<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 1997
REGISTRATION NO. 333-18017
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1 TO
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. [_]
---------------
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.
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- -------------------------------------------------------------------------------
<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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 JANUARY 31, 1997
PROSPECTUS
FEBRUARY , 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. The Indenture contains, among other things,
covenants restricting the Issuers' ability to incur Additional Indebtedness (as
defined herein), including additional Senior Indebtedness. See "Description of
the Notes--Certain Covenants." As of September 30, 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 $48.4 million for the year ended November 30, 1995 and $35.0
million for the ten
(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 September 30, 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
First Union Capital Markets Corp. and CIBC Wood Gundy Securities Corp. (the
"Initial Purchasers") 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>
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, including two magazines that were the only
national magazines published in their respective markets.
The Company's principal sources of revenues are from advertising and
circulation. The Company had net revenues of $213.6 million and $189.1 million
for fiscal 1995 and the ten months ended September 30, 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. The endemic nature of the Company's advertiser base refers to
the fact that a significant portion of the Company's advertising revenues are
from advertisers that are manufacturers, marketers or distributors of products
that relate directly to the editorial content of the magazines in which they
advertise. In addition, the Company has a diverse advertiser base, with its top
25 advertisers accounting for only 32.6% and 32.8% of the Company's advertising
revenues during fiscal 1995 and the ten months ended September 30, 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. In 1995, the Company's magazines reached an aggregate of
approximately 36.5 million of the approximately 60.1 million adult males in the
United States, or 60.7% of the market. The circulation of the Company's
magazines targeting adult males and young females is dependent to a certain
extent on the number of persons in such demographic groups in the U.S.
population at any given time. 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
2
<PAGE>
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.
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 $6.3 million for fiscal 1995 and the ten months ended
September 30, 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 $3.2 million for fiscal 1995 and the
ten months ended September 30, 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, based upon its experience in the industry, 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 at least $2.7 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 September 30, 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 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 at least $2.7 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,
holders of the 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
September 30, 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.
There can be no assurance that the Issuers will
have the financial resources necessary to
repurchase the Notes upon a Change of Control.
See "Risk Factors--Limitations on Change of
Control" and "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 and for the ten-month
period ended September 30, 1996 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 for the ten months ended September 30, 1996 and the
notes thereto appear elsewhere in this Prospectus. The summary historical
statement of operations data for the ten months ended September 30, 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 ten months ended September 30, 1996
are not necessarily indicative of results that may be expected for the entire
year.
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
------------------------------------------------ --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ----------- ------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING
DATA:
Net revenues............ $179,357 $180,503 $186,322 $201,967 $213,615 $178,650 $189,114
Production, selling and
other direct costs..... 144,280 135,250 141,562 149,182 171,112 140,436 148,713
-------- -------- -------- -------- -------- -------- --------
Gross Profit............ 35,077 45,253 44,760 52,785 42,503 38,214 40,401
General and
administrative
expenses............... 32,089 32,328 35,604 33,267 28,145 23,537 24,650
-------- -------- -------- -------- -------- -------- --------
Operating income........ 2,988 12,925 9,156 19,518 14,358 14,677 15,751
Interest income, net.... (1,429) (856) (317) (476) (549) (428) (352)
Gain on sale of assets.. -- -- -- -- -- -- (1,554)
-------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes....... 4,417 13,781 9,473 19,994 14,907 15,105 17,657
Provision for income
taxes(a)............... 125 267 251 698 549 458 331
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 4,292 $ 13,514 $ 9,222 $ 19,296 $ 14,358 $ 14,647 $ 17,326
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
deficiency............. $ (2,791)
Total assets............ 50,541
Total debt.............. --
Total capital
deficiency............. (1,672)
OTHER DATA
Depreciation and
amortization........... $ 4,496 $ 3,381 $ 3,137 $ 3,118 $ 3,439 $ 2,704 $ 2,704
Capital expenditures.... 4,018 1,419 4,739 2,866 4,423 3,492 768
Cash provided by
operating activities... 5,254 2,479 10,680 27,059 9,593 5,530 24,719
Cash provided by (used
in) investing
activities............. 2,951 11,545 (30) (14,478) 2,254 3,185 5,421
Cash provided by (used
in) financing
activities............. 113 (14,013) (14,901) (17,382) (6,092) (5,377) (27,625)
EBITDA (b).............. 7,484 16,306 12,293 22,636 17,797 17,381 20,009
EBITDA margin........... 4.2% 9.0% 6.6% 11.2% 8.3% 9.7% 10.6%
Ratio of earnings to
fixed charges.......... 3.6x 9.2x 6.8x 12.8x 9.2x 11.9x 9.9x
Earnings available to
cover fixed
charges(c)............. $ 6,137 $ 15,457 $ 11,120 $ 21,684 $ 16,724 $ 16,548 $ 19,644
</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"). Such
items excluded from income in calculating EBITDA are significant components
in understanding and evaluating the Company's financial performance. 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. The EBITDA measures presented
herein may not be comparable to similarly titled measures of other
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 ten months ended September 30, 1996 for
which fixed charges also included interest expense of $185,000.
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 September 30, 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 audited financial statements of Petersen and the notes
thereto, as of November 30, 1995 and September 30, 1996 and for each of the
three years in the period ended November 30, 1995, and for the ten months ended
September 30, 1996 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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATING DATA:
Net revenues............................. $213,615 $189,114
Production, selling and other direct
costs................................... 171,040 147,782
-------- --------
Gross profit............................. 42,575 41,332
General and administrative expenses...... 24,432 21,778
Amortization of goodwill................. 31,753 26,461
-------- --------
Operating loss........................... (13,610) (6,907)
Interest expense(a)...................... 34,814 29,691
Gain on sale of assets................... -- (1,554)
-------- --------
Loss before provision for income taxes... (48,424) (35,044)
Provision for income taxes(b)............ -- --
-------- --------
Net loss................................. $(48,424) $(35,044)
======== ========
BALANCE SHEET DATA (AT PERIOD END):
Working capital deficiency(c)............ $(23,030)
Total assets............................. 522,462
Total debt(d)............................ 300,000
Total equity............................. 162,082
OTHER DATA:
Depreciation and amortization............ $ 35,192 $ 29,165
Capital expenditures..................... 4,423 768
EBITDA(e)(f)............................. 21,582 23,812
EBITDA margin............................ 10.1% 12.6%
Pro forma ratio of earnings to fixed
charges................................. (g) (h)
</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 $4.1 million for the ten months ended September 30,
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) The Company has a pro forma working capital deficiency of $23.0 million as
of September 30, 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 $26.4 million of unearned
subscription revenues, net.
(d) Does not give effect to the receipt by the Company of a working capital
adjustment of at least $2.7 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.
(e) "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. Such items excluded from income in calculating
EBITDA are significant components in understanding and evaluating the
Company's financial performance. 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. The EBITDA measures presented herein may not
be comparable to similarly titled measures of other companies.
(f) 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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Historical EBITDA..................... $17,797 $20,009
Pro forma adjustments:
Replacement of executive
management(1)...................... 3,713 2,872
Lease modifications(2).............. 72 358
Cost of excess space(3)............. -- 573
------- -------
Pro forma EBITDA...................... $21,582 $23,812
======= =======
</TABLE>
(footnotes continued on next page)
15
<PAGE>
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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Pro forma EBITDA...................... $21,582 $23,812
Additional adjustments:
Consolidation of Sassy(4)........... 4,699 3,234
Reorganization of loss-producing
magazine titles(5)................. 2,947 3,085
Nonrecurring software development
costs(6)........................... 4,026 1,589
Prior personnel reductions(7)....... 3,689 1,539
Effect of increased paper
prices(8).......................... 1,417 4,226
Effect of December 1995 paper
purchases(9)....................... -- 1,098
Restructuring plan cost
savings(10)........................ 3,786 3,321
Other estimated cost savings(11).... 1,111 819
------- -------
Total pro forma adjustments....... 21,675 18,911
------- -------
Adjusted pro forma EBITDA............. $43,257 $42,723
======= =======
Ratio of total debt to adjusted
annualized pro forma EBITDA(12)...... 5.8x
Ratio of adjusted pro forma EBITDA to
pro forma cash interest expense(13).. 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."
(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) 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
$573,000 for the ten months ended September 30, 1996.
(4) 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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues.............................. $ 3,852 $ 5,348
Costs and expenses.................... 8,551 8,582
------- -------
Total................................. $(4,699) $(3,234)
======= =======
</TABLE>
(5) 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.
(6) 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
(footnotes continued on next page)
16
<PAGE>
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 ten months ended
September 30, 1996 related to the consulting agreement, including an
accrual of $0.8 million during the ten months ended September 30, 1996
related to the resulting litigation, which remains the responsibility of
Petersen.
(7) 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 $1.5 million during the ten months ended September 30,
1996.
(8) The market price of the paper that Petersen uses in the production of
its magazines rose significantly during the latter part of 1995.
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).
Amounts shown reflect the excess of the increased paper prices in the
market over the median historical price of $0.50 per pound during the
relevant periods.
(9) In response to the increase in the market price of paper during the
latter part of 1995, in December 1995, Petersen purchased a large
supply of 32 lb. paper at prices ranging from $0.61 to $0.66 per pound
in anticipation of additional price increases and supply shortages
continuing through the remainder of 1995 and 1996. By May 1996, paper
prices had returned to their historical levels of $0.50 per pound.
Amounts shown reflect the excess of the price actually paid by Petersen
for paper used over the actual market price for such paper during the
relevant periods.
(10) 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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Production, selling and other
direct costs...................... $3,135 $2,750
General and administrative......... 651 571
------ ------
Total.............................. $3,786 $3,321
====== ======
</TABLE>
(11) 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.
(12) Reflects the receipt by the Company of an estimated working capital
adjustment of $2.7 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.
(13) Excludes amortization of deferred financing costs related to the
financing of the Acquisition in the amount of $4.1 million for the ten
months ended September 30, 1996.
(g) Pro forma earnings were insufficient to cover pro forma fixed charges by
$48.4 million for the year ended November 30, 1995.
(h) Pro forma earnings were insufficient to cover pro forma fixed charges by
$35.0 million for the ten months ended September 30, 1996.
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 September 30, 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 $48.4 million for the year ended November 30, 1995
and $35.0 million for the ten months ended September 30, 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 will 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 ten months ended September 30, 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 mid 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 ten months ended September 30,
1996. The excess of the increased paper prices in the market during the fiscal
year ended November 30, 1995 and the ten months ended September 30, 1996 over
the median historical price of $0.50 per pound was $1.4 million and $4.2
million, respectively. The excess of the price actually paid by Petersen for
paper used during the ten months ended September 30, 1996 over the actual
market price for such paper during such periods was $1.1 million.
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 March 1997.
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."
RISKS RELATING TO CONCENTRATION OF REVENUE FROM 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 36.4% and 53.7%, respectively, for
the ten months ended September 30, 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 ADVERTISING 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. The endemic nature of the Company's advertiser base refers to
the fact that a significant portion of the Company's advertising revenues are
from advertisers that are
20
<PAGE>
manufacturers, marketers or distributors of products that relate directly to
the editorial content of the magazines in which they advertise. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview--Cyclicality of Advertising Revenue" and "Business--
Industry Overview."
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." Certain of
the Company's senior executives, including Messrs. Bahrenburg and Vitale,
joined the Company in connection with the Acquisition. While their tenure at
the Company to date has been successful, there can be no assurance that these
or any of the Company's other executives will continue to be successful in
managing the Company in the future.
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 (as defined) 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. See "Description of the Notes--Certain
Definitions." 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
21
<PAGE>
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."
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.
22
<PAGE>
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 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 at least $2.7 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."
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 of up to $60.0 million ( the "Revolving
Credit Facility"); 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").
Commitments under the Revolving Credit Facility will not be reduced until
maturity on December 31, 2002. The Term Loans will be amortized on a quarterly
basis commencing on March 31, 1997. The Tranche A Loan amortizes gradually
prior to its maturity in 2002; the Tranche B Loan is payable primarily in two
balloon payments due in 2003 and 2004.
The interest rates per annum applicable to loans under the Senior Credit
Facility will be a fluctuating rate of interest measured, at the Company's
option, by reference either to: (i) LIBOR plus the applicable borrowing margin
or (ii) the published prime rate of the Agent Bank ("ABR") plus the applicable
borrowing margin. The applicable borrowing margin for the Revolving Credit
Facility and the Tranche A Loans 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 0.500%; provided, however, that the
applicable margin for the Tranche B will not be less than 2.625% for LIBOR
based borrowings and 1.375% or ABR based borrowings. In addition, the Company
has agreed to pay certain fees to the Lenders with respect to the Senior
Credit Facility. See "Description of the 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 September 30, 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 at least $2.7 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 Bridge
Financing Facility provided for loans in the maximum principal amount of
$100.0 million. Such loans were to be repaid from the proceeds from the sale
of Notes, and if not paid on or prior to September 30, 1997, were to be
converted into term loans with a maturity date of September 30, 2006. The
loans under the Bridge Financing Facility bore interest at a fluctuating rate
equal to the ABR plus 4.250%. 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 September 30, 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>
SEPTEMBER 30, 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............................................. 162,082
--------
Total capitalization..................................... $462,082
========
</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 September 30, 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 at least $2.7 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 September 30, 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) 171,040
-------- -------- --------
Gross profit.............................. 42,503 72 42,575
General and administrative expenses....... 28,145 (3,713)(b) 24,432
Amortization of goodwill.................. -- 31,753 (c) 31,753
-------- -------- --------
Operating income (loss)................... 14,358 (27,968) (13,610)
Interest income........................... (549) 549 (d) --
Interest expense.......................... -- 34,814 (e) 34,814
-------- -------- --------
Income (loss) before provision for income
taxes.................................... 14,907 (63,331) (48,424)
Provision for income taxes................ 549 (549)(f) --
-------- -------- --------
Net income (loss)......................... $ 14,358 $(62,782) $(48,424)
======== ======== ========
OTHER DATA:
Depreciation and amortization............. $ 3,439 $ 35,192
Capital expenditures...................... 4,423 4,423
EBITDA(g)(h).............................. 17,797 21,582
EBITDA margin............................. 8.3% 10.1%
Ratio of earnings to fixed charges(i)..... 9.2x --
Earnings available to cover fixed
charges(i)............................... $ 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>
TEN MONTHS ENDED SEPTEMBER
30, 1996
-----------------------------------
PETERSEN PRO FORMA COMPANY
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.............................. $189,114 $ -- $189,114
Production, selling and other direct
costs.................................... 148,713 (358)(a) 147,782
(573)(j)
-------- -------- --------
Gross profit.............................. 40,401 931 41,332
General and administrative expenses....... 24,650 (2,872)(b) 21,778
Amortization of goodwill.................. -- 26,461 (c) 26,461
-------- -------- --------
Operating income (loss)................... 15,751 (22,658) (6,907)
Interest income........................... (537) 537 (d) --
Interest expense.......................... 185 29,506 (e) 29,691
Gain on sale of assets.................... (1,554) -- (1,554)
-------- -------- --------
Income (loss) before provision for income
taxes.................................... 17,657 (52,701) (35,044)
Provision for income taxes................ 331 (331)(f) --
-------- -------- --------
Net income (loss)......................... $ 17,326 $(52,370) $(35,044)
======== ======== ========
OTHER DATA:
Depreciation and amortization............. $ 2,704 $ 29,165
Capital expenditures...................... 768 768
EBITDA(g)(h).............................. 20,009 23,812
EBITDA margin............................. 10.6% 12.6%
Ratio of earnings to fixed charges(i)..... 9.9x --
Earnings available to cover fixed
charges(i)............................... $ 19,644 --
</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) 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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Elimination of Petersen's executive
management cost...................... $6,323 $5,048
Cost of consulting contract with
former executive of Petersen......... (200) (167)
New executive management cost......... (2,410) (2,009)
------ ------
Total................................. $3,713 $2,872
====== ======
</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.
(c) The Acquisition was accounted for under the purchase method of accounting.
Under the purchase method of accounting, 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. The Company is currently performing a study to
refine its preliminary allocation of the purchase price, the results of
which are not yet available. Assuming the purchase price is $476.3 million
(as adjusted to give effect to the receipt by the Company of an estimated
$2.7 million working capital adjustment) and such amount is amortized over
15 years, the resulting amortization is $31.8 million for the year ended
November 30, 1995 and $26.5 million for the ten months ended September 30,
1996.
(d) Reflects elimination of interest income attributable to cash and
investments retained by Petersen.
(e) 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:
<TABLE>
<CAPTION>
YEAR ENDED TEN MONTHS ENDED
RATE AMOUNT NOVEMBER 30, 1995 SEPTEMBER 30, 1996
------ -------- ----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Senior Credit Facility:
Unused revolver
commitment........... 0.500% $ 60,000 $ 300 $ 250
Tranche A Loan(1)..... 9.000 100,000 9,000 7,500
Tranche B Loan(1)..... 9.500 100,000 9,500 7,917
Notes................... 11.125 100,000 11,125 9,271
------- -------
29,925 24,938
Amortization of deferred
financing costs........ 4,368 4,134
Imputed interest on
accrued rent for excess
space.................. 521 434
------- -------
Total interest expense.. $34,814 $29,506
======= =======
</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.
30
<PAGE>
(f) 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.
(g) "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. Such items excluded from income in calculating
EBITDA are significant components in understanding and evaluating the
Company's financial performance. 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. The EBITDA measures presented herein may
not be comparable to similarly titled measures of other companies.
(h) 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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Pro forma EBITDA...................... $21,582 $23,812
Additional adjustments:
Consolidation of Sassy(1)........... 4,699 3,234
Reorganization of loss-producing
magazine titles(2)................. 2,947 3,085
Nonrecurring software development
costs(3)........................... 4,026 1,589
Prior personnel reductions(4)....... 3,689 1,539
Effect of increased paper
prices(5).......................... 1,417 4,226
Effect of December 1995 paper
purchase(6)........................ -- 1,098
Restructuring plan cost savings(7).. 3,786 3,321
Other estimated cost savings(8)..... 1,111 819
------- -------
Total additional adjustments...... 21,675 18,911
------- -------
Adjusted pro forma EBITDA............. $43,257 $42,723
======= =======
Ratio of total debt to adjusted
annualized pro forma EBITDA.......... 5.8x
Ratio of adjusted pro forma EBITDA to
pro forma cash interest expense(9)... 1.7x
</TABLE>
--------
(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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues.............................. $ 3,852 $ 5,348
Costs and expenses.................... 8,551 8,582
------- -------
Total................................. $(4,699) $(3,234)
======= =======
</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.
31
<PAGE>
(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 ten months ended September 30, 1996 related
to the consulting agreement, including an accrual of $0.8 million
during the ten months ended September 30, 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 $1.5 million during the ten months ended
September 30, 1996.
(5) The market price of the paper that Petersen uses in the production of
its magazines rose significantly during the latter part of 1995.
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).
Amounts shown reflect the excess of the increased paper prices in the
market over the median historical price of $0.50 per pound during the
relevant periods.
(6) In response to the increase in the market price of paper during the
latter part of 1995, in December 1995, Petersen purchased a large
supply of 32 lb. paper at prices ranging from $0.61 to $0.66 per pound
in anticipation of additional price increases and supply shortages
continuing through the remainder of 1995 and 1996. By May 1996, paper
prices had returned to their historical levels of $0.50 per pound.
Amounts shown reflect the excess of the price actually paid by Petersen
for paper used over the actual market price for such paper during the
relevant periods.
(7) 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 TEN MONTHS ENDED
NOVEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Production, selling and other
direct costs...................... $3,135 $2,750
General and administrative......... 651 571
------ ------
Total.............................. $3,786 $3,321
====== ======
</TABLE>
(8) 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.
(9) Excludes amortization of deferred financing costs related to the
financing of the Acquisition in the amount of $4.1 million for the ten
months ended September 30, 1996.
(i) 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 $48.4 million for
the year ended November 30, 1995 and $35.0 million for the ten months
ended September 30, 1996.
(j) 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 SEPTEMBER 30, 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..... $12,453 $(12,448) $465,300 (c) $ 5
(450,000)(d)
(15,300)(e)
Short-term investments........ 55 (55) -- --
Accounts receivable, net...... 18,777 -- -- 18,777
Inventories................... 8,518 -- (1,086)(g) 7,432
Prepaid expenses and other
current assets............... 1,431 (693) -- 738
------- -------- -------- --------
Total current assets............ 41,234 (13,196) (1,086) 26,952
Property and equipment, net..... 5,241 (382) -- 4,859
Goodwill, net(b)................ 2,924 (2,924) 450,000 (d) 478,994
1,033 (e)
14,527 (f)
13,434 (g)
Deferred financing costs........ -- -- 14,011 (e) 11,049
(2,962)(h)
Other assets.................... 1,142 (200) -- 608
(334)
------- -------- -------- --------
Total Assets.................... $50,541 $(17,036) $488,957 $522,462
======= ======== ======== ========
LIABILITIES AND EQUITY(B)
Current liabilities:
Accounts payable.............. $ 5,907 $ (965) $ -- $ 4,942
Accrued payroll and related
costs........................ 5,614 (1,274) 4,700 (g) 9,040
Customer incentive bonuses.... 5,374 -- -- 5,374
Unearned subscription
revenues, net................ 26,443 -- -- 26,443
Other accrued expenses and
current liabilities.......... 687 (448) 3,944 (g) 4,183
------- -------- -------- --------
Total current liabilities....... 44,025 (2,687) 8,644 49,982
Unearned subscription revenues,
net............................ 6,546 -- -- 6,546
Deferred state income taxes..... 1,494 (1,494) -- --
Other noncurrent liabilities.... 148 -- 3,704 (g) 3,852
Senior Credit Facility.......... -- -- 200,000 (c) 200,000
Notes........................... -- -- 100,000 (c) 100,000
------- -------- -------- --------
Total liabilities............... 52,213 (4,181) 312,348 360,380
Divisional equity (capital
deficiency).................... (1,672) (12,855) 14,527 (f) --
Stockholders' equity............ -- -- 165,300 (c) 162,082
(2,962)(h)
(256)(e)
------- -------- -------- --------
Total Liabilities and Equity.... $50,541 $(17,036) $488,957 $522,462
======= ======== ======== ========
</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 the purchase method of accounting, 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. The Company is currently performing a study to
refine its preliminary allocation of the purchase price, the results of
which are not yet available.
(c) Reflects the capitalization of the Company as if the Transactions and the
Initial Offering had occurred as of September 30, 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 at least $2.7 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 purchase price of
the Acquisition.
(f) Reflects the excess of liabilities over assets acquired from Petersen
which is added to the purchase price of the Acquisition.
(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 and for the ten-month
period ended September 30, 1996 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 for the ten months ended September 30, 1996 and the
notes thereto appear elsewhere in this Prospectus. The selected historical
statement of operations and balance sheet data of Petersen for the ten months
ended September 30, 1995 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 ten months ended
September 30, 1996 are not necessarily indicative of results that may be
expected for the entire year.
<TABLE>
<CAPTION>
TEN MONTHS
YEARS ENDED NOVEMBER 30, ENDED SEPTEMBER 30,
------------------------------------------------ --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ----------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<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 $102,672 $112,025
Newsstand.............. 35,191 34,499 37,507 40,048 39,889 33,326 34,318
Subscriptions.......... 39,508 39,300 39,820 40,710 41,963 35,113 35,177
Other.................. 3,450 4,305 3,894 4,601 8,353 7,539 7,594
-------- -------- -------- -------- -------- -------- --------
Net revenues......... 179,357 180,503 186,322 201,967 213,615 178,650 189,114
Production, selling and
other direct costs..... 144,280 135,250 141,562 149,182 171,112 140,436 148,713
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 35,077 45,253 44,760 52,785 42,503 38,214 40,401
General and
administrative
expenses............... 32,089 32,328 35,604 33,267 28,145 23,537 24,650
-------- -------- -------- -------- -------- -------- --------
Operating income........ 2,988 12,925 9,156 19,518 14,358 14,677 15,751
Interest income, net.... (1,429) (856) (317) (476) (549) (428) (352)
Gain on sale of assets.. -- -- -- -- -- -- (1,554)
-------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes....... 4,417 13,781 9,473 19,994 14,907 15,105 17,657
Provision for income
taxes(a)............... 125 267 251 698 549 458 331
-------- -------- -------- -------- -------- -------- --------
Net income........... $ 4,292 $ 13,514 $ 9,222 $ 19,296 $ 14,358 $ 14,647 $ 17,326
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficiency)........... $(10,588) $ 1,591 $ (3,629) $(11,027) $ 5,760 $ (2,791)
Total assets............ 56,396 50,973 46,792 55,264 66,808 50,541
Total debt.............. -- -- -- -- -- --
Total equity (capital
deficiency)............ 4,626 4,126 (1,553) 361 8,627 (1,672)
OTHER DATA:
Depreciation and
amortization........... $ 4,496 $ 3,381 $ 3,137 $ 3,118 $ 3,439 $ 2,704 $ 2,704
Capital expenditures.... 4,018 1,419 4,739 2,866 4,423 3,492 768
Cash provided by
operating activities... 5,254 2,479 10,680 27,059 9,593 5,530 24,719
Cash provided by (used
in) investing
activities............. 2,951 11,545 (30) (14,478) 2,254 3,185 5,421
Cash provided by (used
in) financing
activities............. 113 (14,013) (14,901) (17,382) (6,092) (5,377) (27,625)
EBITDA(b)............... 7,484 16,306 12,293 22,636 17,797 17,381 20,009
EBITDA margin........... 4.2% 9.0% 6.6% 11.2% 8.3% 9.7% 10.6%
Pro forma ratio of
earnings to fixed
charges................ (d) (e)
Ratio of earnings to
fixed charges.......... 3.6x 9.2x 6.8x 12.8x 9.2x 11.2x 9.9x
Earnings available to
cover fixed
charges(c)............. $ 6,137 $ 15,457 $ 11,120 $ 21,684 $ 16,724 $ 16,548 $ 19,644
</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. Such items excluded from income in calculating
EBITDA are significant components in understanding and evaluating the
Company's financial performance. 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. The EBITDA measures presented herein may not be
comparable to similarly titled measures of other 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 ten months ended September 30, 1996 for
which fixed charges also included interest expense of $185,000.
(d) Pro forma earnings were insufficient to cover pro forma fixed charges by
$48.4 million for the year ended November 30, 1995.
(e) Pro forma earnings were insufficient to cover pro forma fixed charges by
$35.0 million for the ten months ended September 30, 1996.
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 $189.1 million for the year ended November 30, 1995 and the
ten months ended September 30, 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. The endemic nature of the Company's advertiser base refers to
the fact that % of the Company's advertisers are manufacturers, marketers
or distributors of products which relate directly to the editorial content of
the magazines in which they advertise. 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 ten-month periods ended
September 30, 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>
TEN MONTHS ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Compensation of senior
management(a)................... $ 12,273 $ 9,450 $ 3,713 $ 1,844 $ 2,872
Personnel reductions(b).......... 5,927 6,192 7,181 5,693 4,860
Excess travel and entertainment
expenses(c)..................... 917 1,036 1,111 890 819
Renegotiation of lease with
stockholder and sublease
revenues to be realized(d)...... 52 65 72 60 1,007
Effect of increased paper
prices(e)....................... -- -- 1,417 344 4,226
Effect of December 1995 paper
purchases(f).................... -- -- -- -- 1,098
Reduced software development
costs(g)........................ 2,475 3,507 4,026 3,281 1,589
Reorganization of loss-producing
magazine titles(h).............. (170) 1,707 7,646 5,600 6,319
Reduced retirement plan
contributions(i)................ 2,001 2,271 294 -- --
-------- -------- -------- -------- --------
Total nonrecurring expenses.... $ 23,475 $ 24,228 $ 25,460 $ 17,712 $ 22,790
======== ======== ======== ======== ========
</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 (excluding expenses included under "compensation of
senior management") 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) Amounts shown reflect the excess of the increased paper prices in the
market over the median historical price of $0.50 per pound during the
relevant periods. See "--Paper Prices."
(f) Amounts shown reflect the excess of the price actually paid by Petersen
for paper used over the actual market price for such paper during the
relevant periods. See "--Paper Prices."
(g) See "--Software Consulting Expenses" and "Unaudited Pro Forma Financial
Data."
(h) 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.
(i) 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 ten months ended September 30, 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 March 1997. 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 million and
$4.0 million in each of the three years in the period ended November 30, 1995,
respectively, with
37
<PAGE>
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 ten months ended September 30, 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 $479.0 million has
been 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 $31.7 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.
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 ten month periods ended September 30, 1995 and 1996:
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
---------------------------- ------------------
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% 57.6% 59.2%
Newsstand................. 20.1 19.9 18.7 18.6 18.1
Subscriptions............. 21.4 20.1 19.6 19.6 18.6
Other..................... 2.1 2.3 3.9 4.2 4.1
-------- -------- -------- -------- --------
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 78.6 78.6
-------- -------- -------- -------- --------
Gross profit................ 24.0 26.1 19.9 21.4 21.4
General and administrative
expenses................... 19.1 16.4 13.2 13.2 13.0
-------- -------- -------- -------- --------
Operating income............ 4.9% 9.7% 6.7% 8.2% 8.4%
======== ======== ======== ======== ========
OTHER DATA:
EBITDA...................... 6.6% 11.2% 8.3% 9.7% 10.6%
</TABLE>
38
<PAGE>
Ten Months Ended September 30, 1996 Compared to Ten Months Ended September
30, 1995
Total revenues for the ten months ended September 30, 1996 increased by
$10.5 million, or 5.9%, to $189.1 million from $178.6 million for the ten
months ended September 30, 1995. Of this increase, advertising revenue
accounted for $9.4 million, supplemented by a $1.0 million increase in
newsstand 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 ten months ended
September 30, 1996 increased by $8.3 million, or 5.9%, to $148.7 million from
$140.4 million for the ten months ended September 30, 1995, primarily as a
result of increased paper costs and incremental production costs. Production,
selling and other direct costs, as a percent of revenues, remained constant at
78.6% of revenues for the 1995 and 1996 periods. See""--Overview--Paper
Prices."
General and administrative expenses for the ten months ended September 30,
1996 increased by $1.1 million, or 4.7%, to $24.6 million from $23.5 million
for the ten months ended September 30, 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 13.0% of revenues for the 1996 period from 13.2% of
revenues for the 1995 period.
Operating income for the ten months ended September 30, 1996 increased by
$1.1 million, or 7.3%, to $15.8 million from $14.7 million for the ten months
ended September 30, 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 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
39
<PAGE>
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 $24.7 million for the ten months ended September 30, 1996
compared to $5.5 million for the ten months ended September 30, 1995. Of this
difference, $19.9 million relates to changes in inventory levels and $2.7
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.
Historical Cash Flows from Investing Activities. Net cash provided by
investing activities was $5.4 million for the ten months ended September 30,
1996, including $2.5 million in proceeds from the sale of its Viking Color
pre-press operations, compared to $3.3 million for the ten months ended
September 30, 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 $27.6 million, $5.4 million, $6.1 million, $17.4
million and $14.9 million for the ten months ended September 30, 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
40
<PAGE>
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 $0.8 million and $3.5 million in the ten months
ended September 30, 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.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No.
121"), which is effective for the Company in fiscal 1997. The Company does not
expect the adoption of SFAS No. 121 to have a material impact on the Company's
financial position or results of operations.
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, including two magazines that were the only
national magazines published in their respective markets.
The Company's principal sources of revenues are from advertising and
circulation. The Company had net revenues of $213.6 million and $189.1 million
for fiscal 1995 and the ten months ended September 30, 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. The endemic nature of
the Company's advertiser base refers to the fact that a significant portion of
the Company's advertising revenues are from advertisers that are
manufacturers, marketers or distributors of products that relate directly to
the editorial content of the magazines in which they advertise. In addition,
the Company has a diverse advertiser base, with its top 25 advertisers
accounting for only 32.6% and 32.8% of the Company's advertising revenues
during fiscal 1995 and the ten months ended September 30, 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
42
<PAGE>
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. In 1995, the Company's magazines
reached an aggregate of approximately 36.5 million of the approximately 60.1
million adult males in the United States, or 60.7% of the market. The
circulation of the Company's magazines targeting adult males and young females
is dependent to a certain extent on the number of persons in such demographic
groups in the U.S. population at any given time. 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 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,
43
<PAGE>
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-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 ten months ended
September 30, 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. The endemic nature of
the Company's advertiser base refers to the fact that a significant portion of
the Company's advertising revenues are from advertisers that are
manufacturers, marketers or distributors of products that relate directly to
the editorial content of the magazines in which they advertise.
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.
44
<PAGE>
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.
. 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.
45
<PAGE>
. 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 a negative profit contribution of $7.6 million
and $6.3 million for fiscal 1995 and the ten months ended September 30,
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 $3.2 million for fiscal 1995 and the ten months ended
September 30, 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, based upon its experience in the industry, 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
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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.
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 ten months ended September 30, 1996 (dollars in
millions):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NOVEMBER 30, TEN MONTHS
---------------------------------------- ENDED
1993 1994 1995 SEPTEMBER 30, 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% $ 112.0 59.2%
Newsstand............... 37.5 20.1 40.1 19.9 39.9 18.7 34.3 18.1
Subscriptions........... 39.8 21.4 40.7 20.1 42.0 19.6 35.2 18.6
Other................... 3.9 2.1 4.6 2.3 8.3 3.9 7.6 4.1
------ ----- ------ ----- ------ ----- --------- --------
Total................. $186.3 100.0% $202.0 100.0% $213.6 100.0% $ 189.1 100.0%
====== ===== ====== ===== ====== ===== ========= ========
</TABLE>
Advertising. Advertising sales accounted for approximately 58% and
approximately 59% of the Company's net revenues for fiscal 1995 and the ten
months ended September 30, 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
32.8% of the Company's advertising revenues during fiscal 1995 and the ten
months ended September 30, 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 endemic nature of the
Company's advertiser base refers to the fact that a significant portion of the
Company's advertising revenues are from advertisers that are manufacturers,
marketers or distributors of products that relate directly to the editorial
content of the magazines in which they advertise.
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.
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Newsstand. Newsstand distribution accounted for approximately 19% and
approximately 18% of the Company's net revenues for fiscal 1995 and the ten
months ended September 30, 1996, respectively. 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 ten
months ended September 30, 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. Magazine
publishers are occasionally willing to pay brokers for subscribers in order to
expand their advertising base. 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
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<PAGE>
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.
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
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<PAGE>
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 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. The Company does not expect to incur significant expense in
connection with such relocation.
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
50
<PAGE>
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 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.
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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
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<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 ten months ended September 30, 1996. The excess of the increased paper
prices in the market during the fiscal year ended November 30, 1995 and the
ten months ended September 30, 1996 over the median historical price of $0.50
per pound was $1.4 million and $4.2 million, respectively. The excess of the
price actually paid by Petersen for paper used during the ten months ended
September 30, 1996 over the actual market price for such paper during such
period was $1.1 million.
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 March 1997.
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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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 does
not have any specific plans at this time to close any regional sales offices.
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 December 31, 1996, the Company employed approximately 554 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 Kelley.............. 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...... 70 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
56
<PAGE>
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 Kelley currently serves as an Executive Publisher of the Company. Mr.
Kelley served with Petersen for over 20 years, most recently as Vice
President--Executive Publisher. Mr. Kelley 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 for
the fiscal year ended November 30, 1995 (collectively, the "Named Executive
Officers") for services rendered in all capacities to Petersen during the
fiscal year ended November 30, 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.
58
<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 $1,450,000 $4,052
Chairman of the Board
Frederick R. Waingrow(c)................. 922,900 600,000 5,731
President
John Dianna.............................. 212,000 42,500 5,731
Vice President, Executive Publisher
Peter F. Clancy(d)....................... 195,750 40,000 5,731
Senior Vice President, Marketing & Sales
Nigel P. Heaton(d)....................... 178,250 35,000 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 twelve months 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%. The Company believes such lease provides for lease
payments at a market rate and for terms as favorable to the Company as could
have been negotiated with a third party at arm's length.
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. The Company believes such lease provides for lease
payments at a market rate and for terms as favorable to the Company as could
have been negotiated with a third party at arm's length.
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
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<PAGE>
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 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.
63
<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.
64
<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.
65
<PAGE>
DESCRIPTION OF SENIOR CREDIT FACILITY
In connection with the Acquisition, the Company entered into the Senior
Credit Facility, among 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
of up to $60.0 million; (ii) a Tranche A Loan in an aggregate principal amount
of $100.0 million and (iii) a Tranche B Loan in an aggregate principal amount
of $100.0 million.
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 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.
66
<PAGE>
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.
67
<PAGE>
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."
68
<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.
69
<PAGE>
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.
70
<PAGE>
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, prior to the
Expiration Date (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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<PAGE>
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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<PAGE>
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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<PAGE>
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.
The Issuers have agreed that, for a period of 180 days after the Expiration
Date, they will make copies of this Prospectus available to any Participating
Broker-Dealer for use in connection with resales of the New Notes; provided,
however, that the Issuers have no obligation to amend or supplement this
Prospectus unless they have received written notice from a Participating
Broker-Dealer of its prospectus delivery requirements under the Exchange Act
within five days following consummation of the Exchange Offer.
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.
101
<PAGE>
INDEPENDENT AUDITORS
The financial statements of the publishing division of Petersen Publishing
Company at November 30, 1995 and September 30, 1996 and for each of the three
years in the period ended November 30, 1995 and for the ten months ended
September 30, 1996 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 ten months ended September 30, 1996. As a
result, separate financial statements of the Issuers and Holdings have not
been included herein.
102
<PAGE>
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, 1995 and September 30, 1996.......... F-3
Statements of Income and Divisional Equity (Capital Deficiency) for
the years ended November 30, 1993, 1994 and 1995 and ten months
ended September 30, 1995 (unaudited) and 1996...................... F-4
Statements of Cash Flows for the years ended November 30, 1993, 1994
and 1995 and ten months ended September 30, 1995 (unaudited) and
1996............................................................... F-5
Notes to Financial Statements....................................... F-6
</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, 1995 and September 30, 1996,
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 and for the ten
months ended September 30, 1996. 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, 1995 and September 30, 1996, and
the results of its operations and its cash flows for each of the three years
in the period ended November 30, 1995 and the ten months ended September 30,
1996, 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
December 16, 1996
F-2
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 9,938 $12,453
Short-term investments............................ 3,744 55
Accounts receivable, less allowance for doubtful
accounts of $2,220 in 1995 and $1,871 in 1996.... 18,535 18,777
Inventories....................................... 21,347 8,518
Other prepaid expenses and current assets......... 1,213 1,431
------- -------
Total current assets............................ 54,777 41,234
Property and equipment, net......................... 7,784 5,241
Goodwill, net of accumulated amortization of $1,127
in 1995 and $1,442 in 1996......................... 3,210 2,924
Other assets........................................ 1,037 1,142
------- -------
Total assets.................................... $66,808 $50,541
======= =======
LIABILITIES AND DIVISIONAL EQUITY (CAPITAL DEFICIEN-
CY)
Current liabilities:
Accounts payable.................................. $10,436 $ 5,907
Accrued payroll and related costs................. 6,116 5,614
Customer incentives payable....................... 5,204 5,374
Current portion of unearned subscription revenues,
net of deferred subscription acquisition costs of
$38,161 in 1995 and $40,313 in 1996.............. 26,669 26,443
Other accrued expenses and current liabilities.... 592 687
------- -------
Total current liabilities....................... 49,017 44,025
Unearned subscription revenues, net of deferred
subscription acquisition costs of $31,834 in 1995
and $33,629 in 1996................................ 7,183 6,546
Deferred state income taxes......................... 1,321 1,494
Other noncurrent liabilities........................ 660 148
------- -------
Total liabilities............................... 58,181 52,213
Commitments and contingencies
Divisional equity (capital deficiency).............. 8,627 (1,672)
------- -------
Total liabilities and divisional equity (capital
deficiency).................................... $66,808 $50,541
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
STATEMENTS OF INCOME AND DIVISIONAL EQUITY (CAPITAL DEFICIENCY)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
---------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
Advertising.............. $105,101 $116,608 $123,410 $102,672 $112,025
Newsstand................ 37,507 40,048 39,889 33,326 34,318
Subscriptions............ 39,820 40,710 41,963 35,113 35,177
Other.................... 3,894 4,601 8,353 7,539 7,594
-------- -------- -------- -------- --------
Total net revenues..... 186,322 201,967 213,615 178,650 189,114
Production, selling and
other direct costs
(including rent paid to a
related party of $3,651,
$3,939, $3,875, $3,185 and
$3,778 in 1993, 1994, 1995
and the ten months ended
September 30, 1995 and
1996)..................... 141,562 149,182 171,112 140,436 148,713
-------- -------- -------- -------- --------
Gross profit............... 44,760 52,785 42,503 38,214 40,401
General and administrative
expenses.................. 35,604 33,267 28,145 23,537 24,650
-------- -------- -------- -------- --------
Income from operations..... 9,156 19,518 14,358 14,677 15,751
Interest income............ (317) (476) (549) (428) (537)
Interest expense........... -- -- -- -- 185
Gain on sale of assets..... -- -- -- -- (1,554)
-------- -------- -------- -------- --------
Income before provision for
income taxes.............. 9,473 19,994 14,907 15,105 17,657
Provision for state income
taxes..................... 251 698 549 458 331
-------- -------- -------- -------- --------
Net income................. 9,222 19,296 14,358 14,647 17,326
Divisional equity (capital
deficiency) at beginning
of period................. 4,126 (1,553) 361 361 8,627
Distribution of S
corporation earnings...... -- (26,400) (3,391) (3,300) (21,470)
Net change in advances to
other divisions of the
Company................... (14,901) 9,018 (2,701) (2,077) (6,155)
-------- -------- -------- -------- --------
Divisional equity (capital
deficiency) at end of
period.................... $ (1,553) $ 361 $ 8,627 $ 9,631 $ (1,672)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
---------------------------- -------------------
1993 1994 1995 1995 1996
-------- -------- -------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................. $ 9,222 $ 19,296 $ 14,358 $14,647 $17,326
Adjustments to reconcile
net cash provided by
operating activities:
Depreciation and
amortization............ 3,137 3,118 3,439 2,704 2,704
Allowance for doubtful
accounts................ 740 825 900 750 45
Gain on sale of assets... -- -- -- -- (1,554)
Deferred state income
taxes................... -- 416 406 339 173
Changes in operating assets
and liabilities:
Accounts receivable...... (2,711) (1,758) (197) 2,110 (287)
Inventories.............. (796) (1,204) (11,846) (7,028) 12,829
Other prepaid expenses
and current assets...... (389) (162) (84) 12 (217)
Other assets............. (22) 385 (255) (363) (158)
Accounts payable......... (4,828) 2,116 2,205 (2,443) (4,529)
Accrued payable and
related costs........... 3,123 842 (602) (526) (502)
Customer incentives
payable................. 25 830 355 (13) 170
Unearned subscription
revenues, net........... 1,964 1,542 2,910 (2,485) (863)
Other accrued expenses
and current
liabilities............. 959 1,111 (2,294) (2,337) 95
Other noncurrent
liabilities............. 256 (298) 298 163 (513)
-------- -------- -------- ------- -------
Net cash provided by
operating activities...... 10,680 27,059 9,593 5,530 24,719
INVESTING ACTIVITIES
Purchases of property and
equipment................. (4,739) (2,866) (4,423) (3,492) (768)
Purchases of magazines..... (1,850) (1,300) -- -- --
Sales of investments....... 23,963 7,000 6,677 6,677 3,689
Purchases of investments... (17,404) (17,312) -- -- --
Proceeds from sale of
assets.................... -- -- -- -- 2,500
-------- -------- -------- ------- -------
Net cash (used in) provided
by investing activities... (30) (14,478) 2,254 3,185 5,421
FINANCING ACTIVITIES
Proceeds from bank
borrowing................. -- -- -- -- 10,000
Repayment of bank
borrowing................. -- -- -- -- (10,000)
Distribution of S
corporation earnings...... -- (26,400) (3,391) (3,300) (21,470)
Net change in advances to
other divisions of the
Company................... (14,901) 9,018 (2,701) (2,077) (6,155)
-------- -------- -------- ------- -------
Net cash used in financing
activities................ (14,901) (17,382) (6,092) (5,377) (27,625)
-------- -------- -------- ------- -------
Increase (decrease) in cash
and cash equivalents...... (4,251) (4,801) 5,755 3,338 2,515
Cash and cash equivalents
at beginning period....... 13,235 8,984 4,183 4,183 9,938
-------- -------- -------- ------- -------
Cash and cash equivalents
at end of period.......... $ 8,984 $ 4,183 $ 9,938 $ 7,521 $12,453
======== ======== ======== ======= =======
Supplemental information:
Income taxes paid........ $ 563 $ 342 $ 263 $ 120 $ 40
Interest received........ 364 350 741 393 538
Interest paid............ -- -- -- -- 185
</TABLE>
See accompanying notes.
F-5
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE TEN MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
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.
Basis of Presentation
On August 15, 1996, the Company entered into an asset purchase agreement to
sell substantially all of the assets of the Publishing Division to BrightView
Communications Group, Inc. ("BrightView") for approximately $450,000,000, plus
the assumption of certain liabilities. The acquisition was consummated on
September 30, 1996.
Although these financial statements present the Publishing Division's
balance sheet as of the time of the sale, these financial statements have been
prepared as if the Publishing Division will continue as a going concern and as
a division of the Company. No adjustments have been made to reflect the
purchase of assets, the assumption of liabilities by BrightView or the
expenses incurred by Petersen Company related to the sale of Petersen.
Certain reclassifications have been made to the 1995 financial statements to
conform to the 1996 presentation.
Cash Equivalents and Short-Term Investments
Cash equivalents consist primarily of debt instruments with maturities of
three months or less at the acquisition date. Short-term investments consist
of state and local government debt securities (considered available-for-sale
securities) with maturities greater than 90 days; however, none of Petersen's
investments have maturities greater than one year. Petersen has no investments
in equity securities. Short-term investments are carried at fair value which
approximates cost.
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.
F-6
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE TEN MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
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.
Revenue Recognition
Advertising revenue, net of provisions for related rebates and discounts, is
recognized at the "on sale" 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
(in thousands) for the years ended November 30, 1993, 1994 and 1995 and for the
ten months ended September 30, 1995 and 1996, were $437, $495, $732, $718 and
$700, 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:
F-7
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE TEN MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
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.
3. INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Paper........................................... $16,330 $3,933
Magazines in process............................ 5,017 4,585
------- ------
$21,347 $8,518
======= ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Buildings..................................... $ 518 $ 436
Machinery and equipment....................... 14,164 12,057
Office furniture and fixtures................. 6,447 6,189
------- -------
21,129 18,682
Less accumulated depreciation and
amortization................................. 13,345 13,441
------- -------
$ 7,784 $ 5,241
======= =======
</TABLE>
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.
In March 1995, the Financing Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No.
121"), which is effective for the Company in fiscal 1997. The Company does not
expect the adoption of SFAS No. 121 to have a material impact on the Company's
financial position or results of operations.
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"). During the ten months
ended September 30, 1996, 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 expires 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 in March 1996.
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)
(INFORMATION RELATED TO THE TEN MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
State:
Current..................... $ 251 $ 282 $ 143 $ 119 $ 158
Deferred.................... -- 416 406 339 173
-------- -------- -------- -------- --------
$ 251 $ 698 $ 549 $ 458 $ 331
======== ======== ======== ======== ========
</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>
TEN MONTHS
ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
---------------------------- -------------- -----------
1993 1994 1996 1995 1996
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income tax provision
computed at statutory
federal income tax rate.. $ 3,221 $ 6,798 $ 5,068 $5,136 $6,003
State income taxes........ 251 698 549 458 331
Effect of S Corporation
election................. (3,221) (6,798) (5,068) (5,136) (6,003)
-------- -------- -------- ------ ------
Total provision......... $ 251 $ 698 $ 549 $ 458 $ 331
======== ======== ======== ====== ======
</TABLE>
Petersen had deferred tax assets and liabilities as follows (in thousands):
<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Deferred tax asset:
Accrued liabilities........................... $ 220 $ 205
Deferred tax liabilities:
Subscription acquisition costs................ (1,541) (1,699)
------- --------
Total deferred income tax liability......... $(1,321) $ (1,494)
======= ========
</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 (in thousands)
to the Plan for the years ended November 30, 1993, 1994 and 1995 and for the
ten months ended September 30, 1995 and 1996 were $3,001, $3,271, $1,294,
$1,080 and $1,083, 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
F-9
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATED TO THE TEN MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
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 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
Ten months ended:
1995........................................... $3,185 $1,251 $4,436
1996........................................... 3,778 1,627 5,405
</TABLE>
At September 30, 1996, minimum future annual rentals under long-term leases
are as follows (in thousands):
<TABLE>
<CAPTION>
SHAREHOLDER OTHERS TOTAL
----------- ------ -------
<S> <C> <C> <C>
1996 (Two months ended November 30).......... $ 766 $ 195 $ 961
1997......................................... 4,676 1,101 5,777
1998......................................... 4,758 906 5,664
1999......................................... 4,841 850 5,691
2000......................................... 4,926 850 5,776
2001......................................... 5,012 850 5,862
Thereafter to 2009........................... 43,387 2,337 45,724
------- ------ -------
$68,366 $7,089 $75,455
======= ====== =======
</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.
F-10
<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.................................................... iv
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....................................... 35
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 36
Business................................................................. 42
Management............................................................... 56
Certain Transactions..................................................... 61
Security Ownership of Certain Beneficial Owners and Management........... 63
Limited Liability Company Agreement...................................... 64
Description of Senior Credit Facility.................................... 66
The Exchange Offer....................................................... 68
Description of the Notes................................................. 76
Certain Federal Income Tax Consequences.................................. 100
Plan of Distribution..................................................... 101
Legal Matters............................................................ 101
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 Ratio of Earnings to Fixed
Charges.
12.2 Statement Regarding Computation of Ratio of Pro Forma 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.
** Previously filed.
+ 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 AMENDMENT NO. 1 TO THE
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 JANUARY 31, 1997.
PETERSEN PUBLISHING COMPANY, L.L.C.
/s/ Richard S. Willis
By: _________________________________
Richard S. Willis
Executive Vice President and
Chief Financial Officer
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATES
Chief Executive
** Officer and January 31,
- ------------------------------------- Director of 1997
D. CLAEYS BAHRENBURG BrightView*
(Principal
Executive Officer)
Executive Vice
** President--Chief January 31,
- ------------------------------------- Financial Officer 1997
RICHARD S. WILLIS (Principal
Financial and
Accounting Officer)
Director of
** BrightView* January 31,
- ------------------------------------- 1997
NEAL VITALE
Director of
** BrightView* January 31,
- ------------------------------------- 1997
JAMES D. DUNNING, JR.
Director of
** BrightView* January 31,
- ------------------------------------- 1997
LAURENCE H. BLOCH
II-7
<PAGE>
SIGNATURE CAPACITY DATES
Director of
** BrightView* January 31,
- ------------------------------------- 1997
AVY H. STEIN
Director of
** BrightView* January 31,
- ------------------------------------- 1997
DANIEL H. BLUMENTHAL
Director of
** BrightView* January 31,
- ------------------------------------- 1997
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.
**The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement on behalf of the above named
officers and directors of the Company pursuant to the Power of Attorney
executed by such officers and directors and previously filed with the
Securities and Exchange Commission.
/s/ Richard S. Willis
_________________________________
Richard S. Willis
Attorney-in-fact
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PETERSEN CAPITAL
CORP. HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE 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 JANUARY 31,
1997.
Petersen Capital Corp.
/s/ Richard W. Willis
By: _________________________________
Richard W. Willis
Chief Financial Officer
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATES
Chairman and
* Director (Principal January 31,
- ------------------------------------- Executive Officer) 1997
JAMES D. DUNNING, JR.
Chief Financial
* Officer (Principal January 31,
- ------------------------------------- Financial and 1997
RICHARD S. WILLIS Accounting Officer)
Director
* January 31,
- ------------------------------------- 1997
NEAL VITALE
Director
* January 31,
- ------------------------------------- 1997
D. CLAEYS BAHRENBURG
Director
* January 31,
- ------------------------------------- 1997
LAURENCE H. BLOCH
Director
* January 31,
- ------------------------------------- 1997
AVY H. STEIN
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<PAGE>
SIGNATURE CAPACITY DATES
Director
* January 31,
- ------------------------------------- 1997
DANIEL H. BLUMENTHAL
Director
* January 31,
- ------------------------------------- 1997
STUART KARU
- --------
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement on behalf of the above named
officers and directors of the Company pursuant to the Power of Attorney
executed by such officers and directors and previously filed with the
Securities and Exchange Commission.
/s/ Richard S. Willis
- -------------------------------------
Richard S. Willis
Attorney-in-fact
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, PETERSEN
HOLDINGS, L.L.C. HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE 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 JANUARY 31,
1997.
Petersen Holdings, L.L.C.
/s/ Richard S. Willis
By: _________________________________
Richard S. Willis
Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATES
Chairman and
** Director of January 31,
- ------------------------------------- BrightView* 1997
JAMES D. DUNNING, JR. (Principal
Executive Officer)
Chief Financial
** Officer and January 31,
- ------------------------------------- Director of 1997
LAURENCE H. BLOCH BrightView*
(Principal
Financial and
Accounting Officer)
Director of
** BrightView* January 31,
- ------------------------------------- 1997
NEAL VITALE
Director of
** BrightView* January 31,
- ------------------------------------- 1997
D. CLAEYS BAHRENBURG
Director of
** BrightView* January 31,
- ------------------------------------- 1997
AVY H. STEIN
Director of
** BrightView* January 31,
- ------------------------------------- 1997
DANIEL H. BLUMENTHAL
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<PAGE>
SIGNATURE
CAPACITY DATES
Director of
** BrightView* January 31,
- ------------------------------------- 1997
STUART KARU
- --------
* BrightView is the Managing Member of Petersen Holdings, L.L.C.
**The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to the Registration Statement on behalf of the above named
officers and directors of the Company pursuant to the Power of Attorney
executed by such officers and directors and previously filed with the
Securities and Exchange Commission.
/s/ Richard S. Willis
- -------------------------------
Richard S. Willis
Attorney-in-fact
II-12
<PAGE>
PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- --------- ------------------ ----------- --------
ADDITIONS
------------------
(1) (2)
BALANCE CHARGED CHARGED BALANCE
AT TO COSTS TO OTHER AT END
BEGINNING AND ACCOUNTS- DEDUCTIONS- OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------- --------- -------- --------- ----------- -------- ---
<S> <C> <C> <C> <C> <C> <C>
November 30, 1994:
Allowance for doubtful
accounts............. $2,340 $825 $(1,033)(a) $2,132
November 30, 1995:
Allowance for doubtful
accounts............. $2,132 $900 $ (812)(a) $2,220
September 30, 1996:
Allowance for doubtful
accounts............. $2,220 $500 $ (849)(b) $1,871
</TABLE>
- --------
(a) Represents amounts written-off against the allowance for doubtful accounts,
net of recoveries.
(b) Represents a deduction in the allowance for doubtful accounts based on
management's estimate of collectibility as well as amounts written-off
against the allowance for doubtful accounts, net of recoveries.
<PAGE>
NOTE
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 71 6336AB8
Number 001
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
SERIES B 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.
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<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 Series B 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
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<PAGE>
(REVERSE SIDE)
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
SERIES B 11 1/8% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Petersen Publishing Company, L.L.C., a Delaware limited liability
("Capital," company (the "Company") and Petersen Capital Corp., a Delaware
corporation ("Capital," and together with the Company, the "Issuers"), jointly
and severally 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.
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
<PAGE>
of 1939 (15 U.S. Code (SS) 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:
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
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<PAGE>
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. 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.
10. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
11. 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.
12. 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
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<PAGE>
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.
13. 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.
14. 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.
15. 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.
16. 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
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<PAGE>
releases all such liability. The waiver and release are part of the
consideration for the issuance of this Note.
17. 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.
18. 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).
19. 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.
20. 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.
21. 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
-5-
<PAGE>
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.
-6-
<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.
Date: Your Signature:
------------------ -----------------------------------
-------------------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
------------------------------------------------------
<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>
================================================================================
CREDIT AGREEMENT
among
PETERSEN PUBLISHING COMPANY, L.L.C.,
THE LENDERS NAMED HEREIN,
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Administrative Agent and Syndication Agent,
and
CIBC INC.,
as Documentation Agent
$260,000,000 Senior Credit Facilities
Arranged by
FIRST UNION CAPITAL MARKETS CORP.
Dated as of September 30, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS
ARTICLE I
DEFINITIONS
1.1. Defined Terms........................................................ 2
1.2. Accounting Terms..................................................... 23
1.3. Designated Non-Guarantor Subsidiaries................................ 24
1.4. Other Terms; Construction............................................ 24
1.5. Officers, Directors of Limited Liability Companies................... 24
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Commitments; Loans................................................... 24
2.2. Borrowings........................................................... 25
2.3. Disbursements; Funding Reliance; Domicile of Loans................... 28
2.4. Notes................................................................ 29
2.5. Termination and Reduction of Commitments and Swingline Commitment.... 30
2.6. Mandatory Repayments and Prepayments................................. 31
2.7. Voluntary Prepayments................................................ 35
2.8. Interest............................................................. 36
2.9. Fees................................................................. 37
2.10. Interest Periods..................................................... 38
2.11. Conversions and Continuations........................................ 39
2.12. Method of Payments; Computations..................................... 40
2.13. Recovery of Payments................................................. 41
2.14. Use of Proceeds...................................................... 42
2.15. Pro Rata Treatment; Sharing of Payments.............................. 42
2.16. Increased Costs; Change in Circumstances; Illegality; etc............ 42
2.17. Taxes................................................................ 44
2.18. Compensation......................................................... 46
2.19. Duty to Mitigate..................................................... 46
2.20. Replacement of Lenders............................................... 47
ARTICLE III
LETTERS OF CREDIT
3.1. Issuance............................................................. 47
3.2. Notices.............................................................. 48
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.3. Participations...................................................... 49
3.4. Reimbursement....................................................... 49
3.5. Payment by Revolving Loans.......................................... 49
3.6. Payment to Lenders.................................................. 50
3.7. Obligations Absolute................................................ 50
3.8. Cash Collateral Account............................................. 52
3.9. Effectiveness....................................................... 52
ARTICLE IV
CONDITIONS OF BORROWING
4.1. Conditions of Initial Borrowing..................................... 53
4.2. Conditions of All Borrowings........................................ 58
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Corporate Organization and Power................................... 58
5.2. Authorization; Enforceability...................................... 59
5.3. No Violation....................................................... 59
5.4. Governmental Authorization; Permits................................ 59
5.5. Litigation......................................................... 60
5.6. Taxes.............................................................. 60
5.7. Subsidiaries....................................................... 60
5.8. Full Disclosure.................................................... 60
5.9. Margin Regulations................................................. 61
5.10. Financial Matters.................................................. 61
5.11. Ownership of Properties............................................ 63
5.12. ERISA.............................................................. 63
5.13. Environmental Matters.............................................. 63
5.14. Compliance With Governing Documents, Decrees and Laws.............. 65
5.15. Labor Relations.................................................... 65
5.16. Regulated Industries............................................... 65
5.17. Insurance.......................................................... 65
5.18. Certain Contracts.................................................. 66
5.19. Capitalization..................................................... 66
5.20. Security Documents................................................. 66
5.21. Transaction Documents.............................................. 66
5.22. Broker's or Finder's Fees.......................................... 67
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. Financial Statements............................................... 67
6.2. Other Business and Financial Information........................... 68
</TABLE>
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<TABLE>
<S> <C>
6.3. Existence; Franchises; Maintenance of Properties................... 71
6.4. Compliance with Laws............................................... 71
6.5. Payment of Obligations............................................. 72
6.6. Insurance.......................................................... 72
6.7. Maintenance of Books and Records; Inspection....................... 72
6.8. Interest Rate Protection........................................... 72
6.9. Permitted Acquisitions............................................. 72
6.10. Creation or Acquisition of Subsidiaries............................ 74
6.11. Additional Security; Further Assurances............................ 76
6.12. Fiscal Year........................................................ 76
6.13. Consents........................................................... 76
6.14. Financial Statements of the Business............................... 76
6.15. Projected Analysis................................................. 76
ARTICLE VII
FINANCIAL COVENANTS
7.1. Leverage Ratio...................................................... 77
7.2. Interest Coverage Ratio............................................. 78
7.3. Fixed Charge Coverage Ratio......................................... 78
7.4. Capital Expenditures................................................ 78
ARTICLE VIII
NEGATIVE COVENANTS
8.1. Merger; Consolidation.............................................. 78
8.2. Indebtedness....................................................... 79
8.3. Liens.............................................................. 80
8.4. Disposition of Assets.............................................. 82
8.5. Investments........................................................ 83
8.6. Restricted Payments................................................ 84
8.7. Transactions with Affiliates....................................... 85
8.8. Lines of Business.................................................. 86
8.9. Certain Amendments................................................. 86
8.10. Limitation on Certain Restrictions................................. 86
8.11. No Other Negative Pledges.......................................... 87
8.12. Fiscal Year........................................................ 87
8.13. Accounting Changes................................................. 87
8.14. Designated Senior Indebtedness..................................... 87
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default................................................... 87
9.2. Remedies: Termination of Commitments, Acceleration, etc............. 90
9.3. Remedies: Set-Off................................................... 90
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Appointment......................................................... 91
10.2. Nature of Duties.................................................... 91
10.3. Exculpatory Provisions.............................................. 91
10.4. Reliance by Administrative Agent.................................... 92
10.5. Non-Reliance on Administrative Agent and Other Lenders.............. 92
10.6. Notice of Default................................................... 92
10.7. Indemnification..................................................... 93
10.8. The Administrative Agent in its Individual Capacity................. 93
10.9. Successor Administrative Agent...................................... 94
10.10. Collateral Matters.................................................. 94
10.11. Syndication Agent, Documentation Agent.............................. 94
10.12. Issuing Lender and Swingline Lender................................. 95
ARTICLE XI
MISCELLANEOUS
11.1. Fees and Expenses................................................... 95
11.2. Indemnification..................................................... 95
11.3. Governing Law; Consent to Jurisdiction.............................. 96
11.4. Arbitration; Preservation and Limitation of Remedies................ 96
11.5. Notices............................................................. 97
11.6. Amendments, Waivers, etc............................................ 98
11.7. Assignments, Participations......................................... 99
11.8. No Waiver........................................................... 101
11.9. Successors and Assigns.............................................. 102
11.10. Survival............................................................ 102
11.11. Severability........................................................ 102
11.12. Construction........................................................ 102
11.13. Confidentiality..................................................... 102
11.14. Counterparts........................................................ 103
11.15. Entire Agreement.................................................... 103
</TABLE>
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<PAGE>
ANNEXES
Annex I Applicable Margin Percentages
EXHIBITS
Exhibit A-1 Form of Notice of Revolving Borrowing
Exhibit A-2 Form of Notice of Swingline Borrowing
Exhibit B-1 Form of Tranche A Term Note
Exhibit B-2 Form of Tranche B Term Note
Exhibit B-3 Form of Revolving Credit Note
Exhibit B-4 Form of Swingline Note
Exhibit C Form of Excess Cash Flow Certificate
Exhibit D Form of Notice of Prepayment
Exhibit E Form of Notice of Conversion/Continuation
Exhibit F Form of Letter of Credit Notice
Exhibit G Form of Parent Guaranty
Exhibit H Form of Borrower Pledge and Security Agreement
Exhibit I Form of Parent Pledge and Security Agreement
Exhibit J-1 Form of Opinion of Kirkland & Ellis
Exhibit J-2 Form of Opinion of Heller, Ehrman, White & McCauliffe
Exhibit K Form of Financial Condition Certificate
Exhibit L Form of Compliance Certificate
Exhibit M Form of Assignment and Acceptance
SCHEDULES
Schedule 1.1(a) Consolidated Operating Cash Flow through September 30, 1996
Schedule 1.1(b) Adjustments to Consolidated Operating Cash Flow
Schedule 5.4 Consents and Approvals
Schedule 5.6 Taxes
Schedule 5.11 Leases
Schedule 5.17 Insurance
Schedule 5.18 Certain Contracts
Schedule 5.19 Capitalization
Schedule 6.15 Projected Analysis
Schedule 8.3 Liens
Schedule 8.4 Scheduled Titles
Schedule 8.5 Investments
Schedule 8.7 Transactions with Affiliates
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 30th day of September, 1996
(this "Agreement"), is made among PETERSEN PUBLISHING COMPANY, L.L.C., a
Delaware limited liability company with its principal offices in Los Angeles,
California (the "Borrower"), the banks and financial institutions listed on the
signature pages hereof or that become parties hereto after the date hereof
(collectively, the "Lenders"), CIBC INC. ("CIBC"), as documentation agent (in
such capacity, the "Documentation Agent"), and FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("First Union"), as syndication agent (in such capacity, the
"Syndication Agent") and as administrative agent for the Lenders (in such
capacity, the "Administrative Agent").
RECITALS
A. The Borrower is owned by Petersen Holdings, L.L.C., a Delaware
limited liability company ("Holdings"), which holds a 99.9% managing membership
interest in the Borrower), and by BrightView Communications Group, Inc., a
Delaware corporation ("BrightView"), which holds a 0.1% passive membership
interest in the Borrower.
B. The Borrower proposes to acquire from Petersen Publishing
Company, a California corporation ("Petersen"), the assets and certain
liabilities relating to Petersen's publishing and media businesses (the
"Petersen Acquisition"), pursuant to an Asset Purchase Agreement, dated as of
August 15, 1996, by and between BrightView and Petersen (as amended, modified or
supplemented from time to time in accordance with the terms of this Agreement,
the "Asset Purchase Agreement").
C. In order (i) to finance a portion of the purchase price of the
Petersen Acquisition, (ii) to pay or reimburse certain fees and expenses in
connection with the Petersen Acquisition, the transactions contemplated by this
Agreement and the other Transactions (as hereinafter defined), and (iii) to
provide for working capital and general corporate purposes, including certain
acquisitions, the Borrower has requested that the Lenders make available to the
Borrower credit facilities in the aggregate principal amount of $260,000,000,
all as more fully described herein.
D. The Lenders are willing to make available to the Borrower the
credit facilities described herein subject to and on the terms and conditions
set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants
and agreements herein contained, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1. Defined Terms. For purposes of this Agreement, in addition to
-------------
the terms defined elsewhere herein, the following terms shall have the meanings
set forth below (such meanings to be equally applicable to the singular and
plural forms thereof):
"ABR Loan" shall mean, at any time, any Loan that bears interest at
such time at the applicable Adjusted Alternate Base Rate.
"Account Designation Letter" shall mean a letter from the Borrower to
the Administrative Agent, duly completed and signed by an Authorized Officer and
in form and substance satisfactory to the Administrative Agent, listing any one
or more accounts to which the Borrower may from time to time request the
Administrative Agent to forward the proceeds of any Loans made hereunder.
"Acquisition" shall mean any transaction or series of related
transactions, consummated on or after the date hereof, by which the Borrower
directly, or indirectly through one or more Subsidiaries, (i) acquires any going
business, any publication or brand name and the related rights and assets, or
all or substantially all of the assets, of any Person, whether through purchase
of assets, merger or otherwise, or (ii) acquires securities or other ownership
interests of any Person having at least a majority of combined voting power of
the then outstanding securities or other ownership interests of such Person.
"Acquisition Amount" shall mean, with respect to any Acquisition, the
sum (without duplication) of (i) the amount of cash paid by the Borrower and its
Subsidiaries in connection with such Acquisition, (ii) the Fair Market Value of
all Capital Stock of the Borrower issued or given in connection with such
Acquisition, (iii) the amount (determined by using the face amount or the amount
payable at maturity, whichever is greater) of all Indebtedness incurred, assumed
or acquired by the Borrower and its Subsidiaries in connection with such
Acquisition, (iv) all additional purchase price amounts in connection with such
Acquisition in the form of earnouts and other contingent obligations that should
be recorded as a liability on the balance sheet of the Borrower and its
Subsidiaries or expensed, in either event in accordance with Generally Accepted
Accounting Principles, Regulation S-X under the Securities Act of 1933, as
amended, or any other rule or regulation of the Securities and Exchange
Commission, (v) all amounts paid in respect of covenants not to compete,
consulting agreements and other affiliated contracts in connection with such
Acquisition, (vi) the amount of all transaction fees and expenses (including,
without limitation, legal, accounting and finders' fees and expenses) incurred
by the Borrower and its Subsidiaries in connection with such Acquisition and
(vii) the aggregate fair market value of all other consideration given by the
Borrower and its Subsidiaries in connection with such Acquisition.
"Adjusted Alternate Base Rate" shall mean, at any time with respect to
any ABR Loan, a rate per annum equal to the Alternate Base Rate as in effect at
such time plus the Applicable Margin Percentage for the Class of such ABR Loan,
as in effect at such time.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any
LIBOR Loan, a rate per annum equal to the LIBOR Rate as in effect at such time
plus the Applicable Margin Percentage for the Class of such LIBOR Loan, as in
effect at such time.
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<PAGE>
"Administrative Agent" shall mean First Union, in its capacity as
Administrative Agent appointed under ARTICLE X, and its successors and permitted
assigns in such capacity.
"Affiliate" shall mean, as to any Person, each other Person that
directly, or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person or is a director or
officer of such Person. For purposes of this definition, with respect to any
Person "control" shall mean (i) the possession, direct or indirect, 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 contract or otherwise, or
(ii) the beneficial ownership of securities or other ownership interests of such
Person having 10% or more of the combined voting power of the then outstanding
securities or other ownership interests of such Person ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors or other governing body of such Person.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"Alternate Base Rate" shall mean the higher of (i) the per annum
interest rate publicly announced from time to time by First Union in Charlotte,
North Carolina, to be its prime rate (which may not necessarily be its best
lending rate), as adjusted to conform to changes as of the opening of business
on the date of any such change in such prime rate, or (ii) 0.5% per annum plus
the Federal Funds Rate, as adjusted to conform to changes as of the opening of
business on the date of any such change in the Federal Funds Rate.
"Applicable Margin Percentage" shall mean, at any time from and after
the Closing Date, (i) with respect to any Tranche A Term Loan or Revolving
Credit Loan, 1.5% if such Loan is an ABR Loan and 2.75% if such Loan is a LIBOR
Loan, (ii) with respect to any Tranche B Term Loan, 2.0% if such Loan is an ABR
Loan and 3.25% if such Loan is a LIBOR Loan, and (iii) with respect to the
Revolving Credit Commitment Fee, 0.5%; provided, however, that on each
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Adjustment Date, the Applicable Margin Percentage for all Loans and the
Revolving Credit Commitment Fee shall be adjusted effective as of such date
(based upon the calculation of the Leverage Ratio as of the last day of the
fiscal period to which such Adjustment Date relates) in accordance with the
matrices set forth in Annex I hereto; and provided further that, notwithstanding
------- -------- -------
the foregoing or anything in Annex I to the contrary, if at any time the
-------
Borrower shall have failed to deliver the financial statements and a Compliance
Certificate as required by SECTION 6.1(B) or SECTION 6.1(C) (as the case may be)
and SECTION 6.2(A), or if at any time a Default or Event of Default shall have
occurred and be continuing, then at all times from and including the date on
which such statements and Compliance Certificate are required to have been
delivered (or the date of occurrence of such Default or Event of Default, as the
case may be) to the date on which the same shall have been delivered (or such
Default or Event of Default cured or waived, as the case may be), each
Applicable Margin Percentage shall be determined in accordance with Annex I as
-------
if the Leverage Ratio were greater than or equal to 5.5 : 1.0 (notwithstanding
the actual Leverage Ratio). For purposes of this definition, "Adjustment Date"
shall mean, with respect to any fiscal quarter of the Borrower beginning with
the fiscal quarter ending December 31, 1996, the tenth (10th) day (or, if such
day is not a Business Day, on the next succeeding Business Day) after delivery
by the Borrower in accordance with SECTION 6.1(B) or SECTION 6.1(C), as the case
may be, of (i) financial statements for the most recently completed applicable
fiscal period and (ii) a duly completed Compliance Certificate with respect to
such fiscal period.
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<PAGE>
"Asset Disposition" shall mean any sale, assignment, transfer or other
disposition by the Borrower or any of its Subsidiaries to any other Person
(other than to the Borrower or to a Wholly Owned Subsidiary), whether in one
transaction or in a series of related transactions, of any of its assets,
business units or other properties (including any interests in property, whether
tangible or intangible, and including Capital Stock of Subsidiaries), excluding
(i) sales of inventory and other assets and licenses or leases of intellectual
property, in each case in the ordinary course of business, (ii) the sale or
exchange of used or obsolete equipment to the extent the proceeds of such sale
are applied towards, or such equipment is exchanged for, similar replacement
equipment, and (iii) the sale or other disposition of the Scheduled Titles or
Investments relating thereto as permitted by clause (iii) of SECTION 8.4.
"Asset Purchase Agreement" shall have the meaning given to such term
in the recitals hereof.
"Assignee" shall have the meaning given to such term in SECTION
11.7(A).
"Assignment and Acceptance" shall mean an Assignment and Acceptance
entered into between a Lender and an Assignee and accepted by the Administrative
Agent and the Borrower, in substantially the form of EXHIBIT M.
"Authorized Officer" shall mean (i) any individual properly authorized
in accordance with the terms of the operating agreement of the Borrower to take
the action specified herein on behalf of the Borrower or (ii) in the case of a
corporation or other Person (other than an individual) taking any action on
behalf of the Borrower in its capacity as a manager of the Borrower, any
individual properly authorized by resolution of the board of directors of such
corporation or other Person or in accordance with the terms of its operating
agreement to take the action specified herein on its behalf, and in each case
whose signature and incumbency shall have been certified to the Administrative
Agent by the secretary or an assistant secretary (or such other individual who
is properly authorized to perform the duties normally associated with the title
of secretary or assistant secretary) of the Borrower or such corporation or
other Person, as the case may be.
"Bankruptcy Code" shall mean 11 U.S.C. (S)(S) 101 et seq., as amended
-- ---
from time to time, and any successor statute.
"Borrower Pledge and Security Agreement" shall mean a pledge and
security agreement made by the Borrower in favor of the Administrative Agent, in
substantially the form of EXHIBIT H, as amended, modified or supplemented from
time to time.
"Borrowing" shall mean the incurrence by the Borrower (including as a
result of conversions and continuations of outstanding Loans pursuant to SECTION
2.11) on a single date of a group of Loans of a single Class and Type (or a
Swingline Loan made by the Swingline Lender) and, in the case of LIBOR Loans, as
to which a single Interest Period is in effect.
"Borrowing Date" shall mean, with respect to any Borrowing, the date
upon which such Borrowing is made.
"BrightView" shall have the meaning given to such term in the recitals
hereof.
"Business" shall have the meaning given to such term in the Asset
Purchase Agreement.
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<PAGE>
"Business Day" shall mean (i) any day other than a Saturday or Sunday,
a legal holiday or a day on which commercial banks in Charlotte, North Carolina
are required by law to be closed and (ii) in respect of any determination
relevant to a LIBOR Loan, any such day that is also a day on which tradings are
conducted in the London interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, the aggregate
amount (whether paid in cash or accrued as a liability) that would, in
accordance with Generally Accepted Accounting Principles, be included on the
consolidated statement of cash flows of the Borrower and its Subsidiaries for
such period as additions to equipment, fixed assets, real property or
improvements or other capital assets (including, without limitation, capital
lease obligations); provided, however, that Capital Expenditures shall not
-------- -------
include any such expenditures (i) for replacements and substitutions for capital
assets, to the extent made with the proceeds of insurance, or (ii) made in
connection with Permitted Acquisitions.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in corporate stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants or options to
purchase any of the foregoing.
"Cash Collateral Account" shall have the meaning given to such term in
SECTION 3.8.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within one year from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing within 270 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc., (iii) time deposits and certificates of deposit
maturing within one year from the date of issuance and issued by a bank or trust
company organized under the laws of the United States of America or any state
thereof that has combined capital and surplus of at least $500,000,000 and that
has (or is a subsidiary of a bank holding company that has) a long-term
unsecured debt rating of at least A or the equivalent thereof by Standard &
Poor's Ratings Services or at least A2 or the equivalent thereof by Moody's
Investors Service, Inc., (iv) repurchase obligations with a term not exceeding
seven (7) days with respect to underlying securities of the types described in
clause (i) above entered into with any bank or trust company meeting the
qualifications specified in clause (iii) above, and (v) money market funds at
least 95% of the assets of which are continuously invested in securities of the
type described in clause (i) above.
"Casualty Event" shall mean, with respect to any property (including
any interest in property) of the Borrower or any of its Subsidiaries, any loss
of, damage to, or condemnation or other taking of, such property for which the
Borrower or such Subsidiary receives insurance proceeds, proceeds of a
condemnation award or other compensation (other than business interruption
insurance proceeds).
"Class" shall have the meaning given to such term in SECTION 2.2(A).
"Closing Date" shall mean the date upon which the initial extensions
of credit are made pursuant to this Agreement.
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<PAGE>
"Collateral" shall mean all the assets, property and interests in
property that shall from time to time be pledged or be purported to be pledged
as direct or indirect security for the Obligations pursuant to any one or more
of the Security Documents.
"Commission" shall mean the Securities and Exchange Commission and any
successor thereto.
"Commitment" shall mean, with respect to any Lender, such Lender's
Tranche A Commitment, Tranche B Commitment and Revolving Credit Commitment.
"Commodity Hedge Agreement" shall mean any option, hedge or other
similar agreement or arrangement designed to protect against fluctuations in
commodity or materials prices.
"Compliance Certificate" shall mean a fully completed and duly
executed certificate in the form of EXHIBIT L, together with a Covenant
Compliance Worksheet.
"Consolidated Current Assets" shall mean, as of any date of
determination, the assets of the Borrower and its Subsidiaries (other than cash
and Cash Equivalents) that would, in accordance with Generally Accepted
Accounting Principles, be classified on a consolidated balance sheet of the
Borrower and its Subsidiaries as current assets as of such date.
"Consolidated Current Liabilities" shall mean, as of any date of
determination, all liabilities (without duplication) of the Borrower and its
Subsidiaries that would, in accordance with Generally Accepted Accounting
Principles, be classified on a consolidated balance sheet of the Borrower and
its Subsidiaries as current liabilities as of such date; provided, however, that
-------- -------
Consolidated Current Liabilities shall not include current maturities of any
long-term Indebtedness.
"Consolidated Fixed Charges" shall mean, for any period, the aggregate
(without duplication) of the following, all determined on a consolidated basis
for the Borrower and its Subsidiaries in accordance with Generally Accepted
Accounting Principles for such period: (a) Consolidated Interest Expense for
such period, (b) federal, state, local and other income taxes (but only to the
extent actually paid in cash during such period), (c) Capital Expenditures for
such period, and (d) the aggregate (without duplication) of all scheduled
payments of principal on Funded Debt required to have been made by the Borrower
and its Subsidiaries during such period (whether or not actually made),
including, without limitation, the aggregate principal amount of the Term Loans
due during such period under SECTIONS 2.6(A) and 2.6(B) (as such amounts may
have been previously adjusted in accordance with the terms hereof as a result of
prior prepayments on the Term Loans).
"Consolidated Funded Debt" shall mean, as of any date of
determination, the difference between (i) the aggregate (without duplication) of
all Funded Debt of the Borrower and its Subsidiaries as of such date, determined
on a consolidated basis in accordance with Generally Accepted Accounting
Principles, minus (ii) the amount by which the aggregate cash balances and Cash
-----
Equivalents of the Borrower and its Subsidiaries as of such date, determined on
a consolidated basis in accordance with Generally Accepted Accounting
Principles, exceed $5,000,000. For purposes of determining Consolidated Funded
Debt as of any date, each Contingent Obligation of the Borrower and its
Subsidiaries required to be included in such determination shall be valued at
the maximum aggregate principal amount (whether or not drawn or outstanding) of
the Indebtedness that
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<PAGE>
is the corresponding "primary obligation" (as such term is defined in the
definition of Contingent Obligation) as of such date.
"Consolidated Interest Expense" shall mean, for any period, the sum
(without duplication) of (i) total interest expense of the Borrower and its
Subsidiaries for such period in respect of Funded Debt of the Borrower and its
Subsidiaries (including, without limitation, all such interest expense accrued
or capitalized during such period, whether or not actually paid during such
period), determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles (but excluding pay-in-kind interest, if any, on
Indebtedness permitted under clause (ii) of SECTION 8.2), (ii) all net amounts
payable under or in respect of Interest Rate Protection Agreements, to the
extent paid or accrued by the Borrower and its Subsidiaries during such period,
and (iii) all ongoing commitment fees and other ongoing fees in respect of
Funded Debt (including the Revolving Credit Commitment Fee and the annual
administrative fee payable to the Administrative Agent under paragraph (ii) of
the Fee Letter, but excluding the fees payable to First Union and CIBC under
paragraph (ii) of the Fee Letter) paid, accrued or capitalized by the Borrower
and its Subsidiaries during such period.
"Consolidated Net Income" shall mean, for any period, net income (or
loss) for the Borrower and its Subsidiaries for such period, determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles.
"Consolidated Operating Cash Flow" shall mean, for any period, the
aggregate of (i) Consolidated Net Income for such period, plus (ii) the sum of
----
Consolidated Interest Expense, federal, state, local and other income taxes,
depreciation, amortization of intangible assets, and extraordinary losses and
other noncash expenses or charges reducing income for such period, all to the
extent taken into account in the calculation of Consolidated Net Income for such
period, minus (iii) the sum of extraordinary gains and other noncash credits
-----
increasing income for such period, all to the extent taken into account in the
calculation of Consolidated Net Income for such period. For purposes of any
covenants herein referring to Consolidated Operating Cash Flow for the period
prior to the Closing Date, Consolidated Operating Cash Flow for the fiscal
quarters ended December 31, 1995, March 31, 1996, June 30, 1996 and September
30, 1996 is set forth in SCHEDULE 1.1(A). In addition, for purposes of this
Agreement, calculations of Consolidated Operating Cash Flow for all subsequent
periods shall be made subject to and in accordance with the adjustments and
other provisions set forth in SCHEDULE 1.1(B).
"Consolidated Working Capital" shall mean, as of any date of
determination, Consolidated Current Assets as of such date minus Consolidated
-----
Current Liabilities as of such date.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Indebtedness,
liability or other obligation (the "primary obligation") of another Person (the
"primary obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or provide funds (i) for the payment
or discharge of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or
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<PAGE>
hold harmless the owner of any such primary obligation against loss or failure
or inability to perform in respect thereof; provided, however, that, with
-------- -------
respect to the Borrower and its Subsidiaries, the term Contingent Obligation
shall not include endorsements for collection or deposit in the ordinary course
of business.
