mutually satisfactory to the Issuers and the Trustee all amounts then
due to the Trustee pursuant to Section 7.07 hereof; and
(11) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (to the extent matters of law are
involved), each stating that (x) all conditions precedent herein provided
for relating to either the legal defeasance under paragraph 9.02 above or
<PAGE>
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the covenant defeasance under paragraph 9.03 above, as the case may be,
have been complied with and (y) if any other Indebtedness of the Issuers
shall then be outstanding or committed, such legal defeasance or covenant
defeasance will not violate the provisions of the agreements or instruments
evidencing such Indebtedness.
Section 9.05. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions.
--------------------------------------
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect
of the outstanding Notes 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, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal, premium, if any,
and accrued interest, but such money need not be segregated from other funds
except to the extent required by law.
The Issuers and the Guarantors shall (on a joint and several basis)
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Section
9.04 hereof or the principal, premium, if any, and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon an Issuer
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, 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 9.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or
<PAGE>
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governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuers' and each Guarantor's obligations under this Indenture,
the Notes and the Guarantees shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 9 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 9.01 hereof; provided, however, that if
-------- -------
the Issuers or the Guarantors have made any payment of principal of, premium, if
any, or accrued interest on any Notes because of the reinstatement of their
obligations, the Issuers or the Guarantors, as the case may be, shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
Section 9.07. Moneys Held by Paying Agent.
---------------------------
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon written demand of the Issuers, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Issuers upon an Issuer Request (or, if such moneys had been deposited by the
Guarantors, to such Guarantors), and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
Section 9.08. Moneys Held by Trustee.
----------------------
Any moneys deposited with the Trustee or any Paying Agent or then held
by the Issuers or the Guarantors in trust for the payment of the principal of,
or premium, if any, or interest on any Note that are not applied but remain
unclaimed by the Holder of such Note for two years after the date upon which the
principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Issuers (or, if
appropriate, the Guarantors) upon an Issuer Request, or if such moneys are then
held by the Issuers or the Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Issuers and
the Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
--------
however, that the Trustee or any such Paying Agent, before being required to
- -------
make any such repayment, may, at the expense of the Issuers and the Guarantors,
either mail to each Noteholder affected, at the address shown in the register of
the Notes
<PAGE>
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maintained by the Registrar pursuant to Section 2.03 hereof, or cause to be
published once a week for two successive weeks, in a newspaper published in the
English language, customarily published each Business Day and of general
circulation in the City of New York, New York, a 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 mailing or publication, any unclaimed balance of
such moneys then remaining will be repaid to the Issuers. After payment to the
Issuers or the Guarantors or the release of any money held in trust by the
Issuers or any Guarantors, as the case may be, Noteholders entitled to the money
must look only to the Issuers and the Guarantors for payment as general
creditors unless applicable abandoned property law designates another person.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee.
---------
Subject to the provisions of this Article 10, each Guarantor hereby
jointly and severally unconditionally guarantees to each Holder and to the
Trustee, (i) the due and punctual payment of the principal of, and premium, if
any, and interest on each Note, when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, the due and punctual
payment of interest (including Additional Interest) on the overdue principal of,
and premium, if any, and interest on the Notes, to the extent lawful, and the
due and punctual performance of all other Obligations of the Issuers to the
Holders or the Trustee (including without limitation amounts due the Trustee
under Section 7.07) all in accordance with the terms of such Note and this
Indenture, and (ii) in the case of any extension of time of payment or renewal
of any Notes or any of such other Obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, at stated maturity, by acceleration or otherwise. Each Guarantor
hereby agrees that its obligations hereunder shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Note or this Indenture, any failure
to enforce the provisions of any such Note or this Indenture, any waiver,
modification or indulgence granted to the Issuers with respect thereto by the
Holder of such Note or the Trustee, or any
<PAGE>
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other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or such Guarantor.
Each Guarantor hereby waives diligence, presentment, demand for
payment, filing of claims with a court in the event of merger or bankruptcy of
the Issuers, any right to require a proceeding first against the Issuers,
protest or notice with respect to any such Note or the Indebtedness evidenced
thereby and all demands whatsoever, and covenants that this Guarantee will not
be discharged as to any such Note except by payment in full of the principal
thereof, premium if any, and interest thereon and as provided in Section 9.01
hereof. Each Guarantor further agrees that, as between such Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (i) the maturity
of the Obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of this Guarantee, 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 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by each Guarantor
for the purpose of this Guarantee. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Article 6 hereof,
the Trustee shall promptly make a demand for payment on the Notes under the
Guarantee provided for in this Article 10 and not discharged.
The Guarantee set forth in this Section 10.01 shall not be valid or
become obligatory for any purpose with respect to a Note until the certificate
of authentication on such Note shall have been signed by or on behalf of the
Trustee by its manual signature.
Section 10.02. Execution and Delivery of Guarantees.
------------------------------------
To evidence the Guarantee set forth in this Article 10, each Guarantor
hereby agrees that a notation of such Guarantee substantially in the form
included in Exhibit E hereto shall be placed on each Note authenticated and made
available for delivery by the Trustee and that this Guarantee shall be executed
on behalf of each Guarantor by the manual or facsimile signature of an Officer
of each Guarantor.
Each Guarantor hereby agrees that the Guarantee set forth in Section
10.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Guarantee.
<PAGE>
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If an Officer of a Guarantor whose signature is on the Guarantee no
longer holds that office at the time the Trustee authenticates the Note on which
the Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of each Guarantor.
Section 10.03. Limitation of Guarantee.
-----------------------
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Senior Indebtedness)
and after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor
under its Guarantee or pursuant to its contribution obligations under this
Indenture, result in the obligations of such Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a contribution from each other Guarantor in a pro
rata amount based on the Adjusted Net Assets of each Guarantor.
Section 10.04. Additional Guarantors.
---------------------
The Issuers covenant and agree that they will cause any Person which
becomes obligated to guarantee the Notes, pursuant to the terms of Section 4.14
hereof, to execute a guarantee satisfactory in form and substance to the Trustee
pursuant to which such Restricted Subsidiary shall guarantee the obligations of
the Issuers under the Notes and this Indenture in accordance with this Article
10 with the same effect and to the same extent as if such Person had been named
herein as a Guarantor.
Section 10.05. Release of Guarantor.
--------------------
A Guarantor shall be released from all of its obligations under its
Guarantee if:
(i) the Guarantor has sold all or substantially all of its assets or
the Company and its Restricted Subsidiaries have sold all of the Capital
Stock of the Guarantor owned by them, in each case in a transaction in
compliance with Sections 4.10 and 5.01 hereof; or
<PAGE>
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(ii) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its assets to, the Company or another
Guarantor in a transaction in compliance with Section 5.01 hereof;
and in each such case, such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.06. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness.
----------------------------------
Each Guarantor covenants and agrees, and each Holder of Notes, by its
acceptance thereof, likewise covenants and agrees, that to the extent and in the
manner hereinafter set forth in this Article 10, the Indebtedness represented by
the Guarantee and the payment of the principal of, premium, if any, and interest
on the Notes pursuant to the Guarantee by such Guarantor are hereby expressly
made subordinate and subject in right of payment as provided in this Article 10
to the prior payment in full in cash of all existing and future Guarantor Senior
Indebtedness of such Guarantor.
This Section 10.06 and the following Sections 10.07 through 10.11 shall
constitute a continuing offer to all Persons who, in reliance upon such
provisions, become holders of or continue to hold Guarantor Senior Indebtedness
of any Guarantor; and such provisions are made for the benefit of the holders of
Guarantor Senior Indebtedness of each Guarantor; and such holders are made
obligees hereunder and they or each of them may enforce such provisions.
Section 10.07. Payment Over of Proceeds upon
Dissolution, etc., of a Guarantor.
---------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to any Guarantor or to its creditors, as such, or
to its assets, whether voluntary or involuntary, or (b) any liquidation,
dissolution or other winding-up of any Guarantor, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy or (c) any
general assignment for the benefit of creditors or any other marshaling of
assets or liabilities of any Guarantor (except in connection with the merger or
consolidation of the Issuers or its liquidation or dissolution following the
transfer of substantially all of its assets, upon the terms and
<PAGE>
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conditions permitted under the circumstances described under Section 5.01), then
and in any such event:
(1) the holders of all Guarantor Senior Indebtedness of such
Guarantor shall be entitled to receive payment in full in cash of all
amounts due on or in respect of all such Guarantor Senior Indebtedness
before the Holders of the Notes are entitled to receive or retain, pursuant
to the Guarantee of such Guarantor, any payment or distribution of any kind
or character by such Guarantor on account of any of its Obligations on its
Guarantee; and
(2) any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the subordination provisions of this Article 10 shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Guarantor Senior
Indebtedness of such Guarantor or their representative or representatives
or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Guarantor Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of such Guarantor Senior Indebtedness held or represented by each,
to the extent necessary to make payment in full in cash of all such
Guarantor Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision thereof, to the holders of
such Guarantor Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 10.07, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, including,
without limitation, by way of set-off or otherwise, in respect of any of
its Obligations on its Guarantee before all Guarantor Senior Indebtedness
of such Guarantor is paid and satisfied in full in cash then in such event
such payment or distribution shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of assets of
such Guarantor for application to the payment of all such Guarantor Senior
Indebtedness remaining unpaid, to the extent necessary to pay all of such
<PAGE>
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Guarantor Senior Indebtedness in full in cash after giving effect to any
concurrent payment or distribution to or for the holders of such Guarantor
Senior Indebtedness.
The consolidation of a Guarantor with, or the merger of a Guarantor
with or into, another Person or the liquidation or dissolution of a Guarantor
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of such Guarantor for the purposes of this
Article 10 if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5 hereof.
Section 10.08. Suspension of Guarantee Obligations
When Guarantor Senior Indebtedness
in Default.
-----------------------------------
(a) Unless Section 10.07 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution of any assets or
securities of a Guarantor (or any Restricted Subsidiary or Subsidiary of such
Guarantor) of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of such Guarantor being
subordinated to its Obligations on its Guarantee) may be made by or on behalf of
such Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor),
including, without limitation, by way of set-off or otherwise, for or on account
of its Obligations on its Guarantee, and neither the Trustee nor any holder or
owner of any Notes shall take or receive from any Guarantor (or any Restricted
Subsidiary or Subsidiary of such Guarantor), directly or indirectly in any
manner, payment in respect of all or any portion of its Obligations on its
Guarantee following the delivery by the representative of the holders of
Guarantor Senior Indebtedness (the "Guarantor Representative") to the Trustee of
written notice of the occurrence of a Payment Default, and in any such event,
such prohibition shall continue until such Payment Default is cured, waived in
writing or ceases to exist. At such time as the prohibition set forth in the
preceding sentence shall no longer be in effect, subject to the provisions of
the following
<PAGE>
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paragraph (b), such Guarantor shall resume making any and all required payments
in respect of its Obligations under its Guarantee.
(b) Unless Section 10.07 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets of such Guarantor of any kind or
character shall be made by such Guarantor, including, without limitation, by way
of set-off or otherwise, on account of any of its Obligations on its Guarantee
for a period (the "Guarantee Payment Blockage Period") commencing on the date of
receipt by the Trustee of written notice from the Guarantor Representative of
such Non-Payment Event of Default, unless and until (subject to any blockage of
payments that may then be in effect under the preceding paragraph (a)) the
earliest to occur of the following events: (w) more than 179 days shall have
elapsed since the date of receipt of such written notice by the Trustee, (x)
such Non-Payment Event of Default shall have been cured or waived in writing or
shall have ceased to exist, (y) such Designated Senior Indebtedness shall have
been discharged or paid in full in cash or (z) such Guarantee Payment Blockage
Period shall have been terminated by written notice to such Guarantor or the
Trustee from the Guarantor Representative initiating such Guarantee Payment
Blockage Period, or the holders of at least a majority in principal amount of
such issue of Designated Senior Indebtedness, after which, in the case of clause
(w), (x), (y) or (z), such Guarantor shall resume making any and all required
payments in respect of its Obligations on its Guarantee. Notwithstanding any
other provisions of this Indenture, no Non-Payment Event of Default with respect
to Designated Senior Indebtedness which existed or was continuing on the date of
the commencement of any Guarantee Payment Blockage Period initiated by the
Guarantor Representative shall be, or be made, the basis for the commencement of
a second Guarantee Payment Blockage Period initiated by the Guarantor
Representative unless such event of default shall have been cured or waived for
a period of not less than 90 consecutive days. In no event shall a Guarantee
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Trustee of the notice referred to in this Section 10.08(b) or, in the event
of a Non-Payment Event of Default which formed the basis for a Payment Blockage
Period under Section 11.03(b) hereof, 179 days from the date of the receipt by
the Trustee of the notice referred to in Section 11.03(b) (the "Initial
Guarantee Blockage Period"). Any number of additional Guarantee Payment
Blockage Periods may be commenced during the Initial Guarantee Blockage Period;
provided, however, that no such additional Guarantee Payment Blockage Period
- -------- -------
shall extend
<PAGE>
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beyond the Initial Guarantee Blockage Period. After the expiration
of the Initial Guarantee Blockage Period, no Guarantee Payment Blockage Period
may be commenced under this Section 10.08(b) and no Payment Blockage Period may
be commenced under Section 11.03(b) hereof until at least 180 consecutive days
have elapsed from the last day of the Initial Guarantee Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 10.08, then and in such
event such payment shall be paid over and delivered forthwith to the Guarantor
Representative initiating the Guarantee Payment Blockage Period, in trust for
distribution to the holders of Guarantor Senior Indebtedness or, if no amounts
are then due in respect of Guarantor Senior Indebtedness, promptly returned to
the Guarantor, or as a court of competent jurisdiction shall direct.
Section 10.09. Subrogation to Rights of Holders
of Guarantor Senior Indebtedness.
--------------------------------
Upon the payment in full of all amounts payable under or in respect of
all Guarantor Senior Indebtedness of a Guarantor, the Holders shall be
subrogated to the rights of the holders of such Guarantor Senior Indebtedness to
receive payments and distributions of cash, property and securities of such
Guarantor made on such Guarantor Senior Indebtedness until all amounts due to be
paid under the Guarantee shall be paid in full. For the purposes of such
subrogation, no payments or distributions to holders of Guarantor Senior
Indebtedness of any cash, property or securities to which Holders of the Notes
or the Trustee would be entitled except for the provisions of this Article 10,
and no payments over pursuant to the provisions of this Article 10 to holders of
Guarantor Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among each Guarantor, its creditors other than holders of Guarantor Senior
Indebtedness and the Holders of the Notes, be deemed to be a payment or
distribution by such Guarantor to or on account of such Guarantor Senior
Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 10 shall have been
applied, pursuant to the provisions of this Article 10, to the payment of all
amounts payable under Guarantor Senior Indebtedness, then and in such case, the
Holders shall be entitled to receive from the holders of such Guarantor Senior
Indebtedness at the time outstanding any payments or
<PAGE>
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distributions received by such holders of Guarantor Senior Indebtedness in
excess of the amount sufficient to pay all amounts payable under or in respect
of such Guarantor Senior Indebtedness in full in cash or Cash Equivalents.
Section 10.10. Guarantee Subordination Provisions
Solely to Define Relative Rights.
----------------------------------
The subordination provisions of this Article 10 are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes on the one hand and the holders of Guarantor Senior Indebtedness on the
other hand. Nothing contained in this Article 10 or elsewhere in this Indenture
or in the Notes is intended to or shall (a) impair, as among each Guarantor, its
creditors other than holders of its Guarantor Senior Indebtedness and the
Holders of the Notes, the obligation of such Guarantor, which is absolute and
unconditional, to make payments to the Holders in respect of its Obligations on
its Guarantee in accordance with its terms; or (b) affect the relative rights
against such Guarantor of the Holders of the Notes and creditors of such
Guarantor other than the holders of the Guarantor Senior Indebtedness; or (c)
prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon a Default or an Event of Default
under this Indenture, subject to the rights, if any, under this Article 10 of
the holders of Guarantor Senior Indebtedness (1) in any case, proceeding,
dissolution, liquidation or other winding-up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the Issuers referred
to in Section 10.07 hereof, to receive, pursuant to and in accordance with such
Section, cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 10.08
hereof, to prevent any payment prohibited by such Section or enforce their
rights pursuant to Section 10.08(c) hereof.
The failure by any Guarantor to make a payment in respect of its
obligations on its Guarantee by reason of any provision of this Article 10 shall
not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
Section 10.11. Application of Certain
Article 11 Provisions.
----------------------
The provisions of Sections 11.04, 11.07, 11.08, 11.09, 11.10, 11.12
and 11.13 hereof shall apply, mutatis mutandis, to each Guarantor and their
------- --------
respective holders of Guarantor Senior Indebtedness and the rights, duties and
obligations set forth
<PAGE>
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therein shall govern the rights, duties and obligations of each Guarantor, the
holders of Guarantor Senior Indebtedness, the Holders and the Trustee with
respect to the Guarantee and all references therein to Article 11 hereof shall
mean this Article 10.
ARTICLE 11
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness.
----------------------------------------
The Issuers covenant and agree, and each Holder of Notes, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 11, the Indebtedness
represented by the Notes and the payment of the principal of, premium, if any,
and interest on the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article 11 to the prior indefeasible
payment in full in cash of all existing and future Senior Indebtedness.
This Article 11 shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of or continue to hold
Senior Indebtedness; and such provisions are made for the benefit of the holders
of Senior Indebtedness; and such holders are made obligees hereunder and they or
each of them may enforce such provisions.
Section 11.02. Payment Over of Proceeds upon
Dissolution, etc.
-----------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, arrangement, reorganization or other similar
case or proceeding in connection therewith, relative to the Issuers or to their
creditors, as such, or to its assets, whether voluntary or involuntary or (b)
any liquidation, dissolution or other winding-up of the Issuers, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any general assignment for the benefit of creditors or any other
marshalling of assets or liabilities of the Issuers, (except in connection with
the merger or consolidation of the Issuers or its liquidation or dissolution
following the transfer of substantially all of its assets, upon the terms and
conditions permitted under the
<PAGE>
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circumstances described under Section 5.01) then and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of all amounts due on or in respect of all Senior
Indebtedness before the Holders of the Notes are entitled to receive or
retain any payment or distribution of any kind or character on account of
principal of, premium, if any, or interest on the Notes; and
(2) any payment or distribution of assets of the Issuers of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article 11 shall be paid by the liquidating trustee
or agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Senior
Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 11.02, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of the Issuers of any kind
or character, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of principal of,
premium, if any, and interest on the Notes before all Senior Indebtedness
is paid and satisfied in full in cash then in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Issuers for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full in cash after
giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Indebtedness.
<PAGE>
-100-
The consolidation of the Issuers with, or the merger of the Issuers
with or into, another Person or the liquidation or dissolution of the Issuers
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Issuers for the purposes of this
Article 11 if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5 hereof.
Section 11.03. Suspension of Payment When Senior
Indebtedness in Default.
---------------------------------
(a) Unless Section 11.02 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution of any assets or
securities of the Issuers or any Restricted Subsidiary of any kind or character
(including, without limitation, cash, property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Issuers being subordinated to the payment of the Notes by
the Issuers) may be made by or on behalf of the Issuers or any Restricted
Subsidiary, including, without limitation, by way of set-off or otherwise, for
or on account of principal of, premium, if any, or interest on the Notes, or for
or on account of the purchase, redemption or other acquisition of the Notes, and
neither the Trustee nor any holder or owner of any Notes shall take or receive
from the Issuers or any Restricted Subsidiary, directly or indirectly in any
manner, payment in respect of all or any portion of Notes following the delivery
by the representative of the holders of Designated Senior Indebtedness (the
"Representative") to the Trustee of written notice of the occurrence of a
Payment Default, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist. At such
time as the prohibition set forth in the preceding sentence shall no longer be
in effect, subject to the provisions of the following paragraph (b), the Issuers
shall resume making any and all required payments in respect of the Notes,
including any missed payments.