"Covenant Compliance Worksheet" shall mean a fully completed worksheet
in the form of Attachment A to EXHIBIT L.
"Credit Documents" shall mean this Agreement, the Notes, the Letters
of Credit, the Fee Letter, the Parent Guaranty, the Parent Pledge and Security
Agreement, the Borrower Pledge and Security Agreement, any other Security
Documents, any Subsidiaries Guaranty, any Interest Rate Protection Agreement to
which the Borrower and any Lender are parties and that is entered into by the
Borrower pursuant to, and as required by, SECTION 6.8, and all other agreements,
instruments, documents and certificates now or hereafter executed and delivered
to the Administrative Agent or any Lender by or on behalf of the Borrower or any
of its Subsidiaries with respect to this Agreement and the transactions
contemplated hereby, in each case as amended, modified, supplemented or restated
from time to time.
"Credit Party" shall mean any of the Borrower, any of its
Subsidiaries, Holdings and BrightView.
"Debt Issuance" shall mean the issuance or sale by Holdings,
BrightView, the Borrower or any of their respective Subsidiaries of any debt
securities, whether in a public offering of such securities or otherwise
(including any Excess Permitted Refinancing Indebtedness, but excluding other
Permitted Refinancing Indebtedness).
"Default" shall mean any event or condition that, with the passage of
time or giving of notice, or both, would constitute an Event of Default.
"Designated Acquisition Funds" shall have the meaning given to such
term in SECTION 6.9(A).
"Designated Non-Guarantor Subsidiary" shall mean (i) any Foreign
Subsidiary, (ii) a Subsidiary formed by the Borrower solely to become a co-
issuer of Permitted Refinancing Indebtedness and that has no assets (other than
nominal capitalization) and conducts no business other than the performance of
its obligations with regard to such Permitted Refinancing Indebtedness, or (iii)
any other Subsidiary of the Borrower that is not a Wholly Owned Subsidiary and
that has elected, by written notice to the Administrative Agent given not less
than ten (10) Business Days after the creation or acquisition thereof by the
Borrower or any other Subsidiary, not to become a guarantor under a Subsidiaries
Guaranty and not to grant to the Administrative Agent a Lien upon and security
interest in its personal property assets pursuant to a Subsidiaries Pledge and
Security Agreement.
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person that, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event or otherwise, (i) matures or is mandatorily redeemable or
subject to any mandatory repurchase requirement, pursuant to a sinking fund
obligation or otherwise, (ii) is redeemable or subject to any mandatory
repurchase requirement at the sole option of the holder thereof, or (iii) is
convertible into or exchangeable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (i)
or (ii) above,
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<PAGE>
in each case under (i), (ii) or (iii) above at any time on or prior to the
Tranche B Maturity Date; provided, however, that only the portion of Capital
-------- -------
Stock that so matures or is mandatorily redeemable, is so redeemable at the
option of the holder thereof, or is so convertible or exchangeable on or prior
to such date shall be deemed to be Disqualified Capital Stock.
"Dollars" or "$" shall mean dollars of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or
business, whether or not incorporated) that would be deemed to be under "common
control" with, or a member of the same "controlled group" as, the Borrower or
any of its Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o)
of the Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan
or Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a
Plan or a Multiemployer Plan, (ii) a complete or partial withdrawal by the
Borrower or any ERISA Affiliate from a Multiemployer Plan that results in
liability under Section 4201 or 4204 of ERISA, or the receipt by the Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section 4041A of ERISA, (iii)
the distribution by the Borrower or any ERISA Affiliate under Section 4041 or
4041A of ERISA of a notice of intent to terminate any Plan or the taking of any
action to terminate any Plan, (iv) the commencement of proceedings by the PBGC
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Borrower or any ERISA
Affiliate of a notice from any Multiemployer Plan that such action has been
taken by the PBGC with respect to such Multiemployer Plan, (v) the institution
of a proceeding by any fiduciary of any Multiemployer Plan against the Borrower
or any ERISA Affiliate to enforce Section 515 of ERISA, which is not dismissed
within thirty (30) days, (vi) the imposition upon the Borrower or any ERISA
Affiliate of any liability under Title IV of ERISA, other than for PBGC premiums
due but not delinquent under Section 4007 of ERISA, or the imposition or
threatened imposition of any Lien upon any assets of the Borrower or any ERISA
Affiliate as a result of any alleged failure to comply with the Internal Revenue
Code or ERISA in respect of any Plan, (vii) the engaging in or otherwise
becoming liable for a nonexempt Prohibited Transaction by the Borrower or any
ERISA Affiliate, (viii) a violation of the applicable requirements of Section
404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the
Internal Revenue Code by any fiduciary of any Plan for which the Borrower or any
of its ERISA Affiliates may be directly or indirectly liable or (ix) the
adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the
Internal Revenue Code or Section 307 of ERISA, would result in the loss of tax-
exempt status of the trust of which such Plan is a part if the Borrower or an
ERISA Affiliate fails to timely provide security to such Plan in accordance with
the provisions of such sections.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof and having total assets in
excess of $1,000,000,000, (ii) a commercial bank organized under the laws of any
other country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $1,000,000,000, provided
--------
that such bank or
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other financial institution is acting through a branch or agency located in the
United States, in the country under the laws of which it is organized or in
another country that is also a member of the OECD, (iii) the central bank of any
country that is a member of the OECD, (iv) a finance company, insurance company
or other financial institution or fund that is engaged in making, purchasing or
otherwise investing in loans in the ordinary course of its business and having
total assets in excess of $500,000,000, (v) any Affiliate of an existing Lender
or (vi) any other Person approved by the Required Lenders, which approval shall
not be unreasonably withheld.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
accusations, allegations, notices of noncompliance or violation, investigations
(other than internal reports prepared by any Person in the ordinary course of
its business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any actual or alleged violation of
or liability under any Environmental Law or relating to any permit issued, or
any approval given, under any such Environmental Law (collectively, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
rules of common law and orders of courts or Governmental Authorities, relating
to the protection of human health or occupational safety or the environment, now
or hereafter in effect and in each case as amended from time to time, including,
without limitation, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
"Equity Issuance" shall mean the issuance, sale or other disposition
by Holdings, BrightView or any of their respective Subsidiaries of its Capital
Stock (including, without limitation, pursuant to an initial registered public
offering of Capital Stock of Holdings, BrightView or the Borrower), any rights,
warrants or options to purchase or acquire any shares of its Capital Stock or
any other security or instrument representing, convertible into or exchangeable
for an equity interest in Holdings, BrightView or any of their respective
Subsidiaries; provided, however, that the term Equity Issuance shall not include
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(i) the issuance or sale of Capital Stock in connection with any capital
contributions made directly or indirectly (x) by Persons who hold equity
interests in Holdings or BrightView as of the Closing Date, (y) by Holdings or
BrightView to the Borrower, or (z) by the Borrower to a Subsidiary of the
Borrower, (ii) any issuance or sale of Capital Stock of Holdings or BrightView,
but only to the extent that the Net Cash Proceeds therefrom constitute
Designated Acquisition Funds and are contributed to the Borrower and applied in
payment of the relevant Acquisition Amount as provided in SECTION 6.9(A), (iii)
the issuance or sale of Capital Stock by the Borrower or any of its Subsidiaries
to Holdings, BrightView, the Borrower or any of the Subsidiaries of the
Borrower, provided that such Capital Stock is pledged to the Administrative
--------
Agent pursuant to the Borrower Pledge and Security Agreement, the Parent Pledge
and Security Agreement or a Subsidiaries Pledge and Security Agreement, as
applicable), or (iv) any Capital Stock or other equity securities of Holdings or
BrightView issued or sold in connection with any Permitted Acquisition and
constituting all or a portion of the applicable purchase price.
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"Equity Contribution" shall mean the contribution to the capital of
BrightView and Holdings effected pursuant to the sale of BrightView's and
Holdings' Capital Stock pursuant to the Securities Purchase Agreement.
"Event of Default" shall have the meaning given to such term in
SECTION 9.1.
"Excess Cash Flow" shall mean, for any fiscal year of the Borrower,
(a) the sum of (i) Consolidated Operating Cash Flow for such fiscal year and
(ii) an amount equal to any decrease in Consolidated Working Capital from the
first day to the last day of such fiscal year, minus (b) the sum (without
-----
duplication) of (i) Consolidated Fixed Charges for such fiscal year to the
extent paid in cash, (ii) optional prepayments on the Term Loans made during
such fiscal year, (iii) optional prepayments on the Revolving Loans made during
such fiscal year that are accompanied by a corresponding reduction in the
Revolving Credit Commitments, (iv) the aggregate cash portion (other than
Designated Acquisition Funds) of the Acquisition Amounts for all Permitted
Acquisitions made during such fiscal year, and (v) an amount equal to any
increase in Consolidated Working Capital from the first day to the last day of
such fiscal year.
"Excess Permitted Refinancing Indebtedness" shall mean any Permitted
Refinancing Indebtedness to the extent the aggregate principal amount thereof
(net of underwriting fees, discounts and commissions and customary and
reasonable transaction fees and expenses incurred in connection therewith)
exceeds the sum (without duplication) of (x) $100,000,000, (y) interest accrued
to the date of repayment and not previously paid in cash, and (z) the aggregate
principal amount of "pay-in-kind" Subordinated Bridge Notes or Subordinated Term
Notes then outstanding and that were issued after the Closing Date in payment of
interest thereon pursuant to the terms thereof (less the principal amount of any
Subordinated Bridge Indebtedness or Subordinated Term Indebtedness repaid after
the Closing Date other than with the proceeds of any Permitted Refinancing
Indebtedness).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Fair Market Value" shall mean, with respect to any Capital Stock of
the Borrower given in connection with an Acquisition, the value given to such
Capital Stock for purposes of such Acquisition by the parties thereto, as
determined in good faith pursuant to the relevant acquisition agreement or
otherwise in connection with such Acquisition.
"Federal Funds Rate" shall mean, for any period, a fluctuating per
annum interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by the Administrative Agent.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
<PAGE>
"Fee Letter" shall mean the letter from First Union and CIBC to the
Borrower, dated August 8, 1996, relating to certain fees payable by the Borrower
in respect of the transactions contemplated by this Agreement, as amended,
modified or supplemented from time to time.
"Financial Condition Certificate" shall mean a financial condition
certificate, substantially in the form of EXHIBIT K, duly executed by a
Financial Officer of the Borrower.
"Financial Officer" shall mean, with respect to the Borrower, the
chief financial officer, vice president - finance, principal accounting officer
or treasurer of the Borrower.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of (i) Consolidated Operating Cash Flow for the period
of four consecutive fiscal quarters then ending to (ii) Consolidated Fixed
Charges for such period; provided that, for purposes of calculating the Fixed
--------
Charge Coverage Ratio as of the last day of each of the fiscal quarters ending
December 31, 1996, March 31, 1997, and June 30, 1997, Consolidated Fixed Charges
shall be determined by multiplying (i) Consolidated Fixed Charges for the period
commencing October 1, 1996 and ending on the last day of such fiscal quarter by
(ii) (A) 4, in the case of the fiscal quarter ending December 31, 1996, (B) 2,
in the case of the fiscal quarter ending March 31, 1997, and (C) 4/3, in the
case of the fiscal quarter ending June 30, 1997.
"Foreign Subsidiary" shall mean any Subsidiary of the Borrower that is
organized under the laws of any nation, state or jurisdiction other than the
United States of America or any state thereof.
"Funded Debt" shall mean any Indebtedness other than (i) Indebtedness
arising under Interest Rate Protection Agreements or Commodity Hedge Agreements
and (ii) accrued expenses, current trade or other accounts payable (it being
understood that such expenses and accounts payable that are 90 days or more past
due (except to the extent such items are being disputed by the obligor on
reasonable grounds and in good faith) shall be considered to be "Funded Debt")
and other current liabilities arising in the ordinary course of business and not
incurred through the borrowing of money.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles, as set forth in the statements, opinions and
pronouncements of the Accounting Principles Board, the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board (or,
to the extent not so set forth in such statements, opinions and pronouncements,
as generally followed by entities similar in size to the Borrower and engaged in
generally similar lines of business), consistently applied and maintained and in
conformity with those used in the preparation of the most recent financial
statements of Petersen referred to in SECTION 5.10(A).
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any central bank thereof, any
municipal, local, city or county government, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Hazardous Substances" shall mean any substances or materials (i) that
are or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) that constitute
a nuisance,
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trespass or health or safety hazard to Persons or neighboring properties, or
(iv) that contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.
"Holdings" shall have the meaning given to such term in the recitals
hereof.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness, obligations and liabilities of such Person
for borrowed money or in respect of loans or advances (including, in the case of
the Borrower, pay-in-kind interest, if any, on Indebtedness permitted under
clause (ii) of SECTION 8.2), (ii) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments, (iii) all reimbursement
obligations of such Person with respect to surety bonds, letters of credit and
bankers' acceptances (in each case, whether or not drawn or matured and in the
stated amount thereof), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person, (vi) all obligations of such Person as lessee
under leases that are or are required to be, in accordance with Generally
Accepted Accounting Principles, recorded as capital leases, to the extent such
obligations are required to be so recorded, (vii) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if any (for purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Agreement, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value to be
determined reasonably and in good faith by the board of directors or other
governing body of the issuer of such Disqualified Capital Stock), (viii) the net
termination obligations of such Person under any Interest Rate Protection
Agreements or Commodity Hedge Agreements, calculated as of any date as if such
agreement or arrangement were terminated as of such date, (ix) all Contingent
Obligations of such Person and (x) all indebtedness referred to in clauses (i)
through (ix) above secured by any Lien on any property or asset owned or held by
such Person regardless of whether the indebtedness secured thereby shall have
been assumed by such Person or is nonrecourse to the credit of such Person.
"Interest Coverage Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) Consolidated Operating Cash Flow for the period of
four consecutive fiscal quarters then ending to (ii) Consolidated Interest
Expense for such period; provided that, for purposes of calculating the Interest
--------
Coverage Ratio as of the last day of each of the fiscal quarters ending December
31, 1996, March 31, 1997, and June 30, 1997, Consolidated Interest Expense shall
be determined by multiplying (i) Consolidated Interest Expense for the period
commencing October 1, 1996 and ending on the last day of such fiscal quarter by
(ii) (A) 4, in the case of the fiscal quarter ending December 31, 1996, (B) 2,
in the case of the fiscal quarter ending March 31, 1997, and (C) 4/3, in the
case of the fiscal quarter ending June 30, 1997.
"Interest Period" shall have the meaning given to such term in SECTION
2.10.
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"Interest Rate Protection 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.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Issuing Lender" shall mean First Union in its capacity as issuer of
the Letters of Credit, and its successors in such capacity.
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at
such time at the Adjusted LIBOR Rate.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising
part of the same Borrowing for any Interest Period, an interest rate per annum
obtained by dividing (i) (y) the rate of interest appearing on Telerate Page
3750 (or any successor page) or (z) if no such rate is available, or at the
option of the Administrative Agent in any event, the rate of interest determined
by the Administrative Agent to be the rate or the arithmetic mean of rates
(rounded upward, if necessary, to the nearest 1/16 of one percentage point) at
which Dollar deposits in immediately available funds are offered by First Union
to first-tier banks in the London interbank Eurodollar market, in each case
under (y) and (z) above at approximately 11:00 a.m., London time, two (2)
Business Days prior to the first day of such Interest Period for a period
substantially equal to such Interest Period and in an amount substantially equal
to the amount of First Union's LIBOR Loan comprising part of such Borrowing, by
(ii) the amount equal to 1.00 minus the Reserve Requirement (expressed as a
decimal) for such Interest Period.
"Lender" shall mean each financial institution signatory hereto and
each other financial institution that becomes a "Lender" hereunder pursuant to
SECTION 11.7, and their respective successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of
such Lender designated as its "Lending Office" on its signature page hereto or
in an Assignment and Acceptance, or such other office as may be otherwise
designated in writing from time to time by such Lender to the Borrower and the
Administrative Agent. A Lender may designate separate Lending Offices as
provided in the foregoing sentence for the purposes of making or maintaining
different Types of Loans, and, with respect to LIBOR Loans, such office may be a
domestic or foreign branch or Affiliate of such Lender.
"Letter of Credit Exposure" shall mean, with respect to any Revolving
Credit Lender at any time, such Lender's ratable share (based on the proportion
that its Revolving Credit Commitment bears to the aggregate Revolving Credit
Commitments at such time) of the sum of (i) the aggregate Stated Amount of all
Letters of Credit outstanding at such time and (ii) the aggregate amount of all
Reimbursement Obligations outstanding at such time.
"Letter of Credit Notice" shall have the meaning given to such term in
SECTION 3.2.
"Letters of Credit" shall have the meaning given to such term in
SECTION 3.1.
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"Leverage Ratio" shall mean, as of the last day of any fiscal quarter,
the ratio of (i) Consolidated Funded Debt as of such date to (ii) Consolidated
Operating Cash Flow for the period of four consecutive fiscal quarters then
ending.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
security interest, lien (statutory or otherwise), preference, priority, charge
or other encumbrance of any nature, whether voluntary or involuntary, including,
without limitation, the interest of any vendor or lessor under any conditional
sale agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
"Loans" shall mean any or all of the Tranche A Term Loans, the Tranche
B Term Loans, the Revolving Loans and the Swingline Loans.
"Margin Stock" shall have the meaning given to such term in Regulation U.
"Material Adverse Change" shall mean (i) with reference to any time or
period prior to the Closing Date, a material adverse change in the condition
(financial or otherwise), operations, business, properties or assets of
Petersen, and (ii) with reference to any time or period from and after the
Closing Date, a material adverse change in the condition (financial or
otherwise), operations, business, properties or assets of the Borrower and its
Subsidiaries taken as a whole. For purposes of this definition, determinations
of whether a change is a "Material Adverse Change" shall be made by the Required
Lenders.
"Material Adverse Effect" shall mean (i) with reference to any time or
period prior to the Closing Date, a material adverse effect upon the condition
(financial or otherwise), operations, business, properties or assets of
Petersen, and (ii) with reference to any time or period from and after the
Closing Date, a material adverse effect upon (A) the condition (financial or
otherwise), operations, business, properties or assets of the Borrower and its
Subsidiaries taken as a whole, (B) to the extent not covered under clause (A)
above, the ability of any Credit Party to consummate the Transactions or perform
its obligations under this Agreement or any of the other Credit Documents to
which it is a party or (C) the legality, validity or enforceability of (y) this
Agreement or any of the other Credit Documents or the rights and remedies of the
Administrative Agent and the Lenders hereunder and thereunder, or (z) any other
document or instrument to be delivered in connection with the Transactions that
is executed or to be executed by any Credit Party. For purposes of this
definition, determinations of whether an effect is a "Material Adverse Effect"
shall be made by the Required Lenders.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate makes, is making or is obligated to make contributions or has made or
been obligated to make contributions.
"Net Availability" shall mean, as of any date of determination, the
greatest aggregate principal amount of Revolving Loans that could be borrowed by
the Borrower on such date without violating the Leverage Ratio. For purposes of
determining Net Availability pursuant to any provision of this Agreement, the
Leverage Ratio shall be calculated on the basis set forth in such provision.
"Net Cash Proceeds" shall mean (i) in the case of any Equity Issuance or
Debt Issuance, the aggregate cash payments received by Holdings, BrightView, the
Borrower and the Subsidiaries of the
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Borrower less reasonable and customary fees and expenses (including underwriting
discounts and commissions) incurred by Holdings, BrightView, the Borrower and
the Subsidiaries of the Borrower in connection therewith, (ii) in the case of
any Casualty Event, the aggregate cash proceeds of insurance, condemnation
awards and other compensation received by the Borrower and its Subsidiaries in
respect of such Casualty Event less (y) reasonable fees and expenses incurred by
the Borrower and its Subsidiaries in connection therewith and (z) contractually
required repayments of Indebtedness to the extent secured by Liens on the
property subject to such Casualty Event and any income or transfer taxes paid or
reasonably estimated by the Borrower to be payable by the Borrower and its
Subsidiaries as a result of such Casualty Event, and (iii) in the case of any
Asset Disposition, the aggregate amount of all cash payments received by the
Borrower and its Subsidiaries in connection with such Asset Disposition less (x)
reasonable fees and expenses incurred by the Borrower and its Subsidiaries in
connection therewith, (y) Indebtedness to the extent the amount thereof is
secured by a Lien on the property that is the subject of such Asset Disposition
and the transferee of (or holder of the Lien on) such Property requires that
such Indebtedness be repaid as a condition to such Asset Disposition, and (z)
any income or transfer taxes paid or reasonably estimated by the Borrower to be
payable by the Borrower and its Subsidiaries as a result of such Asset
Disposition.
"Notes" shall mean any or all of the Tranche A Term Notes, the Tranche B
Term Notes, the Revolving Credit Notes and the Swingline Note.
"Notice of Conversion/Continuation" shall have the meaning given to such
term in SECTION 2.11(B).
"Notice of Prepayment" shall have the meaning given to such term in
SECTION 2.7(A).
"Notice of Revolving Borrowing" shall have the meaning given to such term
in SECTION 2.2(B).
"Notice of Swingline Borrowing" shall have the meaning given to such term
in SECTION 2.2(D).
"Obligations" shall mean all principal of and interest (including, to
the greatest extent permitted by law, post-petition interest) on the Loans, all
Reimbursement Obligations and all fees, expenses, indemnities and other
obligations owing, due or payable at any time by the Borrower to the
Administrative Agent, any Lender, the Issuing Lender or any other Person
entitled thereto, under this Agreement or any of the other Credit Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Parent Guaranty" shall mean a guaranty agreement made by BrightView
and Holdings in substantially the form of EXHIBIT G, as amended, modified or
supplemented from time to time.
"Parent Pledge and Security Agreement" shall mean a pledge agreement
made by BrightView and Holdings in favor of the Administrative Agent, in
substantially the form of EXHIBIT I, as amended, modified or supplemented from
time to time.
"Participant" shall have the meaning given to such term in SECTION 11.7(D).
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"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) each business acquired
shall be within the Permitted Lines of Business, (ii) any Capital Stock given as
consideration in connection therewith shall be Capital Stock of Holdings or
BrightView, (iii) in the case of an Acquisition involving the acquisition of
control of Capital Stock of any Person, immediately after giving effect to such
Acquisition such Person (or the surviving Person, if the Acquisition is effected
through a merger or consolidation) shall be the Borrower or a Subsidiary
Guarantor (provided that such Person (or the surviving Person) may be a
--------
Designated Non-Guarantor Subsidiary, but only so long as after giving effect to
such Acquisition the Borrower is in compliance with the applicable provisions of
SECTION 8.5), and (iv) all of the conditions and requirements of SECTIONS 6.9
and 6.10 applicable to such Acquisition are satisfied; or (b) any other
Acquisition to which the Required Lenders (or the Administrative Agent on their
behalf) have given their prior written consent (which consent may be in their
sole discretion and may be given subject to such additional terms and conditions
as the Required Lenders shall establish) and with respect to which all of the
conditions and requirements set forth in this definition and in SECTION 6.9, and
in or pursuant to any such consent, have been satisfied or waived in writing by
the Required Lenders (or the Administrative Agent on their behalf).
"Permitted Holders" shall mean, collectively, Neal Vitale and each Person
purchasing Capital Stock of Holdings, BrightView or Petersen Investment Corp.
pursuant to the Securities Purchase Agreement as of the Closing Date.
"Permitted Liens" shall have the meaning given to such term in SECTION 8.3.
"Permitted Lines of Business" shall have the meaning given to such term in
SECTION 8.8.
"Permitted Refinancing Indebtedness" shall mean Indebtedness of the
Borrower all or a portion of the proceeds of which are used to repay, redeem,
repurchase, defease or refinance, in full, the Subordinated Bridge Indebtedness
or the Subordinated Term Indebtedness; provided that, as a condition to such
--------
Indebtedness being permitted to be issued pursuant to clause (ii) of SECTION
8.2, (i) immediately after giving effect to the issuance of such Indebtedness,
no Default or Event of Default shall exist, (ii) the terms and conditions of
such Indebtedness and all documents and instruments evidencing, governing or
relating to such Indebtedness (a) shall mature by its terms no earlier than the
second anniversary of the Tranche B Maturity Date, (b) shall not provide for any
scheduled payment of principal prior to the first anniversary of the Tranche B
Maturity Date, (c) shall be unsecured, (d) shall have covenants and undertakings
that, taken as a whole, are materially less restrictive than those contained
herein, (e) shall be subordinated in right and time of payment to the
Obligations on terms and conditions no less favorable to the Lenders than those
set forth in Articles 8 and 11 of the Subordinated Debt Agreement, (f) shall
bear interest at an overall rate not exceeding 18% per annum and, to the extent
payable only in cash, at a rate not exceeding 12.5% per annum, and (g) shall be
acceptable in all other respects to the Required Lenders in their reasonable
discretion, (iii) prior to or concurrently with the issuance of such
Indebtedness, the Borrower shall have delivered to each Lender a certificate,
signed by a Financial Officer of the Borrower, satisfactory in form and
substance to the Required Lenders and to the effect that, after giving effect to
the incurrence of such Indebtedness, the Borrower is in compliance with the
financial covenants set forth in SECTIONS 7.1 through 7.4, such compliance being
determined with regard to calculations made on a pro forma basis in accordance
with Generally Accepted Accounting Principles as of the last day of the fiscal
quarter then most recently ended and as if such Indebtedness had been incurred
on the first day of the period applicable to such covenants (such calculations
to be attached to such certificate), and
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(iv) the Net Cash Proceeds from the issuance of such portion of such
Indebtedness constituting Excess Permitted Refinancing Indebtedness shall be
applied to prepay the Term Loans in accordance with, and to the extent required
under, the provisions of SECTION 2.6(F).
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Petersen" shall have the meaning given to such term in the recitals
hereof.
"Petersen Acquisition" shall have the meaning given to such term in the
recitals hereof.
"Petersen License Agreement" shall mean the License Agreement, dated as of
August 15, 1996, between Robert E. Petersen and Petersen, as licensor, and
BrightView, as licensee, as amended, modified or supplemented from time to time
in accordance with the terms of this Agreement.
"Petersen Purchase Price Adjustment" shall mean the post-closing
adjustment to the cash portion of the purchase price for the Purchased Assets
(as defined in the Asset Purchase Agreement), as contemplated by Section 1.5 of
the Asset Purchase Agreement.
"Plan" shall mean any "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA that is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which the Borrower or any ERISA
Affiliate may have any liability.
"Prepayment Event" shall have the meaning given to such term in SECTION
2.6(J).
"Pro Forma Balance Sheet" shall have the meaning given to such term in
SECTION 5.10(C).
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Projections" shall have the meaning given to such term in SECTION 5.10(D).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified IPO" shall have the meaning given to such term in the
Securityholders Agreement.
"Refunded Swingline Loans" shall have the meaning given to such term
in SECTION 2.2(E).
"Register" shall have the meaning given to such term in SECTION 11.7(B).
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"Reimbursement Obligation" shall have the meaning given to such term in
SECTION 3.4.
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"Reportable Event" shall mean (i) any "reportable event" within the meaning
of Section 4043(c) of ERISA for which the 30-day notice under Section 4043(a) of
ERISA has not been waived by the PBGC (including any failure to meet the minimum
funding standard of, or timely make any required installment under, Section 412
of the Internal Revenue Code or Section 302 of ERISA, regardless of the issuance
of any waivers in accordance with Section 412(d) of the Internal Revenue Code),
(ii) any such "reportable event" subject to advance notice to the PBGC under
Section 4043(b)(3) of ERISA, (iii) any application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Internal
Revenue Code, and (iv) a cessation of operations described in Section 4062(e) of
ERISA.
"Required Lenders" shall mean the Lenders holding outstanding Loans and
Commitments (or, after the termination of the Revolving Credit Commitments,
outstanding Loans and Letter of Credit Exposure) representing more than sixty-
six and two-thirds percent (66-2/3%) of the aggregate at such time of all
outstanding Loans and Commitments (or, after the termination of the Revolving
Credit Commitments, the aggregate at such time of all outstanding Loans and
Letter of Credit Exposure).
"Requirement of Law" shall mean, with respect to any Person, the charter,
articles or certificate of organization or incorporation and bylaws or other
organizational or governing documents of such Person, and any statute, law,
treaty, rule, regulation, order, decree, writ, injunction or determination of
any arbitrator or court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject or otherwise pertaining to any or all of the
transactions contemplated by this Agreement and the other Credit Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period, the
reserve percentage (expressed as a decimal) in effect from time to time during
such Interest Period, as provided by the Federal Reserve Board, applied for
determining the maximum reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"Responsible Officer" shall mean, with respect to the Borrower, the
president, the chief executive officer, the chief financial officer, any
executive officer, or any other Financial Officer of the Borrower, and any other
officer or similar official thereof responsible for the administration of the
obligations of the Borrower in respect of this Agreement.
"Revolving Credit Commitment" shall mean, with respect to any Lender at any
time, the amount set forth opposite such Lender's name on its signature page
hereto under the caption "Revolving Credit Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, the amount set forth for
such Lender at such time in the Register maintained by the Administrative Agent
pursuant to SECTION 11.7(B) as such Lender's "Revolving Credit Commitment," as
such amount may be reduced at or prior to such time pursuant to the terms
hereof.
"Revolving Credit Commitment Fee" shall have the meaning given to such term
in SECTION 2.9(B).
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"Revolving Credit Lender" shall mean any Lender having a Revolving Credit
Commitment and holding outstanding Revolving Loans.
"Revolving Credit Maturity Date" shall mean December 31, 2002.
"Revolving Credit Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT B-3, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Revolving Credit Termination Date" shall mean the Revolving Credit
Maturity Date or such earlier date of termination of the Revolving Credit
Commitments pursuant to SECTION 2.5 or SECTION 9.2.
"Revolving Loans" shall have the meaning given to such term in SECTION
2.1(C).
"Scheduled Titles" shall have the meaning given to such term in SECTION
8.4.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of September 30, 1996, among Holdings, Petersen Investment
Corp., BrightView and the Persons listed on Schedule A thereto, providing for
the purchase and sale of Capital Stock of Holdings, BrightView and Petersen
Investment Corp., as amended, modified or supplemented from time to time.
"Security Documents" shall mean the Borrower Pledge and Security Agreement,
the Parent Pledge and Security Agreement, any Subsidiaries Pledge and Security
Agreement and all other pledge or security agreements, mortgages, assignments or
other similar agreements or instruments executed and delivered by any Credit
Party pursuant to SECTION 6.10 or SECTION 6.11 or otherwise in connection with
the transactions contemplated hereby, in each case as amended, modified or
supplemented from time to time.
"Securityholders Agreement" shall mean the Securityholders Agreement, dated
as of September 30, 1996, among Petersen Investment Corp., Holdings, BrightView
and the securityholders named therein, as amended, modified or supplemented from
time to time.
"Stated Amount" shall mean, with respect to any Letter of Credit at any
time, the aggregate amount available to be drawn thereunder at such time
(regardless of whether any conditions for drawing could then be met).
"Subordinated Bridge Indebtedness" shall mean the Indebtedness of the
Borrower outstanding from time to time in respect of the Bridge Loan (as defined
in the Subordinated Debt Agreement) and the Subordinated Bridge Notes.
"Subordinated Bridge Notes" shall mean the Bridge Notes (as defined in the
Subordinated Debt Agreement) of the Borrower issued pursuant to the Subordinated
Debt Agreement, as amended, modified or supplemented from time to time in
accordance with the terms of this Agreement.
"Subordinated Debt Agreement" shall mean the Senior Subordinated Credit
Agreement, dated as of September 30, 1996, among the Borrower, the guarantors
named therein, the lenders named therein, and First Union Corporation, as agent,
providing for the issuance of the Subordinated Bridge
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Indebtedness and the Subordinated Term Indebtedness, as amended, modified or
supplemented from time to time in accordance with the terms of this Agreement.
"Subordinated Term Indebtedness" shall mean the Indebtedness of the
Borrower outstanding from time to time in respect of the Term Loan (as defined
in the Subordinated Debt Agreement) and the Subordinated Term Notes.
"Subordinated Term Notes" shall mean the Term Notes (as defined in the
Subordinated Debt Agreement) of the Borrower at any time issued in redemption of
the Subordinated Bridge Notes pursuant to the Subordinated Debt Agreement, as
amended, modified or supplemented from time to time in accordance with the terms
of this Agreement.
"Subsidiaries Guaranty" shall mean any agreement or instrument, in form and
substance satisfactory to the Administrative Agent and the Required Lenders (and
in any event in substantially the form of the Parent Guaranty, with appropriate
modifications), entered into pursuant to SECTION 6.10 and pursuant to which any
one or more of the Subsidiaries of the Borrower shall guarantee to the
Administrative Agent and the Lenders the payment in full of the Obligations, as
the same may be amended, modified or supplemented from time to time.
"Subsidiaries Pledge and Security Agreement" shall mean any agreement or
instrument, in form and substance satisfactory to the Administrative Agent and
the Required Lenders (and in any event in substantially the form of the Borrower
Pledge and Security Agreement, with appropriate modifications), entered into
pursuant to SECTION 6.10 and pursuant to which any one or more of the
Subsidiaries of the Borrower shall grant to the Administrative Agent a Lien upon
and security interest in its personal property assets as security for its
obligations under a Subsidiaries Guaranty, as the same may be amended, modified
or supplemented from time to time.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and one or more
of its other Subsidiaries or a combination thereof (irrespective of whether, at
the time, securities of any other class or classes of any such corporation or
other Person shall or might have voting power by reason of the happening of any
contingency). When used without reference to a parent entity, the term
"Subsidiary" shall be deemed to refer to a Subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean any Subsidiary of the Borrower that is a
guarantor under a Subsidiaries Guaranty and has granted to the Administrative
Agent a Lien upon and security interest in its personal property assets pursuant
to a Subsidiaries Pledge and Security Agreement.
"Swingline Commitment" shall mean $5,000,000 or, if less, the aggregate
Revolving Credit Commitments at the time of determination, as such amount may be
reduced at or prior to such time pursuant to the terms hereof.
"Swingline Lender" shall mean First Union in its capacity as maker of
Swingline Loans, and its successors in such capacity.
"Swingline Loans" shall have the meaning given to such term in SECTION
2.1(D).
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"Swingline Maturity Date" shall mean the date that is five (5) Business
Days prior to the Revolving Credit Maturity Date.
"Swingline Note" shall mean the promissory note of the Borrower in
substantially the form of EXHIBIT B-4, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Syndication Completion Date" shall have the meaning given to such term in
SECTION 2.2(A).
"Term Loans" shall mean, collectively, the Tranche A Term Loans and the
Tranche B Term Loans.
"Tranche A Commitment" shall mean, with respect to any Lender at any time,
the amount set forth opposite such Lender's name on its signature page hereto
under the caption "Tranche A Commitment" or, if such Lender has entered into one
or more Assignment and Acceptances, the amount set forth for such Lender at such
time in the Register maintained by the Administrative Agent pursuant to SECTION
11.7(B) as such Lender's "Tranche A Commitment," as such amount may be reduced
at or prior to such time pursuant to the terms hereof.
"Tranche A Lender" shall mean (i) prior to the Closing Date, any Lender
having a Tranche A Commitment, and (ii) on and after the Closing Date, any
Lender holding outstanding Tranche A Term Loans.
"Tranche A Maturity Date" shall mean December 31, 2002.
"Tranche A Term Loans" shall have the meaning given to such term in SECTION
2.1(A).
"Tranche A Term Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT B-1, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Tranche B Commitment" shall mean, with respect to any Lender at any time,
the amount set forth opposite such Lender's name on its signature page hereto
under the caption "Tranche B Commitment" or, if such Lender has entered into one
or more Assignment and Acceptances, the amount set forth for such Lender at such
time in the Register maintained by the Administrative Agent pursuant to SECTION
11.7(B) as such Lender's "Tranche A Commitment," as such amount may be reduced
at or prior to such time pursuant to the terms hereof.
"Tranche B Lender" shall mean (i) prior to the Closing Date, any Lender
having a Tranche B Commitment, and (ii) on and after the Closing Date, any
Lender holding outstanding Tranche B Term Loans.
"Tranche B Maturity Date" shall mean September 30, 2004.
"Tranche B Term Loans" shall have the meaning given to such term in SECTION
2.1(B).
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"Tranche B Term Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT B-2, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Transactions" shall mean, collectively, the transactions contemplated by
the Transaction Documents, including (i) the initial extensions of credit under
this Agreement on the Closing Date, (ii) the Petersen Acquisition, (iii) the
issuance of the Subordinated Bridge Indebtedness pursuant to the Subordinated
Debt Agreement, (iv) the Equity Contribution, and (v) the payment of permitted
fees and expenses incident to the foregoing.
"Transaction Documents" shall mean, collectively, this Agreement and the
other Credit Documents, the Asset Purchase Agreement, the Petersen License
Agreement, the Subordinated Debt Agreement, the Subordinated Bridge Notes, the
Subordinated Term Notes, the Securities Purchase Agreement, the Securityholders
Agreement, and all other agreements, instruments, certificates and documents
executed and delivered by the Borrower or any of its Subsidiaries in connection
with the Transactions, in each case as amended, modified or supplemented from
time to time in accordance with the terms of this Agreement.
"Type" shall have the meaning given to such term in SECTION 2.2(A).
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Unutilized Revolving Credit Commitment" shall mean, with respect to any
Revolving Credit Lender at any time, such Lender's Revolving Credit Commitment
at such time less the sum of (i) the aggregate principal amount of all Revolving
----
Loans made by such Lender that are outstanding at such time and (ii) such
Lender's Letter of Credit Exposure at such time.
"Unutilized Swingline Commitment" shall mean, with respect to the Swingline
Lender at any time, the Swingline Commitment at such time less the aggregate
----
principal amount of all Swingline Loans that are outstanding at such time.
"Wholly Owned" shall mean, with respect to any Subsidiary of any Person,
that 100% of the outstanding Capital Stock of such Subsidiary (excluding
directors' qualifying shares and shares required to be held by foreign
nationals, in the case of a Foreign Subsidiary) is owned, directly or
indirectly, by such Person.
"Willis Stein" shall mean Willis Stein & Partners, L.P., a Delaware limited
partnership.
1.2. Accounting Terms. Except as specifically provided otherwise in this
----------------
Agreement, all accounting terms used herein that are not specifically defined
shall have the meanings customarily given them, and all financial computations
hereunder shall be made, in accordance with Generally Accepted Accounting
Principles. Notwithstanding the foregoing, in the event that any changes in
Generally Accepted Accounting Principles after the date hereof are required to
be applied to the Borrower and would affect the computation of the financial
covenants contained in SECTIONS 7.1
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through 7.4, as applicable, such changes shall be followed only from and after
the date this Agreement shall have been amended to take into account any such
changes.
1.3. Designated Non-Guarantor Subsidiaries. Notwithstanding anything to
-------------------------------------
the contrary contained in this Agreement, the assets, liabilities, revenues,
income, losses and other financial statement items of Designated Non-Guarantor
Subsidiaries shall not be taken into account in the calculation of the financial
covenants set forth in SECTIONS 7.1 through 7.4.
1.4. Other Terms; Construction. Unless otherwise specified or unless the
-------------------------
context otherwise requires, all references herein to sections, annexes,
schedules and exhibits are references to sections, annexes, schedules and
exhibits in and to this Agreement, and all terms defined in this Agreement shall
have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto. All references
herein to the Lenders or any of them shall be deemed to include the Issuing
Lender unless specifically provided otherwise or unless the context otherwise
requires. As used in this Agreement or in any other Credit Document, the term
"including" means "including, without limitation."
1.5. Officers, Directors of Limited Liability Companies. References herein
--------------------------------------------------
to officers or directors of any limited liability company shall refer to persons
who are authorized under the articles of organization and operating agreement of
such company to perform the duties and exercise the powers normally associated
with officers and directors, as the case may be, of corporations.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Commitments; Loans. (a) Each Tranche A Lender severally agrees,
------------------
subject to and on the terms and conditions of this Agreement, to make a term
loan (each, a "Tranche A Term Loan," and collectively, the "Tranche A Term
Loans") to the Borrower on the Closing Date in a principal amount not to exceed
its Tranche A Commitment. No Tranche A Term Loans shall be made at any time
after the Closing Date. To the extent repaid, Tranche A Term Loans may not be
reborrowed.
(b) Each Tranche B Lender severally agrees, subject to and on the terms
and conditions of this Agreement, to make a term loan (each, a "Tranche B Term
Loan," and collectively, the "Tranche B Term Loans") to the Borrower on the
Closing Date in a principal amount not to exceed its Tranche B Commitment. No
Tranche B Term Loans shall be made at any time after the Closing Date. To the
extent repaid, Tranche B Term Loans may not be reborrowed.
(c) Each Revolving Credit Lender severally agrees, subject to and on the
terms and conditions of this Agreement, to make revolving credit loans (each, a
"Revolving Loan," and collectively, the "Revolving Loans") to the Borrower, from
time to time on any Business Day during the period from and including the
Closing Date to but not including the Revolving Credit Termination Date, in an
aggregate principal amount at any time outstanding not greater than the excess,
if any, of its Revolving Credit Commitment at such time over its Letter of
Credit Exposure at such time, provided that no Borrowing of Revolving Loans
--------
shall be made if, immediately after giving effect thereto, the sum of (x) the
aggregate principal amount of Revolving Loans outstanding at such time,
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(y) the aggregate Letter of Credit Exposure of all Revolving Credit Lenders at
such time and (z) the aggregate principal amount of Swingline Loans outstanding
at such time (excluding the aggregate amount of any Swingline Loans to be repaid
with proceeds of Revolving Loans made pursuant to such Borrowing) would exceed
the aggregate Revolving Credit Commitments at such time. Subject to and on the
terms and conditions of this Agreement, the Borrower may borrow, repay and
reborrow Revolving Loans.
(d) The Swingline Lender agrees, subject to and on the terms and
conditions of this Agreement, to make loans (each, a "Swingline Loan," and
collectively, the "Swingline Loans") to the Borrower, from time to time on any
Business Day during the period from the Closing Date to but not including the
Swingline Maturity Date (or, if earlier, the Revolving Credit Termination Date),
in an aggregate principal amount not exceeding the Swingline Commitment,
notwithstanding that the aggregate principal amount of Swingline Loans
outstanding at any time, when added to the aggregate principal amount of the
Revolving Loans made by the Swingline Lender in its capacity as a Revolving
Credit Lender outstanding at such time and its Letter of Credit Exposure at such
time, may exceed its Revolving Credit Commitment at such time, but provided that
--------
no Borrowing of Swingline Loans shall be made if, immediately after giving
effect thereto, the sum of (x) the aggregate principal amount of Revolving Loans
outstanding at such time, (y) the aggregate Letter of Credit Exposure of all
Lenders at such time and (z) the aggregate principal amount of Swingline Loans
outstanding at such time would exceed the aggregate Revolving Credit Commitments
at such time. Subject to and on the terms and conditions of this Agreement, the
Borrower may borrow, repay (including by means of a Borrowing of Revolving Loans
pursuant to SECTION 2.2(E)) and reborrow Swingline Loans.
2.2. Borrowings. (a) The Tranche A Term Loans, the Tranche B Term Loans
----------
and the Revolving Loans (each, together with the Swingline Loans, a "Class" of
Loan) shall, at the option of the Borrower and subject to the terms and
conditions of this Agreement, be either ABR Loans or LIBOR Loans (each, a "Type"
of Loan), provided that (i) all Loans comprising the same Borrowing shall,
--------
unless otherwise specifically provided herein, be of the same Type, and (ii)
notwithstanding any other provision of this Agreement, the Term Loans and any
Revolving Loans made on the Closing Date shall be made initially as ABR Loans,
and (iii) notwithstanding any other provision of this Agreement, no LIBOR Loans
having an Interest Period of longer than one month may be borrowed at any time
prior to the earlier of the 60th day after the Closing Date and the date upon
which the Administrative Agent determines in its sole discretion, and notifies
the Borrower, that the primary syndication of the Facilities has been completed
(the earlier of such dates, the "Syndication Completion Date"). The Swingline
Loans shall be made and maintained as ABR Loans at all times.
(b) In order to make a Borrowing of the Term Loans (other than Borrowings
involving continuations or conversions of outstanding Term Loans, which shall be
made pursuant to SECTION 2.11), the Borrower hereby requests a Borrowing of
Tranche A Term Loans on the Closing Date in an amount equal to the aggregate
Tranche A Commitments and a Borrowing of Tranche B Term Loans on the Closing
Date in an amount equal to the aggregate Tranche B Commitments. In order to
make a Borrowing of Revolving Loans (other than Borrowings for the purpose of
repaying Refunded Swingline Loans, which shall be made pursuant to SECTION
2.2(E), and other than Borrowings involving continuations or conversions of
outstanding Revolving Loans, which shall be made pursuant to SECTION 2.11), the
Borrower will give the Administrative Agent written notice (or oral notice
promptly confirmed in writing) not later than 1:00 p.m., Charlotte time, three
(3) Business Days prior to each such Borrowing to be comprised of LIBOR Loans
and one (1) Business Day prior to each such Borrowing to be comprised of ABR
Loans; provided, however, that a request for a
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Borrowing of any Revolving Loans to be made on the Closing Date may, at the
discretion of the Administrative Agent, be given later than the times specified
hereinabove. Each such notice (each, a "Notice of Revolving Borrowing") shall
be irrevocable, shall be given in the form of EXHIBIT A-1 (or, if oral notice is
given, shall be promptly followed with a writing in the form of EXHIBIT A-1) and
shall specify (x) the aggregate principal amount and initial Type of the
Revolving Loans to be made pursuant to such Borrowing, (y) in the case of a
Borrowing of LIBOR Loans, the initial Interest Period to be applicable thereto,
and (z) the requested Borrowing Date, which shall be a Business Day. Upon its
receipt of a Notice of Revolving Borrowing, the Administrative Agent will
promptly notify each Revolving Credit Lender of the proposed Borrowing.
Notwithstanding anything to the contrary contained herein:
(i) the aggregate principal amount of the Borrowing of Tranche A
Term Loans shall be in the amount of the aggregate Tranche A Commitments,
and the aggregate principal amount of the Borrowing of Tranche B Term Loans
shall be in the amount of the aggregate Tranche B Commitments;
(ii) the aggregate principal amount of each Borrowing of Revolving
Loans that is comprised of ABR Loans shall not be less than $3,000,000 or,
if greater, an integral multiple of $1,000,000 in excess thereof (or, if
less, in the amount of the aggregate Unutilized Revolving Credit
Commitments), and the aggregate principal amount of each Borrowing of
Revolving Loans that is comprised of LIBOR Loans shall not be less than
$5,000,000 or, if greater, an integral multiple of $1,000,000 in excess
thereof;
(iii) if the Borrower shall have failed to designate the Type of
Loans comprising a Borrowing, the Borrower shall be deemed to have
requested a Borrowing comprised of ABR Loans; and
(iv) if the Borrower shall have failed to select the duration of the
Interest Period to be applicable to any Borrowing of LIBOR Loans, then the
Borrower shall be deemed to have selected an Interest Period with a
duration of one month.
(c) Not later than 1:00 p.m., Charlotte time, on the requested Borrowing
Date (or the Closing Date, in the case of the Term Loans), each Lender will make
available to the Administrative Agent at its office referred to in SECTION 11.5
(or at such other location as the Administrative Agent may designate) an amount,
in Dollars and in immediately available funds, equal to the amount of the Loan
or Loans to be made by such Lender. To the extent the relevant Lenders have
made such amounts available to the Administrative Agent as provided hereinabove,
the Administrative Agent will make the aggregate of such amounts available to
the Borrower in accordance with SECTION 2.3(A) and in like funds as received by
the Administrative Agent.
(d) In order to make a Borrowing of a Swingline Loan, the Borrower will
give the Administrative Agent and the Swingline Lender written notice (or oral
notice promptly confirmed in writing) not later than 1:00 p.m., Charlotte time,
on the Business Day of such Borrowing. Each such notice (each, a "Notice of
Swingline Borrowing") shall be irrevocable, shall be given in the form of
EXHIBIT A-2 (or, if oral notice is given, shall be promptly followed with a
writing in the form of EXHIBIT A-2) and shall specify (i) the principal amount
of the Swingline Loan to be made pursuant to such Borrowing (which shall not be
less than $500,000 and, if greater, shall be in an integral multiple of $250,000
in excess thereof (or, if less, in the amount of the Unutilized Swingline
Commitment))
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and (ii) the requested Borrowing Date, which shall be a Business Day. Not later
than 3:00 p.m., Charlotte time, on the requested Borrowing Date, the Swingline
Lender will make available to the Administrative Agent at its office referred to
in SECTION 11.5 (or at such other location as the Administrative Agent may
designate) an amount, in Dollars and in immediately available funds, equal to
the amount of the requested Swingline Loan. To the extent the Swingline Lender
has made such amount available to the Administrative Agent as provided
hereinabove, the Administrative Agent will make such amount available to the
Borrower in accordance with SECTION 2.3(A) and in like funds as received by the
Administrative Agent.
(e) With respect to any outstanding Swingline Loans, the Swingline Lender
may at any time (whether or not an Event of Default has occurred and is
continuing) in its sole and absolute discretion, and is hereby authorized and
empowered by the Borrower to, cause a Borrowing of Revolving Loans to be made
for the purpose of repaying such Swingline Loans by delivering to the
Administrative Agent (if the Administrative Agent is different from the
Swingline Lender) and each other Revolving Credit Lender (on behalf of, and with
a copy to, the Borrower), not later than 1:00 p.m., Charlotte time, one (1)
Business Day prior to the proposed Borrowing Date therefor, a notice (which
shall be deemed to be a Notice of Revolving Borrowing given by the Borrower)
requesting the Revolving Credit Lenders to make Revolving Loans (which shall be
made initially as ABR Loans) on such Borrowing Date in an aggregate amount equal
to the amount of such Swingline Loans (the "Refunded Swingline Loans")
outstanding on the date such notice is given that the Swingline Lender requests
to be repaid. Not later than 1:00 p.m., Charlotte time, on the requested
Borrowing Date, each Revolving Credit Lender (other than the Swingline Lender)
will make available to the Administrative Agent at its office referred to in
SECTION 11.5 (or at such other location as the Administrative Agent may
designate) an amount, in Dollars and in immediately available funds, equal to
the amount of the Revolving Loan to be made by such Lender. To the extent the
Revolving Credit Lenders have made such amounts available to the Administrative
Agent as provided hereinabove, the Administrative Agent will make the aggregate
of such amounts available to the Swingline Lender in like funds as received by
the Administrative Agent, which shall apply such amounts in repayment of the
Refunded Swingline Loans. Notwithstanding any provision of this Agreement to
the contrary, on the relevant Borrowing Date, the Refunded Swingline Loans
(including the Swingline Lender's ratable share thereof, in its capacity as a
Revolving Credit Lender) shall be deemed to be repaid with the proceeds of the
Revolving Loans made as provided above (including a Revolving Loan deemed to
have been made by the Swingline Lender), and such Refunded Swingline Loans
deemed to be so repaid shall no longer be outstanding as Swingline Loans but
shall be outstanding as Revolving Loans. If any portion of any such amount
repaid (or deemed to be repaid) to the Swingline Lender shall be recovered by or
on behalf of the Borrower from the Swingline Lender in any bankruptcy,
insolvency or similar proceeding or otherwise, the loss of the amount so
recovered shall be shared ratably among all the Revolving Credit Lenders in the
manner contemplated by SECTION 2.15(B).
(f) If, as a result of any bankruptcy, insolvency or similar proceeding
with respect to the Borrower, Revolving Loans are not made pursuant to
subsection (e) above in an amount sufficient to repay any amounts owed to the
Swingline Lender in respect of any outstanding Swingline Loans, or if the
Swingline Lender is otherwise precluded for any reason from giving a notice on
behalf of the Borrower as provided for hereinabove, the Swingline Lender shall
be deemed to have sold without recourse, representation or warranty, and each
Revolving Credit Lender shall be deemed to have purchased and hereby agrees to
purchase, a participation in such outstanding Swingline Loans in an amount equal
to its ratable share (based on the proportion that its Revolving Credit
Commitment bears to the aggregate Revolving Credit Commitments at such time) of
the unpaid amount thereof
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together with accrued interest thereon. Upon one (1) Business Day's prior
notice from the Swingline Lender, each Revolving Credit Lender (other than the
Swingline Lender) will make available to the Administrative Agent at its office
referred to in SECTION 11.5 (or at such other location as the Administrative
Agent may designate) an amount, in Dollars and in immediately available funds,
equal to its respective participation. To the extent the Revolving Credit
Lenders have made such amounts available to the Administrative Agent as provided
hereinabove, the Administrative Agent will make the aggregate of such amounts
available to the Swingline Lender in like funds as received by the
Administrative Agent. In the event any such Revolving Credit Lender fails to
make available to the Administrative Agent the amount of such Lender's
participation as provided in this subsection (f), the Swingline Lender shall be
entitled to recover such amount on demand from such Lender, together with
interest thereon for each day from the date such amount is required to be made
available for the account of the Swingline Lender until the date such amount is
made available to the Swingline Lender at the Federal Funds Rate for the first
three (3) Business Days and thereafter at the Adjusted Alternate Base Rate
applicable to Revolving Loans. Promptly following its receipt of any payment by
or on behalf of the Borrower in respect of a Swingline Loan, the Swingline
Lender will pay to each Revolving Credit Lender that has acquired a
participation therein such Lender's ratable share of such payment.
(g) Notwithstanding any provision of this Agreement to the contrary, the
obligation of each Revolving Credit Lender (other than the Swingline Lender) to
make Revolving Loans for the purpose of repaying any Refunded Swingline Loans
pursuant to subsection (e) above and each such Lender's obligation to purchase a
participation in any unpaid Swingline Loans pursuant to subsection (f) above
shall be absolute and unconditional and shall not be affected by any
circumstance or event whatsoever, including, without limitation, (i) any set-
off, counterclaim, recoupment, defense or other right that such Lender may have
against the Swingline Lender, the Administrative Agent, the Borrower or any
other Person for any reason whatsoever, (ii) the occurrence or continuance of
any Default or Event of Default, (iii) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of the Borrower or any of its Subsidiaries, or (iv) any breach of this Agreement
by any party hereto.
2.3. Disbursements; Funding Reliance; Domicile of Loans. (a) The Borrower
--------------------------------------------------
hereby authorizes the Administrative Agent to disburse the proceeds of each
Borrowing in accordance with the terms of any written instructions from any of
the Authorized Officers, provided that the Administrative Agent shall not be
--------
obligated under any circumstances to forward amounts to any account not listed
in an Account Designation Letter. The Borrower may at any time deliver to the
Administrative Agent an Account Designation Letter listing any additional
accounts or deleting any accounts listed in a previous Account Designation
Letter.
(b) Unless the Administrative Agent has received, prior to 1:00 p.m.,
Charlotte time, on the relevant Borrowing Date, written notice from a Lender
that such Lender will not make available to the Administrative Agent such
Lender's ratable portion, if any, of the relevant Borrowing, the Administrative
Agent may assume that such Lender has made such portion available to the
Administrative Agent in immediately available funds on such Borrowing Date in
accordance with the applicable provisions of SECTION 2.2, and the Administrative
Agent may, in reliance upon such assumption, but shall not be obligated to, make
a corresponding amount available to the Borrower on such Borrowing Date. If and
to the extent that such Lender shall not have made such portion available to the
Administrative Agent, and the Administrative Agent shall have made such
corresponding amount available to the Borrower, such Lender, on the one hand,
and the Borrower,
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<PAGE>
on the other, severally agree to pay to the Administrative Agent forthwith on
demand such corresponding amount, together with interest thereon for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, (i) in the case of such Lender, at
the Federal Funds Rate, and (ii) in the case of the Borrower, at the rate of
interest applicable at such time to the Class and Type of Loans comprising such
Borrowing, as determined under the provisions of SECTION 2.8. If such Lender
shall repay to the Administrative Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such Borrowing for purposes of
this Agreement. The failure of any Lender to make any Loan required to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan as part of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the Loan
to be made by such other Lender as part of any Borrowing.
(c) Each Lender may, at its option, make and maintain any Loan at, to or
for the account of any of its Lending Offices, provided that any exercise of
--------
such option shall not affect the obligation of the Borrower to repay such Loan
to or for the account of such Lender in accordance with the terms of this
Agreement.
2.4. Notes. (a) The Loans made by each Lender shall be evidenced (i) in
-----
the case of Tranche A Term Loans, by a Tranche A Term Note appropriately
completed in substantially the form of EXHIBIT B-1, (ii) in the case of Tranche
B Term Loans, by a Tranche B Term Note appropriately completed in substantially
the form of EXHIBIT B-2, (iii) in the case of Revolving Loans, by a Revolving
Credit Note appropriately completed in substantially the form of EXHIBIT B-3,
and (iv) in the case of the Swingline Loans, by a Swingline Note appropriately
completed in substantially the form of EXHIBIT B-4.
(b) Each Tranche A Term Note issued to a Tranche A Lender shall (i) be
executed by the Borrower, (ii) be payable to the order of such Lender, (iii) be
dated as of the Closing Date, (iv) be in a stated principal amount equal to such
Lender's Tranche A Commitment (or, in the case of a Tranche A Term Note issued
after the Closing Date, in an amount equal to the unpaid principal amount of
such Lender's Tranche A Term Loan), (v) bear interest in accordance with the
provisions of SECTION 2.8, as the same may be applicable from time to time to
the Tranche A Term Loan made by such Lender, and (vi) be entitled to all of the
benefits of this Agreement and the other Credit Documents and subject to the
provisions hereof and thereof.
(c) Each Tranche B Term Note issued to a Tranche B Lender shall (i) be
executed by the Borrower, (ii) be payable to the order of such Lender, (iii) be
dated as of the Closing Date, (iv) be in a stated principal amount equal to such
Lender's Tranche B Commitment (or, in the case of a Tranche B Term Note issued
after the Closing Date, in an amount equal to the unpaid principal amount of
such Lender's Tranche B Term Loan), (v) bear interest in accordance with the
provisions of SECTION 2.8, as the same may be applicable from time to time to
the Tranche B Term Loan made by such Lender, and (vi) be entitled to all of the
benefits of this Agreement and the other Credit Documents and subject to the
provisions hereof and thereof.
(d) Each Revolving Credit Note issued to a Revolving Credit Lender shall
(i) be executed by the Borrower, (ii) be payable to the order of such Lender,
(iii) be dated as of the Closing Date, (iv) be in a stated principal amount
equal to such Lender's Revolving Credit Commitment, (v) bear interest in
accordance with the provisions of SECTION 2.8, as the same may be applicable to
the
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<PAGE>
Revolving Loans made by such Lender from time to time, and (vi) be entitled to
all of the benefits of this Agreement and the other Credit Documents and subject
to the provisions hereof and thereof.
(e) The Swingline Note shall (i) be executed by the Borrower, (ii) be
payable to the order of the Swingline Lender, (iii) be dated as of the Closing
Date, (iv) be in a stated principal amount equal to the Swingline Commitment,
(v) bear interest in accordance with the provisions of SECTION 2.8, as the same
may be applicable to the Swingline Loans made from time to time, and (vi) be
entitled to all of the benefits of this Agreement and the other Credit Documents
and subject to the provisions hereof and thereof.
(f) Each Lender will record on its internal records the amount and Type of
each Loan made by it and each payment received by it in respect thereof and
will, in the event of any transfer of any of its Notes, either endorse on the
reverse side thereof or on a schedule attached thereto (or any continuation
thereof) the outstanding principal amount and Type of the Loans evidenced
thereby as of the date of transfer or provide such information on a schedule to
the Assignment and Acceptance relating to such transfer; provided, however, that
-------- -------
the failure of any Lender to make any such recordation or provide any such
information, or any error therein, shall not affect the Borrower's obligations
under this Agreement or the Notes.
2.5. Termination and Reduction of Commitments and Swingline Commitment.
-----------------------------------------------------------------
(a) The Tranche A Commitments and the Tranche B Commitments shall be
automatically and permanently terminated at 5:00 p.m., Charlotte time, on the
earlier of (i) October 18, 1996 and (ii) the Closing Date, unless the Term Loans
have been made in full prior to such time. The Revolving Credit Commitments
shall be automatically and permanently terminated on the earlier of (i) October
18, 1996 (if the Closing Date shall not have occurred on or prior to such date)
and (ii) the Revolving Credit Maturity Date (unless sooner terminated pursuant
to subsections (b) or (c) below or SECTION 9.2). The Swingline Commitment shall
be automatically and permanently terminated on the Swingline Maturity Date
(unless sooner terminated pursuant to subsections (c) or (d) below or SECTION
9.2).
(b) The Revolving Credit Commitments shall, on each date upon which a
prepayment of the Term Loans is required under SECTIONS 2.6(E) through 2.6(I)
(and exceeds in amount the aggregate principal amount of Term Loans then
outstanding) or would be required if Term Loans were then outstanding, be
automatically and permanently reduced by the amount, if any, by which the amount
of such required prepayment (determined as if an unlimited amount of Term Loans
were outstanding) exceeds the aggregate principal amount of Term Loans then
actually outstanding, as more particularly set forth in SECTION 2.6(J).
(c) At any time and from time to time after the date hereof, upon not less
than five (5) Business Days' prior written notice to the Administrative Agent
(and, in the case of a termination or reduction of the Unutilized Swingline
Commitment, the Swingline Lender), the Borrower may terminate in whole or reduce
in part the aggregate Unutilized Revolving Credit Commitments or the Unutilized
Swingline Commitment, provided that any such partial reduction shall be in an
--------
aggregate amount of not less than $5,000,000 ($500,000 in the case of the
Unutilized Swingline Commitment) or, if greater, an integral multiple thereof.
The amount of any termination or reduction made under this subsection (c) may
not thereafter be reinstated.
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<PAGE>
(d) Each reduction of the Revolving Credit Commitments pursuant to this
SECTION 2.5 shall be applied ratably among the Revolving Credit Lenders
according to their respective Revolving Credit Commitments. Notwithstanding any
provision of this Agreement to the contrary, any reduction of the Revolving
Credit Commitments pursuant to this SECTION 2.5 that has the effect of reducing
the aggregate Revolving Credit Commitments to an amount less than the amount of
the Swingline Commitment at such time shall result in an automatic corresponding
reduction of the Swingline Commitment to the amount of the aggregate Revolving
Credit Commitments (as so reduced), without any further action on the part of
the Borrower or the Swingline Lender.
2.6. Mandatory Repayments and Prepayments. (a) Except to the extent due
------------------------------------
or made sooner pursuant to the provisions of this Agreement, the Borrower will
repay the aggregate outstanding principal of the Tranche A Term Loans in the
amounts and on the dates set forth below:
<TABLE>
<CAPTION>
Date Payment Amount
---- --------------
<S> <C>
March 31, 1998 $2,500,000
June 30, 1998 $2,500,000
September 30, 1998 $2,500,000
December 31, 1998 $2,500,000
March 31, 1999 $3,750,000
June 30, 1999 $3,750,000
September 30, 1999 $3,750,000
December 31, 1999 $3,750,000
March 31, 2000 $5,000,000
June 30, 2000 $5,000,000
September 30, 2000 $5,000,000
December 31, 2000 $5,000,000
March 31, 2001 $6,250,000
June 30, 2001 $6,250,000
September 30, 2001 $6,250,000
December 31, 2001 $6,250,000
March 31, 2002 $7,500,000
June 30, 2002 $7,500,000
September 30, 2002 $7,500,000
December 31, 2002 $7,500,000
</TABLE>
(b) Except to the extent due or made sooner pursuant to the provisions of
this Agreement, the Borrower will repay the aggregate outstanding principal of
the Tranche B Term Loans in the amounts and on the dates set forth below:
<TABLE>
<CAPTION>
Date Payment Amount
---- --------------
<S> <C>
March 31, 1997 $250,000
June 30, 1997 $250,000
September 30, 1997 $250,000
December 31, 1997 $250,000
March 31, 1998 $250,000
June 30, 1998 $250,000
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
September 30, 1998 $ 250,000
December 31, 1998 $ 250,000
March 31, 1999 $ 250,000
June 30, 1999 $ 250,000
September 30, 1999 $ 250,000
December 31, 1999 $ 250,000
March 31, 2000 $ 250,000
June 30, 2000 $ 250,000
September 30, 2000 $ 250,000
December 31, 2000 $ 250,000
March 31, 2001 $ 250,000
June 30, 2001 $ 250,000
September 30, 2001 $ 250,000
December 31, 2001 $ 250,000
March 31, 2002 $ 250,000
June 30, 2002 $ 250,000
September 30, 2002 $ 250,000
December 31, 2002 $ 250,000
March 31, 2003 $10,000,000
June 30, 2003 $10,000,000
September 30, 2003 $10,000,000
December 31, 2003 $10,000,000
March 31, 2004 $18,000,000
June 30, 2004 $18,000,000
September 30, 2004 $18,000,000
</TABLE>
(c) To the extent not previously paid, and except to the extent due or
made sooner pursuant to the provisions of this Agreement, (i) the aggregate
outstanding principal of the Tranche A Term Loans shall be due and payable on
the Tranche A Maturity Date, (ii) the aggregate outstanding principal of the
Tranche B Term Loans shall be due and payable on the Tranche B Maturity Date,
(iii) the aggregate outstanding principal of the Revolving Credit Loans shall be
due and payable on the Revolving Credit Maturity Date, and (iv) the aggregate
outstanding principal of the Swingline Loans shall be due and payable on the
Swingline Maturity Date.
(d) In the event that at any time the sum of (x) the aggregate principal
amount of Revolving Loans outstanding at such time, (y) the aggregate Letter of
Credit Exposure of all Revolving Credit Lenders at such time and (z) the
aggregate principal amount of Swingline Loans outstanding at such time
(excluding the aggregate amount of any Swingline Loans to be repaid with
proceeds of Revolving Loans made on the date of determination) shall exceed the
aggregate Revolving Credit Commitments at such time (after giving effect to any
concurrent termination or reduction thereof), the Borrower will immediately
prepay the outstanding principal amount of the Swingline Loans and, to the
extent of any excess remaining after prepayment in full of outstanding Swingline
Loans, the Borrower will immediately prepay the outstanding principal amount of
the Revolving Loans in the amount of such excess; provided that, to the extent
--------
such excess amount is greater than the aggregate principal amount of Swingline
Loans and Revolving Loans outstanding immediately prior to the application of
such prepayment, the amount so prepaid shall be retained by the Administrative
Agent and held in the Cash Collateral Account as cover for the Letter of Credit
Exposure of the Revolving Credit Lenders, as more particularly described in
SECTION 3.8, and
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<PAGE>
thereupon such cash shall be deemed to reduce the aggregate Letter of Credit
Exposure by an equivalent amount.
(e) Promptly upon (and in any event not later than two (2) Business Days
after) its receipt thereof, the Borrower will prepay the outstanding principal
amount of the Term Loans in an amount equal to 100% of all amounts (including
interest) in excess of $1,000,000, if any, received by the Borrower pursuant to
Section 1.5 of the Asset Purchase Agreement as a result of the Petersen Purchase
Price Adjustment; provided that, if at the time such prepayment is required to
--------
be made, Net Availability (determined with reference to the Leverage Ratio as
set forth in the Compliance Certificate then most recently delivered to the
Lenders, whether on the Closing Date or under SECTION 6.2(A)) is less than
$15,000,000, such prepayment shall be applied first to the Revolving Loans (but
without any corresponding reduction in the Revolving Credit Commitments) to the
extent of such difference, and then to the Term Loans.
(f) Promptly upon (and in any event not later than two (2) Business Days
after) its receipt thereof, the Borrower will prepay the outstanding principal
amount of the Term Loans in an amount equal to 75% of the Net Cash Proceeds from
any Equity Issuance or 100% of the Net Cash Proceeds from any Debt Issuance, and
will deliver to the Administrative Agent, concurrently with such prepayment, a
certificate signed by a Financial Officer of the Borrower in form and substance
satisfactory to the Administrative Agent and setting forth the calculation of
such Net Cash Proceeds.
(g) Not later than 180 days after its receipt of any proceeds of
insurance, condemnation award or other compensation in respect of any Casualty
Event (and in any event upon its determination not to repair or replace any
property subject to such Casualty Event), the Borrower will prepay the
outstanding principal amount of the Term Loans in an amount equal to 100% of the
Net Cash Proceeds from such Casualty Event (less any amounts theretofore applied
or committed to be applied within a reasonable period to the repair or
replacement of property subject to such Casualty Event) and will deliver to the
Administrative Agent, concurrently with such prepayment, a certificate signed by
a Financial Officer of the Borrower in form and substance satisfactory to the
Administrative Agent and setting forth the calculation of such Net Cash
Proceeds; provided, however, that, notwithstanding the foregoing, (i) nothing in
-------- -------
this subsection shall be deemed to limit or otherwise affect any right of the
Administrative Agent herein or in any of the other Credit Documents to receive
and hold such proceeds as loss payee and to disburse the same to the Borrower
upon the terms hereof or thereof, or any obligation of the Borrower and each of
its Subsidiaries herein or in any of the other Credit Documents to remit any
such proceeds to the Administrative Agent upon its receipt thereof, and (ii) any
and all such proceeds received or held by the Administrative Agent or the
Borrower or any of its Subsidiaries during the continuance of an Event of
Default (regardless of any proposed or actual use thereof for repair or
replacement) shall be applied to prepay the outstanding principal amount of the
Term Loans.
(h) Not later than 180 days after its receipt thereof (and in any event
upon its determination not to acquire additional assets or properties or
otherwise to reinvest in its businesses), the Borrower will prepay the
outstanding principal amount of the Term Loans in an amount equal to 100% of the
Net Cash Proceeds from any Asset Disposition (less any amounts theretofore
expended or committed to be expended within a reasonable period to acquire
assets or properties or otherwise reinvested in its businesses) and will deliver
to the Administrative Agent, concurrently with such prepayment, a certificate
signed by a Financial Officer of the Borrower in form and substance satisfactory
to the Administrative Agent and setting forth the calculation of such Net Cash
Proceeds.
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<PAGE>
Notwithstanding the foregoing, nothing in this subsection shall be deemed to
permit any Asset Disposition not expressly permitted under SECTION 8.4.
(i) Concurrently with the delivery of its annual financial statements
after the end of each fiscal year, beginning with the fiscal year ending
December 31, 1997, and in any event not later than one hundred (100) days after
the last day of each such fiscal year, the Borrower will prepay the outstanding
principal amount of the Term Loans in an amount equal to 75% of Excess Cash
Flow, if any, for such fiscal year and will deliver to the Administrative Agent,
concurrently with such prepayment, a certificate signed by a Financial Officer
of the Borrower in substantially the form of EXHIBIT C and setting forth the
calculation of such Excess Cash Flow; provided, however, that (i) in the event
-------- -------
that the Leverage Ratio is less than 5.0 : 1.0 but greater than or equal to 4.0
: 1.0 as of the last day of any such fiscal year, the prepayment required under
this subsection shall be an amount equal to 50% of Excess Cash Flow, if any, for
such fiscal year, and (ii) in the event that the Leverage Ratio is less than 4.0
: 1.0 as of the last day of any such fiscal year, the Borrower shall not be
required to make any prepayment of the Term Loans pursuant to this subsection in
respect of Excess Cash Flow for such fiscal year.
(j) Each prepayment of the Term Loans made pursuant to subsections (e)
through (i) above (each, a "Prepayment Event") shall be applied (i) first, to
reduce the outstanding principal amount of the Tranche A Term Loans and the
Tranche B Term Loans on a pro rata basis, with each such reduction made pursuant
to subsection (e), (f) or (i) above to be applied to the scheduled principal
payments on the Tranche A Term Loans and the Tranche B Term Loans (as set forth
in subsections (a) and (b) above) in the inverse order of maturity, and with
each such reduction made pursuant to subsection (g) or (h) above to be applied
to such scheduled principal payments pro rata over the remaining terms of such
Loans, (ii) second, to the extent of any excess remaining after application as
provided in clause (i) above, to reduce the outstanding principal amount of the
Swingline Loans, with a corresponding reduction to the Revolving Credit
Commitments as provided in SECTION 2.5(B), (iii) third, to the extent of any
excess remaining after application as provided in clauses (i) and (ii) above, to
reduce the outstanding principal amount of the Revolving Loans, with a
corresponding reduction to the Revolving Credit Commitments as provided in
SECTION 2.5(B), and (iv) fourth, to the extent of any excess remaining after
application as provided in clauses (i), (ii) and (iii) above, to pay any
outstanding Reimbursement Obligations, and thereafter to cash collateralize
Letter of Credit Exposure pursuant to SECTION 3.8. Each such prepayment shall be
applied ratably among the Lenders holding the Loans being prepaid, in proportion
to the principal amount held by each, and within each Class of Loans shall be
applied first to prepay all ABR Loans before any LIBOR Loans are prepaid.
(k) In the event and on each occasion that a Prepayment Event occurs, the
Borrower shall give to the Administrative Agent and the Lenders at least three
(3) Business Days' prior written notice of such event (to the extent
practicable), the amount of Loans anticipated to be prepaid and the application
of such prepayment as set forth in subsection (j) above. Any Lender holding a
Tranche B Term Loan may elect, by notice to the Administrative Agent in writing
at least two (2) Business Days prior to any such prepayment of Tranche B Term
Loans required to be made by the Borrower in respect of any Prepayment Event, to
cause all or a portion of such prepayment to be applied instead to prepay
Tranche A Term Loans in accordance with subsection (j) above. If and to the
extent, however, that the aggregate amount of the prepayment which any holders
of Tranche B Term Loans so elect to refuse exceeds the principal amount of
Tranche A Term Loans remaining outstanding after any concurrent prepayment of
Tranche A Term Loans, the portion of such prepayment that exceeds
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<PAGE>
such outstanding principal amount of the Tranche A Term Loans shall be allocated
among such electing holders of Tranche B Term Loans pro rata according to the
outstanding principal amount of the Tranche B Term Loan of each such holder and
applied to the payment of such holders' Tranche B Term Loans.
(l) Each payment or prepayment of a LIBOR Loan made pursuant to the
provisions of this SECTION 2.6 on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
SECTION 2.18 to be paid as a consequence thereof.
2.7. Voluntary Prepayments. (a) At any time and from time to time, the
---------------------
Borrower shall have the right to prepay the Loans, in whole or in part, without
premium or penalty (except as provided in clause (iii) below), upon written
notice (or oral notice promptly confirmed in writing) given to the
Administrative Agent not later than 1:00 p.m., Charlotte time, three (3)
Business Days prior to each intended prepayment, provided that (i) each partial
--------
prepayment shall be in an aggregate principal amount of not less than $3,000,000
or, if greater, an integral multiple of $1,000,000 in excess thereof, (ii) no
partial prepayment of LIBOR Loans made pursuant to any single Borrowing shall
reduce the aggregate outstanding principal amount of the remaining LIBOR Loans
under such Borrowing to less than $5,000,000 or to any greater amount not an
integral multiple of $1,000,000 in excess thereof, and (iii) unless made
together with all amounts required under SECTION 2.18 to be paid as a
consequence of such prepayment, a prepayment of a LIBOR Loan may be made only on
the last day of the Interest Period applicable thereto. Each such notice (each,
a "Notice of Prepayment") shall be given in the form of EXHIBIT D (or, if oral
notice is given, shall be promptly followed with a writing in the form of
EXHIBIT D), shall specify the proposed date of such prepayment and the aggregate
principal amount, Class and Type of Loans to be prepaid (and, in the case of
LIBOR Loans, the Interest Period of the Borrowing pursuant to which made), and
shall be irrevocable and shall bind the Borrower to make such prepayment on the
terms specified therein. Notwithstanding the foregoing provisions of this
subsection (a), the Borrower may prepay the Swingline Loans at any time and from
time to time after the date hereof, in whole or in part, without premium or
penalty, upon written notice (or oral notice promptly confirmed in writing)
delivered to the Administrative Agent no later than 1:00 p.m., Charlotte time,
on the date of such prepayment, provided that each partial prepayment of
--------
Swingline Loans shall be in an aggregate principal amount of not less than
$500,000 or, if greater, an integral multiple of $250,000 in excess thereof.
Revolving Loans and Swingline Loans (but not Term Loans) prepaid pursuant to
this subsection (a) may be reborrowed, subject to the terms and conditions of
this Agreement.
(b) Each prepayment of the Term Loans made pursuant to subsection (a)
above shall be applied to reduce the outstanding principal amount of the Tranche
A Term Loans and the Tranche B Term Loans on a pro rata basis, with each such
reduction to be applied to the scheduled principal payments on the Tranche A
Term Loans and the Tranche B Term Loans (as set forth in SECTIONS 2.6(A) and
2.6(B)) in the inverse order of maturity. Each such prepayment shall be applied
ratably among the Lenders holding the Loans being prepaid, in proportion to the
principal amount held by each.
(c) Upon receipt by the Administrative Agent of a Notice of Prepayment
with respect to any Term Loans, the Administrative Agent will notify each Lender
holding a Tranche B Term Loan of such intended prepayment. Any Lender holding a
Tranche B Term Loan may elect, by notice to the Administrative Agent in writing
at least two (2) Business Days prior to any such prepayment, to cause all or a
portion of such prepayment to be applied instead to prepay Tranche A Term Loans
in
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<PAGE>
accordance with subsection (b) above. If and to the extent, however, that the
aggregate amount of the prepayment which any holders of Tranche B Term Loans so
elect to refuse exceeds the principal amount of Tranche A Term Loans remaining
outstanding after any concurrent prepayment of Tranche A Term Loans, the portion
of such prepayment that exceeds such outstanding principal amount of the Tranche
A Term Loans shall be allocated among such electing holders of Tranche B Term
Loans pro rata according to the outstanding principal amount of the Tranche B
Term Loan of each such holder and applied to the payment of such holders'
Tranche B Term Loans.
2.8. Interest. (a) The Borrower will pay interest in respect of the
--------
unpaid principal amount of each Loan, from the date of Borrowing thereof until
such principal amount shall be paid in full, (i) at the Adjusted Alternate Base
Rate applicable to the Class of such Loan, as in effect from time to time during
such periods as such Loan is an ABR Loan, and (ii) at the Adjusted LIBOR Rate
applicable to the Class of such Loan, as in effect from time to time during such
periods as such Loan is a LIBOR Loan.
(b) Upon the occurrence and during the continuance of an Event of Default
as the result of failure by the Borrower to pay any principal of or interest on
any Loan, any fees or other amount hereunder when due (whether at maturity,
pursuant to acceleration or otherwise), and (at the election of the Required
Lenders) upon the occurrence and during the continuance of any other Event of
Default, all outstanding principal amounts of the Loans and, to the greatest
extent permitted by law, all interest accrued on the Loans and all other accrued
and outstanding fees and other amounts hereunder, shall bear interest at a rate
per annum equal to the interest rate applicable from time to time thereafter to
such Loans (whether the Adjusted Alternate Base Rate or the Adjusted LIBOR Rate)
plus 2% (or, in the case of fees and other amounts, at the Adjusted Alternate
Base Rate applicable to Revolving Loans plus 2%), and, in each case, such
default interest shall be payable on demand. To the greatest extent permitted by
law, interest shall continue to accrue after the filing by or against the
Borrower of any petition seeking any relief in bankruptcy or under any law
pertaining to insolvency or debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as
follows:
(i) in respect of each ABR Loan (including any ABR Loan or
portion thereof paid or prepaid pursuant to the provisions of SECTION 2.6,
except as provided hereinbelow), in arrears on the last Business Day of
each calendar quarter, beginning with the first such day to occur after the
Closing Date; provided, that in the event the Loans are repaid or prepaid
--------
in full and the Commitments have been terminated, then accrued interest in
respect of all ABR Loans shall be payable together with such repayment or
prepayment on the date thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR Loan or
portion thereof paid or prepaid pursuant to the provisions of SECTION 2.6,
except as provided hereinbelow), in arrears (y) on the last Business Day of
the Interest Period applicable thereto (subject to the provisions of clause
(iv) in SECTION 2.10) and (z) in addition, in the case of a LIBOR Loan with
an Interest Period having a duration of six months, on the date three
months after the first day of such Interest Period; provided, that in the
--------
event all LIBOR Loans made pursuant to a single Borrowing are repaid or
prepaid in full, then accrued interest in respect of such LIBOR Loans shall
be payable together with such repayment or prepayment on the date thereof;
and
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(iii) in respect of any Loan, at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit Document
shall be deemed to establish or require the payment of interest to any Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of any Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
In the event of any such reduction affecting any Lender, if from time to time
thereafter the amount of interest payable for the account of such Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be automatically
increased to such maximum permissible amount, provided that at no time shall the
--------
aggregate amount by which interest paid for the account of any Lender has been
increased pursuant to this sentence exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to the
previous sentence.
(e) The Administrative Agent shall promptly notify the Borrower and the
Lenders upon determining the interest rate for each Borrowing of LIBOR Loans
after its receipt of the relevant Notice of Revolving Borrowing or Notice of
Conversion/Continuation, and upon each change in the Alternate Base Rate;
provided, however, that the failure of the Administrative Agent to provide the
- -------- -------
Borrower or the Lenders with any such notice shall neither affect any
obligations of the Borrower or the Lenders hereunder nor result in any liability
on the part of the Administrative Agent to the Borrower or any Lender. Each such
determination (including each determination of the Reserve Requirement) shall,
absent manifest error, be conclusive and binding on all parties hereto.