(b) Unless Section 11.02 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on
<PAGE>
-101-
Designated Senior Indebtedness, no payment or distribution of any assets of the
Issuers of any kind or character shall be made by the Issuers, including,
without limitation, by way of set-off or otherwise, on account of any principal
of, premium, if any, or interest on the Notes or on account of the purchase,
redemption, defeasance or other acquisition of Notes and neither the Trustee nor
any holder or owner of Notes shall take or receive from the issuers or any
Restricted Subsidiary, directly or indirectly in any manner, payment in respect
of all or any portion of the Notes for a period (a "Payment Blockage Period")
commencing on the date of receipt by the Trustee of written notice from the
Representative of such Non-Payment Event of Default unless and until (subject to
any blockage of payments that may then be in effect under the preceding
paragraph (a)) the earliest to occur of the following events: (w) more than 179
days shall have elapsed since the date of receipt of such written notice by the
Trustee, (x) such Non-Payment Event of Default shall have been cured or waived
in writing or shall have ceased to exist, (y) such Designated Senior
Indebtedness shall have been discharged or paid in full in cash or (z) such
Payment Blockage Period shall have been terminated by written notice to the
Issuers or the Trustee from the Representative initiating such Payment Blockage
Period, or the holders of at least a majority in principal amount of such issue
of Designated Senior Indebtedness, after which, in the case of clause (w), (x),
(y) or (z), the Issuers shall resume making any and all required payments in
respect of the Notes, including any missed payments. Notwithstanding any other
provisions of this Indenture, no Non-Payment Event of Default with respect to
Designated Senior Indebtedness which existed or was continuing on the date of
the commencement of any Payment Blockage Period initiated by the Representative
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by the Representative unless such event of default
shall have been cured or waived for a period of not less than 90 consecutive
days. In no event shall a Payment Blockage Period extend beyond 179 days from
the date of the receipt by the Trustee of the notice referred to in this Section
11.03(b) (the "Initial Blockage Period"). Any number of additional Payment
Blockage Periods may be commenced during the Initial Blockage Period; provided,
--------
however, that no such additional Payment Blockage Period shall extend beyond the
- -------
Initial Blockage Period. After the expiration of the Initial Blockage Period, no
Payment Blockage Period may be commenced under this Section 11.03(b) and no
Guarantee Payment Blockage Period may be commenced under Section 10.08(b) hereof
until at least 180 consecutive days have elapsed from the last day of the
Initial Blockage Period.
<PAGE>
-102-
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment prohibited by the
foregoing provisions of this Section 11.03, then and in such event such payment
shall be paid over and delivered forthwith to the Representative initiating the
Payment Blockage Period, in trust for distribution to the holders of Senior
Indebtedness or, if no amounts are then due in respect of Senior Indebtedness,
promptly returned to the Issuers, or otherwise as a court of competent
jurisdiction shall direct.
Section 11.04. Trustee's Relation to Senior
Indebtedness.
----------------------------
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall mistakenly pay
over or deliver to Holders, the Issuers or any other Person moneys or assets to
which any holder of Senior Indebtedness shall be entitled by virtue of this
Article 11 or otherwise.
Section 11.05. Subrogation to Rights of Holders
of Senior Indebtedness.
--------------------------------
Upon the payment in full of all Senior Indebtedness, the Holders of
the Notes shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any and interest on the Notes shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
11, and no payments over pursuant to the provisions of this Article 11 to the
holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among the Issuers, their creditors other than holders of Senior Indebtedness and
the Holders of the Notes, be deemed to be a payment or distribution by the
Issuers to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this
<PAGE>
-103-
Article 11 shall have been applied, pursuant to the provisions of this Article
11, to the payment of all amounts payable under the Senior Indebtedness of the
Issuers, then and in such case the Holders shall be entitled to receive from the
holders of such Senior Indebtedness at the time outstanding any payments or
distributions received by such holders of such Senior Indebtedness in excess of
the amount sufficient to pay all amounts payable under or in respect of such
Senior Indebtedness in full in cash or Cash Equivalents.
Section 11.06. Provisions Solely to Define Relative
Rights.
------------------------------------
The provisions of this Article 11 are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Issuers, their creditors other
than holders of Senior Indebtedness and the Holders of the Notes, the obligation
of the Issuers, which is absolute and unconditional, to pay to the Holders of
the Notes the principal of, premium, if any, and interest on the Notes as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against the Issuers of the Holders of the Notes
and creditors of the Issuers other than the holders of Senior Indebtedness; or
(c) prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon a Default or an Event of Default
under this Indenture, subject to the rights, if any, under this Article 11 of
the holders of Senior Indebtedness (1) in any case, proceeding, dissolution,
liquidation or other winding-up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Issuers referred to in Section
11.02 hereof, to receive, pursuant to and in accordance with such Section, cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder, or (2) under the conditions specified in Section 11.03, to prevent any
payment prohibited by such Section or enforce their rights pursuant to Section
11.03(c) hereof.
The failure to make a payment on account of principal of, premium, if
any, or interest on the Notes by reason of any provision of this Article 11
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
<PAGE>
-104-
Section 11.07. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Issuers whether in bankruptcy, insolvency, receivership proceedings, or
otherwise, the timely filing of a claim for the unpaid balance of the
indebtedness of the Issuers owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved. If the Trustee does
not file such a claim prior to 30 days before the expiration of the time to file
such a claim, the holders of Senior Indebtedness, or any Representative, may
file such a claim on behalf of Holders of the Notes.
Section 11.08. No Waiver of Subordination
Provisions.
--------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Issuers or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Issuers with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this Section
11.08, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article 11 or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Issuers and any other Person; provided, however, that in no
-------- -------
event shall any such actions limit the right
<PAGE>
-105-
of the Holders of the Notes to take any action to accelerate the maturity of the
Notes pursuant to Article 6 hereof or to pursue any rights or remedies hereunder
or under applicable laws if the taking of such action does not otherwise violate
the terms of this Indenture.
Section 11.09. Notice to Trustee.
-----------------
(a) The Issuers shall give prompt written notice to the Trustee of
any fact known to the Issuers which would prohibit the making of any payment to
or by the Trustee at its Corporate Trust Office in respect of the Notes.
Notwithstanding the provisions of this Article 11 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received written
notice thereof from the Issuers or a holder of Senior Indebtedness or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this Section 11.09,
shall be entitled in all respects to assume that no such facts exist; provided,
--------
however, that if the Trustee shall not have received the notice provided for in
- -------
this Section 11.09 at least five Business Days prior to the date upon which by
the terms hereof any money may become payable for any purpose under this
Indenture (including, without limitation, the payment of the principal of,
premium, if any, or interest on any Note), then, anything herein contained to
the contrary notwithstanding but without limiting the rights and remedies of the
holders of Senior Indebtedness or any trustee, fiduciary or agent therefor, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within five
Business Days prior to such date; nor shall the Trustee be charged with
knowledge of the curing of any such default or the elimination of the act or
condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 7.01 hereof, the Trustee
shall be entitled to rely on the delivery to it of a written notice to the
Trustee and the Issuers by a Person representing itself to be a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor); provided, however, that failure to give such
-------- -------
notice to the Issuers shall not affect in
<PAGE>
-106-
any way the ability of the Trustee to rely on such notice. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Article 11, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article 11, and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 11.10. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of the Issuers referred to
in this Article 11, the Trustee, subject to the provisions of Section 7.01
hereof, and the Holders shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of the Issuers, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 11; provided that the foregoing shall
--------
apply only if such court has been fully apprised of the provisions of this
Article 11.
Section 11.11. Rights of Trustee as a Holder of
Senior Indebtedness; Preservation
of Trustee's Rights.
---------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article 11 with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article 11 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
<PAGE>
-107-
Section 11.12. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Issuers and be then acting hereunder, the term "Trustee"
as used in this Article 11 shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article 11 in addition to or in place of the Trustee.
Section 11.13. No Suspension of Remedies.
-------------------------
Nothing contained in this Article 11 shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article 6 or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article 11 of
the holders, from time to time, of Senior Indebtedness.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
Section 12.02. Notices.
-------
Except for notice or communications to Holders any notice or
communication shall be given in writing and delivered in person, sent by
facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:
<PAGE>
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If to the Issuers or any Guarantor:
Petersen Publishing Company, L.L.C.
6420 Wilshire Boulevard
Los Angeles, California 90048
Attention: Executive Vice President-Chief Financial Officer
Fax Number:
Copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: John A. Weissenbach, Esq.
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Fax Number: (212) 852-1625
Copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Michele D. Ross
Fax Number: (212) 715-8000
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Issuers, the Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
<PAGE>
-109-
Any notice or communication mailed to a Noteholder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication to a Noteholder is mailed in the manner provided
above, it shall be deemed duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 12.03. Communications by Holders with Other Holders.
--------------------------------------------
Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Issuers, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
Section 12.04. Certificate and Opinion as to Conditions
Precedent.
----------------------------------------
Upon any request or application by the Issuers or any Guarantor to the
Trustee to take any action under this Indenture, the Issuers or such Guarantor
shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.05 below) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 12.05 below) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate and Opinion.
----------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
<PAGE>
-110-
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
Section 12.06. When Treasury Notes Disregarded.
-------------------------------
In determining whether the Holders of the required aggregate principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Issuers, any Guarantor or any other obligor on the Notes or by any
Affiliate of any of them shall be disregarded, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes as to which a Responsible Officer of
the Trustee has received an Officer's Certificate stating that such securities
are so owned shall be so disregarded. Notes so owned which have been pledged in
good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to the
Notes and that the pledgee is not an Issuers, a Guarantor or any other obligor
upon the Notes or any Affiliate of any of them.
Section 12.07. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or meetings of
Noteholders. The Registrar and Paying Agent may make reasonable rules for their
functions.
Section 12.08. Business Days; Legal Holidays.
-----------------------------
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a
<PAGE>
-111-
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
Section 12.09. Governing Law.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 12.10. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Issuers or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.11. No Recourse Against Others.
--------------------------
No recourse for the payment of the principal of or premium, if any, or
interest on any of the Notes, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Issuers or any Guarantor in this Indenture or in any
supplemental indenture, or in any of the Notes, or because of the creation of
any Indebtedness represented thereby, shall be had against any stockholder,
officer, director or employee, as such, past, present or future, of the Issuers
or of any successor corporation or against the property or assets of any such
stockholder, officer, employee or director, either directly or through the
Issuers or any Guarantor, or any successor corporation thereof, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the Notes are solely obligations of the Issuers and the
Guarantors, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, any stockholder, officer, employee or director of the
Issuers or any Guarantor, or any successor corporation thereof, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or the Notes or
implied therefrom, and that any and all such personal liability of, and any and
all claims against every stockholder, officer, employee and director, are hereby
expressly
<PAGE>
-112-
waived and released as a condition of, and as a consideration for, the execution
of this Indenture and the issuance of the Notes. It is understood that this
limitation on recourse is made expressly for the benefit of any such
shareholder, employee, officer or director and may be enforced by any of them.
Section 12.12. Successors.
----------
All agreements of the Issuers and the Guarantors in this Indenture and
the Notes shall bind their respective successors. All agreements of the
Trustee, any additional trustee and any Paying Agents in this Indenture shall
bind its successor.
Section 12.13. Multiple Counterparts.
---------------------
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 12.14. Table of Contents, Headings, etc.
--------------------------------
The table of contents, cross-reference sheet 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 hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 12.15. Separability.
------------
Each provision of this Indenture shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or 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.
<PAGE>
-113-
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed all as of the date and year first written above.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ____________________________________
Name:
Title:
ATTEST:
_________________________
Name:
Title:
PETERSEN CAPITAL CORP.
By: ____________________________________
Name:
Title:
ATTEST:
_________________________
Name:
Title:
Guarantor:
PETERSEN HOLDINGS, L.L.C.
By: ____________________________________
Name:
Title:
ATTEST:
__________________________
Name:
Title:
<PAGE>
-114-
UNITED STATES TRUST COMPANY
OF NEW YORK as Trustee,
By: ____________________________________
Name:
Title:
ATTEST:
___________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THREE YEARS AFTER ORIGINAL
ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND 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 IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
A-1
<PAGE>
CUSIP 71 6336AAO
Number
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
Petersen Publishing Company, L.L.C., a Delaware limited liability company
(the "Company", which term includes any successor corporation) and Petersen
Capital Corp., a Delaware corporation (jointly and severally, together with the
Company, the "Issuers"), for value received promise to pay to CEDE & CO. or
registered assigns the principal sum of ONE HUNDRED MILLION DOLLARS
($100,000,000), on November 15, 2006.
Interest Payment Dates: May 15 and November 15, commencing May 15, 1997
Record Dates: May 1 and November 1
This Note shall not be valid or obligatory for any purpose until the
certificate of authentication shall have been executed by the Trustee by its
manual signature.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
A-2
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized Officers.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _____________________________________
By: _____________________________________
PETERSEN CAPITAL CORP.
By: _____________________________________
By: _____________________________________
Certificate of Authentication:
This is one of the 11 1/8% Senior
Subordinated Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee,
By: ___________________________________
Authorized Signatory
A-3
<PAGE>
(REVERSE SIDE)
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Company") and Petersen Capital Corp., a Delaware corporation,
jointly and severally (and together with the Company, the "Issuers"), promise to
pay interest on the principal amount of this Note semiannually on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing on May
15, 1997, at the rate of 11 1/8% per annum. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of the Notes.
The Issuers shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at the rate equal
to 2% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in Paragraph 1
above (except defaulted interest) to the person who is the registered Holder of
this Note at the close of business on the May 1 or November 1 preceding the
Interest Payment Date (whether or not such day is a Business Day). The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Issuers will pay principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts; provided, however, that the Issuers may pay principal, premium,
-------- -------
if any, and interest by check payable in such money. They may mail an interest
check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, United States Trust Company of New York (the "Trustee")
will act as Paying Agent and Registrar. The Issuers may change any Paying Agent
or Registrar without notice to the Holders of the Notes. Neither the Issuers
nor any of their Subsidiaries or Affiliates may act as Paying Agent but may act
as Registrar.
A-4
<PAGE>
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of November
15, 1996 (the "Indenture") among the Issuers, the Guarantors and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture. This Note is
subject to all such terms, and the Holder of this Note is referred to the
Indenture and said Trust Indenture Act for a statement of them. All capitalized
terms in this Note, unless otherwise defined, have the meanings assigned to them
by the Indenture.
The Notes are general unsecured obligations of the Issuers limited to
$100,000,000 aggregate principal amount. The Indenture imposes certain
restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by subsidiaries of the
Issuers, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Issuers and their subsidiaries, certain
other restricted payments by the Issuers and their subsidiaries, certain
transactions with, and investments in, their affiliates, certain sale and lease-
back transactions and a provision regarding change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness as defined in the
Indenture, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
-------- -------
Indebtedness evidenced by this Note shall cease to be so subordinate and subject
in right of payment upon any defeasance of this Note referred to in Paragraph 18
below.
6. OPTIONAL REDEMPTION.
The Issuers, at their option, may redeem the Notes, in whole or in
part, at any time on or after November 15, 2001 upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount), set forth below, plus accrued and unpaid interest to the
Redemption Date, if redeemed during the twelve month period beginning on
November 15 of each year listed below:
A-5
<PAGE>
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001 ...................................... 105.563%
2002 ...................................... 103.708%
2003 ...................................... 101.854%
2004 and thereafter ....................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the aggregate
up to 25% of the original principal amount of Notes at any time and from time to
time prior to November 15, 1999 at a redemption price equal to 111.125% of the
aggregate principal amount so redeemed, plus accrued interest to the Redemption
Date out of the Net Proceeds of one or more Public Equity Offerings; provided
--------
that at least $75,000,000 of the principal amount of Notes originally issued
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 30
days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Issuers shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be used,
subject to further limitations contained therein, to make an offer to purchase
certain amounts of Notes in accordance with the procedures set forth in the
Indenture. The Issuers are also required to make an offer to purchase Notes
upon the occurrence of a Change of Control in accordance with procedures set
forth in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Issuers, the
Guarantors and First Union Capital Markets Corp. and CIBC Wood Gundy Securities
Corp., as initial purchasers of the Notes, the Issuers and the Guarantors will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Note shall have the right to exchange this Note for Notes of a separate
series issued under the Indenture (or a trust indenture substantially identical
to the Indenture in accordance with the terms of the Registration Rights
Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Notes. The
Holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon
A-6
<PAGE>
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar 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. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before the mailing of notice of redemption of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any Note
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Issuers at their written request. After that, Holders entitled to
money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Issuers, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and
A-7
<PAGE>
certain other conditions are satisfied, the predecessor corporation will be
released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(6) or (7) of
the Indenture with respect to either of the Issuers) occurs and is continuing,
the Trustee by notice to the Issuers, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may declare to be
immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued but unpaid interest to the date of acceleration;
provided, however, that after such acceleration but before judgement or decree
- -------- -------
based on such acceleration is obtained by the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of principal, premium or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(6) or
(7) of the Indenture with respect to either of the Issuers occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders of the Notes.
16. TRUSTEE DEALINGS WITH THE ISSUERS
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Issuers, any Guarantor or their Affiliates, and may otherwise deal with the
Issuers any Guarantor or their Affiliates, as if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Issuers or any Guarantor shall not have
any liability for any obligations of the Issuers or any Guarantor under the
Notes or the Indenture or for any claim based on, in respect or by reason of,
such obligations or their creation. The Holder of this Note by accepting this
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain
A-8
<PAGE>
covenants in the Indenture upon compliance by the Issuers with certain
conditions set forth in the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors
Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Issuers have caused CUSIP Numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: PETERSEN
PUBLISHING COMPANY, L.L.C., 6420 Wilshire Boulevard, Los Angeles, California
90048, Attention: Executive Vice President - Chief Financial Officer.
22. GUARANTEE.
The Note is initially entitled to the benefits of the Guarantee of the
Guarantors whose signature appears on the notation endorsed on this Note and may
thereafter be entitled to certain other Guarantees made for the benefit of the
Holders. Upon the terms and subject to the conditions set forth in the
Indenture, each Guarantor has jointly and severally with any other Guarantor,
unconditionally guaranteed on a senior basis that the principal of, and premium,
if any, interest and Additional Interest, if any, on and any additional amounts,
if any, with respect to the Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise, and interest on overdue
principal, premium, if any, and (to the extent permitted by law) interest on any
interest or Additional Interest, if any, on the Notes and all other
A-9
<PAGE>
Obligations of the Issuers to the Holders or the Trustee under the Notes or the
Indenture (including fees, expenses or other Obligations) will be promptly paid
in full or performed. A Guarantor shall be released from the Guarantee upon the
terms and subject to the conditions set forth in the Indenture. Reference is
hereby made to Article 10 of the Indenture and to Exhibit A to the Indenture for
the terms of the Guarantee.
A-10
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act 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 none of the foregoing boxes is checked, the Trustee or 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 of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
<PAGE>
-2-
Date: ____________________ Your Signature: ______________________________
______________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ______________________________________________
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
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.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
<PAGE>
NOTATION ON NOTE
RELATING TO GUARANTEE
Petersen Holdings, L.L.C. (the "Guarantor", which term includes any
successor Person under the Indenture) has unconditionally guaranteed, on a
senior subordinated basis, jointly and severally with any future Guarantors, to
the extent set forth in the Indenture and subject to the provisions of the
Indenture, (a) the due and punctual payment of the principal of and interest on
the Notes, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on overdue principal, and, to the extent permitted
by law, interest, and the due and punctual performance of all other Obligations
of the Issuers to the Noteholders or the Trustee all in accordance with the
terms set forth in Article 10 of the Indenture, and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other Obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms of this Guarantee.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
Guarantor: Petersen Holdings, L.L.C.