2.9. Fees. The Borrower agrees to pay:
----
(a) To First Union and CIBC for their own respective accounts, on the
date of execution of this Agreement, the fees described in paragraph (i) of the
Fee Letter, in the amounts set forth therein as due and payable on such date;
(b) To the Administrative Agent, for the account of each Revolving Credit
Lender, a commitment fee (the "Revolving Credit Commitment Fee") for the period
from the date of this Agreement to the Revolving Credit Termination Date, at a
per annum rate equal to the Applicable Margin Percentage for the Revolving
Credit Commitment Fee, on such Lender's ratable share (based on the proportion
that its Revolving Credit Commitment bears to the aggregate Revolving Credit
Commitments) of the average daily aggregate Unutilized Revolving Credit
Commitments, payable in arrears (i) on the last Business Day of each calendar
quarter, beginning with the first such day to occur after the Closing Date, and
(ii) on the Revolving Credit Termination Date;
(c) To the Administrative Agent, for the account of each Revolving Credit
Lender, a letter of credit fee for each calendar quarter in respect of all
Letters of Credit outstanding during such quarter, at a per annum rate equal to
the Applicable Margin Percentage from time to time during such quarter for
Revolving Loans that are maintained as LIBOR Loans, on such Lender's ratable
share (based on the proportion that its Revolving Credit Commitment bears to the
aggregate Revolving Credit Commitments) of the daily average aggregate Stated
Amount of such Letters of Credit, payable in arrears (i) on the last Business
Day of each calendar quarter, beginning with the first such day to
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occur after the Closing Date, and (ii) on the later of the Revolving Credit
Termination Date and the date of termination of the last outstanding Letter of
Credit;
(d) To the Issuing Lender, for its own account, a facing fee for each
calendar quarter in respect of all Letters of Credit outstanding during such
quarter, at a per annum rate of 0.25% on the daily average aggregate Stated
Amount of such Letters of Credit (provided, however, that, notwithstanding the
-------- -------
foregoing, the amount of such fee with regard to any single Letter of Credit
shall not be less than $500), payable in arrears (i) on the last Business Day of
each calendar quarter, beginning with the first such day to occur after the
Closing Date, and (ii) on the later of the Revolving Credit Termination Date and
the date of termination of the last outstanding Letter of Credit; and
(e) To the Administrative Agent, for its own account, the annual
administrative fee described in paragraph (ii) of the Fee Letter, on the terms,
in the amount and at the times set forth therein.
2.10. Interest Periods. Concurrently with the giving of (y) a Notice of
----------------
Revolving Borrowing or (z) a Notice of Conversion/Continuation in respect of any
Borrowing (whether in respect of Term Loans or Revolving Loans) comprised of ABR
Loans to be converted into, or LIBOR Loans to be continued as, LIBOR Loans, the
Borrower shall have the right to elect, pursuant to such notice, the interest
period (each, an "Interest Period") to be applicable to such LIBOR Loans, which
Interest Period shall, at the option of the Borrower, be a one, three or six-
month period; provided, however, that:
-------- -------
(i) all LIBOR Loans comprising a single Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall commence
on the date of the Borrowing of such LIBOR Loan (including the date of any
continuation of, or conversion into, such LIBOR Loan), and each successive
Interest Period applicable to such LIBOR Loan shall commence on the day on
which the next preceding Interest Period applicable thereto expires;
(iii) LIBOR Loans may not be outstanding under more than seven (7)
separate Interest Periods at any one time (for which purpose Interest
Periods shall be deemed to be separate even if they are coterminous);
(iv) if any Interest Period otherwise would expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall expire on
the next preceding Business Day;
(v) the Borrower may not select any Interest Period that begins
prior to the Closing Date or that expires (x) after the Tranche A Maturity
Date, with respect to Tranche A Term Loans that are to be maintained as
LIBOR Loans, (y) after the Tranche B Maturity Date, with respect to Tranche
B Term Loans that are to be maintained as LIBOR Loans, or (z) after the
Revolving Credit Maturity Date, with respect to Revolving Loans that are to
be maintained as LIBOR Loans;
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(vi) the Borrower may not select any Interest Period having a
duration longer than one month at any time prior to the Syndication
Completion Date;
(vii) no Interest Period may be selected for any Borrowing of
Tranche A Term Loans that would end after a scheduled date for repayment of
principal of the Tranche A Term Loans occurring on or after the first day
of such Interest Period unless, immediately after giving effect to such
selection, the aggregate principal amount of Tranche A Term Loans that are
ABR Loans or that have Interest Periods expiring on or before such
principal repayment date equals or exceeds the principal amount required to
be paid on such principal repayment date;
(viii) no Interest Period may be selected for any Borrowing of
Tranche B Term Loans that would end after a scheduled date for repayment of
principal of the Tranche B Term Loans occurring on or after the first day
of such Interest Period unless, immediately after giving effect to such
selection, the aggregate principal amount of Tranche B Term Loans that are
ABR Loans or that have Interest Periods expiring on or before such
principal repayment date equals or exceeds the principal amount required to
be paid on such principal repayment date;
(ix) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period would otherwise expire, such Interest Period shall expire
on the last Business Day of such calendar month; and
(x) if, upon the expiration of any Interest Period applicable to
a Borrowing of LIBOR Loans, the Borrower shall have failed to elect a new
Interest Period to be applicable to such LIBOR Loans, then the Borrower
shall be deemed to have elected to convert such LIBOR Loans into ABR Loans
as of the expiration of the then current Interest Period applicable
thereto.
2.11. Conversions and Continuations. (a) The Borrower shall have the
-----------------------------
right, on any Business Day occurring on or after the Closing Date, to elect (i)
to convert all or a portion of the outstanding principal amount of any ABR Loans
of any Class into LIBOR Loans of the same Class, or to convert any LIBOR Loans
of any Class the Interest Periods for which end on the same day into ABR Loans
of the same Class, or (ii) to continue all or a portion of the outstanding
principal amount of any LIBOR Loans of any Class the Interest Periods for which
end on the same day for an additional Interest Period, provided that (w) any
such conversion of LIBOR Loans into ABR Loans shall involve an aggregate
principal amount of not less than $3,000,000 or, if greater, an integral
multiple of $1,000,000 in excess thereof; any such conversion of ABR Loans into,
or continuation of, LIBOR Loans shall involve an aggregate principal amount of
not less than $5,000,000 or, if greater, an integral multiple of $1,000,000 in
excess thereof; and no partial conversion of LIBOR Loans made pursuant to a
single Borrowing shall reduce the outstanding principal amount of such LIBOR
Loans to less than $5,000,000 or to any greater amount not an integral multiple
of $1,000,000 in excess thereof, (x) except as otherwise provided in SECTION
2.16(D), LIBOR Loans may be converted into ABR Loans only on the last day of the
Interest Period applicable thereto (and, in any event, if a LIBOR Loan is
converted into an ABR Loan on any day other than the last day of the Interest
Period applicable thereto, the Borrower will pay, upon such conversion, all
amounts required under SECTION 2.18 to be paid as a consequence thereof), (y) no
such conversion or continuation shall be permitted with regard to any ABR Loans
that are Swingline Loans, and (z) no conversion of ABR
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Loans into LIBOR Loans or continuation of LIBOR Loans shall be permitted during
the continuance of a Default or Event of Default.
(b) The Borrower shall make each such election by giving the
Administrative Agent written notice (or oral notice promptly confirmed in
writing) not later than 1:00 p.m., Charlotte time, three (3) Business Days prior
to the intended effective date of any conversion of ABR Loans into, or
continuation of, LIBOR Loans and one (1) Business Day prior to the intended
effective date of any conversion of LIBOR Loans into ABR Loans. Each such notice
(each, a "Notice of Conversion/Continuation") shall be irrevocable, shall be
given in the form of EXHIBIT E (or, if oral notice is given, shall be promptly
followed with a writing in the form of EXHIBIT E) and shall specify (x) the date
of such conversion or continuation (which shall be a Business Day), (y) in the
case of a conversion into, or a continuation of, LIBOR Loans, the Interest
Period to be applicable thereto, and (z) the aggregate amount, Class and Type of
the Loans being converted or continued. Upon the receipt of a Notice of
Conversion/Continuation, the Administrative Agent will promptly notify each
Lender having a Commitment for Loans of the relevant Class (or having
outstanding Loans of the relevant Class) of the proposed conversion or
continuation. In the event that the Borrower shall fail to deliver a Notice of
Conversion/Continuation as provided herein with respect to any outstanding LIBOR
Loans, such LIBOR Loans shall automatically be converted to ABR Loans upon the
expiration of the then current Interest Period applicable thereto (unless repaid
pursuant to the terms hereof).
2.12. Method of Payments; Computations. (a) All payments by the Borrower
--------------------------------
hereunder shall be made without setoff, counterclaim or other defense, in
Dollars and in immediately available funds to the Administrative Agent, for the
account of the Lenders entitled to such payment or the Swingline Lender, as the
case may be (except as otherwise expressly provided herein as to payments
required to be made directly to the Issuing Lender and the Lenders), at the
Administrative Agent's office referred to in SECTION 11.5, prior to 1:00 p.m.,
Charlotte time, on the date payment is due. Any payment made as required
hereinabove, but after 1:00 p.m., Charlotte time, shall be deemed to have been
made on the next succeeding Business Day. If any payment falls due on a day that
is not a Business Day, then such due date shall be extended to the next
succeeding Business Day (except that in the case of LIBOR Loans to which the
proviso of clause (iv) in SECTION 2.10 is applicable, such due date shall be the
next preceding Business Day), and such extension of time shall then be included
in the computation of payment of interest, fees or other applicable amounts.
(b) The Administrative Agent will distribute to the Lenders like amounts
relating to payments made to the Administrative Agent for the account of the
Lenders as follows: (i) if the payment is received by 1:00 p.m., Charlotte time,
in immediately available funds, the Administrative Agent will make available to
each relevant Lender on the same date, by wire transfer of immediately available
funds, such Lender's ratable share of such payment (based on the percentage that
the amount of the relevant payment owing to such Lender bears to the total
amount of such payment owing to all of the relevant Lenders), and (ii) if such
payment is received after 1:00 p.m., Charlotte time, or in other than
immediately available funds, the Administrative Agent will make available to
each such Lender its ratable share of such payment by wire transfer of
immediately available funds on the next succeeding Business Day (or in the case
of uncollected funds, as soon as practicable after collected). If the
Administrative Agent shall not have made a required distribution to the
appropriate Lenders as required hereinabove after receiving a payment for the
account of such Lenders, the Administrative Agent will pay to each such Lender,
on demand, its ratable share of such payment with interest thereon at the
Federal Funds Rate for each day from the date such amount was required to be
disbursed by the Administrative Agent until the date repaid to such Lender. The
Administrative
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Agent will distribute to the Issuing Lender like amounts relating to payments
made to the Administrative Agent for the account of the Issuing Lender in the
same manner, and subject to the same terms and conditions, as set forth
hereinabove with respect to distributions of amounts to the Lenders.
(c) Unless the Administrative Agent shall have received written notice
from the Borrower prior to the date on which any payment is due to any Lender
hereunder that such payment will not be made in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date, and the Administrative Agent may, in reliance on such
assumption, but shall not be obligated to, cause to be distributed to such
Lender on such due date an amount equal to the amount then due to such Lender.
If and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, and without limiting the obligation of the Borrower to
make such payment in accordance with the terms hereof, such Lender shall repay
to the Administrative Agent forthwith on demand such amount so distributed to
such Lender, together with interest thereon for each day from the date such
amount is so distributed to such Lender until the date repaid to the
Administrative Agent, at the Federal Funds Rate.
(d) Each Lender for whose account any payment is to be made hereunder
may, but shall not be obligated to, debit the amount of any such payment not
made as and when required hereunder to any ordinary deposit account of the
Borrower with such Lender (with prompt notice to the Administrative Agent and
the Borrower); provided, however, that the failure to give such notice shall not
-------- -------
affect the validity of such debit by such Lender.
(e) All computations of interest and fees hereunder (including
computations of the Reserve Requirement) shall be made on the basis of a year
consisting of (i) in the case of interest on ABR Loans, 365 or 366 days, as the
case may be, or (ii) in all other instances, 360 days; and in each instance
under (i) and (ii) above, with regard to the actual number of days (including
the first day, but excluding the last day) elapsed.
2.13. Recovery of Payments. (a) The Borrower agrees that to the extent
--------------------
the Borrower makes a payment or payments to or for the account of the
Administrative Agent, the Issuing Lender or any Lender, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or similar state or
federal law, common law or equitable cause, then, to the extent of such payment
or repayment, the Obligation intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been received.
(b) If any amounts distributed by the Administrative Agent to any Lender
are subsequently returned or repaid by the Administrative Agent to the Borrower
or its representative or successor in interest, whether by court order or by
settlement approved by the Lender in question, such Lender will, promptly upon
receipt of notice thereof from the Administrative Agent, pay the Administrative
Agent such amount. If any such amounts are recovered by the Administrative Agent
from the Borrower or its representative or successor in interest, the
Administrative Agent will redistribute such amounts to the Lenders on the same
basis as such amounts were originally distributed.
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2.14. Use of Proceeds. The proceeds of the Loans shall be used solely (i)
---------------
to finance a portion of the purchase price of the Petersen Acquisition, (ii) to
pay or reimburse reasonable transaction fees and expenses in connection with the
consummation of the Petersen Acquisition, the consummation of the transactions
contemplated hereby and the consummation of the other Transactions, and (iii) in
the case of the Revolving Loans only, for working capital and general corporate
purposes and to finance Permitted Acquisitions in accordance with the terms and
provisions of this Agreement, including, without limitation, the provisions set
forth in SECTION 6.9.
2.15. Pro Rata Treatment; Sharing of Payments. (a) Except in the case of
---------------------------------------
Swingline Loans, all fundings, continuations and conversions of Loans of any
Class shall be made by the Lenders pro rata on the basis of their respective
Commitments to provide Loans of such Class (in the case of the initial funding
of Loans of such Class pursuant to SECTION 2.2) or on the basis of their
respective outstanding Loans of such Class (in the case of continuations and
conversions of Loans of such Class pursuant to SECTION 2.11, and additionally in
all cases in the event the Commitments have expired or have been terminated), as
the case may be from time to time. All payments on account of principal of or
interest on any Loans, fees or any other Obligations owing to or for the account
of any one or more Lenders shall be apportioned ratably among such Lenders in
proportion to the amounts of such principal, interest, fees or other Obligations
owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount hereunder
(whether by voluntary payment, realization upon security, exercise of the right
of setoff or banker's lien, counterclaim or cross action, or otherwise, other
than pursuant to SECTION 11.7 or SECTION 2.20) applicable to the payment of any
of the Obligations that exceeds its ratable share (according to the proportion
of (i) the amount of such Obligations due and payable to such Lender at such
time to (ii) the aggregate amount of such Obligations due and payable to all
Lenders at such time) of payments on account of such Obligations then or
therewith obtained by all the Lenders to which such payments are required to
have been made, such Lender shall forthwith purchase from the other Lenders such
participations in such Obligations as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of such excess
-------- -------
payment is thereafter recovered from such purchasing Lender, such purchase from
each such other Lender shall be rescinded and each such other Lender shall repay
to the purchasing Lender the purchase price to the extent of such recovery,
together with an amount equal to such other Lender's ratable share (according to
the proportion of (i) the amount of such other Lender's required repayment to
(ii) the total amount so recovered from the purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to the provisions of this subsection
may, to the fullest extent permitted by law, exercise any and all rights of
payment (including, without limitation, setoff, banker's lien or counterclaim)
with respect to such participation as fully as if such participant were a direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or similar law, any Lender receives a secured
claim in lieu of a setoff to which this subsection applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Lenders entitled under this
subsection to share in the benefits of any recovery on such secured claim.
2.16. Increased Costs; Change in Circumstances; Illegality; etc. (a) If,
---------------------------------------------------------
at any time after the date hereof and from time to time, the introduction of or
any change after the date hereof in any applicable law, rule or regulation or in
the interpretation or administration thereof by any
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Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender with any guideline or request from any such
Governmental Authority (whether or not having the force of law), shall (i)
subject such Lender to any tax or other charge, or change the basis of taxation
of payments to such Lender, in respect of any of its LIBOR Loans or any other
amounts payable hereunder or its obligation to make, fund or maintain any LIBOR
Loans (other than taxes on the overall net income of such Lender or its
applicable Lending Office or any change in the rate or basis thereof), (ii)
impose, modify or deem applicable any reserve, special deposit or similar
requirement (other than as a result of any change in the Reserve Requirement)
against assets of, deposits with or for the account of, or credit extended by,
such Lender or its applicable Lending Office, or (iii) impose on such Lender or
its applicable Lending Office any other condition, and the result of any of the
foregoing shall be to increase the cost to such Lender of making or maintaining
any LIBOR Loans or issuing or participating in Letters of Credit or to reduce
the amount of any sum received or receivable by such Lender hereunder (including
in respect of Letters of Credit), the Borrower will, promptly upon demand
therefor by such Lender, pay to such Lender such additional amounts as shall
compensate such Lender for such increase in costs or reduction in return.
(b) If, at any time after the date hereof and from time to time, any
Lender shall have reasonably determined that the introduction of or any change
after the date hereof in any applicable law, rule or regulation regarding
capital adequacy or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance by such Lender with any guideline or request from any
such Governmental Authority (whether or not having the force of law), has or
would have the effect, as a consequence of such Lender's Commitment, Loans or
issuance of or participations in Letters of Credit hereunder, of reducing the
rate of return on the capital of such Lender or any Person controlling such
Lender to a level below that which such Lender or controlling Person could have
achieved but for such introduction, change or compliance (taking into account
such Lender's or controlling Person's policies with respect to capital
adequacy), the Borrower will, promptly upon demand therefor by such Lender
therefor, pay to such Lender such additional amounts as will compensate such
Lender or controlling Person for such reduction in return.
(c) If, on or prior to the first day of any Interest Period, (y) the
Administrative Agent shall have determined that adequate and reasonable means do
not exist for ascertaining the applicable LIBOR Rate for such Interest Period or
(z) the Administrative Agent shall have received written notice from the
Required Lenders of their determination that the rate of interest referred to in
the definition of "LIBOR Rate" upon the basis of which the Adjusted LIBOR Rate
for LIBOR Loans for such Interest Period is to be determined will not adequately
and fairly reflect the cost to such Lenders of making or maintaining LIBOR Loans
during such Interest Period, the Administrative Agent will forthwith so notify
the Borrower and the Lenders. Upon such notice, (i) all then outstanding LIBOR
Loans shall automatically, on the expiration date of the respective Interest
Periods applicable thereto (unless then repaid in full), be converted into ABR
Loans, (ii) the obligation of the Lenders to make, to convert ABR Loans into, or
to continue, LIBOR Loans shall be suspended (including pursuant to the Borrowing
to which such Interest Period applies), and (iii) any Notice of Revolving
Borrowing or Notice of Conversion/Continuation given at any time thereafter with
respect to LIBOR Loans shall be deemed to be a request for ABR Loans, in each
case until the Administrative Agent or the Required Lenders, as the case may be,
shall have determined that the circumstances giving rise to such suspension no
longer exist (and the Required Lenders, if making such determination, shall have
so notified the Administrative Agent), and the Administrative Agent shall have
so notified the Borrower and the Lenders.
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(d) Notwithstanding any other provision in this Agreement, if, at any
time after the date hereof and from time to time, any Lender shall have
determined in good faith that the introduction of or any change in any
applicable law, rule or regulation or in the interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof, or compliance with any guideline or request from any
such Governmental Authority (whether or not having the force of law), has or
would have the effect of making it unlawful for such Lender to make or to
continue to make or maintain LIBOR Loans, such Lender will forthwith so notify
the Administrative Agent and the Borrower. Upon such notice, (i) each of such
Lender's then outstanding LIBOR Loans shall automatically, on the expiration
date of the respective Interest Period applicable thereto (or, to the extent any
such LIBOR Loan may not lawfully be maintained as a LIBOR Loan until such
expiration date, upon such notice), be converted into an ABR Loan, (ii) the
obligation of such Lender to make, to convert ABR Loans into, or to continue,
LIBOR Loans shall be suspended (including pursuant to any Borrowing of Revolving
Loans for which the Administrative Agent has received a Notice of Revolving
Borrowing but for which the Borrowing Date has not arrived), and (iii) any
Notice of Revolving Borrowing or Notice of Conversion/Continuation given at any
time thereafter with respect to LIBOR Loans shall, as to such Lender, be deemed
to be a request for an ABR Loan, in each case until such Lender shall have
determined that the circumstances giving rise to such suspension no longer exist
and shall have so notified the Administrative Agent, and the Administrative
Agent shall have so notified the Borrower.
(e) Determinations by the Administrative Agent or any Lender for purposes
of this SECTION 2.16 of any increased costs, reduction in return, market
contingencies, illegality or any other matter shall, absent manifest error, be
conclusive, provided that such determinations are made in good faith. No
--------
failure by the Administrative Agent or any Lender at any time to demand payment
of any amounts payable under this SECTION 2.16 shall constitute a waiver of its
right to demand payment of any additional amounts arising at any subsequent
time. Nothing in this SECTION 2.16 shall require or be construed to require the
Borrower to pay any interest, fees, costs or other amounts in excess of that
permitted by applicable law.
2.17. Taxes. (a) Any and all payments by the Borrower hereunder or under
-----
any Note shall be made, in accordance with the terms hereof and thereof, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, other than net income and franchise taxes imposed on the
Administrative Agent or any Lender by the United States or by the jurisdiction
under the laws of which the Administrative Agent or such Lender, as the case may
be, is organized or in which its principal office or (in the case of a Lender)
its applicable Lending Office is located, or any political subdivision or taxing
authority thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to the Administrative Agent or
any Lender, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 2.17), the Administrative Agent or
such Lender, as the case may be, receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower will make such
deductions, (iii) the Borrower will pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and (iv)
the Borrower will deliver to the Administrative Agent or such Lender, as the
case may be, evidence of such payment.
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(b) The Borrower will indemnify the Administrative Agent and each Lender
for the full amount of Taxes (including, without limitation, any Taxes imposed
by any jurisdiction on amounts payable under this SECTION 2.17) paid by the
Administrative Agent or such Lender, as the case may be, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted; provided
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that if the Borrower reasonably believes that such Taxes were not correctly or
legally asserted, the Administrative Agent or such Lender, as the case may be,
will use reasonable efforts to cooperate with the Borrower to obtain a refund of
such Taxes. This indemnification shall be made within 30 days from the date the
Administrative Agent or such Lender, as the case may be, makes written demand
therefor.
(c) Each of the Administrative Agent and the Lenders agrees that if it
subsequently recovers, or receives a permanent net tax benefit with respect to,
any amount of Taxes (i) previously paid by it and as to which it has been
indemnified by or on behalf of the Borrower or (ii) previously deducted by the
Borrower (including, without limitation, any Taxes deducted from any additional
sums payable under clause (i) of subsection (a) above), the Administrative Agent
or such Lender, as the case may be, shall reimburse the Borrower to the extent
of the amount of any such recovery or permanent net tax benefit (but only to the
extent of indemnity payments made, or additional amounts paid, by or on behalf
of the Borrower under this SECTION 2.17 with respect to the Taxes giving rise to
such recovery or tax benefit); provided, however, that the Borrower, upon the
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request of the Administrative Agent or such Lender, agrees to repay to the
Administrative Agent or such Lender, as the case may be, the amount paid over to
the Borrower (together with any penalties, interest or other charges), in the
event the Administrative Agent or such Lender is required to repay such amount
to the relevant taxing authority or other Governmental Authority. The
determination by the Administrative Agent or any Lender of the amount of any
such recovery or permanent net tax benefit shall, in the absence of manifest
error, be conclusive and binding.
(d) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender") and claims exemption from United States withholding tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Administrative Agent and the Borrower, on or prior to the Closing Date
(or, in the case of a Non-U.S. Lender that becomes a party to this Agreement as
a result of an assignment after the Closing Date, on the effective date of such
assignment), (i) in the case of a Non-U.S. Lender that is a "bank" for purposes
of Section 881(c)(3)(A) of the Internal Revenue Code, a properly completed
Internal Revenue Service Form 4224 or 1001, as applicable (or successor forms),
certifying that such Non-U.S. Lender is entitled to an exemption from or a
reduction of withholding or deduction for or on account of United States federal
income taxes in connection with payments under this Agreement or any of the
Notes, together with a properly completed Internal Revenue Service Form W-8 or
W-9, as applicable (or successor forms), and (ii) in the case of a Non-U.S.
Lender that is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal
Revenue Code, a certificate in form and substance reasonably satisfactory to the
Administrative Agent and the Borrower and to the effect that (x) such Non-U.S.
Lender is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal
Revenue Code, is not subject to regulatory or other legal requirements as a bank
in any jurisdiction, and has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any governmental authority,
any application made to a rating agency or qualification for any exemption from
any tax, securities law or other legal requirements, (y) is not a 10-percent
shareholder for purposes of Section 881(c)(3)(B) of the Internal Revenue Code
and (z) is not a controlled foreign corporation receiving interest from a
related person for purposes of Section 881(c)(3)(C) of the Internal Revenue
Code, together with a properly completed Internal Revenue
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Service Form W-8 or W-9, as applicable (or successor forms). Each such Non-U.S.
Lender further agrees to deliver to each of the Administrative Agent and the
Borrower an additional copy of each such relevant form on or before the date
that such form expires or becomes obsolete or after the occurrence of any event
(including a change in its applicable Lending Office) requiring a change in the
most recent forms so delivered by it, in each case certifying that such Non-U.S.
Lender is entitled to an exemption from or a reduction of withholding or
deduction for or on account of United States federal income taxes in connection
with payments under this Agreement or any of the Notes, unless an event
(including, without limitation, any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required, which event renders all such forms inapplicable or the exemption to
which such forms relate unavailable and such Non-U.S. Lender notifies the
Administrative Agent and the Borrower that it is not entitled to receive
payments without deduction or withholding of United States federal income taxes.
Each such Non-U.S. Lender will promptly notify the Administrative Agent and the
Borrower of any changes in circumstances that would modify or render invalid any
claimed exemption or reduction.
(e) If any Lender is entitled to a reduction in (and not a complete
exemption from) the applicable withholding tax, the Borrower and the
Administrative Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If any of the forms or other documentation required under
subsection (d) above are not delivered to the Administrative Agent as therein
required, then the Borrower and the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
2.18. Compensation. The Borrower will compensate each Lender upon demand
------------
for all losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund or maintain LIBOR
Loans) that such Lender may incur or sustain (i) if for any reason (other than a
default by such Lender) a borrowing or continuation of, or conversion into, a
LIBOR Loan does not occur on a date specified therefor in a Notice of Revolving
Borrowing or Notice of Conversion/Continuation, (ii) if any repayment,
prepayment or conversion of any LIBOR Loan occurs on a date other than the last
day of an Interest Period applicable thereto (including as a consequence of
acceleration of the maturity of the Loans pursuant to SECTION 9.2), (iii) if any
prepayment of any LIBOR Loan is not made on any date specified in a notice of
prepayment given by the Borrower or (iv) as a consequence of any other failure
by the Borrower to make any payments with respect to any LIBOR Loan when due
hereunder. Calculation of all amounts payable to a Lender under this SECTION
2.18 shall be made as though such Lender had actually funded its relevant LIBOR
Loan through the purchase of a Eurodollar deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of such LIBOR Loan, having a maturity
comparable to the relevant Interest Period; provided, however, that each Lender
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may fund its LIBOR Loans in any manner it sees fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this SECTION
2.18. Determinations by any Lender for purposes of this SECTION 2.18 of any such
losses, expenses or liabilities shall, absent manifest error, be conclusive,
provided that such determinations are made in good faith.
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2.19. Duty to Mitigate. Any of the Administrative Agent or any Lender
----------------
claiming any additional amounts payable pursuant to SECTION 2.16(A), SECTION
2.16(B) or SECTION 2.17 or exercising its rights under SECTION 2.16(D) shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document reasonably requested by the Borrower or to
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change the jurisdiction of its applicable Lending Office if the making of such
filing or change would avoid the need for or reduce the amount of any such
additional amounts that may thereafter accrue or avoid the circumstances giving
rise to such exercise and would not, in the sole determination of the
Administrative Agent or such Lender, as the case may be, result in any
additional costs, expenses or risks or be otherwise disadvantageous to it. Each
of the Administrative Agent and each Lender agrees to use reasonable efforts to
notify the Borrower as promptly as practicable upon its becoming aware that
circumstances exist that would cause the Borrower to become obligated to pay
additional amounts to the Administrative Agent or such Lender pursuant to
SECTION 2.16(A), SECTION 2.16(B) or SECTION 2.17 or that would entitle such
Lender to exercise its rights under SECTION 2.16(D).
2.20. Replacement of Lenders. The Borrower may, at any time and so long as
----------------------
no Default or Event of Default has then occurred and is continuing, replace any
Lender that has requested additional amounts from the Borrower under SECTION
2.16(A), SECTION 2.16(B) or SECTION 2.17 or the obligation of which to make or
maintain LIBOR Loans has been suspended under SECTION 2.16(D), in either case by
written notice to such Lender and the Administrative Agent given not more than
thirty (30) days after any such event and identifying one or more Persons each
of which shall be reasonably acceptable to the Administrative Agent (each, a
"Replacement Lender," and collectively, the "Replacement Lenders") to replace
such Lender (the "Replaced Lender"), provided that (i) the notice from the
--------
Borrower to the Replaced Lender and the Administrative Agent provided for
hereinabove shall specify an effective date for such replacement (the
"Replacement Effective Date"), which shall be at least five (5) Business Days
after such notice is given, (ii) as of the relevant Replacement Effective Date,
each Replacement Lender shall enter into an Assignment and Acceptance with the
Replaced Lender pursuant to SECTION 11.7(A) (but shall not be required to pay
the processing fee otherwise payable to the Administrative Agent pursuant to
SECTION 11.7(A)), pursuant to which such Replacement Lenders collectively shall
acquire, in such proportion among them as they may agree with the Borrower and
the Administrative Agent, all (but not less than all) of the Commitments and
outstanding Loans of the Replaced Lender, and, in connection therewith, shall
pay to the Replaced Lender, as the purchase price in respect thereof, an amount
equal to the sum as of the Replacement Effective Date (without duplication) of
(y) the unpaid principal amount of, and all accrued but unpaid interest on, all
outstanding Loans of the Replaced Lender and (z) the Replaced Lender's ratable
share of all accrued but unpaid fees owing to the Replaced Lender hereunder, and
(iii) all other obligations of the Borrower owing to the Replaced Lender under
this Agreement (other than those specifically described in clause (ii) above in
respect of which the assignment purchase price has been, or is concurrently
being, paid), including, without limitation, amounts payable under SECTION 2.18
as a result of the actions required to be taken under this SECTION 2.20, shall
be paid in full by the Borrower to the Replaced Lender on or prior to the
Replacement Effective Date.
ARTICLE III
LETTERS OF CREDIT
3.1. Issuance. Subject to and upon the terms and conditions herein set
--------
forth, so long as no Default or Event of Default has occurred and is continuing,
the Issuing Lender will, at any time and from time to time on and after the
Closing Date and prior to the earlier of (i) the seventh day prior to the
Maturity Date and (ii) the Revolving Credit Termination Date, and upon request
by the Borrower in accordance with the provisions of SECTION 3.2, issue for the
account of the Borrower one or more irrevocable standby letters of credit
denominated in Dollars and in a form customarily used
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or otherwise approved by the Issuing Lender (together with all amendments,
modifications and supplements thereto, substitutions therefor and renewals and
restatements thereof, collectively, the "Letters of Credit"). The Stated Amount
of each Letter of Credit shall not be less than such amount as may be acceptable
to the Issuing Lender. Notwithstanding the foregoing:
(a) No Letter of Credit shall be issued the Stated Amount upon issuance of
which (i) when added to the aggregate Letter of Credit Exposure of the Revolving
Credit Lenders at such time, would exceed $10,000,000 or (ii) when added to the
sum of (x) the aggregate Letter of Credit Exposure of all Revolving Credit
Lenders at such time, (y) the aggregate principal amount of all Revolving Loans
then outstanding and (z) the aggregate principal amount of all Swingline Loans
then outstanding, would exceed the aggregate Revolving Credit Commitments at
such time;
(b) Unless the Issuing Lender otherwise agrees, there shall not be more
than five (5) Letters of Credit issued and outstanding at any time;
(c) No Letter of Credit shall be issued that by its terms expires later
than the seventh day prior to the Maturity Date or, in any event, more than one
(1) year after its date of issuance; provided, however, that a Letter of Credit
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may, if requested by the Borrower, provide by its terms, and on terms acceptable
to the Issuing Lender, for renewal for successive periods of one year or less
(but not beyond the seventh day prior to the Maturity Date), unless and until
the Issuing Lender shall have delivered a notice of nonrenewal to the
beneficiary of such Letter of Credit; and
(d) The Issuing Lender shall be under no obligation to issue any Letter of
Credit if, at the time of such proposed issuance, (i) any order, judgment or
decree of any Governmental Authority or arbitrator shall purport by its terms to
enjoin or restrain the Issuing Lender from issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Lender or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing
Lender refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon the Issuing Lender with respect to
such Letter of Credit any restriction or reserve or capital requirement (for
which the Issuing Lender is not otherwise compensated) not in effect on the
Closing Date, or any unreimbursed loss, cost or expense that was not applicable,
in effect or known to the Issuing Lender as of the Closing Date and that the
Issuing Lender in good faith deems material to it, or (ii) the Issuing Lender
shall have actual knowledge, or shall have received notice from any Lender,
prior to the issuance of such Letter of Credit that one or more of the
conditions specified in SECTIONS 4.1 (if applicable) or 4.2 are not then
satisfied (or have not been waived in writing as required herein) or that the
issuance of such Letter of Credit would violate the provisions of subsection (a)
above.
3.2. Notices. Whenever the Borrower desires the issuance of a Letter of
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Credit, the Borrower will give the Issuing Lender written notice (or oral notice
promptly confirmed in writing) with a copy to the Administrative Agent not later
than 1:00 p.m., Charlotte time, three (3) Business Days (or such shorter period
as is acceptable to the Issuing Lender in any given case) prior to the requested
date of issuance thereof. Each such notice (each, a "Letter of Credit Notice")
shall be irrevocable, shall be given in the form of EXHIBIT F (or, if oral
notice is given, shall be promptly followed with a writing in the form of
EXHIBIT F) and shall specify (i) the requested date of issuance, which shall be
a Business Day, (ii) the requested Stated Amount and expiry date of the Letter
of Credit, and (iii) the name and address of the requested beneficiary or
beneficiaries of the Letter of Credit. The Borrower will also complete any
application procedures and documents required by the
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Issuing Lender in connection with the issuance of any Letter of Credit. Upon
its issuance of any Letter of Credit, the Issuing Lender will promptly notify
the Administrative Agent of such issuance, and the Administrative Agent will
give prompt notice thereof to each Lender.
3.3. Participations. Immediately upon the issuance of any Letter of
--------------
Credit, the Issuing Lender shall be deemed to have sold and transferred to each
Lender, and each Revolving Credit Lender shall be deemed irrevocably and
unconditionally to have purchased and received from the Issuing Lender, without
recourse or warranty, an undivided interest and participation, pro rata (based
on the percentage of the aggregate Revolving Credit Commitments represented by
such Lender's Revolving Credit Commitment), in such Letter of Credit, each
drawing made thereunder and the obligations of the Borrower under this Agreement
with respect thereto and any Collateral or other security therefor or guaranty
pertaining thereto; provided, however, that the fee relating to Letters of
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Credit described in SECTION 2.9(D) shall be payable directly to the Issuing
Lender as provided therein, and the Revolving Credit Lenders shall have no right
to receive any portion thereof. Upon any change in the Revolving Credit
Commitments of any of the Lenders pursuant to SECTION 11.7(A), with respect to
all outstanding Letters of Credit and Reimbursement Obligations there shall be
an automatic adjustment to the participations pursuant to this Section to
reflect the new pro rata shares of the assigning Lender and the Assignee.
3.4. Reimbursement. The Borrower hereby agrees to reimburse the Issuing
-------------
Lender by making payment to the Administrative Agent, for the account of the
Issuing Lender, in immediately available funds, for any payment made by the
Issuing Lender under any Letter of Credit (each such amount so paid until
reimbursed, together with interest thereon payable as provided hereinbelow, a
"Reimbursement Obligation") immediately after, and in any event within one (1)
Business Day after its receipt of notice of, such payment (provided that any
--------
such Reimbursement Obligation shall be deemed timely satisfied (but nevertheless
subject to the payment of interest thereon as provided hereinbelow) if satisfied
pursuant to a Borrowing of Revolving Loans made on or prior to the next Business
Day following the date of the Borrower's receipt of notice of such payment),
together with interest on the amount so paid by the Issuing Lender, to the
extent not reimbursed prior to 1:00 p.m., Charlotte time, on the date of such
payment or disbursement, for the period from the date of the respective payment
to the date the Reimbursement Obligation created thereby is satisfied, the
Adjusted Alternate Base Rate applicable to Revolving Loans as in effect from
time to time during such period, such interest also to be payable on demand.
The Issuing Lender will provide the Administrative Agent and the Borrower with
prompt notice of any payment or disbursement made under any Letter of Credit,
although the failure to give, or any delay in giving, any such notice shall not
release, diminish or otherwise affect the Borrower's obligations under this
Section or any other provision of this Agreement. The Administrative Agent will
promptly pay to the Issuing Lender any such amounts received by it under this
Section.
3.5. Payment by Revolving Loans. In the event that the Issuing Lender
--------------------------
makes any payment under any Letter of Credit and the Borrower shall not have
timely satisfied in full its Reimbursement Obligation to the Issuing Lender
pursuant to SECTION 3.4, and to the extent that any amounts then held in the
Cash Collateral Account established pursuant to SECTION 3.8 shall be
insufficient to satisfy such Reimbursement Obligation in full, the Issuing
Lender will promptly notify the Administrative Agent, and the Administrative
Agent will promptly notify each Revolving Credit Lender, of such failure. If
the Administrative Agent gives such notice prior to 11:00 a.m., Charlotte time,
on any Business Day, each Revolving Credit Lender will make available to the
Administrative Agent, for the account of the Issuing Lender, its pro rata share
(based on the percentage of the
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aggregate Revolving Credit Commitments represented by such Lender's Revolving
Credit Commitment) of the amount of such payment on such Business Day in
immediately available funds. If the Administrative Agent gives such notice
after 11:00 a.m., Charlotte time, on any Business Day, each such Lender shall
make its pro rata share of such amount available to the Administrative Agent on
the next succeeding Business Day. If and to the extent any Revolving Credit
Lender shall not have so made its pro rata share of the amount of such payment
available to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent, for the account of the Issuing Lender, forthwith on demand
such amount, together with interest thereon at the Federal Funds Rate for each
day from such date until the date such amount is paid to the Administrative
Agent. The failure of any Revolving Credit Lender to make available to the
Administrative Agent its pro rata share of any payment under any Letter of
Credit shall not relieve any other Revolving Credit Lender of its obligation
hereunder to make available to the Administrative Agent its pro rata share of
any payment under any Letter of Credit on the date required, as specified above,
but no Revolving Credit Lender shall be responsible for the failure of any other
Revolving Credit Lender to make available to the Administrative Agent such other
Lender's pro rata share of any such payment. Each such payment by a Revolving
Credit Lender under this SECTION 3.5 of its pro rata share of an amount paid by
the Issuing Lender shall constitute a Revolving Loan by such Revolving Credit
Lender (the Borrower being deemed to have given a timely Notice of Revolving
Borrowing therefor) and shall be treated as such for all purposes of this
Agreement; provided that for purposes of determining the aggregate Unutilized
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Revolving Credit Commitments immediately prior to giving effect to the
application of the proceeds of such Revolving Loans, the Reimbursement
Obligation being satisfied thereby shall be deemed not to be outstanding at such
time.
3.6. Payment to Lenders. Whenever the Issuing Lender receives a payment
------------------
in respect of a Reimbursement Obligation as to which the Administrative Agent
has received, for the account of the Issuing Lender, any payments from the
Revolving Credit Lenders pursuant to SECTION 3.5, the Issuing Lender will
promptly pay to the Administrative Agent, and the Administrative Agent will
promptly pay to each Revolving Credit Lender that has paid its pro rata share
thereof, in immediately available funds, an amount equal to such Lender's
ratable share (based on the proportionate amount funded by such Lender to the
aggregate amount funded by all Revolving Credit Lenders) of such Reimbursement
Obligation.
3.7. Obligations Absolute. The Reimbursement Obligations of the Borrower,
--------------------
and the obligations of the Revolving Credit Lenders under SECTION 3.5 to make
payments to the Administrative Agent, for the account of the Issuing Lender,
with respect to Letters of Credit, shall be irrevocable, shall remain in effect
until the Issuing Lender shall have no further obligations to make any payments
or disbursements under any circumstances with respect to any Letter of Credit,
and, except to the extent resulting from any gross negligence or willful
misconduct on the part of the Issuing Lender, shall be absolute and
unconditional, shall not be subject to counterclaim, setoff or other defense or
any other qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances,
including, without limitation, any of the following circumstances:
(a) Any lack of validity or enforceability of this Agreement, any of the
other Credit Documents or any documents or instruments relating to any Letter of
Credit;
(b) Any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations in respect of any Letter of Credit
or any other amendment, modification or
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waiver of or any consent to departure from any Letter of Credit or any documents
or instruments relating thereto, in each case whether or not the Borrower has
notice or knowledge thereof;
(c) The existence of any claim, setoff, defense or other right that the
Borrower may have at any time against a beneficiary named in a Letter of Credit,
any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Administrative Agent, the Issuing Lender, any
Lender or other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated hereby or any unrelated transactions
(including any underlying transaction between the Borrower and the beneficiary
named in any such Letter of Credit);
(d) Any draft, certificate or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
(provided that such draft, certificate or other document appears on its face to
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comply with the terms of such Letter of Credit), any errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
telecopier or otherwise, or any errors in translation or in interpretation of
technical terms;
(e) Any defense based upon the failure of any drawing under a Letter of
Credit to conform to the terms of the Letter of Credit (provided that any draft,
--------
certificate or other document presented pursuant to such Letter of Credit
appears on its face to comply with the terms thereof), any nonapplication or
misapplication by the beneficiary or any transferee of the proceeds of such
drawing or any other act or omission of such beneficiary or transferee in
connection with such Letter of Credit;
(f) The exchange, release, surrender or impairment of any Collateral or
other security for the Obligations;
(g) The occurrence of any Default or Event of Default; or
(h) Any other circumstance or event whatsoever, including, without
limitation, any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor.
Any action taken or omitted to be taken by the Issuing Lender under or in
connection with any Letter of Credit, if taken or omitted in the absence of
gross negligence or willful misconduct, shall be binding upon the Borrower and
each Lender and shall not create or result in any liability of the Issuing
Lender to the Borrower or any Lender. It is expressly understood and agreed
that, for purposes of determining whether a wrongful payment under a Letter of
Credit resulted from the Issuing Lender's gross negligence or willful
misconduct, (i) the Issuing Lender's acceptance of documents that appear on
their face to comply with the terms of such Letter of Credit, without
responsibility for further investigation, regardless of any notice or
information to the contrary (so long as such documents appear on their face to
comply with the terms of such Letter of Credit), (ii) the Issuing Lender's
exclusive reliance on the documents presented to it under such Letter of Credit
as to any and all matters set forth therein, including the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect (so long as such document appears on its face to comply with the
terms of such Letter of Credit), and whether or not any other statement or any
other document presented
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pursuant to such Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect whatsoever,
and (iii) any noncompliance in any immaterial respect of the documents presented
under such Letter of Credit with the terms thereof shall, in each case, be
deemed not to constitute gross negligence or willful misconduct of the Issuing
Lender.
3.8. Cash Collateral Account. At any time and from time to time (i) after
-----------------------
the occurrence and during the continuance of an Event of Default, the
Administrative Agent, at the direction or with the consent of the Required
Lenders, may require the Borrower to deliver to the Administrative Agent such
additional amount of cash as is equal to the aggregate Stated Amount of all
Letters of Credit at any time outstanding (whether or not any beneficiary under
any Letter of Credit shall have drawn or be entitled at such time to draw
thereunder) and (ii) in the event of a prepayment under SECTION 2.6(D), or to
the extent any amount of a required prepayment under any of SECTIONS 2.6(E)
through 2.6(I) remains after prepayment of all outstanding Loans and
Reimbursement Obligations and termination of the Commitments, as contemplated by
SECTION 2.6(J), the Administrative Agent will retain such amount as may then be
required to be retained, such amounts in each case under clauses (i) and (ii)
above to be held by the Administrative Agent in a cash collateral account (the
"Cash Collateral Account"). The Borrower hereby grants to the Administrative
Agent, for the benefit of the Issuing Lender and the Revolving Credit Lenders, a
Lien upon and security interest in the Cash Collateral Account and all amounts
held therein from time to time as security for Letter of Credit Exposure, and
for application to the Borrower's Reimbursement Obligations as and when the same
shall arise. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. Other
than any interest on the investment of such amounts in Cash Equivalents, which
investments shall be made at the direction of the Borrower (unless a Default or
Event of Default shall have occurred and be continuing, in which case the
determination as to investments shall be made at the option and in the
discretion of the Administrative Agent), amounts in the Cash Collateral Account
shall not bear interest. Interest and profits, if any, on such investments
shall accumulate in such account. In the event of a drawing, and subsequent
payment by the Issuing Lender, under any Letter of Credit at any time during
which any amounts are held in the Cash Collateral Account, the Administrative
Agent will deliver to the Issuing Lender an amount equal to the Reimbursement
Obligation created as a result of such payment (or, if the amounts so held are
less than such Reimbursement Obligation, all of such amounts) to reimburse the
Issuing Lender therefor. Any amounts remaining in the Cash Collateral Account
after the expiration of all Letters of Credit and reimbursement in full of the
Issuing Lender for all of its obligations thereunder shall be held by the
Administrative Agent, for the benefit of the Borrower, to be applied against the
Obligations in such order and manner as the Administrative Agent may direct. If
the Borrower is required to provide cash collateral pursuant to SECTION 2.6(D),
such amount (to the extent not applied as aforesaid) shall be returned to the
Borrower on demand, provided that after giving effect to such return (i) the sum
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of (x) the aggregate principal amount of all Revolving Loans outstanding at such
time, (y) the aggregate principal amount of all Swingline Loans outstanding at
such time and (z) the aggregate Letter of Credit Exposure of all Revolving
Credit Lenders at such time would not exceed the Aggregate Revolving Credit
Commitments at such time and (ii) no Default or Event of Default shall have
occurred and be continuing at such time. If the Borrower is required to provide
cash collateral as a result of an Event of Default, such amount (to the extent
not applied as aforesaid) shall be returned to the Borrower within three (3)
Business Days after all Events of Default have been cured or waived.
3.9. Effectiveness. Notwithstanding any termination of the Revolving
-------------
Credit Commitments or repayment of the Loans, or both, the obligations of the
Borrower under this ARTICLE III shall
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remain in full force and effect until the Issuing Lender and the Lenders shall
have no further obligations to make any payments or disbursements under any
circumstances with respect to any Letter of Credit.
ARTICLE IV
CONDITIONS OF BORROWING
4.1. Conditions of Initial Borrowing. The obligation of each Lender to
-------------------------------
make Loans in connection with the initial Borrowing hereunder, and the
obligation of the Issuing Lender to issue Letters of Credit hereunder on the
Closing Date, is subject to the satisfaction of the following conditions
precedent:
(a) The Administrative Agent shall have received the following, each
dated as of the Closing Date (unless otherwise specified) and, except for the
Notes and any certificates or instruments required to be delivered under the
Borrower Pledge and Security Agreement and the Parent Pledge and Security
Agreement, in sufficient copies for each Lender:
(i) (w) a Tranche A Term Note for each Tranche A Lender that is a
party hereto as of the Closing Date, in the amount of such Lender's Tranche
A Commitment, (x) a Tranche B Term Note for each Tranche B Lender that is a
party hereto as of the Closing Date, in the amount of such Lender's Tranche
B Commitment, (y) a Revolving Credit Note for each Revolving Credit Lender
that is a party hereto as of the Closing Date, in the amount of such
Lender's Revolving Credit Commitment, and (z) a Swingline Note for the
Swingline Lender, in the amount of the Swingline Commitment, in each case
duly completed in accordance with the relevant provisions of SECTION 2.4
and executed by the Borrower;
(ii) the Parent Guaranty, duly completed and executed by each of
BrightView and Holdings;
(iii) the Borrower Pledge and Security Agreement, duly completed
and executed by the Borrower, and the Parent Pledge and Security Agreement,
duly completed and executed by each of BrightView and Holdings, in each
case together with any certificates evidencing the interests being pledged
thereunder as of the Closing Date and undated assignments separate from
certificate for any such certificate, duly executed in blank, and any
promissory notes being pledged thereunder, duly endorsed in blank (or, in
the case of uncertificated interests, appropriately completed and duly
executed instructions for registration and notification thereof); and
(iv) the favorable opinions of (A) Kirkland & Ellis, special
counsel to the Credit Parties, in substantially the form of EXHIBIT J-1,
and (B) Heller, Ehrman, White & McAuliffe, special California counsel to
the Credit Parties, in substantially the form of EXHIBIT J-2, in each case
addressed to the Administrative Agent and the Lenders and addressing such
other matters as the Administrative Agent or any Lender may reasonably
request.
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(b) The Administrative Agent shall have received a certificate, signed by
the president, the chief executive officer or the chief financial officer of the
Borrower, in form and substance satisfactory to the Administrative Agent,
certifying that (i) all representations and warranties of the Borrower contained
in this Agreement and the other Credit Documents are true and correct as of the
Closing Date, both immediately before and after giving effect to the
consummation of the Transactions, the initial Loans hereunder and the
application of the proceeds thereof, (ii) no Default or Event of Default has
occurred and is continuing, both immediately before and after giving effect to
the consummation of the Transactions, the initial Loans hereunder and the
application of the proceeds thereof, (iii) both immediately before and after
giving effect to the consummation of the Transactions, the initial Loans
hereunder and the application of the proceeds thereof, no Material Adverse
Change has occurred since November 30, 1995, and there exists no event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change, and (iv) all conditions to the consummation of the
Petersen Acquisition have been satisfied in all material respects and have not
been waived or amended without the prior written consent of the Administrative
Agent.
(c) The Administrative Agent shall have received a certificate of the
secretary or an assistant secretary of the Borrower, in form and substance
satisfactory to the Administrative Agent, certifying (i) that attached thereto
is a true and complete copy of the articles of organization and all amendments
thereto of the Borrower, certified as of a recent date by the Secretary of State
of the State of Delaware, and that the same has not been amended since the date
of such certification, and (ii) that attached thereto is a true and complete
copy of the limited liability company operating agreement of the Borrower and
all amendments thereto, as then in effect, and as to the incumbency and
genuineness of the signature of each officer of the Borrower executing this
Agreement or any of the other Credit Documents on behalf of the Borrower, and
attaching all such copies of the documents described above.
(d) The Administrative Agent shall have received a certificate of the
secretary or an assistant secretary of Holdings, in form and substance
satisfactory to the Administrative Agent, certifying (i) that attached thereto
is a true and complete copy of the articles of organization and all amendments
thereto of Holdings, certified as of a recent date by the Secretary of State of
the State of Delaware, and that the same has not been amended since the date of
such certification, and (ii) that attached thereto is a true and complete copy
of the limited liability company operating agreement of Holdings and all
amendments thereto, as then in effect, and as to the incumbency and genuineness
of the signature of each officer of Holdings executing any of such Credit
Documents on behalf of Holdings, and attaching all such copies of the documents
described above.
(e) The Administrative Agent shall have received a certificate of the
secretary or an assistant secretary of BrightView, in form and substance
satisfactory to the Administrative Agent, certifying (i) that attached thereto
is a true and complete copy of the certificate of incorporation and all
amendments thereto of BrightView, certified as of a recent date by the Secretary
of State of the State of Delaware, and that the same has not been amended since
the date of such certification, (ii) that attached thereto is a true and
complete copy of the bylaws of BrightView, as then in effect and as in effect at
all times from the date on which the resolutions referred to in clause (iii)
below were adopted to and including the date of such certificate and (iii) that
attached thereto is a true and complete copy of the resolutions adopted by the
board of directors of BrightView (x) authorizing the execution, delivery and
performance by BrightView of the Credit Documents to which it is a party, (y)
authorizing, in its capacity as the managing member of Holdings, the execution,
delivery and performance by Holdings of the Credit Documents to which Holdings
is a party, and (z) authorizing,
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in its capacity as the managing member of Holdings (in Holdings' capacity as the
managing member of the Borrower), the execution, delivery and performance by the
Borrower of the Credit Documents to which the Borrower is a party, and as to the
incumbency and genuineness of the signature of each officer of BrightView
executing any of such Credit Documents, and attaching all such copies of the
documents described above.
(f) The Administrative Agent shall have received (i) a certificate as of
a recent date of the good standing of each of the Borrower, Holdings and
BrightView under the laws of the State of Delaware, from the Secretary of State
of Delaware, and (ii) certificates as of a recent date of the qualification of
the Borrower to conduct business as a foreign corporation in the States of
Illinois and California, from the Secretaries of State of Illinois and
California.
(g) All aspects of the structure and documentation of the Transactions
(including the Asset Purchase Agreement, the Subordinated Debt Agreement, the
Securities Purchase Agreement, the Securityholders Agreement and the other
Transaction Documents), all legal matters and documentation relating to the
Facilities, and all corporate or other proceedings incident to the Transactions,
shall be satisfactory in form and substance to the Administrative Agent, and the
Documentation Agent, and the Administrative Agent shall have received copies of
the executed Transaction Documents in such number as it shall have reasonably
requested.
(h) Except as set forth on SCHEDULE 5.4, all approvals, permits and
consents of any Governmental Authorities or other Persons required in connection
with the execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the Transactions shall have been obtained,
(without the imposition of conditions that are not acceptable to the
Administrative Agent), and all related filings, if any, shall have been made,
and all such approvals, permits, consents and filings shall be in full force and
effect and the Administrative Agent shall have received such copies thereof as
it shall have requested; all applicable waiting periods shall have expired
without any adverse action being taken by any Governmental Authority having
jurisdiction; and no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before, and no
order, injunction or decree shall have been entered by, any court or other
Governmental Authority, in each case to enjoin, restrain or prohibit, to obtain
substantial damages in respect of, or that is otherwise related to or arises out
of, this Agreement, any of the other Transaction Documents or the consummation
of the Transactions, or that, in the opinion of the Administrative Agent, could
reasonably be expected to have a Material Adverse Effect.
(i) The Asset Purchase Agreement shall not have been amended, modified or
supplemented, nor any provision thereof waived, in any material respect since
the date thereof, except as shall have been approved in writing by the
Administrative Agent; BrightView shall have duly complied with and performed in
all material respects all of its agreements and conditions set forth in the
Asset Purchase Agreement required to be complied with or performed by it on or
prior to the closing date thereunder; the Asset Purchase Agreement, the Petersen
License Agreement and the other documents and instruments executed and delivered
by Petersen in connection with the Asset Purchase Agreement shall be in full
force and effect, and BrightView's rights and interest thereunder shall have
been assigned to the Borrower in compliance with the terms thereof and pursuant
to documentation acceptable to the Administrative Agent; the Administrative
Agent shall have received evidence satisfactory to it that, concurrently with
the making of the initial Loans hereunder, the Petersen Acquisition shall be
consummated in all material respects in accordance with the terms of the Asset
Purchase Agreement and in compliance with all applicable Requirements of Law,
including any
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necessary stockholder approvals; the Administrative Agent shall have received a
letter from O'Melveny & Myers LLP, counsel to Petersen, addressed to the
Administrative Agent and the Lenders and in sufficient copies for each Lender,
to the effect that the Administrative Agent and the Lenders are entitled to rely
on their opinion delivered to the Borrower in connection with the Petersen
Acquisition as if such opinion were addressed to them and attaching a copy
thereof; and after giving effect to the Petersen Acquisition, senior management
of the Borrower shall be reasonably acceptable to the Administrative Agent.
(j) The Administrative Agent shall have received evidence in form and
substance satisfactory to it that the Borrower shall have received gross cash
proceeds of not less than $100,000,000 from the issuance of the Subordinated
Bridge Indebtedness pursuant to the Subordinated Debt Agreement or from such
other issuance of debt securities as is acceptable to the Lenders, in either
case on terms and conditions satisfactory to the Administrative Agent.
(k) The Administrative Agent shall have received evidence in form and
substance reasonably satisfactory to it that the Equity Contribution shall have
been made, that Holdings and BrightView shall have contributed to the capital of
the Borrower gross proceeds of not less than $163,000,000 therefrom (including
cash proceeds of not less than $138,000,000), and that Willis Stein shall have
contributed not less than $50,000,000 of the Equity Contribution, all on terms
and conditions satisfactory to the Administrative Agent.
(l) All transaction fees and expenses payable by or on behalf of the
Borrower in connection with the Transactions shall be in an aggregate amount
reasonably acceptable to the Administrative Agent, and the Administrative Agent
shall have received such evidence thereof in form and substance satisfactory to
it (including itemizations thereof) as it shall have reasonably requested.
(m) The Administrative Agent shall have received certified reports from
an independent search service satisfactory to it listing (i) any judgment or tax
lien filing that names the Borrower as debtor in any of the jurisdictions listed
on Annex A to the Borrower Pledge and Security Agreement or that names Holdings
or BrightView as debtor in any of the jurisdictions listed beneath its
respective name on Annex A to the Parent Pledge and Security Agreement and (ii)
any Uniform Commercial Code financing statement that names the Borrower,
Holdings or BrightView as debtor in any of such jurisdictions, as applicable,
and the results thereof shall be satisfactory to the Administrative Agent.
(n) The Administrative Agent shall have received evidence in form and
substance satisfactory to it that all filings, recordings, registrations and
other actions (including, without limitation, the filing of duly completed UCC-1
financing statements in each jurisdiction listed on Annex A to the Borrower
Pledge and Security Agreement or Annex A to the Parent Pledge and Security
Agreement) necessary or, in the reasonable opinion of the Administrative Agent,
desirable to perfect the Liens created by the Security Documents shall have been
completed, or arrangements satisfactory to the Administrative Agent for the
completion thereof shall have been made.
(o) The Administrative Agent shall have received a duly executed consent
from Petersen and Robert Petersen, in form and substance satisfactory to it, to
the grant of a security interest by the Borrower pursuant to the Borrower Pledge
and Security Agreement in the Petersen License Agreement.
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(p) Since November 30, 1995, both immediately before and after giving
effect to the consummation of the transactions contemplated by this Agreement,
there shall not have occurred any Material Adverse Change or any event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change.
(q) The Borrower shall have paid (i) to First Union and CIBC, the unpaid
balance of the fees described in paragraph (i) of the Fee Letter, (ii) to the
Administrative Agent, the initial payment of the annual administrative fee
described in paragraph (ii) of the Fee Letter, and (iii) all other fees and
expenses of the Administrative Agent and the Lenders required hereunder or under
any other Credit Document to be paid on or prior to the Closing Date (including
fees and expenses of counsel) in connection with this Agreement and the
transactions contemplated hereby.
(r) The Administrative Agent shall have received a Financial Condition
Certificate, together with the Pro Forma Balance Sheet and the Projections as
described in SECTIONS 5.10(C) and 5.10(D), all of which shall be in form and
substance satisfactory to the Administrative Agent.
(s) The Administrative Agent shall have received evidence, in form and
substance satisfactory to it, demonstrating the Borrower's compliance with the
Leverage Ratio, determined on a pro forma basis as of November 30, 1996 after
giving effect to the initial Loans hereunder and the consummation of the
Transactions, and further demonstrating that as of the Closing Date and after
giving effect to the Transactions (i) Consolidated Funded Debt is not greater
than $300,000,000 and (ii) Net Availability is greater than $15,000,000. The
Borrower makes no representation or warranty as to any forecast or projection
for September, October or November 1996 on which such evidence may be based.
(t) The Administrative Agent shall have received, in form and substance
satisfactory to it, the financial statements of the Business at August 31, 1996
and for the nine-month period then ended, together with the review letter of
Ernst & Young, L.L.P. thereon.
(u) The Administrative Agent shall have received from the Borrower its
consolidated operating budget for the period from the Closing Date through
December 31, 1997, and the same shall be in form and substance satisfactory to
the Administrative Agent.
(v) The Administrative Agent shall have received evidence in form and
substance reasonably satisfactory to it that all of the requirements of SECTION
6.6 and those provisions of the Borrower Pledge and Security Agreement relating
to the maintenance of insurance have been satisfied, including receipt of
certificates of insurance evidencing the insurance coverages described on
SCHEDULE 5.17 and all other or additional coverages required under the Borrower
Pledge and Security Agreement and naming the Administrative Agent as loss payee
or additional insured, as its interests may appear.
(w) The Administrative Agent shall have received an Account Designation
Letter, together with written instructions from an Authorized Officer, including
wire transfer information, directing the payment of the proceeds of the initial
Loans to be made hereunder.
(x) The Administrative Agent shall have received such other documents,
certificates, opinions and instruments in connection with the Transactions as it
shall have reasonably requested.
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4.2. Conditions of All Borrowings. The obligation of each Lender to make
----------------------------
any Loans hereunder, including the initial Loans (but excluding Revolving Loans
made for the purpose of repaying Refunded Swingline Loans pursuant to SECTION
2.2(E)), and the obligation of the Issuing Lender to issue any Letters of Credit
hereunder, is subject to the satisfaction of the following conditions precedent
on the relevant Borrowing Date or date of issuance:
(a) The Administrative Agent shall have received a Notice of Revolving
Borrowing in accordance with SECTION 2.2(B), or (together with the Swingline
Lender) a Notice of Swingline Borrowing in accordance with SECTION 2.2(D), or
(together with the Issuing Lender) a Letter of Credit Notice in accordance with
SECTION 3.2, as applicable (provided that, insofar as the request for the
--------
Borrowing of the Term Loans on the Closing Date is set forth in SECTION 2.2(B),
no further notice shall be required as a condition to the Borrowing of the Term
Loans);
(b) Each of the representations and warranties contained in ARTICLE V and
in the other Credit Documents shall be true and correct in all material respects
on and as of such Borrowing Date (including the Closing Date, in the case of the
initial Loans made hereunder) or date of issuance with the same effect as if
made on and as of such date, both immediately before and after giving effect to
the Loans to be made or Letter of Credit to be issued on such date (except to
the extent any such representation or warranty is expressly stated to have been
made as of a specific date, in which case such representation or warranty shall
be true and correct in all material respects as of such date); and
(c) No Default or Event of Default shall have occurred and be continuing
on such date, both immediately before and after giving effect to the Loans to be
made or Letter of Credit to be issued on such date.
Each giving of a Notice of Revolving Borrowing, a Notice of Swingline
Borrowing or a Letter of Credit Notice (and the making of the request for the
Borrowing of the Term Loans set forth in SECTION 2.2(B)), and the consummation
of each Borrowing or issuance of a Letter of Credit, shall be deemed to
constitute a representation by the Borrower that the statements contained in
subsections (b) and (c) above are true, both as of the date of such notice or
request and as of the relevant Borrowing Date or date of issuance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to induce the Lenders to extend the credit contemplated hereby,
the Borrower represents and warrants to the Administrative Agent and the
Lenders, both before and after giving effect to the Transactions, as follows:
5.1. Corporate Organization and Power. Each Credit Party (i) is a limited
--------------------------------
liability company, corporation, partnership or other business organization duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the full limited liability company,
corporate, partnership or other applicable power and authority to execute,
deliver and perform the Transaction Documents to which it is or will be a party,
to own and hold its property and to engage in its business as presently
conducted, and (iii) is duly qualified to do business as a foreign
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limited liability company, corporation, partnership or other business
organization and is in good standing in each jurisdiction where the nature of
its business or the ownership of its properties requires it to be so qualified,
except where the failure to be so qualified could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
5.2. Authorization; Enforceability. Each Credit Party has taken, or on
-----------------------------
the Closing Date will have taken, all necessary limited liability company or
corporate action to execute, deliver and perform each of the Transaction
Documents to which it is or will be a party, and has, or on the Closing Date (or
any later date of execution and delivery) will have, validly executed and
delivered each of the Transaction Documents to which it is or will be a party.
This Agreement constitutes, and each of the other Transaction Documents upon
execution and delivery will constitute, the legal, valid and binding obligation
of each of the Credit Parties that is a party hereto or thereto, enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by general equitable principles or
principles of good faith and fair dealing.
5.3. No Violation. The execution, delivery and performance by each Credit
------------
Party of this Agreement and each of the other Transaction Documents to which it
is or will be a party, compliance by it with the terms hereof and thereof, and
the consummation of the Transactions, do not and will not (i) violate any
provision of its articles of organization, certificate of incorporation,
certificate of partnership, operating agreement, bylaws, partnership agreement
or other constituent documents, as applicable, or contravene any other
Requirement of Law applicable to it, (ii) conflict with, result in a breach of
or constitute (with notice, lapse of time or both) a default under any
indenture, agreement or other instrument to which it is a party, by which it or
any of its properties is bound or to which it is subject, (iii) require any
approval of stockholders, members or partners of any Credit Party or any
approval or consent of any Person under any agreement to which any Credit Party
is a party, except for such approvals or consents which will be obtained on or
before the Closing Date and disclosed in writing to the Lenders or such
approvals or consents the failure of which to obtain could not reasonably be
expected, singly or in the aggregate, to have a Material Adverse Effect, or (iv)
except for the Liens granted pursuant to the Security Documents, result in or
require the creation or imposition of any Lien upon any of its properties or
assets. No Subsidiary is subject to any restriction or encumbrance on its
ability to make dividend payments or other distributions in respect of its
Capital Stock, to repay Indebtedness owed to the Borrower or any other
Subsidiary, to make loans or advances to the Borrower or any other Subsidiary,
or to transfer any of its assets or properties to the Borrower or any other
Subsidiary, in each case other than such restrictions or encumbrances existing
under or by reason of (i) the Credit Documents, (ii) the Subordinated Debt
Agreement and any other agreement or instrument evidencing or governing any
Indebtedness permitted under clause (ii) of SECTION 8.2, (iii) applicable
Requirements of Law, (iv) customary non-assignment provisions in any lease
governing a leasehold interest, (v) the terms of licenses of trademarks and
copyrights entered into in the ordinary course of business, and (vi) other
contractual restrictions in respect of assets not material to the business of
the Credit Parties, taken as a whole.
5.4. Governmental Authorization; Permits. (a) No consent, approval,
-----------------------------------
authorization or other action by, notice to, or registration or filing with, any
Governmental Authority or other Person is or will be required as a condition to
or otherwise in connection with the due execution, delivery and performance by
any Credit Party of this Agreement or any of the other Transaction Documents to
which it is or will be a party or the legality, validity or enforceability
hereof or thereof, other than (i) consents, authorizations and filings in
connection with the Petersen Acquisition that, except as
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indicated on SCHEDULE 5.4, have been (or on or prior to the Closing Date will
have been) made or obtained and that are (or on the Closing Date will be) in
full force and effect, which consents, authorizations and filings are listed on
SCHEDULE 5.4, (ii) filings of Uniform Commercial Code financing statements and
other instruments and actions necessary to perfect the Liens created by the
Security Documents, (iii) consents that would be required in respect of the
leases referred to in clause (iv) of SECTION 5.3, and (iv) consents the failure
to obtain which would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) Each Credit Party has, and is in good standing with respect to, all
governmental approvals, licenses, permits and authorizations necessary to
conduct its business as presently conducted and to own or lease and operate its
properties, except for those the failure to obtain which could not be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.
5.5. Litigation. There are no actions, investigations, suits or
----------
proceedings pending or, to the knowledge of the Borrower (after due
investigation) threatened, at law, in equity or in arbitration, before any
court, other Governmental Authority or other Person ("Litigation"), (i) against
or affecting any Credit Party or any of such Person's properties that could, if
adversely determined, be reasonably expected to have a Material Adverse Effect,
or (ii) with respect to this Agreement, any of the other Transaction Documents
or any of the Transactions. The Borrower has not been advised that there is a
reasonable likelihood of an adverse determination of any Litigation, which
adverse determination, should it occur, would have a Material Adverse Effect.
5.6. Taxes. Each Credit Party has timely filed all federal and all
-----
material state and local tax returns and reports required to be filed by it and
has paid all taxes, assessments, fees and other charges levied upon it or upon
its properties that are shown thereon as due and payable, other than those that
are being contested in good faith and by proper proceedings and for which
adequate reserves have been established in accordance with Generally Accepted
Accounting Principles. Such returns accurately reflect in all material respects
all liability for taxes of the Borrower and its Subsidiaries for the periods
covered thereby. Except as described in SCHEDULE 5.6, there is no ongoing audit
or examination or, to the knowledge of the Borrower, other investigation by any
Governmental Authority of the tax liability of any Credit Party and there is no
unresolved claim by any Governmental Authority concerning the tax liability of
any Credit Party for any period for which tax returns have been or were required
to have been filed, other than claims for which adequate reserves have been
established in accordance with Generally Accepted Accounting Principles. No
Credit Party has waived or extended or has been requested to waive or extend the
statute of limitations relating to the payment of any taxes. As of the Closing
Date, no federal income tax return or report has been required to have been
filed by any Credit Party.
5.7. Subsidiaries. As of the Closing Date and after giving effect to the
------------
Transactions, the Borrower has no Subsidiaries and does not otherwise have any
equity or other ownership interest in any corporation, partnership, joint
venture or other Person.
5.8. Full Disclosure. All factual information furnished to the
---------------
Administrative Agent or any Lender on or prior to the Closing Date in writing by
or on behalf of any Credit Party for purposes of or in connection with this
Agreement, the transactions contemplated hereby and the other Transactions is,
and all other such factual information hereafter furnished to the Administrative
Agent or any Lender in writing by or on behalf of any Credit Party will be, true
and accurate in all material respects on the date as of which such information
is dated or certified (or, if such information has
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been amended or supplemented, on the date as of which any such amendment or
supplement is dated or certified) and not made incomplete by omitting to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which such information was provided, not misleading. No
fact is known, no condition exists nor has any event occurred which has not been
disclosed herein or in any other document, certificate or statement furnished to
the Administrative Agent or the Lenders for use in the transactions contemplated
hereby which, singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.9. Margin Regulations. Neither the Borrower nor any of its Subsidiaries
------------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin Stock. No
proceeds of the Loans will be used, directly or indirectly, to purchase or carry
any Margin Stock, to extend credit for such purpose or for any other purpose
that would violate or be inconsistent with Regulations G, T, U or X or any
provision of the Exchange Act.
5.10. Financial Matters. (a) To the knowledge of the Borrower, the
-----------------
audited consolidated balance sheets of Petersen at November 30, 1995, 1994 and
1993 and the related consolidated statements of income, stockholders equity and
cash flows of Petersen for the three-year period ended November 30, 1995,
certified by Ernst & Young, L.L.P., copies of which have been delivered to the
Administrative Agent, were prepared in accordance with Generally Accepted
Accounting Principles, have been prepared from, and are consistent with, the
books and records of Petersen and fairly present the consolidated financial
position of Petersen as at the respective dates thereof and the consolidated
results of operations and cash flows of Petersen for the periods then ended. No
events which have had or could reasonably be expected to have a Material Adverse
Effect have occurred since November 30, 1995 (it being understood that, with
regard solely to the period from November 30, 1995 to the Closing Date, such
representation is made to the knowledge of the Borrower).
(b) To the knowledge of the Borrower, the unaudited consolidated balance
sheets of Petersen at August 31, 1996 and the related consolidated statements of
income, stockholders equity and cash flows of Petersen for the nine-month period
then ended, copies of which have been delivered to the Administrative Agent,
were prepared in accordance with Generally Accepted Accounting Principles
consistently applied (except to the extent noted therein), have been prepared
from, and are consistent with, the books and records of Petersen and fairly
present the consolidated financial position of Petersen as of such date and the
consolidated results of operations and cash flows of Petersen for the period
covered thereby, in each case subject to normal year-end audit adjustments
(including footnotes), consistent with past practices.
(c) The unaudited pro forma balance sheet of the Company as of August 31,
1996, a copy of which has heretofore been delivered to the Administrative Agent
(the "Pro Forma Balance Sheet"), gives pro forma effect to the consummation of
the Petersen Acquisition, the issuance of the Subordinated Bridge Indebtedness,
the completion of the Equity Contribution, the extensions of credit made under
this Agreement, the payment of transaction fees and expenses incident to the
foregoing, and the consummation of all other Transactions, all as if such events
had occurred on such date. The Pro Forma Balance Sheet has been prepared in
accordance with Generally Accepted Accounting Principles (subject to the absence
of footnotes required by Generally Accepted Accounting Principles and subject to
normal year-end adjustments) and, subject to stated assumptions made in good
faith and having a reasonable basis set forth therein, presents fairly in all
material respects the financial
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condition of the Borrower on an unaudited pro forma basis as of the date set
forth therein after giving effect to the consummation of the Transactions as
described above. Prior to the Closing Date, the Borrower has not engaged in any
business, owned any assets or incurred or assumed any liabilities except in
connection with the execution and performance of the Transaction Documents.
(d) The Borrower has prepared, and has heretofore furnished to the
Administrative Agent a copy of, annual projected balance sheets and statements
of income and cash flows of the Borrower for the six-year period beginning with
the year ended December 31, 1996, giving effect to the consummation of the
Petersen Acquisition, the issuance of the Subordinated Bridge Indebtedness, the
completion of the Equity Contribution, the extensions of credit made under this
Agreement, the payment of transaction fees and expenses related to the
foregoing, and the consummation of the other Transactions (the "Projections").
In the opinion of management of the Borrower, the assumptions used in the
preparation of the Projections were fair, complete and reasonable when made and
continue to be fair, complete and reasonable as of the date hereof. The
Projections have been prepared in good faith by the executive and financial
personnel of the Borrower, are complete and represent a reasonable estimate of
the future performance and financial condition of the Borrower, subject to the
uncertainties and approximations inherent in any projections and without any
representation or warranty that the projected results will be achieved.
(e) Upon consummation of the Transactions and as of the Closing Date:
(i) The fair saleable value of the assets of the Borrower and each
of its Subsidiaries, on a stand-alone basis, exceeds the amount that will
reasonably be required to be paid on or in respect of the existing debts
and other liabilities (including Contingent Obligations) of such Person as
they mature.
(ii) The assets of each of the Borrower and each of its
Subsidiaries, on a stand-alone basis, do not constitute unreasonably small
capital for any such Person to carry out its business as conducted as of
the Closing Date and as proposed to be conducted, including the capital
needs of any such Person, taking into account the particular capital
requirements of the business conducted and to be conducted by such Person,
and the availability of capital in respect thereof (with reference, without
limitation, to the Projections).
(iii) The Borrower does not intend to, and does not intend to
permit any of its Subsidiaries to, incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of debt of each of such Person). As of
the Closing Date, the anticipated cash flow of the Borrower and each of its
Subsidiaries, after taking into account all presently anticipated uses of
the cash of each such Person, will at all times be sufficient to pay all
amounts on or in respect of Indebtedness of each such Person when such
amounts are, as anticipated as of the Closing Date, required to be paid.
(iv) The Borrower does not intend, and does not believe, that final
judgments against any of the Borrower or its Subsidiaries in actions for
money damages will be rendered at a time when, or in an amount such that,
any such Person will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum reasonable
amount of such judgments in any such actions and the earliest reasonable
time at which such judgments might be rendered). The anticipated cash flow
of the Borrower and
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each of its Subsidiaries, on a stand-alone basis, after taking into account
all other anticipated uses of the cash of each such Person (including the
payments on or in respect of debt referred to in clause (iii) of this
SECTION 5.10(E)), will at all times be sufficient to pay all such judgments
promptly in accordance with their terms.
5.11. Ownership of Properties. Each Credit Party (i) has good and
-----------------------
marketable title to all real property owned by it, (ii) holds interests as
lessee under valid leases in full force and effect with respect to all material
leased real and personal property used in connection with its business, (iii)
possesses or has rights to use licenses, patents, copyrights, trademarks,
service marks, trade names and other assets sufficient to enable it to continue
to conduct its business substantially as heretofore conducted (including, to the
knowledge of the Borrower, as conducted by Petersen prior to the Closing Date)
and without any material conflict with the rights of others, and (iv) after
giving effect to the Petersen Acquisition, has good title to all of its other
properties and assets reflected in the most recent financial statements referred
to in SECTION 5.10(A) (except as sold or otherwise disposed of since the date
thereof in the ordinary course of business), in each case under (i), (ii), (iii)
and (iv) above free and clear of all Liens other than Permitted Liens, and other
than encumbrances or restrictions that could not reasonably be expected to have
a Material Adverse Effect. SCHEDULE 5.11 lists, as of the Closing Date and
after giving effect to the Transactions, all real property leasehold interests
of each Credit Party, indicating in each case the identity of the owner, the
nature of the leased premises and the address of the property. As of the
Closing Date and after giving effect to the Transactions, no Credit Party owns
any fee interest in any real property.
5.12. ERISA. Each Plan is and has been administered in compliance in all
-----
material respects with all applicable Requirements of Law, including, without
limitation, the applicable provisions of ERISA and the Internal Revenue Code.
No ERISA Event has occurred and is continuing or, to the knowledge of the
Borrower, is reasonably expected to occur with respect to any Plan, in either
case that could be reasonably expected, individually or in the aggregate, to
have a Material Adverse Effect. No Plan has any Unfunded Pension Liability, and
neither the Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA, in either instance where
the same could be reasonably expected, individually or in the aggregate, to have
a Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate is
required to contribute to or has, or has at any time had, any liability to a
Multiemployer Plan.
5.13. Environmental Matters. (a) No Hazardous Substances are or have been
---------------------
generated, used, located, released, treated, disposed of or stored by any Credit
Party or, to the knowledge of the Borrower, by any other Person (including any
predecessor in interest) or otherwise, in, on or under any portion of any real
property, leased or owned, of any Credit Party, except as could not reasonably
be expected to have a Material Adverse Effect, and no portion of any such real
property or, to the knowledge of the Borrower, any other real property at any
time leased, owned or operated by any Credit Party, has been contaminated by any
Hazardous Substance; and no portion of any real property, leased or owned, of
any Credit Party has been or is presently the subject of an environmental audit,
assessment or remedial action, except for any such contamination, audit,
assessment or remedial action that could not reasonably be expected to have a
Material Adverse Effect.
(b) No portion of any real property leased or owned by any Credit Party
as of the Closing Date has been used by a Credit Party or, to the knowledge of
the Borrower, by any other Person, as or for a mine, a landfill, a dump or other
disposal facility, a gasoline service station, or
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(other than for petroleum substances stored in the ordinary course of business)
a petroleum products storage facility; no portion of such real property or any
other real property at any time leased, owned or operated by any Credit Party
has, pursuant to any Environmental Law, been placed on the "National Priorities
List" or "CERCLIS List" (or any similar federal or state list) of sites subject
to possible environmental problems; and there are not, and to the Borrower's
knowledge have never been, any underground or above-ground storage tanks
situated on any real property currently leased or owned by any Credit Party.
(c) Each Credit Party has obtained all licenses and permits under
Environmental Laws necessary to their respective operations, and all such
licenses and permits are being maintained in good standing, and each Credit
Party is in compliance with all material terms and conditions of such licenses
and permits, except for any such failure to obtain, maintain or comply which
could not reasonably be expected to have a Material Adverse Effect.
(d) No Credit Party has received (i) any notice or claim to the effect
that it is or may be liable to any Person under any Environmental Law, including
without limitation, any claim relating to any Hazardous Materials except as
could not reasonably be expected to have a Material Adverse Effect or (ii) any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9604) or
comparable foreign or state laws regarding any matter which could reasonably be
expected to result in a Material Adverse Effect, and, to the best of the
Borrower's knowledge, no Credit Party is involved in any investigation, response
or corrective action relating to or in connection with any Hazardous Materials
at any real property occupied by such Person or at any other location except for
such of the foregoing which could not reasonably be expected to have a Material
Adverse Effect.
(e) No Credit Party is subject to any judicial or administrative
proceeding alleging the violation of or liability under any Environmental Laws
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect.
(f) No Credit Party nor any of its respective properties or operations is
subject to any outstanding written order or agreement with any governmental
authority or private party relating to (a) any actual or potential violation of
or liability under any Environmental Laws or (b) any Environmental Claims,
except for such of the foregoing which could not reasonably be expected to have
a Material Adverse Effect.
(g) No Credit Party or, to the best of the Borrower's knowledge, any
predecessor of any Credit Party, has filed any notice under any Environmental
Law indicating past or present ownership or operation of a hazardous waste
treatment, storage or disposal facility, as defined under 40 C.F.R. Parts 260-
270 or any state equivalent.
(h) No Lien in favor of any Person relating to or in connection with any
Environmental Claim has attached to any property currently owned by any Credit
Party, except for any such Lien which could not reasonably be expected to have a
Material Adverse Effect.
(i) All activities and operations of each Credit Party are in compliance
with the requirements of all applicable Environmental Laws, except to the extent
the failure so to comply, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect. No Credit Party is
involved in any suit, action or proceeding, or has received any notice,
complaint
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or other request for information from any Governmental Authority or other
Person, in either case with respect to any actual, alleged or threatened
Environmental Claims that, if adversely determined, could be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.
(j) To the Borrower's knowledge, no event or condition has occurred which
may interfere with present compliance by any Credit Party with any Environmental
Law, or which may give rise to any liability of any Credit Party under any
Environmental Law, which individually or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect.
5.14. Compliance With Governing Documents, Decrees and Laws. (a) No
-----------------------------------------------------
Credit Party is in violation of (i) its articles of incorporation, articles of
organization, bylaws, operating agreement or any other organizational documents
or (ii) any order, decree or judgment of any Governmental Authority having
jurisdiction over any such Person.
(b) Each Credit Party has timely filed all material reports, documents
and other materials required to be filed by it under all applicable Requirements
of Law with any Governmental Authority, has retained all material records and
documents required to be retained by it under all applicable Requirements of
Law, and is otherwise in compliance with all applicable Requirements of Law in
respect of the conduct of its business and the ownership and operation of its
properties, except for such Requirements of Law the failure to comply with
which, individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect.
5.15. Labor Relations. Except as could not reasonably be expected to have
---------------
a Material Adverse Effect: (a) no Credit Party is engaged in any unfair labor
practice within the meaning of the National Labor Relations Act of 1947, as
amended; (b) there is (i) no unfair labor practice complaint before the National
Labor Relations Board, or grievance or arbitration proceeding arising out of or
under any collective bargaining agreement, pending or, to the knowledge of the
Borrower, threatened against any Credit Party, (ii) no strike, lock-out,
slowdown, stoppage, walkout or other labor dispute pending or, to the knowledge
of the Borrower, threatened against any Credit Party and (iii) to the knowledge
of the Borrower, no petition for certification or union election or union
organizing activities with respect to any Credit Party; and (c) the Borrower is
not aware of any existing or imminent labor disturbance by the employees of any
Credit Party's principal suppliers, manufacturers or customers.
5.16. Regulated Industries. No Credit Party is (i) an "investment
--------------------
company," a company "controlled" by an "investment company," or an "investment
advisor," within the meaning of the Investment Company Act of 1940, as amended,
or (ii) a "holding company," a "subsidiary company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended or (iii) subject to regulation under the Federal Power Act.
5.17. Insurance. SCHEDULE 5.17 sets forth a summary (that is true and
---------
correct in all material respects) of all insurance policies or arrangements
carried or maintained by any Credit Party as of the Closing Date and after
giving effect to the Transactions. The assets, properties and business of the
Credit Parties are insured against such hazards and liabilities, under such
coverages and in such amounts, as are customarily maintained by prudent
companies of established repute engaged in the same or similar businesses and
under policies issued by insurers of recognized responsibility.
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5.18. Certain Contracts. SCHEDULE 5.18 lists, as of the Closing Date and
-----------------
after giving effect to the Transactions, each contract, agreement or commitment,
written or oral, to which any Credit Party is a party, by which any of them or
their respective properties is bound or to which any of them is subject and that
(i) relates to employment of senior executives of a Credit Party or labor
matters, (ii) evidences Funded Debt of a Credit Party, or (iii) the termination
of which by any party or the breach of which by a Credit Party could reasonably
be expected to have a Material Adverse Effect, in each case other than purchase
orders in the ordinary course of business and the Transaction Documents, and
also indicates the parties, subject matter and term thereof. As of the Closing
Date, each such contract is in full force and effect, and no Credit Party or, to
the knowledge of the Borrower, any other party thereto, is in default under any
such contract.
5.19. Capitalization. As of the Closing Date and after giving effect to
--------------
the Transactions, the capitalization of each Credit Party is set forth on
SCHEDULE 5.19. All issued and outstanding Capital Stock of the Borrower and
each Subsidiary has been duly authorized and validly issued and, to the extent
applicable, is fully paid and nonassessable. As of the Closing Date and after
giving effect to the Transactions, there will be no outstanding securities
convertible into or exchangeable for Capital Stock of any Credit Party or
options, warrants or other rights to purchase or subscribe for Capital Stock of
any Credit Party or contracts, commitments, agreements, understandings or
arrangements of any kind to which any Credit Party is a party relating to the
issuance of any Capital Stock of such Credit Party, any such convertible or
exchangeable securities or any such options, warrants or rights. As of the
Closing Date, no stockholder or member of the Borrower or any of its
Subsidiaries has any preemptive rights to subscribe for any additional equity
securities of such Credit Party. Any issuance and sale of Capital Stock of the
Borrower or any Subsidiary, upon such issuance and sale, will either (a) have
been registered or qualified under applicable federal and state securities laws
or (b) be exempt therefrom.
5.20. Security Documents. The provisions of each of the Security Documents
------------------
(whether executed and delivered prior to or on the Closing Date or thereafter)
are and will be effective to create in favor of the Administrative Agent, for
its benefit and the benefit of the Lenders, a valid and enforceable security
interest in and Lien upon all right, title and interest of each Credit Party
that is a party thereto in and to the Collateral purported to be pledged by such
Credit Party thereunder and described therein, and upon (i) the initial
extension of credit hereunder, (ii) the filing of appropriately completed
Uniform Commercial Code financing statements and continuations thereof in the
jurisdictions specified therein, (iii) the filing of appropriately completed
short-form assignments in the U.S. Patent and Trademark Office and the U.S.
Copyright Office, (iv) in the case of uncertificated securities, compliance with
Section 8-313 (or its successor provision) of the applicable Uniform Commercial
Code, and (v) the possession by the Administrative Agent of any certificates
evidencing the securities pledged thereby, such security interest and Lien shall
constitute a fully perfected and first priority security interest in and Lien
upon such right, title and interest of each such Credit Party in and to such
Collateral, to the extent that such security interest and Lien can be perfected
by such filings, actions and possession, subject only to Permitted Liens.
5.21. Transaction Documents. The Borrower has heretofore furnished to each
---------------------
Lender a true and complete copy of each of the Asset Purchase Agreement, the
Subordinated Debt Agreement, the Securities Purchase Agreement and the
Securityholders Agreement, in each case together with all schedules and exhibits
referred to therein or delivered pursuant thereto and all amendments,
modifications and waivers relating thereto. As of the Closing Date, none of
such Transaction Documents has been amended, modified or supplemented, nor have
any of the provisions thereof been
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waived, in any material respect other than as approved in writing by the
Administrative Agent. All representations and warranties of any Credit Party
contained in any of such Transaction Documents were true and correct in all
material respects on and as of the date made and will be true and correct in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except as contemplated by the terms of such
Transaction Documents.
5.22. Broker's or Finder's Fees. No broker's or finder's fees or
-------------------------
commissions will be payable by any Credit Party with respect to any transaction
contemplated hereby or in connection with the Transactions and no similar fees
or commissions will be payable by any Credit Party for any other services
rendered to a Credit Party in connection with the transactions contemplated
hereby and thereby.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
6.1. Financial Statements. The Borrower will deliver to each Lender:
--------------------
(a) As soon as available and in any event within thirty (30) days after
the end of each month ending after the Closing Date, unaudited consolidated
balance sheets of the Borrower and its Subsidiaries as of the end of such month
and unaudited consolidated statements of income and cash flows for the Borrower
and its Subsidiaries for the month then ended and for that portion of the fiscal
year then ended, in each case setting forth comparative consolidated figures as
of the end of and for the corresponding period in the preceding fiscal year, all
in reasonable detail and prepared in accordance with Generally Accepted
Accounting Principles (subject to the absence of notes required by Generally
Accepted Accounting Principles and subject to normal year-end adjustments)
applied on a basis consistent with that of the preceding month or containing
disclosure of the effect on the financial condition or results of operations of
any change in the application of accounting principles and practices during such
month, and certified by a Financial Officer of the Borrower as fairly presenting
the financial condition and results of operations of the Borrower and its
Subsidiaries on a consolidated basis as of the dates and for the periods
indicated;
(b) As soon as available and in any event within forty-five (45) days
after the end of each of the first three fiscal quarters of each fiscal year,
beginning with the fiscal quarter ended September 30, 1996, (i) unaudited
consolidated balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal quarter and unaudited consolidated statements of income and cash
flows for the Borrower and its Subsidiaries for the fiscal quarter then ended
and for that portion of the fiscal year then ended, in each case setting forth
comparative consolidated figures as of the end of and for the corresponding
period in the preceding fiscal year, all in reasonable detail and prepared in
accordance with Generally Accepted Accounting Principles (subject to the absence
of notes required by Generally Accepted Accounting Principles and subject to
normal year-end adjustments) applied on a basis consistent with that of the
preceding quarter or containing disclosure of the effect on the
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financial condition or results of operations of any change in the application of
accounting principles and practices during such quarter (and, in the case of the
financial statements as of and for the period ended September 30, 1996, which
are not required by this Agreement to be delivered together with a Compliance
Certificate, such statements shall be certified by a Financial Officer of the
Borrower as fairly presenting the financial condition and results of operations
of the Borrower and its Subsidiaries on a consolidated basis as of the dates and
for the periods indicated) and (ii) if applicable, the Borrower's quarterly
report on Form 10-Q for such quarterly period; and
(c) As soon as available and in any event within 100 days after the end
of each fiscal year, beginning with the fiscal year ending December 31, 1996,
(i) an audited consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such fiscal year and audited consolidated statements of income
and cash flows for the Borrower and its Subsidiaries for the fiscal year then
ended, in each case setting forth comparative figures as of the end of and for
the preceding fiscal year, all in reasonable detail, together with (y) a report
thereon by Ernst & Young, L.L.P. or another certified public accounting firm of
recognized national standing reasonably acceptable to the Required Lenders that
is not qualified as to going concern or scope of audit and to the effect that
(A) such financial statements present fairly the consolidated financial
condition and results of operations of the Borrower and its Subsidiaries as of
the dates and for the periods indicated in accordance with Generally Accepted
Accounting Principles applied on a basis consistent with that of the preceding
year or containing disclosure of the effect on the financial position or results
of operations of any change in the application of accounting principles and
practices during such year and (B) the examination by such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards, and (z) a report by such accountants to
the effect that, based on and in connection with their examination of the
financial statements of the Borrower and its Subsidiaries, such accountants
obtained no knowledge of the occurrence or existence of any Default or Event of
Default relating to accounting or financial reporting matters, or a statement
specifying the nature and period of existence of any such Default or Event of
Default disclosed by their audit; provided, however, that such accountants
-------- -------
shall not be liable by reason of the failure to obtain knowledge of any Default
or Event of Default that would not be disclosed or revealed in the course of
their audit examination, and (ii) if applicable, the Borrower's annual report on
Form 10-K for such year; and
(d) As soon as available and in any event within sixty (60) days after
the end of each fiscal quarter of each fiscal year, beginning with the fiscal
quarter ended September 30, 1996, unaudited statements of profit and loss
(listing revenues, contribution profit and circulation figures) for each of the
top twenty publications (ranked by revenues) of the Borrower and its
Subsidiaries (and to the extent not already included in such group, the
Scheduled Titles) for such fiscal quarter.
At the Borrower's option, the financial statements described in
subsections (a), (b) and (c) above may be consolidated financial statements of
Holdings and its Subsidiaries, provided that not less than 99% of the assets,
--------
liabilities, revenues, income and other financial items contained in the
consolidated financial statements of Holdings and its Subsidiaries shall be
attributable to the Borrower and its Subsidiaries.
6.2. Other Business and Financial Information. The Borrower will deliver
----------------------------------------
to each Lender:
(a) Concurrently with each delivery of the financial statements described
in SECTION 6.1(B) or SECTION 6.1(C), beginning with the delivery of financial
statements with respect to
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the fiscal year ending December 31, 1996, a Compliance Certificate in the form
of EXHIBIT L with respect to the period covered by the financial statements then
being delivered, executed by a Financial Officer of the Borrower, together with
a Covenant Compliance Worksheet reflecting the computation of the financial
covenants set forth in SECTIONS 7.1 through 7.4 as of the last day of the period
covered by such financial statements;
(b) Concurrently with each delivery of the financial statements described
in SECTION 6.1(C) and in any event not later than one hundred (100) days after
the last day of each fiscal year, beginning with the fiscal year ending December
31, 1997, a certificate in the form of EXHIBIT C, executed by a Financial
Officer of the Borrower and setting forth the calculations required under
SECTION 2.6(I);
(c) As soon as available and in any event within thirty (30) days after
the end of each fiscal year, beginning with the fiscal year ending December 31,
1996, a consolidated operating budget for the Borrower and its Subsidiaries for
the succeeding fiscal year (prepared on a quarterly basis), together with a
certificate of a Financial Officer of the Borrower to the effect that such
budget has been prepared in good faith and is a reasonable estimate of the
financial position and results of operations of the Borrower and its
Subsidiaries for the period covered thereby and that such Financial Officer has
no reason to believe such budget is misleading in any material respect in light
of the circumstances existing at the time of preparation or delivery thereof
(but without representation or warranty that the results reflected therein will
actually be achieved); and as soon as available from time to time thereafter,
any modifications or revisions to or restatements of such budget;
(d) Promptly upon receipt thereof, copies of all reports in final form
(other than reports of a routine or ministerial nature which are not material)
submitted to the Borrower by its independent certified public accountants in
connection with each annual, interim or special audit, including, without
limitation, any comment letter submitted by such accountants to management in
connection with their annual audit, and promptly upon completion thereof, any
response reports from the Borrower in respect thereof;
(e) Promptly upon the sending, filing or receipt thereof, copies of (i)
all financial statements, reports, notices and proxy statements that the
Borrower or any of its Subsidiaries shall send or make available generally to
Holdings or the members of Holdings in their capacity as such or to BrightView
or the stockholders of BrightView, (ii) all regular, periodic and special
reports, registration statements and prospectuses (other than on Form S-8) that
the Borrower or any of its Subsidiaries shall render to or file with the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. or any national securities exchange and (iii) all press releases
and other statements made available generally by the Borrower or any of its
Subsidiaries to the public concerning material developments in the business of
the Borrower or any of its Subsidiaries;
(f) Promptly upon (and in any event within five (5) Business Days after)
a Responsible Officer obtains knowledge thereof, written notice of any of the
following:
(i) the occurrence of any Default or Event of Default or of any
condition or event that would be required to be disclosed in a current
report filed with the Commission on Form 8-K (whether or not the Borrower
is required to file such reports under the Exchange Act), together with a
written statement of a Responsible Officer of the Borrower specifying the
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nature and period of existence of such event or condition and the action
that the Borrower has taken, is taking and proposes to take with respect
thereto;
(ii) the institution or threatened institution of any action, suit,
investigation or proceeding against or affecting the Borrower or any of its
Subsidiaries, including any such investigation or proceeding by any
Governmental Authority (other than routine periodic inquiries,
investigations or reviews), that seeks to enjoin or otherwise prevent the
consummation of, or to recover damages or obtain relief as a result of, any
of the Transactions, or that could, if adversely determined, be reasonably
expected, individually or in the aggregate, to have a Material Adverse
Effect, and any material development in any litigation or other proceeding
previously reported pursuant to SECTION 5.5 or this SECTION 6.3(F)(II);
(iii) the receipt by the Borrower or any of its Subsidiaries from
any Governmental Authority of any notice asserting any failure by the
Borrower or any of its Subsidiaries to be in compliance with applicable
Requirements of Law or that threatens the taking of any action against the
Borrower or such Subsidiary or sets forth circumstances that, if taken or
adversely determined, could be reasonably expected to have a Material
Adverse Effect;
(iv) the occurrence of any ERISA Event that could be reasonably
expected to have a Material Adverse Effect, together with (i) a written
statement of a Responsible Officer of the Borrower specifying the details
of such ERISA Event and the action that the Borrower has taken, is taking
and proposes to take with respect thereto, (ii) a copy of any notice with
respect to such ERISA Event that may be required to be filed with the PBGC
and (iii) a copy of any notice delivered by the PBGC to the Borrower or
such ERISA Affiliate with respect to such ERISA Event;
(v) the termination, resignation or replacement of any of the
chairman, chief executive officer, president or chief operating officer of
the Borrower, and (together with copies thereof) the execution of any
modification of any existing employment agreement, or any new employment
agreement, with any such officer;
(vi) the occurrence of any material default under, or any proposed
or threatened termination or cancellation of, any material contract or
agreement to which the Borrower or any of its Subsidiaries is a party, the
termination or cancellation of which could be reasonably expected to have a
Material Adverse Effect;
(vii) the occurrence of any of the following: (i) the assertion of
any Environmental Claim against or affecting the Borrower, any of its
Subsidiaries or any of their respective real property, leased or owned;
(ii) the receipt by the Borrower or any of its Subsidiaries of notice of
any alleged violation of or noncompliance with any Environmental Laws; or
(iii) the taking of any remedial action by the Borrower, any of its
Subsidiaries or any other Person in response to the actual or alleged
generation, storage, release, disposal or discharge of any Hazardous
Substances on, to, upon or from any real property leased or owned by the
Borrower or any of its Subsidiaries; but in each case under clauses (i),
(ii) and (iii) above, only to the extent the same could be reasonably
expected to have a Material Adverse Effect; and
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(viii) any other matter or event that has, or could be reasonably
expected to have, a Material Adverse Effect, together with a written
statement of a Responsible Officer of the Borrower setting forth the nature
and period of existence thereof and the action that the Borrower has taken,
is taking and proposes to take with respect thereto;
(g) At the same time provided to the holders of the Subordinated Bridge
Notes or the Subordinated Term Notes (or of any debt securities in respect of
any Permitted Refinancing Indebtedness), any information provided to such
holders pursuant to Section 5.1 of the Subordinated Debt Agreement (or pursuant
to any similar provisions of any agreement or instrument in respect of such
Permitted Refinancing Indebtedness);
(h) Promptly upon (and in any event not later than two (2) Business Days
after) determination of the Petersen Purchase Price Adjustment, a certificate
signed by a Financial Officer of the Borrower, in form and substance
satisfactory to the Administrative Agent, attaching or setting forth the
calculation of the Petersen Purchase Price Adjustment;
(i) Not later than the last day of each fiscal year of the Borrower, a
report in form and substance satisfactory to the Administrative Agent outlining
all material insurance coverage maintained as of the date of such report by the
Borrower and its Subsidiaries and all material insurance coverage planned to be
maintained by such Persons in the subsequent fiscal year;
(j) Promptly after the availability thereof, copies of all material
amendments to the articles of organization, operating agreement or other
organizational documents of the Borrower or any of its Subsidiaries; and
(k) As promptly as reasonably possible, such other information about the
business, condition (financial or otherwise), operations or properties of the
Borrower or any of its Subsidiaries (including any Plan and any information
required to be filed under ERISA, and including any statements, audits or other
reports submitted by or on behalf of the Borrower or any of its Subsidiaries to
any state Governmental Authority) as the Administrative Agent or any Lender may
from time to time reasonably request.
6.3. Existence; Franchises; Maintenance of Properties. The Borrower will,
------------------------------------------------
and will cause each of its Subsidiaries to, (i) maintain and preserve in full
force and effect its limited liability company or corporate existence, as
applicable, except as expressly permitted otherwise by SECTION 8.1, (ii) obtain,
maintain and preserve in full force and effect all other rights, franchises,
licenses, permits, certifications, approvals and authorizations required by
Governmental Authorities and necessary to the ownership, occupation or use of
its properties or the conduct of its business, except to the extent the failure
to do so could not be reasonably expected to have a Material Adverse Effect, and
(iii) keep all material properties in good working order and condition (normal
wear and tear excepted) and from time to time make all necessary repairs to and
renewals and replacements of such properties, except to the extent that any of
such properties are obsolete or are being replaced.
6.4. Compliance with Laws. The Borrower will, and will cause each of its
--------------------
Subsidiaries to, comply in all respects with all Requirements of Law applicable
in respect of the conduct of its business and the ownership and operation of its
properties, except to the extent the failure so to comply could not be
reasonably expected to have a Material Adverse Effect.
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6.5. Payment of Obligations. The Borrower will, and will cause each of
----------------------
its Subsidiaries to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so could not be reasonably expected to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
the Borrower or any of its Subsidiaries; provided, however, that neither the
-------- -------
Borrower nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good faith and by
proper proceedings and as to which the Borrower or such Subsidiary is
maintaining adequate reserves with respect thereto in accordance with Generally
Accepted Accounting Principles, unless and until any tax lien notice has become
effective with respect thereto or until any lien resulting therefrom attaches to
its properties and becomes enforceable against its other creditors.
6.6. Insurance. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance with respect to its assets, properties and business, against
such hazards and liabilities, of such types and in such amounts, as is
customarily maintained by companies of established reputation engaged in the
same or similar businesses similarly situated, and maintain such other or
additional insurance on such terms and subject to such conditions as may be
required under any Security Document.
6.7. Maintenance of Books and Records; Inspection. The Borrower will, and
--------------------------------------------
will cause each of its Subsidiaries to, (i) maintain adequate books, accounts
and records, in which full, true and correct entries in all material respects
shall be made of all financial transactions in relation to its business and
properties, and prepare all financial statements required under this Agreement,
in each case in accordance with Generally Accepted Accounting Principles and in
compliance with the requirements of any Governmental Authority having
jurisdiction over it, and (ii) permit employees or agents of the Administrative
Agent or any Lender to inspect its properties and examine or audit its books,
records, working papers and accounts and make copies and memoranda of them, and
to discuss its affairs, finances and accounts with its officers and employees
and, upon notice to the Borrower, the independent public accountants of the
Borrower and its Subsidiaries (and by this provision the Borrower authorizes
such accountants, in the presence of a Responsible Officer, to discuss the
finances and affairs of the Borrower and its Subsidiaries), all at such times
and from time to time, upon reasonable notice and during business hours, as may
be reasonably requested.
6.8. Interest Rate Protection. At March 31, 1997, the Borrower shall have
------------------------
entered into or obtained, and the Borrower will thereafter maintain in full
force and effect, Interest Rate Protection Agreements in form and substance
reasonably satisfactory to the Administrative Agent the effect of which shall be
to fix or limit interest rates payable by the Borrower as to at least fifty
percent (50%) of all principal amounts outstanding under all Funded Debt at such
date of the Borrower and its Subsidiaries for a period of not less than three
(3) years after such date. The Borrower will deliver to the Administrative
Agent, promptly upon receipt thereof, copies of such Interest Rate Protection
Agreements (and any supplements or amendments thereto), and promptly upon
request therefor, any other information reasonably requested by the
Administrative Agent to evidence its compliance with the provisions of this
Section.
6.9. Permitted Acquisitions. (a) Subject to the provisions of subsection
----------------------
(b) below and the requirements contained in the definition of Permitted
Acquisition, and subject to the other terms and
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conditions of this Agreement, the Borrower may from time to time on or after the
Closing Date effect Permitted Acquisitions, provided that, with respect to each
--------
Permitted Acquisition:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of the consummation of such Permitted Acquisition or
would exist immediately after giving effect thereto;
(ii) if, after giving pro forma effect to such Permitted
Acquisition and any incurrence of Indebtedness in connection therewith
(determined as if such Permitted Acquisition had been consummated and such
Indebtedness incurred as of the first day of the period of four consecutive
fiscal quarters ending on the last day of the Borrower's most recently
ended fiscal quarter), the Leverage Ratio as of the last day of the
Borrower's most recently ended fiscal quarter is equal to or greater than
5.0 to 1.0, the Acquisition Amount with respect thereto (x) to the extent
paid or payable in cash (other than cash contributed by Holdings or
BrightView to the Borrower specifically for the purpose of paying all or a
portion of the Acquisition Amount and which is in fact used solely for such
purpose ("Designated Acquisition Funds")), shall not exceed $10,000,000,
(y) together with the aggregate of the Acquisition Amounts (to the extent
paid or payable in cash other than Designated Acquisition Funds) for all
other Permitted Acquisitions consummated during the same fiscal quarter or
the period of three consecutive fiscal quarters immediately prior thereto,
shall not exceed $20,000,000, and (z) together with the aggregate of the
Acquisition Amounts (regardless of the form of consideration) for all other
Permitted Acquisitions consummated during the same fiscal quarter or the
period of three consecutive fiscal quarters immediately prior thereto,
shall not exceed $80,000,000; and
(iii) if, after giving pro forma effect to such Permitted
Acquisition and any incurrence of Indebtedness in connection therewith
(determined as if such Permitted Acquisition had been consummated and such
Indebtedness incurred as of the first day of the period of four consecutive
fiscal quarters ending on the last day of the Borrower's most recently
ended fiscal quarter), the Leverage Ratio as of the last day of the
Borrower's most recently ended fiscal quarter is less than 5.0 to 1.0, the
Acquisition Amount with respect thereto (to the extent paid or payable in
cash other than Designated Acquisition Funds), together with the aggregate
of the Acquisition Amounts (to the extent paid or payable in cash other
than Designated Acquisition Funds) for all other Permitted Acquisitions
consummated during the same fiscal quarter or the period of three
consecutive fiscal quarters immediately prior thereto, shall not exceed
$20,000,000.
(b) The Borrower shall have delivered to the Administrative Agent and
each Lender the items listed in clauses (i) and (ii) below not less than ten
(10) Business Days prior to the consummation of any Permitted Acquisition with
respect to which the Acquisition Amount exceeds $10,000,000, and the items
listed in clauses (iii) and (iv) below not less than three (3) Business Days
prior thereto:
(i) a reasonably detailed description of the material terms of such
Permitted Acquisition (including, without limitation, the purchase price
and method and structure of payment) and of each Person or business that is
the subject of such Permitted Acquisition (each, a "Target");
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(ii) historical financial statements of the Target (or, if there
are two or more Targets that are the subject of such Permitted Acquisition
and that are part of the same consolidated group, consolidated historical
financial statements for all such Targets) for the two (2) most recent
fiscal years available and, if available, for any interim periods since the
most recent fiscal year-end;
(iii) consolidated projected income statements of the Borrower and
its Subsidiaries (giving effect to such Permitted Acquisition and the
consolidation with the Borrower of each relevant Target) for the three-year
period following the consummation of such Permitted Acquisition, in
reasonable detail, together with any appropriate statement of assumptions
and pro forma adjustments; and
(iv) a certificate, in form and substance reasonably satisfactory to
the Administrative Agents, executed by a Financial Officer of the Borrower
setting forth the Acquisition Amount and further to the effect that, to the
best of such individual's knowledge, (x) the consummation of such Permitted
Acquisition will not result in a violation of any provision of this SECTION
6.9, and after giving effect to such Permitted Acquisition and any
Borrowings made in connection therewith, the Borrower will be in compliance
with the financial covenants contained in SECTIONS 7.1 through 7.4 (and,
additionally, in the case of a Permitted Acquisition subject to clause
(iii) of subsection (a) above, that the Borrower will be in compliance with
the requirements set forth in such clause (iii) as to the Leverage Ratio),
such compliance determined with regard to calculations made on a pro forma
--- -----
basis in accordance with Generally Accepted Accounting Principles as if
each Target had been consolidated with the Borrower for those periods
applicable to SECTION 6.9 and such covenants (such calculations to be
attached to the certificate), (y) the Borrower believes in good faith that
it will continue to comply with such financial covenants for a period of
one year following the date of the consummation of such Permitted
Acquisition, and (z) after giving effect to such Permitted Acquisition and
any Borrowings in connection therewith, the Borrower believes in good faith
that it will have sufficient availability under the Revolving Credit
Commitments to meet its ongoing working capital requirements.
(c) As soon as reasonably practicable after the consummation of any
Permitted Acquisition, the Borrower will deliver to the Administrative Agent and
each Lender a copy of the fully executed acquisition agreement (including
schedules and exhibits thereto) and other material documents and closing papers
delivered in connection therewith.
The consummation of each Permitted Acquisition shall be deemed to be a
representation and warranty by the Borrower that (except as shall have been
approved by the Required Lenders) all conditions thereto set forth in this
SECTION 6.9 and in the description furnished under clause (i) of subsection (b)
above have been satisfied in all material respects, that the same is permitted
in accordance with the terms of this Agreement and that the matters certified to
by the Financial Officer of the Borrower in the certificate referred to in
clause (iv) of subsection (b) above are, to the best of such individual's
knowledge, true and correct in all material respects as of the date such
certificate is given, which representation and warranty shall be deemed to be a
representation and warranty as of the date thereof for all purposes hereunder,
including, without limitation, for purposes of SECTIONS 4.2 and 9.1.
6.10. Creation or Acquisition of Subsidiaries. Subject to the provisions
---------------------------------------
of SECTION 8.5, the Borrower may from time to time create or acquire new
Subsidiaries in connection with Permitted
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Acquisitions or otherwise, and the Subsidiaries of the Borrower may create or
acquire new Subsidiaries, provided that:
--------
(a) Concurrently with (and in any event within ten (10) Business Days
thereafter) the creation or direct or indirect acquisition by the Borrower
thereof, each such new Subsidiary (unless such Subsidiary is a Designated Non-
Guarantor Subsidiary) will execute and deliver to the Administrative Agent (i) a
Subsidiaries Guaranty (or an appropriate joinder to an existing Subsidiaries
Guaranty), pursuant to which such new Subsidiary shall guarantee the payment in
full of the Obligations of the Borrower under this Agreement and the other
Credit Documents, and (ii) a Subsidiaries Pledge and Security Agreement (or an
appropriate joinder to an existing Subsidiaries Pledge and Security Agreement),
pursuant to which such new Subsidiary shall grant to the Administrative Agent a
first priority Lien upon and security interest in its accounts receivable,
inventory, equipment, general intangibles and other personal property as
Collateral for its obligations under the Subsidiaries Guaranty, subject only to
Permitted Liens;
(b) Concurrently with (and in any event within ten (10) Business Days
thereafter) the creation or acquisition of any new Subsidiary all or a portion
of the Capital Stock of which is directly owned by the Borrower, the Borrower
will execute and deliver to the Administrative Agent an appropriate amendment or
supplement to the Borrower Pledge and Security Agreement pursuant to which all
of the Capital Stock of such new Subsidiary owned by the Borrower shall be
pledged to the Administrative Agent, together with the certificates evidencing
such Capital Stock and undated stock powers duly executed in blank; and
concurrently with (and in any event within ten (10) Business Days thereafter)
the creation or acquisition of any new Subsidiary all or a portion of the
Capital Stock of which is directly owned by another Subsidiary (the "Parent
Subsidiary"), the Parent Subsidiary will execute and deliver to the
Administrative Agent an appropriate joinder, amendment or supplement to the
Subsidiaries Pledge and Security Agreement, pursuant to which all of the Capital
Stock of such new Subsidiary owned by such Parent Subsidiary shall be pledged to
the Administrative Agent, together with the certificates evidencing such Capital
Stock and undated stock powers duly executed in blank (provided that no more
--------
than 65% of the Capital Stock of any Foreign Subsidiary shall be required to be
pledged pursuant to this subsection (b)); and
(c) As promptly as reasonably possible, the Borrower and its Subsidiaries
will deliver any such other documents, certificates and opinions (including
opinions of local counsel in the jurisdiction of organization of each such new
Subsidiary), in form and substance reasonably satisfactory to the Administrative
Agent, as the Administrative Agent may reasonably request in connection
therewith and will take such other action as the Administrative Agent may
reasonably request to create in favor of the Administrative Agent a perfected
security interest in the Collateral being pledged pursuant to the documents
described above. In the event of a sale or other disposition of the Capital
Stock of any Subsidiary Guarantor in a transaction expressly permitted by or
pursuant to this Agreement or any other applicable Credit Document, such
Subsidiary Guarantor shall be released from its obligations under the applicable
Subsidiaries Guaranty, Subsidiaries Pledge and Security Agreement and any other
Security Documents to which it is a party, the security interest of the
Administrative Agent in the Collateral of such Subsidiary Guarantor pledged
thereunder shall be released, and in connection therewith the Administrative
Agent, at the request and expense of the Borrower, will execute and deliver to
such Subsidiary Guarantor such documents and instruments evidencing such release
or termination as the Borrower may reasonably request.
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6.11. Additional Security; Further Assurances. (a) The Borrower will, and
---------------------------------------
will cause each of its Subsidiaries (other than any Designated Non-Guarantor
Subsidiaries) to, grant to the Administrative Agent from time to time security
interests, Liens and mortgages in and upon such assets and properties of the
Borrower or such Subsidiary as are not covered by the Security Documents
executed and delivered on the Closing Date or pursuant to SECTION 6.10 and as
may be reasonably requested from time to time by the Required Lenders
(including, without limitation, Liens on assets acquired by the Borrower or a
Subsidiary in connection with any Permitted Acquisition). Such security
interests, Liens and mortgages shall be granted pursuant to documentation in
form and substance reasonably satisfactory to the Required Lenders and shall
constitute valid and perfected security interests and Liens, subject to no Liens
other than Permitted Liens. Without limitation of the foregoing, in connection
with the grant of any mortgage or deed of trust with respect to any interest in
real property, the Borrower will, and will cause each applicable Subsidiary to,
at the Borrower's expense, prepare, obtain and deliver to the Administrative
Agent any environmental assessments, appraisals, surveys, title insurance and
other matters or documents as the Administrative Agent may reasonably request or
as may be required under applicable banking laws and regulations.
(b) The Borrower will, and will cause each of its Subsidiaries to, make,
execute, endorse, acknowledge and deliver any amendments, modifications or
supplements hereto and restatements hereof and any other agreements, instruments
or documents, and take any and all such other actions, as may from time to time
be reasonably requested by the Administrative Agent or the Required Lenders to
perfect and maintain the validity and priority of the Liens granted pursuant to
the Security Documents and to effect, confirm or further assure or protect and
preserve the interests, rights and remedies of the Administrative Agent and the
Lenders under this Agreement and the other Credit Documents.
6.12. Fiscal Year. The Borrower will, within thirty (30) days after the
-----------
Closing Date, cause the ending date of its fiscal year to be December 31.
6.13. Consents. The Borrower shall use its best efforts to obtain duly
--------
executed consents, in form and substance satisfactory to the Administrative
Agent, to the grant of a security interest by the Borrower pursuant to the
Borrower Pledge and Security Agreement in each contract listed on Annex D
thereto for which a consent has not previously been furnished as required by the
terms of such contract.
6.14. Financial Statements of the Business. The Borrower will deliver to
------------------------------------
the Lenders, as soon as available, copies of the audited financial statements of
the Business as of and for the fiscal years ended November 30, 1995, 1994 and
1993, together with the report hereon by Ernst and Young, L.L.P.
6.15. Projected Analysis. The Borrower will deliver to the Lenders, on or
------------------
prior to October 15, 1996, a pro forma and projected analysis, prepared by Ernst
& Young, L.L.P., with regard to operating cash flow of the Business for the
twelve-month period ending November 30, 1996, which analysis shall show
adjustments to such operating cash flow consistent with those set forth in
SCHEDULE 6.15 and shall be consistent with the reviewed financial statements of
the Business at August 31, 1996 and for the nine-month period then ended.
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ARTICLE VII
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
7.1. Leverage Ratio. The Borrower will not permit the Leverage Ratio as
--------------
of the last day of any fiscal quarter during the periods set forth below to be
greater than the ratio set forth below opposite such period:
Date Leverage Ratio
---- --------------
October 1, 1996 through
March 31, 1997 6.50 : 1.0
April 1, 1997 through
June 30, 1997 6.35 : 1.0
July 1, 1997 through
September 30, 1997 6.25 : 1.0
October 1, 1997 through
March 31, 1998 6.15 : 1.0
April 1, 1998 through
September 30, 1998 5.50 : 1.0
October 1, 1998 through
March 31, 1999 4.75 : 1.0
April 1, 1999 through
September 30, 1999 4.40 : 1.0
Thereafter 4.00 : 1.0
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7.2. Interest Coverage Ratio. The Borrower will not permit the Interest
-----------------------
Coverage Ratio as of the last day of any fiscal quarter during the periods set
forth below to be less than the ratio set forth below opposite such period:
Date Interest Coverage Ratio
---- -----------------------
October 1, 1996 through
September 30, 1997 1.50 : 1.0
October 1, 1997 through
March 31, 1998 1.55 : 1.0
April 1, 1998 through
September 30, 1998 1.85 : 1.0
October 1, 1998 through
March 31, 1999 2.00 : 1.0
April 1, 1999 through
September 30, 1999 2.10 : 1.0
Thereafter 2.25 : 1.0
7.3. Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
---------------------------
Charge Coverage Ratio as of the last day of any fiscal quarter, beginning with
the fiscal quarter ending December 31, 1996, to be less than 1.05 : 1.0.
7.4. Capital Expenditures. The Borrower will not permit Capital
--------------------
Expenditures during the period of four consecutive fiscal quarters (a "Reference
Period") ending on the last day of any fiscal quarter, beginning with the fiscal
quarter ending December 31, 1996, to be greater than the sum of (i) $3,500,000
(the "Permitted Amount") plus (ii) fifty percent (50%) of the excess, if any, of
----
the Permitted Amount applicable to the immediately preceding Reference Period
(without giving effect to any carryover from any prior Reference Period) over
the actual amount of Capital Expenditures for such immediately preceding
Reference Period.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
8.1. Merger; Consolidation. The Borrower will not, and will not permit or
---------------------
cause any of its Subsidiaries to, liquidate, wind up or dissolve, or enter into
any consolidation, merger or other combination, or agree to do any of the
foregoing; provided, however, that:
-------- -------
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(i) the Borrower may merge or consolidate with another Person so
long as (w) the Borrower is the surviving entity, (x) if such other Person
is a Subsidiary immediately prior to giving effect thereto, the aggregate
of any cash or other assets of the Borrower or any of its Subsidiaries
received as consideration pursuant to such transaction by Persons other
than the Borrower or a Wholly Owned Subsidiary shall be deemed to
constitute an Investment made by the Borrower pursuant to clause (xiv) of
SECTION 8.5, (y) if such other Person is not a Subsidiary immediately prior
to giving effect thereto, such merger or consolidation shall constitute a
Permitted Acquisition and the applicable conditions and requirements of
SECTIONS 6.9 and 6.10 shall be satisfied, and (z) immediately after giving
effect thereto, no Default or Event of Default would exist; and
(ii) any Subsidiary may merge or consolidate with another Person
so long as (w) the surviving entity is the Borrower or a Subsidiary
Guarantor (which may be the acquired entity), (x) if such other Person is a
Subsidiary immediately prior to giving effect thereto, the aggregate of any
cash or other assets of the Borrower or any of its Subsidiaries received as
consideration pursuant to such transaction by Persons other than the
Borrower or a Wholly Owned Subsidiary shall be deemed to constitute an
Investment made by the Borrower pursuant to clause (xiv) of SECTION 8.5,
(y) if such other Person is not a Subsidiary immediately prior to giving
effect thereto, such merger or consolidation shall constitute a Permitted
Acquisition and the applicable conditions and requirements of SECTIONS 6.9
and 6.10 shall be satisfied, and (z) immediately after giving effect
thereto, no Default or Event of Default would exist.
8.2. Indebtedness. The Borrower will not, and will not permit or cause
------------
any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness other than:
(i) Indebtedness incurred under this Agreement, the Notes, the
Parent Guaranty and any Subsidiaries Guaranty;
(ii) the Subordinated Bridge Indebtedness and, upon maturity
thereof, the Subordinated Term Indebtedness, and any Permitted Refinancing
Indebtedness (provided that, in the event any Excess Permitted Refinancing
--------
Indebtedness is issued, the Borrower will make a prepayment of the Term
Loans in an amount equal to the Net Cash Proceeds thereof in accordance
with the provisions of SECTION 2.6(F));
(iii) subordinated guarantees of the Subordinated Bridge
Indebtedness (and, upon maturity thereof, the Subordinated Term
Indebtedness) by the guarantors party to the Subordinated Debt Agreement,
as set forth in the Subordinated Debt Agreement, and guarantees of the
Permitted Refinancing Indebtedness which guarantees are subordinated to the
guarantees of the Obligations to at least the same extent and in the same
manner as the Permitted Refinancing Indebtedness is subordinated to the
Obligations;
(iv) accrued expenses (including salaries, accrued vacation and
other compensation), current trade or other accounts payable and other
current liabilities arising in the ordinary course of business and not
incurred through the borrowing of money, provided that the same shall be
paid within thirty (30) days of when due except to the extent being
contested in good faith and by appropriate proceedings;
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(v) loans and advances by the Borrower or any Subsidiary
Guarantors to any other Subsidiary Guarantor or by any Subsidiary Guarantor
to the Borrower, provided that any such loan or advance is subordinated in
--------
right and time of payment to the Obligations and is evidenced by a
promissory note, in form and substance satisfactory to the Administrative
Agent, pledged to the Administrative Agent pursuant to the Security
Documents;
(vi) Indebtedness of the Borrower under Interest Rate Protection
Agreements required pursuant to SECTION 6.8 or entered into for the purpose
of hedging interest rate risk and not for speculation;
(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 (iv) and (v) of SECTION 8.3;
(ix) Indebtedness consisting of guarantees made in the ordinary
course of business by the Borrower or any of its Subsidiaries of
obligations of the Borrower or any of its Subsidiaries, which obligations
are otherwise permitted under this Agreement; and
(x) Indebtedness of the Borrower and its Subsidiaries incurred
solely to finance the payment of all or part of the purchase price of any
equipment, real property or other fixed assets acquired in the ordinary
course of business after the Closing Date, including Indebtedness in
respect of capital lease obligations ("Purchase Money Indebtedness") 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 (x)), and other Indebtedness that is unsecured
(other than Indebtedness specified in clauses (i) through (ix) above),
which Purchase Money Indebtedness and other unsecured Indebtedness shall
not exceed $10,000,000 in the aggregate at any time.
8.3. Liens. The Borrower will not, and will not permit or cause any of
-----
its Subsidiaries to, directly or indirectly, make, create, incur, assume or
suffer to exist, any Lien upon or with respect to any part of its property or
assets, whether now owned or hereafter acquired, or file or permit the filing
of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar recording or
notice statute, or agree to do any of the foregoing, other than the following
(collectively, "Permitted Liens"):
(i) Liens created under the Security Documents;
(ii) Liens in existence on the Closing Date and set forth on
SCHEDULE 8.3;
(iii) 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
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which adequate reserves have been established in accordance with Generally
Accepted Accounting Principles (if so required);
(iv) Liens (other than any Lien imposed by ERISA, the creation or
incurrence of which would result in an Event of Default under SECTION
9.1(J)) incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure 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;
(v) Liens for taxes, assessments or other governmental charges
or statutory obligations that are not delinquent or remain payable without
any penalty or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with Generally Accepted Accounting Principles (if so required);
(vi) Liens securing the Purchase Money Indebtedness permitted
under clause (x) of SECTION 8.2, provided that the aggregate principal
--------
amount at any time outstanding of all Indebtedness secured by such Liens,
when combined with the aggregate amount of all other unsecured Indebtedness
outstanding at such time incurred pursuant to clause (x) of SECTION 8.2,
does not exceed $10,000,000, and provided further that any such Lien (i)
-------- -------
shall attach to such property concurrently with or within twenty (20) days
after the acquisition thereof by the Borrower or such Subsidiary, (ii)
shall not exceed the lesser of (y) the fair market value of such property
or (z) the cost thereof to the Borrower or such Subsidiary and (iii) shall
not encumber any other property of the Borrower or any of its Subsidiaries;
and the replacement, extension or renewal of any such Lien, provided that
--------
such replacement, extension or renewal Lien shall not extend to or cover
any property other than the property subject to such Lien immediately prior
to such replacement, extension or renewal, and provided further that the
-------- -------
Indebtedness secured by such replacement, extension or renewal Lien is
permitted under this Agreement;
(vii) any attachment or judgment Lien not constituting an Event of
Default under SECTION 9.1(I) that is being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with Generally Accepted Accounting Principles (if
so required);
(viii) Liens arising from the filing, for notice purposes only, of
financing statements in respect of operating leases;
(ix) Liens arising by operation of law in favor of depositary
banks and collecting banks, incurred in the ordinary course of business;
(x) Liens consisting of restrictions on the transfer of
securities pursuant to applicable federal and state securities laws;
(xi) interests of lessors and licensors under leases and licenses
to which the Borrower or any of its Subsidiaries is a party;
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(xii) with respect to any real property occupied by the Borrower
or any of its Subsidiaries, all easements, rights of way, licenses and
similar encumbrances on title that do not materially impair the use of such
property for its intended purposes; and
(xiii) Liens in favor of the trustee or agent under any agreement
or indenture relating to Indebtedness of the Borrower permitted under
clause (ii) of SECTION 8.2, covering sums required to be deposited with
such trustee or agent thereunder.
8.4. Disposition of Assets. The Borrower will not, and will not permit or
---------------------
cause any of its Subsidiaries to, sell, assign, lease, convey, transfer or
otherwise dispose of (whether in one or a series of transactions) all or any
portion of its assets, business or properties (including, without limitation,
any Capital Stock of any Subsidiary), or enter into any arrangement with any
Person providing for the lease by the Borrower or any Subsidiary as lessee of
any asset that has been sold or transferred by the Borrower or such Subsidiary
to such Person, or agree to do any of the foregoing, except for:
(i) sales of inventory and licenses or leases of intellectual
property and other assets, in each case in the ordinary course of business;
(ii) the sale or exchange of used or obsolete equipment to the
extent (y) the proceeds of such sale are applied towards, or such equipment
is exchanged for, replacement equipment or (z) such equipment is no longer
necessary for the operations of the Borrower or its applicable Subsidiary
in the ordinary course of business;
(iii) the sale or other disposition of any or all right, title and
interest of the Borrower and its Subsidiaries in and to the assets and
properties (other than cash) directly associated with the publications
listed in SCHEDULE 8.4 (such assets and properties, collectively, 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 (xi) of SECTION 8.5, in each case provided that, in the good faith
--------
judgment of the Borrower, fair value is received in exchange for such sale
or other disposition;
(iv) the sale, lease or other disposition of assets by a
Subsidiary of the Borrower to the Borrower or to another Wholly Owned
Subsidiary if, immediately after giving effect thereto, no Default or Event
of Default would exist; and
(v) the sale or disposition of assets outside the ordinary
course of business for cash, provided that (w) the Net Cash Proceeds from
--------
such sales or dispositions, when aggregated with the Net Cash Proceeds from
all other sales and dispositions not otherwise specifically permitted under
this SECTION 8.4 that are consummated during the same fiscal quarter or the
period of three consecutive fiscal quarters immediately prior thereto, do
not exceed (A) $5,000,000 in the aggregate for the Borrower and its
Subsidiaries if at the time of such sale or disposition the Leverage Ratio
(determined with reference to the Compliance Certificate then most recently
delivered to the Lenders) is greater than or equal to 5.0 to 1.0, and (B)
$10,000,000 in the aggregate for the Borrower and its Subsidiaries if at
the time of such sale or disposition the Leverage Ratio (determined with
reference to the Compliance Certificate then most recently delivered to the
Lenders) is less than 5.0 to 1.0, (x) to the
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extent not theretofore expended or committed to be expended within a
reasonable period to acquire assets or properties or otherwise reinvested
in the businesses of the Borrower, such Net Cash Proceeds are delivered to
the Administrative Agent within 180 days after receipt thereof for
application in prepayment of the Loans in accordance with the provisions of
SECTION 2.6(H), (y) in no event shall the Borrower or any of its
Subsidiaries sell or otherwise dispose of any of the Capital Stock of any
Subsidiary (other than a Subsidiary to which the Borrower has contributed
no assets or properties other than assets consisting of Scheduled Titles),
and (z) immediately after giving effect thereto, no Default or Event of
Default would exist.
8.5. Investments. The Borrower will not, and will not permit or cause any
-----------
of its Subsidiaries to, directly or indirectly, purchase, own, invest in or
otherwise acquire any Capital Stock, evidence of indebtedness or other
obligation or security or any interest whatsoever in any other Person, or make
or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any other Person, or purchase
or otherwise acquire (whether in one or a series of related transactions) any
portion of the assets, business or properties of another Person (including
pursuant to an Acquisition), or create or acquire any Subsidiary, or become a
partner or joint venturer in any partnership or joint venture (collectively,
"Investments"), or make a commitment or otherwise agree to do any of the
foregoing, other than:
(i) Cash Equivalents;
(ii) 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,
(iii) 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;
(iv) without duplication, Investments consisting of Indebtedness
permitted under clause (v) of SECTION 8.2;
(v) Investments existing on the Closing Date and described in
SCHEDULE 8.5;
(vi) Investments of the Borrower under Interest Rate Protection
Agreements required pursuant to SECTION 6.8 or entered into for the purpose
of hedging interest rate risk and not for speculation;
(vii) Investments under Commodity Hedge Agreements entered into in
the ordinary course of business consistent with reasonable business
requirements and not for speculation;
(viii) Investments consisting of endorsements for collection or
deposit in the ordinary course of business;
(ix) Investments consisting of the making of capital
contributions or the purchase of Capital Stock (a) by the Borrower or any
Subsidiary in any other Subsidiary that is (or
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after giving effect to such Investment will be) a Subsidiary Guarantor, and
(b) by any Subsidiary in the Borrower;
(x) Permitted Acquisitions;
(xi) Investments consisting of the contribution by the Borrower
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
--------
Closing Date;
(xii) Investments consisting of the licensing of publication
titles and other assets pursuant to joint marketing arrangements with other
Persons;
(xiii) Investments in the Borrower or any Subsidiary consisting of
Designated Acquisition Funds; 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 Closing Date (which Investments may include, without
limitation, (a) Investments in Foreign Subsidiaries and other Designated
Non-Guarantor Subsidiaries, (b) Investments in Persons holding Scheduled
Titles, to the extent such Investments are made with cash or other property
not consisting of Scheduled Titles, and (c) cash or other assets of the
Borrower or any of its Subsidiaries received as consideration by any Person
other than the Borrower or a Wholly Owned Subsidiary in a transaction
permitted by SECTION 8.1); provided that the permitted aggregate amount of
--------
such Investments shall increase to (A) $10,000,000 upon delivery pursuant
to SECTION 6.2(A) of a Compliance Certificate indicating a Leverage Ratio
of less than 5.0 to 1.0, and (B) $15,000,000 upon delivery pursuant to
SECTION 6.2(A) of a Compliance Certificate evidencing a Leverage Ratio of
less than 4.0 to 1.0; and provided further that for purposes of determining
-------- -------
compliance with the limitations set forth in this clause (xiv), the amount
of any such Investment shall be reduced (but not below zero) by the amount
of any cash distributions or cash proceeds (in the case of a sale or other
disposition of such Investment) actually received from time to time by the
Borrower or any Subsidiary in respect thereof.
8.6. Restricted Payments. (a) The Borrower will not, and will not permit
-------------------
or cause any of its Subsidiaries to, directly or indirectly, declare or make any
dividend payment, or make any other distribution of cash, property or assets, in
respect of any of its Capital Stock or any warrants, rights or options to
acquire its Capital Stock, or purchase, redeem, retire or otherwise acquire for
value any shares of its Capital Stock or any warrants, rights or options to
acquire its Capital Stock (including any warrants issued in connection with the
Subordinated Term Indebtedness), or set aside funds for any of the foregoing,
except that:
(i) the Borrower may declare and make dividend payments or other
distributions payable solely in Qualified Capital Stock;
(ii) each Wholly Owned Subsidiary of the Borrower may declare and
make dividend payments or other distributions to the Borrower or another
Wholly Owned
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Subsidiary of the Borrower, to the extent not prohibited under applicable
Requirements of Law;
(iii) so long as no Event of Default pursuant to SECTION 9.1(A),
9.1(B), 9.1(G) or 9.1(H) shall have occurred and is continuing, or would
result from any such distribution, the Borrower may make distributions to
Holdings and BrightView from time to time in an amount approximately equal
to the income tax liability of such member (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
Borrower (after taking into account all of the Borrower's prior tax losses,
to the extent such losses have not previously been deemed to reduce the
taxable income of the Borrower and thereby reduce distributions for taxes
pursuant to this clause (iii)); such distribution for taxes shall be based
on the approximate highest combined tax rate that applies to any one of the
members of the Borrower; and
(iv) so long as no Default or Event of Default shall have
occurred and is continuing, the Borrower may make dividend payments or
other distributions of cash in an amount not in excess of (y) $1,000,000
per fiscal year solely for the purpose of paying fees and expenses of the
Credit Parties, including directors' fees, less (z) the amount of any
management, advisory, consulting and similar fees paid by the Borrower to
Willis Stein and its Affiliates during such fiscal year.
(b) The Borrower will not, and will not permit or cause any of its
Subsidiaries to, make (or give any notice in respect of) any voluntary or
optional payment or prepayment of principal on, or directly or indirectly make
any redemption (including pursuant to any change of control provision),
retirement, defeasance or other acquisition for value of, any of the
Subordinated Bridge Indebtedness, the Subordinated Term Indebtedness or any
Permitted Refinancing Indebtedness, or make any deposit or otherwise set aside
funds for any of the foregoing purposes, other than (i) the issuance of the
Subordinated Term Indebtedness in payment of and exchange for the Subordinated
Bridge Indebtedness in accordance with the terms of the Subordinated Debt
Agreement and (ii) the repayment and redemption in full of the Subordinated
Bridge Indebtedness or the Subordinated Term Indebtedness, as the case may be,
with the proceeds from the issuance of Permitted Refinancing Indebtedness.
8.7. Transactions with Affiliates. The Borrower will not, and will not
----------------------------
permit or cause any of its Subsidiaries to, enter into any material transaction
(including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service) with any officer, director,
stockholder or other Affiliate of the Borrower or any Subsidiary, except in the
ordinary course of its business and upon fair and reasonable terms that are no
less favorable to it than would obtain in a comparable arm's length transaction
with a Person other than an Affiliate of the Borrower or such Subsidiary;
provided, however, that nothing contained in this Section shall prohibit:
- -------- -------
(i) transactions described on SCHEDULE 8.7 or otherwise
expressly permitted under this Agreement;
(ii) the consummation on the Closing Date of the Transactions;
and
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(iii) transactions after the Closing Date that are expressly
contemplated by the Securities Purchase Agreement and the Securityholders
Agreement (including any registration rights described therein) and that
are not prohibited by any other provision of this Agreement or any other
Credit Document, provided that the aggregate management, advisory,
--------
consulting and similar fees paid by the Borrower 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 Borrower during such fiscal year pursuant to
SECTION 8.6(A)(IV), and provided further that any such fees may accrue but
-------- -------
shall not be paid by the Borrower at any time after the occurrence and
during the continuance of a Default or Event of Default.
8.8. Lines of Business. The Borrower will not, and will not permit or
-----------------
cause any of its Subsidiaries to, engage in any businesses other than the
publication, sale, distribution and licensing of publications and brand names,
copyrights, patents, servicemarks and trademarks for the conduct of a
publishing, programming, events and media business (including, without
limitation, electronic media), and including new or additional publications,
media, programming or events and the business and activities ancillary thereto
(the "Permitted Lines of Business").
8.9. Certain Amendments. The Borrower will not, and will not permit or
------------------
cause any of its Subsidiaries to, (i) amend, modify or waive, or permit the
amendment, modification or waiver of, any provision of the Subordinated Debt
Agreement, the Subordinated Bridge Notes, the Subordinated Term Notes or any
other agreement or instrument evidencing or governing any Indebtedness permitted
under clause (ii) of SECTION 8.2, the effect of which would be to (a) increase
the principal amount due thereunder, (b) shorten or accelerate the time of
payment of any amount due thereunder, (c) increase the applicable interest rate
or amount of any fees or costs due thereunder, (d) amend any of the
subordination provisions thereunder (including any of the definitions relating
thereto), (e) make any covenant therein more restrictive or add any new
covenant, or (f) otherwise materially and adversely affect the Lenders, or
breach or otherwise violate any of the subordination provisions applicable
thereto, including, without limitation, restrictions against payment of
principal and interest thereon, (ii) amend, modify or waive, or permit the
amendment, modification or waiver of, any material provision of the Asset
Purchase Agreement, or (iii) amend, modify or change any provision of its
articles of organization, certificate of incorporation, limited liability
company operating agreement or bylaws, as applicable, or the terms of any class
or series of its Capital Stock, other than in a manner that could not reasonably
be expected to materially and adversely affect the Lenders.
8.10. Limitation on Certain Restrictions. The Borrower will not, and will
----------------------------------
not permit or cause any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any restriction or
encumbrance on (i) the right of the Borrower and its Subsidiaries to perform and
comply with their respective obligations under the Credit Documents or (ii) the
right of any Subsidiary of the Borrower to make any dividend payments or other
distributions in respect of its Capital Stock, to repay Indebtedness owed to the
Borrower or any other Subsidiary, to make loans or advances to the Borrower or
any other Subsidiary, or to transfer any of its assets or properties to the
Borrower or any other Subsidiary, in each case other than such restrictions or
encumbrances existing under or by reason of (i) the Credit Documents, (ii) the
Subordinated Debt Agreement and any other agreement or instrument evidencing or
governing any Indebtedness permitted under clause (ii) of SECTION 8.2, (iii)
applicable Requirements of Law, (iv) customary non-assignment provisions in any
lease governing a leasehold interest, (v) the terms of licenses or trademarks
and
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copyrights entered into in the ordinary course of business, and (vi) other
contractual restrictions in respect of assets not material to the business of
the Credit Parties, taken as a whole.
8.11. No Other Negative Pledges. The Borrower will not, and will not
-------------------------
permit or cause any of its Subsidiaries to, directly or indirectly, enter into
or suffer to exist any agreement or restriction that prohibits or conditions the
creation, incurrence or assumption of any Lien upon or with respect to any part
of its property or assets, whether now owned or hereafter acquired, or agree to
do any of the foregoing, other than as set forth in (i) this Agreement and the
Security Documents, (ii) the Subordinated Debt Agreement or any other agreement
or instrument evidencing or governing any Indebtedness permitted under clause
(ii) of SECTION 8.2, (iii) any agreement or instrument creating a Permitted Lien
(but only to the extent such agreement or restriction applies to the assets
subject to such Permitted Lien), (iv) operating leases of real or personal
property entered into by the Borrower or any of its Subsidiaries as lessee in
the ordinary course of business, (v) interests of licensors in licenses entered
into by the Borrower or any of its Subsidiaries as licensee in the ordinary
course of business, and (vi) restrictions on assignability in other contracts
not material to the business of the Credit Parties, taken as a whole.
8.12. Fiscal Year. The Borrower will not, and will not permit or cause any
-----------
of its Subsidiaries to, change the ending date of its fiscal year to a date
other than December 31.
8.13. Accounting Changes. The Borrower will not, and will not permit or
------------------
cause any of its Subsidiaries to, make or permit any material change in its
accounting policies or reporting practices, except as may be required by
Generally Accepted Accounting Principles.
8.14. Designated Senior Indebtedness. The Borrower will not designate any
------------------------------
Indebtedness other than the Indebtedness under this Agreement as "Designated
Senior Indebtedness" for purposes of any Permitted Refinancing Indebtedness.
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when due;
(b) The Borrower shall fail to pay any interest on any Loan, any fee or
any other Obligation (other than as set forth in subsection (a) above) when due,
and such failure shall continue unremedied for three (3) days;
(c) The Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of SECTIONS 2.14, 6.2(F)(I),
6.3(I), 6.9, 6.10, 6.12, ARTICLE VII or ARTICLE VIII;
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(d) The Borrower or any other Credit Party shall fail to observe, perform
or comply with any condition, covenant or agreement contained in this Agreement
or any of the other Credit Documents other than those enumerated in subsections
(a), (b) and (c) above, and such failure shall continue unremedied for any grace
period specifically applicable thereto or, if no such grace period is
applicable, for a period of thirty (30) days after the earlier of (i) the date
on which a Responsible Officer of the Borrower acquires knowledge thereof and
(ii) the date on which written notice thereof is delivered by the Administrative
Agent or any Lender to the Borrower;
(e) (i) Any representation or warranty made or deemed made by or on
behalf of the Borrower or any other Credit Party in this Agreement, any of the
other Credit Documents or in any certificate, instrument, report or other
document furnished in connection herewith or therewith or in connection with the
transactions contemplated hereby or thereby shall prove to have been false or
misleading in any material respect as of the time made, deemed made or
furnished, or (ii) any representation or warranty made or deemed made by or on
behalf of Petersen in the Asset Purchase Agreement or in any certificate,
instrument, report or other document furnished in connection therewith or in
connection with the transactions contemplated thereby shall prove to have been
false or misleading in any material respect as of the time made, deemed made or
furnished, and in the case of this clause (ii) the effect of such
misrepresentation is that the Business is materially and adversely different
from that represented by Petersen in the Asset Purchase Agreement;
(f) The Borrower or any other Credit Party shall (i) fail to pay when due
(whether by scheduled maturity, acceleration or otherwise and after giving
effect to any applicable grace period) any principal of or interest on any
Indebtedness (other than the Indebtedness incurred pursuant to this Agreement)
having an aggregate principal amount of at least $1,000,000; or (ii) fail to
observe, perform or comply with any condition, covenant or agreement contained
in any agreement or instrument evidencing or relating to any such Indebtedness,
or any other event shall occur or condition exist in respect thereof, and the
effect of such failure, event or condition is to cause, or permit the holder or
holders of such Indebtedness (or a trustee or agent on its or their behalf) to
cause (with the giving of notice, lapse of time, or both), such Indebtedness to
become due, or to be prepaid, redeemed, purchased or defeased, prior to its
stated maturity;
(g) The Borrower or any other Credit Party (other than a Designated Non-
Guarantor Subsidiary) shall (i) file a voluntary petition or commence a
voluntary case seeking liquidation, winding-up, reorganization, dissolution,
arrangement, readjustment of debts or any other relief under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to controvert
in a timely and appropriate manner, any petition or case of the type described
in subsection (h) below, (iii) apply for or consent to the appointment of or
taking possession by a custodian, trustee, receiver or similar official for or
of itself or all or a substantial part of its properties or assets, (iv) fail
generally, or admit in writing its inability, to pay its debts generally as they
become due, (v) make a general assignment for the benefit of creditors or (vi)
take any corporate action to authorize or approve any of the foregoing;
(h) Any involuntary petition or case shall be filed or commenced against
the Borrower or any other Credit Party (other than a Designated Non-Guarantor
Subsidiary) seeking liquidation, winding-up, reorganization, dissolution,
arrangement, readjustment of debts, the appointment of a custodian, trustee,
receiver or similar official for it or all or a substantial part of its
properties or any other relief under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, and
such petition or case shall continue undismissed and
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unstayed for a period of sixty (60) days; or an order, judgment or decree
approving or ordering any of the foregoing shall be entered in any such
proceeding;
(i) Any one or more money judgments, writs or warrants of attachment,
executions or similar processes involving an aggregate amount (exclusive of
amounts fully bonded or covered by insurance as to which the surety or insurer,
as the case may be, has acknowledged its liability in writing) in excess of
$1,000,000 shall be entered or filed against the Borrower or any other Credit
Party or any of their respective properties and the same shall not be dismissed,
stayed or discharged for a period of thirty (30) days or in any event later than
five days prior to the date of any proposed sale thereunder;
(j) Any ERISA Event shall occur or exist with respect to any Plan or
Multiemployer Plan, and such ERISA Event, together with all other ERISA Events
then existing, if any, could be reasonably expected to have a Material Adverse
Effect;
(k) The Petersen License Agreement shall be terminated or shall, for any
other reason, fail to be in full force and effect and enforceable in accordance
with its terms in all material respects;
(l) Any Security Document to which any Credit Party is now or hereafter a
party shall for any reason cease to be in full force and effect or cease to be
effective to give the Administrative Agent a valid and perfected security
interest in and Lien upon any material portion of the Collateral purported to be
covered thereby, subject to no Liens other than Permitted Liens, in each case
unless any such cessation occurs in accordance with the terms thereof or is due
to any act or failure to act on the part of the Administrative Agent or any
Lender, or any Credit Party shall assert any of the foregoing;
(m) The Parent Guaranty or any Subsidiaries Guaranty shall cease to be in
full force and effect, or either BrightView or Holdings or any Person acting on
its behalf shall deny or disaffirm such Credit Party's obligations under the
Parent Guaranty, or any Subsidiary or any Person acting on its behalf shall deny
or disaffirm such Subsidiary's obligations under any Subsidiaries Guaranty; or
(n) Any of the following shall occur: (i) Holdings and BrightView
collectively shall cease to own all of the outstanding Capital Stock of the
Borrower; (ii) prior to a Qualified IPO, (x) Holdings shall cease to be the
managing member of the Borrower or shall otherwise cease to have the sole right
and authority to exercise control over the management of the Borrower, (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; (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; or
(iv) a Change of Control (as defined in the Subordinated Debt Agreement) shall
occur under the Subordinated Debt Agreement, or any
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other "change of control" or similar event within the meaning of any agreement
or instrument governing or evidencing Permitted Refinancing Indebtedness shall
occur thereunder.
9.2. Remedies: Termination of Commitments, Acceleration, etc. Upon and at
-------------------------------------------------------
any time after the occurrence and during the continuance of any Event of
Default, the Administrative Agent
shall at the direction, or may with the consent, of the Required Lenders, take
any or all of the following actions at the same or different times:
(a) Declare the Commitments, the Swingline Commitment, and the Issuing
Lender's obligation to issue Letters of Credit, to be terminated, whereupon the
same shall terminate (provided that, upon the occurrence of an Event of Default
--------
pursuant to SECTION 9.1(G) or SECTION 9.1(H), the Commitments, the Swingline
Commitment, and the Issuing Lender's obligation to issue Letters of Credit shall
automatically be terminated);
(b) Declare all or any part of the outstanding principal amount of the
Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Notes and the
other Credit Documents, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrower (provided that, upon the occurrence of an Event of
--------
Default pursuant to SECTION 9.1(G) or SECTION 9.1(H), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind, all of which are hereby knowingly and expressly waived by the
Borrower);
(c) Direct the Borrower to deposit (and the Borrower hereby agrees,
forthwith upon receipt of notice of such direction from the Administrative
Agent, to deposit) with the Administrative Agent from time to time such
additional amount of cash as is equal to the aggregate Stated Amount of all
Letters of Credit then outstanding (whether or not any beneficiary under any
Letter of Credit shall have drawn or be entitled at such time to draw
thereunder), such amount to be held by the Administrative Agent in the Cash
Collateral Account as security for the Letter of Credit Exposure as described in
SECTION 3.8; and
(d) Exercise all rights and remedies available to it under this
Agreement, the other Credit Documents and applicable law.
9.3. Remedies: Set-Off. In addition to all other rights and remedies
-----------------
available under the Credit Documents or applicable law or otherwise, upon and at
any time after the occurrence and during the continuance of any Event of
Default, each Lender may, and each is hereby authorized by the Borrower, at any
such time and from time to time, to the fullest extent permitted by applicable
law, without presentment, demand, protest or other notice of any kind, all of
which are hereby knowingly and expressly waived by the Borrower, to set off and
to apply any and all deposits (general or special, time or demand, provisional
or final) and any other property at any time held (including at any branches or
agencies, wherever located), and any other indebtedness at any time owing, by
such Lender to or for the credit or the account of the Borrower against any or
all of the Obligations to such Lender now or hereafter existing, whether or not
such Obligations may be contingent or unmatured, the Borrower hereby granting to
each Lender a continuing security interest in and Lien
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upon all such deposits and other property as security for such Obligations.
Each Lender agrees to notify the Borrower promptly after any such set-off and
application; provided, however, that the failure to give such notice shall not
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affect the validity of such set-off and application.
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Appointment. Each Lender hereby irrevocably appoints and authorizes
-----------
First Union to act as Administrative Agent hereunder and under the other Credit
Documents and to take such actions as agent on its behalf hereunder and under
the other Credit Documents, and to exercise such powers and to perform such
duties, as are specifically delegated to the Administrative Agent by the terms
hereof or thereof, together with such other powers and duties as are reasonably
incidental thereto.
10.2. Nature of Duties. The Administrative Agent shall have no duties or
----------------
responsibilities other than those expressly set forth in this Agreement and the
other Credit Documents. The Administrative Agent shall not have, by reason of
this Agreement or any other Credit Document, a fiduciary relationship in respect
of any Lender; and nothing in this Agreement or any other Credit Document,
express or implied, is intended to or shall be so construed as to impose upon
the Administrative Agent any obligations or liabilities in respect of this
Agreement or any other Credit Document except as expressly set forth herein or
therein. The Administrative Agent may execute any of its duties under this
Agreement or any other Credit Document by or through agents or attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact that it selects with reasonable care. The Administrative
Agent shall be entitled to consult with legal counsel, independent public
accountants and other experts selected by it with respect to all matters
pertaining to this Agreement and the other Credit Documents and its duties
hereunder and thereunder and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts. The Lenders hereby acknowledge that the Administrative
Agent shall not be under any duty to take any discretionary action permitted to
be taken by it pursuant to the provisions of this Agreement or any other Credit
Document unless it shall be requested in writing to do so by the Required
Lenders (or, where a higher percentage of the Lenders is expressly required
hereunder, such Lenders).
10.3. Exculpatory Provisions. Neither the Administrative Agent nor any of
----------------------
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action taken or omitted to be taken by it or such
Person under or in connection with the Credit Documents, except for its or such
Person's own gross negligence or willful misconduct, (ii) responsible in any
manner to any Lender for any recitals, statements, information, representations
or warranties herein or in any other Credit Document or in any document,
instrument, certificate, report or other writing delivered in connection
herewith or therewith, for the execution, effectiveness, genuineness, validity,
enforceability or sufficiency of this Agreement or any other Credit Document, or
for the financial condition of the Borrower, its Subsidiaries or any other
Person, or (iii) required to ascertain or make any inquiry concerning the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document or the existence or possible existence of
any Default or Event of Default, or to inspect the properties, books or records
of the Borrower or any of its Subsidiaries.
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10.4. Reliance by Administrative Agent. The Administrative Agent shall be
--------------------------------
entitled to rely, and shall be fully protected in relying, upon any notice,
statement, consent or other communication (including, without limitation, any
thereof by telephone, telecopy, telex, telegram or cable) believed by it in good
faith to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons. The Administrative Agent may deem and treat each
Lender as the owner of its interest hereunder for all purposes hereof unless and
until a written notice of the assignment, negotiation or transfer thereof shall
have been given to the Administrative Agent in accordance with the provisions of
this Agreement. The Administrative Agent shall be entitled to refrain from
taking or omitting to take any action in connection with this Agreement or any
other Credit Document (i) if such action or omission would, in the reasonable
opinion of the Administrative Agent, violate any applicable law or any provision
of this Agreement or any other Credit Document or (ii) unless and until it shall
have received such advice or concurrence of the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders)
as it deems appropriate or it shall first have been indemnified to its
satisfaction by the Lenders against any and all liability and expense (other
than liability and expense arising from its own gross negligence or willful
misconduct) that may be incurred by it by reason of taking, continuing to take
or omitting to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Administrative Agent as a
result of the Administrative Agent's acting or refraining from acting hereunder
or under any other Credit Document in accordance with the instructions of the
Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders), and such instructions and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders
(including all subsequent Lenders).
10.5. Non-Reliance on Administrative Agent and Other Lenders. Each Lender
------------------------------------------------------
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representation or warranty to it and that no act by the Administrative Agent
or any such Person hereafter taken, including any review of the affairs of the
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender represents
to the Administrative Agent that (i) it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, properties, financial
and other condition and creditworthiness of the Borrower and its Subsidiaries
and made its own decision to enter into this Agreement and extend credit to the
Borrower hereunder, and (ii) it will, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action
hereunder and under the other Credit Documents and to make such investigation as
it deems necessary to inform itself as to the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries. Except as expressly provided in this Agreement and the
other Credit Documents, the Administrative Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information concerning the business, prospects,
operations, properties, financial or other condition or creditworthiness of the
Borrower, its Subsidiaries or any other Person that may at any time come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
10.6. Notice of Default. The Administrative Agent shall not be deemed to
-----------------
have knowledge or notice of the occurrence of any Default or Event of Default
unless the Administrative
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Agent shall have received written notice from the Borrower or a Lender referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." In the event that the Administrative
Agent receives such a notice, the Administrative Agent will give notice thereof
to the Lenders as soon as reasonably practicable; provided, however, that if any
-------- -------
such notice has also been furnished to the Lenders, the Administrative Agent
shall have no obligation to notify the Lenders with respect thereto. The
Administrative Agent shall (subject to SECTIONS 10.4 and 11.6) take such action
with respect to such Default or Event of Default as shall reasonably be directed
by the Required Lenders; provided that, unless and until the Administrative
--------
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of the Lenders.
10.7. Indemnification. To the extent the Administrative Agent is not
---------------
reimbursed by or on behalf of the Borrower, and without limiting the obligation
of the Borrower to do so, the Lenders agree (i) to indemnify the Administrative
Agent and its officers, directors, employees, agents, attorneys-in-fact and
Affiliates, ratably in proportion to their respective percentages as used in
determining the Required Lenders as of the date of determination, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
attorneys' fees and expenses) or disbursements of any kind or nature whatsoever
that may at any time (including, without limitation, at any time following the
repayment in full of the Loans and the termination of the Commitments) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any other Credit Document or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or thereby or any action taken or omitted by the Administrative Agent
under or in connection with any of the foregoing, and (ii) to reimburse the
Administrative Agent upon demand, ratably in proportion to their respective
percentages as used in determining the Required Lenders as of the date of
determination, for any expenses incurred by the Administrative Agent in
connection with the preparation, negotiation, execution, delivery,
administration, amendment, modification, waiver or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement or any of the other Credit
Documents (including, without limitation, reasonable attorneys' fees and
expenses and compensation of agents and employees paid for services rendered on
behalf of the Lenders); provided, however, that no Lender shall be liable for
-------- -------
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
resulting from the gross negligence or willful misconduct of the party to be
indemnified.
10.8. The Administrative Agent in its Individual Capacity. With respect to
---------------------------------------------------
its Commitment, the Loans made by it, the Letters of Credit issued or
participated in by it and the Note or Notes issued to it, the Administrative
Agent in its individual capacity and not as Administrative Agent shall have the
same rights and powers under the Credit Documents as any other Lender and may
exercise the same as though it were not performing the agency duties specified
herein; and the terms "Lenders," "Required Lenders," "holders of Notes" and any
similar terms shall, unless the context clearly otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent and
its Affiliates may accept deposits from, lend money to, make investments in, and
generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower, any of its Subsidiaries or any of their respective
Affiliates as if the Administrative Agent were not performing the agency duties
specified herein, and may accept fees and other consideration
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from any of them for services in connection with this Agreement and otherwise
without having to account for the same to the Lenders.
10.9. Successor Administrative Agent. The Administrative Agent may resign
------------------------------
at any time by giving ten (10) days' prior written notice to the Borrower and
the Lenders. Upon any such notice of resignation, the Required Lenders will,
with the prior written consent of the Borrower (which consent shall not be
unreasonably withheld), appoint from among the Lenders a successor to the
Administrative Agent (provided that the Borrower's consent shall not be required
--------
in the event a Default or Event of Default shall have occurred and be
continuing). If no successor to the Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within such ten-day period, then the retiring Administrative Agent may, on
behalf of the Lenders and after consulting with the Lenders and the Borrower,
appoint a successor Administrative Agent from among the Lenders. Upon the
acceptance of any appointment as Administrative Agent by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder and under the
other Credit Documents. After any retiring Administrative Agent's resignation
as Administrative Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent. If no successor to the Administrative Agent has accepted
appointment as Administrative Agent by the thirtieth (30th) day following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become
effective, and the Lenders shall thereafter perform all of the duties of the
Administrative Agent hereunder and under the other Credit Documents until such
time, if any, as the Required Lenders appoint a successor Administrative Agent
as provided for hereinabove.
10.10. Collateral Matters. (a) The Administrative Agent is hereby
------------------
authorized on behalf of the Lenders, without the necessity of any notice to or
further consent from the Lenders, from time to time (but without any obligation)
to take any action with respect to the Collateral and the Security Documents
that may be necessary to perfect and maintain perfected the Liens upon the
Collateral granted pursuant to the Security Documents.
(b) The Lenders hereby irrevocably authorize the Administrative Agent,
at its option and in its discretion, to release any Lien granted to or held by
the Administrative Agent upon any Collateral (i) upon termination of the
Commitments, termination or expiration of all outstanding Letters of Credit and
payment in full of all of the Obligations, (ii) constituting property sold or to
be sold or disposed of as part of or in connection with any disposition
expressly permitted hereunder or under any other Credit Document or to which the
Required Lenders have consented or (iii) otherwise pursuant to and in accordance
with the provisions of any applicable Credit Document. Upon request by the
Administrative Agent at any time, the Lenders will confirm in writing the
Administrative Agent's authority to release Collateral pursuant to this
subsection (b).
10.11. Syndication Agent, Documentation Agent. Notwithstanding any other
--------------------------------------
provision of this Agreement or any of the other Credit Documents, the
Syndication Agent and the Documentation Agent are named as such for recognition
purposes only, and in their capacities as such shall have no powers, rights,
duties, responsibilities or liabilities with respect to this Agreement and the
other Credit Documents and the transactions contemplated hereby and thereby.
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10.12. Issuing Lender and Swingline Lender. The provisions of this ARTICLE
-----------------------------------
X (other than SECTION 10.9) shall apply to the Issuing Lender and the Swingline
Lender mutatis mutandis to the same extent as such provisions apply to the
------- --------
Administrative Agent.
ARTICLE XI
MISCELLANEOUS
11.1. Fees and Expenses. The Borrower agrees (i) whether or not the
-----------------
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Administrative
Agent and the Documentation Agent (including, without limitation, the reasonable
fees and expenses of counsel to the Administrative Agent and counsel to the
Documentation Agent, and the allocated costs of internal counsel) in connection
with the preparation, negotiation, execution, delivery and syndication of this
Agreement and the other Credit Documents, and all reasonable out-of-pocket costs
and expenses of the Administrative Agent (including, without limitation, the
reasonable fees and expenses of counsel to the Administrative Agent, and the
allocated costs of internal counsel) in connection with any amendment,
modification or waiver hereof or thereof or consent with respect hereto or
thereto, (ii) to pay upon demand all reasonable out-of-pocket costs and expenses
of the Administrative Agent and each Lender (including, without limitation, the
reasonable fees and expenses of counsel to the Administrative Agent or any
Lender, including the allocated costs of internal counsel) in connection with
(y) after the occurrence and during the continuance of an Event of Default, any
refinancing or restructuring of the credit arrangement provided under this
Agreement, whether in the nature of a "work-out," in any insolvency or
bankruptcy proceeding or otherwise and whether or not consummated, and (z) the
enforcement, attempted enforcement or preservation of any rights or remedies
under this Agreement or any of the other Credit Documents, whether in any
action, suit or proceeding (including any bankruptcy or insolvency proceeding)
or otherwise, and (iii) to pay and hold harmless the Administrative Agent and
each Lender from and against all liability for any intangibles, documentary,
stamp or other similar taxes, fees and excises, if any, including any interest
and penalties, and any finder's or brokerage fees, commissions and expenses
(other than any fees, commissions or expenses of finders or brokers engaged by
the Administrative Agent or any Lender), that may be payable in connection with
the transactions contemplated by this Agreement and the other Credit Documents.
11.2. Indemnification. The Borrower agrees, whether or not the
---------------
transactions contemplated by this Agreement shall be consummated, to indemnify
and hold harmless the Administrative Agent and each Lender and each of their
respective directors, officers, employees, agents and Affiliates (each, an
"Indemnified Person") from and against any and all claims, losses, damages,
obligations, liabilities, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) of any kind or nature
whatsoever, whether direct, indirect or consequential (collectively,
"Indemnified Costs"), that may at any time be imposed on, incurred by or
asserted against any such Indemnified Person as a result of, arising from or in
any way relating to the preparation, execution, performance or enforcement of
this Agreement, any of the other Credit Documents or any of the other
Transaction Documents, any of the transactions contemplated herein or therein
(including, without limitation, the Transactions) or any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
any Loans or Letters of Credit, or any action, suit or proceeding (including any
inquiry or investigation) by any Person, whether threatened or initiated,
related to any of the foregoing, and in any case whether or not such Indemnified
Person is a party to
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any such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
-------- -------
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. All of the foregoing Indemnified Costs of any Indemnified Person shall
be paid or reimbursed by the Borrower, as and when incurred and upon demand.
11.3. Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE OTHER
--------------------------------------
CREDIT DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL BE
DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF); PROVIDED
--------
THAT EACH LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT OR, IF NO
SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR
DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER OF COMMERCE, AS IN EFFECT FROM TIME
TO TIME (THE "UNIFORM CUSTOMS"), AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM
CUSTOMS, THE LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT REGARD TO THE
CONFLICTS OF LAW PROVISIONS THEREOF). THE BORROWER HEREBY CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH
CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE
OF NORTH CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE
OTHER CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH THE
ADMINISTRATIVE AGENT OR ANY LENDER OR THE BORROWER IS A PARTY, INCLUDING ANY
ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH, ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE ADMINISTRATIVE AGENT OR ANY LENDER OR THE BORROWER. THE BORROWER
IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY
JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION
THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON
---------
CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS THAT
- ----------
ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT
ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY
ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY TO
BRING ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY IN THE COURTS OF ANY
OTHER JURISDICTION.
11.4. Arbitration; Preservation and Limitation of Remedies. (a) Upon
----------------------------------------------------
demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Agreement or any other Credit
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Document ("Disputes") between or among the Borrower, the Administrative Agent
and the Lenders, or any of them, shall be resolved by binding arbitration as
provided herein. Institution of a judicial proceeding by a party does not waive
the right of that party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, claims brought as class actions,
claims arising from documents executed in the future, or claims arising out of
or connected with the transactions contemplated by this Agreement and the other
Credit Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA"), as in effect from time to time,
and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be
conducted in the city in which the principal office of the Administrative Agent
is located. The expedited procedures set forth in Rule 51 et seq. of the
-- ---
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted. Notwithstanding the foregoing, this arbitration
provision does not apply to Disputes under or related to Interest Rate
Protection Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any Collateral by
exercising a power of sale granted pursuant to any of the Credit Documents or
under applicable law or by judicial foreclosure and sale, including a proceeding
to confirm the sale; (ii) all rights of self-help, including peaceful occupation
of real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies, including
injunctive relief, sequestration, garnishment, attachment, appointment of a
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Preservation of these
remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute. The parties hereto agree that no
party shall have a remedy of punitive or exemplary damages against any other
party in any Dispute, and each party hereby waives any right or claim to
punitive or exemplary damages that it has now or that may arise in the future in
connection with any Dispute, whether such Dispute is resolved by arbitration or
judicially.
11.5. Notices. All notices and other communications provided for hereunder
-------
shall be in writing (including telegraphic, telex, facsimile transmission or
cable communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered to the party to be notified at the following addresses:
(a) if to the Borrower, to Petersen Publishing Company, L.L.C., 6420
Wilshire Blvd., Los Angeles, California 90048, Attention: Neal Vitale and
Richard Vitale, Telecopy No. (213) 782-2041;
(b) if to the Administrative Agent, to First Union National Bank of
North Carolina, One First Union Center, TW-10, 301 South College Street,
Charlotte, North Carolina 28288-0608, Attention: Syndication Agency
Services, Telecopy No. (704) 383-0288; and
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(c) if to any Lender, to it at the address for notices set forth on
its signature page hereto (or if to any Lender not a party hereto as of the
date hereof, at the address for notices set forth in its Assignment and
Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given (i) if mailed as provided above by any method
other than overnight delivery service, on the third Business Day after deposit
in the mails, (ii) if mailed by overnight delivery service, telegraphed,
telexed, telecopied or cabled, when delivered for overnight delivery, delivered
to the telegraph company, confirmed by telex answerback, transmitted by
telecopier or delivered to the cable company, respectively, or (iii) if
delivered by hand, upon delivery; provided that notices and communications to
--------
the Administrative Agent shall not be effective until received by the
Administrative Agent.