By: ___________________________________________
Name:
Title:
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, check the
appropriate box:
[_] Section 4.10 [_] Section 4.19
If you want to have only part of the Note purchased by the pursuant
to Section 4.10 or Section 4.19 of the Indenture, state the amount you elect to
have purchased:
$_________________
Date: ____________
Your Signature: _________________________________________________
(Sign exactly as your name appears on the face
of this Note)
___________________________
Signature Guaranteed
<PAGE>
EXHIBIT B
---------
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THREE YEARS AFTER ORIGINAL
ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND 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 IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
B-1
<PAGE>
CUSIP UO4393AA9
Number
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
Petersen Publishing Company, L.L.C., a Delaware limited liability company
(the "Company", which term includes any successor corporation) and Petersen
Capital Corp., a Delaware corporation (jointly and severally, together with the
Company, the "Issuers"), for value received promise to pay to CEDE & CO. or
registered assigns the principal sum of NO DOLLARS ($0), on November 15, 2006.
Interest Payment Dates: May 15 and November 15, commencing May 15, 1997
Record Dates: May 1 and November 1
This Note shall not be valid or obligatory for any purpose until the
certificate of authentication shall have been executed by the Trustee by its
manual signature.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
B-2
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized Officers.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _______________________________________
By: _______________________________________
PETERSEN CAPITAL CORP.
By: _______________________________________
By: _______________________________________
Certificate of Authentication:
This is one of the 11 1/8% Senior
Subordinated Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee,
By: ___________________________________
Authorized Signatory
B-3
<PAGE>
(REVERSE SIDE)
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Company") and Petersen Capital Corp., a Delaware corporation,
jointly and severally (and together with the Company, the "Issuers"), promise to
pay interest on the principal amount of this Note semiannually on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing on May
15, 1997, at the rate of 11 1/8% per annum. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of the Notes.
The Issuers shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at the rate equal
to 2% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in Paragraph 1
above (except defaulted interest) to the person who is the registered Holder of
this Note at the close of business on the May 1 or November 1 preceding the
Interest Payment Date (whether or not such day is a Business Day). The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Issuers will pay principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts; provided, however, that the Issuers may pay principal, premium,
-------- -------
if any, and interest by check payable in such money. They may mail an interest
check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, United States Trust Company of New York (the "Trustee")
will act as Paying Agent and Registrar. The Issuers may change any Paying Agent
or Registrar without notice to the Holders of the Notes. Neither the Issuers
nor any of their Subsidiaries or Affiliates may act as Paying Agent but may act
as Registrar.
B-4
<PAGE>
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of November
15, 1996 (the "Indenture") among the Issuers, the Guarantors and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture. This Note is
subject to all such terms, and the Holder of this Note is referred to the
Indenture and said Trust Indenture Act for a statement of them. All capitalized
terms in this Note, unless otherwise defined, have the meanings assigned to them
by the Indenture.
The Notes are general unsecured obligations of the Issuers limited to
$100,000,000 aggregate principal amount. The Indenture imposes certain
restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by subsidiaries of the
Issuers, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Issuers and their subsidiaries, certain
other restricted payments by the Issuers and their subsidiaries, certain
transactions with, and investments in, their affiliates, certain sale and lease-
back transactions and a provision regarding change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness as defined in the
Indenture, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
-------- -------
Indebtedness evidenced by this Note shall cease to be so subordinate and subject
in right of payment upon any defeasance of this Note referred to in Paragraph 18
below.
6. OPTIONAL REDEMPTION.
The Issuers, at their option, may redeem the Notes, in whole or in
part, at any time on or after November 15, 2001 upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount), set forth below, plus accrued and unpaid interest to the
Redemption Date, if redeemed during the twelve month period beginning on
November 15 of each year listed below:
B-5
<PAGE>
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001 .................................. 105.563%
2002 .................................. 103.708%
2003 .................................. 101.854%
2004 and thereafter ................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the aggregate
up to 25% of the original principal amount of Notes at any time and from time to
time prior to November 15, 1999 at a redemption price equal to 111.125% of the
aggregate principal amount so redeemed, plus accrued interest to the Redemption
Date out of the Net Proceeds of one or more Public Equity Offerings; provided
--------
that at least $75,000,000 of the principal amount of Notes originally issued
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 30
days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Issuers shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be used,
subject to further limitations contained therein, to make an offer to purchase
certain amounts of Notes in accordance with the procedures set forth in the
Indenture. The Issuers are also required to make an offer to purchase Notes
upon the occurrence of a Change of Control in accordance with procedures set
forth in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Issuers, the
Guarantors and First Union Capital Markets Corp. and CIBC Wood Gundy Securities
Corp., as initial purchasers of the Notes, the Issuers and the Guarantors will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Note shall have the right to exchange this Note for Notes of a separate
series issued under the Indenture (or a trust indenture substantially identical
to the Indenture in accordance with the terms of the Registration Rights
Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Notes. The
Holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon
B-6
<PAGE>
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar 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. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before the mailing of notice of redemption of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any Note
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Issuers at their written request. After that, Holders entitled to
money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Issuers, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and
B-7
<PAGE>
certain other conditions are satisfied, the predecessor corporation will be
released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(6) or (7) of
the Indenture with respect to either of the Issuers) occurs and is continuing,
the Trustee by notice to the Issuers, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may declare to be
immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued but unpaid interest to the date of acceleration;
provided, however, that after such acceleration but before judgement or decree
- -------- -------
based on such acceleration is obtained by the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of principal, premium or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(6) or
(7) of the Indenture with respect to either of the Issuers occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders of the Notes.
16. TRUSTEE DEALINGS WITH THE ISSUERS
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Issuers, any Guarantor or their Affiliates, and may otherwise deal with the
Issuers any Guarantor or their Affiliates, as if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Issuers or any Guarantor shall not have
any liability for any obligations of the Issuers or any Guarantor under the
Notes or the Indenture or for any claim based on, in respect or by reason of,
such obligations or their creation. The Holder of this Note by accepting this
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain
B-8
<PAGE>
covenants in the Indenture upon compliance by the Issuers with certain
conditions set forth in the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors
Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Issuers have caused CUSIP Numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: PETERSEN
PUBLISHING COMPANY, L.L.C., 6420 Wilshire Boulevard, Los Angeles, California
90048, Attention: Executive Vice President - Chief Financial Officer.
22. GUARANTEE.
The Note is initially entitled to the benefits of the Guarantee of the
Guarantors whose signature appears on the notation endorsed on this Note and may
thereafter be entitled to certain other Guarantees made for the benefit of the
Holders. Upon the terms and subject to the conditions set forth in the
Indenture, each Guarantor has jointly and severally with any other Guarantor,
unconditionally guaranteed on a senior basis that the principal of, and premium,
if any, interest and Additional Interest, if any, on and any additional amounts,
if any, with respect to the Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise, and interest on overdue
principal, premium, if any, and (to the extent permitted by law) interest on any
interest or Additional Interest, if any, on the Notes and all other
B-9
<PAGE>
Obligations of the Issuers to the Holders or the Trustee under the Notes or the
Indenture (including fees, expenses or other Obligations) will be promptly paid
in full or performed. A Guarantor shall be released from the Guarantee upon the
terms and subject to the conditions set forth in the Indenture. Reference is
hereby made to Article 10 of the Indenture and to Exhibit A to the Indenture for
the terms of the Guarantee.
B-10
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act 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 none of the foregoing boxes is checked, the Trustee or 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 of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
<PAGE>
-2-
Date: ____________________ Your Signature: ________________________________
________________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ________________________________________________
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
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.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
<PAGE>
NOTATION ON NOTE
RELATING TO GUARANTEE
Petersen Holdings, L.L.C. (the "Guarantor", which term includes any
successor Person under the Indenture) has unconditionally guaranteed, on a
senior subordinated basis, jointly and severally with any future Guarantors, to
the extent set forth in the Indenture and subject to the provisions of the
Indenture, (a) the due and punctual payment of the principal of and interest on
the Notes, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on overdue principal, and, to the extent permitted
by law, interest, and the due and punctual performance of all other Obligations
of the Issuers to the Noteholders or the Trustee all in accordance with the
terms set forth in Article 10 of the Indenture, and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other Obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms of this Guarantee.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
Guarantor: Petersen Holdings, L.L.C.
By: __________________________________________________
Name:
Title:
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, check the
appropriate box:
[_] Section 4.10 [_] Section 4.19
If you want to have only part of the Note purchased by the pursuant
to Section 4.10 or Section 4.19 of the Indenture, state the amount you elect to
have purchased:
$_________________
Date: ____________
Your Signature: _______________________________________________
(Sign exactly as your name appears on the face
of this Note)
___________________________
Signature Guaranteed
<PAGE>
EXHIBIT C
---------
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE
ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
C-1
<PAGE>
EXHIBIT D
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
___________, ____
United States Trust Company of New York
Attention: Corporate Trust Department
Re: Petersen Publishing Company, L.L.C.
and Petersen Capital Corp. (the
"Issuers") 11 1/8% Senior Subordinated
Notes due 2006 (the "Notes")
--------------------------------------
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as
of November 15, 1996 relating to the Notes and the undersigned agrees to be
bound by, and not to resell, pledge or otherwise transfer the Securities
except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Notes within three years after the original issuance
of the Notes, we will do so only (A) to the Issuers or any subsidiary
thereof, (B) inside the United States in compliance with Rule 144A under
the Securities Act, to a "qualified institutional buyer" (as defined in
Rule 144A), (C) inside the United States to an "accredited investor" (as
defined below) that, prior to such transfer, furnishes to you a signed
letter substantially in the form of this letter, (D) outside the United
States to a foreign person in compliance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (F)
pursuant to an effective registration statement under the Securities Act,
and we further agree to
D-1
<PAGE>
provide to any person purchasing any of the Notes from us a notice advising
such purchaser that resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Issuers such certifications, legal
opinions and other information as you and the Issuers may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and have such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: _____________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
______________, ____
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
]
Attention: Corporate Trust Department
Re: Petersen Publishing Company, L.L.C.
and Petersen Capital Corp. (the
"Issuers") 11 1/8% Senior Subordinated
Notes due 2006 (the "Notes")
--------------------------------------
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
E-1
<PAGE>
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ________________________________________
Authorized Signature
E-2
<PAGE>
EXHIBIT 4.2
NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THREE YEARS AFTER ORIGINAL
ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND 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 IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE
<PAGE>
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUERS OR
THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
CUSIP 71 6336AAO
Number 001
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Company", which term includes any successor corporation) and
Petersen Capital Corp., a Delaware corporation (jointly and severally, together
with the Company, the "Issuers"), for value received promise to pay to CEDE &
CO. or registered assigns the principal sum of ONE HUNDRED MILLION DOLLARS
($100,000,000), on November 15, 2006.
Interest Payment Dates: May 15 and November 15, commencing May 15,
1997
Record Dates: May 1 and November 1
This Note shall not be valid or obligatory for any purpose until the
certificate of authentication shall have been executed by the Trustee by its
manual signature.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized Officers.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _________________________________________
Neal Vitale
President/Chief Operating Officer
By: _________________________________________
Richard Willis
Chief Financial Officer
PETERSEN CAPITAL CORP.
By: _________________________________________
Neal Vitale
Vice President
By: _________________________________________
Richard Willis
Chief Financial Officer
Certificate of Authentication:
This is one of the 11 1/8% Senior
Subordinated Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee,
By: ___________________________________
Authorized Signatory
<PAGE>
(REVERSE SIDE)
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Company") and Petersen Capital Corp., a Delaware corporation
(jointly and severally) and together with the Company, the "Issuers"), promise
to pay interest on the principal amount of this Note semiannually on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing on May
15, 1997, at the rate of 11 1/8% per annum. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of the Notes.
The Issuers shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at the rate equal
to 2% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in Paragraph 1
above (except defaulted interest) to the person who is the registered Holder of
this Note at the close of business on the May 1 or November 1 preceding the
Interest Payment Date (whether or not such day is a Business Day). The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Issuers will pay principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts; provided, however, that the Issuers may pay principal, premium,
-------- -------
if any, and interest by check payable in such money. They may mail an interest
check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, United States Trust Company of New York (the "Trustee")
will act as Paying Agent and Registrar. The Issuers may change any Paying Agent
or Registrar without notice to the Holders of the Notes. Neither the Issuers
nor any of their Subsidiaries or Affiliates may act as Paying Agent but may act
as Registrar.
<PAGE>
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of November
15, 1996 (the "Indenture") among the Issuers, the Guarantors and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture. This Note is
subject to all such terms, and the Holder of this Note is referred to the
Indenture and said Trust Indenture Act for a statement of them. All capitalized
terms in this Note, unless otherwise defined, have the meanings assigned to them
by the Indenture.
The Notes are general unsecured obligations of the Issuers limited to
$100,000,000 aggregate principal amount. The Indenture imposes certain
restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by subsidiaries of the
Issuers, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Issuers and their subsidiaries, certain
other restricted payments by the Issuers and their subsidiaries, certain
transactions with, and investments in, their affiliates, certain sale and lease-
back transactions and a provision regarding change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness as defined in the
Indenture, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
-------- -------
Indebtedness evidenced by this Note shall cease to be so subordinate and subject
in right of payment upon any defeasance of this Note referred to in Paragraph 18
below.
6. OPTIONAL REDEMPTION.
The Issuers, at their option, may redeem the Notes, in whole or in
part, at any time on or after November 15, 2001 upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount), set forth below, plus accrued and unpaid interest to the
Redemption Date,
<PAGE>
if redeemed during the twelve month period beginning on November 15 of each year
listed below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001...................................... 105.563%
2002...................................... 103.708%
2003...................................... 101.854%
2004 and thereafter....................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the aggregate
up to 25% of the original principal amount of Notes at any time and from time to
time prior to November 15, 1999 at a redemption price equal to 111.125% of the
aggregate principal amount so redeemed, plus accrued interest to the Redemption
Date out of the Net Proceeds of one or more Public Equity Offerings; provided
--------
that at least $75,000,000 of the principal amount of Notes originally issued
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 30
days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Issuers shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be used,
subject to further limitations contained therein, to make an offer to purchase
certain amounts of Notes in accordance with the procedures set forth in the
Indenture. The Issuers are also required to make an offer to purchase Notes
upon the occurrence of a Change of Control in accordance with procedures set
forth in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Issuers, the
Guarantors and First Union Capital Markets Corp. and CIBC Wood Gundy Securities
Corp., as initial purchasers of the Notes, the Issuers and the Guarantors will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Note shall have the right to exchange this Note for Notes of a separate
series issued under the Indenture (or a trust indenture
<PAGE>
substantially identical to the Indenture in accordance with the terms of the
Registration Rights Agreement) which have been registered under the Securities
Act, in like principal amount and having substantially identical terms as the
Notes. The Holders shall be entitled to receive certain additional interest
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar 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. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before the mailing of notice of redemption of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any Note
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Issuers at their written request. After that, Holders entitled to
money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Issuers, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
<PAGE>
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(6) or (7) of
the Indenture with respect to either of the Issuers) occurs and is continuing,
the Trustee by notice to the Issuers, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may declare to be
immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued but unpaid interest to the date of acceleration;
provided, however, that after such acceleration but before judgement or decree
- -------- -------
based on such acceleration is obtained by the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of principal, premium or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(6) or
(7) of the Indenture with respect to either of the Issuers occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders of the Notes.
16. TRUSTEE DEALINGS WITH THE ISSUERS
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Issuers, any Guarantor or their Affiliates, and may otherwise deal with the
Issuers any Guarantor or their Affiliates, as if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Issuers or any
<PAGE>
Guarantor shall not have any liability for any obligations of the Issuers or any
Guarantor under the Notes or the Indenture or for any claim based on, in respect
or by reason of, such obligations or their creation. The Holder of this Note by
accepting this Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Issuers with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors
Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Issuers have caused CUSIP Numbers to be
printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: PETERSEN
PUBLISHING COMPANY, L.L.C., 6420 Wilshire Boulevard, Los Angeles, California
90048, Attention: Executive Vice President - Chief Financial Officer.
22. GUARANTEE.
<PAGE>
The Note is initially entitled to the benefits of the Guarantee of the
Guarantors whose signature appears on the notation endorsed on this Note and may
thereafter be entitled to certain other Guarantees made for the benefit of the
Holders. Upon the terms and subject to the conditions set forth in the
Indenture, each Guarantor has jointly and severally with any other Guarantor,
unconditionally guaranteed on a senior basis that the principal of, and premium,
if any, interest and Additional Interest, if any, on and any additional amounts,
if any, with respect to the Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise, and interest on overdue
principal, premium, if any, and (to the extent permitted by law) interest on any
interest or Additional Interest, if any, on the Notes and all other Obligations
of the Issuers to the Holders or the Trustee under the Notes or the Indenture
(including fees, expenses or other Obligations) will be promptly paid in full or
performed. A Guarantor shall be released from the Guarantee upon the terms and
subject to the conditions set forth in the Indenture. Reference is hereby made
to Article 10 of the Indenture and to Exhibit A to the Indenture for the terms
of the Guarantee.
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act 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 none of the foregoing boxes is checked, the Trustee or 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 of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
<PAGE>
-2-
Date: ____________________ Your Signature:_________________________________
________________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ________________________________________________
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
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.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
<PAGE>
NOTATION ON NOTE
RELATING TO GUARANTEE
Petersen Holdings, L.L.C. (the "Guarantor", which term includes any
successor Person under the Indenture) has unconditionally guaranteed, on a
senior subordinated basis, jointly and severally with any future Guarantors, to
the extent set forth in the Indenture and subject to the provisions of the
Indenture, (a) the due and punctual payment of the principal of and interest on
the Notes, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on overdue principal, and, to the extent permitted
by law, interest, and the due and punctual performance of all other Obligations
of the Issuers to the Noteholders or the Trustee all in accordance with the
terms set forth in Article 10 of the Indenture, and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other Obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms of this Guarantee.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
Guarantor: Petersen Holdings, L.L.C.
By: ____________________________________________
Name: Neal Vitale
Title: Executive Vice President
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, check the
appropriate box:
[_] Section 4.10 [_] Section 4.19
If you want to have only part of the Note purchased by the pursuant
to Section 4.10 or Section 4.19 of the Indenture, state the amount you elect to
have purchased:
$_________________
Date: ____________
Your Signature: ______________________________________________
(Sign exactly as your name appears on the face of this Note)
___________________________
Signature Guaranteed
<PAGE>
(FACE OF NOTE)
REGULATION S NOTE
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR
DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S.
PERSON, UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUERS OR
THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
CUSIP UO4393AA9
Number 001
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Company", which term includes any successor corporation) and
Petersen Capital Corp., a Delaware corporation (jointly and severally, together
with the Company, the "Issuers"), for value received promise to pay to CEDE &
CO. or registered assigns the principal sum of NO DOLLARS ($0), on November 15,
2006.
Interest Payment Dates: May 15 and November 15, commencing May 15,
1997
Record Dates: May 1 and November 1
This Note shall not be valid or obligatory for any purpose until the
certificate of authentication shall have been executed by the Trustee by its
manual signature.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized Officers.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ____________________________________
Neal Vitale
President/Chief Operating Officer
By: ____________________________________
Richard Willis
Chief Financial Officer
PETERSEN CAPITAL CORP.
By: ____________________________________
Neal Vitale
Vice President
By: ____________________________________
Richard Willis
Chief Financial Officer
Certificate of Authentication:
This is one of the 11 1/8% Senior
Subordinated Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee,
By: ___________________________________
Authorized Signatory
<PAGE>
(REVERSE SIDE)
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Company") and Petersen Capital Corp., a Delaware corporation
(jointly and severally, and together with the Company, the "Issuers"), promise
to pay interest on the principal amount of this Note semiannually on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing on May
15, 1997, at the rate of 11 1/8% per annum. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of the original issuance of the Notes.
The Issuers shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at the rate equal
to 2% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in Paragraph 1
above (except defaulted interest) to the person who is the registered Holder of
this Note at the close of business on the May 1 or November 1 preceding the
Interest Payment Date (whether or not such day is a Business Day). The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Issuers will pay principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts; provided, however, that the Issuers may pay principal, premium,
-------- -------
if any, and interest by check payable in such money. They may mail an interest
check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, United States Trust Company of New York (the "Trustee")
will act as Paying Agent and Registrar. The Issuers may change any Paying Agent
or Registrar without notice to the Holders of the Notes. Neither the Issuers
nor any of their Subsidiaries or Affiliates may act as Paying Agent but may act
as Registrar.
<PAGE>
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of November
15, 1996 (the "Indenture") among the Issuers, the Guarantors and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture. This Note is
subject to all such terms, and the Holder of this Note is referred to the
Indenture and said Trust Indenture Act for a statement of them. All capitalized
terms in this Note, unless otherwise defined, have the meanings assigned to them
by the Indenture.
The Notes are general unsecured obligations of the Issuers limited to
$100,000,000 aggregate principal amount. The Indenture imposes certain
restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by subsidiaries of the
Issuers, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Issuers and their subsidiaries, certain
other restricted payments by the Issuers and their subsidiaries, certain
transactions with, and investments in, their affiliates, certain sale and lease-
back transactions and a provision regarding change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated and subject in right of payment
to the prior payment in full of all Senior Indebtedness as defined in the
Indenture, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
-------- -------
Indebtedness evidenced by this Note shall cease to be so subordinate and subject
in right of payment upon any defeasance of this Note referred to in Paragraph 18
below.
6. OPTIONAL REDEMPTION.
The Issuers, at their option, may redeem the Notes, in whole or in
part, at any time on or after November 15, 2001 upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount), set forth below, plus accrued and unpaid interest to the
Redemption Date,
<PAGE>
if redeemed during the twelve month period beginning on November 15 of each year
listed below:
Year Redemption Price
---- ----------------
2001 .................................... 105.563%
2002 .................................... 103.708%
2003 .................................... 101.854%
2004 and thereafter ..................... 100.000%
Notwithstanding the foregoing, the Issuers may redeem in the
aggregate up to 25% of the original principal amount of Notes at any time and
from time to time prior to November 15, 1999 at a redemption price equal to
111.125% of the aggregate principal amount so redeemed, plus accrued interest to
the Redemption Date out of the Net Proceeds of one or more Public Equity
Offerings; provided that at least $75,000,000 of the principal amount of
--------
Notes originally issued remain outstanding immediately after the occurrence of
any such redemption and that any such redemption occurs within 90 days following
the closing of any such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 30
days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Issuers shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be used,
subject to further limitations contained therein, to make an offer to purchase
certain amounts of Notes in accordance with the procedures set forth in the
Indenture. The Issuers are also required to make an offer to purchase Notes
upon the occurrence of a Change of Control in accordance with procedures set
forth in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Issuers, the
Guarantors and First Union Capital Markets Corp. and CIBC Wood Gundy Securities
Corp., as initial purchasers of the Notes, the Issuers and the Guarantors will
be obligated to consummate an exchange offer pursuant to which the Holder of
this Note shall have the right to exchange this Note for Notes of a separate
series issued under the Indenture (or a trust indenture
<PAGE>
substantially identical to the Indenture in accordance with the terms of the
Registration Rights Agreement) which have been registered under the Securities
Act, in like principal amount and having substantially identical terms as the
Notes. The Holders shall be entitled to receive certain additional interest
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar 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. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before the mailing of notice of redemption of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any Note
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Issuers at their written request. After that, Holders entitled to
money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Issuers, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
<PAGE>
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(6) or (7) of
the Indenture with respect to either of the Issuers) occurs and is continuing,
the Trustee by notice to the Issuers, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may declare to be
immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued but unpaid interest to the date of acceleration;
provided, however, that after such acceleration but before judgement or decree
- -------- -------
based on such acceleration is obtained by the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of principal, premium or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(6) or
(7) of the Indenture with respect to either of the Issuers occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders of the Notes.
16. TRUSTEE DEALINGS WITH THE ISSUERS
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Issuers, any Guarantor or their Affiliates, and may otherwise deal with the
Issuers any Guarantor or their Affiliates, as if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Issuers or any
<PAGE>
Guarantor shall not have any liability for any obligations of the Issuers or any
Guarantor under the Notes or the Indenture or for any claim based on, in respect
or by reason of, such obligations or their creation. The Holder of this Note by
accepting this Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Issuers with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors
Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Issuers have caused CUSIP Numbers to be
printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: PETERSEN
PUBLISHING COMPANY, L.L.C., 6420 Wilshire Boulevard, Los Angeles, California
90048, Attention: Executive Vice President - Chief Financial Officer.
22. GUARANTEE.
<PAGE>
The Note is initially entitled to the benefits of the Guarantee of the
Guarantors whose signature appears on the notation endorsed on this Note and may
thereafter be entitled to certain other Guarantees made for the benefit of the
Holders. Upon the terms and subject to the conditions set forth in the
Indenture, each Guarantor has jointly and severally with any other Guarantor,
unconditionally guaranteed on a senior basis that the principal of, and premium,
if any, interest and Additional Interest, if any, on and any additional amounts,
if any, with respect to the Notes will be duly and punctually paid in full when
due, whether at maturity, by acceleration or otherwise, and interest on overdue
principal, premium, if any, and (to the extent permitted by law) interest on any
interest or Additional Interest, if any, on the Notes and all other Obligations
of the Issuers to the Holders or the Trustee under the Notes or the Indenture
(including fees, expenses or other Obligations) will be promptly paid in full or
performed. A Guarantor shall be released from the Guarantee upon the terms and
subject to the conditions set forth in the Indenture. Reference is hereby made
to Article 10 of the Indenture and to Exhibit A to the Indenture for the terms
of the Guarantee.
<PAGE>
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
---------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act 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 none of the foregoing boxes is checked, the Trustee or 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 of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
<PAGE>
-2-
Date: ____________________ Your Signature:_______________________________
______________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ______________________________________________
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
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.
Dated: __________________ ___________________________________
NOTICE: To be executed by
an executive officer
<PAGE>
NOTATION ON NOTE
RELATING TO GUARANTEE
Petersen Holdings, L.L.C. (the "Guarantor", which term includes any
successor Person under the Indenture) has unconditionally guaranteed, on a
senior subordinated basis, jointly and severally with any future Guarantors, to
the extent set forth in the Indenture and subject to the provisions of the
Indenture, (a) the due and punctual payment of the principal of and interest on
the Notes, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on overdue principal, and, to the extent permitted
by law, interest, and the due and punctual performance of all other Obligations
of the Issuers to the Noteholders or the Trustee all in accordance with the
terms set forth in Article 10 of the Indenture, and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other Obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms of this Guarantee.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
Guarantor: Petersen Holdings, L.L.C.
By: _________________________________________
Name: Neal Vitale
Title: Executive Vice President
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Company pursuant to Section 4.10 or Section 4.19 of the Indenture, check the
appropriate box:
[_] Section 4.10 [_] Section 4.19
If you want to have only part of the Note purchased by the pursuant
to Section 4.10 or Section 4.19 of the Indenture, state the amount you elect to
have purchased:
$_________________
Date: ____________
Your Signature:
(Sign exactly as your name appears on the face
of this Note)
___________________________
Signature Guaranteed
<PAGE>
EXHIBIT 4.3
________________________________________________________________________________
SECURITIES PURCHASE AGREEMENT
by and among
PETERSEN PUBLISHING COMPANY, L.L.C.
and
PETERSEN CAPITAL CORP.,
THE GUARANTOR
named herein
and
THE INITIAL PURCHASERS NAMED HEREIN
_____________________________
Dated as of November 20, 1996
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1. Definitions .............................................. 1
Section 1.2. Accounting Terms; Financial Statements ................... 5
ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE OF
NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASERS
Section 2.1. Issue of Notes ........................................... 5
Section 2.2. Purchase, Sale and Delivery of Notes ..................... 6
Section 2.3. Registration Rights of Holders of Notes .................. 7
Section 2.4. Offering by the Initial Purchasers ....................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
Section 3.1. Representations and Warranties of the Issuers and
the Guarantor .......................................... 7
Section 3.2. Resale of Notes .......................................... 18
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1. Conditions Precedent to Obligations of the
Initial Purchasers ..................................... 19
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Issuers and the Guarantor ............... 21
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI
FEES
Section 6.1. Costs, Expenses and Taxes ................................ 24
ARTICLE VII
INDEMNITY
Section 7.1. Indemnity ................................................ 25
Section 7.2. Contribution ............................................. 27
Section 7.3. Registration Rights Agreement ............................ 29
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Provisions ................................... 29
Section 8.2. Termination .............................................. 29
Section 8.3. No Waiver; Modifications in Writing ...................... 30
Section 8.4. Information Supplied by the Initial Purchasers ........... 31
Section 8.5. Communications ........................................... 31
Section 8.6. Execution in Counterparts ................................ 31
Section 8.7. Successors ............................................... 31
Section 8.8. Governing Law ............................................ 32
Section 8.9. Severability of Provisions ............................... 32
Section 8.10. Headings ................................................. 32
SIGNATURE PAGE ......................................................... 33
SCHEDULE I
</TABLE>
-ii-
<PAGE>
SECURITIES PURCHASE AGREEMENT, dated as of November 20, 1996 (the
"Agreement"), among PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Company"), PETERSEN CAPITAL CORP., a Delaware
corporation and a wholly-owned subsidiary of the Company ("Capital" and,
together with the Company, the "Issuers"), PETERSEN HOLDINGS, L.L.C. (the
"Guarantor"), and FIRST UNION CAPITAL MARKETS CORP. ("First Union") and CIBC
WOOD GUNDY SECURITIES CORP. ("CIBC") (the "Initial Purchasers").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. Definitions. As used in this Agreement, and unless the
-----------
context requires a different meaning, the following terms have the meanings
indicated:
"Accredited Investor" has the meaning provided therefor in Section 3.2
-------------------
of this Agreement.
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the Commission thereunder.
"Affiliate" means, with respect to any Person, any other Person which
---------
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Person in question. 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, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that beneficial ownership of at least 10% of the
-------- -------
voting securities of a Person shall be deemed to be control.
"Agreement" means this Agreement, as the same may be amended,
---------
supplemented or modified in accordance with the terms hereof and in effect.
<PAGE>
-2-
"Basic Documents" means, collectively, the Indenture, the Notes, the
---------------
Guarantee, the Registration Rights Agreement and this Agreement.
"BrightView" shall mean BrightView Communications Group, Inc.
----------
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday which is not a day on which banking institutions in the City of New York
are authorized or obligated by law to close.
"Capital Stock" of any Person means any and all shares, interests or
-------------
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's equity, including membership interests or
units in a limited liability company, and includes, without limitation, all
series and classes of such equity.
"Closing" has the meaning provided therefor in Section 2.2 of this
-------
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Act.
"Default" means any event, act or condition which, with notice or
-------
lapse of time or both, would constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Event of Default" means any event defined as an Event of Default in
----------------
the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission thereunder.
"Exchange Notes" has the meaning provided therefor in the Registration
--------------
Rights Agreement.
"Final Memorandum" has the meaning provided therefor in Section 2.1 of
----------------
this Agreement.
<PAGE>
-3-
"Guarantee" has the meaning provided therefor in Section 2.1 of this
---------
Agreement.
"Guarantor" has the meaning set forth in the introductory paragraph to
---------
this Agreement.
"Indemnified Party" has the meaning provided therefor in Section
-----------------
7.1(c) of this Agreement.
"Indemnifying Party" has the meaning provided therefor in Section
------------------
7.1(c) of this Agreement.
"Indenture" means the indenture dated as of November 15, 1996 among
---------
the Issuers, the Guarantor and United States Trust Company of New York, as
Trustee, under which the Notes will be issued.
"Initial Purchasers" has the meaning set forth in the introductory
------------------
paragraph to this Agreement.
"Lien" means, with respect to any property or assets of any Person,
----
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligations (as defined in the
Indenture)), conditional sales, or other title retention agreement having
substantially the same economic effect as any of the foregoing.
"Material Adverse Effect" means, with respect to the Issuers, a
-----------------------
material adverse effect on the business, condition (financial or otherwise),
results of operations or prospects of the Issuers, taken as a whole; provided
--------
that, with respect to the Issuers, "Material Adverse Effect" shall also mean a
material adverse effect on the ability of the Issuers to perform their
obligations under this Agreement or the Basic Documents or on the ability of the
Guarantor to perform its obligations under the Guarantee.
"Memorandum" has the meaning provided therefor in Section 2.1 of this
----------
Agreement.
"Notes" means the 11 1/8% Senior Subordinated Notes due 2006 of the
-----
Issuers.
<PAGE>
-4-
"Offering" has the meaning assigned thereto in the Memorandum.
--------
"Offering Materials" has the meaning provided therefor in Section 7.1
------------------
of this Agreement.
"Person" means any individual, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint-stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"Petersen" means the publishing division of Petersen Publishing
--------
Company, a California corporation.
"PORTAL" means the Private Offering, Resales, and Trading through
------
Automated Linkages Market.
"Preliminary Memorandum" has the meaning provided therefor in Section
----------------------
2.1 of this Agreement.
"Private Exchange Notes" shall have the meaning provided therefor in
----------------------
the Registration Rights Agreement.
"Proceeding" has the meaning provided therefor in Section 7.1(c) of
----------
this Agreement.
"QIB" has the meaning provided therefor in Section 3.2 of this
---
Agreement.
"Registration Rights Agreement" means the registration rights
-----------------------------
agreement among the Issuers, the Guarantor and the Initial Purchasers relating
to the Notes.
"Senior Credit Facility" has the meaning provided therefor in the
----------------------
Indenture.
"State" means each of the states of the United States, the District of
-----
Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having jurisdiction
----------------
to enforce such State's securities laws.
"Subsidiaries" means, with respect to any Person, any corporation,
------------
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the capital stock entitled
(without regard to the occurrence of any contingency) to vote in
<PAGE>
-5-
the election of directors, officers or trustees thereof is held by such first-
named Person or any of its Subsidiaries; or (ii) in the case of a partnership,
limited liability company, joint venture, association or other business entity,
with respect to which such first-named Person or any of its Subsidiaries has the
power to direct or cause the direction of the management and policies of such
entity by contract or otherwise or if in accordance with generally accepted
accounting principles such entity is consolidated with the first-named Person
for financial statement purposes.
"Taxes" has the meaning provided therefor in Section 3.1(v) of this
-----
Agreement.
"Time of Purchase" has the meaning provided therefor in Section 2.2 of
----------------
this Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended, and the rules and regulations of the Commission thereunder.
Section 1.2. Accounting Terms; Financial Statements. All accounting
--------------------------------------
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with sound accounting practice.
The term "sound accounting practice" shall mean such accounting practice as, in
the opinion of the independent accountants regularly retained by the Company,
conforms at the time to generally accepted accounting principles in the United
States applied on a consistent basis except for changes with which such
accountants concur. All determinations to which accounting principles apply
shall be made in accordance with sound accounting practice.
ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE
OF NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASERS
-------------------------------------
Section 2.1. Issue of Notes. The Company has authorized the issuance
--------------
of $100,000,000 aggregate principal amount of the Notes which are to be issued
pursuant to the Indenture. Each Note will be substantially in the form of the
Note set forth as Exhibit A to the Indenture. The Notes will be unconditionally
guaranteed by the Guarantor pursuant to the terms of the Indenture (the
"Guarantee").
<PAGE>
-6-
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Act, in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Issuers and the
Guarantor have prepared a preliminary offering memorandum dated October 28, 1996
(the "Preliminary Memorandum") and prepared a final offering memorandum dated
November 20, 1996 (the "Final Memorandum" and, together with the Preliminary
Memorandum, the "Memorandum") setting forth or including a description of the
terms of the Notes, the terms of the offering, a description of the Issuers and
the Guarantor and any material developments relating to the Issuers and the
Guarantor occurring after the date of the most recent financial statements
included therein.
Section 2.2. Purchase, Sale and Delivery of Notes. On the basis of
------------------------------------
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Issuers agree that
they will sell to each Initial Purchaser, and each Initial Purchaser agrees,
acting severally and not jointly, that it will purchase from the Issuers at the
Time of Purchase, the principal amount of the Notes set forth opposite the name
of such Initial Purchaser on Schedule I hereto at a price equal to 97% of the
principal amount thereof.
The purchase, sale and delivery of the Notes will take place at a
closing (the "Closing") at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York, at 10:00 A.M., New York time, on November , 1996, or
such later date and time, if any, as the Initial Purchasers and the Company
shall agree. The time at which such Closing is concluded is herein called the
"Time of Purchase."
One or more certificates in definitive form for the Notes that the
Initial Purchasers have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Initial Purchasers
request upon notice to the Company at least 24 hours prior to the Closing, shall
be delivered by or on behalf of the Issuers to the Initial Purchasers, against
payment by or on behalf of the Initial Purchasers of the purchase price therefor
by wire transfer of immediately available funds wired in accordance with the
written instructions of the Company. The Issuers will make such certificate or
certificates for the Notes available for checking and packaging by the Initial
Purchasers at the offices of First Union or CIBC, or such other place as First
Union and CIBC may designate, at least 24 hours prior to the Closing.
<PAGE>
-7-
Section 2.3. Registration Rights of Holders of Notes. The Initial
---------------------------------------
Purchasers and their direct and indirect transferees of the Notes will have such
rights with respect to the registration thereof under the Act and qualification
of the Indenture under the Trust Indenture Act as are set forth in the
Registration Rights Agreement.
Section 2.4. Offering by the Initial Purchasers. The Initial
----------------------------------
Purchasers propose to make an offering of the Notes at the price and upon the
terms set forth in the Final Memorandum, as soon as practicable after this
Agreement is entered into and as in the judgment of the Initial Purchasers is
advisable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
-----------------------------------------------
Section 3.1. Representations and Warranties of the Issuers and the
-----------------------------------------------------
Guarantor. The Issuers and the Guarantor, jointly and severally, represent and
- ---------
warrant to and agree with each of the Initial Purchasers as follows:
(a) The Final Memorandum, as of its date and at the Time of Purchase,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 3.1(a) do not
apply to statements or omissions made in reliance upon and in conformity
with information relating to the Initial Purchasers furnished to the
Company in writing by the Initial Purchasers expressly for use in the Final
Memorandum or any amendment or supplement thereto as set forth in Section
8.4 hereof.
(b) To the best of the Company's knowledge, the financial statements
of Petersen together with related notes, set forth in the Final Memorandum
fairly present the financial condition of Petersen, as of the dates
indicated and the results of operations and changes in financial position
for the periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise stated therein), except that the unaudited interim
financial statements are subject to normal year-end adjustments; the
summary and selected financial data in the Final Memorandum present fairly
the financial information shown therein and
<PAGE>
-8-
have been prepared and compiled on a basis consistent with audited
financial statements included therein, except as otherwise stated therein;
and the pro forma financial information and the related notes thereto
included in the Final Memorandum have been prepared using reasonable
assumptions and (except with respect to note (d) to Summary Pro Forma
Financial Data and note (i) to Unaudited Pro Forma Financial Data, which
each include supplemental adjustments not required under the Act) have been
prepared in accordance with the applicable requirements of the Act and
include all adjustments necessary to present fairly the pro forma financial
information included in the Final Memorandum at the respective dates and
for the respective periods indicated. Ernst & Young LLP, which has reported
upon the audited financial statements included in the Memorandum, is an
independent public accounting firm as required by the Act and the rules and
regulations thereunder.