11.6. Amendments, Waivers, etc. No amendment, modification, waiver or
------------------------
discharge or termination of, or consent to any departure by the Borrower from,
any provision of this Agreement or any other Credit Document, shall be effective
unless in a writing signed by the Required Lenders (or by the Administrative
Agent at the direction or with the consent of the Required Lenders), and then
the same shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment,
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modification, waiver, discharge, termination or consent shall:
(a) unless agreed to by each Lender directly affected thereby, (i) reduce
or forgive the principal amount of any Loan, reduce the rate of or forgive any
interest thereon, or reduce or forgive any fees or other Obligations (other than
fees payable to the Administrative Agent for its own account), or (ii) extend
the Tranche A Maturity Date, the Tranche B Maturity Date, the Revolving Credit
Maturity Date or any other date fixed for the payment of any principal of or
interest on any Loan (other than additional interest payable under SECTION
2.8(B) at the election of the Required Lenders, as provided therein), any fees
(other than fees payable to the Administrative Agent for its own account) or any
other Obligations;
(b) unless agreed to by all of the Lenders, (i) increase or extend any
Commitment of any Lender (it being understood that a waiver of any Event of
Default, if agreed to by the requisite Lenders hereunder, shall not constitute
such an increase or extension), (ii) change the percentage of the aggregate
Commitments or of the aggregate unpaid principal amount of the Loans, or the
number or percentage of Lenders, that shall be required for the Lenders or any
of them to take or approve, or direct the Administrative Agent to take or
approve, any action hereunder (including as set forth in the definition of
"Required Lenders"), (iii) except as may be otherwise specifically provided in
this Agreement or in any other Credit Document, release all or substantially all
of the Collateral, release BrightView or Holdings from the Parent Guaranty, or
release any material Guarantor from a Subsidiaries Guaranty, or (iv) change any
provision of SECTION 2.15 or this SECTION 11.6;
(c) unless agreed to by (i) all of the Revolving Credit Lenders, extend
the expiry date of any Letter of Credit beyond the seventh day prior to the
Revolving Credit Maturity Date or reduce or forgive any Reimbursement
Obligation, or (ii) Revolving Credit Lenders having more than sixty-six and two-
thirds percent (66-2/3%) of the Revolving Credit Commitments (or, if the
Commitments have been terminated, Revolving Credit Lenders holding more than
sixty-six and two-thirds percent (66-2/3%) of the aggregate outstanding
principal amount of the Revolving Loans and Letter of Credit Exposure), change
any other provision of ARTICLE III; and
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<PAGE>
(d) unless agreed to by the Issuing Lender, the Swingline Lender or the
Administrative Agent in addition to the Lenders required as provided hereinabove
to take such action, affect the respective rights or obligations of the Issuing
Lender, the Swingline Lender or the Administrative Agent, as applicable,
hereunder or under any of the other Credit Documents;
and provided further that (i) if any amendment, modification, waiver or consent
-------- -------
would adversely affect the holders of Loans of a particular Class (the "affected
Class") relative to holders of Loans of any other Class (including, without
limitation, by way of reducing the relative proportion of any payments,
prepayments or Commitment reductions to be applied for the benefit of holders of
Loans of the affected Class under SECTIONS 2.6(E) through 2.6(I)), then such
amendment, modification, waiver or consent shall require the consent of Lenders
holding more than sixty-six and two-thirds percent (66-2/3%) of the aggregate
outstanding principal amount of all Loans of the affected Class, and (ii) the
Fee Letter and any Interest Rate Protection Agreement to which any Lender is a
party may be amended or modified, and any rights thereunder waived, in a writing
signed by the parties thereto.
11.7. Assignments, Participations. (a) Each Lender may assign to one or
---------------------------
more other Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of any of its Commitments, the outstanding Loans made by it, the
Note or Notes held by it and its participations in Letters of Credit); provided,
--------
however, that (i) any such assignment (other than an assignment to a Lender or
- -------
an Affiliate of a Lender) shall not be made without the prior written consent of
the Administrative Agent and the Borrower (to be evidenced by their
counterexecution of the relevant Assignment and Acceptance), which consents
shall not be unreasonably withheld, provided that the Borrower's consent shall
--------
not be required in the event a Default or Event of Default shall have occurred
and be continuing, and provided further that in the case of an assignment of a
-------- -------
Revolving Credit Commitment, the Issuing Lender must also give its prior written
consent thereto (which consent shall not be unreasonably withheld), (ii) each
such assignment by a Lender of any of its interests relating to Loans of a
particular Class shall be made in such manner so that the same portion of its
Commitment, Loans, Note or Notes and other interests under and with respect to
such Class is assigned to the relevant Assignee, (iii) except in the case of an
assignment to a Lender or an Affiliate of a Lender, no such assignment shall be
in an aggregate principal amount (determined as of the date of the Assignment
and Acceptance with respect to such assignment) less than (w) in the case of
Tranche A Term Loans, $5,000,000 (or, if less, the full amount of the assigning
Lender's outstanding Tranche A Term Loans), (x) in the case of Tranche B Term
Loans, $5,000,000 (or, if less, the full amount of the assigning Lender's
outstanding Tranche B Term Loans), (y) in the case of Revolving Credit
Commitments, $5,000,000, determined by combining the amount of the assigning
Lender's outstanding Revolving Loans, L/C Exposure and Unutilized Revolving
Credit Commitment being assigned pursuant to such assignment (or, if less, the
entire Revolving Credit Commitment of the assigning Lender), or (z) in the case
of Swingline Loans, the entire Swingline Commitment and the full amount of the
outstanding Swingline Loans, (iv) unless the assigning Lender ceases to be a
Lender, the aggregate amount of the Loans owing to and unused Commitments of
such Lender after giving effect to such assignment shall not be less than
$5,000,000, and (v) the parties to each such assignment will execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with any Note or Notes subject to such
assignment, and will pay a nonrefundable processing fee of $3,000 to the
Administrative Agent for its own account. Upon such execution, delivery,
acceptance and recording of the Assignment and Acceptance, from and after the
effective date specified therein, which effective date shall be at least five
Business Days after the execution thereof (unless the Administrative Agent shall
otherwise agree),
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<PAGE>
(A) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of the
assigning Lender hereunder with respect thereto and (B) the assigning Lender
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (other than
rights under the provisions of this Agreement and the other Credit Documents
relating to indemnification or payment of fees, costs and expenses, to the
extent such rights relate to the time prior to the effective date of such
Assignment and Acceptance) and be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of such assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto). The terms and
provisions of each Assignment and Acceptance shall, upon the effectiveness
thereof, be incorporated into and made a part of this Agreement, and the
covenants, agreements and obligations of each Lender set forth therein shall be
deemed made to and for the benefit of the Administrative Agent and the other
parties hereto as if set forth at length herein.
(b) The Administrative Agent will maintain at its address for notices
referred to herein a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and
each Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an Assignee and counterexecuted by the
Borrower and the Issuing Lender (if required), together with the Note or Notes
subject to such assignment and the processing fee referred to in subsection (a)
above, the Administrative Agent will (i) accept such Assignment and Acceptance,
(ii) on the effective date thereof, record the information contained therein in
the Register and (iii) give notice thereof to the Borrower and the Lenders.
Within five (5) Business Days after its receipt of such notice, the Borrower, at
its own expense, will execute and deliver to the Administrative Agent, in
exchange for the surrendered Note or Notes, a new Note or Notes to the order of
the Assignee (and, if the assigning Lender has retained any portion of its
rights and obligations hereunder, to the order of the assigning Lender),
prepared in accordance with the applicable provisions of SECTION 2.4 as
necessary to reflect, after giving effect to the assignment, the Commitments (or
outstanding Term Loans, as the case may be) of the Assignee and (to the extent
of any retained interests) the assigning Lender, dated the date of the replaced
Note or Notes and otherwise in substantially the form of EXHIBITS B-1, B-2, B-3
and B-4, as applicable. The Administrative Agent will return cancelled Notes to
the Borrower.
(d) Each Lender may, without the consent of the Borrower, the
Administrative Agent or any other Lender, sell to one or more other Persons
(each, a "Participant") participations in any portion comprising less than all
of its rights and obligations under this Agreement (including, without
limitation, a portion of its Commitments, the outstanding Loans made by it, the
Note or Notes held by it and its participations in Letters of Credit); provided,
--------
however, that (i) such Lender's obligations under this Agreement shall remain
- -------
unchanged and such Lender shall remain solely responsible for the performance of
such obligations, (ii) no Lender shall sell any participation that, when taken
together
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<PAGE>
with all other participations, if any, sold by such Lender, covers all of such
Lender's rights and obligations under this Agreement, (iii) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and no Lender shall permit any Participant to
have any voting rights or any right to control the vote of such Lender with
respect to any amendment, modification, waiver, consent or other action
hereunder or under any other Credit Document (except as to actions that would
(x) reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other
Obligations, (y) extend the Tranche A Maturity Date, the Tranche B Maturity
Date, the Revolving Credit Maturity Date or any other date fixed for the payment
of any principal of or interest on any Loan, any fees or any other Obligations,
or (z) increase or extend any Commitment of any Lender), and (iv) no Participant
shall have any rights under this Agreement or any of the other Credit Documents,
each Participant's rights against the granting Lender in respect of any
participation to be those set forth in the participation agreement, and all
amounts payable by the Borrower hereunder shall be determined as if such Lender
had not granted such participation. Notwithstanding the foregoing, each
Participant shall have the rights of a Lender for purposes of SECTIONS 2.16(A),
2.16(B), 2.17, 2.18 and 9.3, and shall be entitled to the benefits thereto, to
the extent that the Lender granting such participation would be entitled to such
benefits if the participation had not been made, provided that no Participant
--------
shall be entitled to receive any greater amount pursuant to any of such Sections
than the Lender granting such participation would have been entitled to receive
in respect of the amount of the participation made by such Lender to such
Participant had such participation not been made.
(e) Nothing in this Agreement shall be construed to prohibit any Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
-------- -------
release a Lender from any of its obligations hereunder.
(f) Assignments and participations pursuant to this SECTION 11.7 need not
be pro rata as among the Facilities.
(g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
Assignee or Participant or proposed Assignee or Participant any information
relating to the Borrower and its Subsidiaries furnished to it by or on behalf of
any other party hereto, provided that such Assignee or Participant or proposed
--------
Assignee or Participant agrees in writing to keep such information confidential
to the same extent required of the Lenders under SECTION 11.13.
11.8. No Waiver. The rights and remedies of the Administrative Agent and
---------
the Lenders expressly set forth in this Agreement and the other Credit Documents
are cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege or be
construed to be a waiver of any Default or Event of Default. No course of
dealing between any of the Borrower and the Administrative Agent or the Lenders
or their agents or employees shall be effective to amend, modify or discharge
any provision of this Agreement or any other Credit Document or to constitute a
waiver of any Default or Event of Default. No notice to or demand upon the
Borrower in any case shall entitle the Borrower to any other or further
-101-
<PAGE>
notice or demand in similar or other circumstances or constitute a waiver of the
right of the Administrative Agent or any Lender to exercise any right or remedy
or take any other or further action in any circumstances without notice or
demand.
11.9. Successors and Assigns. This Agreement shall be binding upon, inure
----------------------
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, and all references herein to any party shall be deemed to
include its successors and assigns; provided, however, that (i) the Borrower
-------- -------
shall not sell, assign or transfer any of its rights, interests, duties or
obligations under this Agreement or any other Credit Document without the prior
written consent of all of the Lenders and (ii) any Assignees shall have such
rights and obligations with respect to this Agreement and the other Credit
Documents as are provided for under and pursuant to the provisions of SECTION
11.7.
11.10. Survival. All representations, warranties and agreements made by or
--------
on behalf of the Borrower or any of its Subsidiaries in this Agreement and in
the other Credit Documents shall survive the execution and delivery hereof or
thereof, the making and repayment of the Loans and the issuance and repayment of
the Letters of Credit. In addition, notwithstanding anything herein or under
applicable law to the contrary, the provisions of this Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, including, without limitation, the provisions of SECTIONS 2.16(A),
2.16(B), 2.17, 2.18, 10.7, 11.1 and 11.2, shall survive the payment in full of
all Loans and Letters of Credit, the termination of the Commitments and all
Letters of Credit, and any termination of this Agreement or any of the other
Credit Documents.
11.11. Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
11.12. Construction. The headings of the various articles, sections and
------------
subsections of this Agreement have been inserted for convenience only and shall
not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Credit
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
11.13. Confidentiality. Each Lender agrees to keep confidential, pursuant
---------------
to its customary procedures for handling confidential information of a similar
nature and in accordance with safe and sound banking practices, all nonpublic
information provided to it by or on behalf of the Borrower or any of its
Subsidiaries in connection with this Agreement or any other Credit Document;
provided, however, that any Lender may disclose such information (i) to its
- -------- -------
directors, employees and agents and to its auditors, counsel and other
professional advisors, (ii) at the demand or request of any bank regulatory
authority, court or other Governmental Authority having or asserting
jurisdiction over such Lender, as may be required pursuant to subpoena or other
legal process, or otherwise in order to comply with any applicable Requirement
of Law, (iii) in connection with any proceeding to enforce its rights hereunder
or under any other Credit Document or any other litigation or proceeding related
hereto or to which it is a party, (iv) to the Administrative Agent or any other
Lender, (v) to
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<PAGE>
the extent the same has become publicly available other than as a result of a
breach of this Agreement and (vi) pursuant to and in accordance with the
provisions of SECTION 11.7(G).
11.14. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto and receipt by the Administrative Agent and the Borrower of
written or telephonic notification of such execution and authorization of
delivery thereof.
11.15. Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
----------------
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING THE COMMITMENT LETTER FROM FIRST
UNION TO THE BORROWER DATED AUGUST 8, 1996, BUT SPECIFICALLY EXCLUDING THE FEE
LETTER, AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED OR OTHERWISE
MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES.
-103-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ?????????????
----------------------------------
Title: Chief Executive Officer
--------------------------------
(signatures continued)
-104-
<PAGE>
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Administrative
Agent and as a Lender
Tranche A Commitment: By: ????????????????
$55,000,000 ------------------------------------
Title: SVP
Tranche B Commitment: ----------------------------------
$55,000,000
Instructions for wire transfers to the
Revolving Credit Administrative Agent:
Commitment:
$33,000,000 First Union National Bank of
North Carolina
ABA Routing No. 053000219
Charlotte, North Carolina
General Ledger No. 465906, RC No. 5007
Attention: Syndication Agency Services
Re: Petersen Publishing Company, L.L.C.
Address for notices (as a Lender):
First Union National Bank of
North Carolina
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: James W. Wood
Telephone: (704) 374-3242
Telecopy: (704) 374-4092
Lending Office:
First Union National Bank of
North Carolina
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: James W. Wood
Telephone: (704) 374-3242
Telecopy: (704) 374-4092
(signatures continued)
-105-
<PAGE>
CIBC INC.
Tranche A Commitment: By: ????????????
$45,000,000 -------------------------------------
Title: DIRECTOR, CIBC WOOD GUNDY
----------------------------------
Tranche B Commitment: SECURITIES CORP., AS AGENT
$45,000,000
Address for Notices of Borrowing, Notices of
Revolving Credit Conversion/Continuation and Letter of Credit Notices:
Commitment:
$27,000,000 2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attention: Bonnie Harris
Telephone: (770) 319-4850
Telecopy: (770) 319-4950
Address for all other notices:
425 Lexington Avenue
New York New York 10017
Attention: Susan Hanna
Telephone: (212) 856-3839
Telecopy: (212) 856-3558
Lending Office:
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attention: Bonnie Harris
Telephone: (770) 319-4850
Telecopy: (770) 319-4950
-106-
<PAGE>
ANNEX I
-------
APPLICABLE MARGIN PERCENTAGES
Applicable Margin Percentages for Tranche A Term Loans and Revolving Loans
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
Percentage for Percentage for
Leverage Ratio ABR Loans LIBOR Loans
-------------- --------- -----------
<S> <C> <C>
Greater than or equal to 5.5 to 1.0 1.5% 2.75%
Greater than or equal to 5.0 to 1.0
but less than 5.5 to 1.0 1.25% 2.5%
Greater than or equal to 4.5 to 1.0
but less than 5.0 to 1.0 0.875% 2.125%
Greater than or equal to 4.0 to 1.0
but less than 4.5 to 1.0 0.5% 1.75%
Less than 4.0 to 1.0 0.125% 1.375%
</TABLE>
Applicable Margin Percentages for Tranche B Term Loans
------------------------------------------------------
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
Percentage for Percentage for
Leverage Ratio ABR Loans LIBOR Loans
-------------- --------- -----------
<S> <C> <C>
Greater than or equal to 5.5 to 1.0 2.0% 3.25%
Greater than or equal to 5.0 to 1.0
but less than 5.5 to 1.0 1.75% 3.0%
Greater than or equal to 4.5 to 1.0
but less than 5.0 to 1.0 1.375% 2.625%
Greater than or equal to 4.0 to 1.0
but less than 4.5 to 1.0 1.375% 2.625%
Less than 4.0 to 1.0 1.375% 2.625%
</TABLE>
-107-
<PAGE>
Applicable Margin Percentages for Revolving Credit Commitment Fee
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Applicable Margin
Leverage Ratio Percentage
-------------- ----------
<S> <C>
Greater than or equal to 5.5 to 1.0 0.5%
Greater than or equal to 5.0 to 1.0
but less than 5.5 to 1.0 0.5%
Greater than or equal to 4.5 to 1.0
but less than 5.0 to 1.0 0.5%
Greater than or equal to 4.0 to 1.0
but less than 4.5 to 1.0 0.5%
Less than 4.0 to 1.0 0.375%
</TABLE>
-108-
<PAGE>
Exhibit A-1 to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
______________________________
FORM OF
NOTICE OF REVOLVING BORROWING
[Date]
First Union National Bank of
North Carolina, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Petersen Publishing Company, L.L.C. (the "Borrower"),
refers to the Credit Agreement, dated as of September 30, 1996, among the
Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), CIBC Inc., as Documentation Agent, and you, as
Administrative Agent for the Lenders and as Syndication Agent (as amended,
modified or supplemented from time to time, the "Credit Agreement," the terms
defined therein being used herein as therein defined), and, pursuant to SECTION
2.2(B) of the Credit Agreement, hereby gives you, as Administrative Agent,
irrevocable notice that the Borrower requests a Borrowing of Revolving Loans
under the Credit Agreement, and to that end sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by SECTION
2.2(B) of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Borrowing is
$_______________./1/
(ii) The Revolving Loans comprising the Proposed Borrowing shall be
initially made as [ABR Loans] [LIBOR Loans]./2/
[(iii) The initial Interest Period for the LIBOR Loans comprising
the Proposed Borrowing shall be [one/three/six months].]/3/
_________________________
/1/Shall be an amount not less than $3,000,000 or, if greater, an integral
multiple of $1,000,000 in excess thereof (in the case of ABR Loans), or
$5,000,000 or, if greater, an integral multiple of $1,000,000 in excess
thereof (in the case of LIBOR Loans).
/2/Select the applicable Type of Revolving Loans.
/3/Include this clause in the case of a Proposed Borrowing comprised of
LIBOR Loans, and select the applicable Interest Period.
<PAGE>
(iv) The Proposed Borrowing is requested to be made on
__________________ (the "Borrowing Date")./4/
The Borrower hereby certifies that the following statements are true on and
as of the date hereof and will be true on and as of the Borrowing Date:
(A) Each of the representations and warranties contained in ARTICLE
V of the Credit Agreement and in the other Credit Documents is and will be
true and correct in all material respects on and as of each such date, with
the same effect as if made on and as of each such date, both immediately
before and after giving effect to the Proposed Borrowing and to the
application of the proceeds therefrom (except to the extent any such
representation or warranty is expressly stated to have been made as of a
specific date, in which case such representation or warranty shall be true
and correct in all material respects as of such date);
(B) No Default or Event of Default has occurred and is continuing
or would result from the Proposed Borrowing or from the application of the
proceeds therefrom; and
(C) After giving effect to the Proposed Borrowing, the sum of (i)
the aggregate principal amount of Revolving Loans outstanding, (ii) the
aggregate Letter of Credit Exposure of all Revolving Credit Lenders, and
(iii) the aggregate principal amount of Swingline Loans outstanding, will
not exceed the aggregate Revolving Credit Commitments.
Very truly yours,
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
______________________
/4/Shall be a Business Day at least one Business Day after the date hereof
(in the case of ABR Loans) or at least three Business Days after the date hereof
(in the case of LIBOR Loans).
-2-
<PAGE>
Exhibit A-2 to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
______________________________
FORM OF
NOTICE OF SWINGLINE BORROWING
[Date]
First Union National Bank of
North Carolina, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Petersen Publishing Company, L.L.C. (the "Borrower"),
refers to the Credit Agreement, dated as of September 30, 1996, among the
Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), CIBC Inc., as Documentation Agent, and you, as
Administrative Agent for the Lenders and as Syndication Agent (as amended,
modified or supplemented from time to time, the "Credit Agreement," the terms
defined therein being used herein as therein defined), and, pursuant to SECTION
2.2(D) of the Credit Agreement, hereby gives you, as Swingline Lender,
irrevocable notice that the Borrower requests a Borrowing of a Swingline Loan
under the Credit Agreement, and to that end sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by SECTION
2.2(D) of the Credit Agreement:
(i) The principal amount of the Proposed Borrowing is
$_______________./1/
(ii) The Proposed Borrowing is requested to be made on
__________________ (the "Borrowing Date")./2/
The Borrower hereby certifies that the following statements are true on and
as of the date hereof and will be true on and as of the Borrowing Date:
(A) Each of the representations and warranties contained in ARTICLE
V of the Credit Agreement and in the other Credit Documents is and will be
true and correct in all material respects on and as of each such date, with
the same effect as if made on and as of
_________________
/1/Shall be an amount not less than $500,000 or, if greater, an integral
multiple of $250,000 in excess thereof.
/2/Shall be a Business Day.
<PAGE>
each such date, both immediately before and after giving effect to the
Proposed Borrowing and to the application of the proceeds therefrom (except
to the extent any such representation or warranty is expressly stated to
have been made as of a specific date, in which case such representation or
warranty shall be true and correct in all material respects as of such
date);
(B) No Default or Event of Default has occurred and is continuing
or would result from the Proposed Borrowing or from the application of the
proceeds therefrom; and
(C) After giving effect to the Proposed Borrowing, the sum of (i)
the aggregate principal amount of Revolving Loans outstanding, (ii) the
aggregate Letter of Credit Exposure of all Revolving Credit Lenders, and
(iii) the aggregate principal amount of Swingline Loans outstanding, will
not exceed the aggregate Revolving Credit Commitments.
Very truly yours,
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
-2-
<PAGE>
Exhibit B-1 to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
------------------------------
Borrower's Taxpayer Identification No. 95-4597937
FORM OF
TRANCHE A TERM NOTE
$__________ _____________, 1996
Charlotte, North Carolina
FOR VALUE RECEIVED, PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), hereby promises to pay to the order of
_______________________________________________ (the "Lender"), at the
offices of First Union National Bank of North Carolina (the "Administrative
Agent") located at One First Union Center, 301 South College Street, Charlotte,
North Carolina (or at such other place or places as the Administrative Agent may
designate), at the times and in the manner provided in the Credit Agreement,
dated as of September 30, 1996 (as amended, modified or supplemented from time
to time, the "Credit Agreement"), among the Borrower, the Lenders from time to
time parties thereto, CIBC Inc., as Documentation Agent, and First Union
National Bank of North Carolina, as Administrative Agent and as Syndication
Agent, the principal sum of
__________________________ DOLLARS ($___________), under the terms and
conditions of this promissory note (this "Tranche A Term Note") and the Credit
Agreement. The defined terms in the Credit Agreement are used herein with the
same meaning. The Borrower also unconditionally promises to pay interest on the
aggregate unpaid principal amount of this Tranche A Term Note at the rates
applicable thereto from time to time as provided in the Credit Agreement.
This Tranche A Term Note is one of a series of Tranche A Term Notes
referred to in the Credit Agreement and is issued to evidence the Tranche A Term
Loans made by the Lender pursuant to the Credit Agreement. All of the terms,
conditions and covenants of the Credit Agreement are expressly made a part of
this Tranche A Term Note by reference in the same manner and with the same
effect as if set forth herein at length, and any holder of this Tranche A Term
Note is entitled to the benefits of and remedies provided in the Credit
Agreement and the other Credit Documents. Reference is made to the Credit
Agreement for provisions relating to the interest rate, maturity, payment,
prepayment and acceleration of this Tranche A Term Note.
In the event of an acceleration of the maturity of this Tranche A Term
Note, this Tranche A Term Note shall become immediately due and payable, without
presentation, demand, protest or notice of any kind, all of which are hereby
waived by the Borrower.
In the event this Tranche A Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
<PAGE>
This Tranche A Term Note shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of North Carolina.
The Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Lender shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Tranche A Term Note to be
executed under seal by its duly authorized corporate officer as of the day and
year first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _________________________________
Title: ________________________________
-2-
<PAGE>
Exhibit B-2 to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
------------------------------
Borrower's Taxpayer Identification No. 95-4597937
FORM OF
TRANCHE B TERM NOTE
$___________ ____________, 1996
Charlotte, North Carolina
FOR VALUE RECEIVED, PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), hereby promises to pay to the order of
_______________________________________________ (the "Lender"), at the
offices of First Union National Bank of North Carolina (the "Administrative
Agent") located at One First Union Center, 301 South College Street, Charlotte,
North Carolina (or at such other place or places as the Administrative Agent may
designate), at the times and in the manner provided in the Credit Agreement,
dated as of September 30, 1996 (as amended, modified or supplemented from time
to time, the "Credit Agreement"), among the Borrower, the Lenders from time to
time parties thereto, CIBC Inc., as Documentation Agent, and First Union
National Bank of North Carolina, as Administrative Agent and as Syndication
Agent, the principal sum of
__________________________ DOLLARS ($___________), under the terms and
conditions of this promissory note (this "Tranche B Term Note") and the Credit
Agreement. The defined terms in the Credit Agreement are used herein with the
same meaning. The Borrower also unconditionally promises to pay interest on the
aggregate unpaid principal amount of this Tranche B Term Note at the rates
applicable thereto from time to time as provided in the Credit Agreement.
This Tranche B Term Note is one of a series of Tranche B Term Notes
referred to in the Credit Agreement and is issued to evidence the Tranche B Term
Loans made by the Lender pursuant to the Credit Agreement. All of the terms,
conditions and covenants of the Credit Agreement are expressly made a part of
this Tranche B Term Note by reference in the same manner and with the same
effect as if set forth herein at length, and any holder of this Tranche B Term
Note is entitled to the benefits of and remedies provided in the Credit
Agreement and the other Credit Documents. Reference is made to the Credit
Agreement for provisions relating to the interest rate, maturity, payment,
prepayment and acceleration of this Tranche B Term Note.
In the event of an acceleration of the maturity of this Tranche B Term
Note, this Tranche B Term Note shall become immediately due and payable, without
presentation, demand, protest or notice of any kind, all of which are hereby
waived by the Borrower.
In the event this Tranche B Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
<PAGE>
This Tranche B Term Note shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of North Carolina.
The Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Lender shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Tranche B Term Note to be
executed under seal by its duly authorized corporate officer as of the day and
year first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _________________________________
Title: ________________________________
-2-
<PAGE>
Exhibit B-3 to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
------------------------------
Borrower's Taxpayer Identification No. 95-4597937
FORM OF
REVOLVING CREDIT NOTE
$___________ ____________, 1996
Charlotte, North Carolina
FOR VALUE RECEIVED, PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), hereby promises to pay to the order of
_______________________________________________ (the "Lender"), at the
offices of First Union National Bank of North Carolina (the "Administrative
Agent") located at One First Union Center, 301 South College Street, Charlotte,
North Carolina (or at such other place or places as the Administrative Agent may
designate), at the times and in the manner provided in the Credit Agreement,
dated as of September 30, 1996 (as amended, modified or supplemented from time
to time, the "Credit Agreement"), among the Borrower, the Lenders from time to
time parties thereto, CIBC Inc., as Documentation Agent, and First Union
National Bank of North Carolina, as Administrative Agent and as Syndication
Agent, the principal sum of
__________________________ DOLLARS ($___________), or such lesser amount as
may constitute the unpaid principal amount of the Revolving Loans made by the
Lender, under the terms and conditions of this promissory note (this "Revolving
Credit Note") and the Credit Agreement. The defined terms in the Credit
Agreement are used herein with the same meaning. The Borrower also
unconditionally promises to pay interest on the aggregate unpaid principal
amount of this Revolving Credit Note at the rates applicable thereto from time
to time as provided in the Credit Agreement.
This Revolving Credit Note is one of a series of Revolving Credit Notes
referred to in the Credit Agreement and is issued to evidence the Revolving
Loans made by the Lender from time to time pursuant to the Credit Agreement.
All of the terms, conditions and covenants of the Credit Agreement are expressly
made a part of this Revolving Credit Note by reference in the same manner and
with the same effect as if set forth herein at length, and any holder of this
Revolving Credit Note is entitled to the benefits of and remedies provided in
the Credit Agreement and the other Credit Documents. Reference is made to the
Credit Agreement for provisions relating to the interest rate, maturity,
payment, prepayment and acceleration of this Revolving Credit Note.
In the event of an acceleration of the maturity of this Revolving Credit
Note, this Revolving Credit Note shall become immediately due and payable,
without presentation, demand, protest or notice of any kind, all of which are
hereby waived by the Borrower.
<PAGE>
In the event this Revolving Credit Note is not paid when due at any stated
or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys'
fees.
This Revolving Credit Note shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of North Carolina.
The Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Lender shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to
be executed under seal by its duly authorized corporate officer as of the day
and year first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _________________________________
Title: ________________________________
-2-
<PAGE>
Exhibit B-4 to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
------------------------------
Borrower's Taxpayer Identification No. 95-4597937
FORM OF
SWINGLINE NOTE
$___________ ____________, 1996
Charlotte, North Carolina
FOR VALUE RECEIVED, PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), hereby promises to pay to the order of
_______________________________________________ (the "Swingline Lender"),
at the offices of First Union National Bank of North Carolina (the
"Administrative Agent") located at One First Union Center, 301 South College
Street, Charlotte, North Carolina (or at such other place or places as the
Administrative Agent may designate), at the times and in the manner provided in
the Credit Agreement, dated as of September 30, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), among the Borrower, the
Lenders from time to time parties thereto, CIBC Inc., as Documentation Agent,
and First Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent, the principal sum of
__________________________ DOLLARS ($___________), or such lesser amount as
may constitute the unpaid principal amount of the Swingline Loans made by the
Swingline Lender, under the terms and conditions of this promissory note (this
"Swingline Note") and the Credit Agreement. The defined terms in the Credit
Agreement are used herein with the same meaning. The Borrower also
unconditionally promises to pay interest on the aggregate unpaid principal
amount of this Swingline Note at the rates applicable thereto from time to time
as provided in the Credit Agreement.
This Swingline Note is issued to evidence the Swingline Loans made by the
Swingline Lender from time to time pursuant to the Credit Agreement. All of the
terms, conditions and covenants of the Credit Agreement are expressly made a
part of this Swingline Note by reference in the same manner and with the same
effect as if set forth herein at length, and any holder of this Swingline Note
is entitled to the benefits of and remedies provided in the Credit Agreement and
the other Credit Documents. Reference is made to the Credit Agreement for
provisions relating to the interest rate, maturity, payment, prepayment and
acceleration of this Swingline Note.
In the event of an acceleration of the maturity of this Swingline Note,
this Swingline Note shall become immediately due and payable, without
presentation, demand, protest or notice of any kind, all of which are hereby
waived by the Borrower.
In the event this Swingline Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
<PAGE>
This Swingline Note shall be governed by and construed in accordance with
the internal laws and judicial decisions of the State of North Carolina. The
Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Swingline Lender shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Swingline Note to be
executed under seal by its duly authorized corporate officer as of the day and
year first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _________________________________
Title: ________________________________
-2-
<PAGE>
Exhibit C to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
-----------------------------------
FORM OF
EXCESS CASH FLOW CERTIFICATE
THIS CERTIFICATE is given pursuant to SECTION 2.6(I) of the Credit
Agreement, dated as of September 30, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement," the terms defined therein being used
herein as therein defined), among PETERSEN PUBLISHING COMPANY, L.L.C. (the
"Borrower"), certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), CIBC Inc., as Documentation Agent, and First
Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent.
The undersigned hereby certifies that:
1. He is a duly elected Financial Officer of the Borrower.
2. Attached to this Certificate as Attachment A is a worksheet
reflecting the computation of the Borrower's Excess Cash Flow for the fiscal
year ended December 31, _____________ and the amount required to be prepaid in
respect of the Term Loans pursuant to Section 2.6(i) of the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the _______ day of ________________, ____.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: [signature of Financial Officer]
------------------------------------
Name: __________________________________
Title: _________________________________
<PAGE>
ATTACHMENT A
EXCESS CASH FLOW WORKSHEET
- -------------------------------------------------------------------------------
(1) Consolidated Operating Cash Flow
for the fiscal year ended December 31, _____ /1/ $__________
(2) Amount of any decrease in Consolidated Working
Capital for such period $__________
(3) Deductions from Consolidated Operating
Cash Flow:
(a) Consolidated Fixed Charges for such
period (to the extent paid in cash) $__________
(b) Optional prepayments on the Term
Loans made during such period $__________
(c) Cash amounts paid in Permitted
Acquisitions during such period $__________
(d) Amount of any increase in Consolidated
Working Capital for such period $__________
(e) Total deductions from Consolidated
Operating Cash Flow:
Add Line 3(a), (b), (c) and (d) ($__________)
(4) Total Excess Cash Flow:
Add Lines 1 and 2 and subtract Line 3(d) $==========
(5) Percentage of Excess Cash Flow required to
be paid pursuant to Section 2.6(i)/2/ %
-----------
(6) Amount of Excess Cash Flow prepayment:
Multiply Lines 4 and 5 $==========
- -------------------------------------------------------------------------------
- --------------------------
/1/As set forth in the Compliance Certificate delivered pursuant to
Section 6.2(a) of the Credit Agreement for the most recently completed fiscal
year.
/2/75% if the Leverage Ratio is greater than or equal to 5.0 to 1.0 as of
the last day of the subject fiscal year, and 50% if such ratio as of such time
is less than 5.0 to 1.0 but greater than or equal to 4.0 to 1.0 (as set forth in
the Compliance Certificate delivered pursuant to Section 6.2(a) of the Credit
Agreement for the most recently completed fiscal year).
<PAGE>
Exhibit D to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
___________________________________
FORM OF
NOTICE OF PREPAYMENT
[Date]
First Union National Bank of
North Carolina, as
Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Petersen Publishing Company, L.L.C. (the "Borrower"),
refers to the Credit Agreement, dated as of September 30, 1996, among the
Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), CIBC Inc., as Documentation Agent, and you, as
Administrative Agent for the Lenders and as Syndication Agent (as amended,
modified or supplemented from time to time, the "Credit Agreement," the terms
defined therein being used herein as therein defined,) and, pursuant to SECTION
2.7(A) of the Credit Agreement, hereby gives you, as Administrative Agent,
irrevocable notice that the Borrower intends to prepay certain Loans under the
Credit Agreement, and to that end sets forth the following information with
respect to such prepayment as required by SECTION 2.7(A) of the Credit
Agreement:
1. The Borrower shall prepay [Tranche A Term/Tranche B Term/Revolving
Credit] Loans in an aggregate amount of $_____________, consisting of [ABR Loans
in an aggregate amount of $_________] [LIBOR Loans in an aggregate amount of
$____________]. [The Borrowing pursuant to which such LIBOR Loans were made has
an Interest Period of ________________ month(s), ending on
_____________________.]/1/
2. The Borrower shall prepay the above referenced Loans on the following
Business Day: __________________.
Very truly yours,
PETERSEN PUBLISHING COMPANY, L.L.C.
By:______________________________________
Title:______________________________________
_________________________
/1/ Insert in the case of a prepayment of LIBOR Loans.
<PAGE>
Exhibit E to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
----------------------------------
FORM OF
NOTICE OF CONVERSION/CONTINUATION
[DATE]
First Union National Bank of
North Carolina, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Petersen Publishing Company, L.L.C. (the "Borrower"),
refers to the Credit Agreement, dated as of September 30, 1996, among the
Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), CIBC Inc., as Documentation Agent, and you, as
Administrative Agent for the Lenders and as Syndication Agent (as amended,
modified or supplemented form time to time, the "Credit Agreement," the terms
defined therein being used herein as therein defined), and, pursuant to SECTION
2.11(B) of the Credit Agreement, hereby gives you, as Administrative Agent,
irrevocable notice that the Borrower requests a [conversion] [continuation]/1/
of Loans under the Credit Agreement, and to that end sets forth below the
information relating to such [conversion] [continuation] (the "Proposed
[Conversion] [Continuation]") as required by SECTION 2.11(B) of the Credit
Agreement:
(i) The Proposed [Conversion] [Continuation] is requested to be
made on _______________./2/
_____________________
/1/Insert "conversion" or "continuation" throughout the notice, as
applicable.
/2/Shall be a Business Day at least one Business Day after the date hereof
(in the case of any conversion of LIBOR Loans into ABR Loans) or at least three
Business Days after the date hereof (in the case of any conversion of ABR Loans
into, or continuation of, LIBOR Loans), and additionally, in the case of any
conversion of LIBOR Loans into ABR Loans, or continuation of LIBOR Loans, shall
be the last day of the Interest Period applicable to such LIBOR Loans.
<PAGE>
(ii) The Proposed [Conversion] [Continuation] involves
$____________/3/ in aggregate principal amount of [Tranche A Term] [Tranche
B Term] [Revolving]/4/ Loans made pursuant to a Borrowing on
________________,/5/ which Loans are presently maintained as [ABR] [LIBOR]
Loans and are proposed hereby to be [converted into ABR Loans] [converted
into LIBOR Loans] [continued as LIBOR Loans]./6/
[(iii) The initial Interest Period for the Loans being [converted
into] [continued as] LIBOR Loans pursuant to the Proposed [Conversion]
[Continuation] shall be [one/three/six months].]/7/
The Borrower hereby certifies that the following statement is true both on
and as of the date hereof and on and as of the effective date of the Proposed
[Conversion] [Continuation]: no Default or Event of Default has or will have
occurred and is continuing or would result from the Proposed [Conversion]
[Continuation].
Very truly yours,
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _________________________________________
Title: ______________________________________
___________________________
/3/Shall be an amount not less than $3,000,000 or, if greater, an integral
multiple of $1,000,000 in excess thereof (in the case of any conversion of LIBOR
Loans into ABR Loans) or $5,000,000 or, if greater, an integral multiple of
$1,000,000 in excess thereof (in the case of any conversion of ABR Loans into,
or continuation of, LIBOR Loans).
/4/Select the applicable Class of Loans.
/5/Insert the applicable Borrowing Date for the Loans being converted or
continued.
/6/Complete with the applicable bracketed language.
/7/Include this clause in the case of a Proposed Conversion or Continuation
involving a conversion of ABR Loans into, or continuation of, LIBOR Loans, and
select the applicable Interest Period.
-2-
<PAGE>
Exhibit F to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
-----------------------------------
FORM OF
LETTER OF CREDIT NOTICE
[Date]
First Union National Bank of
North Carolina, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
First Union National Bank of
North Carolina, as Issuing Lender
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: James W. Wood,
Communications/Media Finance Group
Ladies and Gentleman:
The undersigned, Petersen Publishing Company, L.L.C. (the "Borrower"),
refers to the Credit Agreement, dated as of September 30, 1996, among the
Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), CIBC Inc., as Documentation Agent, and you, as
Administrative Agent for the Lenders and as Syndication Agent (as amended,
modified or supplemented from time to time, the "Credit Agreement," the terms
defined therein being used herein as therein defined), and, pursuant to SECTION
3.2 of the Credit Agreement, hereby gives you, as Issuing Lender, irrevocable
notice that the Borrower requests the issuance of a Letter of Credit for its
account under the Credit Agreement, and to that end sets forth below the
information relating to such Letter of Credit (the "Requested Letter of Credit")
as required by SECTION 3.2 of the Credit Agreement:
(i) The Business Day on which the Requested Letter of Credit is
requested to be issued is ___________./1/
(ii) The Stated Amount of the Requested Letter of Credit is
$____________.
___________________
/1/Shall be at least three Business Days (or such shorter period as is
acceptable to the Issuing Lender in any given case) after the date hereof.
<PAGE>
(iii) The expiry date of the Requested Letter of Credit is
______________.
(iv) The name and address of the beneficiary of the Requested
Letter of Credit is ________________________________.
The undersigned agrees to complete all application procedures and documents
required by you in connection with the Requested Letter of Credit.
The undersigned hereby certifies that the following statements are true on
the date hereof and will be true on the date of issuance of the Requested Letter
of Credit:
(A) Each of the representations and warranties contained in ARTICLE
V of the Credit Agreement and in the other Credit Documents is and will be
true and correct in all material respects on and as of each such date, with
the same effect as if made on and as of each such date, both immediately
before and after giving effect to the issuance of the Requested Letter of
Credit (except to the extent any such representation or warranty is
expressly stated to have been made as of a specific date, in which case
such representation or warranty shall be true and correct in all material
respects as of such date);
(B) No Default or Event of Default has occurred and is continuing
or would result from the issuance of the Requested Letter of Credit; and
(C) After giving effect to the issuance of the Requested Letter of
Credit, the sum of (i) the aggregate principal amount of Revolving Loans
outstanding, (ii) the aggregate Letter of Credit Exposure of all Revolving
Lenders, and (iii) the aggregate principal amount of Swingline Loans
outstanding, will not exceed the aggregate Revolving Credit Commitments.
Very truly yours,
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ________________________________
Title: _____________________________
cc: First Union National Bank of
North Carolina, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
-2-
<PAGE>
Exhibit G to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
___________________________________
FORM OF
PARENT GUARANTY
THIS GUARANTY AGREEMENT (this "Guaranty"), dated as of the ____ day of
_________, 1996 (this "Guaranty"), is made between (a) PETERSEN HOLDINGS,
L.L.C., a Delaware limited liability company ("Holdings"), and BRIGHTVIEW
COMMUNICATIONS GROUP, INC., a Delaware corporation ("BrightView"; each of
Holdings and BrightView, a "Guarantor," and collectively, the "Guarantors"), and
(b) FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as administrative agent for the
banks and other financial institutions (collectively, the "Lenders") party to
the Credit Agreement referred to below (in such capacity, the "Administrative
Agent"), for the benefit of the Guaranteed Parties (as hereinafter defined).
Capitalized terms used herein without definition shall have the meanings given
to them in the Credit Agreement referred to below.
RECITALS
A. Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Borrower"), the Lenders, CIBC Inc., as Documentation Agent, and
First Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent, are parties to a Credit Agreement, dated as of September 30,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Borrower upon the terms and subject to the conditions set forth therein. The
Guarantors own all of the membership interests in the Borrower.
B. It is a condition to the extension of credit to the Borrower under
the Credit Agreement that each Guarantor shall have agreed, by executing and
delivering this Guaranty, to guarantee to the Guaranteed Parties the payment in
full of the Guaranteed Obligations (as hereinafter defined). The Guaranteed
Parties are relying on this Guaranty in their decision to extend credit to the
Borrower under the Credit Agreement, and would not enter into the Credit
Agreement without this Guaranty.
C. The Guarantors will obtain benefits as a result of the extension of
credit to the Borrower under the Credit Agreement, which benefits are hereby
acknowledged, and, accordingly, desire to execute and deliver this Guaranty.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Guaranteed Parties to enter into the Credit
Agreement and to induce the Lenders to extend credit to the Borrower thereunder,
each Guarantor hereby agrees as follows:
<PAGE>
1. Guaranty. (a) Each Guarantor hereby irrevocably, absolutely and
--------
unconditionally, and jointly and severally:
(i) guarantees to the Lenders (including the Issuing Lender and
the Swingline Lender in their capacities as such, and including any Lender
in its capacity as a counterparty to any Interest Rate Protection Agreement
with the Borrower), the Documentation Agent and the Administrative Agent
(collectively, the "Guaranteed Parties") the full and prompt payment, at
any time and from time to time as and when due (whether at the stated
maturity, by acceleration or otherwise), of all Obligations of the Borrower
under the Credit Agreement and the other Credit Documents, including,
without limitation, all principal of and interest on the Loans, all
Reimbursement Obligations in respect of Letters of Credit, all fees,
expenses, indemnities and other amounts payable by the Borrower under the
Credit Agreement or any other Credit Document (including interest accruing
after the filing of a petition or commencement of a case by or with respect
to the Borrower seeking relief under any applicable federal and state laws
pertaining to bankruptcy, reorganization, arrangement, moratorium,
readjustment of debts, dissolution, liquidation or other debtor relief,
specifically including, without limitation, the Bankruptcy Code and any
fraudulent transfer and fraudulent conveyance laws (collectively,
"Insolvency Laws"), whether or not the claim for such interest is allowed
in such proceeding), all obligations of the Borrower to any Lender under
any Interest Rate Protection Agreement, and all Obligations that, but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, would become due, in each case whether now existing or hereafter
created or arising and whether direct or indirect, absolute or contingent,
due or to become due (all liabilities and obligations described in this
clause (i), collectively, the "Guaranteed Obligations"); and
(ii) agrees to pay or reimburse upon demand all reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred or paid by (y) any Guaranteed Party in connection with
any suit, action or proceeding to enforce or protect any rights of the
Guaranteed Parties hereunder and (z) the Administrative Agent in connection
with any amendment, modification or waiver hereof or consent pursuant
hereto (all liabilities and obligations described in this clause (ii),
collectively, the "Other Obligations"; and the Other Obligations, together
with the Guaranteed Obligations, the "Total Obligations").
(b) The guaranty of each Guarantor set forth in this SECTION 1 is a
guaranty of payment as a primary obligor, and not a guaranty of collection.
2. Guaranty Absolute. Each Guarantor agrees that its obligations
-----------------
hereunder are irrevocable, absolute and unconditional, are independent of the
Guaranteed Obligations and any Collateral or other security therefor or other
guaranty or liability in respect thereof, whether given by such Guarantor or any
other Person, and (to the full extent permitted by applicable law) shall not be
discharged, limited or otherwise affected by reason of any of the following,
whether or not such Guarantor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in
any other term of, any Guaranteed Obligations or any guaranty or other
liability in respect thereof, or any amendment, modification or supplement
to, restatement of, or consent to any rescission or waiver of or departure
from, any provisions of the Credit Agreement, any other Credit Document or
any agreement or instrument delivered pursuant to any of the foregoing;
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<PAGE>
(ii) the invalidity or unenforceability of any Guaranteed
Obligations, any guaranty or other liability in respect thereof or any
provisions of the Credit Agreement, any other Credit Document or any
agreement or instrument delivered pursuant to any of the foregoing;
(iii) the release of either Guarantor hereunder or the taking,
acceptance or release of other guarantees of any Guaranteed Obligations or
additional Collateral or other security for any Guaranteed Obligations or
for any guaranty or other liability in respect thereof;
(iv) any renewal, extension, increase, decrease, release,
discharge, modification, settlement, compromise or other action or inaction
in respect of any Guaranteed Obligations or any guaranty or other liability
in respect thereof (other than satisfaction of the Termination Requirements
(as hereinafter defined)), including any acceptance or refusal of any offer
or performance with respect to the same or the subordination of the same to
the payment of any other obligations;
(v) any agreement not to pursue or enforce or any failure to
pursue or enforce (whether voluntarily or involuntarily as a result of
operation of law, court order or otherwise) any right or remedy in respect
of any Guaranteed Obligations, any guaranty or other liability in respect
thereof or any Collateral or other security for any of the foregoing; any
sale, exchange, release, substitution, compromise or other action in
respect of any such Collateral or other security; or any failure to create,
protect, perfect, secure, insure, continue or maintain any Liens in any
such Collateral or other security;
(vi) the exercise of any right or remedy available under the
Credit Documents, at law, in equity or otherwise in respect of any
Collateral or other security for any Guaranteed Obligations or for any
guaranty or other liability in respect thereof, in any order and by any
manner thereby permitted, including, without limitation, foreclosure on any
such Collateral or other security by any manner of sale thereby permitted,
whether or not every aspect of such sale is commercially reasonable;
(vii) any bankruptcy, reorganization, arrangement, liquidation,
insolvency, dissolution, termination, reorganization or like change in the
corporate structure or existence of the Borrower or any other Person
directly or indirectly liable for any Guaranteed Obligations (it being
understood and agreed that, as between each Guarantor, on the one hand, and
the Guaranteed Parties, on the other hand, (a) the maturity of the
Guaranteed Obligations may be accelerated as provided in the Credit
Agreement for the purposes of such Guarantor's guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (b) in
the event of any declaration of acceleration of such Obligations as
provided in the Credit Agreement, such Obligations (whether or not due and
payable) shall forthwith become due and payable in full by such Guarantor
for purposes of this Guaranty);
(viii) any manner of application of any payments by or amounts
received or collected from any Person, by whomsoever paid and howsoever
realized, whether in reduction of any Guaranteed Obligations or any other
obligations of the Borrower or any other Person directly or indirectly
liable for any Guaranteed Obligations, regardless of what Guaranteed
Obligations may remain unpaid after any such application; or
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<PAGE>
(ix) any other circumstance that might otherwise constitute a legal
or equitable discharge of, or a defense, set-off or counterclaim available
to, the Borrower, either Guarantor or a surety or guarantor generally,
other than the occurrence of all of the following: (x) the payment in full
of the Total Obligations (other than indemnity obligations not then due and
payable and that survive termination of the Credit Documents), (y) the
termination or expiration of all Letters of Credit under the Credit
Agreement and (z) the termination of the Commitments under the Credit
Agreement (the events in clauses (x), (y) and (z) above, collectively, the
"Termination Requirements").
3. Waivers. Each Guarantor hereby knowingly, voluntarily and expressly
-------
waives to the full extent permitted by applicable law:
(i) presentment, demand for payment, demand for performance, protest
and notice of any other kind, including, without limitation, notice of
nonpayment or other nonperformance (including notice of default under any
Credit Document with respect to any Guaranteed Obligations), protest,
dishonor, acceptance hereof, extension of additional credit to the Borrower
and of any of the matters referred to in SECTION 2 and of any rights to
consent thereto;
(ii) any right to require the Guaranteed Parties or any of them, as a
condition of payment or performance by the Guarantors hereunder, to proceed
against, or to exhaust or have resort to any Collateral or other security
from or any deposit balance or other credit in favor of, the Borrower or
any other Person directly or indirectly liable for any Guaranteed
Obligations, or to pursue any other remedy or enforce any other right; and
any other defense based on an election of remedies with respect to any
Collateral or other security for any Guaranteed Obligations or for any
guaranty or other liability in respect thereof, notwithstanding that any
such election (including any failure to pursue or enforce any rights or
remedies) may impair or extinguish any right of indemnification,
contribution, reimbursement or subrogation or other right or remedy of
either Guarantor against the Borrower or any other Person directly or
indirectly liable for any Guaranteed Obligations or any such Collateral or
other security; and, without limiting the generality of the foregoing, each
Guarantor hereby specifically waives the benefits of Sections 26-7 through
26-9, inclusive, of the General Statutes of North Carolina, as amended from
time to time, and any similar statute or law of any other jurisdiction, as
the same may be amended from time to time;
(iii) any right or defense based on or arising by reason of any right
or defense of the Borrower or any other Person, including, without
limitation, any defense based on or arising from a lack of authority or
other disability of the Borrower or any other Person, the invalidity or
unenforceability of any Guaranteed Obligations, any Collateral or other
security therefor or any Credit Document or other agreement or instrument
delivered pursuant thereto, or the cessation of the liability of the
Borrower for any reason other than the satisfaction of the Termination
Requirements;
(iv) any defense based on the acts or omissions of any Guaranteed
Party in the administration of the Guaranteed Obligations, any guaranty or
other liability in respect thereof or any Collateral or other security for
any of the foregoing, and promptness, diligence or any
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<PAGE>
requirement that any Guaranteed Party create, protect, perfect, secure,
insure, continue or maintain any Liens in any such Collateral or other
security;
(v) any right to assert against any Guaranteed Party, as a
defense, counterclaim, crossclaim or set-off, any defense, counterclaim,
claim, right of recoupment or set-off that it may at any time have against
any Guaranteed Party (including, without limitation, failure of
consideration, statute of limitations, payment, accord and satisfaction and
usury), other than compulsory counterclaims; and
(vi) any defense based on or afforded by any applicable law that
limits the liability of or exonerates guarantors or sureties or that may in
any other way conflict with the terms of this Guaranty.
4. Waiver of Subrogation; Subordination. Each Guarantor hereby knowingly,
------------------------------------
voluntarily and expressly waives, until satisfaction of the Termination
Requirements, all claims and rights that it may have against the Borrower at any
time as a result of any payment made under or in connection with this Guaranty
or the performance or enforcement hereof, including all rights of subrogation to
the rights of any Guaranteed Party against the Borrower, all rights of
indemnity, contribution or reimbursement against the Borrower, all rights to
enforce any remedies of any Guaranteed Party against the Borrower, and any
benefit of, and any right to participate in, any Collateral or other security
held by any Guaranteed Party to secure payment of the Guaranteed Obligations, in
each case whether such claims or rights arise by contract, statute (including,
without limitation, the Bankruptcy Code), common law or otherwise. Each
Guarantor agrees that all indebtedness and other obligations, whether now or
hereafter existing, of the Borrower to such Guarantor, including, without
limitation, any such indebtedness in any proceeding under the Bankruptcy Code
and any intercompany receivables, together with any interest thereon, shall be,
and hereby are, subordinated and made junior in right of payment to the Total
Obligations. Each Guarantor agrees further that if any amount shall be paid to
or any distribution received by such Guarantor (i) on account of any such
indebtedness at any time after the occurrence and during the continuance of an
Event of Default, or (ii) on account of any such rights of subrogation,
indemnity, contribution or reimbursement at any time prior to the satisfaction
of the Termination Requirements, such amount or distribution shall be deemed to
have been received and to be held in trust for the benefit of the Guaranteed
Parties, and shall forthwith be delivered to the Administrative Agent in the
form received (with any necessary endorsements in the case of written
instruments), to be applied against the Guaranteed Obligations, whether or not
matured, in accordance with the terms of the applicable Credit Documents and
without in any way discharging, limiting or otherwise affecting the liability of
such Guarantor under any other provision of this Guaranty.
5. Representations and Warranties. Each Guarantor represents and warrants
------------------------------
to the Guaranteed Parties as follows:
(a) Such Guarantor (i) is a limited liability company or corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the full limited liability company or
corporate power and authority to execute, deliver and perform this Guaranty and
the other Transaction Documents to which it is or will be a party, to own and
hold its property and to engage in its business as presently conducted, and
(iii) is duly qualified to do business as a foreign limited liability company or
corporation and is in good standing in each jurisdiction where the nature of its
business or the ownership of its properties requires it to be so qualified,
except
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<PAGE>
where the failure to be so qualified could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
(b) Such Guarantor has taken, or on the Closing Date will have taken, all
necessary limited liability company or corporate action to execute, deliver and
perform this Guaranty and each of the other Transaction Documents to which it is
or will be a party, and has, or on the Closing Date (or any later date of
execution and delivery) will have, validly executed and delivered this Guaranty
and each of the other Transaction Documents to which it is or will be a party.
This Guaranty constitutes, and upon execution and delivery thereof each of such
other Transaction Documents will constitute, the legal, valid and binding
obligation of such Guarantor, enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by general equitable principles or principles of good faith and
fair dealing.
(c) The execution, delivery and performance by such Guarantor of this
Guaranty and each of the other Transaction Documents to which it is or will be a
party, compliance by it with the terms hereof and thereof, and the consummation
of the Transactions, do not and will not (i) violate any provision of its
articles of organization, certificate of incorporation, operating agreement or
bylaws, as applicable, or contravene any other Requirement of Law applicable to
it, (ii) conflict with, result in a breach of or constitute (with notice, lapse
of time or both) a default under any indenture, agreement or other instrument to
which it is a party, by which it or any of its properties is bound or to which
it is subject, (iii) require any approval of its stockholders or members or any
approval or consent of any Person under any agreement to which it is a party,
except for such approvals or consents which will be obtained on or before the
Closing Date and disclosed in writing to the Lenders or such approvals or
consents the failure of which to obtain could not reasonably be expected, singly
or in the aggregate, to have a Material Adverse Effect, or (iv) except for the
Liens granted pursuant to the Security Documents, result in or require the
creation or imposition of any Lien upon any of its properties or assets.
(d) No consent, approval, authorization or other action by, notice to, or
registration or filing with, any Governmental Authority or other Person is or
will be required as a condition to or otherwise in connection with the due
execution, delivery and performance by such Guarantor of this Guaranty or any of
the other Transaction Documents to which it is or will be a party or the
legality, validity or enforceability hereof or thereof, other than (i) consents,
authorizations and filings in connection with the Petersen Acquisition that have
been (or on or prior to the Closing Date will have been) made or obtained and
that are (or on the Closing Date will be) in full force and effect, which
consents, authorizations and filings are listed on SCHEDULE 5.4 to the Credit
Agreement, and (ii) filings of Uniform Commercial Code financing statements and
other instruments and actions necessary to perfect the Liens created by the
Security Documents.
(e) There are no actions, investigations, suits or proceedings pending or,
to the knowledge of such Guarantor (after due investigation) threatened, at law,
in equity or in arbitration, before any court, other Governmental Authority or
other Person, (i) against or affecting such Guarantor or any of its properties
that could, if adversely determined, be reasonably expected to have a Material
Adverse Effect, or (ii) with respect to this Guaranty, any of the other
Transaction Documents or any of the Transactions.
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<PAGE>
(f) All representations and warranties contained in the Credit Agreement
or any of the other Credit Documents that relate to such Guarantor are true and
correct in all material respects.
(g) Such Guarantor has been provided with a true and complete copy of the
executed Credit Agreement, as in effect as of the date hereof, and its principal
officers are familiar with the contents thereof, particularly insofar as the
contents thereof relate or apply to such Guarantor.
6. Financial Condition of the Borrower. Each Guarantor represents that it
-----------------------------------
has knowledge of the Borrower's financial condition and affairs and that it has
adequate means to obtain from the Borrower on an ongoing basis information
relating thereto and to the Borrower's ability to pay and perform the Guaranteed
Obligations, and agrees to assume the responsibility for keeping, and to keep,
so informed for so long as this Guaranty is in effect with respect to such
Guarantor. Each Guarantor agrees that the Guaranteed Parties shall have no
obligation to investigate the financial condition or affairs of the Borrower for
the benefit of either Guarantor nor to advise either Guarantor of any fact
respecting, or any change in, the financial condition or affairs of the Borrower
that might become known to any Guaranteed Party at any time, whether or not such
Guaranteed Party knows or believes or has reason to know or believe that any
such fact or change is unknown to either Guarantor, or might (or does)
materially increase the risk of either Guarantor as guarantor, or might (or
would) affect the willingness of either Guarantor to continue as a guarantor of
the Guaranteed Obligations.
7. Negative Covenants. Each Guarantor covenants and agrees that, until
------------------
the termination of the Commitments and all Letters of Credit and the payment in
full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
under the Credit Agreement:
(a) Such Guarantor will not incur, create, assume or suffer to exist any
Indebtedness (including, without limitation, any Contingent Obligations), except
for (i) the Indebtedness created by this Guaranty, (ii) guaranties of the
Subordinated Bridge Indebtedness, the Subordinated Term Indebtedness and any
Permitted Refinancing Indebtedness (provided that such guaranties are
--------
subordinated to the obligations of the Guarantors under this Guaranty to at
least the same extent and in the same manner as the Subordinated Bridge
Indebtedness, the Subordinated Term Indebtedness or Permitted Refinancing
Indebtedness, as the case may be, is (or are) subordinated to the Guaranteed
Obligations), and (iii) Indebtedness in an aggregate principal amount not
exceeding $5,000,000 outstanding at any time issued to repurchase its 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 the Guaranteed Obligations on terms and conditions satisfactory to
the Administrative Agent in its sole discretion (which terms and conditions may,
at the sole discretion of the Administrative Agent, provide that such
Indebtedness shall not mature or require any cash payment of principal or
interest at any time prior to the first anniversary of the Tranche B Maturity
Date)).
(b) Such Guarantor shall not own, lease, manage or otherwise operate any
assets or properties, or make any investments, loans or advances to any Person,
in each case other than in connection with the activities described in
subsection (c) below.
(c) Such Guarantor shall not conduct, transact or otherwise engage, or
commit to transact, conduct or otherwise engage, in any business or operations
other than (i) the consummation
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<PAGE>
of the Transactions, (ii) the ownership of equity interests in the Borrower
(and, as to BrightView, also the ownership of equity interests in Holdings) and
the exercise of rights and performance of obligations in connection therewith,
(iii) the entry into, and exercise of rights and performance of obligations in
respect of, (A) this Guaranty and any other Transaction Documents to which it is
or may become a party, (B) contracts and agreements with or for the benefit of
officers, directors and employees of it or any Subsidiary thereof relating to
their employment or directorships, (C) insurance policies and related contracts
and agreements and (D) equity subscription agreements, registration rights
agreements, warrant agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, (iv) the
offering, issuance and sale of its equity securities to the extent such
offering, issuance or sale does not constitute a Default or Event of Default,
(v) the filing of registration statements, and compliance with applicable
reporting and other obligations, under federal, state or other securities laws,
(vi) the performance of obligations under and compliance with its articles of
organization and operating agreement, or certificate of incorporation and by-
laws, or any applicable law, ordinance, regulation, rule, order, judgment,
decree or permit, including, without limitation, as a result of or in connection
with the activities of its Subsidiaries, (vii) the performance of contractual
obligations not otherwise prohibited hereunder, (viii) the incurrence and
payment of its business expenses and any taxes for which it may be liable, and
(ix) other activities reasonably incidental or related to the foregoing .
(d) Such Guarantor will (i) maintain and preserve in full force and effect
its limited liability company or corporate existence, as applicable, and (ii)
comply in all respects with all Requirements of Law applicable in respect of the
conduct of its business and the ownership and operation of its properties,
except to the extent the failure so to comply could not be reasonably expected
to have a Material Adverse Effect.
(e) Such Guarantor will contribute to the Borrower, promptly upon its
receipt thereof, such of the Net Cash Proceeds received by it from any Debt
Issuance or Equity Issuance as shall enable the Borrower to comply with its
obligations under SECTION 2.6(F) of the Credit Agreement arising as a result of
such Debt Issuance or Equity Issuance.
(f) Such Guarantor will deliver to the Lenders, promptly upon the sending,
filing or receipt thereof, all reports and other information sent, filed or
received by it of the types described in SECTIONS 6.2(D) and 6.2(E) of the
Credit Agreement.
(g) Such Guarantor shall not take or omit to take any action if such
action or omission would result in a violation of any of the covenants of the
Borrower contained in ARTICLE VI, ARTICLE VII or ARTICLE VIII of the Credit
Agreement.
8. Payments; Application; Set-Off. (a) Each Guarantor agrees that,
------------------------------
upon the failure of the Borrower to pay any Guaranteed Obligations when and as
the same shall become due (whether at the stated maturity, by acceleration or
otherwise), and without limitation of any other right or remedy that any
Guaranteed Party may have at law, in equity or otherwise against such Guarantor,
such Guarantor will forthwith pay or cause to be paid to the Administrative
Agent, for the benefit of the Guaranteed Parties, an amount equal to the amount
of the Guaranteed Obligations then due and owing as aforesaid.
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<PAGE>
(b) All payments made by each Guarantor hereunder will be made in Dollars
to the Administrative Agent, without set-off, counterclaim or other defense and,
in accordance with SECTION 2.17 of the Credit Agreement, free and clear of and
without deduction for any Taxes, each Guarantor hereby agreeing to comply with
and be bound by the provisions of SECTION 2.17 of the Credit Agreement in
respect of all payments made by it hereunder and the provisions of which Section
are hereby incorporated into and made a part of this Guaranty by this reference
as if set forth herein at length.
(c) All payments made hereunder shall be applied upon receipt as follows:
(i) first, to the payment of all Other Obligations owing to the
Administrative Agent;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Total Obligations
owing to the Guaranteed Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this Guaranty,
to the Guarantors or any other Person lawfully entitled to receive such
surplus.
(d) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Guaranteed Party that
has entered into an Interest Rate Protection Agreement with the Borrower for a
determination (which such Guaranteed Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding Guaranteed
Obligations owed to such Guaranteed Party under any such Interest Rate
Protection Agreement. Unless it has actual knowledge (including by way of
written notice from any such Guaranteed Party) to the contrary, the
Administrative Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements or Obligations in respect thereof are in
existence between any Guaranteed Party and the Borrower.
(e) The Guarantors shall remain jointly and severally liable to the extent
of any deficiency between the amount of all payments made hereunder and the
aggregate amount of the sums referred to in clauses (i) and (ii) of subsection
(c) above.
(f) In addition to all other rights and remedies available under the
Credit Documents or applicable law or otherwise, upon and at any time after the
occurrence and during the continuance of any Event of Default, each Guaranteed
Party may, and is hereby authorized by each Guarantor, at any such time and from
time to time, to the fullest extent permitted by applicable law, without
presentment, demand, protest or other notice of any kind, all of which are
hereby knowingly and expressly waived by each Guarantor, to set off and to apply
any and all deposits (general or special, time or demand, provisional or final)
and any other property at any time held (including at any branches or agencies,
wherever located), and any other indebtedness at any time owing, by such
Guaranteed Party to or for the credit or the account of such Guarantor against
any or all of the obligations of such Guarantor to such Guaranteed Party
hereunder now or hereafter existing, whether or not such obligations may be
contingent or unmatured, each Guarantor hereby granting to each Guaranteed Party
a continuing security interest in and Lien upon all such deposits and other
property as security for such obligations. Each Guaranteed Party agrees to
notify any affected Guarantor
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<PAGE>
promptly after any such set-off and application; provided, however,
that the failure to give such notice shall not affect the validity of such set-
off and application.
9. Enforcement. The Guaranteed Parties agree that, except as provided
-----------
in SECTION 8(F), this Guaranty may be enforced only by the Administrative Agent,
acting upon the instructions or with the consent of the Required Lenders as
provided for in the Credit Agreement, and that no Guaranteed Party shall have
any right individually to enforce or seek to enforce this Guaranty or to realize
upon any Collateral or other security given to secure the payment and
performance of the Guarantors' obligations hereunder. The obligations of each
Guarantor hereunder are independent of the Guaranteed Obligations, and a
separate action or actions may be brought against either Guarantor whether or
not action is brought against the Borrower or the other Guarantor and whether or
not the Borrower or the other Guarantor is joined in any such action. Each
Guarantor agrees that to the extent all or part of any payment of the Guaranteed
Obligations made by any Person is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid by or on behalf
of any Guaranteed Party to a trustee, receiver or any other party under any
Insolvency Laws (the amount of any such payment, a "Reclaimed Amount"), then, to
the extent of such Reclaimed Amount, this Guaranty shall continue in full force
and effect or be revived and reinstated, as the case may be, as to the
Guaranteed Obligations intended to be satisfied as if such payment had not been
received; and each Guarantor acknowledges that the term "Guaranteed Obligations"
includes all Reclaimed Amounts that may arise from time to time.
Notwithstanding any other provisions contained herein or in any other Credit
Document, no provision of this Guaranty shall require or permit the collection
from either Guarantor of interest in excess of the maximum rate or amount that
such Guarantor may be required or permitted to pay pursuant to applicable law.
10. Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by either Guarantor
from, any provision of this Guaranty, shall be effective unless in a writing
executed and delivered in accordance with SECTION 11.6 of the Credit Agreement,
and then the same shall be effective only in the specific instance and for the
specific purpose for which given.
11. Continuing Guaranty; Term; Successors and Assigns; Assignment;
--------------------------------------------------------------
Survival. This Guaranty is a continuing guaranty and covers all of the
- --------
Guaranteed Obligations as the same may arise and be outstanding at any time and
from time to time from and after the date hereof, and shall (i) remain in full
force and effect until satisfaction of all of the Termination Requirements, (ii)
be binding upon and enforceable against each Guarantor and its successors and
assigns (provided, however, that no Guarantor may sell, assign or transfer any
-------- -------
of its rights, interests, duties or obligations hereunder without the prior
written consent of all of the Lenders) and (iii) inure to the benefit of and be
enforceable by each Guaranteed Party and its successors and assigns. All
representations, warranties, covenants and agreements herein shall survive the
execution and delivery of this Guaranty.
12. Governing Law; Consent to Jurisdiction. THIS GUARANTY SHALL BE
--------------------------------------
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE GUARANTEED PARTIES AND THE
GUARANTORS DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, EACH GUARANTOR HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR
ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH
CAROLINA FOR ANY
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<PAGE>
PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS, OR
ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER CREDIT
DOCUMENTS, OR ANY PROCEEDING TO WHICH ANY GUARANTEED PARTY OR SUCH GUARANTOR IS
A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY GUARANTEED PARTY OR SUCH GUARANTOR. EACH GUARANTOR IRREVOCABLY
AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT
RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY
HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
--------------------
THE CONDUCT OF ANY SUCH PROCEEDING. EACH GUARANTOR CONSENTS THAT ALL SERVICE OF
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS
ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) BUSINESS DAYS
AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY
ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY GUARANTEED PARTY
TO BRING ANY ACTION OR PROCEEDING AGAINST EITHER GUARANTOR IN THE COURTS OF ANY
OTHER JURISDICTION.
13. Arbitration; Preservation and Limitation of Remedies. (a) Upon demand
----------------------------------------------------
of any party hereto, whether made before or after institution of any judicial
proceeding, any dispute, claim or controversy arising out of, connected with or
relating to this Guaranty or any other Credit Document ("Disputes") between or
among the Guarantors and the Guaranteed Parties, or any of them, shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from documents
executed in the future, or claims arising out of or connected with the
transactions contemplated by this Guaranty, the Credit Agreement and the other
Credit Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA"), as in effect from time to time,
and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be
conducted in the city in which the principal office of the Administrative Agent
is located. The expedited procedures set forth in Rule 51 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or, if such person is not available to serve, the
single arbitrator may be a licensed attorney. Notwithstanding the foregoing,
this arbitration provision does not apply to Disputes under or related to
Interest Rate Protection Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise
-11-
<PAGE>
freely, independently or in connection with an arbitration proceeding or after
an arbitration action is brought. Any party hereto shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) all rights to foreclose
against any Collateral by exercising a power of sale granted pursuant to any of
the Credit Documents or under applicable law or by judicial foreclosure and
sale, including a proceeding to confirm the sale; (ii) all rights of self-help,
including peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies, including injunctive relief, sequestration, garnishment,
attachment, appointment of a receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute. The
parties hereto agree that no party shall have a remedy of punitive or exemplary
damages against any other party in any Dispute, and each party hereby waives any
right or claim to punitive or exemplary damages that it has now or that may
arise in the future in connection with any Dispute, whether such Dispute is
resolved by arbitration or judicially.
14. Notices. All notices and other communications provided for hereunder
-------
shall be given in the manner set forth in and subject to the provisions of
SECTION 11.5 of the Credit Agreement and shall be addressed (a) if to either
Guarantor, in care of the Borrower and at the Borrower's address for notices set
forth in SECTION 11.5 of the Credit Agreement, and (b) if to any Guaranteed
Party, at its address for notices set forth in SECTION 11.5 of the Credit
Agreement; or to such other address as any of the Persons listed above may
designate for itself by like notice to the other Persons listed above; and in
each case, with copies to such other Persons as may be specified under the
provisions of the Credit Agreement.
15. No Waiver. The rights and remedies of the Guaranteed Parties
---------
expressly set forth in this Guaranty and the other Credit Documents are
cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of any Guaranteed Party in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Default or Event of Default. No course of dealing between either
Guarantor and any Guaranteed Party or their agents or employees shall be
effective to amend, modify or discharge any provision of this Guaranty or any
other Credit Document or to constitute a waiver of any Default or Event of
Default. No notice to or demand upon either Guarantor in any case shall entitle
such Guarantor or the other Guarantor to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the right of any
Guaranteed Party to exercise any right or remedy or take any other or further
action in any circumstances without notice or demand.
16. Severability. To the extent any provision of this Guaranty is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Guaranty in any jurisdiction.
17. Construction. The headings of the various sections and subsections of
------------
this Guaranty have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular.
-12-
<PAGE>
18. Counterparts. This Guaranty may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their duly authorized officers as of the date first above written.
PETERSEN HOLDINGS, L.L.C.
By: ___________________________________
Title: ________________________________
BRIGHTVIEW COMMUNICATIONS GROUP, INC.
By: ___________________________________
Title: ________________________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Administrative Agent
By: _________________________________
Title: ______________________________
<PAGE>
Exhibit H to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
___________________________________
FORM OF
BORROWER PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the _____ day of
_____________, 1996 (this "Agreement"), is made by PETERSEN PUBLISHING COMPANY,
L.L.C., a Delaware limited liability company (the "Pledgor"), in favor of FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, as administrative agent for the banks and
other financial institutions (collectively, the "Lenders") party to the Credit
Agreement referred to below (in such capacity, the "Administrative Agent"), for
the benefit of the Secured Parties (as hereinafter defined). Capitalized terms
used herein without definition shall have the meanings given to them in the
Credit Agreement referred to below.
RECITALS
A. The Pledgor, the Lenders, CIBC Inc., as Documentation Agent, and First
Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent, are parties to a Credit Agreement, dated as of September 30,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Pledgor upon the terms and subject to the conditions set forth therein.
B. It is a condition to the extension of credit to the Pledgor under the
Credit Agreement that the Pledgor shall have agreed, by executing and delivering
this Agreement, to secure the payment in full of its Obligations under the
Credit Agreement and the other Credit Documents. The Secured Parties are
relying on this Agreement in their decision to extend credit to the Pledgor
under the Credit Agreement, and would not enter into the Credit Agreement
without this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Secured Parties to enter into the Credit Agreement
and to induce the Lenders to extend credit to the Pledgor thereunder, the
Pledgor hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to the
-------------
terms defined elsewhere herein, the following terms shall have the meanings set
forth below:
<PAGE>
"Accounts" shall mean, collectively, all of the Pledgor's accounts, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all of the
Pledgor's accounts receivable, all rights to payment for goods sold or leased or
to be sold or to be leased (including all rights to returned or repossessed
goods) or for services rendered at any time or for services to be rendered
(including any rights to stoppage in transit, repossession and reclamation and
other rights of an unpaid vendor or secured party), all rights under or
evidenced by book debts, notes, bills, drafts or acceptances, all Instruments
evidencing or relating to any of the foregoing, and all rights under security
agreements, guarantees, indemnities and other instruments and contracts securing
or otherwise relating to any of the foregoing, in each case whether now owned or
existing or hereafter acquired or arising.
"Collateral" shall have the meaning given to such term in SECTION 2.1.
"Collateral Accounts" shall have the meaning given to such term in SECTION
6.3.
"Contracts" shall mean, collectively, all rights of the Pledgor under all
leases, contracts and agreements to which the Pledgor is now or hereafter a
party, including, without limitation, all rights, privileges and powers, whether
for payment or performance, under distribution agreements, printing service
agreements and promotional and marketing agreements, and all rights, privileges
and powers under Investment Agreements and Licenses as more particularly
described in the definitions of such terms herein, together with any and all
extensions, modifications, amendments and renewals of such contracts and
agreements and all rights of the Pledgor to receive moneys due or to become due
thereunder or pursuant thereto and to amend, modify, terminate or exercise
rights under such contracts and agreements, but excluding rights under (but not
excluding proceeds of) any lease, agreement, license (including without
limitation any License) or contract that by the terms thereof, or under
applicable law, cannot be assigned or a security interest granted therein in the
manner contemplated by this Agreement unless consent from the relevant party or
parties has been obtained and under the terms of which lease, agreement or
contract any such assignment or grant of a security interest therein in the
absence of such consent would, or could, result in the termination thereof, but
only to the extent that (y) such rights are subject to such contractual or legal
restriction and (z) such restriction has not been rendered ineffective pursuant
to the Uniform Commercial Code of any relevant jurisdiction or any other
applicable law (including the Bankruptcy Code) or principles of equity.
"Copyrights" shall mean, collectively, all of the Pledgor's copyrights,
copyright registrations and applications for copyright registration, whether
under the laws of the United States or any other country or jurisdiction,
including all recordings, supplemental registrations and derivative or
collective work registrations, and all renewals and extensions thereof, in each
case whether now owned or existing or hereafter acquired or arising.
"Copyright Collateral" shall mean, collectively, (i) all Copyrights and
(ii) all Copyright Licenses to which the Pledgor is or hereafter becomes a party
and all other General Intangibles embodying, incorporating, evidencing or
otherwise relating or pertaining to any Copyrights, in each case whether now
owned or existing or hereafter acquired or arising.
"Copyright License" shall mean any agreement now or hereafter in effect
granting any right to any third party under any Copyright now or hereafter owned
by the Pledgor or which the Pledgor otherwise has the right to license, or
granting any right to the Pledgor under any property of the type
-2-
<PAGE>
described in the definition of Copyright herein now or hereafter owned by any
third party, and all rights of the Pledgor under any such agreement.
"Deposit Accounts" shall mean, collectively, all of the Pledgor's deposit
accounts, whether maintained with the Administrative Agent or any other bank or
depository institution, in each case whether now owned or existing or hereafter
acquired or arising and including, without limitation, any Collateral Account,
together with all funds held from time to time therein and all certificates and
instruments from time to time representing, evidencing or deposited into such
accounts.
"Equipment" shall mean, collectively, all of the Pledgor's equipment, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all machinery,
equipment, computer equipment and software, parts, supplies, appliances,
fittings, furniture and fixtures of every kind and nature, wherever located and
whether or not affixed to any real property, all Mobile Goods, and all
accessions, accessories, additions, attachments, improvements, modifications and
upgrades to, replacements of and substitutions for the foregoing, in each case
whether now owned or existing or hereafter acquired or arising.
"General Intangibles" shall mean, collectively, all of the Pledgor's
general intangibles, as defined in the Uniform Commercial Code, whether now
owned or existing or hereafter acquired or arising, including, without
limitation, all Contracts, all Copyright Collateral, Patent Collateral and
Trademark Collateral, all inventions, designs, trade secrets, trade processes,
confidential or proprietary technical or business information, know-how,
registrations, licenses, permits and franchises, all rights under or evidenced
by book debts, notes, bills, drafts, acceptances, chooses in action, causes of
action or Instruments, all indebtedness, obligations and other amounts at any
time owing to the Pledgor from any Person and all interest, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness,
obligations or other amounts (including, without limitation, all Intercompany
Obligations), all judgments, tax refund claims, claims against carriers and
shippers, claims under liens and insurance policies, all rights under security
agreements, guarantees, indemnities and other instruments and contracts securing
or otherwise relating to any of the foregoing, all invoices, customer lists,
books and records, ledger and account cards, computer tapes, disks, software,
printouts and other corporate or business records relating to the foregoing, and
all other intangible personal property of every kind and nature, and all
accessions, additions, improvements, modifications and upgrades to, replacements
of and substitutions for the foregoing, in each case whether now owned or
existing or hereafter acquired or arising, but excluding Accounts and excluding
leases, agreements, licenses (including without limitation Licenses) and
contracts to the extent excluded from Contracts under the definition of such
term herein.
"Instruments" shall mean, collectively, all instruments, chattel paper or
documents, each as defined in the Uniform Commercial Code, of the Pledgor,
whether now owned or existing or hereafter acquired or arising, evidencing,
representing, securing, arising from or otherwise relating to any Accounts,
General Intangibles, Intercompany Obligations or other Collateral, including,
without limitation, any promissory notes, drafts, bills of exchange, documents
of title and receipts.
"Intercompany Obligations" shall mean, collectively, all indebtedness,
obligations and other amounts at any time owing to the Pledgor from its
Subsidiaries and Affiliates and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness, obligations or
other amounts.
-3-
<PAGE>
"Interests" shall mean, collectively, all partnership, joint venture,
limited liability company or other equity interests in any Person not a
corporation (including, without limitation, any such Person that is or hereafter
becomes a Subsidiary of the Pledgor) at any time owned by the Pledgor, and all
rights, powers and privileges relating thereto or arising therefrom, including,
without limitation, the Pledgor's right to vote and to manage and administer the
business of any such Person pursuant to the applicable Investment Agreement,
together with all other rights, interests, claims and other property of the
Pledgor in any manner arising out of or relating to any such interests, whether
now existing or hereafter arising or acquired, of whatever kind or character
(including any tangible or intangible property or interests therein), and
further including, without limitation (but subject to the provisions of SECTION
5.3), all rights of the Pledgor to receive amounts due and to become due
(including, without limitation, dividends, distributions, interest, income and
returns of capital) under or in respect of any Investment Agreement, to receive
payments or other amounts upon termination of any Investment Agreement, and to
receive any other payments or distributions, whether in cash, securities,
property, or a combination thereof, in respect of any such interests, all of the
Pledgor's rights of access to the books and records of any such Person, and all
rights granted or available under applicable law in connection therewith, all
options, warrants and other rights exercisable for any of the foregoing, and all
securities convertible into any of the foregoing, in each case whether now or
hereafter existing and any time owned by the Pledgor, together with all
certificates, instruments and entries upon the books of financial intermediaries
at any time evidencing any of the foregoing.
"Inventory" shall mean, collectively, all of the Pledgor's inventory, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all goods
manufactured, acquired or held for sale or lease, all raw materials, component
materials, work-in-process and finished goods, all supplies, goods and other
items and materials used or consumed in the manufacture, production, packaging,
shipping, selling, leasing or furnishing of such inventory or otherwise in the
operation of the business of the Pledgor, all goods in which the Pledgor now or
at any time hereafter has any interest or right of any kind, and all goods that
have been returned to or repossessed by or on behalf of the Pledgor, in each
case whether or not the same is in transit or in the constructive, actual or
exclusive occupancy or possession of the Pledgor or is held by the Pledgor or by
others for the account of the Pledgor, and in each case whether now owned or
existing or hereafter acquired or arising.
"Investment Agreement" shall mean any partnership agreement, joint venture
agreement, limited liability company operating agreement or other agreement
creating, governing or evidencing any Interests and to which the Pledgor is now
or hereafter becomes a party, as any such agreement may be amended, modified,
supplemented, restated or replaced from time to time.
"Investments" shall mean, collectively, the Stock and the Interests.
"License" shall mean any Copyright License, Patent License or Trademark
License.
"Material Contracts" shall have the meaning given to such term in SECTION
3.8.
"Mobile Goods" shall mean, collectively, all of the Pledgor's motor
vehicles, tractors, trailers, aircraft, rolling stock and other like property,
whether or not the title thereto is governed by a certificate of title or
ownership), in each case whether now owned or existing or hereafter acquired or
arising.
-4-
<PAGE>
"Patents" shall mean, collectively, all of the Pledgor's letters patent,
whether under the laws of the United States or any other country or
jurisdiction, all recordings and registrations thereof and applications
therefor, including, without limitation, the inventions described therein, all
reissues, continuations, divisions, renewals, extensions, continuations-in-part
thereof, in each case whether now owned or existing or hereafter acquired or
arising.
"Patent Collateral" shall mean, collectively, (i) all Patents and (ii) all
Patent Licenses to which the Pledgor is or hereafter becomes a party and all
other General Intangibles embodying, incorporating, evidencing or otherwise
relating or pertaining to any Patents, in each case whether now owned or
existing or hereafter acquired or arising.
"Patent License" shall mean any agreement now or hereafter in effect
granting to any third party any right to make, use or sell any invention on
which a Patent, now or hereafter owned by the Pledgor or which the Pledgor
otherwise has the right to license, is in existence, or granting to the Pledgor
any right to make, use or sell any invention on which property of the type
described in the definition of Patent herein, now or hereafter owned by any
third party, is in existence, and all rights of the Pledgor under any such
agreement.
"Proceeds" shall have the meaning given to such term in SECTION 2.1.