(c) The Company and the Guarantor are limited liability companies duly
organized, validly existing and in good standing under the laws of the
State of Delaware and have filed all reports with the Secretary of State of
Delaware required to obtain a certificate of existence from that office.
Capital is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has filed all reports
with the Secretary of State of Delaware required to obtain a certificate of
existence from that office. Each of the Company, Capital and the
Guarantor, is duly qualified and in good standing as a foreign corporation
or limited liability company, and is authorized to do business, in each
jurisdiction in which the ownership or leasing of any property or the
character of its operations makes such qualification necessary and in which
the failure so to qualify could reasonably be expected to have a Material
Adverse Effect. None of the Company, Capital or the Guarantor have any
subsidiaries other than the Company and Capital.
(d) As of the Time of Purchase (after giving effect to the Offering),
the Company will have the capitalization as set forth in the Final
Memorandum, except as otherwise noted therein. All of the issued and
outstanding Capital Stock of the Company, Capital and the Guarantor are
validly issued, fully paid and nonassessable (other than certain equity
securities issued to the Company's management that are subject to
forfeiture under certain conditions) and were not issued in violation of
any preemptive or similar rights. As
<PAGE>
-9-
of the date hereof, except as set forth in the Final Memorandum, (i) 99.9%
of the Capital Stock of the Company and Capital is owned directly or
indirectly by the Guarantor, free and clear of any Liens, (ii) there are no
outstanding subscriptions, options, warrants, rights, convertible
securities or other binding agreements or commitments of any character
obligating the Guarantor or the Issuers to issue any securities and (iii)
there is no agreement, understanding or arrangement among the Guarantor or
the Issuers and their respective securityholders or any other Person
relating to the ownership or disposition of any Capital Stock in the
Guarantor or the Issuers or the governance of the Guarantor's or the
Issuers' affairs, and such agreements, arrangements or understandings will
not be breached or violated as a result of the execution and delivery of,
or the consummation of the transactions contemplated by, this Agreement and
the Basic Documents.
(e) This Agreement has been duly authorized, executed and delivered by
the Issuers and the Guarantor and (assuming the due authorization,
execution and delivery by the Initial Purchasers), is a valid and legally
binding agreement of the Issuers and the Guarantor, enforceable against
each of them in accordance with its terms except (i) that the enforcement
hereof may be subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and to general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought and (ii) as any rights to indemnity or contribution
hereunder may be limited by federal and state securities laws and public
policy considerations.
(f) The Indenture has been duly authorized by the Issuers and the
Guarantor and, when executed and delivered by the Issuers and the Guarantor
(assuming the due authorization, execution and delivery by the Trustee),
will constitute a valid and legally binding agreement of the Issuers and
the Guarantor, enforceable against each of them in accordance with its
terms except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
<PAGE>
-10-
(g) The Registration Rights Agreement has been duly authorized by the
Issuers and the Guarantor and, when executed and delivered by the Issuers
and the Guarantor (assuming the due authorization, execution and delivery
by the Initial Purchasers), will constitute a valid and legally binding
agreement of the Issuers and the Guarantor, enforceable against each of
them in accordance with its terms except (i) that the enforcement thereof
may be subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and to general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought and (ii) as any rights to indemnity or contribution
thereunder may be limited by federal and state securities laws and public
policy considerations.
(h) The Notes, the Exchange Notes and the Private Exchange Notes have
each been duly authorized by the Issuers and, when executed by the Issuers
and authenticated by the Trustee in accordance with the provisions of the
Indenture and, in the case of the Notes, delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, will be
entitled to the benefits of the Indenture and will constitute valid and
legally binding obligations of the Issuers enforceable in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally, and (ii) general principles of equity and the discretion
of the court before which any proceeding therefor may be brought.
(i) The Guarantees endorsed on the Notes and the guarantees to be
endorsed on the Exchange Notes and the Private Exchange Notes have each
been duly authorized by the Guarantor and, when the Notes are executed by
the Issuers and authenticated by the Trustee in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Guarantees
will be entitled to the benefits of the Indenture and will constitute valid
and legally binding obligations of the Guarantor enforceable in accordance
with their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to
<PAGE>
-11-
creditors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought.
(j) Immediately after the consummation of the transactions
contemplated by this Agreement (including the use of proceeds from the sale
of Notes at the Time of Purchase), the fair value and present fair saleable
value of the assets of the Company (on a consolidated basis) will exceed
the sum of its stated liabilities and identified contingent liabilities;
the Company (on a consolidated basis) will not be, after giving effect to
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby (including the use of
proceeds from the sale of Notes at the Time of Purchase), (i) left with
unreasonably small capital with which to carry on its business as it is
proposed to be conducted, (ii) unable to pay its debts (contingent or
otherwise) as they mature or (iii) otherwise insolvent.
(k) Each of the Issuers and the Guarantor (to the extent a party
thereto) has all requisite limited liability company or corporate power and
authority to (i) execute, deliver and perform its obligations under this
Agreement and each of the Basic Documents, (ii) execute, deliver and
perform its obligations under all other agreements and instruments executed
and delivered by the Company pursuant to or in connection with this
Agreement, and each of the Basic Documents and (iii) issue the Notes and
the Guarantee, as the case may be, in the manner and for the purpose
contemplated by this Agreement.
(l) Subsequent to the date as of which information is given in the
Final Memorandum there has not been (i) any event or condition that has had
or that could reasonably be expected to have a Material Adverse Effect,
(ii) any transaction entered into by the Issuers or the Guarantor, other
than in the ordinary course of business, that is material to the Issuers or
the Guarantor, or (iii) any dividend or distribution of any kind declared,
paid or made by the Guarantor or the Company on its common equity.
(m) Except as set forth in the Final Memorandum, there is no action,
suit, investigation or proceeding, governmental or otherwise, pending or,
to the best knowledge of the Company, threatened to which the Issuers or
the Guarantor is or would be a party or of which the properties or assets
of the Issuers or the Guarantor are or may be
<PAGE>
-12-
subject that (i) seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance and sale of the Notes by the Issuers or
the making of the Guarantee by the Guarantor or any of the other
transactions contemplated hereby, (ii) questions the legality or validity
of any such transactions or seeks to recover damages or obtain other relief
in connection with any such transactions or (iii) could, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(n) The execution, delivery and performance by the Issuers and the
Guarantor (to the extent a party thereto) of this Agreement and the Basic
Documents, and the issuance and sale by the Issuers of the Notes, the
making of the Guarantees by the Guarantor, and the execution, delivery and
performance by the Issuers and the Guarantor (to the extent a party
thereto) of all other agreements and instruments to be executed and
delivered by the Issuers and the Guarantor, pursuant hereto or thereto or
in connection herewith or therewith, and compliance by the Issuers and the
Guarantor (to the extent a party thereto) with the terms and provisions
hereof and thereof, do not and will not (i) violate any provision of any
law, rule or regulation (including, without limitation, Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System), order, writ,
judgment, decree, determination or award presently in effect or in effect
at the Time of Purchase having applicability to the Issuers or the
Guarantor or (ii) conflict with or result in a breach of or constitute a
default under the organizational documents of the Issuers or the Guarantor
or, as of the Time of Purchase, any indenture or loan or credit agreement,
or any other material agreement or instrument, to which the Issuers or the
Guarantor, is a party or by which the Issuers or the Guarantor, or any of
their respective properties or assets may be bound or affected, or (iii)
except as contemplated by this Agreement and the Basic Documents, result
in, or require the creation or imposition of, any Lien upon or with respect
to any of the properties now owned or hereafter acquired by the Issuers or,
the Guarantor, except, in each case, where such violation, conflict,
default or creation or imposition of any Lien would not (individually or in
the aggregate) reasonably be expected to have a Material Adverse Effect.
(o) Each agreement or instrument executed and delivered by the
Issuers or the Guarantor (to the extent a party thereto) in connection with
this Agreement and the Basic Documents has been duly and validly
authorized,
<PAGE>
-13-
executed and delivered by the Issuers and the Guarantor (to the extent a
party thereto) and constitutes or will constitute a valid and legally
binding obligation of the Issuers and the Guarantor (to the extent a party
thereto), enforceable against them in accordance with its terms, except (i)
that the enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally, and to
general principles of equity and the discretion of the court before which
any proceeding therefor may be brought and (ii) as any rights to indemnity
and contribution hereunder and thereunder may be limited by applicable law.
(p) Neither the Issuers nor the Guarantor is currently or, after
giving effect to the consummation of the transactions contemplated by this
Agreement and the Basic Documents, will be (i) in violation of its
respective organizational documents, (ii) in default (nor will an event
occur which with notice or passage of time or both would constitute such a
default) under or in violation of any indenture or loan or credit agreement
or any other material agreement or instrument to which it is a party or by
which it or any of its properties or assets may be bound or affected
(except as set forth in the Final Memorandum), (iii) in violation of any
order of any court, arbitrator or governmental body or (iv) in violation of
or will have violated any statute, rule or regulation of any governmental
authority, which default or violation (individually or in the aggregate)
could reasonably be expected to (x) affect the legality, validity or
enforceability of this Agreement or any of the Basic Documents or (y) have
a Material Adverse Effect.
(q) Except as set forth in the Final Memorandum, no authorization,
consent, approval, license, qualification or formal exemption from, nor any
filing, declaration or registration with, any court, governmental agency or
regulatory authority or any securities exchange is required in connection
with the execution, delivery or performance by the Issuers or the Guarantor
of this Agreement, or any of the Basic Documents, except (i) as may be
required under state securities or "blue sky" laws or the laws of any
foreign jurisdiction in connection with the offer and sale of the Notes or
(ii) as would not (individually or in the aggregate) have a Material
Adverse Effect. All such authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and
<PAGE>
-14-
registrations set forth in the Final Memorandum (other than as disclosed
therein) which are required to have been obtained by the date hereof have
been obtained or made, as the case may be, and are in full force and effect
and not the subject of any pending or, to the knowledge of the Company,
threatened attack by appeal or direct proceeding or otherwise.
(r) The Issuers are not and immediately after the Time of Purchase
will not be "investment companies" or, to the Company's knowledge,
companies "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(s) The execution and delivery of this Agreement and the other Basic
Documents and the sale of the Notes to the Initial Purchasers will not
involve any non-exempt prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code on the part of the Issuers or any
of their Subsidiaries. No Reportable Event (as defined in Section 4043 of
ERISA) has occurred during the five-year period prior to the date on which
this representation is made or deemed made with respect to any Employee
Benefit Plan (as defined below), and the Issuers and each of their
Subsidiaries have complied in all material respects with the applicable
provisions of ERISA and the Code in connection with the Employee Benefit
Plans. The present value of all accrued benefits under each Employee
Benefit Plan subject to Title IV of ERISA (based on the current liability,
interest rate and other assumptions used in preparation of the plan's Form
5500 Annual Report) did not, as of the last annual valuation date prior to
the date on which this representation is made or deemed made, exceed the
value of the assets of such plan allocable to such accrued benefits.
Neither the Issuers, any of their Subsidiaries, nor any Commonly Controlled
Entity (as defined below) has had a complete or partial withdrawal from any
Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA), and neither
the Issuers, any of their Subsidiaries, nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Issuers, any of
their Subsidiaries, or any such Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the valuation date most
closely preceding the date on which such representation is made or deemed
made. No such Multiemployer Plan is in reorganization or insolvent. There
are no material liabilities of the Issuers, any of their Subsidiaries, or
any Commonly Controlled Entity for post-
<PAGE>
-15-
retirement benefits to be provided to their current and former employees
under Plans which are welfare benefit plans (as described in Section 3(1)
of ERISA). "Commonly Controlled Entity" shall mean any person or entity
that, together with any Issuer or any Subsidiary of an Issuer, is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"Employee Benefit Plan" shall mean an employee benefit plan, as defined in
Section 3(3) of ERISA, which is maintained or contributed to by an Issuer,
any of their Subsidiaries or any Commonly Controlled Entity or to which an
Issuer, any of their Subsidiaries or any Commonly Controlled Entity may
have liability.
(t) The Company has good and valid title to, or valid and enforceable
leasehold interests (other than with respect to the lease relating to the
Company's New York office) in, all properties and assets identified in the
Final Memorandum as owned or leased, respectively, by it which are material
to the business of the Company, free and clear of all Liens, except (i)
such Liens as are described in the Final Memorandum or (ii) Liens created
in the ordinary course of business which are Permitted Liens (as defined in
the Indenture). All of the leases material to the business of the Company
and under which the Company holds properties described in the Final
Memorandum, are valid and binding as leased by them, with such exceptions
as are not material and do not interfere with the use made and proposed to
be made of such properties by the Company.
(u) No form of general solicitation or general advertising was used
by the Issuers or the Guarantor or their representatives in connection with
the offer and sale of the Notes. Neither the Issuers or the Guarantor nor
any Person authorized to act for any of them has, either directly or
indirectly, sold or offered for sale any of the Notes or any other similar
security of the Issuers to, or solicited any offers to buy any thereof
from, or has otherwise approached or negotiated in respect thereof with,
any Person or Persons other than with or through the Initial Purchasers;
and the Issuers and the Guarantor agree that neither they nor any Person
acting on their behalf will sell or offer for sale any Notes to, or solicit
any offers to buy any Notes from, or otherwise approach or negotiate in
respect thereof with, any Person or Persons so as thereby to bring the
issuance or sale of any of the Notes within the provisions of Section 5 of
the Act.
<PAGE>
-16-
(v) All tax returns required to be filed by the Issuers in any
jurisdiction (including foreign jurisdictions) have been so filed and all
taxes, assessments, fees and other charges including, without limitation,
withholding taxes, penalties, and interest ("Taxes") due or claimed to be
due have been paid, other than those Taxes being contested in good faith
and those Taxes for which adequate reserves or accruals have been
established in accordance with generally accepted accounting principles,
except where the failure to file such returns or to pay such Taxes is not
reasonably likely to have, singly or in the aggregate, a Material Adverse
Effect. The Company knows of no actual or proposed additional tax
assessments for any fiscal period against the Issuers that, individually or
in the aggregate, is reasonably likely to have a Material Adverse Effect.
(w) The Company is the sole and exclusive owner or licensee of all
trade names, unregistered trademarks and service marks, brand names,
patents, registered and unregistered copyrights, registered trademarks and
service marks, and all applications for any of the foregoing, and all
permits, grants and licenses or other rights with respect thereto, the
absence of which would have or could reasonably be expected to have a
Material Adverse Effect. Except as set forth in the Final Memorandum,
neither of the Issuers has been charged with any material infringement of
any intangible property of the character described above or been notified
or advised of any material claim of any other Person relating to any of the
intangible property which infringements or claims (individually or in the
aggregate) would have a Material Adverse Effect.
(x) Except as set forth in the Final Memorandum, the Issuers comply
with all, and have no liability under any, laws, rules and regulations
(including, without limitation, all applicable environmental laws, rules
and regulations) applicable to the Issuers, and the Issuers own or possess
and are operating in compliance in all material respects with the terms,
provisions, conditions, restrictions and limitations contained in all
licenses, franchises, approvals, certificates and permits (including,
without limitation, environmental permits) from all Federal, state,
territorial, foreign and local governmental and regulatory authorities
which are necessary to own or lease their respective properties and assets
and to the conduct of their respective businesses (other than compliance
with or liability under such laws, rules, regulations, licenses,
<PAGE>
-17-
franchises, approvals, certificates or permits that are immaterial in scope
or application to the Issuers). There are no citations or notices of
forfeiture or other proceedings pending or, to the best knowledge of the
Company, threatened or any basis therefor which would lead to the
revocation, termination, suspension or non-renewal of any such license,
franchise, approval, certificate or permit except where all such
revocations, terminations, suspensions or non-renewals, individually or in
the aggregate, would not have a Material Adverse Effect. Other than as
disclosed in the Final Memorandum, (i) there are no license renewal or rate
or tariff proceedings existing, pending or, to the best knowledge of the
Company, threatened against the Issuers or the Guarantor that would have a
Material Adverse Effect, and (ii) there are no restrictions or limitations
contained in any applicable license, franchise, approval, certificate or
permit, or, to the best knowledge of the Company, threatened or proposed in
any pending or contemplated hearing, proceeding or procedure, that would
have a Material Adverse Effect.
(y) The Notes, the Guarantees, the Indenture, and the Registration
Rights Agreement conform in all material respects to the description
thereof in the Final Memorandum.
(z) Assuming the accuracy of the Initial Purchasers' representation
and warranties set forth in Section 3.2 hereof, and the due performance by
the Initial Purchasers of the covenants and agreements set forth in Section
3.2 hereof, the offer and sale of the Notes to the Initial Purchasers in
the manner contemplated by this Agreement and the Memorandum does not
require registration under the Act and the Indenture does not require
qualification under the Trust Indenture Act of 1939, as amended.
(aa) Except as set forth in the Final Memorandum, there is no strike,
labor dispute, slowdown or work stoppage with the employees of the company
which is pending or, to the best knowledge of the Company, threatened.
(bb) Each of the Company and its Subsidiaries carries insurance
(including self insurance) in such amounts and covering such risks as in
its reasonable determination is adequate for the conduct of its business
and the value of its properties.
<PAGE>
-18-
(cc) No securities of the Issuers are of the same class (within the
meaning of Rule 144A under the Act) as the Notes and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or
quoted in a U.S. automated interdealer quotation system.
(dd) Neither of the Issuers nor the Company has taken, nor will any of
them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of
the price of the Notes.
(ee) None of the Issuers, the Guarantors, any of their respective
Affiliates or any person acting on its or their behalf (other than the
Initial Purchaser) has engaged in any directed selling efforts (as that
term is defined in Regulation S under the Act ("Regulation S") with respect
to the Notes and the Company, the Guarantor and their respective Affiliates
and any person acting on its or their behalf (other than the Initial
Purchaser) have acted in accordance with the offering restrictions
requirements of Regulation S.
(ff) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate or represents the Company's good faith
estimates that are made on the basis of data derived from such sources.
(gg) Except as stated in the Final Memorandum, the Company does not
know of any claims for services, either in the nature of a finder's fee or
financial advisory fee, with respect to the offering of the Notes and the
transactions contemplated by the Final Memorandum.
Section 3.2. Resale of Notes. Each of the Initial Purchasers
---------------
represents and warrants (as to itself only) that it is a "qualified
institutional buyer" as defined in Rule 144A of the Act ("QIB"). Each of the
Initial Purchasers agrees with the Issuers (as to itself only) that (a) it has
not and will not solicit offers for, or offer or sell, the Notes by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Act; and (b) it has and will solicit offers
for the Notes only from, and will offer the Notes only to (A) in the case of
offers inside the United States, (i) Persons whom the Initial Purchasers
reasonably believe to be QIBs or, if any such Person is buying
<PAGE>
-19-
for one or more institutional accounts for which such Person is acting as
fiduciary or agent, only when such Person has represented to the Initial
Purchasers that each such account is a QIB, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A or (ii) a limited number of other institutional
investors reasonably believed by the Initial Purchasers to be "Accredited
Investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the Act) that,
prior to their purchase of the Notes, deliver to the Initial Purchasers a letter
containing the representations and agreements set forth in Annex A to the Final
Memorandum and (B) in the case of offers outside the United States, to Persons
other than U.S. Persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)); provided,
--------
however, that, in the case of this clause (B), in purchasing such Notes such
- -------
Persons are deemed to have represented and agreed as provided under the caption
"Notice to Investors" contained in the Final Memorandum.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
Section 4.1. Conditions Precedent to Obligations of the Initial
--------------------------------------------------
Purchasers. The obligation of each Initial Purchaser to purchase the Notes to
- ----------
be purchased by it hereunder is subject, at the Time of Purchase, to the
satisfaction of the following conditions:
(a) At the Time of Purchase, the Initial Purchasers shall have
received the opinion, dated as of the Time of Purchase and addressed to the
Initial Purchasers, of Kirkland & Ellis, counsel for the Issuers and the
Guarantor, in form and substance satisfactory to counsel for the Initial
Purchasers, to the effect as set forth on Exhibit A hereto.
---------
(b) The Initial Purchasers shall have received an opinion, addressed
to the Initial Purchasers in form and substance satisfactory to the Initial
Purchasers and dated the Time of Purchase, of Cahill Gordon & Reindel,
counsel to the Initial Purchasers.
(c) The Initial Purchasers shall have received from Ernst & Young LLP
a comfort letter or letters dated the date
<PAGE>
-20-
hereof and the Closing in form and substance reasonably satisfactory to
counsel to the Initial Purchasers.
(d) The representations and warranties made by the Issuers and the
Guarantor herein shall be true and correct in all material respects (except
for changes expressly provided for in this Agreement) on and as of the Time
of Purchase with the same effect as though such representations and
warranties had been made on and as of the Time of Purchase, the Issuers and
the Guarantor shall have complied in all material respects with all
agreements as set forth in or contemplated hereunder and in the Basic
Documents required to be performed by it at or prior to the Time of
Purchase and the Company shall have furnished to each Purchaser a
certificate, dated the Time of Purchase, to such effect.
(e) Subsequent to the date of the Final Memorandum, (i) there shall
not have been any change, or any development involving a prospective
change, which has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the Issuers shall have conducted their respective
businesses only in the ordinary course.
(f) At the Time of Purchase and after giving effect to the
consummation of the transactions contemplated by this Agreement and the
Basic Documents, there shall exist no Default or Event of Default.
(g) The purchase of and payment for the Notes by the Initial
Purchasers hereunder shall not be prohibited or enjoined (temporarily or
permanently) by any applicable law or governmental regulation (including,
without limitation, Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System).
(h) At the Time of Purchase, the Initial Purchasers shall have
received a certificate, dated the Time of Purchase, from the Issuers and
the Guarantor stating that the conditions specified in Sections 4.1(d),
(e), (f) and (g) have been satisfied or duly waived at the Time of
Purchase.
(i) Each of the Basic Documents shall be satisfactory in form and
substance to each of the Initial Purchasers and shall have been executed
and delivered by all the respective parties thereto and shall be in full
force and effect.
<PAGE>
-21-
(j) All proceedings taken in connection with the issuance of the
Notes and the transactions contemplated by this Agreement, the Basic
Documents and all documents and papers relating thereto shall be reasonably
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers. The Initial Purchasers and counsel to the Initial Purchasers
shall have received copies of such papers and documents as they may
reasonably request in connection therewith, all in form and substance
reasonably satisfactory to them.
On or before the Closing, the Initial Purchasers and counsel to the
Initial Purchasers shall have received such further documents, opinions,
certificates and schedules or other instruments relating to the business,
corporate, legal and financial affairs of the Issuers as they may reasonably
request.
ARTICLE V
COVENANTS
---------
Section 5.1. Covenants of the Issuers and the Guarantor. The Issuers
------------------------------------------
and the Guarantor covenant and agree with each of the Initial Purchasers that:
(a) The Issuers will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers shall
not previously have been advised and furnished a copy for a reasonable
period of time prior to the proposed amendment or supplement and as to
which the Initial Purchasers shall not have given their consent, which
consent shall not be unreasonably withheld. The Issuers will promptly, upon
the reasonable request of the Initial Purchasers or counsel to the Initial
Purchasers, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable in
connection with the resale of the Notes by the Initial Purchasers.
(b) The Issuers will cooperate with the Initial Purchasers in
arranging for the qualification of the Notes for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Initial
Purchasers may designate and will continue such qualifications in effect
for as long as may be reasonably necessary to complete the resale of the
Notes; provided, however, that in connection therewith, the Issuers shall
not be required to qualify as a foreign corporation or to execute a general
consent to
<PAGE>
-22-
service of process in any jurisdiction or subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction where it is not
then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Notes or the Private Exchange Notes, any
event occurs or information becomes known as a result of which the Final
Memorandum as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is necessary
at any time to amend or supplement the Final Memorandum to comply with
applicable law, the Issuers will promptly notify the Initial Purchasers
thereof (who thereafter will not use such Final Memorandum until
appropriately amended or supplemented) and will prepare, at the expense of
the Issuers, an amendment or supplement to the Final Memorandum that
corrects such statement or omission or effects such compliance.
(d) The Issuers will, without charge, provide to the Initial
Purchasers and to counsel to the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as the Initial Purchasers may reasonably request.
(e) The Issuers will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For and during the period ending on the date no Notes are
outstanding, the Issuers will furnish to the Initial Purchasers copies of
all reports and other communications (financial or otherwise) furnished by
the Issuers to the Trustee or the holders of the Notes and, promptly after
available, copies of any reports or financial statements furnished to or
filed by the Issuers with the Commission or any national securities
exchange on which any class of securities of the Company may be listed.
(g) Prior to the Time of Purchase, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared, a copy of any
unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Final Memorandum.
<PAGE>
-23-
(h) None of the Issuers or any of its Affiliates will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale
of the Notes in a manner which would require the registration under the Act
of the Notes.
(i) The Issuers will not solicit any offer to buy or offer to sell the
Notes by means of any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the Act
and not salable in full under Rule 144 under the Act (or any successor
provision), the Issuers will make available, upon request, to any seller of
such Notes the information specified in Rule 144A(d)(4) under the Act,
unless the Issuers are then subject to Section 13 or 15(d) of the Exchange
Act.
(k) The Issuers will use their best efforts to (i) permit the Notes to
be included for quotation on PORTAL and (ii) permit the Notes to be
eligible for clearance and settlement through The Depository Trust Company.
(l) The Issuers and the Guarantor (to the extent a party thereto) will
do and perform all things required to be done and performed by them under
this Agreement and the Basic Documents prior to or after the Closing and to
satisfy all conditions precedent on their part to the obligations of the
Initial Purchasers to purchase and accept delivery of the Notes.
(m) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S) the Issuers will not register any
transfer of such Notes not made in accordance with the provisions of
Regulation S and will not, except in accordance with the provisions of
Regulation S, if applicable, issue any such Notes in the form of definitive
securities.
<PAGE>
-24-
ARTICLE VI
FEES
----
Section 6.1. Costs, Expenses and Taxes. The Issuers and the
-------------------------
Guarantor, jointly and severally, agree to pay all costs and expenses incident
to the performance of their obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 8.2 hereof, including, but not limited to, all costs and
expenses incident to (i) the printing, word processing and reproduction of this
Agreement, each of the Basic Documents, any amendment or supplement to or
modification of any of the foregoing and any and all other documents furnished
pursuant hereto or thereto or in connection herewith or therewith, (ii) any
costs of printing the Preliminary Memorandum and the Final Memorandum and any
amendment or supplement thereto, any other marketing related materials, (iii)
all arrangements relating to the delivery to the Initial Purchasers of copies of
the foregoing documents, (iv) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Company, (v)
preparation (including printing), issuance and delivery to the Initial
Purchasers of the Notes, (vi) the qualification of the Notes under state
securities and "Blue Sky" laws, including filing fees, word processing and
reproduction costs of any "Blue Sky" memoranda and fees and disbursements of
counsel to the Initial Purchasers relating thereto not to exceed $15,000, (vii)
expenses of Company personnel and the cost of any privately chartered air travel
in connection with any meetings with prospective investors in the Notes, (viii)
fees and expenses of the trustee, including fees and expenses of counsel to the
Trustee, (ix) all expenses and listing fees incurred in connection with the
application for quotation of the Notes on PORTAL, (x) any fees charged by
investment rating agencies for the rating of the Notes, and (xi) except as
limited by Article VII, all costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses), if any, in connection with the
enforcement of this Agreement, the Notes or any other agreement furnished
pursuant hereto or thereto or in connection herewith or therewith. In addition,
the Issuers shall pay any and all stamp, transfer and other similar taxes
payable or determined to be payable in connection with the execution and
delivery of this Agreement, any Basic Document or the issuance of the Notes, and
shall save and hold each Initial Purchaser harmless from and against any and all
liabilities with respect to or resulting from any delay in paying, or omission
to pay, such taxes.
<PAGE>
-25-
ARTICLE VII
INDEMNITY
---------
Section 7.1. Indemnity.
---------
(a) Indemnification by the Issuers and the Guarantor. The Issuers and
------------------------------------------------
the Guarantor, jointly and severally, agree and covenant to hold harmless and
indemnify each of the Initial Purchasers and any Affiliates thereof (including
any director, officer, employee, agent or controlling Person of any of the
foregoing) from and against any losses, claims, damages, liabilities and
expenses (including expenses of investigation) to which such Initial Purchaser
and its Affiliates may become subject arising out of or based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Memorandum and any amendments or supplements thereto, the Basic Documents, any
documents filed with the Commission or any State Commission (collectively, the
"Offering Materials") or arising out of or based upon the omission or alleged
omission to state in any of the Offering Materials a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Issuers and the Guarantor shall not be liable under
- -------- -------
this paragraph (a) to the extent that such losses, claims, damages or
liabilities arose out of or are based upon an untrue statement or omission made
in any of the documents referred to in this paragraph (a) in reliance upon and
in conformity with the information relating to the Initial Purchasers furnished
in writing by such Initial Purchasers for inclusion therein; provided, further,
-------- -------
that the Issuers and the Guarantor shall not be liable under this paragraph (a)
to the extent that such losses, claims, damages or liabilities arose out of or
are based upon an untrue statement or omission made in any Memorandum that is
corrected in the Final Memorandum (or any amendment or supplement thereto) if
the person asserting such loss, claim, damage or liability purchased Notes from
an Initial Purchaser in reliance on such Memorandum but was not given the Final
Memorandum (or any amendment or supplement thereto) on or prior to the
confirmation of the sale of such Notes. The Issuers and the Guarantor, on a
joint and several basis, further agree to reimburse each Initial Purchaser for
any reasonable legal and other expenses as they are incurred by it in connection
with investigating, preparing to defend or defending any lawsuits, claims or
other proceedings or investigations arising in any manner out of or in
connection with such Person being an Initial Purchaser; provided that if the
--------
Issuers or the Guarantor reimburses an Initial Purchaser hereunder for any
expenses incurred in connection with a lawsuit, claim or other proceeding
<PAGE>
-26-
for which indemnification is sought, such Initial Purchaser hereby agrees to
refund such reimbursement of expenses to the extent that the losses, claims,
damages or liabilities are not entitled to indemnification hereunder. The
Issuers and the Guarantor further agree that the indemnification, contribution
and reimbursement commitments set forth in this Article VII shall apply whether
or not an Initial Purchaser is a formal party to any such lawsuits, claims or
other proceedings. The indemnity, contribution and expense reimbursement
obligations of the Issuers and the Guarantor under this Article VII shall be in
addition to any liability the Issuers and the Guarantor may otherwise have.
(b) Indemnification by the Initial Purchasers. Each of the Initial
-----------------------------------------
Purchasers agrees and covenants, severally and not jointly, to hold harmless and
indemnify the Issuers and the Guarantor and any Affiliates thereof (including
any director, officer, employee, agent or controlling Person of any of the
foregoing) from and against any losses, claims, damages, liabilities and
expenses insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement of any material fact contained in
the Offering Materials, or upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or omission was made in reliance upon and in conformity with the
information relating to such Initial Purchaser furnished in writing by such
Initial Purchaser for inclusion therein. The indemnity, contribution and
expense reimbursement obligations of the Initial Purchasers under this Article
VII shall be in addition to any liability the Initial Purchasers may otherwise
have.
(c) Procedure. If any Person shall be entitled to indemnity hereunder
---------
(each an "Indemnified Party"), such Indemnified Party shall give prompt written
notice to the party or parties from which such indemnity is sought (each an
"Indemnifying Party") of the commencement of any action, suit, investigation or
proceeding, governmental or otherwise (a "Proceeding"), with respect to which
such Indemnified Party seeks indemnification or contribution pursuant hereto;
provided, however, that the failure so to notify the Indemnifying Parties shall
- -------- -------
not relieve the Indemnifying Parties from any obligation or liability except to
the extent that the Indemnifying Parties have been prejudiced materially by such
failure. The Indemnifying Parties shall have the right, exercisable by giving
written notice to an Indemnified Party promptly after the receipt of written
notice from such Indemnified Party of such Proceeding, to assume, at the
Indemnifying Parties' expense, the defense of any
<PAGE>
-27-
such Proceeding, with counsel reasonably satisfactory to such Indemnified Party;
provided, however, that an Indemnified Party or parties (if more than one such
- -------- -------
Indemnified Party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or parties unless: (1) the Indemnifying Parties agree to
pay such fees and expenses; or (2) the Indemnifying Parties fail promptly to
assume the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such Indemnified Party or parties; or (3) the named parties to
any such Proceeding (including any impleaded parties) include both such
Indemnified Party or parties and the Indemnifying Party or an Affiliate of the
Indemnifying Party and such Indemnified Parties, and the Indemnified Parties
shall have been advised in writing by counsel that there may be one or more
legal defenses available to such Indemnified Party or parties that are different
from or additional to those available to the Indemnifying Parties, in which
case, if such Indemnified Party or parties notifies the Indemnifying Parties in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Parties, the Indemnifying Parties shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Parties, it being understood, however, that, unless there exists a
conflict among Indemnified Parties, the Indemnifying Parties shall not, in
connection with any one such Proceeding or separate but substantially similar or
related Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such Indemnified Party or Parties, or for fees and expenses that are
not reasonable. No Indemnified Party or Parties will settle any Proceeding
without the consent of the Indemnifying Party or Parties (but such consent shall
not be unreasonably withheld). No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
or threatened Proceeding in respect of which any Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability or claims that are the subject of such
Proceeding.
Section 7.2. Contribution. If for any reason the indemnification
------------
provided for in Section 7.1 of this Agreement is unavailable to an Indemnified
Party, or insufficient to hold it harmless, in respect of any losses, claims,
damages, liabilities
<PAGE>
-28-
or expenses referred to therein, then each applicable Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect not only the
relative benefits received by the Indemnifying Party on the one hand and the
Indemnified Party on the other, but also the relative fault of the Indemnifying
and Indemnified Parties in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Indemnifying and Indemnified Parties shall be deemed to be in the same
proportion as the total proceeds from the offering of the Notes (before
deducting expenses) received by the Issuers bear to the total discounts and
commissions received by each Initial Purchaser. The relative fault of the
Indemnifying and Indemnified Parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying or Indemnified Parties and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses incurred by such party in
connection with investigating or defending any such claim.
The Issuers and the Guarantor and each of the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to the
immediately preceding paragraph were determined pro rata or per capita or by any
other method of allocation which does not take into account the equitable
considerations referred to in such paragraph. Notwithstanding any other
provision of this Section 7.2, no Initial Purchaser shall be obligated to make
contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
<PAGE>
-29-
Section 7.3. Registration Rights Agreement. Notwithstanding anything
-----------------------------
to the contrary in this Article 7, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim with
respect thereto.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1. Survival of Provisions. The representations, warranties
----------------------
and covenants of the Issuers, the Guarantor, their respective officers and the
Initial Purchasers made herein, the indemnity and contribution agreements
contained herein and each of the provisions of Articles VI, VII and VIII shall
remain operative and in full force and effect regardless of (a) any
investigation made by or on behalf of the Issuers, the Guarantor, any Initial
Purchaser or any Indemnified Party, (b) acceptance of any of the Notes and
payment therefor, (c) any termination of this Agreement, or (d) disposition of
the Notes by the Initial Purchasers whether by redemption, exchange, sale or
otherwise.
Section 8.2. Termination. (a) This Agreement may be terminated in
-----------
the sole discretion of the Initial Purchasers by notice to the Company given
prior to the Time of Purchase in the event that the Issuers shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
their part to be performed or satisfied hereunder at or prior thereto or, if at
or prior to the Closing:
(i) the Issuers or the Guarantor shall have sustained any loss or
interference with respect to their businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down or work stoppage or
any legal or governmental proceeding, which loss or interference, in the
sole judgment of the Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchasers, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a Change of Control (as defined in the
Indenture) of the Issuers or the Guarantor), except in each case as
described in the Final Memorandum (exclusive of any amendment or supplement
thereto);
<PAGE>
-30-
(ii) trading in securities of the Company or in securities generally
on the New York Stock Exchange, American Stock Exchange or the Nasdaq
National Market shall have been suspended or minimum or maximum prices
shall have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of (A), (B) or (C) above and in the sole
judgment of the Initial Purchasers, makes it impracticable or inadvisable
to proceed with the offering or the delivery of the Notes as contemplated
by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 8.2 shall
be without liability of any party to any other party except as provided in
Section 8.1 hereof.
Section 8.3. No Waiver; Modifications in Writing. No failure or delay
-----------------------------------
on the part of the Issuers, the Guarantors or any Initial Purchaser in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Issuers or
the Guarantor or any Initial Purchaser at law or in equity or otherwise. No
waiver of or consent to any departure by the Issuers or the Guarantor from any
provision of this Agreement shall be effective unless signed in writing by the
party entitled to the benefit thereof, provided that notice of any such waiver
--------
shall be given to each party hereto as set forth below. Except as otherwise
provided herein, no amendment, modification or termination of any provision of
this Agreement shall be effective unless signed in writing by or on behalf of
each of the Issuers, the Guarantor and each Initial
<PAGE>
-31-
Purchaser. Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Issuers or the Guarantor from the terms of any provision
of this Agreement, shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on the Issuers or the
Guarantor in any case shall entitle the Issuers or the Guarantor to any other or
further notice or demand in similar or other circumstances.
Section 8.4. Information Supplied by the Initial Purchasers. The
----------------------------------------------
statements set forth in the first paragraph on page (i), the fourth and the
fifth sentences of the third paragraph and in the sixth paragraph under the
heading "Plan of Distribution" in the Final Memorandum (to the extent such
statements relate to the Initial Purchasers) constitute the only information
furnished by the Initial Purchasers to the Company for the purposes of Sections
3.1(a) and 7.1(a) and (b) hereof.
Section 8.5. Communications. All notices, demands and other
--------------
communications provided for hereunder shall be in writing, and, (a) if to the
Initial Purchasers, shall be given by registered or certified mail, return
receipt requested, telex, telegram, telecopy, courier service or personal
delivery, addressed to First Union Capital Markets Corp., 301 South College
Street TW-10, Charlotte, NC 28288, and CIBC Wood Gundy Securities Corp., 425
Lexington Avenue, 3rd floor, New York, New York 10017, with a copy to Cahill
Gordon & Reindel, 80 Pine Street, New York, New York, 10005, Attention: Roger
Meltzer, Esq. and (b) if to the Issuers or the Guarantor, shall be given by
similar means to 6420 Wilshire Boulevard, Los Angeles, California 90048, attn:
Chief Financial Officer and General Counsel, with copies to Kirkland & Ellis,
200 East Randolph Drive, Chicago, IL 60601, attn: John Weissenbach, Esq. In
each case notices, demands and other communications shall be deemed given when
received.
Section 8.6. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
Section 8.7. Successors. This Agreement shall inure to the benefit of
----------
and be binding upon the Initial Purchasers, the Issuers, the Guarantor and their
respective successors and legal representatives, and nothing expressed or
mentioned in this
<PAGE>
-32-
Agreement is intended or shall be construed to give any other Person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such Persons and for the benefit of no other Person except that (i)
the indemnities of the Issuers and the Guarantor contained in Section 7.1(a) of
this Agreement shall also be for the benefit of the directors, officers,
employees and agents of the Initial Purchasers and any Person or Persons who
control the Initial Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and (ii) the indemnities of the Initial
Purchasers contained in Section 7.1(b) of this Agreement shall also be for the
benefit of the directors of the Issuers and the Guarantor, their officers and
any Person or Persons who control the Issuers or the Guarantor within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser
of Notes from the Initial Purchasers will be deemed a successor because of such
purchase.