"Secured Parties" shall mean, collectively, the Lenders (including the
Issuing Lender and the Swingline Lender in their capacities as such, and
including any Lender in its capacity as a counterparty to any Interest Rate
Protection Agreement with the Pledgor), the Documentation Agent and the
Administrative Agent.
"Securities Act" shall have the meaning given to such term in SECTION 6.5.
"Stock" shall mean, collectively, all of the issued and outstanding shares,
interests or other equivalents of capital stock of any corporation (including,
without limitation, any corporation that is or hereafter becomes a Subsidiary of
the Pledgor) at any time owned by the Pledgor, whether voting or non-voting and
whether common or preferred, all options, warrants and other rights to acquire,
and all securities convertible into, any of the foregoing, all interest,
dividends, distributions and other amounts, and all additional stock, warrants,
options, securities and other property, from time to time paid or payable or
distributed or distributable in respect of any of the foregoing, in each case
whether now or hereafter existing and any time owned by the Pledgor, together
with all certificates, instruments and entries upon the books of financial
intermediaries at any time evidencing any of the foregoing.
"Trademarks" shall mean, collectively, all of the Pledgor's trademarks,
service marks, trade names, corporate and company names, business names, logos,
trade dress, trade styles, other source or business identifiers, designs and
general intangibles of a similar nature, whether under the laws of the United
States or any other country or jurisdiction, all recordings and registrations
thereof and applications therefor, all renewals and extensions thereof, all
rights corresponding thereto, and all goodwill associated therewith or
symbolized thereby, in each case whether now owned or existing or hereafter
acquired or arising.
"Trademark Collateral" shall mean, collectively, (i) all Trademarks and
(ii) all Trademark Licenses to which the Pledgor is or hereafter becomes a party
and all other General Intangibles
-5-
<PAGE>
embodying, incorporating, evidencing or otherwise relating or pertaining to any
Trademarks, in each case whether now owned or existing or hereafter acquired or
arising.
"Trademark License" shall mean any agreement now or hereafter in effect
granting any right to any third party under any Trademark now or hereafter owned
by the Pledgor or which the Pledgor otherwise has the right to license, or
granting any right to the Pledgor under any property of the type described in
the definition of Trademark herein now or hereafter owned by any third party,
and all rights of the Pledgor under any such agreement.
1.2 Other Terms. All terms in this Agreement that are not capitalized
-----------
shall have the meanings provided by the applicable Uniform Commercial Code to
the extent the same are used or defined therein.
ARTICLE II
CREATION OF SECURITY INTEREST
2.1 Pledge and Grant of Security Interest. The Pledgor hereby pledges,
-------------------------------------
assigns and delivers to the Administrative Agent, for the ratable benefit of the
Secured Parties, and grants to the Administrative Agent, for the ratable benefit
of the Secured Parties, a Lien upon and security interest in, all of the
Pledgor's right, title and interest in and to the following, in each case
whether now owned or existing or hereafter acquired or arising (collectively,
the "Collateral"):
(i) all Accounts;
(ii) all Contracts;
(iii) all Deposit Accounts;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Inventory;
(vii) all Instruments;
(viii) subject to the provisions of SECTION 5.1(A), all Investments;
(ix) to the extent not covered or not specifically excluded by clauses
(i) through (viii) above, all of the Pledgor's other personal property,
whether now owned or existing or hereafter arising or acquired; and
(x) any and all proceeds, as defined in the Uniform Commercial Code,
products, rents and profits of or from any and all of the foregoing and, to
the extent not otherwise included, (w) all payments under any insurance
(whether or not the Administrative Agent is the loss payee thereunder),
indemnity, warranty or guaranty with respect to any of the foregoing
-6-
<PAGE>
Collateral, (x) all payments in connection with any requisition,
condemnation, seizure or forfeiture with respect to any of the foregoing
Collateral, (y) all claims and rights to recover for any past, present or
future infringement or dilution of or injury to any Copyright Collateral,
Patent Collateral or Trademark Collateral, and (z) all other amounts from
time to time paid or payable under or with respect to any of the foregoing
Collateral (collectively, "Proceeds"). For purposes of this Agreement, the
term "Proceeds" includes whatever is receivable or received when Collateral
or Proceeds are sold, exchanged, collected or otherwise disposed of,
whether voluntarily or involuntarily.
2.2 Security for Obligations. This Agreement and the Collateral secure
------------------------
the full and prompt payment, at any time and from time to time as and when due
(whether at the stated maturity, by acceleration or otherwise), of all
Obligations of the Pledgor under the Credit Agreement and the other Credit
Documents, including, without limitation, all principal of and interest on the
Loans, all Reimbursement Obligations in respect of Letters of Credit, all fees,
expenses, indemnities and other amounts payable by the Pledgor under the Credit
Agreement or any other Credit Document (including interest accruing after the
filing of a petition or commencement of a case by or with respect to the Pledgor
seeking relief under any applicable federal and state laws pertaining to
bankruptcy, reorganization, arrangement, moratorium, readjustment of debts,
dissolution, liquidation or other debtor relief, specifically including, without
limitation, the Bankruptcy Code and any fraudulent transfer and fraudulent
conveyance laws, whether or not the claim for such interest is allowed in such
proceeding), all obligations of the Pledgor to any Lender under any Interest
Rate Protection Agreement, all Obligations that, but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, would become due,
and all fees, costs and expenses payable by the Pledgor under SECTION 8.1, in
each case whether now existing or hereafter created or arising and whether
direct or indirect, absolute or contingent, due or to become due.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants as follows:
3.1 Ownership of Collateral. The Pledgor owns, or has valid rights as a
-----------------------
lessee or licensee with respect to, all Collateral purported to be pledged by it
hereunder, free and clear of any Liens except for the Liens granted to the
Administrative Agent, for the benefit of the Secured Parties, pursuant to this
Agreement, and except for other Permitted Liens. No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any government or public office, and
the Pledgor has not filed or consented to the filing of any such statement or
notice, except (i) Uniform Commercial Code financing statements naming the
Administrative Agent as secured party, (ii) security instruments filed in the
U.S. Copyright Office or the U.S. Patent and Trademark Office naming the
Administrative Agent as secured party and (iii) as may be otherwise permitted by
the Credit Agreement.
3.2 Security Interests; Filings. This Agreement, together with (i) the
---------------------------
filing of duly completed and executed Uniform Commercial Code financing
statements naming the Pledgor as debtor, the Administrative Agent as secured
party, and describing the Collateral, in the jurisdictions set forth on Annex B
-------
hereto, which have been duly executed and delivered by the Pledgor and delivered
to the
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<PAGE>
Administrative Agent for filing, (ii) to the extent required by applicable law,
the filing of duly completed and executed assignments in the forms set forth as
Exhibits B and C with the U.S. Copyright Office or the U.S. Patent and Trademark
- ---------- -
Office, as appropriate, with regard to registered Copyright Collateral, Patent
Collateral and Trademark Collateral, as the case may be, (iii) in the case of
uncertificated Investments, compliance with Section 8-313 (or its successor
provision) of the applicable Uniform Commercial Code, (iv) as to Mobile Goods
covered by a certificate of title or ownership, the notation of the
Administrative Agent's security interest therein on the applicable certificates
of title or ownership, and (v) the delivery to the Administrative Agent of all
chattel paper, promissory notes and other Instruments included in the
Collateral, creates, and at all times shall constitute, a valid and perfected
security interest in and Lien upon the Collateral in favor of the Administrative
Agent, for the benefit of the Secured Parties, to the extent a security interest
therein can be perfected by such filings or possession of such chattel paper,
promissory notes or Instruments, as applicable, superior and prior to the rights
of all other Persons therein (except for Permitted Liens), and no other or
additional filings, registrations, recordings or actions are or shall be
necessary or appropriate in order to maintain the perfection and priority of
such Lien and security interest, other than actions required with respect to
Collateral of the types excluded from Article 9 of the applicable Uniform
Commercial Code or from the filing requirements under such Article 9 by reason
of Section 9-104 or 9-302 of the applicable Uniform Commercial Code and other
than continuation statements required under the applicable Uniform Commercial
Code (it being specifically noted that the Administrative Agent may at its
option, but shall not be required to, require that any bank or other depository
institution at which a Deposit Account is maintained enter into a written
agreement or take such other action as may be necessary to perfect the security
interest of the Administrative Agent in such Deposit Account and the funds
therein, and it being specifically understood that the security interest of the
Administrative Agent in such Deposit Account, absent such action, might not be
perfected).
3.3 Locations. Annex C lists, as to the Pledgor, (i) the address of its
--------- -------
chief executive office and principal place of business and each other place of
business, (ii) the address of each location of all original invoices, ledgers,
chattel paper, Instruments and other records or information evidencing or
relating to the Accounts, General Intangibles or other Collateral, and (iii) the
address of each location at which any Equipment or Inventory (other than Mobile
Goods and goods in transit) is kept or maintained, in each instance except for
any new locations established in accordance with the provisions of SECTION 4.2.
Except as may be otherwise noted therein, all locations identified in Annex C
-------
are leased by the Pledgor. The Pledgor does not presently conduct business
under any prior or other limited liability company name or under any trade or
fictitious name, except as indicated on Annex C, and the Pledgor has not entered
-------
into any contract or granted any Lien within the past five years under any name
other than its legal limited liability company name or a trade or fictitious
name indicated on Annex C.
-------
3.4 Authorization; Consent. No authorization, consent or approval of, or
----------------------
declaration or filing with, any Governmental Authority is required for the valid
execution, delivery and performance by the Pledgor of this Agreement, the grant
by it of the Lien and security interest in favor of the Administrative Agent
provided for herein, or the exercise by the Administrative Agent of its rights
and remedies hereunder, except for the filings described in SECTION 3.2, any
notices required under the Federal Assignment of Claims Act and similar state
statutes and any notice filing with state tax or revenue authorities required to
be made by account creditors in order to enforce any Accounts in such state,
and, in the case of Investments, except as may be required in connection with a
disposition of any such Collateral by laws affecting the offering and sale of
securities generally.
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<PAGE>
3.5 No Restrictions. There are no statutory or regulatory restrictions,
---------------
prohibitions or limitations on the Pledgor's ability to grant to the
Administrative Agent a Lien upon and security interest in the Collateral
pursuant to this Agreement or on the exercise by the Administrative Agent of its
rights and remedies hereunder (including any foreclosure upon or collection of
the Collateral, assuming compliance with any notice and other procedural
requirements applicable to such action under law), and there are no contractual
restrictions on the Pledgor's ability so to grant such Lien and security
interest.
3.6 Accounts. Each Account is, or at the time it arises will be, a bona
--------
fide, valid and legally enforceable indebtedness of the account debtor according
to its terms, arising out of or in connection with the sale, lease or
performance of goods or services by the Pledgor.
3.7 Investments. As of the date hereof, the Investments required to be
-----------
pledged by the Pledgor hereunder consist of the number and type of shares of
capital stock (in the case of issuers that are corporations) or the percentage
and type of equity interests (in the case of issuers other than corporations) as
described in Annex A. All of the Investments have been duly and validly issued
-------
and are fully paid and nonassessable (or, in the case of Interests, not subject
to any capital call or other additional capital requirement) and not subject to
any preemptive rights, warrants, options or similar rights or restrictions in
favor of third parties or any contractual or other restrictions upon transfer.
3.8 Material Contracts. As to each Investment Agreement, each Contract
------------------
listed on Annex D, each Contract specified in writing by the Administrative
-------
Agent to the Pledgor at any time after the date hereof, and each other Contract
to which the Pledgor is or hereafter becomes a party and that is material to its
business (the foregoing, collectively, "Material Contracts"), (i) the Pledgor is
not in default in any material respect under such Material Contract, and to the
knowledge of the Pledgor, none of the other parties to such Material Contract is
in default in any material respect thereunder (except as shall have been
disclosed in writing to the Administrative Agent), (ii) such Material Contract
is, or at the time of execution will be, the legal, valid and binding obligation
of all parties thereto, enforceable against such parties in accordance with the
respective terms thereof, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and no defense, offset, deduction or counterclaim will exist in any
material respect thereunder in favor of any such party, (iii) the performance by
the Pledgor of its obligations under such Material Contract in accordance with
its terms will not contravene any Requirement of Law or any contractual
restriction binding on or affecting the Pledgor or any of its properties, and
will not result in or require the creation of any Lien upon or with respect to
any of its properties, and (iv) the Pledgor has (or at the time of execution
will have) furnished the Administrative Agent with a correct and complete copy
of each Material Contract to which it is a party as then in effect.
3.9 Intellectual Property. Annexes E, F and G correctly set forth all
--------------------- ------------ -
registered Copyrights, Patents and Trademarks owned by the Pledgor and as of the
date hereof used or proposed to be used in its business. The Pledgor owns or
possesses the valid right to use all such Copyrights, Patents and Trademarks
listed under its name; all registrations therefor have been validly issued under
applicable law and are in full force and effect; no claim has been made in
writing or, to the knowledge of the Pledgor, orally, that any of such
Copyrights, Patents or Trademarks is invalid or unenforceable or violates or
infringes the rights of any other Person, and there is no such violation or
infringement in existence; and to the knowledge of the Pledgor, no other Person
is presently infringing upon the rights of the Pledgor with regard to any of
such Copyrights, Patents or Trademarks.
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<PAGE>
3.10 Documents of Title. No bill of lading, warehouse receipt or other
------------------
document or instrument of title is outstanding with respect to any Collateral
other than Mobile Goods and other than Inventory in transit in the ordinary
course of business to a location set forth on Annex C or to a customer of the
-------
Pledgor.
ARTICLE IV
COVENANTS
4.1 Use and Disposition of Collateral. So long as no Event of Default
---------------------------------
shall have occurred and be continuing, the Pledgor may, in any lawful manner not
inconsistent with the provisions of this Agreement and the other Credit
Documents, use, control and manage the Collateral in the operation of its
business, and receive and use the income, revenue and profits arising therefrom
and the Proceeds thereof, in the same manner and with the same effect as if this
Agreement had not been made; provided, however, that the Pledgor will not sell
-------- -------
or otherwise dispose of, grant any option with respect to, or mortgage, pledge,
grant any Lien with respect to or otherwise encumber any of the Collateral or
any interest therein, except for the security interest created in favor of the
Administrative Agent hereunder and except as may be otherwise expressly
permitted in accordance with the terms of this Agreement and the Credit
Agreement (including any applicable provisions therein regarding delivery of
proceeds of sale or disposition to the Administrative Agent).
4.2 Change of Name, Locations, etc. The Pledgor will not (i) change its
-------------------------------
name, identity or corporate structure, (ii) change its chief executive office or
principal place of business from the location thereof listed on Annex C, or
-------
(iii) remove any Collateral (other than Mobile Goods and goods in transit), or
any books, records or other information relating to Collateral, from the
applicable location thereof listed on Annex C, or keep or maintain any
-------
Collateral at a location not listed on Annex C, unless in each case the Pledgor
-------
has (1) given twenty (20) days' prior written notice to the Administrative Agent
of its intention to do so, together with information regarding any such new
location and such other information in connection with such proposed action as
the Administrative Agent may reasonably request, and (2) delivered to the
Administrative Agent ten (10) days prior to any such change or removal such
documents, instruments and financing statements as may be required by the
Administrative Agent, all in form and substance satisfactory to the
Administrative Agent, paid all necessary filing and recording fees and taxes,
and taken all other actions reasonably requested by the Administrative Agent
(including, at the reasonable request of the Administrative Agent, delivery of
opinions of counsel reasonably satisfactory to the Administrative Agent to the
effect that all such actions have been taken), in order to perfect and maintain
the Lien upon and security interest in the Collateral provided for herein in
accordance with the provisions of SECTION 3.2.
4.3 Records; Inspection. (a) The Pledgor will keep and maintain at its
-------------------
own cost and expense satisfactory and complete records of the Accounts and all
other Collateral, including, without limitation, records of all payments
received, all credits granted thereon, all merchandise returned and all other
documentation relating thereto, and will furnish to the Administrative Agent
from time to time such statements, schedules and reports (including, without
limitation, accounts receivable aging schedules) with regard to the Collateral
as the Administrative Agent may reasonably request.
(b) The Pledgor shall, from time to time at such times as may be
reasonably requested and upon reasonable notice, (i) make available to the
Administrative Agent for inspection and review at the
-10-
<PAGE>
Pledgor's offices copies of all invoices and other documents and information
relating to the Collateral (including, without limitation, itemized schedules
of all collections of Accounts, showing the name of each account debtor, the
amount of each payment and such other information as the Administrative Agent
shall reasonably request), and (ii) permit the Administrative Agent or its
representatives to visit its offices or the premises upon which any Collateral
may be located, inspect its books and records and make copies and memoranda
thereof, inspect the Collateral, discuss its finances and affairs with its
officers, employees and independent accountants and take any other actions
necessary for the protection of the interests of the Secured Parties in the
Collateral. At the request of the Administrative Agent, the Pledgor will
legend, in form and manner satisfactory to the Administrative Agent, the books,
records and materials evidencing or relating to the Collateral with an
appropriate reference to the fact that the Collateral has been assigned to the
Administrative Agent and that the Administrative Agent has a security interest
therein. The Administrative Agent shall have the right to make test
verifications of Accounts in any reasonable manner and through any reasonable
medium, and the Pledgor agrees to furnish all such reasonable assistance and
information as the Administrative Agent may require in connection therewith.
4.4 Accounts. Unless notified otherwise by the Administrative Agent in
--------
accordance with the terms hereof, the Pledgor shall endeavor to collect its
Accounts and all amounts owing to it thereunder in the ordinary course of its
business consistent with reasonable business practices and shall apply forthwith
upon receipt thereof all such amounts as are so collected to the outstanding
balances thereof, and in connection therewith shall, at the request of the
Administrative Agent, take such action as the Administrative Agent may deem
necessary or advisable (within applicable laws) to enforce such collection. The
Pledgor shall not, except to the extent done in the ordinary course of its
business consistent with reasonable business practices and in accordance with
sound business judgment and provided that no Event of Default shall have
occurred and be continuing, (i) grant any extension of the time for payment of
any Account, (ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, in whole or in part, any Person or property liable for
the payment of any Account, or (iv) allow any credit or discount on any Account.
The Pledgor shall promptly inform the Administrative Agent of any disputes with
any account debtor or obligor and of any claimed offset and counterclaim that
may be asserted with respect thereto involving, in each case, $100,000 or more,
where the Pledgor reasonably believes that the likelihood of payment by such
account debtor is materially impaired, indicating in detail the reason for the
dispute, all claims relating thereto and the amount in controversy.
4.5 Equipment. The Pledgor will, in accordance with sound business
---------
practices, maintain all Equipment used by it in its business (other than
obsolete Equipment) in good repair, working order and condition (normal wear and
tear excepted) and make all necessary repairs and replacements thereof so that
the value and operating efficiency thereof shall at all times be maintained and
preserved. The Pledgor shall not knowingly permit any Equipment to become a
fixture to any real property.
4.6 Inventory. The Pledgor will, in accordance with sound business
---------
practices, maintain all Inventory held by it or on its behalf in good saleable
or useable condition. Unless notified otherwise by the Administrative Agent
in accordance with the terms hereof, the Pledgor may, in any lawful manner not
inconsistent with the provisions of this Agreement and the other Credit
Documents, process,inconsistent use and, in the ordinary course of business but
not otherwise, sell its Inventory. Without limiting the generality of the
foregoing, the Pledgor agrees that it shall not permit any material amount of
Inventory to be in the possession of any bailee, warehouseman, agent or
processor at any time unless such bailee, warehouseman, agent or processor shall
have been notified of the security interest created by this
-11-
<PAGE>
Agreement and the Pledgor shall have exercised its reasonable best efforts to
obtain, at the Pledgor's sole cost and expense, a written agreement to hold such
Inventory subject to the security interest created by this Agreement and the
instructions of the Administrative Agent and to waive and release any Lien
(whether arising by operation of law or otherwise) it may have with respect to
such Inventory, such agreement to be in form and substance reasonably
satisfactory to the Administrative Agent.
4.7 Contracts. The Pledgor will, at its expense, at all times perform and
---------
comply with, in all material respects, all terms and provisions of each Material
Contract to which it is or hereafter becomes a party required to be performed or
complied with by it and enforce in all material respects the terms and
provisions thereof in accordance with its terms, and will not waive, amend or
modify any provision thereof in any manner other than in the ordinary course of
business of the Pledgor in accordance with reasonable business practices and for
a valid economic reason benefitting the Pledgor (provided that in no event may
--------
any waiver, amendment or modification be made that would materially adversely
affect the interests of the Administrative Agent and the Secured Parties). The
Pledgor will deliver copies of each Material Contract and each material
amendment or modification thereof to the Administrative Agent promptly upon the
execution and delivery thereof. With regard to all leases, contracts, licenses
and agreements that are excluded from the definition of the term "Contracts,"
the Pledgor covenants and agrees to exercise all of its material rights and
remedies under such leases, agreements, licenses and contracts in a commercially
reasonable manner consistent with the interests of the Administrative Agent and
the Secured Parties. The Pledgor will not enter into any Material Contract that
by its terms prohibits the assignment of the Pledgor's rights and interest
thereunder in the manner contemplated by this Agreement, other than as may be
entered into in the ordinary course of business of the Pledgor in accordance
with reasonable business practices and for a valid economic reason benefitting
the Pledgor. The Pledgor further covenants and agrees to use its reasonable best
efforts to obtain any required consent to the collateral assignment of any
Material Contract, in form and substance reasonably satisfactory to the
Administrative Agent, upon the request of the Administrative Agent, and will
deliver copies thereof to the Administrative Agent promptly upon execution and
delivery thereof. The Pledgor will notify the Administrative Agent promptly in
writing upon any termination of any Material Contract, in whole or in part, or
any material breach, default or event of default by any party thereunder.
4.8 Taxes. The Pledgor will pay and discharge (i) all taxes, assessments
-----
and governmental charges or levies imposed upon it, upon its income or profits
or upon any of its properties, prior to the date on which penalties would attach
thereto, and (ii) all lawful claims that, if unpaid, might become a Lien upon
any of its properties; provided, however, that the Pledgor shall not be required
-------- -------
to pay any such tax, assessment, charge, levy or claim that is being contested
in good faith and by proper proceedings and as to which the Pledgor has
maintained adequate reserves with respect thereto in accordance with Generally
Accepted Accounting Principles, unless and until any tax lien notice has become
effective with respect thereto or until any Lien resulting therefrom attaches to
its properties and becomes enforceable against its other creditors.
4.9 Insurance. (a) The Pledgor will, and will cause each of its
---------
Subsidiaries to, maintain and pay for, or cause to be maintained and paid for,
insurance covering commercial general liability, property and casualty, business
interruption and such other risks, and in such amounts and with such financially
sound and reputable insurance companies, as are usually and customarily carried
by companies of similar size engaged in similar businesses (and in any event,
insuring all Inventory and Equipment against such losses and risks), and will,
and will cause each of its Subsidiaries to, deliver certificates of such
insurance to the Administrative Agent with standard loss payable endorsements
naming the Administrative Agent as loss payee (on property and casualty
policies) and additional insured
-12-
<PAGE>
(on liability policies) as its interests may appear. Each such policy of
insurance shall contain a clause requiring the insurer to give not less than
thirty (30) days' prior written notice to the Administrative Agent before any
cancellation of the policies for any reason whatsoever and shall provide that
any loss shall be payable in accordance with the terms thereof notwithstanding
any act of the Pledgor or any Subsidiary that might result in the forfeiture of
such insurance.
(b) The Pledgor will, and will cause each of its Subsidiaries to, direct
all insurers under policies of property and casualty insurance on the Collateral
to pay all proceeds payable thereunder in excess of $1,000,000 for each loss
directly to the Administrative Agent. The Administrative Agent shall hold all
such proceeds for the account of the Pledgor. So long as no Event of Default
has occurred and is continuing, and subject to Section 2.6(g) of the Credit
Agreement, the Administrative Agent shall, at the Pledgor's request, disburse
such proceeds as payment for the purpose of replacing or repairing destroyed or
damaged assets, as and when required to be paid and upon presentation of
evidence satisfactory to the Administrative Agent of such required payments and
such other documents as the Administrative Agent may reasonably request. As and
to the extent required by Section 2.6(g) of the Credit Agreement, and in any
event upon and during the continuance of an Event of Default, the Administrative
Agent shall be entitled to receive all proceeds of property and casualty
insurance directly from the insurers and shall apply such proceeds as a
prepayment of the Term Loans in the order and manner provided in the Credit
Agreement. The Pledgor hereby irrevocably makes, constitutes and appoints the
Administrative Agent at all times during the continuance of an Event of Default,
its true and lawful attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of insurance, endorsing its
name on any check, draft, instrument or other item or payment for the proceeds
of such policies of insurance and for making all determinations and decisions
with respect to such policies of insurance.
(c) If the Pledgor fails to, or to cause any of its Subsidiaries to,
obtain and maintain any of the policies of insurance required to be maintained
hereunder or to pay any premium in whole or in part, the Administrative Agent
may, without waiving or releasing any obligation or Default, at the Pledgor'
expense, but without any obligation to do so, procure such policies or pay such
premiums. All sums so disbursed by the Administrative Agent, including
reasonable attorneys' fees, court costs, expenses and other charges related
thereto, shall be payable by the Pledgor to the Administrative Agent on demand
and shall be additional Obligations hereunder, secured by the Collateral.
(d) The Pledgor will, and will cause each of its Subsidiaries to, deliver
to the Administrative Agent, promptly as rendered, true copies of all material
claims and reports made in any reporting forms to insurance companies. Not less
than 30 days prior to the expiration date of the insurance policies required to
be maintained by the Pledgor and its Subsidiaries hereunder, the Pledgor will,
and will cause each of its Subsidiaries to, deliver to the Administrative Agent
one or more certificates of insurance evidencing renewal of the insurance
coverage required hereunder plus such other evidence of payment of premiums
therefor as the Administrative Agent may request. Upon the reasonable request
of the Administrative Agent from time to time, the Pledgor will, and will cause
each of its Subsidiaries to, deliver to the Administrative Agent evidence that
the insurance required to be maintained pursuant to this Section is in effect.
4.10 Intellectual Property. (a) The Pledgor will, at its own expense,
---------------------
execute, deliver and record, as promptly as possible (but in any event within 10
days) after the date hereof fully completed assignments in the forms of Exhibits
--------
B and C, as applicable, in the U.S. Copyright Office or the U.S. Patent and
- - -
Trademark Office pursuant to 35 U.S.C. (S)261, 15 U.S.C. (S)1060 or 17 U.S.C.
(S)205, as
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<PAGE>
applicable, with regard to any Copyright Collateral, Patent Collateral or
Trademark Collateral, as the case may be, described in Annex E, F or G hereto.
------- - -
In the event that after the date hereof the Pledgor shall acquire any registered
Copyright, Patent or Trademark, or effect any registration of any Copyright,
Patent or Trademark or file any application for registration thereof, whether
within the United States or any other country or jurisdiction, the Pledgor shall
promptly furnish written notice thereof to the Administrative Agent together
with information sufficient to permit the Administrative Agent, upon its receipt
of such notice, to (and the Pledgor hereby authorizes the Administrative Agent
to) modify this Agreement, as appropriate, by amending Annexes E, F and G
--------- - -
hereto or to add additional exhibits hereto to include any Copyright, Patent
or Trademark that becomes part of the Collateral under this Agreement, and the
Pledgor shall additionally, at its own expense, execute, deliver and record, as
promptly as possible (but in any event within 10 days) after the date of such
acquisition, registration or application, as applicable, with regard to United
States Patents, Trademarks and Copyrights, fully completed assignments in the
forms of Exhibits B and C, as applicable, in the U.S. Copyright Office or the
---------- -
U.S. Patent and Trademark Office as more fully described hereinabove (provided
--------
that, notwithstanding the foregoing, the Pledgor may at its election furnish
such notices and execute, deliver and record such documents and instruments on a
quarterly basis with respect to all Copyrights, Patents and Trademarks that
become part of the Collateral during such quarter), together in all instances
with any other agreements, instruments and documents that the Administrative
Agent may reasonably request from time to time to further effect and confirm the
assignment and security interest created by this Agreement in such Copyrights,
Patents and Trademarks, and the Pledgor hereby appoints the Administrative Agent
its attorney-in-fact to execute, deliver and record any and all such agreements,
instruments and documents for the foregoing purposes, all acts of such attorney
being hereby ratified and confirmed and such power, being coupled with an
interest, shall be irrevocable for so long as this Agreement shall be in effect
with respect to the Pledgor (except that compliance with this subsection shall
not be required with respect to any Copyright, Patent or Trademark that the
Pledgor has elected to abandon).
(b) The Pledgor (either itself or through its licensees or its
sublicensees) will, for each material Trademark used in the conduct of its
business, use its best efforts to (i) maintain such Trademark in full force and
effect, free from any claim of abandonment or invalidity for non-use, (ii)
maintain the quality of products and services offered under such Trademark,
(iii) display such Trademark with notice of federal registration to the extent
required by applicable law and (iv) not knowingly use or knowingly permit the
use of such Trademark in violation of any third-party rights.
(c) The Pledgor (either itself or through its licensees or sublicensees)
will refrain from committing any act, or omitting any act, whereby any material
Patent used in the conduct of the Pledgor's business may become invalidated or
dedicated to the public, and shall continue to mark any products covered by a
material Patent with the relevant patent number as required by applicable patent
laws.
(d) The Pledgor (either itself or through its licensees or sublicensees)
will, for each work covered by a material Copyright, continue to publish,
reproduce, display, adopt and distribute the work with appropriate copyright
notice as required under applicable copyright laws.
(e) The Pledgor shall notify the Administrative Agent immediately if it
knows or has reason to know that any material Patent, Trademark or Copyright
used in the conduct of its business may become abandoned or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the U.S. Patent and Trademark Office, U.S. Copyright Office or any court)
regarding the Pledgor's ownership of
-14-
<PAGE>
any material Patent, Trademark or Copyright, its right to register the same, or
to keep and maintain the same.
(f) The Pledgor will take all necessary steps that are consistent with the
practice in any proceeding before the U.S. Patent and Trademark Office, U.S.
Copyright Office or any office or agency in any political subdivision of the
United States or in any other country or any political subdivision thereof, to
maintain and pursue each application relating to any material Patents,
Trademarks or Copyrights (and to obtain the relevant grant or registration) and
to maintain each registration of any material Patents, Trademarks and Copyrights
used in the conduct of the Pledgor's business, including the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
maintenance fees, and, if consistent with sound business judgment, to initiate
opposition, interference and cancellation proceedings against third parties.
(g) In the event that any Collateral consisting of a material Patent,
Trademark or Copyright used in the conduct of the Pledgor's business is believed
infringed, misappropriated or diluted by a third party, the Pledgor shall notify
the Administrative Agent promptly after it learns thereof and shall, if
consistent with sound business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.
(h) Upon the occurrence and during the continuance of any Event of
Default, the Pledgor shall use its reasonable best efforts to obtain all
requisite consents or approvals from the licensor of each material License
included within the Copyright Collateral, Patent Collateral or Trademark
Collateral to effect the assignment of all of the Pledgor's right, title and
interest thereunder to the Administrative Agent or its designee.
4.11 Mobile Goods. Upon the request of the Administrative Agent at any
------------
time (and promptly upon the occurrence of any Event of Default), the Pledgor
will deliver to the Administrative Agent originals of the certificates of title
or ownership for all Mobile Goods owned by it, together (in the case of motor
vehicles) with the manufacturer's statement of origin with the Administrative
Agent listed as lienholder and odometer statements and together in all other
cases with appropriate instruments or certificates of transfer and delivery,
duly completed and executed, and will take such other action as the
Administrative Agent may deem necessary to perfect the security interest created
by this Agreement in all such Mobile Goods.
4.12 Delivery of Collateral. All certificates or instruments representing
----------------------
or evidencing any Accounts, Intercompany Obligations or other Collateral (other
than checks or drafts, except during the continuance of an Event of Default)
shall be delivered to and held by or on behalf of the Administrative Agent
pursuant hereto, shall be in form suitable for transfer by delivery and shall be
delivered together with undated stock powers duly executed in blank, appropriate
endorsements or other necessary instruments of registration, transfer or
assignment, duly executed and in form and substance satisfactory to the
Administrative Agent, and in each case such other instruments or documents as
the Administrative Agent may reasonably request.
4.13 Protection of Security Interest. The Pledgor agrees that it will, at
-------------------------------
its own cost and expense, take any and all actions necessary to warrant and
defend the right, title and interest of the Secured Parties in and to the
Collateral against the claims and demands of all other Persons.
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<PAGE>
ARTICLE V
CERTAIN PROVISIONS RELATING TO INVESTMENTS
5.1 Ownership; After-Acquired Investments. (a) If the Pledgor shall, at
-------------------------------------
any time and from time to time after the date hereof, acquire any additional
capital stock or other equity interests in any Person of the types described in
the definition of the terms "Stock" or "Interests," the same shall be
automatically deemed to be Stock or Interests, as the case may be, and to be
pledged to the Administrative Agent pursuant to SECTION 2.1 (but subject, in the
case of Foreign Subsidiaries, to the provisions of SECTION 6.10 of the Credit
Agreement), and the Pledgor will forthwith pledge and deposit the same with the
Administrative Agent and deliver to the Administrative Agent any certificates or
instruments therefor, together with the endorsement of the Pledgor (in the case
of any promissory notes or other instruments), undated stock powers (in the case
of Stock evidenced by certificates) or other necessary instruments of transfer
or assignment, duly executed in blank and in form and substance satisfactory to
the Administrative Agent, together with such other certificates and instruments
as the Administrative Agent may reasonably request (including Uniform Commercial
Code financing statements or appropriate amendments thereto), and will promptly
thereafter deliver to the Administrative Agent a fully completed and duly
executed amendment to this Agreement in the form of Exhibit A (each, a "Pledge
---------
Amendment") in respect thereof. The Pledgor hereby authorizes the
Administrative Agent to attach each Pledge Amendment to this Agreement, and
agrees that all such Collateral listed on any Pledge Amendment shall for all
purposes be deemed Collateral hereunder and shall be subject to the provisions
hereof; provided that the failure of the Pledgor to execute and deliver any
--------
Pledge Amendment with respect to any such additional Collateral as required
hereinabove shall not impair the security interest of the Administrative Agent
in such Collateral or otherwise adversely affect the rights and remedies of the
Administrative Agent hereunder with respect thereto.
(b) If any Investments (whether now owned or hereafter acquired) included
in the Collateral are "uncertificated securities" within the meaning of the
applicable Uniform Commercial Code or are otherwise not evidenced by any
certificate or instrument, the Pledgor will promptly notify the Administrative
Agent thereof and will promptly take and cause to be taken all actions required
under applicable law, including, as applicable, under Article 8 or 9 of the
applicable Uniform Commercial Code, to perfect the security interest of the
Administrative Agent therein.
5.2 Voting Rights. So long as no Event of Default shall have occurred and
-------------
be continuing, the Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Investments (subject to its obligations
under SECTION 5.1), and for that purpose the Administrative Agent will execute
and deliver or cause to be executed and delivered to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably request in writing
to enable the Pledgor to exercise such voting and other consensual rights;
provided, however, that the Pledgor will not cast any vote, give any consent,
- -------- -------
waiver or ratification, or take or fail to take any action, in any manner that
would, or could reasonably be expected to, violate or be inconsistent with any
of the terms of this Agreement, the Credit Agreement or any other Credit
Document, or have the effect of impairing in any material respect the position
or interests of the Administrative Agent or any other Secured Party.
5.3 Dividends and Other Distributions. So long as no Event of Default
---------------------------------
shall have occurred and be continuing (or would occur as a result thereof), and
except as provided otherwise herein, all interest, income, dividends,
distributions and other amounts payable in cash in respect of the Investments
may be paid to and retained by the Pledgor; provided, however, that all such
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interest, dividends,
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distributions and other amounts shall, at all times after the occurrence and
during the continuance of an Event of Default, be paid to the Administrative
Agent and retained by it as part of the Collateral (except to the extent applied
upon receipt to the repayment of the Obligations). The Administrative Agent
shall also be entitled at all times (whether or not during the continuance of an
Event of Default) to receive directly, and to retain as part of the Collateral,
(i) all interest, income, dividends, distributions or other amounts paid or
payable in cash or other property in respect of any Investments included in the
Collateral in connection with the dissolution, liquidation, recapitalization or
reclassification of the capital of the applicable issuer to the extent
representing (in the reasonable judgment of the Administrative Agent) an
extraordinary, liquidating or other distribution in return of capital, (ii) all
additional membership interests, warrants, options or other securities or
property (other than cash) paid or payable or distributed or distributable in
respect of any Investments included in the Collateral in connection with any
noncash dividend, distribution, return of capital, spin-off, stock split, split-
up, reclassification, combination of shares or interests or similar
rearrangement, and (iii) without affecting any restrictions against such actions
contained in the Credit Agreement, all additional membership interests,
warrants, options or other securities or property (including cash) paid or
payable or distributed or distributable in respect of any Investments included
in the Collateral in connection with any consolidation, merger, exchange of
securities, liquidation or other reorganization. All interest, income,
dividends, distributions or other amounts that are received by the Pledgor in
violation of the provisions of this Section shall be received in trust for the
benefit of the Administrative Agent, shall be segregated from other property or
funds of the Pledgor and shall be forthwith delivered to the Administrative
Agent as Collateral in the same form as so received (with any necessary
endorsements).
ARTICLE VI
REMEDIES
6.1 Remedies. If an Event of Default shall have occurred and be
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continuing, the Administrative Agent shall be entitled to exercise in respect of
the Collateral all of its rights, powers and remedies provided for herein or
otherwise available to it under any other Credit Document, by law, in equity or
otherwise, including all rights and remedies of a secured party under the
Uniform Commercial Code as in effect in each relevant jurisdiction, and shall be
entitled in particular, but without limitation of the foregoing, to exercise the
following rights, which the Pledgor agrees to be commercially reasonable:
(a) To notify any or all account debtors or obligors under any Accounts,
Contracts or other Collateral of the security interest in favor of the
Administrative Agent created hereby and to direct all such Persons to make
payments of all amounts due thereon or thereunder directly to the Administrative
Agent or to an account designated by the Administrative Agent; and in such
instance and from and after such notice, all amounts and Proceeds (including
wire transfers, checks and other instruments) received by the Pledgor in respect
of any Accounts or other Collateral shall be received in trust for the benefit
of the Administrative Agent hereunder, shall be segregated from the other funds
of the Pledgor and shall be forthwith deposited into such account or paid over
or delivered to the Administrative Agent in the same form as so received (with
any necessary endorsements or assignments), to be held as Collateral and applied
to the Obligations as provided herein; and by this provision, the Pledgor
irrevocably authorizes and directs each Person who is or shall be a party to or
liable for the performance of any Contract, upon receipt of notice from the
Administrative Agent to the effect that an Event of Default has occurred and is
continuing, to attorn to or otherwise recognize the Administrative Agent as
owner under such Contract
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and to pay, observe and otherwise perform the obligations under such Contract to
or for the Administrative Agent or the Administrative Agent's designee as though
the Administrative Agent or such designee were the Pledgor named therein, and to
do so until otherwise notified by the Administrative Agent;
(b) To take possession of, receive, endorse, assign and deliver, in its
own name or in the name of the Pledgor, all checks, notes, drafts and other
instruments relating to any Collateral, including receiving, opening and
properly disposing of all mail addressed to the Pledgor concerning Accounts and
other Collateral; to verify with account debtors or other contract parties the
validity, amount or any other matter relating to any Accounts or other
Collateral, in its own name or in the name of the Pledgor; to accelerate any
indebtedness or other obligation constituting Collateral that may be accelerated
in accordance with its terms; to take or bring all actions and suits deemed
necessary or appropriate to effect collections and to enforce payment of any
Accounts or other Collateral; to settle, compromise or release in whole or in
part any amounts owing on Accounts or other Collateral; and to extend the time
of payment of any and all Accounts or other amounts owing under any Collateral
and to make allowances and adjustments with respect thereto, all in the same
manner and to the same extent as the Pledgor might have done;
(c) To notify any or all depository institutions with which any Deposit
Accounts are maintained to remit and transfer all monies, securities and other
property on deposit in such Deposit Accounts or deposited or received for
deposit thereafter to the Administrative Agent, for deposit in a Collateral
Account or such other accounts as may be designated by the Administrative Agent,
for application to the Obligations as provided herein;
(d) To transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to the
Pledgor and with or without disclosing that such Collateral is subject to the
security interest created hereunder;
(e) To assign any Copyright Collateral, Patent Collateral or Trademark
Collateral, for such term or terms, on such conditions and in such manner as the
Administrative Agent shall determine; and to license and (to the extent
permitted by applicable law) sublicense, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any Copyright Collateral,
Patent Collateral or Trademark Collateral, throughout the world, for such term
or terms, on such conditions and in such manner as the Administrative Agent
shall determine;
(f) To require the Pledgor to, and the Pledgor hereby agrees that it will
at its expense and upon request of the Administrative Agent forthwith, assemble
all or any part of the Collateral as directed by the Administrative Agent and
make it available to the Administrative Agent at a place designated by the
Administrative Agent;
(g) To enter and remain upon the premises of any of the Pledgor and take
possession of all or any part of the Collateral, with or without judicial
process; to use the materials, services, books and records of the Pledgor for
the purpose of liquidating or collecting the Collateral, whether by foreclosure,
auction or otherwise; and to remove the same to the premises of the
Administrative Agent or any designated agent for such time as the Administrative
Agent may desire, in order to effectively collect or liquidate the Collateral;
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(h) To exercise (i) all voting, consensual and other rights and powers
pertaining to the Investments (whether or not transferred into the name of the
Administrative Agent), at any meeting of shareholders, partners, members or
otherwise, and (ii) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Investments as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Investments upon the merger,
consolidation, reorganization, reclassification, combination of shares or
interests, similar rearrangement or other similar fundamental change in the
structure of the applicable issuer, or upon the exercise by the Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
Investments, and in connection therewith, the right to deposit and deliver any
and all of the Investments with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may determine, and give all consents, waivers and
ratifications in respect of the Investments, all without liability except to
account for any property actually received by it, but the Administrative Agent
shall have no duty to exercise any such right, privilege or option or give any
such consent, waiver or ratification and shall not be responsible for any
failure to do so or delay in so doing; and for the foregoing purposes the
Pledgor will promptly execute and deliver or cause to be executed and delivered
to the Administrative Agent, upon request, all such proxies and other
instruments as the Administrative Agent may reasonably request to enable the
Administrative Agent to exercise such rights and powers; AND IN FURTHERANCE OF
THE FOREGOING AND WITHOUT LIMITATION THEREOF, THE PLEDGOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE ADMINISTRATIVE AGENT AS THE TRUE AND LAWFUL PROXY
AND ATTORNEY-IN-FACT OF THE PLEDGOR, WITH FULL POWER OF SUBSTITUTION IN THE
PREMISES, TO EXERCISE ALL SUCH VOTING, CONSENSUAL AND OTHER RIGHTS AND POWERS TO
WHICH ANY HOLDER OF ANY INVESTMENTS WOULD BE ENTITLED BY VIRTUE OF HOLDING THE
SAME, WHICH PROXY AND POWER OF ATTORNEY, BEING COUPLED WITH AN INTEREST, IS
IRREVOCABLE AND SHALL BE EFFECTIVE FOR SO LONG AS THIS AGREEMENT SHALL BE IN
EFFECT; and
(i) To sell, resell, assign and deliver, in its sole discretion, all or
any of the Collateral, in one or more parcels, on any securities exchange on
which any Investments may be listed, at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, upon credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as the Administrative Agent may deem satisfactory. If any of the
Collateral is sold by the Administrative Agent upon credit or for future
delivery, the Administrative Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Administrative Agent may resell such Collateral. In no event shall the
Pledgor be credited with any part of the Proceeds of sale of any Collateral
until and to the extent cash payment in respect thereof has actually been
received by the Administrative Agent. Each purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor, and the
Pledgor hereby expressly waives all rights of redemption, stay or appraisal, and
all rights to require the Administrative Agent to marshal any assets in favor of
the Pledgor or any other party or against or in payment of any or all of the
Obligations, that it has or may have under any rule of law or statute now
existing or hereafter adopted. No demand, presentment, protest, advertisement
or notice of any kind (except any notice required by law, as referred to below),
all of which are hereby expressly waived by the Pledgor, shall be required in
connection with any sale or other disposition of any part of the Collateral. If
any notice of a proposed sale or other disposition of any part of the Collateral
shall be required under applicable law, the Administrative Agent shall give the
Pledgor at least ten (10) days' prior notice of the time and place of any public
sale and of the time after which any private sale or other disposition is to be
made, which notice the Pledgor agrees is commercially
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<PAGE>
reasonable. The Administrative Agent shall not be obligated to make any sale of
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale may have been given. The Administrative Agent may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. Upon each public sale and, to the extent
permitted by applicable law, upon each private sale, the Administrative Agent
may purchase all or any of the Collateral being sold, free from any equity,
right of redemption or other claim or demand, and may make payment therefor by
endorsement and application (without recourse) of the Obligations in lieu of
cash as a credit on account of the purchase price for such Collateral.
6.2 Application of Proceeds. (a) All Proceeds collected by the
-----------------------
Administrative Agent upon any sale, other disposition of or realization upon any
of the Collateral, together with all other moneys received by the Administrative
Agent hereunder, shall be applied as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, all amounts advanced by the Administrative Agent
for the account of the Pledgor, and all other amounts payable to the
Administrative Agent under SECTION 8.1;
(ii) second, after payment in full of the amounts specified in clause
(i) above, to the ratable payment of all other Obligations owing to the
Secured Parties; and
(iii) third, after payment in full of the amounts specified in clauses
(i) and (ii) above, and following the termination of this Agreement, to the
Pledgor or any other Person lawfully entitled to receive such surplus.
(b) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Secured Party that has
entered into an Interest Rate Protection Agreement with the Pledgor for a
determination (which such Secured Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding
Obligations owed to such Secured Party under any such Interest Rate Protection
Agreement. Unless it has actual knowledge (including by way of written notice
from any such Secured Party) to the contrary, the Administrative Agent, in
acting hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Obligations in respect thereof are in existence between any
Secured Party and the Pledgor.
(c) The Pledgor shall remain liable to the extent of any deficiency
between the amount of all Proceeds realized upon sale or other disposition of
the Collateral pursuant to this Agreement and the aggregate amount of the sums
referred to in clauses (i) and (ii) of subsection (a) above. Upon any sale of
any Collateral hereunder by the Administrative Agent (whether by virtue of the
power of sale herein granted, pursuant to judicial proceeding, or otherwise),
the receipt of the Administrative Agent or the officer making the sale shall be
a sufficient discharge to the purchaser or purchasers of the Collateral so sold,
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Administrative
Agent or such officer or be answerable in any way for the misapplication
thereof.
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6.3 Collateral Accounts. Upon the occurrence and during the continuance
-------------------
of an Event of Default, the Administrative Agent shall have the right to cause
to be established and maintained, at its principal office or such other location
or locations as it may establish from time to time in its discretion, one or
more cash collateral bank accounts (collectively, "Collateral Accounts") for the
collection of Proceeds of the Collateral. Such Proceeds, when deposited, shall
continue to constitute Collateral for the Obligations and shall not constitute
payment thereof until applied as herein provided. The Administrative Agent
shall have sole dominion and control over all funds deposited in any Collateral
Account, and such funds may be withdrawn therefrom only by the Administrative
Agent. Upon the occurrence and during the continuance of an Event of Default,
the Administrative Agent shall have the right to (and, if directed by the
Required Lenders pursuant to the Credit Agreement, shall) apply amounts held in
the Collateral Accounts in payment of the Obligations in the manner provided for
in SECTION 6.2.
6.4 Grant of License. For the purpose of enabling the Administrative
----------------
Agent to exercise rights and remedies under SECTION 6.1 at such time as the
Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, the Pledgor hereby grants to the Administrative Agent an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to the Pledgor) to use, license or sublicense any Patent
Collateral, Trademark Collateral or Copyright Collateral now owned or licensed
or hereafter acquired or licensed by the Pledgor, and wherever the same may be
located, and including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of such
license or sublicense by the Administrative Agent shall be exercised, at the
option of the Administrative Agent, only upon the occurrence and during the
continuation of an Event of Default; provided that any license, sublicense or
--------
other transaction entered into by the Administrative Agent in accordance
herewith shall be binding upon the Pledgor notwithstanding any subsequent cure
of an Event of Default.
6.5 Registration; Private Sales. (a) If, at any time after the
---------------------------
occurrence and during the continuance of an Event of Default, the Pledgor shall
have received from the Administrative Agent a written request or requests that
the Pledgor cause any registration, qualification or compliance under any
federal or state securities law or laws to be effected with respect to all or
any part of the Investments, the Pledgor will, as soon as practicable and at its
expense, use its best efforts to cause such registration to be effected and be
kept effective and will use its best efforts to cause such qualification and
compliance to be effected and be kept effective as may be so requested and as
would permit or facilitate the sale and distribution of such Investments,
including, without limitation, registration under the Securities Act of 1933, as
amended (the "Securities Act"), appropriate qualifications under applicable blue
sky or other state securities laws and appropriate compliance with any other
applicable requirements of Governmental Authorities; provided, that the
--------
Administrative Agent shall furnish to the Pledgor such information regarding the
Administrative Agent as the Pledgor may reasonably request in writing and as
shall be required in connection with any such registration, qualification or
compliance. The Pledgor will cause the Administrative Agent to be kept
reasonably advised in writing as to the progress of each such registration,
qualification or compliance and as to the completion thereof, will furnish to
the Administrative Agent such number of prospectuses, offering circulars or
other documents incident thereto as the Administrative Agent from time to time
may reasonably request, and will indemnify the Administrative Agent and all
others participating in the distribution of such Pledged Securities against all
claims, losses, damages and liabilities caused by any untrue statement (or
alleged untrue statement) of a material fact contained therein (or in any
related registration statement, notification or
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the like) or by any omission (or alleged omission) to state therein (or in any
related registration statement, notification or the like) a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same may have been caused by an untrue
statement or omission based upon information furnished in writing to the Pledgor
by the Administrative Agent or any other Secured Party expressly for use
therein.
(b) The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws as in
effect from time to time, the Administrative Agent may be compelled, with
respect to any sale of all or any part of the Investments conducted without
registration or qualification under the Securities Act and such state securities
laws, to limit purchasers to any one or more Persons who will represent and
agree, among other things, to acquire such Investments for their own account,
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges that any such private sales may be made in such manner and
under such circumstances as the Administrative Agent may deem necessary or
advisable in its sole and absolute discretion, including at prices and on terms
less favorable than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and agrees that the Administrative
Agent shall have no obligation to conduct any public sales and no obligation to
delay the sale of any Investments for the period of time necessary to permit its
registration for public sale under the Securities Act and applicable state
securities laws, and shall not have any responsibility or liability as a result
of its election so not to conduct any such public sales or delay the sale of any
Investments, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after such registration. The
Pledgor hereby waives any claims against the Administrative Agent or any Secured
Party arising by reason of the fact that the price at which any Investments may
have been sold at any private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Administrative Agent accepts the first offer received
and does not offer such Investments to more than one offeree.
(c) The Pledgor agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgor.
6.6 The Pledgor Remains Liable. Notwithstanding anything herein to the
--------------------------
contrary, (i) the Pledgor shall remain liable under all Contracts included
within the Collateral (including, without limitation, all Investment Agreements)
to perform all of its obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Administrative Agent
of any of its rights or remedies hereunder shall not release the Pledgor from
any of its obligations under any of such Contracts, and (iii) except as
specifically provided for hereinbelow, the Administrative Agent shall not have
any obligation or liability by reason of this Agreement under any of such
Contracts, nor shall the Administrative Agent be obligated to perform any of the
obligations or duties of the Pledgor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder. This Agreement shall not
in any way be deemed to obligate the Administrative Agent, any other Secured
Party or any purchaser at a foreclosure sale under this Agreement to assume any
of the Pledgor's obligations, duties or liabilities under any Investment
Agreement, including, without limitation, the Pledgor's obligations, if any, to
manage the business and affairs of the applicable partnership, joint venture,
limited liability company or other issuer (collectively, the "Partner
Obligations"), unless the Administrative Agent or
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such other Secured Party or purchaser otherwise agrees in writing to assume any
or all of such Partner Obligations. In the event of foreclosure by the
Administrative Agent hereunder, then except as provided in the preceding
sentence, the Pledgor shall remain bound and obligated to perform its Partner
Obligations and neither the Administrative Agent nor any other Secured Party
shall be deemed to have assumed any Partner Obligations. In the event the
Administrative Agent, any other Secured Party or any purchaser at a foreclosure
sale elects to become a substitute member in place of the Pledgor, the party
making such election shall adopt in writing such Investment Agreement and agree
to be bound by the terms and provisions thereof; and subject to the execution of
such written agreement, the Pledgor hereby irrevocably consents in advance to
the admission of the Administrative Agent, any other Secured Party or any such
purchaser as a substitute member to the extent of the Investments acquired
pursuant to such sale, and agrees to execute any documents or instruments and
take any other action as may be necessary or as may be reasonably requested in
connection therewith. The powers, rights and remedies conferred on the
Administrative Agent hereunder are solely to protect its interest and privilege
in such Contracts, as Collateral, and shall not impose any duty upon it to
exercise any such powers, rights or remedies.
ARTICLE VII
THE ADMINISTRATIVE AGENT
7.1 The Administrative Agent; Standard of Care. The Administrative Agent
------------------------------------------
will hold all items of the Collateral at any time received under this Agreement
in accordance with the provisions hereof. The obligations of the Administrative
Agent as holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement and the other Credit
Documents, are only those expressly set forth in this Agreement and the other
Credit Documents. The Administrative Agent shall act hereunder at the
direction, or with the consent, of the Required Lenders on the terms and
conditions set forth in the Credit Agreement. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest, on behalf of
the Secured Parties, in the Collateral, and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Administrative
Agent, in its individual capacity, accords its own property of a similar nature,
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to the Collateral. Neither the Administrative Agent nor any
other Secured Party shall be liable to the Pledgor (i) for any loss or damage
sustained by the Pledgor, or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral that may occur as a result of
or in connection with or that is in any way related to any exercise by the
Administrative Agent or any other Secured Party of any right or remedy under
this Agreement, any failure to demand, collect or realize upon any of the
Collateral or any delay in doing so, or any other act or failure to act on the
part of the Administrative Agent or any other Secured Party, except to the
extent that the same is caused by its own gross negligence or willful
misconduct.
7.2 Further Assurances; Attorney-in-Fact. (a) The Pledgor agrees that it
------------------------------------
will join with the Administrative Agent to execute and, at its own expense, file
and refile under any applicable Uniform Commercial Code such financing
statements, continuation statements and other documents and instruments in such
offices as the Administrative Agent may reasonably deem necessary or
appropriate, and wherever required or permitted by law, in order to perfect and
preserve the Administrative Agent's security interest in the Collateral, and
hereby authorizes the Administrative Agent to file financing
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statements and amendments thereto relating to all or any part of the Collateral
without the signature of the Pledgor where permitted by law, and agrees to do
such further acts and things (including, without limitation, making any notice
filings with state tax or revenue authorities required to be made by account
creditors in order to enforce any Accounts in such state) and to execute and
deliver to the Administrative Agent such additional conveyances, assignments,
agreements and instruments as the Administrative Agent may reasonably require or
deem advisable to perfect, establish, confirm and maintain the security interest
and Lien provided for herein, to carry out the purposes of this Agreement or to
further assure and confirm unto the Administrative Agent its rights, powers and
remedies hereunder.
(b) The Pledgor hereby irrevocably appoints the Administrative Agent its
lawful attorney-in- fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor, the Administrative Agent or otherwise,
and with full power of substitution in the premises (which power of attorney,
being coupled with an interest, is irrevocable for so long as this Agreement
shall be in effect), from time to time in the Administrative Agent's discretion
after the occurrence and during the continuance of an Event of Default to take
any action and to execute any instruments that the Administrative Agent may deem
necessary or advisable to accomplish the purpose of this Agreement, including,
without limitation:
(i) to sign the name of the Pledgor on any financing statement,
continuation statement, notice or other similar document that, in the
Administrative Agent's opinion, should be made or filed in order to perfect
or continue perfected the security interest granted under this Agreement
(including, without limitation, any title or ownership applications for
filing with applicable state agencies to enable any motor vehicles now or
hereafter owned by the Company to be retitled and the Administrative Agent
listed as lienholder thereon);
(ii) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(iii) to receive, endorse and collect any checks, drafts, instruments,
chattel paper and other orders for the payment of money made payable to the
Pledgor representing any interest, income, dividend, distribution or other
amount payable in respect of any of the Collateral and to give full
discharge for the same;
(iv) to obtain, maintain and adjust any property or casualty
insurance required to be maintained by the Pledgor under SECTION 4.9 and
direct the payment of proceeds thereof to the Administrative Agent;
(v) to pay or discharge taxes, Liens or other encumbrances levied or
placed on or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
the Administrative Agent in its sole discretion, any such payments made by
the Administrative Agent to become Obligations of the Pledgor to the
Administrative Agent, due and payable immediately and without demand;
(vi) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or advisable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral;
and
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<PAGE>
(vii) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with any and all of the Collateral as fully
and completely as though the Administrative Agent were the absolute owner
of the Collateral for all purposes, and to do from time to time, at the
Administrative Agent's option and the Pledgors' expense, all other acts and
things deemed necessary by the Administrative Agent to protect, preserve or
realize upon the Collateral and to more completely carry out the purposes
of this Agreement.
(c) If the Pledgor fails to perform any covenant or agreement contained in
this Agreement after written request to do so by the Administrative Agent
(provided that no such request shall be necessary at any time after the
- ---------
occurrence and during the continuance of an Event of Default), the
Administrative Agent may itself perform, or cause the performance of, such
covenant or agreement and may take any other action that it deems necessary and
appropriate for the maintenance and preservation of the Collateral or its
security interest therein, and the reasonable expenses so incurred in connection
therewith shall be payable by the Pledgor under SECTION 8.1.
ARTICLE VIII
MISCELLANEOUS
8.1 Indemnity and Expenses. The Pledgor agrees:
----------------------
(a) To indemnify and hold harmless the Administrative Agent, each other
Secured Party and each of their respective directors, officers, employees,
agents and affiliates from and against any and all claims, damages, demands,
losses, obligations, judgments and liabilities (including, without limitation,
reasonable attorneys' fees and expenses) in any way arising out of or in
connection with this Agreement and the transactions contemplated hereby, except
to the extent the same shall arise as a result of the gross negligence or
willful misconduct of the party seeking to be indemnified; and
(b) To pay and reimburse the Administrative Agent upon demand for all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) that the Administrative Agent may incur in
connection with (i) the custody, use or preservation of, or the sale of,
collection from or other realization upon, any of the Collateral, including the
reasonable expenses of re-taking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, (ii) the exercise or
enforcement of any rights or remedies granted hereunder (including, without
limitation, under ARTICLE VI), under any of the other Credit Documents or
otherwise available to it (whether at law, in equity or otherwise), or (iii) the
failure by the Pledgor to perform or observe any of the provisions hereof. The
provisions of this SECTION 8.1 shall survive the execution and delivery of this
Agreement, the repayment of any of the Obligations, the termination of the
Commitments under the Credit Agreement and the termination of this Agreement or
any other Credit Document.
8.2 No Waiver. The rights and remedies of the Secured Parties expressly
---------
set forth in this Agreement and the other Credit Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No failure or delay on the part of any Secured
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege or be construed to be a waiver of any Default or
Event of Default. No course of dealing between the Pledgor and the Secured
Parties or their
-25-
<PAGE>
agents or employees shall be effective to amend, modify or discharge any
provision of this Agreement or any other Credit Document or to constitute a
waiver of any Default or Event of Default. No notice to or demand upon the
Pledgor in any case shall entitle the Pledgor to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the right of
any Secured Party to exercise any right or remedy or take any other or further
action in any circumstances without notice or demand.
8.3 Enforcement. By its acceptance of the benefits of this Agreement,
-----------
each Lender agrees that this Agreement may be enforced only by the
Administrative Agent, acting upon the instructions or with the consent of the
Required Lenders as provided for in the Credit Agreement, and that no Lender
shall have any right individually to enforce or seek to enforce this Agreement
or to realize upon any Collateral or other security given to secure the payment
and performance of the Obligations.
8.4 Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by the Pledgor from,
any provision of this Agreement, shall be effective unless in a writing executed
and delivered in accordance with SECTION 11.6 of the Credit Agreement, and then
the same shall be effective only in the specific instance and for the specific
purpose for which given.
8.5 Continuing Security Interest; Term; Successors and Assigns;
-----------------------------------------------------------
Assignment; Termination and Release; Survival. This Agreement shall create a
- ---------------------------------------------
continuing security interest in the Collateral and shall secure the payment and
performance of all of the Obligations as the same may arise and be outstanding
at any time and from time to time from and after the date hereof, and shall (i)
remain in full force and effect until the occurrence of (x) the payment in full
of the Obligations (other than indemnity obligations not then due and payable
and that survive termination of the Credit Documents), (y) the termination or
expiration of all Letters of Credit under the Credit Agreement and (z) the
termination of the Commitments under the Credit Agreement (the events in clauses
(x), (y) and (z) above, collectively, the "Termination Requirements"), (ii) be
binding upon and enforceable against the Pledgor and its successors and assigns
(provided, however, that the Pledgor may not sell, assign or transfer any of its
-------- -------
rights, interests, duties or obligations hereunder without the prior written
consent of the Lenders) and (iii) inure to the benefit of and be enforceable by
each Secured Party and its successors and assigns. Upon any sale or other
disposition by the Pledgor of any Collateral in a transaction expressly
permitted hereunder or under or pursuant to the Credit Agreement or any other
applicable Credit Document, the Lien and security interest created by this
Agreement in and upon such Collateral shall be automatically released, and upon
the satisfaction of all of the Termination Requirements, this Agreement and the
Lien and security interest created hereby shall terminate; and in connection
with any such release or termination, the Administrative Agent, at the request
and expense of the Pledgor, will execute and deliver to the Pledgor such
documents and instruments evidencing such release or termination as the Pledgor
may reasonably request and will assign, transfer and deliver to the Pledgor,
without recourse and without representation or warranty, such of the Collateral
as may then be in the possession of the Administrative Agent (or, in the case of
any partial release of Collateral, such of the Collateral so being released as
may be in its possession). All representations, warranties, covenants and
agreements herein shall survive the execution and delivery of this Agreement and
any Pledge Amendment.
8.6 Notices. All notices and other communications provided for hereunder
-------
shall be given to the parties in the manner and subject to the other notice
provisions set forth in the Credit Agreement.
-26-
<PAGE>
8.7 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
8.8 Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
8.9 Construction. The headings of the various sections and subsections of
------------
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular.
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _________________________________
Title: ______________________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Administrative Agent
By: _________________________________
Title: ______________________________
-28-
<PAGE>
Annex A to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
<TABLE>
<CAPTION>
Pledged Investments
- -------------------
Percentage of
Outstanding
Type of Certificate No. of shares Interests
Name of Issuer Interests Number (if applicable) in Issuer
-------------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
None.
<PAGE>
Annex B to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
FILING LOCATIONS
Secretary of State of California
Secretary of State of Colorado
Secretary of State of Connecticut
Secretary of State of Florida
Fulton County, Georgia
Secretary of State of Illinois
Secretary of State of Michigan
Secretary of State of New Jersey
Secretary of State of New York
New York County, New York
Secretary of State of North Carolina
Secretary of State of Ohio
Secretary of State of Tennessee
Secretary of State of Texas
<PAGE>
Annex C to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
LOCATIONS OF CHIEF EXECUTIVE OFFICE, PLACES OF BUSINESS,
RECORDS RELATING TO COLLATERAL, AND EQUIPMENT AND INVENTORY
1. Chief executive office/principal place
of business:
6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
a. 6420 Wilshire Blvd.
Los Angeles, California
b. 437 Madison Avenue
New York, New York 10022
c. 333 West Fort Street
Detroit, Michigan
d. 800 West Airport Freeway
Irving, Texas 75062
e. Union Plaza
Lakewood, Colorado
f. Corporate Center Five
Five Concourse Pkwy.
Fulton County, Georgia
g. 815 N. LaSalle Street
Chicago, Illinois
h. c/o Willis Stein & Partners, L.P.
227 West Monroe
Chicago, Illinois 60606
i. 217 Braeside Drive
Hamden, Connecticut 06514
j. 6 West Laurelwood Drive
Lawrenceville, New Jersey 08648
<PAGE>
k. 2 Sunset Court
Montville, New Jersey 07045
3. Equipment or Inventory:
a. 6420 Wilshire Blvd.
Los Angeles, California
b. 437 Madison Avenue
New York, New York 10022
c. 333 West Fort Street
Detroit, Michigan
d. 800 West Airport Freeway
Irving, Texas 75062
e. Union Plaza
Lakewood, Colorado
f. Corporate Center Five
Five Concourse Pkwy.
Fulton County, Georgia
g. 815 N. LaSalle Street
Chicago, Illinois
h. inventory located at:
World Color Press
2030 Sylvan Road
Dyersburg, Tennessee 38025
i. inventory located at:
Johnson & Hardin Company
760 Fujitech Road
Lebanon, Ohio 45036
j. inventory located at:
3-Z Printing
U.S. Route 40 West
Teutopolis, Illinois 62467
4. Other places of business:
None.
<PAGE>
Annex D to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
CERTAIN CONTRACTS
1. License Agreement, dated as of August 15, 1996, by and between Robert
E. Petersen and Petersen Publishing Company, as licensor, and Brightview
Communications Group, Inc., as licensee.
2. Agreements, dated May 3, 1996, with World Color Press, Inc., regarding
paper purchasing program.
3. Agreement, dated December 19, 1995, with World Color Press, Inc., as
modified, regarding printing services.
4. Agreement, dated January 12, 1996, with Johnson & Hardin Company,
regarding printing services.
5. Circulation Fulfillment Agreement, dated September 1, 1995, with
Neodata Services, Inc.
6. Agreement, dated December 1981, with Compuname, Inc.
7. Distribution Agreement, dated January 10, 1994, with Warner Publisher
Services, Inc.
8. Distribution Agreement, dated October 18, 1995, with Worldwide
Distribution Services.
9. Publisher Distribution Agreement, dated May 21, 1996, with Retail
Vision.
<PAGE>
ANNEX E TO PLEDGE AND
SECURITY AGREEMENT
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, AS
ADMINISTRATIVE AGENT
PETERSEN PUBLISHING COMPANY, L.L.C.
SEPTEMBER 30, 1996
-----------------------------------
COPYRIGHTS AND COPYRIGHT APPLICATIONS
U.S. COPYRIGHT REGISTRATIONS
----------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Image magic TX15188 03/27/78
- --------------------------------------------------------------------------------
The .22 TX15189 03/15/78
- --------------------------------------------------------------------------------
Petersen Action Group street TX15190 03/15/78
machines & bracket racing:
no. 2
- --------------------------------------------------------------------------------
Creative customizing TX15191 03/15/78
- --------------------------------------------------------------------------------
Big-bore handguns TX15192 02/23/78
- --------------------------------------------------------------------------------
Petersen Action Group TX15193 02/23/78
Chevrolet
- --------------------------------------------------------------------------------
[Mini cars] TX18055 03/13/78
- --------------------------------------------------------------------------------
Mini-truck repair manual TX21709 04/03/78
- --------------------------------------------------------------------------------
[Varmints] TX35891 05/15/78
- --------------------------------------------------------------------------------
Corvette, an American TX64836 06/22/78
classic
- --------------------------------------------------------------------------------
Guns for big game TX66296 07/10/78
- --------------------------------------------------------------------------------
Increasing film speed TX72172 06/12/78
- --------------------------------------------------------------------------------
Petersen's How to build a TX72173 06/12/78
street rod
- --------------------------------------------------------------------------------
Discover yourself II TX79514 07/17/78
- --------------------------------------------------------------------------------
Motor Trend's Sports car TX84338 07/27/78
graphic
- --------------------------------------------------------------------------------
Adding storage space TX85097 07/17/78
- --------------------------------------------------------------------------------
Remodeling kitchens & baths TX85098 07/17/78
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Blueprint series: v.II TX99507 05/24/78
- --------------------------------------------------------------------------------
Deer hunting TX113120 09/20/78
- --------------------------------------------------------------------------------
Petersen's Chevrolet tune-up TX113121 09/14/78
& repair
- --------------------------------------------------------------------------------
Basic automotive tune-up & TX131091 09/14/78
test equipment
- --------------------------------------------------------------------------------
Mechanical specifications, TX144653 11/03/78
special units & ads
- --------------------------------------------------------------------------------
The Exotic world of custom TX149108 11/14/78
handguns
- --------------------------------------------------------------------------------
Sports photography TX149560 11/22/78
- --------------------------------------------------------------------------------
Honda tune-up & repair TX150333 11/13/78
- --------------------------------------------------------------------------------
A Gallery of waterfowl and TX171443 01/05/79
upland birds/paintings
- --------------------------------------------------------------------------------
Guns & ammo's Complete TX199877 01/22/79
new guide to blackpowder
- --------------------------------------------------------------------------------
`Teen great looks health & TX208097 02/05/79
beauty guide
- --------------------------------------------------------------------------------
Petersen's Ford tune-up & TX216497 03/12/79
repair: Fords, Lincolns, and
Mercury since 1970
- --------------------------------------------------------------------------------
Hunting big game TX216498 03/14/79
- --------------------------------------------------------------------------------
Petersen's Chevy/G M C TX216499 11/22/78
pickup repair
- --------------------------------------------------------------------------------
Vans: no. 7 TX223252 02/09/78
- --------------------------------------------------------------------------------
Petersen's Ford pickup repair TX233270 04/03/79
- --------------------------------------------------------------------------------
Photo retouching and TX233271 04/03/79
restoration
- --------------------------------------------------------------------------------
Hot rod magazine custom TX241958 04/27/79
painting
- --------------------------------------------------------------------------------
Modern handguns TX244308 05/14/79
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. No. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Car craft: Chevy Camaro TX258552 04/27/79
celebration!
- --------------------------------------------------------------------------------
Photographic self-assignments TX290541 07/06/79
- --------------------------------------------------------------------------------
Petersen's Toyota tune-up & TX309374 08/06/79
repair
- --------------------------------------------------------------------------------
Petersen's Datsun tune-up & TX309375 08/06/79
repair
- --------------------------------------------------------------------------------
Pinto tune-up & repair TX311435 08/09/79
- --------------------------------------------------------------------------------
Jeff Cooper on handguns TX322003 07/20/79
- --------------------------------------------------------------------------------
Hell, I was there! TX331615/1/ 09/04/79
- --------------------------------------------------------------------------------
Petersen's VW Rabbit tune- TX341456 09/28/79
up & repair
- --------------------------------------------------------------------------------
Petersen's Dodge pickup TX342696 09/28/79
repair
- --------------------------------------------------------------------------------
Petersen's How to tune your TX342697 09/28/79
car
- --------------------------------------------------------------------------------
A Complete guide to handgun TX382650 11/28/79
hunting
- --------------------------------------------------------------------------------
Planning your future TX418869 02/20/80
- --------------------------------------------------------------------------------
.22 rimfire, the world's TX455657 04/18/80
number 1 cartridge
- --------------------------------------------------------------------------------
The Paintings of Franz A. TX458192 04/18/80
Bischoff (1864-1929): a
retrospective exhibition from
March 27, through April 19,
1980
- --------------------------------------------------------------------------------
Petersen's Chevrolet high- TX461024 04/18/80
performance
- --------------------------------------------------------------------------------
The Darkroom guide TX461374 04/29/80
- --------------------------------------------------------------------------------
</TABLE>
_______________
/1/ Search results indicate this copyright registration is owned by the Company
and Elmer Keith.
3
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. No REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Guns and ammo book of the TX464246 04/28/80
.45 auto, king of handguns!
- --------------------------------------------------------------------------------
Hot rod magazine Kit car TX479564 05/22/80
annual : giant buyer's guide
- --------------------------------------------------------------------------------
Magnum handguns TX486871 05/22/80
- --------------------------------------------------------------------------------
Magnum rifles : powerhouse TX513603 07/11/80
cartridges from .22 to .460
- --------------------------------------------------------------------------------
Money-making photography TX513655 07/21/80
- --------------------------------------------------------------------------------
`Teen total fitness : good TX516243 07/21/80
looks guide
- --------------------------------------------------------------------------------
Petersen's big Book of kit TX538034 08/25/80
cars
- --------------------------------------------------------------------------------
Motor trend's Complete auto TX556977 09/29/80
guide for the `80s
- --------------------------------------------------------------------------------
Deer hunting across North TX556978 09/29/80
America
- --------------------------------------------------------------------------------
How to build a street TX557931 10/07/80
machine
- --------------------------------------------------------------------------------
Electronic flash TX566123 10/06/80
- --------------------------------------------------------------------------------
Method modeling TX566124 10/06/80
- --------------------------------------------------------------------------------
Available light TX581002 10/27/80
- --------------------------------------------------------------------------------
Rifles & cartridges for TX581003 11/17/80
North American game
- --------------------------------------------------------------------------------
Mechanical specifications TX632981 01/26/81
and postal regulations for
catalog inserts
- --------------------------------------------------------------------------------
Great looks : II : health & TX632982 02/02/81
beauty guide
- --------------------------------------------------------------------------------
The Guns & Ammo Complete TX659690 03/24/81
book of test fire
- --------------------------------------------------------------------------------
Petersen's Hot rod shop TX668632 04/02/81
series engine swapping
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- -----------------------------------------------------------------------------
<S> <C> <C>
Photo filters and lens TX668633 03/24/81
attachments
- -----------------------------------------------------------------------------
Basic automotive tune-up & TX668634 04/15/81
test equipment
- -----------------------------------------------------------------------------
Special purpose handguns TX670248 04/06/81
- -----------------------------------------------------------------------------
General Motors X-cars, TX693113 05/06/81
Citation, Omega, Phoenix,
Skylark: Petersen's tune-up
& repair
- -----------------------------------------------------------------------------
`Teen's great looks summer TX721978 06/23/81
beauty guide
- -----------------------------------------------------------------------------
Petersen's Basic bodywork & TX728458 06/24/81
painting
- -----------------------------------------------------------------------------
Gunlore, the complete TX731039 06/22/81
shooter's almanac
- -----------------------------------------------------------------------------
Hot rod magazine drag racing TX735011 06/22/81
- -----------------------------------------------------------------------------
Gun & ammo centerfire TX751440 08/05/81
revolvers
- -----------------------------------------------------------------------------
Hot rod Volkswagen classics TX752838 08/05/81
: 30 pages of outrageous
beetles!
- -----------------------------------------------------------------------------
Hot rod magazine shop series TX756275 08/31/81
- -----------------------------------------------------------------------------
Guide to camera equipment TX763355 08/31/81
- -----------------------------------------------------------------------------
Petersen's Family & home TX765063 08/28/81
protection
- -----------------------------------------------------------------------------
Deer hunting TX791126 11/04/81
- -----------------------------------------------------------------------------
Medium format photography TX801364 11/09/81
- -----------------------------------------------------------------------------
The Best of Hot rod TX801933 11/09/81
- -----------------------------------------------------------------------------
Petersen's History of drag TX806586 11/13/81
racing
- -----------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- ----------------------------------------------------------------------------
<S> <C> <C>
Western masters; a TX817452 11/31/81
comprehensive exhibition,
October 30 through
November 28, 1981
- ----------------------------------------------------------------------------
Guns & ammo : all around TX843564 01/21/82
rifles : hunting
- ----------------------------------------------------------------------------
Petersen's Action group TX889484 04/09/82
sports car classics
- ----------------------------------------------------------------------------
Guns & ammo : assault rifles TX897645 03/05/82
- ----------------------------------------------------------------------------
Guns & Ammo's Famous TX898410 03/05/81
firearms : guns that shaped
our century!
- ----------------------------------------------------------------------------
How to build an off-road TX915289 04/09/82
vehicle
- ----------------------------------------------------------------------------
Petersen's Porsche classics TX915969 05/10/82
- ----------------------------------------------------------------------------
The Guns & ammo book of TX977644 09/20/82
.22 rimfire
- ----------------------------------------------------------------------------
Petersen's Three wheeler : TX1016489 12/02/82
torture tests! : Honda,
Yamaha, Kawasaki : special
3-wheel buyers' guide!
- ----------------------------------------------------------------------------
Camaro TX1016490 12/02/82
- ----------------------------------------------------------------------------
Car Craft pro street machines TX1016491 12/02/82
- ----------------------------------------------------------------------------
Custom cars : the mild TX1016492 12/02/82
custom craze
- ----------------------------------------------------------------------------
Motorcyclist's Dirt bike TX1017771 12/02/82
guide
- ----------------------------------------------------------------------------
Petersen's Circle track TX1018075 12/02/82
- ----------------------------------------------------------------------------
Handguns for home defense TX1018077 12/02/82
- ----------------------------------------------------------------------------
Hot rod magazine drag TX1018078 12/02/82
racing : the funny car story
- ----------------------------------------------------------------------------
Petersen's Personal security TX1028538 12/02/82
- ----------------------------------------------------------------------------
`Teen modeling TX1029134 12/02/82
- ----------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Petersen's Circle track TX1100649 04/11/83
- --------------------------------------------------------------------------------
Demands attention, Motor VA136886/2/ 10/05/83
Trend
- --------------------------------------------------------------------------------
Demands attention, Motor VA141530/2/ 10/05/83
Trend
- --------------------------------------------------------------------------------
Alson S. Clark TX1318493 02/21/84
- --------------------------------------------------------------------------------
Jane Wooster Scott at TX1465291 10/09/84
Petersen Galleries 1984:
May 17 through June 9
- --------------------------------------------------------------------------------
Motor trend presents 100 TX1704430 11/21/85
years of the automobile
- --------------------------------------------------------------------------------
Petersen's The Best of Hot TX1762008 02/27/86
rod
- --------------------------------------------------------------------------------
Carroll Shelby's Racing TX1839765 06/03/86
cobra
- --------------------------------------------------------------------------------
Motor trend Dodge truckin' TX1927852 10/14/86
- --------------------------------------------------------------------------------
Chevrolet celebrating TX2009792 03/13/87
seventy-five years of
performance
- --------------------------------------------------------------------------------
Mechanical specifications-- TX2021133 10/20/86
special units & ads
- --------------------------------------------------------------------------------
Corvettes: how to buy, TX3309073 06/10/92
restore, customize
- --------------------------------------------------------------------------------
Chevrolet small-block TX3346672 07/08/92
engines
- --------------------------------------------------------------------------------
Hot rod hot Chevy: buyer's TX3416083 10/23/92
guide to performance parts
- --------------------------------------------------------------------------------
Hot rod swimsuit spectacular: TX3480989 02/18/93
the nation's top speed and
beauty combinations
- --------------------------------------------------------------------------------
</TABLE>
_______________________
/2/ Search results indicate these copyright registrations are owned by the
Company and Mirage Editions.
7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
How to build a street rod: TX3481033 02/18/93
step-by-step installation &
source guides
- --------------------------------------------------------------------------------
Petersen's Performance cars TX3506893 03/31/93
- --------------------------------------------------------------------------------
`93 new car buyer's guide TX3519007 12/21/92
- --------------------------------------------------------------------------------
Hot Rod hot customs & Rod TX3524903 04/27/93
& custom fat fender rods
- --------------------------------------------------------------------------------
The best of street machine TX3531371 04/27/93
nationals
- --------------------------------------------------------------------------------
Home defense firearms TX3558060 05/14/93
- --------------------------------------------------------------------------------
4-wheel tech tips & how-to's TX3558066 05/14/93
- --------------------------------------------------------------------------------
Hot rod Harleys: bitchin' TX3559386 07/02/93
bikes and babes
- --------------------------------------------------------------------------------
Hot rod Chevrolet small- TX3574079 06/02/93
block engines: giant parts &
accessories buyer's guide
- --------------------------------------------------------------------------------
Hot Chevys TX3587322 07/19/93
- --------------------------------------------------------------------------------
Performance cars TX3606664 08/30/93
- --------------------------------------------------------------------------------
Hot rod hot trucks: wild 08/20/93
pickup special!
- --------------------------------------------------------------------------------
Hot rod hot trucks: wild TX3632653 08/20/93
pickup special
- --------------------------------------------------------------------------------
NSRA street rod nationals, TX3648727 10/07/93
1993
- --------------------------------------------------------------------------------
Rifles and cartridges for big TX3648730 10/07/93
game
- --------------------------------------------------------------------------------
Hot rod Harleys TX3681139 12/23/93
- --------------------------------------------------------------------------------
How to build a hot rod TX3685008 12/22/93
- --------------------------------------------------------------------------------
High-tech firearms TX3688992 12/23/93
- --------------------------------------------------------------------------------
Car craft drag racing TX3746164 01/14/94
- --------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Hot rod 1994 truck shopper's TX3753076 02/14/94
guide: pickups, SUV's &
accessories
- --------------------------------------------------------------------------------
Motor trend giant buyer's TX3753077 02/14/94
guide: `94 performance cars
- --------------------------------------------------------------------------------
Engines TX3757772 04/06/94
- --------------------------------------------------------------------------------
Home Defense TX3757779 04/06/94
- --------------------------------------------------------------------------------
High-performance buyer's TX3773683 02/03/94
guide
- --------------------------------------------------------------------------------
Hot Chevys TX3773684 02/03/94
- --------------------------------------------------------------------------------
Truck & Van Buyer's Guide TX3794857 04/26/94
- --------------------------------------------------------------------------------
Motorcycle Buyer's Guide TX3794858 04/26/94
1994
- --------------------------------------------------------------------------------
How to Build Your First TX3801037 04/15/94
Race Car
- --------------------------------------------------------------------------------
Pro Baseball TX3801044 04/15/94
- --------------------------------------------------------------------------------
Performance Musclecars TX3801046 04/15/94
- --------------------------------------------------------------------------------
Fastest Street Cars in TX3801047 04/15/94
America
- --------------------------------------------------------------------------------
Motor Trend performance TX3843038 03/30/95
cars: complete `95 buyer's
guide
- --------------------------------------------------------------------------------
Petersen's Football 1994 Pro TX3844562 07/15/94
Preview
- --------------------------------------------------------------------------------
Road Tests TX3885057 07/15/94
- --------------------------------------------------------------------------------
Rod & Custom Annual TX3885059 07/15/94
- --------------------------------------------------------------------------------
Specialty Car TX3885418 07/15/96
- --------------------------------------------------------------------------------
1995 Hunting Annual TX3902025 10/07/94
- --------------------------------------------------------------------------------
Handguns for home defense TX3906265 10/07/94
- --------------------------------------------------------------------------------
How to build a budget street TX3906267 10/07/94
machine
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Hot rod Harleys pictorial TX3906268 10/07/94
- --------------------------------------------------------------------------------
`55, `56, `57 classic Chevy TX3906270 10/07/94
builders' guide
- --------------------------------------------------------------------------------
4Wheel Tech Tips & How-To's TX3906378 10/07/94
- --------------------------------------------------------------------------------
How to Build a Street Machine TX3906379 10/07/94
- --------------------------------------------------------------------------------
Shooting Tips TX3906538 10/07/94
- --------------------------------------------------------------------------------
Sport Truck - Mini Trucks TX3906542 10/07/94
- --------------------------------------------------------------------------------
1994 Rifle Shotgun Annual TX3943342 12/01/94
- --------------------------------------------------------------------------------
4Wheel & Off-Road 1994 Annual TX3943475 12/01/94
- --------------------------------------------------------------------------------
Guns & Ammo Annual TX3943905 12/01/94
- --------------------------------------------------------------------------------
New Car Buyer's Guide 1995 TX3943933 12/01/94
- --------------------------------------------------------------------------------
Photographic Buyer's Guide 1995 TX3947200 12/01/94
- --------------------------------------------------------------------------------
How to build a 4x4; hands-on TX3985162 02/22/95
projects
- --------------------------------------------------------------------------------
Hot rod bikes pictorial TX4036632 05/31/95
- --------------------------------------------------------------------------------
Photographic-Big Book of TX4038907 08/01/95
Photography
- --------------------------------------------------------------------------------
Motor Trend Road Tests TX4053066 07/06/95
- --------------------------------------------------------------------------------
Chevy High Performance Annual TX4077034 08/01/95
- --------------------------------------------------------------------------------
Pro Football TX4093696 09/07/95
- --------------------------------------------------------------------------------
Hot Rod Bikes Pictorial TX4093717 09/07/95
- --------------------------------------------------------------------------------
Hot Rod Junior TX4093718 09/07/95
- --------------------------------------------------------------------------------
Double Action Auto TX4093722 09/07/95
- --------------------------------------------------------------------------------
4Wheel Tech Tips & How-To's TX4132945 10/12/95
- --------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Rifle & Shotgun 1995 TX4132947 10/12/95
Annual
- --------------------------------------------------------------------------------
1996 Photographic Buyer's TX4154156 12/14/95
Guide
- --------------------------------------------------------------------------------
Pro Basketball TX4154157 12/14/95
- --------------------------------------------------------------------------------
1996 Hunting Annual TX4154158 12/14/95
- --------------------------------------------------------------------------------
Pocket Pistols TX4154454 12/14/95
- --------------------------------------------------------------------------------
High Power Handguns TX4173030 12/14/95
- --------------------------------------------------------------------------------
Hot Rod-Hot tips & How TX4173032 12/14/95
To's
- --------------------------------------------------------------------------------
Hot Rod 1996 Annual TX4173033 12/14/95
- --------------------------------------------------------------------------------
Guns & Ammo 1996 Annual TX4173037 12/14/95
- --------------------------------------------------------------------------------
Motor Trend's 1996 New Car TX4176397 03/19/96
Buyer's Guide
- --------------------------------------------------------------------------------
Event Scene TX4176400 03/19/96
- --------------------------------------------------------------------------------
Dirt Rider TX4176401 03/19/96
- --------------------------------------------------------------------------------
5.0 Mustang TX4176403 03/19/96
- --------------------------------------------------------------------------------
Rod & Custom TX4176404 03/19/96
- --------------------------------------------------------------------------------
Custom Arms TX4176407 03/19/96
- --------------------------------------------------------------------------------
Custom & Classic Trucks TX4176410 03/19/96
- --------------------------------------------------------------------------------
Photographic TX4179399 04/30/96
- --------------------------------------------------------------------------------
Sassy TX4179900 04/30/96
- --------------------------------------------------------------------------------
Sport TX4179903 04/30/96
- --------------------------------------------------------------------------------
Sport Rider TX4179904 04/30/96
- --------------------------------------------------------------------------------
Sport Truck TX4179905 04/30/96
- --------------------------------------------------------------------------------
`Teen TX4179906 04/30/96
- --------------------------------------------------------------------------------
Kit Car TX4203559 03/04/96
- --------------------------------------------------------------------------------
Mustang & Fords TX4203589 03/04/96
- --------------------------------------------------------------------------------
Golfing TX4203590 03/04/96
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- ------------------------------------------------------------------------------
<S> <C> <C>
All About You TX4205056 03/19/96
- ------------------------------------------------------------------------------
Mountain Biker TX4206253 03/04/96
- ------------------------------------------------------------------------------
Chevy High Performance TX4212949 04/09/96
- ------------------------------------------------------------------------------
Hunting TX4212950 04/09/96
- ------------------------------------------------------------------------------
Drag Racing TX4212964 04/09/96
- ------------------------------------------------------------------------------
Bicycle Guide TX4214174 02/05/96
- ------------------------------------------------------------------------------
Familyphoto TX4214404 04/09/96
- ------------------------------------------------------------------------------
Complete Book of the .45 TX4214405 04/09/96
- ------------------------------------------------------------------------------
High-Tech Firearms TX4214406 04/09/96
- ------------------------------------------------------------------------------
5.0 Mustang Hop UPS TX4214407 04/09/96
- ------------------------------------------------------------------------------
Motor Trend's Performance Cars TX4214408 04/09/96
- ------------------------------------------------------------------------------
Motor Trend's Performance Cars TX4214408 04/09/96
- ------------------------------------------------------------------------------
Engines TX4214409 04/09/96
- ------------------------------------------------------------------------------
Handguns TX4214813 04/09/96
- ------------------------------------------------------------------------------
Guns & Ammo TX4214814 04/09/96
- ------------------------------------------------------------------------------
Hot Rod Bikes TX4214815 04/09/96
- ------------------------------------------------------------------------------
Motorcyclist TX4214816 04/09/96
- ------------------------------------------------------------------------------
Motor Trend TX4214817 04/09/96
- ------------------------------------------------------------------------------
4 Wheel & Off-Road TX4214818 04/09/96
- ------------------------------------------------------------------------------
Bowhunting TX4224713 04/09/96
- ------------------------------------------------------------------------------
Circle Track TX4224751 04/09/96
- ------------------------------------------------------------------------------
Car Craft TX4224752 04/09/96
- ------------------------------------------------------------------------------
Hot Rod TX4224753 04/09/96
- ------------------------------------------------------------------------------
1996 Handguns Annual TX4224754 04/09/96
- ------------------------------------------------------------------------------
Sport Truck Annual 1995 TX4226490 01/29/96
- ------------------------------------------------------------------------------
Skin Diver TX4227913 04/30/96
- ------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Surplus Firearms TX4230123 01/29/96
- --------------------------------------------------------------------------------
Rod & Custom 1995 Annual TX4230124 01/29/96
- --------------------------------------------------------------------------------
Motor Trend's Sport Utility TX4230125 01/29/96
Truck & Van Buyer's Guide
- --------------------------------------------------------------------------------
40th Anniversary Chevy TX4230127 01/29/96
Small-Block Engine
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Annex F to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Application or Issue or
Registration No. Country Inventor Filing Date
---------------- ------- -------- -----------
<S> <C> <C> <C>
</TABLE>
None.
<PAGE>
Annex G to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
TRADEMARKS AND TRADEMARK APPLICATIONS
I. TRADEMARKS
U.S. TRADEMARK REGISTRATIONS
----------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARK REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
HOT ROD (Stylized Letters) 572,151 03/17/53
- --------------------------------------------------------------------------------
TRUE (Stylized Letters) 681,508 07/07/59
- --------------------------------------------------------------------------------
MISS TEENAGE AMERICA 712,636 03/14/61
- --------------------------------------------------------------------------------
TEEN (Stylized Letters) 789,364 05/11/65
- --------------------------------------------------------------------------------
MISS TEENAGE AMERICA 1,009,579 04/29/75
- --------------------------------------------------------------------------------
SPORT (Stylized Letters) 1,024,658 11/11/75
- --------------------------------------------------------------------------------
BICYCLE GUIDE/1/ 1,357,412 08/27/85
- --------------------------------------------------------------------------------
SASSY (Stylized Letters) 1,617,573 10/16/90
- --------------------------------------------------------------------------------
SASSY 1,698,439 06/30/92
- --------------------------------------------------------------------------------
SASSY 1,743,913 12/29/92
- --------------------------------------------------------------------------------
SASSY (Stylized Letters) 1,782,749 07/20/93
- --------------------------------------------------------------------------------
GREAT MODEL SEARCH 1,789,697 08/24/93
- --------------------------------------------------------------------------------
</TABLE>
________________________________
/1/ According to our search results the Company was assigned this
trademark registration from Winning International, Inc. ("WII"). Search results
indicate that an assignment from the previous owner Raben/Bicycle Guide Partners
to WII was never filed with the U.S. Patent and Trademark Office ("PTO").
<PAGE>
II. TRADEMARK APPLICATIONS
U.S. TRADEMARK APPLICATION
--------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARK SERIAL NO. FILING DATE
<S> <C> <C>
- --------------------------------------------------------------------------------
ALL ABOUT YOU! 75/034,232 12/13/95
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit A to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
PLEDGE AMENDMENT
THIS PLEDGE AMENDMENT, dated as of _______________, 19___, is delivered by
PETERSEN PUBLISHING COMPANY, L.L.C. (the "Pledgor") pursuant to SECTION 5.1 of
the Pledge Agreement referred to hereinbelow. The Pledgor hereby agrees that
this Pledge Amendment may be attached to the Pledge and Security Agreement,
dated as of __________, 1996, made by the Pledgor in favor of First Union
National Bank of North Carolina, as Administrative Agent (as amended, modified,
supplemented or restated from time to time, the "Pledge Agreement," capitalized
terms defined therein being used herein as therein defined), and that the
Investments listed on Annex A to this Pledge Amendment shall be deemed to be
-------
part of the Investments within the meaning of the Pledge Agreement and shall
become part of the Collateral and shall secure all of the Obligations as
provided in the Pledge Agreement. This Pledge Amendment and its attachments are
hereby incorporated into the Pledge Agreement and made a part thereof.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
<PAGE>
Annex A to Exhibit A (Pledge
Amendment)
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
Pledged Investments
- -------------------
<TABLE>
<CAPTION>
Percentage of
Outstanding
Type of Certificate No. of shares Interests
Name of Issuer Interests Number (if applicable) in Issuer
-------------- ---------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit B to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
ASSIGNMENT AND GRANT OF SECURITY INTEREST
IN COPYRIGHTS
WHEREAS, PETERSEN PUBLISHING COMPANY, L.L.C. (the "Grantor") is the owner
of the copyrights listed on Schedule A attached hereto, which copyrights are
----------
registered or have pending registrations in the United States Copyright Office
as set forth on Schedule A attached hereto (all such copyrights, registrations
----------
and applications, collectively, the "Copyrights"); and
WHEREAS, the Grantor has entered into a Pledge and Security Agreement (as
amended, modified, restated or supplemented from time to time, the "Security
Agreement"), dated as of _____________, 1996, in which the Grantor has agreed
with First Union National Bank of North Carolina, as Administrative Agent (the
"Administrative Agent"), with offices at One First Union Center, 301 South
College Street, Charlotte, North Carolina 28288-0735, to execute this
Assignment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, as security for the payment and
performance of the Obligations (as defined in the Security Agreement), the
Grantor does hereby assign and grant to the Administrative Agent a security
interest in all of its right, title and interest in and to the Copyrights, and
the use thereof, together with all proceeds and products thereof and the
goodwill of the businesses symbolized by the Copyrights. This Assignment has
been given in conjunction with the assignment and security interest granted to
the Administrative Agent under the Security Agreement, and the provisions of
this Assignment are without prejudice to and in addition to the provisions of
the Security Agreement, which are incorporated herein by this reference.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
<PAGE>
Schedule A
----------
COPYRIGHTS AND COPYRIGHT APPLICATIONS
<TABLE>
<CAPTION>
Application or Issue or
Grantor Registration No. Country Filing Date
- ------- ---------------- ------- -----------
<S> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit C to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
ASSIGNMENT AND GRANT OF SECURITY INTEREST
IN PATENTS AND TRADEMARKS
WHEREAS, PETERSEN PUBLISHING COMPANY, L.L.C. (the "Grantor") is the owner
of the trademarks and service marks listed on Schedule A attached hereto, which
----------
marks are registered or have pending registrations in the United States Patent
and Trademark Office as set forth on Schedule A attached hereto (all such
----------
trademarks, service marks, registrations and applications, collectively, the
"Trademarks") and is the owner of the patents listed on Schedule A attached
----------
hereto, which patents are registered or have pending applications in the United
States Patent and Trademark Office as set forth on Schedule A attached hereto
----------
(all such patents, registrations and applications, collectively, the "Patents");
and
WHEREAS, the Grantor has entered into a Pledge and Security Agreement (as
amended, modified, restated or supplemented from time to time, the "Security
Agreement"), dated as of _____________, 1996, in which the Grantor has agreed
with First Union National Bank of North Carolina, as Administrative Agent (the
"Administrative Agent"), with offices at One First Union Center, 301 South
College Street, Charlotte, North Carolina 28288-0735, to execute this
Assignment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, as security for the payment and
performance of the Obligations (as defined in the Security Agreement), the
Grantor does hereby assign and grant to the Administrative Agent a security
interest in all of its right, title and interest in and to the Trademarks and
the Patents, and the use thereof, together with all proceeds and products
thereof and the goodwill of the businesses symbolized by the Trademarks and the
Patents. This Assignment has been given in conjunction with the assignment and
security interest granted to the Administrative Agent under the Security
Agreement, and the provisions of this Assignment are without prejudice to and in
addition to the provisions of the Security Agreement, which are incorporated
herein by this reference.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
<PAGE>
Schedule A
----------
TRADEMARKS AND TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Application or Issue or
Grantor Mark Registration No. Country Filing Date
- ------- ---- ---------------- ------- -----------
<S> <C> <C> <C> <C>
</TABLE>
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Patent No. Date Issued Country Description
- ---------- ----------- ------- -----------
<S> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit I to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
-----------------------------------
FORM OF
PARENT PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the ____ day of _________,
1996 (this "Agreement"), is made by PETERSEN HOLDINGS, L.L.C., a Delaware
limited liability company ("Holdings"), and BRIGHTVIEW COMMUNICATIONS GROUP,
INC., a Delaware corporation ("BrightView"; each of Holdings and BrightView, a
"Pledgor," and collectively, the "Pledgors"), in favor of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, as administrative agent for the banks and other
financial institutions (collectively, the "Lenders") party to the Credit
Agreement referred to below (in such capacity, the "Administrative Agent"), for
the benefit of the Secured Parties (as hereinafter defined). Capitalized terms
used herein without definition shall have the meanings given to them in the
Credit Agreement referred to below.
RECITALS
A. Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Borrower"), the Lenders, CIBC Inc., as Documentation Agent, and
First Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent, are parties to a Credit Agreement, dated as of September 30,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Borrower upon the terms and subject to the conditions set forth therein. The
Pledgors own all of the membership interests in the Borrower.
B. As a condition to the extension of credit to the Borrower under the
Credit Agreement, the Pledgors have executed and delivered a Guaranty Agreement,
dated as of the date hereof (as amended, modified or supplemented from time to
time, the "Parent Guaranty"), pursuant to which each Pledgor has guaranteed to
the Secured Parties the payment in full of the Obligations of the Borrower under
the Credit Agreement and the other Credit Documents.
C. It is a further condition to the extension of credit to the Borrower
under the Credit Agreement that each Pledgor shall have agreed, by executing and
delivering this Agreement, to secure the payment in full of its obligations
under the Parent Guaranty. The Secured Parties are relying on this Agreement in
their decision to extend credit to the Borrower under the Credit Agreement, and
would not enter into the Credit Agreement without this Agreement.
D. The Pledgors will obtain benefits as a result of the extension of
credit to the Borrower under the Credit Agreement, which benefits are hereby
acknowledged, and, accordingly, desire to execute and deliver this Agreement.
<PAGE>
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Secured Parties to enter into the Credit Agreement
and to induce the Lenders to extend credit to the Borrower thereunder, each
Pledgor hereby agrees as follows:
1. Pledge and Grant of Security Interest. Each Pledgor hereby pledges,
-------------------------------------
assigns and delivers to the Administrative Agent, for the ratable benefit of the
Lenders (including the Issuing Lender and the Swingline Lender in their
capacities as such, and including any Lender in its capacity as a counterparty
to any Interest Rate Protection Agreement with the Borrower), the Documentation
Agent and the Administrative Agent (collectively, the "Secured Parties"), and
grants to the Administrative Agent, for the ratable benefit of the Secured
Parties, a Lien upon and security interest in, all of such Pledgor's right,
title and interest in and to the following, in each case whether now owned or
existing or hereafter acquired or arising (collectively, the "Collateral"):
(i) all of the issued and outstanding membership interests in the
Borrower owned by such Pledgor, and all rights, powers and privileges
relating thereto or arising therefrom, including, without limitation, such
Pledgor's right to vote and to manage and administer the business of the
Borrower pursuant to the Limited Liability Company Agreement, dated as of
September 30, 1996, among the Pledgors and the Borrower (as amended,
modified, supplemented, restated or replaced from time to time, the
"Operating Agreement"), together with all other rights, interests, claims
and other property of such Pledgor in any manner arising out of or relating
to its interest as a member of the Borrower, whether now existing or
hereafter arising or acquired, of whatever kind or character (including any
tangible or intangible property or interests therein), and further
including, without limitation (but subject to the provisions of SECTION 8),
all rights of such Pledgor to receive amounts due and to become due
(including, without limitation, dividends, distributions, interest, income
and returns of capital) under or in respect of the Operating Agreement, to
receive payments or other amounts upon termination of the Operating
Agreement, and to receive any other payments or distributions, whether in
cash, securities, property, or a combination thereof, in respect of such
Pledgor's interest as a member of the Borrower, all of such Pledgor's
rights of access to the Borrower's books and records, and all rights
granted or available under applicable law in connection therewith, and all
additional equity interests in the Borrower (including all warrants,
options and other rights to acquire, and all securities convertible into,
equity interests in the Borrower), whether now or hereafter existing and
any time owned by such Pledgor, together with all certificates, instruments
and entries upon the books of financial intermediaries at any time
evidencing any of the foregoing (collectively, the "Pledged Interests");
(ii) all indebtedness, obligations and other amounts at any time
owing to such Pledgor from the Borrower or from any holder of equity
interests in such Pledgor and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness, obligations
or other amounts (collectively, "the Pledged Indebtedness"); and
(iii) all Proceeds of any of the foregoing. For purposes of this
Agreement, the term "Proceeds" shall mean and include all cash, securities
and other property of any nature received or receivable upon the sale,
exchange or other disposition of or realization upon any Collateral,
-2-
<PAGE>
whether voluntary or involuntary, together with all other payments and
distributions in respect of any Collateral, including pursuant to any
insurance, indemnity or guaranty with respect to any Collateral and
pursuant to any liquidation, reorganization or similar proceeding with
respect to any Pledgor or any issuer of or obligor on any Collateral.
2. Security for Secured Obligations. This Agreement and the Collateral
--------------------------------
secure the full and prompt payment, at any time and from time to time as and
when due (whether at the stated maturity, by acceleration or otherwise), of all
liabilities and obligations of each Pledgor, whether now existing or hereinafter
incurred, under, arising out of or in connection with the Parent Guaranty, this
Agreement or any of the other Credit Documents to which it is a party,
including, without limitation, each Pledgor's liabilities and obligations as
guarantor in respect of all principal of and interest on the Loans, all
Reimbursement Obligations in respect of Letters of Credit, all fees, expenses,
indemnities and other amounts payable by the Borrower under the Credit Agreement
or any other Credit Document (including interest accruing after the filing of a
petition or commencement of a case by or with respect to the Borrower seeking
relief under any applicable federal and state laws pertaining to bankruptcy,
reorganization, arrangement, moratorium, readjustment of debts, dissolution,
liquidation or other debtor relief, specifically including, without limitation,
the Bankruptcy Code and any fraudulent transfer and fraudulent conveyance laws,
whether or not the claim for such interest is allowed in such proceeding), all
obligations of the Borrower to any Lender under any Interest Rate Protection
Agreement, all Obligations that, but for the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due, and all fees,
costs and expenses payable by each Pledgor under SECTION 13, in each case
whether now existing or hereafter created or arising and whether direct or
indirect, absolute or contingent, due or to become due (the liabilities and
obligations of the Pledgors described in this SECTION 2, collectively, the
"Secured Obligations").
3. Delivery of Collateral. All certificates or instruments representing
----------------------
or evidencing any Collateral (other than checks or drafts, except during the
continuance of an Event of Default) shall be delivered to and held by or on
behalf of the Administrative Agent pursuant hereto, shall be in form suitable
for transfer by delivery and shall be delivered together with undated stock
powers duly executed in blank, appropriate endorsements or other necessary
instruments of registration, transfer or assignment, duly executed and in form
and substance satisfactory to the Administrative Agent, and in each case such
other instruments or documents as the Administrative Agent may reasonably
request.
4. Representations and Warranties. Each Pledgor represents and
------------------------------
warrants as follows:
(a) As of the date hereof, the Pledged Interests being pledged by each
Pledgor hereunder consist of the percentage and type of equity membership
interests in the Borrower as described beneath such Pledgor's name in Annex A.
--------
The Pledged Interests described in Annex A collectively represent 100% of the
-------
issued and outstanding equity membership interests in the Borrower.
(b) Each Pledgor is, or at the time when pledged hereunder will be, the
sole legal, record and beneficial owner of all Pledged Interests purported to be
pledged by it hereunder, free and clear of any Lien whatsoever other than the
security interest created by this Agreement. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any government or public office, and no
Pledgor has filed or consented to the filing of any such statement or notice,
except for Uniform Commercial Code financing statements naming the
Administrative Agent as secured party.
-3-
<PAGE>
(c) This Agreement, together with (i) the filing, with regard to each
Pledgor, of duly completed and executed Uniform Commercial Code financing
statements naming such Pledgor as debtor, the Administrative Agent as secured
party, and describing the Collateral, in the jurisdictions set forth beneath
such Pledgor's name on Annex B hereto, (ii) in the case of uncertificated
-------
Pledged Interests, compliance with Section 8-313 (or its successor provision) of
the applicable Uniform Commercial Code, and (iii) the delivery to the
Administrative Agent of all certificates, chattel paper, promissory notes and
other instruments included in the Collateral, creates, and at all times will
constitute, a valid and perfected security interest in and Lien upon the
Collateral owned by such Pledgor in favor of the Administrative Agent, for the
benefit of the Secured Parties, to the extent a security interest therein can be
perfected by such filings or possession of such chattel paper, promissory notes
or instruments, as applicable, superior and prior to the rights of all other
Persons therein (except for Permitted Liens), and no other or additional
filings, registrations, recordings or actions are or shall be necessary or
appropriate in order to maintain the perfection and priority of such Lien and
security interest, other than continuation statements required under the
applicable Uniform Commercial Code.
(d) All of the Pledged Interests have been duly and validly issued and are
fully paid and not subject to any preemptive rights, warrants, options or
similar rights or restrictions in favor of third parties, any capital call or
other additional capital requirement or any contractual or other restrictions
upon transfer, except as expressly set forth in the Operating Agreement.
(e) No consent, approval, authorization, exemption or other action by,
notice to, or filing with, any Governmental Authority is required in connection
with the due execution, delivery and performance by each Pledgor of this
Agreement, the pledge of the Collateral hereunder or the exercise by the
Administrative Agent of the voting or other rights and remedies in respect of
the Collateral provided for herein, except as expressly set forth in the
Operating Agreement and except as may be required in connection with a
disposition of any Collateral by laws affecting the offering and sale of
securities generally.
(f) The Pledgors have furnished the Administrative Agent with a correct
and complete copy of the Operating Agreement as in effect as of the date hereof.
The Operating Agreement is in full force and effect and there exists no default,
breach or event of default thereunder by any party. The Operating Agreement sets
forth the entire agreement and understanding of the parties thereto in respect
of the subject matter thereof, and there are no other agreements or
understandings, written or oral, relating to the matters covered thereby.
(g) Annex C lists, as to each Pledgor, (i) the address of its chief
-------
executive office and principal place of business and (ii) the address of each
location of all chattel paper, instruments and other records or information
evidencing or relating to the Collateral of such Pledgor. No Pledgor presently
conducts business under any prior or other corporate or limited liability
company name or under any trade or fictitious name, except as indicated beneath
its name on Annex C, and no Pledgor has entered into any contract or granted
-------
any Lien within the past five years under any name other than its legal
corporate or limited liability company name or a trade or fictitious name
indicated beneath its name on Annex C.
-------
5. Additional Collateral. If either Pledgor shall, at any time and from
---------------------
time to time after the date hereof, acquire any additional membership interests
in the Borrower or Indebtedness of the types described in clauses (i) and (ii)
of SECTION 1, the same shall be automatically deemed to be Pledged Interests or
Pledged Indebtedness, as the case may be, and to be pledged to the
Administrative Agent
-4-
<PAGE>
pursuant to SECTION 1, and such Pledgor will forthwith pledge and deposit the
same with the Administrative Agent and deliver to the Administrative Agent any
certificates or instruments therefor, together with the endorsement of such
Pledgor (in the case of any promissory notes or other instruments), undated
stock powers (in the case of Pledged Interests evidenced by certificates) or
other necessary instruments of transfer or assignment, duly executed in blank
and in form and substance satisfactory to the Administrative Agent, together
with such other certificates and instruments as the Administrative Agent may
reasonably request (including Uniform Commercial Code financing statements or
appropriate amendments thereto), and will promptly thereafter deliver to the
Administrative Agent a fully completed and duly executed amendment to this
Agreement in the form of Exhibit A (each, a "Pledge Amendment") in
---------
respect thereof. Each Pledgor hereby authorizes the Administrative Agent to
attach each Pledge Amendment to this Agreement, and agrees that all such
Collateral listed on any Pledge Amendment shall for all purposes be deemed
Collateral hereunder and shall be subject to the provisions hereof; provided
--------
that the failure of such Pledgor to execute and deliver any Pledge
Amendment with respect to any such additional Collateral as required hereinabove
shall not impair the security interest of the Administrative Agent in such
Collateral or otherwise adversely affect the rights and remedies of the
Administrative Agent hereunder with respect thereto. If any Pledged Interests
(whether now owned or hereafter acquired) are "uncertificated securities" within
the meaning of the applicable Uniform Commercial Code or are otherwise not
evidenced by any certificate or instrument, each applicable Pledgor will
promptly notify the Administrative Agent thereof and will promptly take and
cause to be taken all actions required under applicable law, including, as
applicable, under Article 8 or 9 of the applicable Uniform Commercial Code, to
perfect the security interest of the Administrative Agent therein.
6. Certain Covenants of the Pledgors. (a) The Pledgors will cause the
---------------------------------
Pledged Interests to constitute at all times 100% of the equity membership
interests in the Borrower, and unless the Administrative Agent shall have given
its prior written consent, neither Pledgor will cause or permit the Borrower to
issue or sell any new equity membership interests, any warrants, options or
rights to acquire its equity membership interests, or other equity securities of
any nature to any Person other than the Pledgors, or cause, permit or consent to
the admission of any other Person as a member of the Borrower.
(b) Neither Pledgor will sell or otherwise dispose of, grant any options,
warrants or other rights with respect to, or mortgage, pledge, grant any Lien
with respect to or otherwise encumber, any of its Pledged Interests or any other
Collateral or any interest therein, except for the security interest created by
this Agreement.
(c) Neither Pledgor will (i) amend, modify, waive or forgive any provision
of or right arising under the Operating Agreement in a manner that would, or
could reasonably be expected to, have the effect of impairing the position or
interests of the Administrative Agent or any other Secured Party, (ii) cancel or
terminate the Operating Agreement or petition, request or take any other action
that seeks, or that could reasonably be expected, to rescind, terminate, cancel
or suspend the Operating Agreement, to obtain any partition with respect to the
Borrower or to dissolve or liquidate the Borrower. The Pledgors will deliver to
the Administrative Agent from time to time copies of all amendments or
modifications to the Operating Agreement promptly upon completion thereof;
provided that nothing herein shall be deemed to permit any amendment or
- --------
modification not otherwise permitted hereunder.
(d) Each Pledgor will perform and comply in all material respects with all
terms of the Operating
-5-
<PAGE>
Agreement required to be performed or complied with by it, will maintain the
Operating Agreement in full force and effect, will enforce the Operating
Agreement in accordance with its terms and will take all such action to that end
as may from time to time be reasonably requested by the Administrative Agent.
(e) Each Pledgor will pay and discharge (i) all taxes, assessments and
governmental charges or levies imposed upon it, upon its income or profits or
upon any of its properties, prior to the date on which penalties would attach
thereto, and (ii) all lawful claims that, if unpaid, might become a Lien upon
any of its properties; provided, however, that no Pledgor shall be required to
-------- -------
pay any such tax, assessment, charge, levy or claim that is being contested in
good faith and by proper proceedings and as to which such Pledgor has maintained
adequate reserves with respect thereto in accordance with Generally Accepted
Accounting Principles, unless and until any tax lien notice has become effective
with respect thereto or until any Lien resulting therefrom attaches to its
properties and becomes enforceable against its other creditors.
(f) Neither Pledgor will (i) change its name, identity or corporate
structure, (ii) change its chief executive office or principal place of business
from the applicable location thereof listed on Annex C, or (iii) remove any
-------
books, records or other information relating to Collateral from the applicable
location thereof listed on Annex C, unless in each case such Grantor has (1)
-------
given twenty (20) days' prior written notice to the Administrative Agent of its
intention to do so, together with information regarding any such new location
and such other information in connection with such proposed action as the
Administrative Agent may reasonably request, and (2) delivered to the
Administrative Agent ten (10) days prior to any such change or removal such
documents, instruments and financing statements as may be required by the
Administrative Agent, all in form and substance satisfactory to the
Administrative Agent, paid all necessary filing and recording fees and taxes,
and taken all other actions reasonably requested by the Administrative Agent
(including, at the reasonable request of the Administrative Agent, delivery of
opinions of counsel reasonably satisfactory to the Administrative Agent to the
effect that all such actions have been taken), in order to perfect and maintain
the Lien upon and security interest in the Collateral provided for herein in
accordance with the provisions of SECTION 4(C).
(g) Each Pledgor shall, from time to time at such times as may be
reasonably requested and upon reasonable notice, (i) make available to the
Administrative Agent for inspection and review at such Pledgor's offices copies
of all documents and information relating to the Collateral, and (ii) permit the
Administrative Agent or its representatives to visit its offices or the premises
upon which any Collateral may be located, inspect its books and records and make
copies and memoranda thereof, inspect the Collateral, discuss its finances and
affairs with its officers, employees and independent accountants and take any
other actions necessary for the protection of the interests of the Secured
Parties in the Collateral.
(h) Each Pledgor agrees that it will, at its own cost and expense, take
any and all actions necessary to warrant and defend the right, title and
interest of the Secured Parties in and to the Collateral against the claims and
demands of all other Persons.
7. Voting Rights. So long as no Event of Default shall have occurred
-------------
and be continuing, each Pledgor shall be entitled to exercise all voting and
other consensual rights pertaining to the Pledged Interests (subject to its
obligations under SECTION 5), and for that purpose the Administrative Agent will
execute and deliver or cause to be executed and delivered to each applicable
Pledgor all such proxies and other instruments as such Pledgor may reasonably
request in writing to enable such Pledgor to exercise such voting and other
consensual rights; provided, however, that neither Pledgor will cast any vote,
-------- -------
give
-6-
<PAGE>
any consent, waiver or ratification, or take or fail to take any action, in
any manner that would, or could reasonably be expected to, violate or be
inconsistent with any of the terms of this Agreement, the Credit Agreement or
any other Credit Document, or have the effect of impairing in any material
respect the position or interests of the Administrative Agent or any other
Secured Party.
8. Dividends and Other Distributions. So long as no Event of Default
---------------------------------
shall have occurred and be continuing (or would occur as a result thereof), and
except as provided otherwise herein, all interest, income, dividends,
distributions and other amounts payable in cash in respect of the Pledged
Interests may be paid to and retained by the Pledgors; provided, however, that
- -------- -------
all such interest, dividends, distributions and other amounts shall, at all
times after the occurrence and during the continuance of an Event of Default, be
paid to the Administrative Agent and retained by it as part of the Collateral
(except to the extent applied upon receipt to the repayment of the Secured
Obligations); but provided, further, that Holdings and BrightView may receive
-------- -------
and distribute to their respective members any distributions made by the
Borrower pursuant to SECTION 8.6(A)(III) of the Credit Agreement that are not
prohibited by such Section from being made during such Event of Default. The
Administrative Agent shall also be entitled at all times (whether or not during
the continuance of an Event of Default) to receive directly, and to retain as
part of the Collateral, (i) all interest, income, dividends, distributions or
other amounts paid or payable in cash or other property in respect of any
Pledged Interests in connection with the dissolution, liquidation,
recapitalization or reclassification of the capital of the Borrower to the
extent representing (in the reasonable judgment of the Administrative Agent) an
extraordinary, liquidating or other distribution in return of capital, (ii) all
additional membership interests, warrants, options or other securities or
property (other than cash) paid or payable or distributed or distributable in
respect of any Pledged Interests in connection with any noncash dividend,
distribution, return of capital, spin-off, split-up, reclassification,
combination of interests or similar rearrangement, and (iii) without affecting
any restrictions against such actions contained in the Credit Agreement, all
additional membership interests, warrants, options or other securities or
property (including cash) paid or payable or distributed or distributable in
respect of any Pledged Interests in connection with any consolidation, merger,
exchange of securities, liquidation or other reorganization. All interest,
income, dividends, distributions or other amounts that are received by either
Pledgor in violation of the provisions of this Section shall be received in
trust for the benefit of the Administrative Agent, shall be segregated from
other property or funds of the Pledgors and shall be forthwith delivered to the
Administrative Agent as Collateral in the same form as so received (with any
necessary endorsements).
9. Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Administrative Agent shall be entitled to exercise in respect of
the Collateral all of its rights, powers and remedies provided for herein or
otherwise available to it under any other Credit Document, by law, in equity or
otherwise, including all rights and remedies of a secured party under the
Uniform Commercial Code as in effect in each relevant jurisdiction, and shall be
entitled in particular, but without limitation of the foregoing, to exercise the
following rights, which each Pledgor agrees to be commercially reasonable:
(a) To notify the parties obligated on any of the Collateral to make
payment to the Administrative Agent of any amount due or to become due
thereunder and receive all such amounts;
(b) To transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to the
Pledgors and with or without disclosing that such Collateral is subject to the
security interest created hereunder;
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<PAGE>
(c) To accelerate any Pledged Indebtedness that may be accelerated in
accordance with its terms, and take any other lawful action to collect upon any
Pledged Indebtedness;
(d) To exercise (i) all voting, consensual and other rights and powers
pertaining to the Pledged Interests (whether or not transferred into the name of
the Administrative Agent), at any meeting of the members of the Borrower or
otherwise, and (ii) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Pledged Interests as
if it were the absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Interests upon the
merger, consolidation, reorganization, reclassification, combination of
interests, similar rearrangement or other similar fundamental change in the
structure of the Borrower, or upon the exercise by either Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
Pledged Interests, and in connection therewith, the right to deposit and deliver
any and all of the Pledged Interests with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Administrative Agent may determine, and give all consents, waivers and
ratifications in respect of the Pledged Interests, all without liability except
to account for any property actually received by it, but the Administrative
Agent shall have no duty to exercise any such right, privilege or option or give
any such consent, waiver or ratification and shall not be responsible for any
failure to do so or delay in so doing; and for the foregoing purposes each
Pledgor will promptly execute and deliver or cause to be executed and delivered
to the Administrative Agent, upon request, all such proxies and other
instruments as the Administrative Agent may reasonably request to enable the
Administrative Agent to exercise such rights and powers; AND IN FURTHERANCE OF
THE FOREGOING AND WITHOUT LIMITATION THEREOF, EACH PLEDGOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE ADMINISTRATIVE AGENT AS THE TRUE AND LAWFUL PROXY
AND ATTORNEY-IN-FACT OF SUCH PLEDGOR, WITH FULL POWER OF SUBSTITUTION IN THE
PREMISES, TO EXERCISE ALL SUCH VOTING, CONSENSUAL AND OTHER RIGHTS AND POWERS TO
WHICH ANY MEMBER OF THE BORROWER HOLDING THE PLEDGED INTERESTS WOULD BE ENTITLED
BY VIRTUE OF HOLDING THE SAME, WHICH PROXY AND POWER OF ATTORNEY, BEING COUPLED
WITH AN INTEREST, IS IRREVOCABLE AND SHALL BE EFFECTIVE FOR SO LONG AS THIS
AGREEMENT SHALL BE IN EFFECT; and
(e) To sell, resell, assign and deliver, in its sole discretion, all or
any of the Collateral, in one or more parcels, on any securities exchange on
which the Pledged Interests may be listed, at public or private sale, at any of
the Administrative Agent's offices or elsewhere, for cash, upon credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as the Administrative Agent may deem satisfactory. If any of the
Collateral is sold by the Administrative Agent upon credit or for future
delivery, the Administrative Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Administrative Agent may resell such Collateral. In no event shall the
Pledgors be credited with any part of the Proceeds of sale of any Collateral
until and to the extent cash payment in respect thereof has actually been
received by the Administrative Agent. Each purchaser at any such sale shall hold
the property sold absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Pledgors, and each Pledgor
hereby expressly waives all rights of redemption, stay or appraisal, and all
rights to require the Administrative Agent to marshal any assets in favor of
such Pledgor or any other party or against or in payment of any or all of the
Secured Obligations, that it has or may have under any rule of law or statute
now existing or hereafter adopted. No demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law, as
referred to below), all of which are hereby expressly waived by each Pledgor,
shall be required in connection with any sale or
-8-
<PAGE>
other disposition of any part of the Collateral. If any notice of a proposed
sale or other disposition of any part of the Collateral shall be required under
applicable law, the Administrative Agent shall give the applicable Pledgor at
least ten (10) days' prior notice of the time and place of any public sale and
of the time after which any private sale or other disposition is to be made,
which notice each Pledgor agrees is commercially reasonable. The Administrative
Agent shall not be obligated to make any sale of Collateral if it shall
determine not to do so, regardless of the fact that notice of sale may have been
given. The Administrative Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. Upon each public sale and, to the extent permitted by applicable law,
upon each private sale, the Administrative Agent may purchase all or any of the
Collateral being sold, free from any equity, right of redemption or other claim
or demand, and may make payment therefor by endorsement and application (without
recourse) of the Secured Obligations in lieu of cash as a credit on account of
the purchase price for such Collateral.
10. Application of Proceeds. (a) All Proceeds collected by the
-----------------------
Administrative Agent upon any sale, other disposition of or realization upon any
of the Collateral, together with all other moneys received by the Administrative
Agent hereunder, shall be applied as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, all amounts advanced by the Administrative Agent
for the account of the Pledgors, and all other amounts payable to the
Administrative Agent under SECTION 13;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Secured Obligations
owing to the Secured Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Pledgors or any other Person lawfully entitled to receive
such surplus.
(b) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Secured Party that has
entered into an Interest Rate Protection Agreement with the Borrower for a
determination (which such Secured Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding Secured
Obligations owed to such Secured Party under any such Interest Rate Protection
Agreement. Unless it has actual knowledge (including by way of written notice
from any such Secured Party) to the contrary, the Administrative Agent, in
acting hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Obligations in respect thereof are in existence between any
Secured Party and the Borrower.
(c) The Pledgors shall remain jointly and severally liable to the extent
of any deficiency between the amount of all Proceeds realized upon sale or other
disposition of the Collateral pursuant to this Agreement and the aggregate
amount of the sums referred to in clauses (i) and (ii) of subsection (a) above.
Upon any sale of any Collateral hereunder by the Administrative Agent (whether
by virtue of the power of sale herein granted, pursuant to judicial proceeding,
or otherwise), the receipt of the Administrative Agent or the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to
see to the
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<PAGE>
application of any part of the purchase money paid over to the Administrative
Agent or such officer or be answerable in any way for the misapplication
thereof.
11. Each Pledgor Remains Liable. Notwithstanding anything herein to the
---------------------------
contrary, (i) the Pledgors shall remain liable under the Operating Agreement to
perform all of their respective obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Administrative
Agent of any of its rights or remedies hereunder shall not release either
Pledgor from any of its obligations under the Operating Agreement, and (iii)
except as specifically provided for hereinbelow, the Administrative Agent shall
not have any obligation or liability by reason of this Agreement under the
Operating Agreement, nor shall the Administrative Agent be obligated to perform
any of the obligations or duties of the Pledgors thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder. This
Agreement shall not in any way be deemed to obligate the Administrative Agent,
any other Secured Party or any purchaser at a foreclosure sale under this
Agreement to assume any of either Pledgor's obligations, duties or liabilities
under the Operating Agreement, including, without limitation, each Pledgor's
obligations, if any, to manage the business and affairs of the Borrower
(collectively, the "Member Obligations"), unless the Administrative Agent or
such other Secured Party or purchaser otherwise agrees in writing to assume any
or all of such Member Obligations. In the event of foreclosure by the
Administrative Agent hereunder, then except as provided in the preceding
sentence, each Pledgor shall remain bound and obligated to perform its Member
Obligations and neither the Administrative Agent nor any other Secured Party
shall be deemed to have assumed any Member Obligations. In the event the
Administrative Agent, any other Secured Party or any purchaser at a foreclosure
sale elects to become a substitute member in place of either Pledgor, the party
making such election shall adopt in writing the Operating Agreement and agree to
be bound by the terms and provisions thereof; and subject to the execution of
such written agreement, each Pledgor hereby irrevocably consents in advance,
pursuant to the Operating Agreement, to the admission of the Administrative
Agent, any other Secured Party or any such purchaser as a substitute member to
the extent of the Pledged Interests acquired pursuant to such sale, and agrees
to execute any documents or instruments and take any other action as may be
necessary or as may be reasonably requested in connection therewith. The
powers, rights and remedies conferred on the Administrative Agent hereunder are
solely to protect its interest and privilege in the Operating Agreement, as
Collateral, and shall not impose any duty upon it to exercise any such powers,
rights or remedies.
12. Registration; Private Sales. (a) If, at any time after the
---------------------------
occurrence and during the continuance of an Event of Default, either Pledgor
shall have received from the Administrative Agent a written request or requests
that such Pledgor cause any registration, qualification or compliance under any
federal or state securities law or laws to be effected with respect to all or
any part of the Pledged Interests, such Pledgor will, as soon as practicable and
at its expense, use its best efforts to cause such registration to be effected
and be kept effective and will use its best efforts to cause such qualification
and compliance to be effected and be kept effective as may be so requested and
as would permit or facilitate the sale and distribution of such Pledged
Interests, including, without limitation, registration under the Securities Act
of 1933, as amended (the "Securities Act"), appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliance
with any other applicable requirements of Governmental Authorities; provided,
--------
that the Administrative Agent shall furnish to such Pledgor such information
regarding the Administrative Agent as such Pledgor may reasonably request in
writing and as shall be required in connection with any such registration,
qualification or compliance. Such Pledgor will cause the Administrative Agent to
be kept reasonably advised in writing as to the progress of each such
registration, qualification or compliance and as to the completion thereof, will
furnish to the Administrative Agent such number of prospectuses, offering
circulars or other documents
-10-
<PAGE>
incident thereto as the Administrative Agent from time to time may reasonably
request, and will indemnify the Administrative Agent and all others
participating in the distribution of such Pledged Securities against all claims,
losses, damages and liabilities caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to such Pledgor by the Administrative Agent or
any other Secured Party expressly for use therein.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws as in
effect from time to time, the Administrative Agent may be compelled, with
respect to any sale of all or any part of the Pledged Interests conducted
without registration or qualification under the Securities Act and such state
securities laws, to limit purchasers to any one or more Persons who will
represent and agree, among other things, to acquire such Pledged Interests for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sales may be
made in such manner and under such circumstances as the Administrative Agent may
deem necessary or advisable in its sole and absolute discretion, including at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and agrees that the
Administrative Agent shall have no obligation to conduct any public sales and no
obligation to delay the sale of any Pledged Interests for the period of time
necessary to permit its registration for public sale under the Securities Act
and applicable state securities laws, and shall not have any responsibility or
liability as a result of its election so not to conduct any such public sales or
delay the sale of any Pledged Interests, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after such registration. Each Pledgor hereby waives any claims against the
Administrative Agent or any Secured Party arising by reason of the fact that the
price at which any Pledged Interests may have been sold at any private sale was
less than the price that might have been obtained at a public sale or was less
than the aggregate amount of the Secured Obligations, even if the Administrative
Agent accepts the first offer received and does not offer such Pledged Interests
to more than one offeree.
(c) Each Pledgor agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgors.
13. Indemnity and Expenses. The Pledgors agree jointly and severally:
----------------------
(a) To indemnify and hold harmless the Administrative Agent, each other
Secured Party and each of their respective directors, officers, employees,
agents and affiliates from and against any and all claims, damages, demands,
losses, obligations, judgments and liabilities (including, without limitation,
reasonable attorneys' fees and expenses) in any way arising out of or in
connection with this Agreement and the transactions contemplated hereby, except
to the extent the same shall arise as a result of the gross negligence or
willful misconduct of the party seeking to be indemnified; and
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<PAGE>
(b) To pay and reimburse the Administrative Agent upon demand for all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) that the Administrative Agent may incur in
connection with (i) the custody, use or preservation of, or the sale of,
collection from or other realization upon, any of the Collateral, including the
reasonable expenses of re-taking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, (ii) the exercise or
enforcement of any rights or remedies granted hereunder (including, without
limitation, under SECTION 12), under any of the other Credit Documents or
otherwise available to it (whether at law, in equity or otherwise), or (iii) the
failure by either Pledgor to perform or observe any of the provisions hereof.
The provisions of this SECTION 13 shall survive the execution and delivery of
this Agreement, the repayment of any of the Obligations, the termination of the
Commitments under the Credit Agreement and the termination of this Agreement or
any other Credit Document.
14. Further Assurances; Attorney-in-Fact. (a) Each Pledgor agrees that
------------------------------------
it will join with the Administrative Agent to execute and, at its own expense,
file and refile under any applicable Uniform Commercial Code such financing
statements, continuation statements and other documents and instruments in such
offices as the Administrative Agent may reasonably deem necessary or
appropriate, and wherever required or permitted by law, in order to perfect and
preserve the Administrative Agent's security interest in the Collateral, and
hereby authorizes the Administrative Agent to file financing statements and
amendments thereto relating to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Administrative Agent such
additional conveyances, assignments, agreements and instruments as the
Administrative Agent may reasonably require or deem advisable to perfect,
establish, confirm and maintain the security interest and Lien provided for
herein, to carry out the purposes of this Agreement or to further assure and
confirm unto the Administrative Agent its rights, powers and remedies hereunder.
(b) Each Pledgor hereby irrevocably appoints the Administrative Agent its
lawful attorney- in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, the Administrative Agent or otherwise,
and with full power of substitution in the premises (which power of attorney,
being coupled with an interest, is irrevocable for so long as this Agreement
shall be in effect), from time to time in the Administrative Agent's discretion
after the occurrence and during the continuance of an Event of Default to take
any action and to execute any instruments that the Administrative Agent may deem
necessary or advisable to accomplish the purpose of this Agreement, including,
without limitation:
(i) to sign the name of such Pledgor on any financing statement,
continuation statement, notice or other similar document that, in the
Administrative Agent's opinion, should be made or filed in order to perfect
or continue perfected the security interest granted under this Agreement;
(ii) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(iii) to receive, endorse and collect any checks, drafts,
instruments, chattel paper and other orders for the payment of money made
payable to such Pledgor representing any interest, income, dividend,
distribution or other amount payable in respect of any of the Collateral
and to give full discharge for the same;
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<PAGE>
(iv) to pay or discharge taxes, Liens or other encumbrances levied
or placed on or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
the Administrative Agent in its sole discretion, any such payments made by
the Administrative Agent to become Secured Obligations of the Pledgors to
the Administrative Agent, due and payable immediately and without demand;
(v) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or advisable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral;
and
(vi) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with any and all of the Collateral as fully
and completely as though the Administrative Agent were the absolute owner
of the Collateral for all purposes, and to do from time to time, at the
Administrative Agent's option and the Pledgors' expense, all other acts and
things deemed necessary by the Administrative Agent to protect, preserve or
realize upon the Collateral and to more completely carry out the purposes
of this Agreement.
(c) If either Pledgor fails to perform any covenant or agreement contained
in this Agreement after written request to do so by the Administrative Agent
(provided that no such request shall be necessary at any time after the
- ---------
occurrence and during the continuance of an Event of Default), the
Administrative Agent may itself perform, or cause the performance of, such
covenant or agreement and may take any other action that it deems necessary and
appropriate for the maintenance and preservation of the Collateral or its
security interest therein, and the reasonable expenses so incurred in connection
therewith shall be payable by the Pledgors under SECTION 13.
15. The Administrative Agent; Standard of Care. The Administrative
------------------------------------------
Agent will hold all items of the Collateral at any time received under this
Agreement in accordance with the provisions hereof. The obligations of the
Administrative Agent as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement and the
other Credit Documents, are only those expressly set forth in this Agreement and
the other Credit Documents. The Administrative Agent shall act hereunder at the
direction, or with the consent, of the Required Lenders on the terms and
conditions set forth in the Credit Agreement. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest, on behalf of
the Secured Parties, in the Collateral, and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Administrative
Agent, in its individual capacity, accords its own property of a similar nature,
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to the Collateral. Neither the Administrative Agent nor any
other Secured Party shall be liable to either Pledgor (i) for any loss or damage
sustained by such Pledgor, or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral that may occur as a result of
or in connection with or that is in any way related to any exercise by the
Administrative Agent or any other Secured Party of any right or remedy under
this Agreement, any failure to demand, collect or realize upon any of the
Collateral or any delay in doing so, or any other act or failure to act on the
part of the Administrative Agent or any other Secured Party, except to the
extent that the same is caused by its own gross negligence or willful
misconduct.
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<PAGE>
16. Security Interest Absolute. Each Pledgor agrees that its
--------------------------
obligations, and the security interest granted to and all rights of the
Administrative Agent, hereunder are irrevocable, absolute and unconditional and
shall not be discharged, limited or otherwise affected by reason of any of the
following, whether or not such Pledgor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in
any other term of, any Secured Obligations, or any amendment, modification
or supplement to, restatement of, or consent to any rescission or waiver of
or departure from, any provisions of the Credit Agreement, any other Credit
Document or any agreement or instrument delivered pursuant to any of the
foregoing;
(ii) the invalidity or unenforceability of any Secured Obligations
or any provisions of the Credit Agreement, any other Credit Document or any
agreement or instrument delivered pursuant to any of the foregoing;
(iii) any sale, exchange, release, substitution, compromise,
nonperfection or other action or inaction in respect of any other
collateral pledged as direct or indirect security for any Secured
Obligations, or any discharge, modification, settlement, compromise or
other action or inaction in respect of any guaranty or other direct or
indirect liability for any Secured Obligations; or
(iv) any other circumstance that might otherwise constitute a legal
or equitable discharge of, or a defense, set-off or counterclaim available
to, either Pledgor, other than the occurrence of (x) the payment in full of
the Secured Obligations (other than indemnity obligations not then due and
payable and that survive termination of the Credit Documents), (y) the
termination or expiration of all Letters of Credit under the Credit
Agreement and (z) the termination of the Commitments under the Credit
Agreement (the events in clauses (x), (y) and (z) above, collectively, the
"Termination Requirements").
17. No Waiver. The rights and remedies of the Secured Parties expressly
---------
set forth in this Agreement and the other Credit Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No failure or delay on the part of any Secured
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege or be construed to be a waiver of any Default or
Event of Default. No course of dealing between the Pledgors and the Secured
Parties or their agents or employees shall be effective to amend, modify or
discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon either Pledgor in any case shall entitle such Pledgor or the other Pledgor
to any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of any Secured Party to exercise any right or
remedy or take any other or further action in any circumstances without notice
or demand.
18. Enforcement. By its acceptance of the benefits of this Agreement,
-----------
each Lender agrees that this Agreement may be enforced only by the
Administrative Agent, acting upon the instructions or with the consent of the
Required Lenders as provided for in the Credit Agreement, and that no Lender
shall have any right individually to enforce or seek to enforce this Agreement
or to realize upon any Collateral or other security given to secure the payment
and performance of the Secured Obligations.
-14-
<PAGE>
19. Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by either Pledgor from,
any provision of this Agreement, shall be effective unless in a writing executed
and delivered in accordance with Section 11.6 of the Credit Agreement, and then
the same shall be effective only in the specific instance and for the specific
purpose for which given.
20. Continuing Security Interest; Term; Successors and Assigns;
-----------------------------------------------------------
Assignment; Termination and Release; Survival. This Agreement shall create a
- ---------------------------------------------
continuing security interest in the Collateral and shall secure the payment and
performance of all of the Secured Obligations as the same may arise and be
outstanding at any time and from time to time from and after the date hereof,
and shall (i) remain in full force and effect until the satisfaction of all of
the Termination Requirements, (ii) be binding upon and enforceable against each
Pledgor and its successors and assigns (provided, however, that neither Pledgor
-------- -------
may sell, assign or transfer any of its rights, interests, duties or obligations
hereunder without the prior written consent of the Lenders) and (iii) inure to
the benefit of and be enforceable by each Secured Party and its successors and
assigns. Upon any sale or other disposition by any Pledgor of any Collateral in
a transaction expressly permitted hereunder or under or pursuant to the Credit
Agreement or any other applicable Credit Document, the Lien and security
interest created by this Agreement in and upon such Collateral shall be
automatically released, and upon the satisfaction of all of the Termination
Requirements, this Agreement and the Lien and security interest created hereby
shall terminate; and in connection with any such release or termination, the
Administrative Agent, at the request and expense of the applicable Pledgor, will
execute and deliver to such Pledgor such documents and instruments evidencing
such release or termination as such Pledgor may reasonably request and will
assign, transfer and deliver to such Pledgor, without recourse and without
representation or warranty, such of the Collateral as may then be in the
possession of the Administrative Agent (or, in the case of any partial release
of Collateral, such of the Collateral so being released as may be in its
possession). All representations, warranties, covenants and agreements herein
shall survive the execution and delivery of this Agreement and any Pledge
Amendment.
21. Notices. All notices and other communications provided for hereunder
-------
shall be given to the parties in the manner and subject to the other notice
provisions set forth in the Parent Guaranty.
22. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
23. Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
24. Construction. The headings of the various sections and subsections
------------
of this Agreement have been inserted for convenience only and shall not in any
way affect the meaning or construction of any of the provisions hereof. Unless
the context otherwise requires, words in the singular include the plural and
words in the plural include the singular. All terms in this Agreement that are
not capitalized shall have the meanings provided by the applicable Uniform
Commercial Code to the extent the same are used or defined therein.
-15-
<PAGE>
25. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first above written.
PETERSEN HOLDINGS, L.L.C.
By: __________________________________
Title: _______________________________
BRIGHTVIEW COMMUNICATIONS GROUP, INC.
By: __________________________________
Title: _______________________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Administrative Agent
By: _______________________________
Title: ______________________________
-17-
<PAGE>
Annex A to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
<TABLE>
<CAPTION>
Pledged Interests pledged by Holdings
- -------------------------------------
Percentage of
Outstanding
Type of Interests
Name of Issuer Interests in Issuer
-------------- --------- ---------
<S> <C> <C>
Petersen Publishing Company, L.L.C. Common 99.9%
Pledged Interests pledged by BrightView
- ---------------------------------------
Percentage of
Outstanding
Type of Interests
Name of Issuer Interests in Issuer
-------------- --------- ---------
Petersen Publishing Company, L.L.C. Common 0.1%
</TABLE>
<PAGE>
Annex B to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
FILING LOCATIONS
A. Petersen Holdings, L.L.C.
-------------------------
Secretary of State of California
Secretary of State of Illinois
B. BrightView Communications Group, Inc.
-------------------------------------
Secretary of State of California
Secretary of State of Illinois
<PAGE>
Annex C to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
----------------------------------
LOCATIONS OF CHIEF EXECUTIVE OFFICE
AND RECORDS RELATING TO COLLATERAL
A. Petersen Holdings, L.L.C.
1. Chief executive office/principal place
--------------------------------------
of business:
-----------
a) 6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
------------------------------
a) 6420 Wilshire Blvd.
Los Angeles, California
b) c/o Willis Stein & Partners, L.P.
227 West Monroe, Suite 4300
Chicago, Illinois 60606
A. BrightView Communications Group, Inc.
1. Chief executive office/principal place
--------------------------------------
of business:
-----------
a) 6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
------------------------------
a) 6420 Wilshire Blvd.
Los Angeles, California
b) c/o Willis Stein & Partners, L.P.
227 West Monroe, Suite 4300
Chicago, Illinois 60606
<PAGE>
Annex C to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
PLEDGE AMENDMENT
THIS PLEDGE AMENDMENT, dated as of _______________, 19___, is delivered by
______________________ (the "Pledgor") pursuant to SECTION 5 of the Pledge
Agreement referred to hereinbelow. The Pledgor hereby agrees that this Pledge
Amendment may be attached to the Pledge and Security Agreement, dated as of
__________, 1996, made by the Pledgor in favor of First Union National Bank of
North Carolina, as Administrative Agent (as amended, modified, supplemented or
restated from time to time, the "Pledge Agreement," capitalized terms defined
therein being used herein as therein defined), and that the Pledged Interests
listed on Annex A to this Pledge Amendment shall be deemed to be part of the
-------
Pledged Interests within the meaning of the Pledge Agreement and shall become
part of the Collateral and shall secure all of the Secured Obligations as
provided in the Pledge Agreement. This Pledge Amendment and its attachments are
hereby incorporated into the Pledge Agreement and made a part thereof.
__________________________
By: _________________________________
Title: ______________________________
<PAGE>
Annex A to Exhibit A (Pledge
Amendment)
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
Pledged Interests
- -----------------
Percentage of
Outstanding
Type of Certificate Interests
Name of Issuer Interests Number in Issuer
-------------- --------- ----------- ---------
<PAGE>
Exhibit K to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
______________________________
FORM OF
FINANCIAL CONDITION CERTIFICATE
THIS FINANCIAL CONDITION CERTIFICATE is delivered pursuant to Section
4.1(r) of the Credit Agreement, dated as of September 30, 1996 (the "Credit
Agreement"), among PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), certain banks and other financial
institutions from time to time parties thereto (the "Lenders"), CIBC INC., as
Documentation Agent, and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as
Syndication Agent and as Administrative Agent. Capitalized terms used herein
without definition shall have the meanings given to such terms in the Credit
Agreement.
The undersigned hereby certifies for and on behalf of the Borrower as
follows:
1. Capacity. The undersigned is, and at all pertinent times mentioned
--------
herein has been, the duly qualified and acting chief financial officer of
Petersen Holdings, L.L.C., the managing member of the Borrower, and in such
capacity has responsibility for the management of the Borrower's financial
affairs and for the preparation of the Borrower's financial statements.
2. Procedures. For purposes of this Certificate, the undersigned, or
----------
officers or other personnel of the Borrower under the direction and supervision
of the undersigned, have, as of or prior to the date hereof, undertaken the
following activities in connection herewith:
2.1 The undersigned has carefully reviewed the following:
(a) the contents of this Certificate;
(b) the Credit Agreement (including the exhibits and schedules
thereto);
(c) the Subordinated Debt Agreement (including the exhibits and
schedules thereto);
(d) the audited consolidated balance sheets of Petersen for the
fiscal years ended November 30, 1993, 1994 and 1995, and the
related consolidated statements of income, stockholders equity
and cash flows of Petersen for the three-year period ended
November 30, 1995, each certified by Ernst & Young L.L.P.;
(e) the unaudited consolidated balance sheet of Petersen as of
August 31, 1996 and the related consolidated statements of
income, stockholders equity and cash flows of Petersen for the
nine-month period then ended;
(f) the Pro Forma Balance Sheet; and
<PAGE>
(g) the Projections.
2.2 The undersigned has made such inquiries of certain officers and
personnel of the Borrower with responsibility for financial, accounting and
other matters and affairs of the Borrower as the undersigned has deemed
necessary for purposes of this Certificate.
2.3. With respect to any Contingent Liabilities of the Borrower, the
undersigned confirms that, to the best of his knowledge, all material Contingent
Liabilities that may arise from any pending litigation, asserted claims and
assessments, guarantees, uninsured risks, and other Contingent Liabilities of
the Borrower have been considered in making the certification set forth herein,
and with respect to each such Contingent Liability the estimable maximum
estimated of liability with respect thereto was used in making such
certification.
2.4. The Pro Forma Balance Sheet and the Projections have been prepared
under the direction of the undersigned, and the undersigned has reexamined the
Pro Forma Balance Sheet and the Projections as of the date hereof and considered
the effect thereon of any changes since the date of the preparation thereof on
the financial condition set forth and the results projected therein.
2.5. The officers and other personnel of the Borrower who were involved in
the preparation of the Projections have relied on historical financial and other
information and upon information with respect to sales, costs and other data
obtained in discussions with the officers of the Borrower and of Petersen
directly responsible for the various operations involved. In the opinion of the
undersigned, the assumptions upon which the Projections are based were fair,
complete and reasonable when made, and continue as of the date hereof to be
fair, complete and reasonable.
2.6. The undersigned has inquired of certain officers of the Borrower
having responsibility for financial reporting and accounting matters regarding
whether such persons were aware of any events or conditions that, as of the date
hereof, would cause the statements made in Section 3 below to be untrue.
2.7. The undersigned has conferred with counsel to the Borrower for the
purpose of discussing the meaning of the contents of this Certificate
(including, without limitation, Sections 3.4, 3.5 and 3.6 below).
3. Certifications. Based on the foregoing, the undersigned hereby
--------------
certifies as follows:
3.1. Attached hereto as ANNEX A is a true, correct and complete copy of
the Pro Forma Balance Sheet. Such Pro Forma Balance Sheet gives pro forma effect
to the consummation of the Petersen Acquisition, the issuance of the
Subordinated Bridge Indebtedness, the completion of the Equity Contribution, the
extensions of credit made under the Credit Agreement, the payment of transaction
fees and expenses incident to the foregoing, and the consummation of all other
Transactions, all as if such events had occurred on August 31, 1996. The Pro
Forma Balance Sheet has been prepared in good faith and in accordance with
Generally Accepted Accounting Principles (subject to the absence of footnotes
required by Generally Accepted Accounting Principles and subject to normal year-
end adjustments) and, subject to stated assumptions made in good faith and
having a reasonable basis set forth therein, presents fairly the financial
condition of the Borrower on an unaudited pro forma basis as of the date set
forth therein after giving effect to the consummation of the Transactions as
described above. Prior to the Closing Date, the Borrower has not engaged in any
-2-
<PAGE>
business, owned any assets or incurred or assumed any liabilities except in
connection with the execution and performance of the Transaction Documents.
3.2. Attached hereto as ANNEX B is a true, correct and complete copy of
the Projections. Such Projections cover the six-year period beginning with the
fiscal year ending December 31, 1996 and give effect to the consummation of the
Petersen Acquisition, the issuance of the Subordinated Bridge Indebtedness, the
completion of the Equity Contribution, the extensions of credit contemplated by
the Credit Agreement, the payment of transaction fees and expenses incident to
the foregoing and the consummation of the other Transactions. The Projections
have been prepared in good faith by the executive and financial personnel of the
Borrower and, to the best knowledge of the undersigned, represent a reasonable
estimate of the future performance and financial condition of the Borrower,
subject to the uncertainties and approximations inherent in any projections but
without any representation or warranty that the projected results will be
achieved.
3.3. After giving effect to the Transactions, all material accounts and
other liabilities of the Borrower are current and not past due.
3.4. The Borrower is not now, nor will the incurrence of the Obligations
pursuant to the Credit Agreement and the obligations under the Subordinated Debt
Agreement render the Borrower, "insolvent" (as hereinafter defined). The
undersigned understands that, in this context, "insolvent" means that the
present fair saleable value of assets is less than the amount that will be
required to be paid on or in respect of the existing debts and other liabilities
as such debts and liabilities of the Borrower mature. The undersigned
understands that the term "debts" includes any legal liability, whether matured
or unmatured, liquidated or unliquidated, absolute, fixed or contingent,
including any guaranty obligations. The foregoing is supported by an analysis
of the Pro Forma Balance Sheet. A valuation of the Borrower, on the basis
thereof, with reasonable allowance for error, would reflect the net worth of the
Borrower in the aggregate (excess of fair value of assets over liabilities) as
not less than $__________.
3.5. The undersigned believes that, by incurring the Obligations pursuant
to the Credit Agreement and the obligations under the Subordinated Debt
Agreement, the Borrower will not incur debts beyond its ability to pay as such
obligations mature (taking into account the timing and amounts of cash to be
payable on or in respect of the Borrower's Indebtedness). The foregoing
conclusion is based in part on the Projections, which demonstrate that the cash
flow of the Borrower, after taking into account all anticipated uses of the cash
of the Borrower, will at all times be sufficient to pay all amounts on or in
respect of Indebtedness of the Borrower when such amounts are required to be
paid (including without limitation scheduled payments pursuant to the Credit
Agreement).
3.6. After giving effect to the consummation of the Transactions, the
assets of the Borrower do not constitute "unreasonably small capital" (within
the meaning of Section 548(a) of the Bankruptcy Code, 11 U.S.C. Section 548(a)),
for the Borrower to carry on its business as now conducted and as proposed to be
conducted (taking into account the particular capital requirements of the
business conducted and to be conducted by the Borrower and the availability of
capital in respect thereof (with reference to, without limitation, the
Projections)).
3.7. The Borrower has not executed the Credit Agreement, the Subordinated
Debt Agreement or any documents mentioned herein, or made any transfer or
incurred any obligations thereunder, with intent to hinder, delay or defraud
either present or future creditors of the Borrower.
-3-
<PAGE>
3.8. The undersigned understands that the Lenders have performed their
own review and analysis of the financial condition of the Borrower, but that the
Lenders are relying on the foregoing statements in connection with the extension
of credit to the Borrower pursuant to the Credit Agreement.
Executed as of the ______ day of ______________, 1996.
___________________________________
Chief Financial Officer
Petersen Holdings, L.L.C.
-4-
<PAGE>
FINANCIAL CONDITION CERTIFICATE
ANNEX A
PETERSEN PUBLISHING COMPANY, L.L.C.
PRO FORMA BALANCE SHEET
[see attached]
<PAGE>
FINANCIAL CONDITION CERTIFICATE
ANNEX B
PETERSEN PUBLISHING COMPANY, L.L.C.
PROJECTIONS
[see attached]
<PAGE>
Exhibit L to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
----------------------------------
FORM OF
COMPLIANCE CERTIFICATE
THIS CERTIFICATE is given pursuant to SECTION 6.2(A) of the Credit
Agreement, dated as of September 30, 1996 (as amended, modified or supplemented
from time to time, the "Credit Agreement," the terms defined therein being used
herein as therein defined), among PETERSEN PUBLISHING COMPANY, L.L.C. (the
"Borrower"), certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), CIBC Inc., as Documentation Agent, and First
Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent.
The undersigned hereby certifies that:
1. He is a duly elected Financial Officer of the Borrower.
2. Enclosed with this Certificate are copies of the financial statements
of the Borrower and its Subsidiaries as of _____________, and for the [________-
month period] [year] then ended, required to be delivered under SECTION
[6.1(B)][6.1(C)] of the Credit Agreement. Such financial statements have been
prepared in accordance with Generally Accepted Accounting Principles [(subject
to the absence of notes required by Generally Accepted Accounting Principles and
subject to normal year-end adjustments)]/1/ and fairly present the financial
condition of the Borrower and its Subsidiaries on a consolidated basis as of the
date indicated and the results of operation of the Borrower and its Subsidiaries
on a consolidated basis for the period covered thereby.
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under the supervision of the undersigned, a review in
reasonable detail of the transactions and condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements.
4. The examination described in paragraph 3 above did not disclose, and
the undersigned has no knowledge of the existence of, any Default or Event of
Default during or at the end of the accounting period covered by such financial
statements or as of the date of this Certificate. [, except as set forth below.
Describe here or in a separate attachment any exceptions to paragraph 4
above by listing, in reasonable detail, the nature of the Default or Event of
Default, the period during which it existed and the action that the Borrower has
taken or proposes to take with respect thereto.]
________________________________
/1/Insert in the case of quarterly financial statements.
<PAGE>
5. Attached to this Certificate as Attachment A is a covenant compliance
worksheet reflecting the computation of the financial covenants set forth in
ARTICLE VII of the Credit Agreement as of the last day of the period covered by
the financial statements enclosed herewith.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the _______ day of _____________, ____.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: [signature of Financial Officer]
-----------------------------------
Name: _________________________________
Title: ________________________________
<PAGE>
- --------------------------------------------------------------------------------
A. LEVERAGE RATIO
(SECTION 7.1 OF THE CREDIT AGREEMENT): NOT GREATER THAN ______: 1.0/2/
- --------------------------------------------------------------------------------
(1) Consolidated Funded Debt as of the date
of determination:
(a) Aggregate amount of Funded Debt
of the Borrower and its Subsidiaries
as of the date of determination $__________
(b) Less: cash and cash equivalents
of the Borrower and its Subsidiaries
in excess of $5,000,000 as of the
date of determination ($________)
(c) Consolidated Funded Debt:
Subtract Line 1(b) from Line 1(a) $=========
(2) Consolidated Operating Cash Flow
for the period of four consecutive fiscal
quarters ending on the date of determination
(from Box E, Line 5 below) $=========
(3) Ratio of Consolidated Funded Debt to
Consolidated Operating Cash Flow:
Divide Line 1(c) by Line 2 =========
- --------------------------------------------------------------------------------
________________________
/2/Refer to Section 7.1 of the Credit Agreement for the applicable maximum
Leverage Ratio as of the relevant date of determination.
<PAGE>
- --------------------------------------------------------------------------------
B. INTEREST COVERAGE RATIO
(SECTION 7.2 OF THE CREDIT AGREEMENT): NOT LESS THAN ____: 1.0/3/
- --------------------------------------------------------------------------------
(1) Consolidated Operating Cash Flow
for the period of four consecutive
fiscal quarters ending on the date
of determination (from Box E, Line 5 below) $=========
(2) Consolidated Interest Expense for the
relevant calculation period/4/ $=========
(3) Interest Coverage Ratio:
Divide Line 1 by Line 2 =========
- --------------------------------------------------------------------------------
________________________
/3/Refer to Section 7.2 of the Credit Agreement for the applicable minimum
Interest Coverage Ratio as of the relevant date of determination.
/4/Refer to the definition of Consolidated Interest Expense for the
applicable calculation period as of the date of determination.
<PAGE>
- --------------------------------------------------------------------------------
C. FIXED CHARGE COVERAGE RATIO
(SECTION 7.3 OF THE CREDIT AGREEMENT): NOT LESS THAN 1.05: 1.0
- --------------------------------------------------------------------------------
(1) Consolidated Operating Cash Flow
for the period of four consecutive
fiscal quarters ending on the date
of determination (from Box E, Line 5 below)
$=========
(2) Fixed Charges:
(a) Consolidated Interest Expense for
the relevant calculation period/5/ $_________
(b) Amount of taxes actually paid by the
Borrower and its Subsidiaries during
such period (including amounts permitted
to be paid to members pursuant to
Section 8.6(a)(iii)) $_________
(c) Capital Expenditures for such period $_________
(d) Aggregate amount of principal payments
on Funded Debt scheduled or required to
have been made by the Borrower and its
Subsidiaries during such period $_________
(e) Fixed Charges:
Add Lines 2(a), 2(b), 2(c) and 2(d) $=========
(3) Fixed Charge Coverage Ratio:
Divide Line 1 by Line 2(e) =========
- --------------------------------------------------------------------------------
_______________________
/5/Refer to the definition of Consolidated Fixed Charges for the applicable
calculation period as of the date of determination.
<PAGE>
- --------------------------------------------------------------------------------
D. CAPITAL EXPENDITURES
(SECTION 7.4 OF THE CREDIT AGREEMENT): NOT GREATER THAN THE FOLLOWING:
- --------------------------------------------------------------------------------
(1) Maximum permitted Capital Expenditures:
(a) Permitted base Capital Expenditures
for the period of four consecutive
fiscal quarters ending on the date of
determination (the "Reference Period") $3,500,000
(b) Unused permitted Capital Expenditures
from the prior Reference Period (if
applicable) $__________
(c) Permitted Capital Expenditures carryover:
Multiply Line 1(b) by 50% $_________
(d) Maximum permitted Capital Expenditures:
Add Lines 1(a) and 1(c) $=========
(2) Actual Capital Expenditures for the relevant
Reference Period $=========
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
E. CONSOLIDATED OPERATING CASH FLOW/5/
- --------------------------------------------------------------------------------
(1) Consolidated Net Income for the period of
four consecutive fiscal quarters ending on
the date of determination $=========
(2) Additions to Consolidated Net Income (to the
extent taken into account in the calculation of
Consolidated Net Income for such period):
(a) Consolidated Interest Expense for such period $_________
(b) Taxes accrued or paid by the Borrower and its
Subsidiaries during such period $_________
(c) Depreciation and amortization for such period $_________
(d) Extraordinary losses recognized by the Borrower
and its Subsidiaries during such period $_________
(e) Other non-cash expenses or charges reducing
income for such period $_________
(f) Adjustments permitted under Schedule 1.1(b) to
the Credit Agreement and recognized during
such period/7/ $_________
(g) Add Lines 2(a) through 2(f) $=========
(3) Net Income plus Additions:
Add Lines (1) and 2(g) $=========
(4) Reductions from Consolidated Net Income (to
the extent taken into account in the
calculation of Consolidated Net Income for
such period):
(a) Extraordinary gains recognized by the
Borrower and its Subsidiaries during such
period $
(b) Non-cash items increasing Consolidated Net
Income during such period $
(c) Add Lines 4(a) and 4(b) ($========)
(5) Consolidated Operating Cash Flow:
Subtract Line 4(c) from Line 3 $=========
- --------------------------------------------------------------------------------
_______________________
/6/Refer to Schedule 1.1(a) to the Credit Agreement to calculate
Consolidated Operating Cash Flow for any periods prior to the Closing Date.
/7/Attach supporting calculations.
<PAGE>
Exhibit M to Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
-----------------------------------
FORM OF
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") is made
this _____ day of ____________, ____, by and between
_______________________________ (the "Assignor") and ________________________
(the "Assignee"). Reference is made to the Credit Agreement, dated as of
September 30, 1996 (as amended, modified or supplemented from time to time, the
"Credit Agreement"), among Petersen Publishing Company, L.L.C. (the "Borrower"),
certain banks and other financial institutions from time to time parties thereto
(the "Lenders"), CIBC Inc., as Documentation Agent, and First Union National
Bank of North Carolina, as Administrative Agent for the Lenders (the
"Administrative Agent") and as Syndication Agent. Unless otherwise defined
herein, capitalized terms used herein without definition shall have the meanings
given to them in the Credit Agreement.
The Assignor and the Assignee hereby agree as follows:
1. Assignment and Assumption. Subject to the terms and conditions
-------------------------
hereof, the Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, without recourse to the Assignor
and, except as expressly provided herein, without representation or warranty by
the Assignor, the interest or interests as of the Effective Date (as hereinafter
defined) in and to all of the Assignor's rights and obligations under the Credit
Agreement and the other Credit Documents (in its capacity as a Lender
thereunder) with respect to each Class of Loans represented by the percentage
interest or interests specified with regard to such Class in Item 4 of Annex I
------ -------
(each such assigned interest, an "Assigned Share"), including, without
limitation, (i) in the case of Tranche A Term Loans, the relevant Assigned Share
of all rights and obligations of the Assignor with respect to its Tranche A
Commitment (unless terminated), Tranche A Term Note and Tranche A Term Loans,
(ii) in the case of Tranche B Term Loans, the relevant Assigned Share of all
rights and obligations of the Assignor with respect to its Tranche B Commitment
(unless terminated), Tranche B Term Note and Tranche B Term Loans, and (iii) in
the case of Revolving Loans, the relevant Assigned Share of (x) the Assignor's
Revolving Credit Commitment, (y) the Assignor's Letter of Credit Exposure, and
(z) all rights and obligations of the Assignor with respect to its Revolving
Credit Note and Revolving Loans.
2. The Assignor. The Assignor (i) represents and warrants that it is the
------------
legal and beneficial owner of each interest being assigned by it hereunder, that
each such interest is free and clear of any adverse claim, that as of the date
hereof the amount of its Commitments and outstanding Loans of each Class with
regard to which an interest is being assigned hereunder (and Letter of Credit
Exposure, if applicable) is as set forth in Item 4 of Annex I, and that after
------ -------
giving effect to the assignment provided for herein the respective Commitments
of the Assignor and the Assignee will be as set forth in Item 4 of Annex I, (ii)
------ -------
except as set forth in clause (i) above, makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement, any other
Credit Document or any other instrument or document furnished pursuant thereto
or the execution, legality, validity, enforceability,
<PAGE>
genuineness, sufficiency or value of the Credit Agreement, any other Credit
Document or any other instrument or document furnished pursuant thereto, and
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any of its Subsidiaries or
the performance or observance by the Borrower or any of its Subsidiaries of any
of their respective obligations under the Credit Agreement, any other Credit
Document or any other instrument or document furnished pursuant thereto.
3. The Assignee. The Assignee (i) represents and warrants that it is
------------
legally authorized to enter into this Assignment and Acceptance, (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements most recently required to have been delivered under SECTION
6.1 of the Credit Agreement and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance, (iii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, (iv) confirms that it is an Eligible
Assignee, (v) appoints and authorizes the Administrative Agent to take such
actions as agent on its behalf under the Credit Agreement and the other Credit
Documents, and to exercise such powers and to perform such duties, as are
specifically delegated to the Administrative Agent by the terms thereof,
together with such other powers and duties as are reasonably incidental thereto,
and (vi) agrees that it will perform in accordance with their respective terms
all of the obligations that by the terms of the Credit Agreement are required to
be performed by it as a Lender. [To the extent legally entitled to do so, the
Assignee will deliver to the Administrative Agent, as and when required to be
delivered under the Credit Agreement, duly completed and executed originals of
the applicable tax withholding forms described in SECTION 2.17(D) of the Credit
Agreement]./1/
4. Effective Date. Following the execution of this Assignment and
--------------
Acceptance by the Assignor and the Assignee, an executed original hereof,
together with all attachments hereto, shall be delivered to each of the
Administrative Agent, the Issuing Lender and the Borrower (and also to the
Administrative Agent, the processing fee referred to in SECTION 11.7(A) of the
Credit Agreement). The effective date of this Assignment and Acceptance (the
"Effective Date") shall be the earlier of (i) the date of acceptance hereof by
the Administrative Agent, the Issuing Lender and the Borrower or (ii) the date,
if any, designated as the Effective Date in Item 5 of Annex I (which date shall
------ -------
be not less than five (5) Business Days after the date of execution hereof by
the Assignor and the Assignee). As of the Effective Date, (y) the Assignee shall
be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, shall have the rights and obligations of a Lender
thereunder and under the other Credit Documents, and (z) the Assignor shall, to
the extent provided in this Assignment and Acceptance, relinquish its rights
(other than rights under the provisions of the Credit Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, to the extent such rights relate to the time prior to the Effective
Date) and be released from its obligations under the Credit Agreement and the
other Credit Documents.
5. Payments; Settlement. On or prior to the Effective Date, in
--------------------
consideration of the sale and assignment provided for herein and as a condition
to the effectiveness of this Assignment and Acceptance, the Assignee will pay to
the Assignor an amount (to be confirmed between the Assignor
___________________________
/1/Insert if the Assignee is organized under the laws of a jurisdiction
outside the United States.
-2-
<PAGE>
and the Assignee) that represents the Assigned Share of the principal amount of
the Loans of each relevant Class made by the Assignor and outstanding on the
Effective Date (together, if and to the extent the Assignor and the Assignee so
elect, with the Assigned Share of any related accrued but unpaid interest, fees
and other amounts). From and after the Effective Date, the Administrative Agent
will make all payments required to be made by it under the Credit Agreement in
respect of each interest assigned hereunder (including, without limitation, all
payments of principal, interest and fees in respect of the Assigned Share of the
Assignor's Commitments and Loans assigned hereunder) directly to the Assignee.
The Assignor and the Assignee shall be responsible for making between themselves
all appropriate adjustments in payments due under the Credit Agreement in
respect of the period prior to the Effective Date. All payments required to be
made hereunder or in connection herewith shall be made in Dollars by wire
transfer of immediately available funds to the appropriate party at its address
for payments designated in Annex I.
-------
6. Governing Law. This Assignment and Acceptance shall be governed by,
-------------
and construed in accordance with, the internal laws of the State of North
Carolina (without regard to the conflicts of laws principles thereof).
7. Entire Agreement. This Assignment and Acceptance, together with the
----------------
Credit Agreement and the other Credit Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
8. Successors and Assigns. This Assignment and Acceptance shall be
----------------------
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
9. Counterparts. This Assignment and Acceptance may be executed in any
------------
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and Acceptance
to be executed by their duly authorized officers as of the date first above
written.
ASSIGNOR:
________________________________
By: __________________________________
Title: _______________________________
ASSIGNEE:
________________________________
By: __________________________________
Title: _______________________________
Accepted this _______ day of
______________, 19___:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Administrative
Agent and as Issuing Lender
By: __________________________________
Title: _______________________________
Consented and agreed to:
PETERSEN PUBLISHING COMPANY, L.L.C.
By: __________________________________
Title: _______________________________
-4-
<PAGE>
ANNEX I
-------
1. Borrower: ____________________________________
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of September 30, 1996, among Petersen Publishing
Company, L.L.C., certain Lenders from time to time parties thereto, CIBC
Inc., as Documentation Agent, and First Union National Bank of North
Carolina, as Administrative Agent and as Syndication Agent.
3. Date of Assignment and Acceptance: ________________, 19___.
4. Amounts:
<TABLE>
<CAPTION>
Amount of
Aggregate for Assigned Assigned
Assignor Share /2/ Share
---------- --------- -------
<S> <C> <C> <C>
(a) Tranche A Commitment/3/ $___________ _____% $___________
(b) Tranche A Loans $___________ _____% $___________
(c) Tranche B Commitment/3/ $___________ _____% $___________
(d) Tranche B Loans $___________ _____% $___________
(e) Revolving Credit Commitment $___________ _____% $___________
(f) Revolving Credit Loans/4/ $___________ _____% $___________
(g) Letter of Credit Exposure $___________ _____% $___________
</TABLE>
5. Effective Date: ________________________/5/
______________________________
/2/ Percentage taken to up to ten decimal places, if necessary.