Section 8.8. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
-------------
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 8.9. Severability of Provisions. Any provision of this
--------------------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.10. Headings. The Article and Section headings and Table of
--------
Contents used or contained in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
PETERSEN PUBLISHING COMPANY, L.L.C.
(a Delaware limited liability company)
By: ____________________________________
Name:
Title:
PETERSEN CAPITAL CORP.
(a Delaware corporation)
By: ____________________________________
Name:
Title:
PETERSEN HOLDINGS, L.L.C.
(a Delaware limited liability company)
as Guarantor
By: ___________________________________
Name:
Title:
<PAGE>
FIRST UNION CAPITAL MARKETS CORP.
By: ___________________________________
Name:
Title:
CIBC WOOD GUNDY SECURITIES CORP.
By: ___________________________________
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
- ----------------- ----------------
<S> <C>
First Union Capital Markets Corp. $ 55,000,000
CIBC Wood Gundy Securities Corp. 45,000,000
------------
Total $100,000,000
------------
</TABLE>
<PAGE>
EXHIBIT 10.1
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is made and entered into as
of August 15, 1996 by and between Robert E. Petersen ("Petersen") and Petersen
Publishing Company, a California corporation (the "Company", and together with
Petersen, the "Licensor"), and BrightView Communications Group, Inc., a Delaware
corporation (including permitted assignees and/or sublicensees, the "Licensee").
WHEREAS, Licensee and the Company entered into that certain Asset
Purchase Agreement dated August 15, 1996 (the "Asset Purchase Agreement") for
the conveyance of various assets of the Company, including, but not limited to,
(a) any brand name, copyright, patent, service mark, trademark - and all
registrations or applications for registration of any of the foregoing - listed
on Schedule A hereto (the "Marks") and (b) all of the Company's rights, in the
United States and worldwide, to publish, sell, distribute and license those
publications set forth on Schedule B to this Agreement (the "Publications");
WHEREAS, Licensee desires to use, and Licensor desires to grant to
Licensee, the right to use the name, tradename, dba, copyright, service mark and
trademark "Petersen" and "Petersen Publishing Company" and derivatives thereof
(the "Licensed Property") as provided herein;
WHEREAS, a Licensor serves as a trustee of the R.E. & M.M. Petersen
Living Trust, dated January 17, 1983, which currently owns all of the
outstanding capital stock of the Company;
NOW, THEREFORE, in consideration of the recitals above and the mutual
promises set forth below, effective as of the Closing under the Asset Purchase
Agreement, the parties hereto agree as follows:
1. License. Licensor hereby grants to Licensee a royalty free exclusive
-------
license (the "License") to use the Licensed Property solely in connection with
Licensee's publication, sale,
<PAGE>
distribution and licensing of the Publications and the Marks for the conduct of
a publishing, programming, events and media business, including without
limitation electronic media, by Licensee with the various assets conveyed to
Licensee under the Asset Purchase Agreement, and new or additional publications,
media, programming or events and the business and activities ancillary thereto
(collectively, the "Publishing Business"). Licensee may not grant a license or
sub-license to use the Licensed Property to any Person other than the Licensee,
except for Persons controlled by, or under common control with, Licensee or as
contemplated by Section 16 below. Licensor agrees that it will not use or grant
to Person any license to use the Licensed Property for purposes competitive to
the Licensee's Publishing Business. For purposes of this Agreement, "Person"
means an association, a corporation, a limited liability company, an individual,
a partnership, a trust or any other entity or organization, including any
government or any agency, bureau, board, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign. Except as
provided in the first or third sentence of this Section 1, nothing in this
Agreement shall affect the right of Licensor to use and license the Licensed
Property; except that Licensor agrees not to use the name "Petersen Publishing
Company" to conduct any business.
2. Term of License. The term of the License shall commence as of the
---------------
date hereof and shall continue in perpetuity, unless this Agreement is earlier
terminated pursuant to the terms hereof (the "Term").
3. Use of Licensed Property. Licensee shall not use and shall cease
------------------------
any use of the Licensed Property in a manner that: (i) contravenes any statute
or regulation; (ii) impairs the validity or enforceability of the Licensed
Property; (iii) impairs the quality of products and services with which the
Licensed Property is used; (iv) associates the Licensed Property with any
immoral, lewd, prurient, lascivious or licentious conduct or image (except to
the extent, if any, consistent with the practices and policies of the Company
prior to the Closing); or (v) disparages the Licensed Property, the Licensor, or
any Affiliate of Licensor. For purposes of this Agreement, "Affiliate of
Licensor" or "Affiliate" shall mean any spouse and members of
2
<PAGE>
the immediate family of Petersen and any Person controlled by, or under common
control with, Licensor. Licensee agrees that all proprietary right and goodwill
in the Licensed Property shall inure to the benefit of Licensor, that the uses
of the Licensed Property by Licensee shall not create any interest or right,
express or implied, of the Licensee in the Licensed Property except as set forth
in this Agreement, and that Licensee does not and will not assert any claim to
any ownership thereof. If, by operation of law, or otherwise, Licensee is
deemed to or appears to own any property rights in the Licensed Property,
Licensee shall, at Licensor's request, execute any and all documents necessary
to confirm or otherwise establish Licensor's rights therein. The rights of
copyright granted by the License shall not be construed as granting to Licensor
any ownership rights in works of authorship created by or for Licensee.
4. Preservation of Licensed Property. Licensee, at its cost, shall
---------------------------------
take all steps necessary to preserve and protect the validity of the Licensed
Property, to the extent relating to the Publishing Business. All displays of the
Licensed Property by Licensee shall bear such trademark and/or copyright notices
or other legal notices which Licensor from time to time may prescribe, and all
such notices shall be printed legibly and irremovably.
5. Approvals, Samples, Quality Control.
-----------------------------------
(a) The quality of Publications, new or additional publications,
media and events and other activities of the Publishing Business for which
the Licensee utilizes at any time and in any manner any Licensed Property
(the "Relevant Publications") shall meet or exceed the quality of any
products or services provided by Licensor or any Affiliate of Licensor
prior to the date hereof.
(b) In the event Licensor shall have reasonable cause to believe
that the standard of quality required herein for the Relevant Publications
has not been met, Licensor shall give notice thereof to Licensee specifying
in reasonable detail the alleged deficiencies, and Licensee shall have a
period of 30 days within which to conform to such standard. Licensee shall
permit representatives of Licensor to inspect Licensee's facilities upon
reasonable
3
<PAGE>
notice and during normal business hours to determine whether Licensee is
maintaining the quality standard set forth in this Section 5.
6. Infringement Actions. In the event that Licensee learns of any
--------------------
infringement, misuse or misappropriation of the Licensed Property, it shall
promptly notify Licensor thereof in writing. In such event, Licensee shall have
the initial right to institute any legal action or proceeding concerning
infringement, misuse or misappropriation of the Licensed Property and at its
option to join Licensor as plaintiff. If Licensee institutes any legal action
or proceeding, Licensee shall indemnify and hold Licensor harmless from and
against any and all liabilities, damages, judgments, penalties, losses, costs,
expenses, claims, suits or demands relating to or arising out of such legal
action or proceeding. Licensee may select counsel of its choice, and shall
control the action and shall bear the entire cost of such action, and shall be
entitled to retain the entire amount of any recovery by way of judgment, award,
decree or settlement. If Licensee determines, in its sole discretion, not to
institute any legal action or proceeding, Licensor shall have the right, but not
the obligation, to institute any legal action or proceeding; provided, however,
that Licensor agrees to indemnify and hold Licensee harmless from and against
any and all liabilities, damages, judgments, penalties, losses, costs, expenses,
claims, suits or demands relating to or arising out of such legal action or
proceeding. In such event, Licensor may select counsel of its choice, and shall
control the action and shall bear the entire cost of such action, and shall be
entitled to retain the entire amount of any recovery by way of judgment, award,
decree or settlement. Each party shall cooperate with the other party in any
such actions against third parties, and may if such party desires, elect to be
represented by counsel of its choice, but at its own expense.
7. Indemnification. Licensee will protect, defend, indemnify and
---------------
hold Licensor and Affiliates, and the officers, directors, employees,
shareholders and agents of each of them, harmless from and against any and all
liabilities, damages, judgments, penalties, losses, costs, expenses (including
without limitation reasonable attorneys' fees), claims, suits, or demands
relating to or arising from any breach by Licensee of any of its
representations, warranties or agreements hereunder or by reason
4
<PAGE>
of the publication, distribution or other use by Licensee of the Licensed
Property.
8. Insurance. Licensee shall obtain and maintain during the Term of
---------
this Agreement and for a period of five (5) years following its termination,
standard comprehensive Public and Product Liability and Advertising Insurance,
from a recognized insurance company which is reasonably acceptable to Licensor.
The form of said insurance must be reasonably acceptable to Licensor, and the
policy shall name Licensor as an additional named insured. Such policy shall
provide protection against any and all claims, demands and causes of action
arising out of any defects or failure to perform alleged or otherwise, of the
Relevant Publications or any material used in connection therewith or any use
thereof. The amount of coverage shall be not less than Five Million Dollars
($5,000,000) combined single limit, with a deductible amount not to exceed Ten
Thousand Dollars ($10,000), for each single occurrence for bodily injury and/or
for property damage. The policy shall provide for thirty (30) days prior notice
to Licensor from the insurer by Registered or Certified Mail, return receipt
requested, in the event of any modification, cancellation or termination.
Licensee agrees to furnish Licensor with a certificate of insurance evidencing
same within thirty (30) days after Closing under the Asset Purchase Agreement
and, in no event shall Licensee publish, distribute or sell any issue of any
Relevant Publication incorporating any Licensed Property prior to receipt by
Licensor of such evidence of insurance. For the purposes of this paragraph,
"Licensor" shall include agents and employees of Licensor and agents, employees,
officers, directors and partners of any Affiliate.
9. Termination.
-----------
(a) Licensor may terminate this Agreement with respect to the
Licensee's ability to use or license the Licensed Property in connection with a
Publication (or any new or additional publication or media) and the Marks and
activities (including, without limitation, publishing, programming, events and
other media) related to such Publication (or new or additional publication or
media) upon written notice effective immediately, if Licensee commits any
material breach of this Agreement in connection with such Publication (or new
publication or other media) or its Marks and related activities (including,
without
5
<PAGE>
limitation, publishing, programming, events and other media) and fails to cure
the breach within sixty (60) days after receipt of Licensor's written request to
do so;
(b) In addition to its rights to terminate this Agreement in part
under Section 9(a), Licensor may terminate this Agreement, in whole, upon
written notice effective immediately, if Licensee has materially breached this
Agreement with respect to any three or more Publications, new or additional
publications, or media or its Marks or related activities and in connection
therewith Licensor has exercised its rights to terminate this Agreement, in
part, pursuant to Section 9(a).
(c) Licensee may terminate this Agreement for its convenience at any
time by giving Licensor ten (10) days prior written notice thereto, provided
however that no such termination shall relieve Licensee of its obligations to
indemnify and hold harmless Licensor pursuant to Sections 6 or 7 hereof.
10. Effect of Termination. If this Agreement is terminated, or
---------------------
terminated in part pursuant to Section 9(a), Licensee and its receivers,
representatives, trustees, agents, administrators, successors and/or permitted
assignees of Licensee shall have no further rights to use the Licensed Property
hereunder (or, if terminated in part, with respect to the Publications, new or
additional publications, or other media and related activities so terminated).
11. Equitable Relief and Monetary Damages. Licensee acknowledges
-------------------------------------
that a breach of this Agreement by Licensee would cause immediate and
irreparable harm to Licensor for which money damages could not adequately
compensate Licensor. Therefore, Licensor shall have the right to enforce this
Agreement, not only by an action or actions for damages, but also by an action
or actions for specific performance or injunctive or other equitable relief in
order to enforce or prevent any violations of the terms or conditions of this
Agreement, without proof of actual damages and without the posting of bond or
other security.
12. Amendments; Waivers. This Agreement and any Schedule attached
-------------------
hereto may be amended only by agreement in writing of both parties. No waiver
of any provision nor consent
6
<PAGE>
to any exception to the terms of this Agreement shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
13. Exhibits and Schedules; Integration. Each Schedule delivered
-----------------------------------
pursuant to the terms of this Agreement shall be in writing and shall constitute
a part of this Agreement, although such Schedule need not be attached to each
copy of this Agreement. This Agreement, together with such Schedules,
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties in connection therewith.
14. Governing Law. This Agreement, the legal relations between the
-------------
parties and any Action, whether contractual or non-contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and performed in such State and without regard to conflicts of
law doctrines. For purposes of this Agreement, "Action" shall mean any
complaint, petition, suit or other proceeding, whether civil or criminal, in law
or in equity, before any arbitrator or any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether state, federal or local,
domestic or foreign.
15. Assignment. Licensor shall not assign any of its rights or
----------
privileges hereunder without the prior written consent of Licensee (which
consent the Licensee shall not withhold unreasonably), except to an Affiliate or
member of the immediate family of Petersen. Licensee shall not assign any of
its rights or privileges hereunder without the prior written consent of Licensor
(which consent the Licensor shall not withhold unreasonably), except to a
successor in ownership of all or substantially all of the assets related to the
Publishing Business or substantially all of the stock of Licensee. Licensee may
sub-license the Licensed Property to any entity in which it holds a significant
economic interest or in a transaction from which it derives a significant
economic benefit, if the following apply:
7
<PAGE>
(a) Licensee retains control rights sufficient to permit Licensee to
ensure enforcement against sub-licensee of the terms set forth in Sections 3 and
5 of this Agreement;
(b) the sub-license entered into between Licensee and its sub-
licensee expressly permits Licensor to enforce the terms of this Agreement
against the sub-licensee; and
(c) Licensee is liable to Licensor for any breach of its sub-licensee
of this Agreement and any such breach by a sub-licensee shall also constitute a
breach of this Agreement by Licensee.
16. Current Assignment of Licensed Property. Notwithstanding anything
---------------------------------------
herein to the contrary, and provided that this Agreement is in effect at the
time of the deaths of Robert E. Petersen and Margaret Petersen, Licensor hereby
assigns to Licensee, effective immediately upon the deaths of the last to die of
Robert E. Petersen and Margaret Petersen, all of Licensor's right, title and
interest in and to: (a) the Licensed Property for use in the Publishing
Business; and (b) all other licensed rights (if any) granted by Licensor to
Licensee pursuant to this Agreement. The terms and conditions of this Agreement
shall terminate simultaneously with the effectiveness of such assignments.
17. Headings. The descriptive headings of the Sections and
--------
Subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
18. Counterparts. This Agreement and any amendment hereto or any
------------
other agreement or document delivered pursuant hereto may be executed in one or
more counterparts and by different parties in separate counterparts. All of
such counterparts shall constitute one and the same agreement or other document
and shall become effective unless otherwise provided therein when one or more
counterparts have been signed by each party and delivered to the other party.
19. Parties in Interest. This Agreement shall be binding upon and
-------------------
inure to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to confer upon
8
<PAGE>
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
20. Notices. Any notice or other communication hereunder must be
-------
given in writing and (a) delivered in person, (b) transmitted by telex, telefax
or telecommunications mechanism provided that any notice so given is also mailed
or sent as provided in clause (c), or (c) mailed by certified or registered
mail, postage prepaid, receipt requested or sent by reputable overnight courier
as follows:
If to Licensee, addressed to:
BrightView Communications Group, Inc.
c/o Willis Stein & Partners L.L.C.
227 West Monroe Street
Suite 4300
Chicago, Illinois 60606
Telecopy: (312) 422-2424
Attn: Avy H. Stein
Daniel H. Blumenthal
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Telecopy: (312) 861-2200
Attn: John A. Weissenbach, Esq.
If to Licensor, addressed to:
Robert E. Petersen
6420 Wilshire Boulevard
Los Angeles, California 90048
Telecopy: (213) 782-2734
9
<PAGE>
With copies to:
O'Melveny & Myers LLP
400 S. Hope St.
Los Angeles, CA 90071
Telecopy: (213) 669-6407
Attn: C. James Levin, Esq.
and:
Robert Gottlieb, Esq.
617 Maple Drive
Beverly Hills, California 90210
Telecopy: (213) 782-2855
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, on the
business day on which it is transmitted (or if not transmitted on a business
day, then on the first business day following the date of such transmission) to
the applicable number specified in (or pursuant to) this Section 20 and an
appropriate answerback is received, (ii) if given by mail or courier or any
other means, when actually delivered.
21. Expenses. Licensee and Licensor shall each pay their own
--------
expenses incident to the negotiation, preparation and performance of this
Agreement and the transactions contemplated hereby, including, but not limited
to, the fees, expenses and disbursements of their advisers.
22. Attorneys' Fees. In the event of any Action by any party arising
---------------
under or out of, in connection with or in respect of this Agreement, including
any participation in bankruptcy proceedings to enforce against a party a right
or claim in such proceedings, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and expenses incurred in such Action.
Attorneys' fees incurred in enforcing any judgement in respect of this Agreement
are recoverable as a separate item. The parties intend that the preceding
sentence be severable from the other provisions of this Agreement, survive any
judgment and,
10
<PAGE>
to the maximum extent permitted by law, not be deemed merged into such judgment.
23. Representation By Counsel; Interpretation. Licensee and Licensor
-----------------------------------------
each acknowledge that each party to this Agreement has been represented by
counsel in connection with this Agreement and the transactions contemplated by
this Agreement. Accordingly, any rule of law or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived. The
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intent of Licensor and Licensee.
24. Severability. If any provision of this Agreement is determined
------------
to be invalid, illegal or unenforceable by any Governmental Entity, the
remaining provisions of this Agreement shall remain in full force and effect
provided that the essential terms and conditions of this Agreement for both
parties remain valid, binding and enforceable. For purpose of this Agreement,
"Governmental Entity" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign. To the extent permitted by Law, the parties hereby to the
same extent waive any provision of Law that renders any provision hereof
prohibited or unenforceable in any respect.
25. Dispute Resolution; Agreement to Arbitrate. Except to the extent
------------------------------------------
that any specific dispute resolution mechanism has been otherwise provided for
with respect to any specific provision of this Agreement (or such mechanism has
been pursued to its conclusion and either the dispute in question remains
unresolved or the resolution reached by such process has not been honored), in
the event that any dispute arises between Licensor and Licensee with respect to
this Agreement or the transactions contemplated hereby, the following procedures
shall apply.
(a) The parties will attempt in good faith to resolve any dispute,
controversy or claim under, arising out of, relating to or in connection
with this Agreement, including, but not limited to, the negotiation,
execution,
11
<PAGE>
interpretation, construction, performance, non-performance, breach,
termination, validity, scope, coverage or enforceability of this Agreement
or any alleged fraud in connection therewith, promptly by negotiations
between representatives of the parties. If any such dispute, controversy
or claim should arise, duly authorized representatives of Licensor and
Licensee will meet at least once and will attempt to resolve the matter.
Either representative may request the other to meet again within 14 days
thereafter, at a mutually agreed time and place. If the matter has not
been resolved within 30 days after the first meeting of the representatives
(which period may be extended by mutual agreement), the parties will
attempt in good faith to resolve the controversy or claim in accordance
with the Center for Public Resources Model Procedure for Mediation of
Business Disputes.
(b) If the matter has not been resolved pursuant to the foregoing
procedures within 60 days after the first meeting (which period may be
extended by mutual agreement), the matter shall be resolved, at the request
of either party, by arbitration conducted in accordance with the provisions
of the Federal Arbitration Act (9 U.S.C. (S)(S)1-16) and in accordance with
the Center for Public Resources Rules for Non-Administered Arbitration of
Business Disputes, by one arbitrator mutually selected by the parties. If
the parties are unable to agree on the selection of an arbitrator, they
shall select an arbitrator through the procedures established by the Center
for Public Resources Rules for Non-Administered Arbitration of Business
Disputes. The arbitration of such issues, including the determination of
any amount of damages suffered by any party hereto by reason of the acts or
omissions of any party, shall be final and binding upon the parties, except
that the arbitrator shall not be empowered to act as amiable compositeur or
authorized to award punitive damages with respect to any such claim,
dispute or controversy. No party shall seek any punitive damages relating
to any matters under, arising out of, in connection with or relating to
this Agreement. Equitable remedies shall be available in any such
arbitration. The parties intend that this agreement to arbitrate be valid,
binding, enforceable and irrevocable. The substantive law of the State of
California shall apply
12
<PAGE>
to any such arbitration proceedings. The place of any such arbitration
shall be Los Angeles, California. Judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.
(c) Notwithstanding the provisions of this Section 24, either party
may seek injunctive or other equitable relief to maintain the status quo
before any court of competent jurisdiction in connection with any claim,
dispute or controversy arising out of this Agreement.
IN WITNESS WHEREOF, the authorized representatives of the parties
hereto have duly executed this Agreement as of the first date above.
LICENSEE:
--------
BRIGHTVIEW COMMUNICATIONS GROUP, INC.
By:_________________________
Its:________________
LICENSOR:
--------
By: _________________________
Robert E. Petersen
PETERSEN PUBLISHING COMPANY
By:_________________________
Its:________________
13
<PAGE>
SPOUSAL CONSENT
The undersigned, being the spouse of Robert E. Petersen, does hereby
consent to this Agreement and agree to be bound by the terms of the Agreement.
By: __________________________
Margaret McNally Petersen
Dated: August 15, 1996
14
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of August 15, 1996 and shall
be effective as of the Closing Date (as defined in the Asset Purchase Agreement
described below) by and between BrightView Communications Group, Inc., a
Delaware corporation ("Employer"), and Robert E. Petersen ("Employee").
-------- --------
WITNESSETH:
WHEREAS, Employee is the founder and Chairman of the Board of Petersen
Publishing Company, a California corporation (the "Company"), which has been
-------
engaged in the publishing business since 1948;
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of August 15,
1996, between Employer and the Company (the "Asset Purchase Agreement"),
------------------------
Employer has acquired and assumed substantially all of the Company's assets and
liabilities relating to the publishing business;
WHEREAS, the Board of Directors of Employer (the "Board") has determined
-----
that because of Employee's substantial experience and business relationships in
connection with the publishing business and Employee's familiarity with the
clientele served by Employer, it is in Employer's best interest and that of its
stockholders to secure services of Employee, to secure certain additional
commitments from Employee and to provide Employee with certain additional
benefits; and
WHEREAS, Employer and Employee desire to set forth in this Agreement the
terms and conditions of Employee's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree, effective as of the Closing Date under the
Asset Purchase Agreement, as follows:
<PAGE>
1. Term. Employer agrees to employ Employee and Employee agrees to serve
----
Employer, in accordance with the terms of this Agreement, for a term of five (5)
years, commencing on the Closing Date (as defined in the Asset Purchase
Agreement), unless this Agreement is earlier terminated in accordance with the
provisions which follow.
2. Specific Position; Duties and Responsibilities. Employer and Employee
----------------------------------------------
agree that, subject to the provisions of this Agreement, Employer will employ
Employee and Employee will serve Employer as Chairman Emeritus for the duration
of this Agreement. Employee shall have such corporate power and authority as
shall reasonably be required to enable the discharge of the duties of his
office.
For the term of this Agreement, Employee shall report only to the Chairman
of the Board of Employer.
Employee's duties shall not, unless otherwise consented to by Employee,
exceed the following:
i. as requested by the Chairman of the Board of Employer, advising such
Chairman concerning the conduct of the publishing business previously conducted
by the Company (the "Business");
--------
ii. as requested by the Chairman of the Board of Employer, acting as a
public spokesperson and representative of Employer at public functions relating
to the Business;
iii. introducing other key executives of Employer to clientele of the
Business known to Employee; and
iv. as requested by the Chairman of the Board of Employer, participating
in significant meetings of the key executives of Employer concerning the
strategy to be adopted by the Business, marketing and sales objectives and
plans, important personnel decisions and similar activities that are material to
the conduct of the Businesses by Employer's top management.
Employer acknowledges that Employee is not required to devote his full-time
business efforts to Employer.
2
<PAGE>
As a result, and notwithstanding anything to the contrary in this
Agreement, Employee shall not be required to devote more than 40 hours of
service to Employer in any month; provided that for each year during the term of
this Agreement, Employee, upon delivering notice to Employer, shall be entitled
to designate two periods of up to three weeks each during which Employee shall
not be required to provide any services under this Agreement.
Employee shall be required to conduct his duties only at reasonable
business hours and shall be required to attend meetings, events or other
gatherings only after receiving reasonable advance notice thereof (which shall
be received not less than seven business days prior to the date of such meeting,
event or gathering). Employer acknowledges that Employee maintains an active
business and social calendar, and that it shall not be able to require Employee
to reschedule prior commitments in order to conduct duties required hereunder.
3. Total Compensation and Business Expenses.
----------------------------------------
a. Total Compensation.
------------------
During the term of this Agreement, Employer agrees to pay Employee total
compensation at the rate of $200,000 per year (the "Total Compensation").
------------------
Employee may, at his sole discretion, allocate the Total Compensation towards
(i) his own salary, (ii) the salary and benefits of any assistant(s) hired by
Employer for exclusive use by Employee, or (iii) expenses incurred in connection
with his duties not specifically related to an event or meeting which Employer
requested Employee to attend or host. In the event that Employer requests
Employee to attend or host any meeting, event, or other occasion, Employer shall
reimburse Employee for reasonable expenses incurred by Employee in connection
therewith upon the same terms as it reimburses expenses of its most senior
executives, including travel at first class air fare rates. If Employee uses
services or facilities not available for reimbursement to such executives under
Employer's policies, he shall nevertheless be reimbursed at the rate for the
most comparable service or facility that is reimbursable under Employer's
policies. The Employer must request (and Employee shall then have the option to
attend or host) that Employee attend or host the meetings, events and
3
<PAGE>
occasions set forth on Schedule 3(a) attached hereto. In the event of the death
of the Employee prior to the expiration of the term of this Agreement, Employer
shall continue to pay each assistant, described in clause (ii) above, a salary,
at a level equivalent to the salary each assistant was receiving immediately
prior to Employee's death, for a period of six (6) months following Employee's
death.
b. Additional Benefits.
-------------------
Employee shall also be entitled to the following additional benefits
(collectively, the "Additional Benefits"):
-------------------
i. During the life of Employee and the life of his spouse, Employer shall
maintain for the benefit of Employee and his spouse, life, medical, dental,
disability and insurance plans and policies having coverage that is equal to or
better than the coverage provided by the plans and policies that the Company
provided to Employee and his spouse immediately prior to the Closing Date
contemplated by the Asset Purchase Agreement; provided, however, that if such
coverage becomes unobtainable at a cost comparable to that incurred by the
Company to maintain such coverage prior to the Closing Date (as defined in the
Asset Purchase Agreement), Employer shall provide coverage as nearly comparable
as practicable for the same cost as most recently incurred for the coverage not
obtainable.
ii. During the term of this Agreement, Employee, at Employer's expense,
shall be permitted to use, on a personal basis, all stadium and arena luxury
boxes and suites maintained by the Company as of the date hereof which Employer
elects, at Employer's sole discretion, to maintain during the term of this
Agreement. Prior to the beginning of each season (or the calendar year, if the
boxes or suites are not received on a seasonal basis), Employer shall offer to
Employee the opportunity to reserve the boxes or suites for use on dates (or for
events) to be identified by Employee (and Employee shall specify the number of
seats to be reserved for each such date or event). Employee shall not be
entitled to reserve boxes or suites for more than 25% of the available dates or
events. In addition, to the extent that such boxes and suites are not otherwise
being used by Employer, Employer will notify Employee as and when any such boxes
or suites, or any part thereof, are available for use
4
<PAGE>
by Employee, and upon receipt of such notification (which may be by telephone)
Employee will promptly indicate whether Employee will use all or any portion of
such available boxes and suites. In addition, prior to any transfer, sale or
relinquishment of any right or interest in any such boxes or suites (or the
right to future leases or use thereof) after the term of this Agreement,
Employer shall first offer to transfer its rights in or to any box or suite (or
such right to future lease or use) to Employee to the extent permitted by the
contract governing Employer's use of such box or suite, at a price equal to
Employer's cost.
c. Perquisites.
-----------
In addition to the salary and benefits contemplated above, Employee shall
also be entitled to the following perquisites of his office:
i. Employee shall be entitled to paid vacation in accordance with
Employer's policies that are applicable to full-time executive employees of
Employer.
ii. Employee shall be entitled, at Employee's request, to attend any
conventions, congresses, events or similar public gatherings of business people
in the publishing industry or in a trade covered by a publication of the
Business, as a representative of Employer.
iii. Employer shall provide Employee with at least the office specified in
Section 7(d) as his place of employment with no alteration or diminishment of
the fixtures and furniture therein, nor of the telephone, facsimile or data
transmission and receipt capabilities thereof so long as Employer leases such
space.
4. Termination. The employment of Employee by Employer, shall be
-----------
terminated prior to expiration of the term of this Agreement only (i) upon
delivery of written notice by Employee to Employer, which notice Employee may
deliver in his sole discretion, (ii) subject to compliance with Section 4(c),
upon delivery of written notice by Employer to Employee, which notice shall
specify whether termination is for cause pursuant to Section 4(b) or otherwise,
and which notice Employer may deliver in its sole discretion, or (iii) as
provided in this Section 4:
5
<PAGE>
a. Disability.
----------
In the event that Employee shall fail, because of illness, incapacity or
injury which is determined to be total and permanent by a physician mutually
acceptable to Employer and Employee, to render services required hereunder for
one hundred twenty consecutive calendar days, Employee's employment hereunder
may be terminated by written notice of termination from Employer to Employee.
Thereafter, Employer shall continue, until (i) Employee dies, (ii) Employee
recovers from such disability and returns to service or (iii) 365 days after
such determination, whichever first occurs, to pay Total Compensation to
Employee at a rate and time and in an amount and manner equal to the Total
Compensation payable immediately prior to the termination, minus (ii) the amount
of any cash payments to Employee under the terms of Employer's disability
insurance or its other disability benefits or plans.
b. For Cause.
---------
Employee's employment hereunder may be terminated and his rights to receive
Total Compensation and (subject to the terms of any plans relating thereto)
Additional Benefits hereunder in respect of any period after such termination,
shall terminate 30 days after a determination by the Board, acting in good faith
based upon actual knowledge at such time, that during the term of this Agreement
Employee has been grossly negligent, has engaged in willful misconduct or a
breach of fiduciary duty, has repeatedly or intentionally failed to perform
stated duties in accordance with the terms of this Agreement, has willfully
violated any law, rule or regulation or has been convicted of a felony, in each
case in a manner that has materially adversely affected the reputation and
financial performance of the Businesses.
Notwithstanding the foregoing, Employee shall not be terminated for cause
pursuant to this Section 4(c) unless Employee has received notice of a proposed
termination for cause at least 60 days prior to the effective date thereof, has
been given the reasonable opportunity to cure any action giving rise to the
termination (if such action is susceptible to cure), and has had an opportunity
to be heard before the Board acts to terminate Employee.
6
<PAGE>
c. Constructive Termination.
------------------------
If Employer takes any of the actions described in the second paragraph of
this subsection (c), Employee may terminate his employment because of a
Constructive Termination Without Cause (as defined below) at any time after the
10th day after a notice of intent to terminate pursuant to this Section 4(c) has
been delivered to the Board, provided such condition (if susceptible to cure) is
not so cured prior to the end of that 10th day. Upon such termination, Employee
shall be entitled to continue to receive his Total Compensation for the
remaining unexpired term of this Agreement, as and when such payments would
otherwise be due hereunder.
For purposes of this Agreement, "Constructive Termination Without Cause"
means the occurrence of any of the following events without the express written
consent of Employee: (i) relocation from his principal office as described in
Section 6(d) hereof, (ii) any other material breach of this Agreement by
Employer, or (iii) the assignment to Employee of a significantly lower position
in the organization in terms of his responsibility, authority and status,
requiring Employee to perform services not commensurate with Employee's ability,
experience and qualifications, in any such case other than as a result of
grounds for termination of employment for cause under Section 4(b), for
disability under Section 4(a) or because of retirement or the termination of
employment by Employee for any other reason.
d. Termination Without Cause. If Employer terminates Employee's
-------------------------
employment hereunder other than in accordance with Section 4(a) or 4(b),
Employee shall be entitled to continue to receive his Total Compensation for the
remaining unexpired term of this Agreement, as and when such payments would
otherwise be due hereunder.
5. Indemnity. To the fullest extent permitted by applicable law and the
---------
bylaws of Employer, as from time to time in effect, Employer shall indemnify
Employee and hold Employee harmless for any acts or decisions made in good faith
while performing services for Employer, and Employer shall use its best efforts
to obtain coverage for Employee under any liability insurance policy or policies
now in force or hereafter obtained
7
<PAGE>
during the term of this Agreement that cover other officers of Employer. To the
same extent, Employer will pay and, subject to any legal limitations, advance
all expenses, including reasonable attorneys' fees and costs of court approved
settlements, actually incurred by Employee in connection with the defense of any
action, suit or proceeding and in connection with any appeal thereon, which has
been brought against Employee by reason of Employee's service as an officer or
agent of Employer or of a subsidiary of Employer. The rights granted to
Employee by this Section 5 shall be in addition to, and not in limitation of,
any other rights that Employee may obtain by reason of law or statute, or
pursuant to Employer's documents of incorporation or bylaws, or under the terms
of any other contracts or agreements.
6. Miscellaneous.
-------------
a. Succession; Survival.
--------------------
This Agreement shall inure to the benefit of and shall be binding upon
Employer, its successors and assigns, but without the prior written consent of
Employee this Agreement may not be assigned, whether by operation of law or
express assumption all obligations of Employer hereunder or otherwise. The
obligations and duties of Employee hereunder are personal and otherwise not
assignable.
b. Waiver.
------
No failure on the part of any party to exercise or delay in exercising any
right hereunder shall be deemed a waiver thereof or of any other right, nor
shall any single or partial exercise preclude any further or other exercise of
such right or any other right.
c. Choice of Law.
-------------
This Agreement, the legal relations between the parties and any action,
whether contractual or non-contractual, instituted by any party with respect to
matters arising under or growing out of or in connection with or in respect of
this Agreement, the relationship of the parties or the subject matter hereof
shall be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and
8
<PAGE>
performed in such State and without regard to conflicts of law doctrines, to the
extent permitted by law.
d. Place of Employment.
-------------------
During the term of this Agreement, Employee's principal office shall be the
same office space (without modification or alteration) that Employee and his
personal staff occupy on the 20th floor of the Company's headquarters
immediately prior to the date of this Agreement, so long as Employer leases such
space.
e. Severability.
------------
If this Agreement shall for any reason be or become unenforceable in any
material respect by any party, this Agreement shall thereupon terminate and
become unenforceable by the other party as well. In all other respects, if any
provision of this Agreement is held invalid or unenforceable, the remainder of
this Agreement shall nevertheless remain in full force and effect, and if any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances, to the fullest extent permitted by law.
f. Section Headings.
----------------
Section and other headings contained in this Agreement are for convenience
of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
g. Counterparts.
------------
This Agreement and any amendment hereto may be executed in one or more
counterparts. All of such counterparts shall constitute one and the same
agreement and shall become effective when a copy signed by each party has been
delivered to the other party.
h. Other Activities.
----------------
Employee agrees to comply with the requirements of Section 6.11 of the
Asset Purchase Agreement on the terms and subject to the conditions and
limitations therein. Such Section
9
<PAGE>
6.11, insofar as it relates to Employee's actions is hereby incorporated into
this Agreement and made a part hereof.
Employer agrees that, subject to compliance by Employee with his
obligations under Section 6.11 of the Asset Purchase Agreement, Employee may
serve as a director or in any other capacity of any business enterprise or
governmental entity or trade association, whether or not their activities
involve or relate to the business of the Employer, provided in each case that
such service does not in any material way prevent Employee from performing his
duties hereunder.
Subject to compliance by Employee with his obligations under Section 6.11
of the Asset Purchase Agreement, Employee may make and manage personal business
investments of his choice and serve in any capacity with any civic, educational
or charitable organization without seeking or obtaining approval by the Board.
i. No Duty to Mitigate.
-------------------
Employee shall have no duty to mitigate any damages suffered by Employee in
connection with Employer's breach of this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"EMPLOYER"
BrightView Communications Group, Inc.
By _________________________
Its ________________________
"EMPLOYEE"
____________________________
Robert E. Petersen
625 Mountain Drive
----------------------------
Beverly Hills, CA 90210
----------------------------
11
<PAGE>
Schedule 3(a)
1. The Shot Show
2. The annual convention of the National Rifle Association
3. The annual SEMA convention
4. Any events sponsored by Employer
12
<PAGE>
EXHIBIT 21.1
The following is a list of the subsidiaries of each of the Registrants.
Unless otherwise noted, each listed company is wholly owned, either directly or
indirectly, by Petersen Holdings, L.L.C.
List of Subsidiaries
- --------------------
PETERSEN HOLDINGS, L.L.C.
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF
INCORPORATION OR NAMES UNDER WHICH SUCH
NAME OF SUBSIDIARY ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------------------------- ------------------- ------------------------------------
<S> <C> <C>
Petersen Publishing Company, L.L.C.(1) Delaware Petersen Publishing Company, L.L.C.
Petersen Capital Corp. Delaware Petersen Capital Corp.
(1) Petersen Publishing Company, L.L.C.'s equity securities are 99.9% owned by Petersen Holdings, L.L.C.
and 0.1% by BrightView Communications Group, Inc.
PETERSON PUBLISHING COMPANY, L.L.C.
STATE OR OTHER JURISDICTION
OF INCORPORATION OR NAMES UNDER WHICH SUCH
NAME OF SUBSIDIARY ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------------- --------------------------------- ---------------------------------
Petersen Capital Corp. Delaware Petersen Capital Corp.
PETERSEN CAPITAL CORP.
STATE OR OTHER JURISDICTION
OF INCORPORATION OR NAMES UNDER WHICH SUCH
NAME OF SUBSIDIARY ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------------- -------------------------------- ----------------------------------
None.
</TABLE>
<PAGE>
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 7, 1996, in the Registration Statement (Form S-
4 No. 333- ) and related Prospectus of Petersen Publishing Company, L.L.C.
for the registration of $100,000,000 of its 11-1/8% Series B Subordinated Notes
due 2006.
ERNST & YOUNG LLP
December , 1996
Los Angeles, California
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> NOV-30-1995 AUG-31-1996
<PERIOD-START> DEC-01-1994 DEC-01-1995
<PERIOD-END> NOV-30-1995 AUG-31-1996
<CASH> 9,938 19,195
<SECURITIES> 3,744 55
<RECEIVABLES> 20,755 20,240
<ALLOWANCES> (2,220) (2,326)
<INVENTORY> 21,347 10,232
<CURRENT-ASSETS> 54,777 48,074
<PP&E> 21,129 18,585
<DEPRECIATION> (13,345) (13,243)
<TOTAL-ASSETS> 66,808 57,492
<CURRENT-LIABILITIES> 49,017 45,790
<BONDS> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 8,627 4,323
<TOTAL-LIABILITY-AND-EQUITY> 66,808 57,492
<SALES> 213,615 168,812
<TOTAL-REVENUES> 213,615 168,812
<CGS> 171,112 133,034
<TOTAL-COSTS> 171,112 133,034
<OTHER-EXPENSES> 28,145 20,920
<LOSS-PROVISION> 900 450
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 14,907 16,718
<INCOME-TAX> 549 393
<INCOME-CONTINUING> 14,358 16,325
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,358 16,325
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