/3/ Applicable only to assignments made prior to the Closing Date.
/4/ Insert amounts outstanding as of the date of the Assignment and
Acceptance.
/5/ Shall be a date not less than five Business Days after the date of the
Assignment and Acceptance.
-5-
<PAGE>
6. Addresses for Payments:
Assignor: _________________________________
_________________________________
_________________________________
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
Reference: __________________
Assignee: _________________________________
_________________________________
_________________________________
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
Reference: __________________
7. Addresses for Notices:
Assignor: _________________________________
_________________________________
_________________________________
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
Assignee: _________________________________
_________________________________
_________________________________
Attention: __________________
Telephone: _________________
Telecopy: __________________
8. Lending Office of Assignee:
_________________________________
_________________________________
_________________________________
Attention: ___________________
Telephone: ___________________
Telecopy: ___________________
-6-
<PAGE>
SCHEDULE 5.4
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
CONSENTS AND APPROVALS
----------------------
Material Contracts Requiring Consent of Other Party
1. Lease, dated September 17, 1991, with Sage Realty Corporation, as Agent for
owner of the premises
- 4th Floor of 437 Madison Avenue, New York, NY 10022
2. Lease, dated March 31, 1987, with 333 West Fort Street Associates, Ltd., as
amended on July 1, 1992
- Part of 18th Floor of 333 West Fort Street Building, Detroit, MI
3. Lease, dated January 1, 1995, with Eurotex Properties, L.P.
- Suite 201, 800 West Airport Freeway, Irving, TX 75062
4. Lease, dated December 16, 1993, with John Hancock Mutual Life Insurance
Company
- Suite 415, Union Plaza, Lakewood, Colorado
5. Lease, dated February 1, 1993, with Concourse V Associates, as amended May
1995
- Suite 2950 and entire 24th Floor, Corporate Center Five, Five Concourse
Pkwy, Fulton County, GA
6. Sublease, dated December 21, 1995, with Newport Mortgage Company, L.P., as
Sublessee
- Space on 24th Floor of Corporate Center Five, Five Concourse Pkwy, Fulton
County, Georgia
7. Joe Louis Arena: Penthouse Suite Agreement, dated March 22, 1996
8. Agreement with World Color Press, dated December 19, 1995, as modified by
the Agreement re Paper Supply for Periodicals Produced by World Color
Press, dated May 3, 1996
9. Agreement with Johnson & Hardin, dated January 12, 1996
<PAGE>
10. Prepress Services Agreement with World Color Press, dated February 26, 1996
11. Software License and Services Agreement with Oracle Corporation, dated
November 21, 1990
12. Motor Trend Letter Agreement with RTM III Television Productions, dated May
1, 1995
13. Madison Square Garden: License Agreement, dated July 23, 1993, with
International Speedway Corp
14. License Agreement, dated July 23, 1993, with International Speedway Corp.
(re: Daytona International Speedway)
15. Customer Support Agreement, dated May 1, 1996, with Technology Services
Corporation
16. Agreement, dated January 10, 1996, with C.S.R. Marketing, Inc.
17. Asset Sale Agreement, dated February 23, 1996, with World Color Press
18. International License Agreement, dated September 1, 1995, with Yollin
Sesang
19. Lease, dated July 23, 1993, with Charlotte Motor Speedway
20. Purchasing Program Agreement, dated September 26, 1994, with First Bank of
South Dakota
21. Corporate Card Program Agreement, dated September 25, 1990, with First Bank
System Card Services
22. Agreements with Bank America National Trust and Savings Association
(assigned to Automatic Data Processing):
(a) Service Agreement, dated March 2, 1992
(b) Software License and Maintenance Addendum to Service Agreement, dated
March 2, 1992
(c) Personnel Plus Addendum to Service Agreement
23. Purchase and License Agreement with Sequent Computer Systems as set forth
in letter agreements dated March 18, 1992 and March 26, 1992, as amended
March 30, 1992
24. Agreement with National Hot Rod Association (re: Atlanta Dragway)
<PAGE>
Other than with respect to the contracts referred to in 1, 4, 5, 6, 13, 20
and 21 above, all consents under the contracts referred to in this Schedule 5.4
will have been obtained as of the Closing Date.
Government Permits and Consents
1. Seller's Permit, California State Board of Equalization
- Sales of tangible personal property at 6420 Wilshire Boulevard, Los
Angeles, CA
2. EPA ID No. CA0983672106 for hazardous waste disposal related to the silver
recovery process in the photo lab located at 6420 Wilshire Boulevard, Los
Angeles, CA
3. Approval under Hart-Scott-Rodino Act
4. City of Los Angeles Tax Registration Certificate - Wholesale sales
5. City of Los Angeles Tax Registration Certificate - Professions and
occupations
6. City of Los Angeles Tax Registration Certificate - Retail Sales
7. Certificate of Authority, New York State Department of Taxation and Finance
- Collection of sales and use tax
8. Sales Tax License, State of Michigan, Department of Treasury
9. Business Tax Registration Certificate, City and County of San Francisco,
Office of Tax Collector
10. Letter from IRS confirming Company's election to be taxed as an S-
Corporation
11. Permits dealing with goods and services tax and import/export (Revenue
Canada)
As of the Closing Date, governmental approval will only have been obtained
for item 3 above.
<PAGE>
SCHEDULE 5.6
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
TAXES
-----
None
<PAGE>
SCHEDULE 5.11
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
LEASES
------
1 Lease, dated Sept. 17, 1991, with Sage Realty Corporation, as Agent for
owner of premises
-4th Floor of 437 Madison Avenue, New York, New York 10022
2 Lease with Michigan International Speedway, dated January 16, 1996
- Terrace Suite for 2 NASCAR events during June & August of 1996
3. Agreement, dated Aug. 29, 1995, with National Hot Rod Association, Inc.
- VIP Hospitality Building, Suite 1.05 of Pomona Raceway, LA County
Fairplex, Pomona, California
4. Agreement with National Hot Rod Association, Inc.
- VIP Hospitality Building (suites 301 and 302), Atlanta Dragway, Commerce,
Georgia
5. Letter Agreement with National Hot Rod Association, Inc., dated Jan. 2,
1991
- West Finish Line Tower, Indianapolis Raceway Park, Indianapolis, Indiana.
6. Lease, dated December 1, 1994, with Robert E. Petersen and Margaret McNally
Petersen, Trustees of the R.E. and M.M. Petersen Living Trust Dated Jan.
17, 1983
- 6420 Wilshire Blvd., Los Angeles, California
7. Lease, dated March 31st, 1987, with 333 West Fort Street Associates, LTD.
- Part of 18th Floor of 333 West Fort Street Building, Detroit, Michigan
8. Lease with Eurotex Properties, L.P., dated January 1, 1995
- Suite 201, 800 West Airport Freeway, Irving, Texas, 75062
9. Lease with John Hancock Mutual Life Insurance Company, dated December 16,
1993
- Suite 415, Union Plaza, Lakewood, Colorado
10. Lease, dated Feb. 1, 1993, with Concourse V Associates
- Suite 2950 and 24th Floor, Corporate Center Five, Five Concourse Pkwy,
Fulton County, Georgia
<PAGE>
11. Sublease, dated December 21, 1995, with Newport Mortgage Company, L.P., as
Sublessee
- Space on 24th Floor of Corporate Center Five, Five Concourse Pkwy, Fulton
County, Georgia
12. License Agreement, dated as of August 17, 1990, with Madison Square Garden
Center, Inc. (as amended by letter agreements dated March 7, 1991 and
January 18, 1994)
- License to use Club Suite No. 1047
13. Hospitality Facilities License Agreement, dated July 23, 1993, with
International Speedway Corporation
- Campbell Suite Q at Daytona International Speedway, Daytona, Florida
14. Lease, dated July 23, 1993, with Charlotte Motor Speedway, Inc.
- Suite 326 of Smith Tower, Concord, North Carolina
15. Penthouse Suite Agreement, dated February 11, 1993, with Olympic Arenas,
Inc.
- Joe Louis Arena
16. Lease, dated as of September 30, 1996, with Robert E. Petersen
- 815 N. La Salle St, Chicago, Illinois
<PAGE>
SCHEDULE 5.17
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
INSURANCE
---------
See attached certificate of insurance.
<PAGE>
SCHEDULE 5.18
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
CERTAIN CONTRACTS
-----------------
1. Lease, dated Sept. 17, 1991, with Sage Realty Corporation, as Agent for
owner of premises
- 4th Floor of 437 Madison Avenue, New York, New York 10022
2. Letter Agreement with National Hot Rod Association, Inc., dated Jan. 2,
1991
- West Finish Line Tower, Indianapolis Raceway Park, Indianapolis, Indiana.
3. Lease, dated December 1, 1994, with Mr. Petersen and Margaret McNally
Petersen, Trustees of the R.E. and M.M. Petersen Living Trust Dated Jan.
17, 1983
- 6420 Wilshire Blvd., Los Angeles, California
4. Lease, dated March 31st, 1987, with 333 West Fort Street Associates, LTD.
- Part of 18th Floor of 333 West Fort Street Building, Detroit, Michigan
5. Agreement, dated April 8, 1991, with PDC Business Systems, Inc.
- Development of Open Options Ad Management System
6. Distribution Agreement, dated January 10, 1994, with Warner Publisher
Services, Inc.
- wholesale distribution of Company titles
7. Distribution Agreement, dated October 18, 1995, with Worldwide Distribution
Services
- Distribution of Company titles to Barnes and Noble
8. Publisher Distribution Agreement, dated May 21, 1996, with Retail Vision,
dated May 21, 1996,
- Distribution of Company titles to Blockbuster Music Stores
9. Publisher Distribution Agreement, dated April 22, 1996, with Retail Vision,
dated April 22, 1996,
- Distribution of Company titles to Wet Seal/Contempo Casuals.
10. Circulation Fulfillment Service Agreement, dated September 1, 1995, with
NeoData Services, Inc.
<PAGE>
11. Agreement, dated December, 1981, with Compuname, Inc.
- Management of Company's lists of active and expired subscribers
12. Agreements, dated May 3, 1996, with World Color Press, Inc.
- Paper purchasing program
13. Agreement, dated December 19, 1995, with World Color Press, Inc., as
modified by the Agreement re Paper Supply for Periodicals Produced by World
Color Press, Inc., dated May 3, 1996
- Printing Services for certain of Company's titles
14. Agreement, dated January 12, 1996, with Johnson & Hardin Company
- Printing Services for certain of Company's titles
15. Prepress Services Agreement, dated February 26, 1996 with World Color
Press, Inc.
16. Agreement with Quark, Inc., dated May 6, 1996
17. Motor Trend Letter of Agreement with RTM III Television Productions, Inc.,
dated May 1, 1995
- Use of title "Motor Trend TV"
18. Agreement with RTM Productions, Inc., dated May 28, 1996
- Cablecast and TV rights to use the magazine title "Hot Rod" and similar
rights with respect to certain APG Special Events
19. Hospitality Facilities License Agreement, dated July 23, 1993, with
International Speedway Corporation
- Campbell Suite Q at Daytona International Speedway, Daytona, Florida
20. Asset Sale Agreement with World Color Press, Inc.
- Sale to World Color Press, Inc. of assets relating to pre-press services
provided by the Company's Viking Color Department
21. Lease, dated as of September 30, 1996, with Robert E. Petersen
- 815 N. LaSalle Street, Chicago, Illinois
22. Employment Agreement, dated as of August 15, 1996, between BrightView
Communication Group, Inc. and Robert E. Petersen.
23. License Agreement, dated as of August 15, 1996, between Robert E. Petersen,
BrightView Communication Group, Inc. and Petersen Publishing Company
- Right to use names "Petersen" and "Petersen Publishing Company" and
derivatives thereof
<PAGE>
24. Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, Holdings, the Borrower and D.
Claeys Bahrenburg
25. Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, Holdings, the Borrower and
Neal Vitale
26. Senior Subordinated Credit Agreement, dated as of September 30, 1996, among
the Borrower, the Guarantors named therein, the Lenders named therein and
First Union Corporation, as Agent and the other documents executed in
connection therewith
<PAGE>
SCHEDULE 5.19
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
CAPITAL STOCK
-------------
BORROWER:
- --------
Holder Percentage Ownership
- ------ --------------------
Petersen Holdings, L.L.C. 99.9%
BrightView Communications
Group, Inc. 0.1%
HOLDINGS:
- --------
See attached
MANAGER:
- -------
See attached
<PAGE>
SCHEDULE 6.15
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
OPERATING BUDGET
----------------
See attached
<PAGE>
SCHEDULE 8.3
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
LIENS
-----
1. UCC-1 Financing Statement filed with the Secretary of State of California
naming Minnesota Mining & Mfg Co. as secured party (file #9508960955)
<PAGE>
SCHEDULE 8.4
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
SCHEDULED TITLES
----------------
1. Sassy
2. Sport
3. Golfing
4. Mountain Biker
5. Bicycle Guide
6. Custom & Classic Trucks
7. Pro Basketball
8. Pro Baseball
9. Pro Football
10. Pro Hockey
11. College Basketball
12. College Football
13. Super Street
14. VW Custom & Classic
15. Event Scene
16. Hot Rod Bikes
17. 4X4 Power
18. Family Photo
<PAGE>
SCHEDULE 8.5
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
INVESTMENTS
-----------
1. Promissory Note, dated as of September 30, 1996, from D. Claeys Bahrenburg
in favor of BrightView in the amount of $8,000
2. Promissory Note, dated as of September 30, 1996, from D. Claeys Bahrenburg
in favor of BrightView in the amount of $2,000
3. Promissory Note, dated as of September 30, 1996, from D. Claeys Bahrenburg
in favor of Holdings in the amount of $891,000
4. Promissory Note, dated as of September 30, 1996, from D. Claeys Bahrenburg
in favor of Holdings in the amount of $99,000
5. Promissory Note, dated as of September 30, 1996, from Neal Vitale in favor
of BrightView in the amount of $7,500
6. Promissory Note, dated as of September 30, 1996, from Neal Vitale in favor
of Holdings in the amount of $742,500
The Promissory Notes listed in 1-6 above will be contributed to the
Borrower on the Closing Date.
<PAGE>
SCHEDULE 8.7
TO
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
TRANSACTIONS WITH AFFILIATES
----------------------------
1. Lease, dated December 1, 1994, with Robert E. Petersen and Margaret McNally
Petersen, Trustees of the R.E. and M.M. Petersen Living Trust Dated Jan.
17, 1983
- 6420 Wilshire Blvd., Los Angeles, California
2. Lease with Robert E. Petersen
- 815 N. La Salle St., Chicago, Illinois
3. Any obligations of the Company to reimburse Robert E. Peterson and Margaret
McNally Petersen for employment related expenses incurred prior to Closing,
subject to compliance with Section 1.2(viii) of the Asset Purchase
Agreement.
4.. Employment Agreement, dated as of August 15, 1996, between BrightView
Communication Group, Inc. and Robert E. Petersen.
5. License Agreement, dated as of August 15, 1996, between Robert E. Petersen,
BrightView Communication Group, Inc. and Petersen Publishing Company
- Right to use names "Petersen" and "Petersen Publishing Company" and
derivatives thereof
6. Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, Holdings, the Borrower and D.
Claeys Bahrenburg
7. Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among BrightView, Holdings, the Borrower and
Neal Vitale
<PAGE>
Exhibit J-1 to Credit Agreement
First Union National Bank of North
Carolina, as Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
-----------------------------------
KIRKLAND & ELLIS
PARTNERSHIPS INCLUDING PROFESSIONAL CORPORATIONS
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
To Call Writer Direct: 212 446-4800 Facsimile:
312 861-2000 212 446-4900
September 30, 1996
To each Lender party to the Credit Agreement
referred to below, CIBC Inc. as Documentation
Agent and First Union National Bank of
North Carolina as Syndication Agent and
Administrative Agent
Re: Petersen Publishing Company, L.L.C.--Senior Credit Agreement
------------------------------------------------------------
Ladies and Gentlemen:
We are issuing this letter in our capacity as counsel for Petersen
Publishing Company, L.L.C., a Delaware limited liability company (the
"Borrower"), Petersen Holdings, L.L.C., a Delaware limited liability company
("Holdings"), and BrightView Communications Group, Inc., a Delaware corporation
(the "Manager", and together with the Borrower and Holdings, "our Clients" or
the "Credit Parties"), in connection with that certain Credit Agreement dated as
of September 30, 1996, among the Borrower, the banks and other financial
institutions from time to time parties thereto (the "Lenders"), CIBC Inc. as
Documentation Agent and First Union National Bank of North Carolina as
Syndication Agent and as Administrative Agent (the "Credit Agreement"). We are
issuing this letter at the request of our Clients and pursuant to Section
4.1(a)(iv) of the Credit Agreement.
In addition to the Credit Agreement, we have reviewed executed counterparts
of the documents listed on the Transaction Document Schedule attached hereto.
The Credit Agreement and the other documents listed on such Transaction Document
Schedule are herein called the "Transaction Documents", and the Credit Agreement
and the other documents listed as items 2 through 10 on the Transaction Document
Schedule are herein called the "Credit Documents". Each term used herein which
is defined or given special meaning in the Credit Agreement but which is not
otherwise defined herein shall have the same meaning herein as ascribed to it in
the Credit Agreement. Each term which is defined or given special meaning in
this letter has the same meaning whenever it is used in the attached schedules.
London Los Angeles New York Washington D.C.
<PAGE>
KIRKLAND & ELLIS
To each Lender party to the Credit
Agreement referred to below, CIBC Inc.
as Documentation Agent and First Union
National Bank of North Carolina as
Syndication Agent and Administrative Agent
September 30, 1996
Page 2
Subject to the assumptions, qualifications, exclusions and other
limitations that are identified in this letter and in the schedules attached to
this letter, it is our opinion that:
1. Each of the Borrower and Holdings is a limited liability company duly
formed, existing and in good standing under the laws of the State of
Delaware.
2. Manager is a corporation duly incorporated, existing and in good standing
under the laws of the State of Delaware.
3. Each Credit Party has the corporate or limited liability company power to
execute and deliver the Transaction Documents to which it is party, to
borrow money under the Credit Agreement (in the case of Borrower), to pledge
and grant or convey security interests in and liens upon its assets as
collateral as required under the Credit Agreement and under the other Credit
Documents, and to perform its obligations under the Transaction Documents to
which it is party.
4. All corporate or limited liability company action by each Credit Party and
all internal consents and approvals have been duly taken or obtained to
authorize such Credit Party's execution, delivery and performance of each of
the Transaction Documents to which it is a party.
5. Each Transaction Document to which any Credit Party is a party has been duly
executed and delivered by authorized officers of such Credit Party (or in
the case of a limited liability company, authorized officers of a Person
authorized to execute documents on behalf of such Credit Party, as
appropriate).
6. To our knowledge, but without our having made any independent investigation,
there are no actions, suits or proceedings pending or threatened against or
affecting any Credit Party or any properties of any Credit Party at law or
in equity, before any court or administrative officer or agency, other than
as described on the Schedule of Pending Litigation attached hereto.
<PAGE>
KIRKLAND & ELLIS
To each Lender party to the Credit
Agreement referred to below, CIBC Inc.
as Documentation Agent and First Union
National Bank of North Carolina as
Syndication Agent and Administrative Agent
September 30, 1996
Page 3
7. The execution and delivery by each Credit Party of the Credit Documents to
which it is a party and its performance of its obligations thereunder will
not (a) violate any provision of its respective Certificate of Incorporation
and bylaws or limited liability company organization agreement or (b)
constitute a violation of any agreement listed on the Schedule of Specified
Agreements attached hereto (the "Specified Agreements") (except that we
express no opinion with respect to violations under cross-default provisions
referring to or based upon agreements that are not included in the Specified
Agreements or with respect to compliance with financial covenants or tests)
or (c) constitute a violation by such Credit Party of any statutory law or
governmental regulation covered by this letter or (d) to our knowledge
result in or require the creation or imposition of any Lien (other than
those created by the Credit Documents) upon any assets or property of any
Credit Party. No Credit Party was required to obtain any consent, approval,
authorization or order of, or make any filings or registrations with, any
United States federal court or governmental agency in order to obtain the
right to enter into or perform under any of the Transaction Documents or to
take any of the actions taken by it on or prior to this date to consummate
the closing of the acquisition under the Asset Purchase Agreement and the
Loans made this date under the Credit Agreement, except for (i) such
consents, authorizations, approvals, orders, registrations or filings as
have been made or obtained prior to the date hereof, or as permitted to be
made or obtained on or after the date hereof pursuant to the Credit
Agreement or the Subordinated Debt Agreement and the Exhibits and schedules
thereto, respectively; (ii) such consents, authorizations, approvals,
orders, registrations or filings which have not been obtained as of the date
hereof and which are indicated as such on Schedule 5.4 to the Credit
Agreement; (iii) such consents, authorizations, approvals, orders,
registrations or filings as could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect; and (iv) the
recording or filing of Security Documents to perfect Liens and security
interests in the Collateral.
8. (a) Our review of the records of the United States Patent and
Trademark Office ("PTO") discloses no present claims, liens, pledges,
security interests, mortgages, infringements, licenses or grants with
respect to any trademark or patent
<PAGE>
KIRKLAND & ELLIS
To each Lender party to the Credit
Agreement referred to below, CIBC Inc.
as Documentation Agent and First Union
National Bank of North Carolina as
Syndication Agent and Administrative Agent
September 30, 1996
Page 4
owned by any Credit Party except as disclosed in the Credit Documents. Upon
the due filing and recordation of each Short Form Trademark Collateral
Assignment (as contemplated by the Pledge and Security Agreement and the
Parent Pledge and Security Agreement) in the PTO and the payment of all
filing and recordation fees associated therewith, and assuming the existence
of the security interests purported to be created by such Trademark
Collateral Assignments, such security interests are or will be perfected
security interests in the Collateral described therein to the extent the
same may be perfected by such filing. We note for your information that
filing with the PTO alone may not be sufficient to perfect fully the
security interests in such Collateral, and that under the applicable Uniform
Commercial Code and federal law, appropriate UCC financing statements may
also be required to be filed in order to perfect fully such security
interests. We also note that the perfection of your security interest in
such Collateral is subject to the effect of section 9-306 of the applicable
Uniform Commercial Code and to sections 547 and 552 of the Bankruptcy Code.
(b) To the extent that (i) the membership interests in the Borrower
pledged to you pursuant to the Parent Pledge and Security Agreement
constitute "uncertificated securities" (as defined in the Uniform Commercial
Code) and (ii) the perfection and effect of perfection of any security
interest in such membership interests is therefore governed by the law of
the State of Delaware (as to which matters we express no opinion), and
assuming the existence of the security interests in such membership
interests purported to be created by the Parent Pledge and Security
Agreement, upon the registration of such security interest on the records of
the Borrower in which the ownership of membership interests in the Borrower
are registered and the issuance by the Borrower to you of an Initial
Transaction Statement (as defined in Section 8-408 of the Uniform Commercial
Code) relating to such security interest and containing the information set
forth in Section 8-408(2) of the Uniform Commercial Code, your security
interest in such membership interests will be perfected to the extent the
same may be perfected under the Delaware Uniform Commercial Code. Our
opinion in this Section 8(b) is based solely on our review of the Delaware
Uniform Commercial Code as set forth in the
<PAGE>
KIRKLAND & ELLIS
To each Lender party to the Credit
Agreement referred to below, CIBC Inc.
as Documentation Agent and First Union
National Bank of North Carolina as
Syndication Agent and Administrative Agent
September 30, 1996
Page 5
Commerce Clearing House, Inc. Secured Transactions Guide (the "Guide") as
supplemented through September 17, 1996. The perfection of your security
interest in such Collateral is subject to the effect of sections 8-302, 8-
321, 9-306 and 9-309 of the Delaware Uniform Commercial Code and to sections
547 and 552 of the Bankruptcy Code.
9. No federal taxes or other federal impositions are required to be paid in
connection with the execution, delivery and performance or recordation of
the Credit Agreement or the other Credit Documents, except for the filing
and recording fees in respect of the Short Form Trademark Collateral
Assignments in the PTO, and except that we express no opinion regarding any
taxes or impositions that may be required to be paid with respect to or as a
result of payments made by any Credit Party under the Credit Documents.
10. No Credit Party is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
11. The consummation on the date hereof of the acquisition contemplated by the
Asset Purchase Agreement and the making and borrowing of the Loans this date
under the Credit Documents to finance said acquisition will not violate or
result in a violation of Regulation G, T, U or X of the Board of Governors
of the Federal Reserve System.
Each opinion in this letter is subject to the General Qualifications that
are recited in Schedule A to this letter to the extent relevant to such opinion.
In preparing this letter we have relied, as to factual matters, without any
independent verification upon the assumptions recited in Schedule B to this
letter and upon: (i) information contained in certificates obtained from
governmental authorities; (ii) factual information represented to be true in the
Transaction Documents; (iii) factual information provided to us by our Clients,
including without limitation the information set forth in a Support Certificate
provided to us by our Clients in connection with this letter; and (iv) factual
information we have obtained from such other sources as we have deemed
reasonable. We have assumed without
<PAGE>
KIRKLAND & ELLIS
To each Lender party to the Credit
Agreement referred to below, CIBC Inc.
as Documentation Agent and First Union
National Bank of North Carolina as
Syndication Agent and Administrative Agent
September 30, 1996
Page 6
investigation that there has been no relevant change or development between the
dates as of which the information cited in the preceding sentence was given and
the date of this letter and that the information upon which we have relied is
accurate and does not omit disclosures necessary to prevent such information
from being misleading.
While we have not conducted any independent investigation to determine
facts upon which our opinions are based, we confirm that we do not have any
actual knowledge which has caused us to conclude that our reliance and
assumptions cited in the preceding paragraph are unwarranted. The term "actual
knowledge" whenever it is used in this letter with respect to our firm means
conscious awareness at the time this letter is delivered on the date it bears by
the following Kirkland & Ellis lawyers who have had significant involvement with
negotiation or preparation of the Transaction Documents (herein called "our
Designated Transaction Lawyers"): John A. Weissenbach, Andrew M. Kaufman,
Margaret A. Gibson, Paul Van Houten, Brian R. Boch, Karin Orsic, and W. Stephen
Westermann.
Our advice on every legal issue addressed in this letter is based
exclusively on such federal law of the United States which is in our experience
normally applicable to general business corporations and limited liability
companies not engaged in regulated business activities and to transactions of
the type contemplated in the Credit Documents between the Credit Parties, on the
one hand, and you on the other hand (but without our having made any special
investigation as to any other laws), except that we express no opinion or advice
as to any law (i) the violation of which would not have any material adverse
effect on the Credit Parties, (ii) which might be violated by any
misrepresentation or omission or a fraudulent act, (iii) to which any Credit
Party may be subject as a result of your legal or regulatory status, your sale
or transfer of the Loans or interests therein or your (as opposed to any other
lender's) involvement in the transactions contemplated by the Transaction
Documents, or (iv) identified on Schedule C, and except that the opinions in
paragraphs 1 - 5 and 7(a) are based exclusively on the General Corporation Law,
and the Limited Liability Company Act, as applicable, of the State of Delaware
and except that the opinion in paragraph 8(b) is based exclusively on our review
of the Delaware Uniform Commercial Code as set forth in the Guide. We advise
you that some issues addressed by this letter
<PAGE>
KIRKLAND & ELLIS
To each Lender party to the Credit
Agreement referred to below, CIBC Inc.
as Documentation Agent and First Union
National Bank of North Carolina as
Syndication Agent and Administrative Agent
September 30, 1996
Page 7
may be governed in whole or in part by other laws, but we express no opinion as
to whether any relevant difference exists between the laws upon which our
opinions are based and any other laws which may actually govern. Our opinions
do not cover or otherwise address any law or legal issue which is identified in
the attached Schedule C. Provisions in the Transaction Documents which are not
excluded by any other part of this letter or its attachments are called the
"Relevant Agreement Terms."
Our advice on each legal issue addressed in this letter represents our
opinion as to how that issue would be resolved were it to be considered by the
highest court of the jurisdiction upon whose law our opinion on that issue is
based. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the
case, and this letter is not intended to guarantee the outcome of any legal
dispute which may arise in the future.
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which our Designated Transaction Lawyers did
not have actual knowledge at that time, by reason of any change subsequent to
that time in any law covered by any of our opinions, or for any other reason.
The attached schedules are an integral part of this letter, and any term defined
in this letter or any schedule has that defined meaning wherever it is used in
this letter or in any schedule to this letter.
This letter is delivered to you in satisfaction of your requirement that
you receive it as a condition of making the advances contemplated by the Credit
Agreement and may be used by you only for that purpose. Without our written
consent: (i) no person other than you may rely on this letter for any purpose;
(ii) this letter may not be cited or quoted in any financial statement,
prospectus, private placement memorandum or other similar document; (iii) this
letter may not be cited or quoted in any other document or communication which
might encourage reliance upon this letter by any person or for any purpose
excluded by the restrictions in this paragraph; and (iv) copies of this letter
may not be furnished to anyone for purposes of encouraging such reliance.
Persons who
<PAGE>
KIRKLAND & ELLIS
To each Lender party to the Credit
Agreement referred to below, CIBC Inc.
as Documentation Agent and First Union
National Bank of North Carolina as
Syndication Agent and Administrative Agent
September 30, 1996
Page 8
subsequently become Lenders may rely on this letter as of the time of its
delivery on the date hereof as if this letter were addressed to them.
Very truly yours,
Kirkland & Ellis
<PAGE>
SCHEDULE A
GENERAL QUALIFICATIONS
The term "General Qualifications" as used in the letter to which this
Schedule is attached ("our letter") means the Bankruptcy Exception.
Bankruptcy and Insolvency Exception. Each of the opinions ("our opinions")
in our letter is subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws. This
exception includes:
(a) the Federal Bankruptcy Code and thus comprehends, among others,
matters of turn-over, automatic stay, avoiding powers, fraudulent
transfer, preference, discharge, conversion of a non-recourse
obligation into a recourse claim, limitations on ipso facto and anti-
assignment clauses and the coverage of pre-petition security
agreements applicable to property acquired after a petition is filed;
(b) all other Federal and state bankruptcy, insolvency, reorganization,
receivership, moratorium, arrangement and assignment for the benefit
of creditors laws that affect the rights of creditors generally or
that have reference to or affect only creditors of specific types of
debtors;
(c) state fraudulent transfer and conveyance laws; and
(d) judicially developed doctrines in this area, such as substantive
consolidation of entities and equitable subordination.
A-1
<PAGE>
SCHEDULE B
ASSUMPTIONS
For purposes of the letter to which this Schedule is attached ("our
letter"), we have relied, without investigation, upon each of the following
assumptions:
1. Each natural person who is executing any Transaction Document on behalf of
our Client has sufficient legal capacity to enter into such Transaction
Document.
2. Each document submitted to us for review is accurate and complete, each
such document that is an original is authentic, each such document that is
a copy conforms to an authentic original, and all signatures (other than
those of or on behalf of our Clients) on each such document are genuine.
3. Each certificate obtained from a governmental authority relied on by us is
accurate, complete and authentic and all relevant official public records
to which each such certificate relates are accurate and complete.
4. There has not been any mutual mistake of fact or misunderstanding, fraud,
duress or undue influence.
5. All statutes, judicial and administrative decisions, and rules and
regulations of governmental agencies, in each of the jurisdictions upon
whose law our opinions are based are generally available (i.e., in terms of
access and distribution following publication or other release) to lawyers
practicing in that jurisdiction, and are in a format that makes legal
research reasonably feasible.
6. The constitutionality or validity of a relevant statute, rule, regulation
or agency action is not in issue.
7. Each of the Specified Agreements would be enforced as written, and our
Clients will not in the future take any discretionary action (including a
decision not to act) permitted under the Transaction Documents that would
result in a violation of law or constitute a violation of any Specified
Agreement.
8. Our Clients will obtain all permits and governmental approvals required in
the future, and will take all actions similarly required, relevant to the
subsequent consummation of the Transactions or performance of the
Transaction Agreements.
9. All parties to the Transactions will act in accordance with, and will
refrain from taking any action that is forbidden by, the terms and
conditions of the Transaction Documents.
B-1
<PAGE>
10. Any information required to be disclosed to our Clients or their governing
bodies in connection with any matter relevant to any legal issue covered by
our opinions has been disclosed and no such disclosure contains any
relevant error or omission.
11. Insofar as any security interest is the subject of any of our opinions, the
grantor of such security interest has rights in the Collateral subject to
such security interest sufficient to support such security interest,
"value" (as defined in applicable Uniform Commercial Code) has been given
by you to the grantor of such security interest for such security interest
and the description of the Collateral subject to such security interest in
any Transaction Document (including without limitation any UCC financing
statement) reasonably describes such Collateral.
B-2
<PAGE>
SCHEDULE C
EXCLUDED LAW AND LEGAL ISSUES
None of the opinions or advice contained in the letter to which this
Schedule is attached (herein called "our letter") covers or otherwise addresses
any of the following legal issues:
1. except as set forth in paragraph 10 of our letter, Federal securities laws
and regulations administered by the Securities and Exchange Commission,
state "Blue Sky" laws and regulations, and laws and regulations relating to
commodity (and other) futures and indices and other similar instruments;
2. pension and employee benefit laws and regulations (e.g., ERISA);
3. Federal and state antitrust and unfair competition laws and regulations
(other than Hart-Scott-Rodino compliance);
4. Federal laws, regulations, directives and executive orders that prohibit or
limit the enforceability of obligations based on attributes of the party
seeking enforcement (e.g., the Trading with the Enemy Act and the
International Emergency Economic Powers Act);
5. Federal and state laws and regulations concerning filing and notice
requirements (other than requirements applicable to charter-related
documents such as a certificate of merger and other than compliance with
Hart-Scott-Rodino requirements and other requirements prerequisite to
entering into the Credit Documents and borrowing and repaying the Loans
contemplated thereunder);
6. compliance with fiduciary duty requirements;
7. the statues and ordinances, the administrative decisions and the rules and
regulations of counties, towns, municipalities and special political
subdivisions and judicial decisions to the extent that they deal with any
of the foregoing;
8. fraudulent transfer and fraudulent conveyance laws;
9. Federal and state environmental laws and regulations;
10. except as set forth in paragraph 9 of our letter, Federal and state tax
laws and regulations;
11. except as expressly set forth in paragraph 8 of our letter pertaining to
the perfection of security interests in certain trademarks, Federal patent,
copyright and trademark,
C-1
<PAGE>
state trademark, and other Federal and state intellectual property laws and
regulations;
12. Federal and state health and safety laws and regulations (e.g., OSHA);
13. Federal and state labor laws and regulations;
14. Federal and state laws, regulations and policies concerning (i) national
and local emergency and (ii) possible judicial deference to acts of
sovereign states;
15. other Federal and state statutes of general application to the extent they
provide for criminal prosecution (e.g., mail fraud and wire fraud
statutes);
16. the effect of any law, regulation or order which hereafter becomes
effective;
17. title to any property or the priority of any security interest; and
18. except as expressly set forth in paragraph 8 (a) or 8(b) of our letter, the
perfection of any security interest.
C-2
<PAGE>
TRANSACTION DOCUMENT SCHEDULE
1. Credit Agreement
2. Tranche A Term Notes, dated as of the date hereof, issued by the Borrower
in favor of each Tranche A Lender.
3. Tranche B Term Notes, dated as of the date hereof, issued by the Borrower
in favor of each Tranche B Lender.
4. Revolving Credit Notes, dated as of the date hereof, issued by the Borrower
in favor of each Revolving Credit Lender.
5. Swingline Note, dated as of the date hereof, issued by the Borrower in
favor of the Swingline Lender.
6. Parent Guaranty, dated as of the date hereof, between Petersen Holdings,
L.L.C. and First Union National Bank of North Carolina.
7. Pledge and Security Agreement, dated as of the date hereof by Petersen
Publishing Company, L.L.C. in favor of First Union National Bank of North
Carolina.
8. Parent Pledge and Security Agreement, dated as of the date hereof, by
Petersen Holdings, L.L.C. in favor of First Union National Bank of North
Carolina.
9. Assignment and Grant of Security Interest in Copyrights, dated as of
September 30, 1996 by Petersen Publishing Company, L.L.C. in favor of First
Union National Bank of North Carolina, as Administrative Agent.
10. Assignment and Grant of Security Interest in Patents and Trademarks, dated
as of September 30, 1996 by Petersen Publishing Company, L.L.C. in favor of
First Union National Bank of North Carolina, as Administrative Agent.
<PAGE>
SCHEDULE OF PENDING LITIGATION
(1) Claim by Steven Smith, an advertiser and publisher, against Petersen
Publishing Company for copyright infringement. Claim involves staff
writer/senior editor of Circle Track. So far, Steven Smith has sought only a
cessation of the claimed copyright infringement and has not requested payment of
damages. There has been no court filing.
(2) Wrongful termination claim by salesman in Eastern Office. Damages
claim is estimated at $25,000.
(3) Michael Henry Smith v. Robert Petersen et al -- U.S. District Court
for the Central District of California. Filed on March 22, 1995. Plaintiff
claims Petersen Publishing Company billed him for a magazine he never ordered.
Judge is in the process of dismissing the case.
(4) Showcase Publishing Corp. et al v. Petersen Publishing Company
et al -- L.A. Superior Court. Filed June 14, 1995. $1,950,000 plus additional
unspecified damages. Claim by tenant of Petersen Publishing Company for damages
resulting from fie. Petersen Publishing Company's insurance carrier accepted
coverage.
(5) Marla Mintz v. Petersen Publishing Company -- L.A. Superior Court.
Filed August 18, 1995. $100,000 plus attorney's fees and unspecified punitives.
Plaintiff claims used her picture in a magazine without first receiving a model
release. Judge is referring the case to non-binding mediation.
(6) Petersen Publishing Company v. Hector Sierra -- U.S. District Court
for the Central District of California. Sierra filed with the American
Arbitration Association on Dec. 20, 1995. Claims that Petersen Publishing
Company never returned transparencies. Damages equal to between $400,000 and
$600,000. Insurer defending under reservation of rights. Petersen Publishing
Company filed with the District Court for declaratory relief on March 7, 1996.
Subject of the court action is whether Petersen Publishing Company must accept
binding arbitration.
(7) Boyle v. Petersen Publishing Company -- Wrongful termination claim and
retaliation claim (under California's Fair Employment and Housing Act) by Boyle
in LA Superior Court. Filed January 5, 1996. Amount of damages not specified.
Petersen Publishing Company has filed a demurrer to the complaint.
(8) Ressler v. Petersen Publishing Company -- Sexual harassment/hostile
work environment claim by Lauren Ressler in LA Superior Court. Attorney for
Ressler offered to dismiss if Petersen Publishing Company agrees not to sue for
malicious prosecution.
(9) Calia v. Petersen Publishing Company -- Claim in Federal District
Court by Vince Calia for wrongful termination (age discrimination).
<PAGE>
SCHEDULE OF SPECIFIED AGREEMENTS
1. Asset Purchase Agreement, dated as of August 15, 1996, by and between
Bright View Communications Group, Inc. and Petersen Publishing Company.
2. License Agreement, dated as of August 15, 1996, by and among Robert E.
Petersen, Petersen Publishing Company and Bright View Communications Group,
Inc.
3. Security Holders Agreement, dated as of September 30, 1996, among Holdings,
Manager, Petersen Investment Corp. ("PIC"), and certain holders of the
securities of Holdings, Manager and PIC.
<PAGE>
Exhibit J-2 to Credit Agreement
First Union National Bank of North
Carolina, as Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996 / $260,000,000
===================================
[Heller Ehrman White & McAuliffe]
September 30, 1996
First Union National Bank of North Carolina
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
CIBC Inc.
425 Lexington Avenue, 7th Floor
New York, New York 10017
Re: Credit Agreement dated as of September 30, 1996
-----------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Petersen Publishing Company, L.L.C., a Delaware
limited liability company (the "Borrower"), Petersen Holdings, L.L.C., a
Delaware limited liability company ("Holdings") and BrightView Communications
Group, Inc., a Delaware corporation ("Manager"), in connection with the Credit
Agreement (the "Credit Agreement"), dated as of September 30, 1996, among the
Borrower, CIBC Inc., as a Lender ("CIBC") and as documentation agent (the
"Documentation Agent"), the banks and financial institutions that become parties
to the Credit Agreement after the date of the Credit Agreement (collectively,
the "Lenders"), and First Union National Bank of North Carolina, as a Lender
("First Union") and as administrative agent (the "Administrative Agent"). The
Borrower, Holdings and Manager are collectively referred to as the "Credit
Parties." This opinion is rendered to you pursuant to Section 4.1(a)(iv) of the
Credit Agreement. Capitalized terms used without definition in this opinion have
the meanings given to them in the Credit Agreement.
We do not generally represent the Borrower, Holdings or Manager in
connection with their legal affairs. We have been retained by the Borrower,
Holdings and Manager solely for the purpose of rendering this opinion and have
not participated in the negotiation or preparation of any of the documents
relating to the transaction which is the subject of this opinion.
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 2
I.
We have assumed the authenticity of all records, documents and instruments
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to the originals of all records,
documents and instruments submitted to us as copies. We have based our opinion
upon our review of the following records, documents, instruments and
certificates and such additional certificates relating to factual matters as we
have deemed necessary or appropriate for our opinion:
(a) The Credit Agreement;
(b) The Fee Letter;
(c) The Parent Guaranty;
(d) The Parent Pledge and Security Agreement;
(e) The Borrower Pledge and Security Agreement;
(f) The Asset Purchase Agreement;
(g) The Subordinated Debt Agreement;
(h) The Subordinated Bridge Notes;
(i) The Subordinated Term Notes;
(j) The Tranche A Term Note, dated September 30, 1996, in the principal
amount of $55,000,000, payable by the Borrower to First Union;
(k) The Tranche A Term Note, dated September 30, 1996, in the principal
amount of $45,000,000, payable by the Borrower to CIBC;
(l) The Tranche B Term Note, dated September 30, 1996, in the principal
amount of $55,000,000, payable by the Borrower to First Union;
(m) The Tranche B Term Note, dated September 30, 1996, in the principal
amount of $45,000,000, payable by the Borrower to CIBC;
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 3
(n) The Promissory Note, dated September 30, 1996, in the principal amount
of $5,000,000 (the "Swingline Note"), payable by the Borrower to First
Union;
(o) The Revolving Credit Note, dated September 30, 1996, in the principal
amount of $33,000,000, payable by the Borrower to First Union;
(p) The Revolving Credit Note, dated September 30, 1996, in the principal
amount of $27,000,000 payable by the Borrower to CIBC;
(q) A Financing Statement describing certain personal property of the
Borrower and naming the Borrower as debtor and the Lenders as secured
parties (the "Borrower Financing Statement");
(r) A Financing Statement describing certain personal property of Holdings
and naming Holdings as debtor and the Lenders as secured parties (the
"Holdings Financing Statement");
(s) A Financing Statement describing certain personal property of Manager
and naming Manager as debtor and the Lenders as secured parties (the
"Manager Financing Statement");
(t) A Certificate of Good Standing relating to the Borrower issued by the
California Secretary of State, dated September 25, 1996;
(u) A Certificate of Good Standing relating to Holdings issued by the
California Secretary of State, dated September 25, 1996; and
(v) A Certificate of Good Standing relating to Manager issued by the
California Secretary of State, dated September 25, 1996.
Documents (a) through (p) are collectively referred to in this opinion as the
"Transaction Documents." Documents (b) through (e) and (j) through (s) are
collectively referred to in this opinion as the "Credit Documents."
Our opinion expressed in Paragraph 1 of Part IV as to the good standing of
the Borrower, Holdings and Manager under the laws of the State of California is
based solely upon the Certificates of Good Standing enumerated above. We have
made no additional investigation after the respective dates of those
Certificates in rendering our opinion expressed in Paragraph 1 of Part IV.
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 4
II.
We have also assumed the following:
A. Each of the Borrower, Holdings and Manager has been duly organized and
is validly existing and in good standing under the laws of the State
of Delaware.
B. Each of the Borrower, Holdings and Manager has all requisite limited
liability company or corporate power and limited liability company or
corporate authority to enter into and perform each Transaction
Document to which it is a party, to own its properties and to carry on
its business as, to our knowledge, such business is now conducted.
C. Each of the Transaction Documents (i) has been duly authorized by all
necessary limited liability company or corporate action on the part of
each of the Borrower, Holdings and Manager to the extent each is a
party to that Transaction Document and (ii) has been duly executed and
delivered on behalf of each of the Borrower, Holdings and Manager to
the extent each is a party to that Transaction Document. With respect
to the Transaction Documents to which the Borrower is a party,
Holdings was authorized to sign for the Borrower and the officer who
signed the Transaction Documents on behalf of Holdings was authorized
to sign for Holdings. With respect to Transaction Documents to which
Holdings is a party, the officer who signed the Transaction Documents
on behalf of Holdings was authorized to sign for Holdings. With
respect to Transaction Documents to which Manager is a party, the
officer who signed the Transaction Documents on behalf of Manager was
authorized to sign for Manager.
D. None of the Lenders is transacting intrastate business within the
meaning of Section 191 of the California Corporations Code or any of
the Lenders which is transacting intrastate business within the
meaning of Section 191 of the California Corporations Code has
obtained a certificate of qualification as required by Section 2105 of
the California Corporations Code to transact intrastate business in
California and is not transacting any core banking business within the
meaning of Section 3800 (b) of the California Financial Code except at
a branch office established in accordance with federal law and the law
of the domicile of the bank.
E. First Union, CIBC and each other Lender qualify for the exemption from
the otherwise applicable interest rate limitations of California law
for loans or forbearances by their status as either (a) a bank created
and operating under and
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 5
pursuant to the laws of California or the United States; (b) a foreign
(other nation) bank (as defined in California Financial Code Section
139.4) that at the time of the execution of the Credit Documents or
the making of any loan thereunder (i) has assets equal to at least one
hundred million dollars, (ii) is licensed to maintain an office in
California, (iii) is licensed or otherwise authorized by another state
of the United States to maintain an agency or branch office in that
state or (iv) maintains a federal agency or federal branch in any
state of the United States or (c) a foreign (other state) bank (as
defined in California Financial Code Section 139.5) as provided by
California Constitution, article XV, Section 1 and California
Financial Code Sections 1716 and 3805; all loans under the Credit
Documents will be made by the Lenders for their own account or for the
account of another person or entity that qualifies for an exemption
from the interest rate limitations of California law; and there is no
present agreement or plan, express or implied, on the part of any of
the Lenders to sell participations or any other interest in the loans
to be made under the Credit Documents to any person or entity other
than a person or entity that also qualifies for an exemption from the
interest rate limitations of California law.
F. The Lenders have given value pursuant to the Credit Documents and the
Borrower, Holdings and Manager have rights in the personal property
collateral described in the Credit Documents.
G. The descriptions of collateral contained in, or attached as schedules
to, the Credit Documents sufficiently describe the collateral intended
to be covered by the Credit Documents, except to the extent the
collateral described in the Credit Documents refers to "Accounts,"
"Equipment," "General Intangibles," "Instruments," or "Inventory" and
the parties to the Credit Documents intend those terms to have the
meanings given to them in the California Uniform Commercial Code (the
"Code").
H. The Borrower Financing Statement, the Holdings Financing Statement and
the Manager Financing Statement will be duly filed in the office of
the California Secretary of State (the "Filing Office") in accordance
with the provisions of the Code.
I. The Borrower's chief executive office, within the meaning of
Section 9103(3)(d) of the Code, is located in the State of California.
J. Holdings' chief executive office, within the meaning of Section
9103(3)(d) of the Code, is located in the State of California.
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 6
K. Manager's chief executive office, within the meaning of Section
9103(3)(d) of the Code, is located in the State of California.
L. First Union's chief executive office, within the meaning of Section
9103(3)(d) of the Code, is located in the State of North Carolina.
CIBC does not have its chief executive office in California.
M. The membership interests of the Borrower are not represented by an
instrument issued in bearer or registered form.
III.
We express no opinion as to:
A. The priority of any lien or security interest created, or purported to
be created, by any of the Credit Documents.
B. Except as expressly stated in the opinion set forth in Paragraph 11 of
this opinion, the applicable choice of law rules that may affect (i)
the interpretation or enforcement of any of the Transaction Documents
or (ii) the attachment, perfection or enforcement of any lien or
security interest created, or purported to be created, by any of the
Credit Documents.
C. Any securities, anti-trust, tax, federal intellectual property,
trademark, land use, safety, environmental, hazardous materials,
insurance company or banking laws, rules or regulations or laws, rules
or regulations applicable to the Lenders by virtue of their status as
a financial institution engaged in business of a type exemplified by
the Credit Agreement.
D. The effect on the Borrower's or Holdings' obligations, and the
Lenders' rights, under the Transaction Documents of laws relating to
fraudulent transfers and fraudulent obligations set forth in Sections
544 and 548 of the federal Bankruptcy Code and Sections 3439 et seq.
of the California Civil Code.
This opinion is limited to the laws of the State of California, and we
disclaim any opinion as to the laws of any other jurisdiction. We further
disclaim any opinion as to any statute, rule, regulation, ordinance, order or
other promulgation of any regional or local governmental body or as to any
related judicial or administrative decision.
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 7
IV.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for our opinion, and subject to the
limitations and qualifications expressed below, it is our opinion that:
1. Each of the Borrower, Holdings and Manager is duly qualified to do
business and is in good standing in the state of California.
2. If a court were to apply California law (notwithstanding the choice of
law provision in the Transaction Documents) to the Transaction
Documents, each Transaction Document to which any Credit Party is a
party is a valid and binding obligation of such Credit Party,
enforceable against such Credit Party in accordance with its terms,
subject, as to enforcement, (i) to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other laws of general
applicability relating to or affecting creditors' rights and (ii) to
general principles of equity, whether such enforceability is considered
in a proceeding in equity or at law.
3. If a court were to apply California law (notwithstanding the choice of
law provision in the Borrower Pledge and Security Agreement) to the
Borrower Pledge and Security Agreement, a valid and enforceable
security interest in favor of the Lenders has attached under the Code
to the collateral described in the Borrower Pledge and Security
Agreement (other than (i) securities and (ii) letters of credit)
consisting of personal property to which a security interest may attach
under Division 9 of the Code.
4. The Borrower Financing Statement is in proper form for filing in the
Filing Office, and, upon due filing in such office, the security
interest created by the Borrower Pledge and Security Agreement in the
collateral described in the Borrower Financing Statement will be
perfected to the extent a security interest can be perfected in such
collateral under the Code by the filing of a financing statement in the
Filing Office.
5. If a court were to apply California law (notwithstanding the choice of
law provision in the Parent Pledge and Security Agreement) to the
Parent Pledge and Security Agreement, a valid and enforceable security
interest in favor of the Lenders has attached under the Code to the
collateral described in the Parent Pledge and Security Agreement (other
than (i) securities and (ii) letters of credit)
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 8
consisting of personal property and fixtures to which a security
interest may attach under Division 9 of the Code.
6. The Holdings Financing Statement is in proper form for filing in the
Filing Office, and, upon due filing in such office, the security
interest created by the Parent Pledge and Security Agreement in the
collateral described in the Holdings Financing Statement will be
perfected to the extent a security interest can be perfected in such
collateral under the Code by the filing of a financing statement in
the Filing Office.
7. The Manager Financing Statement is in proper form for filing in the
Filing Office, and, upon due filing in such office, the security
interest created by the Parent Pledge and Security Agreement in the
collateral described in the Manager Financing Statement will be
perfected to the extent a security interest can be perfected in such
collateral under the Code by the filing of a financing statement in
the Filing Office.
8. The Parent Pledge and Security Agreement purports to grant to the
Lenders a valid and enforceable security interest in Holdings' and
Managers' membership interests in the Borrower (the "Pledged
Interests"). We have assumed that the Borrower is organized under the
Delaware limited liability company statute and that the membership
interests of the Borrower are not represented by an instrument issued
in bearer or registered form. (See Paragraphs A and M of Part II of
this opinion.) California law is unsettled as to whether membership
interests in a limited liability company (an "LLC") are general
intangibles subject to the attachment and perfection provisions of
Article 9 of the Code or securities subject to the attachment and
perfection provisions of Article 8 of the Code. The Code does not
include or exclude membership interests in an LLC in or from the
definition of "general intangible" or "security" and case law is
silent on this issue.
If a court were to apply California law (notwithstanding the choice of
law provision in the Credit Documents) to the Credit Documents then
Article 9 of the Code would govern perfection of the Lenders' security
interest if the Pledged Interests are general intangibles but Article
8 of the Delaware UCC would govern attachment and perfection of the
Lenders' security interest if the Pledged Interests are uncertificated
securities.
To the extent (i) a California court finds the membership interests in
a limited liability company to be general intangibles and (ii) the
California court were to apply California law (notwithstanding the
choice of law provision in the Credit
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 9
Documents) to the Credit Documents, a valid and enforceable security
interest in favor of the Lenders has attached under the Code to the
Pledged Interests described in the Parent Pledge and Security
Agreement. To the extent (i) a California court finds the membership
interests in a limited liability company to be general intangibles and
(ii) the California court were to apply California law
(notwithstanding the choice of law provision in the Credit Documents)
to the Credit Documents, the Holdings Financing Statement and the
Manager Financing Statement are in proper form for filing in the
Filing Office and upon due filing in such office, the security
interest created by the Parent Pledge and Security Agreement in the
Pledged Interests will be perfected.
If a court were to apply California law (notwithstanding the choice of
law provision in the Credit Documents) to the Credit Documents, to the
extent a California court finds the Pledged Interests to be securities
under Code Section 8106, the law of the State of Delaware will govern
the attachment and perfection of a security interest in the Pledged
Interests and we express no opinion as to the attachment and
perfection of the Pledged Interests under Delaware law.
We call your attention to the fact that the Revised Article 8 to the
UCC will become law in California as of January 1, 1997. Under the
Revised Article 8, membership interests in an LLC are not securities
unless the membership interests are dealt in or traded on securities
exchanges or in securities markets or their terms expressly provide
that they are securities governed by Article 8; however, presently
their status remains unclear. We express no opinion as to whether the
security interest in the Pledged Interests would be perfected under
the Revised Article 8.
9. If a court were to apply California law (notwithstanding the choice of
law provision in the Credit Documents) to the Credit Documents, the
payment of the interests, fees or other charges provided for in the
Credit Documents does not violate any usury law applicable to the
Borrower.
10. No California taxes (other than taxes based on income) or other
impositions are required to be paid in connection with the execution,
delivery and performance or filing of the Credit Agreement or the
other Credit Documents, except for the filing fees in respect of the
UCC financing statements being executed in connection with the
Borrower Pledge and Security Agreement and the Parent Pledge and
Security Agreement. Other than the foregoing, no taxes (other than
taxes based on income) or other impositions of the state of California
will be imposed on or payable by, the Administrative Agent, the
Documentation Agent or
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 10
the Lenders, except as described in the foregoing sentence, as a
precondition to the enforcement of their rights and remedies
thereunder.
11. A provision in the Credit Documents (the "Choice of Law Clause")
provides that the Credit Documents will be governed by North Carolina
law without regard to North Carolina's conflict of law laws. Section
1105 of the Code permits parties to a transaction subject to the Code
to agree to choose the application of the law of a state which bears a
"reasonable relation" to the transaction. Under Nedlloyd Lines B.V. v.
Superior Court, 3 Cal.4th 459 (1992) and Hambrecht & Quist Venture
Partners v. American Medical International, Inc., 38 Cal.App.4th 1532
(1995), a California court applying the common law of contracts will
enforce a choice of law clause in an agreement if (i) the chosen state
bears a "substantial relationship" to one or more of the parties to
the transaction or the transaction itself or there is any other
"reasonable basis" for the parties' choice of law, and (ii) the
application of the chosen state's law to a particular provision of the
agreement does not violate a fundamental public policy of the State of
California. Restatement Second of Conflict of Laws, section 187
provides that a "substantial relationship" to a chosen state exists if
at least one party has a principal place of business in that state. As
mentioned, we have assumed that First Union has its principal place of
business in the state of North Carolina and CIBC does not have its
chief executive office in California. We note that the test under
Section 1105 of the Code referring to "reasonable relation" differs
somewhat from the test in Nedlloyd referring to "substantial
relationship." Nedlloyd at 465, fn.2. Nevertheless, we believe, as the
court expressed in Nedlloyd, that these tests are similar, and we
further believe that a California court interpreting Section 1105 of
the Code would apply the "reasonable relation" test in a manner
similar to the analysis in Nedlloyd and Hambrecht & Quist. Based
solely on the fact that First Union has its principal place of
business in the state of North Carolina and that CIBC does not have
its chief executive office in California, it is our opinion that a
California court of competent jurisdiction considering all of the
relevant authority under California law should hold that the Choice of
Law Clause is enforceable, except to the extent the enforcement of the
Choice of Law Clause would violate a fundamental policy of the state
of California. The authorities considering when a choice of law clause
violates a "fundamental" public policy are new and limited. Based on
our review of such limited authority, we do not believe any
fundamental public policy will be violated by any of the provisions of
the Credit Documents.
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 11
V.
If a court were to apply California law (notwithstanding the choice of
law provision in the Transaction Documents), we further advise you that:
A. As noted, the enforceability of the Transaction Documents is subject
to the effect of general principles of equity. These principles
include, without limitation, concepts of commercial reasonableness,
materiality and good faith and fair dealing. As applied to the
Transaction Documents, these principles will require the Lenders to
act reasonably, in good faith and in a manner that is not arbitrary or
capricious in the administration and enforcement of the Transaction
Documents and will preclude the Lenders from invoking penalties for
defaults that bear no reasonable relation to the damage suffered or
that would otherwise work a forfeiture.
B. The enforceability of the Transaction Documents is subject to the
effects of (i) Section 1102 of the Code, which provides that
obligations of good faith, diligence, reasonableness and care
prescribed by the Code may not be disclaimed by agreement, although
the parties may by agreement determine the standards by which the
performance of such obligations is to be measured if those standards
are not manifestly unreasonable, (ii) Section 1203 of the Code, which
imposes an obligation of good faith in the performance or enforcement
of a contract and (iii) Section 1670.5 of the California Civil Code,
which provides that a court may refuse to enforce, or may limit the
enforcement of, a contract or any clause of a contract that a court
finds as a matter of law to have been unconscionable at the time it
was made.
C. The effectiveness of indemnities, rights of contribution, exculpatory
provisions and waivers of the benefits of statutory provisions may be
limited on public policy grounds.
D. Section 1717 of the California Civil Code provides that, in any action
on a contract where the contract specifically provides that attorneys'
fees and costs incurred to enforce that contract shall be awarded
either to one of the parties or to the prevailing party, then the
party who is determined to be the party prevailing in the action,
whether that party is the party specified in the contract or not,
shall be entitled to reasonable attorneys' fees in addition to other
costs.
E. Provisions of the Transaction Documents requiring that waivers must be
in writing may not be binding or enforceable if a non-executory oral
agreement has
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 12
been created modifying any such provision or an implied agreement by
trade practice or course of conduct has given rise to a waiver.
F. The enforceability of the Transaction Documents will be subject to
statutory and other legal requirements generally applicable to a
lender exercising remedies relating to its collateral; however, we do
not believe that these legal requirements render the remedies
contained in the Transaction Documents inadequate to afford
substantial realization by the Lenders on their collateral under the
Transaction Documents.
G. Perfection of a security interest in proceeds of any collateral may be
limited as provided in Section 9306 of the Code.
H. A security interest in collateral acquired after the respective dates
of the applicable Credit Documents will not be perfected unless the
security interest attaches to such collateral.
I. The continued perfection of the security interests created by the
Credit Documents and perfected by the filing of the Borrower Financing
Statement, the Holdings Financing Statement and the Manager Financing
Statement depend upon the filing of periodic continuation statements
relating to the Borrower Financing Statement, the Holdings Financing
Statement and the Manager Financing Statement in accordance with the
Code and may depend upon (i) the continued location of the collateral
in the State of California; (ii) the continuation of the Borrower,
Holdings and Manager's present corporate names, identity and corporate
structure; and (iii) the continued location of the Borrower, Holdings
and Manager in the state of California within the meaning of Section
9103(3)(d) of the Code.
J. The enforceability of the Parent Guaranty may be subject to California
statutory provisions and case law to the effect that a guarantor may
be exonerated if the beneficiary of the guaranty alters the original
obligation of the principal, fails to inform the guarantor of material
information pertinent to the principal or any collateral, elects
remedies that may impair the subrogation rights of the guarantor
against the principal or that may impair the value of any collateral,
fails to accord the guarantor the protections afforded a debtor under
Division 9 of the Code or otherwise takes any action that materially
prejudices the guarantor unless, in any such case, the guarantor
validly waives such rights or the consequences of any such action.
See, e.g., California Civil Code Section 2799 through Section 2856 and
related authority. While express and specific waivers of a guarantor's
right to
<PAGE>
First Union National Bank
of North Carolina
September 30, 1996
Page 13
be exonerated, such as those contained in the Parent Guaranty, are
generally enforceable under California law, we express no opinion as
to whether the Parent Guaranty contains an express and specific waiver
of each exoneration defense a guarantor might assert or as to whether
each of the waivers contained in the Parent Guaranty is fully
enforceable.
K. The enforceability of the subordination provisions of a subordination
agreement may be limited by exoneration defenses similar to those that
may be asserted by a guarantor, unless the subordinated creditor
validly waives the defenses or the consequences of the kinds of
actions that would exonerate a guarantor.
VI.
This opinion is rendered to you in connection with the Credit Agreement and
is solely for your benefit. This opinion may not be relied upon by any other
person, firm, corporation or other entity without our prior written consent.
Persons that become parties to the Credit Agreement after the date of the Credit
Agreement may rely on this opinion only if they are financial institutions that
in the ordinary course of their business make loans the size of the loans
represented by the notes identified in documents (j) through (p) of Part I of
this opinion. We disclaim any obligation to advise you of any change of law that
occurs, or any facts of which we become aware, after the date of this opinion.
Very truly yours,
<PAGE>
BORROWER PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the 30th day of September,
1996 (this "Agreement"), is made by PETERSEN PUBLISHING COMPANY, L.L.C., a
Delaware limited liability company (the "Pledgor"), in favor of FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, as administrative agent for the banks and other
financial institutions (collectively, the "Lenders") party to the Credit
Agreement referred to below (in such capacity, the "Administrative Agent"), for
the benefit of the Secured Parties (as hereinafter defined). Capitalized terms
used herein without definition shall have the meanings given to them in the
Credit Agreement referred to below.
RECITALS
A. The Pledgor, the Lenders, CIBC Inc., as Documentation Agent, and First
Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent, are parties to a Credit Agreement, dated as of September 30,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Pledgor upon the terms and subject to the conditions set forth therein.
B. It is a condition to the extension of credit to the Pledgor under the
Credit Agreement that the Pledgor shall have agreed, by executing and delivering
this Agreement, to secure the payment in full of its Obligations under the
Credit Agreement and the other Credit Documents. The Secured Parties are
relying on this Agreement in their decision to extend credit to the Pledgor
under the Credit Agreement, and would not enter into the Credit Agreement
without this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Secured Parties to enter into the Credit Agreement
and to induce the Lenders to extend credit to the Pledgor thereunder, the
Pledgor hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to the
-------------
terms defined elsewhere herein, the following terms shall have the meanings set
forth below:
"Accounts" shall mean, collectively, all of the Pledgor's accounts, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all of the
Pledgor's accounts receivable, all rights to payment for goods sold or leased or
to be sold or to be leased (including all rights to returned or repossessed
goods) or for services rendered at any time or for services to be rendered
(including any rights to stoppage in
<PAGE>
transit, repossession and reclamation and other rights of an unpaid vendor or
secured party), all rights under or evidenced by book debts, notes, bills,
drafts or acceptances, all Instruments evidencing or relating to any of the
foregoing, and all rights under security agreements, guarantees, indemnities and
other instruments and contracts securing or otherwise relating to any of the
foregoing, in each case whether now owned or existing or hereafter acquired or
arising.
"Collateral" shall have the meaning given to such term in SECTION 2.1.
"Collateral Accounts" shall have the meaning given to such term in SECTION
6.3.
"Contracts" shall mean, collectively, all rights of the Pledgor under all
leases, contracts and agreements to which the Pledgor is now or hereafter a
party, including, without limitation, all rights, privileges and powers, whether
for payment or performance, under distribution agreements, printing service
agreements and promotional and marketing agreements, and all rights, privileges
and powers under Investment Agreements and Licenses as more particularly
described in the definitions of such terms herein, together with any and all
extensions, modifications, amendments and renewals of such contracts and
agreements and all rights of the Pledgor to receive moneys due or to become due
thereunder or pursuant thereto and to amend, modify, terminate or exercise
rights under such contracts and agreements, but excluding rights under (but not
excluding proceeds of) any lease, agreement, license (including without
limitation any License) or contract that by the terms thereof, or under
applicable law, cannot be assigned or a security interest granted therein in the
manner contemplated by this Agreement unless consent from the relevant party or
parties has been obtained and under the terms of which lease, agreement or
contract any such assignment or grant of a security interest therein in the
absence of such consent would, or could, result in the termination thereof, but
only to the extent that (y) such rights are subject to such contractual or legal
restriction and (z) such restriction has not been rendered ineffective pursuant
to the Uniform Commercial Code of any relevant jurisdiction or any other
applicable law (including the Bankruptcy Code) or principles of equity.
"Copyrights" shall mean, collectively, all of the Pledgor's copyrights,
copyright registrations and applications for copyright registration, whether
under the laws of the United States or any other country or jurisdiction,
including all recordings, supplemental registrations and derivative or
collective work registrations, and all renewals and extensions thereof, in each
case whether now owned or existing or hereafter acquired or arising.
"Copyright Collateral" shall mean, collectively, (i) all Copyrights and
(ii) all Copyright Licenses to which the Pledgor is or hereafter becomes a party
and all other General Intangibles embodying, incorporating, evidencing or
otherwise relating or pertaining to any Copyrights, in each case whether now
owned or existing or hereafter acquired or arising.
"Copyright License" shall mean any agreement now or hereafter in effect
granting any right to any third party under any Copyright now or hereafter owned
by the Pledgor or which the Pledgor otherwise has the right to license, or
granting any right to the Pledgor under any property of the type described in
the definition of Copyright herein now or hereafter owned by any third party,
and all rights of the Pledgor under any such agreement.
"Deposit Accounts" shall mean, collectively, all of the Pledgor's deposit
accounts, whether maintained with the Administrative Agent or any other bank or
depository institution, in each case
-2-
<PAGE>
whether now owned or existing or hereafter acquired or arising and including,
without limitation, any Collateral Account, together with all funds held from
time to time therein and all certificates and instruments from time to time
representing, evidencing or deposited into such accounts.
"Equipment" shall mean, collectively, all of the Pledgor's equipment, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all machinery,
equipment, computer equipment and software, parts, supplies, appliances,
fittings, furniture and fixtures of every kind and nature, wherever located and
whether or not affixed to any real property, all Mobile Goods, and all
accessions, accessories, additions, attachments, improvements, modifications and
upgrades to, replacements of and substitutions for the foregoing, in each case
whether now owned or existing or hereafter acquired or arising.
"General Intangibles" shall mean, collectively, all of the Pledgor's
general intangibles, as defined in the Uniform Commercial Code, whether now
owned or existing or hereafter acquired or arising, including, without
limitation, all Contracts, all Copyright Collateral, Patent Collateral and
Trademark Collateral, all inventions, designs, trade secrets, trade processes,
confidential or proprietary technical or business information, know-how,
registrations, licenses, permits and franchises, all rights under or evidenced
by book debts, notes, bills, drafts, acceptances, chooses in action, causes of
action or Instruments, all indebtedness, obligations and other amounts at any
time owing to the Pledgor from any Person and all interest, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness,
obligations or other amounts (including, without limitation, all Intercompany
Obligations), all judgments, tax refund claims, claims against carriers and
shippers, claims under liens and insurance policies, all rights under security
agreements, guarantees, indemnities and other instruments and contracts securing
or otherwise relating to any of the foregoing, all invoices, customer lists,
books and records, ledger and account cards, computer tapes, disks, software,
printouts and other corporate or business records relating to the foregoing, and
all other intangible personal property of every kind and nature, and all
accessions, additions, improvements, modifications and upgrades to, replacements
of and substitutions for the foregoing, in each case whether now owned or
existing or hereafter acquired or arising, but excluding Accounts and excluding
leases, agreements, licenses (including without limitation Licenses) and
contracts to the extent excluded from Contracts under the definition of such
term herein.
"Instruments" shall mean, collectively, all instruments, chattel paper or
documents, each as defined in the Uniform Commercial Code, of the Pledgor,
whether now owned or existing or hereafter acquired or arising, evidencing,
representing, securing, arising from or otherwise relating to any Accounts,
General Intangibles, Intercompany Obligations or other Collateral, including,
without limitation, any promissory notes, drafts, bills of exchange, documents
of title and receipts.
"Intercompany Obligations" shall mean, collectively, all indebtedness,
obligations and other amounts at any time owing to the Pledgor from its
Subsidiaries and Affiliates and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness, obligations or
other amounts.
"Interests" shall mean, collectively, all partnership, joint venture,
limited liability company or other equity interests in any Person not a
corporation (including, without limitation, any such Person that is or hereafter
becomes a Subsidiary of the Pledgor) at any time owned by the Pledgor, and all
-3-
<PAGE>
rights, powers and privileges relating thereto or arising therefrom, including,
without limitation, the Pledgor's right to vote and to manage and administer the
business of any such Person pursuant to the applicable Investment Agreement,
together with all other rights, interests, claims and other property of the
Pledgor in any manner arising out of or relating to any such interests, whether
now existing or hereafter arising or acquired, of whatever kind or character
(including any tangible or intangible property or interests therein), and
further including, without limitation (but subject to the provisions of SECTION
5.3), all rights of the Pledgor to receive amounts due and to become due
(including, without limitation, dividends, distributions, interest, income and
returns of capital) under or in respect of any Investment Agreement, to receive
payments or other amounts upon termination of any Investment Agreement, and to
receive any other payments or distributions, whether in cash, securities,
property, or a combination thereof, in respect of any such interests, all of the
Pledgor's rights of access to the books and records of any such Person, and all
rights granted or available under applicable law in connection therewith, all
options, warrants and other rights exercisable for any of the foregoing, and all
securities convertible into any of the foregoing, in each case whether now or
hereafter existing and any time owned by the Pledgor, together with all
certificates, instruments and entries upon the books of financial intermediaries
at any time evidencing any of the foregoing.
"Inventory" shall mean, collectively, all of the Pledgor's inventory, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all goods
manufactured, acquired or held for sale or lease, all raw materials, component
materials, work-in-process and finished goods, all supplies, goods and other
items and materials used or consumed in the manufacture, production, packaging,
shipping, selling, leasing or furnishing of such inventory or otherwise in the
operation of the business of the Pledgor, all goods in which the Pledgor now or
at any time hereafter has any interest or right of any kind, and all goods that
have been returned to or repossessed by or on behalf of the Pledgor, in each
case whether or not the same is in transit or in the constructive, actual or
exclusive occupancy or possession of the Pledgor or is held by the Pledgor or by
others for the account of the Pledgor, and in each case whether now owned or
existing or hereafter acquired or arising.
"Investment Agreement" shall mean any partnership agreement, joint venture
agreement, limited liability company operating agreement or other agreement
creating, governing or evidencing any Interests and to which the Pledgor is now
or hereafter becomes a party, as any such agreement may be amended, modified,
supplemented, restated or replaced from time to time.
"Investments" shall mean, collectively, the Stock and the Interests.
"License" shall mean any Copyright License, Patent License or Trademark
License.
"Material Contracts" shall have the meaning given to such term in SECTION
3.8.
"Mobile Goods" shall mean, collectively, all of the Pledgor's motor
vehicles, tractors, trailers, aircraft, rolling stock and other like property,
whether or not the title thereto is governed by a certificate of title or
ownership), in each case whether now owned or existing or hereafter acquired or
arising.
"Patents" shall mean, collectively, all of the Pledgor's letters patent,
whether under the laws of the United States or any other country or
jurisdiction, all recordings and registrations thereof and applications
therefor, including, without limitation, the inventions described therein, all
reissues,
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continuations, divisions, renewals, extensions, continuations-in-part thereof,
in each case whether now owned or existing or hereafter acquired or arising.
"Patent Collateral" shall mean, collectively, (i) all Patents and (ii) all
Patent Licenses to which the Pledgor is or hereafter becomes a party and all
other General Intangibles embodying, incorporating, evidencing or otherwise
relating or pertaining to any Patents, in each case whether now owned or
existing or hereafter acquired or arising.
"Patent License" shall mean any agreement now or hereafter in effect
granting to any third party any right to make, use or sell any invention on
which a Patent, now or hereafter owned by the Pledgor or which the Pledgor
otherwise has the right to license, is in existence, or granting to the Pledgor
any right to make, use or sell any invention on which property of the type
described in the definition of Patent herein, now or hereafter owned by any
third party, is in existence, and all rights of the Pledgor under any such
agreement.
"Proceeds" shall have the meaning given to such term in SECTION 2.1.
"Secured Parties" shall mean, collectively, the Lenders (including the
Issuing Lender and the Swingline Lender in their capacities as such, and
including any Lender in its capacity as a counterparty to any Interest Rate
Protection Agreement with the Pledgor), the Documentation Agent and the
Administrative Agent.
"Securities Act" shall have the meaning given to such term in SECTION 6.5.
"Stock" shall mean, collectively, all of the issued and outstanding shares,
interests or other equivalents of capital stock of any corporation (including,
without limitation, any corporation that is or hereafter becomes a Subsidiary of
the Pledgor) at any time owned by the Pledgor, whether voting or non-voting and
whether common or preferred, all options, warrants and other rights to acquire,
and all securities convertible into, any of the foregoing, all interest,
dividends, distributions and other amounts, and all additional stock, warrants,
options, securities and other property, from time to time paid or payable or
distributed or distributable in respect of any of the foregoing, in each case
whether now or hereafter existing and any time owned by the Pledgor, together
with all certificates, instruments and entries upon the books of financial
intermediaries at any time evidencing any of the foregoing.
"Trademarks" shall mean, collectively, all of the Pledgor's trademarks,
service marks, trade names, corporate and company names, business names, logos,
trade dress, trade styles, other source or business identifiers, designs and
general intangibles of a similar nature, whether under the laws of the United
States or any other country or jurisdiction, all recordings and registrations
thereof and applications therefor, all renewals and extensions thereof, all
rights corresponding thereto, and all goodwill associated therewith or
symbolized thereby, in each case whether now owned or existing or hereafter
acquired or arising.
"Trademark Collateral" shall mean, collectively, (i) all Trademarks and
(ii) all Trademark Licenses to which the Pledgor is or hereafter becomes a party
and all other General Intangibles embodying, incorporating, evidencing or
otherwise relating or pertaining to any Trademarks, in each case whether now
owned or existing or hereafter acquired or arising.
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<PAGE>
"Trademark License" shall mean any agreement now or hereafter in effect
granting any right to any third party under any Trademark now or hereafter owned
by the Pledgor or which the Pledgor otherwise has the right to license, or
granting any right to the Pledgor under any property of the type described in
the definition of Trademark herein now or hereafter owned by any third party,
and all rights of the Pledgor under any such agreement.
1.2 Other Terms. All terms in this Agreement that are not capitalized
-----------
shall have the meanings provided by the applicable Uniform Commercial Code to
the extent the same are used or defined therein.
ARTICLE II
CREATION OF SECURITY INTEREST
2.1 Pledge and Grant of Security Interest. The Pledgor hereby pledges,
-------------------------------------
assigns and delivers to the Administrative Agent, for the ratable benefit of the
Secured Parties, and grants to the Administrative Agent, for the ratable benefit
of the Secured Parties, a Lien upon and security interest in, all of the
Pledgor's right, title and interest in and to the following, in each case
whether now owned or existing or hereafter acquired or arising (collectively,
the "Collateral"):
(i) all Accounts;
(ii) all Contracts;
(iii) all Deposit Accounts;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Inventory;
(vii) all Instruments;
(viii) subject to the provisions of SECTION 5.1(A), all Investments;
(ix) to the extent not covered or not specifically excluded by
clauses (i) through (viii) above, all of the Pledgor's other personal
property, whether now owned or existing or hereafter arising or acquired;
and
(x) any and all proceeds, as defined in the Uniform Commercial Code,
products, rents and profits of or from any and all of the foregoing and, to
the extent not otherwise included, (w) all payments under any insurance
(whether or not the Administrative Agent is the loss payee thereunder),
indemnity, warranty or guaranty with respect to any of the foregoing
Collateral, (x) all payments in connection with any requisition,
condemnation, seizure or forfeiture with respect to any of the foregoing
Collateral, (y) all claims and rights to recover for any past, present or
future infringement or dilution of or injury to any
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Copyright Collateral, Patent Collateral or Trademark Collateral, and (z)
all other amounts from time to time paid or payable under or with respect
to any of the foregoing Collateral (collectively, "Proceeds"). For purposes
of this Agreement, the term "Proceeds" includes whatever is receivable or
received when Collateral or Proceeds are sold, exchanged, collected or
otherwise disposed of, whether voluntarily or involuntarily.
2.2 Security for Obligations. This Agreement and the Collateral secure
------------------------
the full and prompt payment, at any time and from time to time as and when due
(whether at the stated maturity, by acceleration or otherwise), of all
Obligations of the Pledgor under the Credit Agreement and the other Credit
Documents, including, without limitation, all principal of and interest on the
Loans, all Reimbursement Obligations in respect of Letters of Credit, all fees,
expenses, indemnities and other amounts payable by the Pledgor under the Credit
Agreement or any other Credit Document (including interest accruing after the
filing of a petition or commencement of a case by or with respect to the Pledgor
seeking relief under any applicable federal and state laws pertaining to
bankruptcy, reorganization, arrangement, moratorium, readjustment of debts,
dissolution, liquidation or other debtor relief, specifically including, without
limitation, the Bankruptcy Code and any fraudulent transfer and fraudulent
conveyance laws, whether or not the claim for such interest is allowed in such
proceeding), all obligations of the Pledgor to any Lender under any Interest
Rate Protection Agreement, all Obligations that, but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, would become due,
and all fees, costs and expenses payable by the Pledgor under SECTION 8.1, in
each case whether now existing or hereafter created or arising and whether
direct or indirect, absolute or contingent, due or to become due.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants as follows:
3.1 Ownership of Collateral. The Pledgor owns, or has valid rights as a
-----------------------
lessee or licensee with respect to, all Collateral purported to be pledged by it
hereunder, free and clear of any Liens except for the Liens granted to the
Administrative Agent, for the benefit of the Secured Parties, pursuant to this
Agreement, and except for other Permitted Liens. No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any government or public office, and
the Pledgor has not filed or consented to the filing of any such statement or
notice, except (i) Uniform Commercial Code financing statements naming the
Administrative Agent as secured party, (ii) security instruments filed in the
U.S. Copyright Office or the U.S. Patent and Trademark Office naming the
Administrative Agent as secured party and (iii) as may be otherwise permitted by
the Credit Agreement.
3.2 Security Interests; Filings. This Agreement, together with (i) the
---------------------------
filing of duly completed and executed Uniform Commercial Code financing
statements naming the Pledgor as debtor, the Administrative Agent as secured
party, and describing the Collateral, in the jurisdictions set forth on Annex B
-------
hereto, which have been duly executed and delivered by the Pledgor and delivered
to the Administrative Agent for filing, (ii) to the extent required by
applicable law, the filing of duly completed and executed assignments in the
forms set forth as Exhibits B and C with the U.S. Copyright Office or the U.S.
---------- -
Patent and Trademark Office, as appropriate, with regard to
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registered Copyright Collateral, Patent Collateral and Trademark Collateral, as
the case may be, (iii) in the case of uncertificated Investments, compliance
with Section 8-313 (or its successor provision) of the applicable Uniform
Commercial Code, (iv) as to Mobile Goods covered by a certificate of title or
ownership, the notation of the Administrative Agent's security interest therein
on the applicable certificates of title or ownership, and (v) the delivery to
the Administrative Agent of all chattel paper, promissory notes and other
Instruments included in the Collateral, creates, and at all times shall
constitute, a valid and perfected security interest in and Lien upon the
Collateral in favor of the Administrative Agent, for the benefit of the Secured
Parties, to the extent a security interest therein can be perfected by such
filings or possession of such chattel paper, promissory notes or Instruments, as
applicable, superior and prior to the rights of all other Persons therein
(except for Permitted Liens), and no other or additional filings, registrations,
recordings or actions are or shall be necessary or appropriate in order to
maintain the perfection and priority of such Lien and security interest, other
than actions required with respect to Collateral of the types excluded from
Article 9 of the applicable Uniform Commercial Code or from the filing
requirements under such Article 9 by reason of Section 9-104 or 9-302 of the
applicable Uniform Commercial Code and other than continuation statements
required under the applicable Uniform Commercial Code (it being specifically
noted that the Administrative Agent may at its option, but shall not be required
to, require that any bank or other depository institution at which a Deposit
Account is maintained enter into a written agreement or take such other action
as may be necessary to perfect the security interest of the Administrative Agent
in such Deposit Account and the funds therein, and it being specifically
understood that the security interest of the Administrative Agent in such
Deposit Account, absent such action, might not be perfected).
3.3 Locations. Annex C lists, as to the Pledgor, (i) the address of its
--------- -------
chief executive office and principal place of business and each other place of
business, (ii) the address of each location of all original invoices, ledgers,
chattel paper, Instruments and other records or information evidencing or
relating to the Accounts, General Intangibles or other Collateral, and (iii) the
address of each location at which any Equipment or Inventory (other than Mobile
Goods and goods in transit) is kept or maintained, in each instance except for
any new locations established in accordance with the provisions of SECTION 4.2.
Except as may be otherwise noted therein, all locations identified in Annex C
-------
are leased by the Pledgor. The Pledgor does not presently conduct business
under any prior or other limited liability company name or under any trade or
fictitious name, except as indicated on Annex C, and the Pledgor has not entered
-------
into any contract or granted any Lien within the past five years under any name
other than its legal limited liability company name or a trade or fictitious
name indicated on Annex C.
-------
3.4 Authorization; Consent. No authorization, consent or approval of, or
----------------------
declaration or filing with, any Governmental Authority is required for the valid
execution, delivery and performance by the Pledgor of this Agreement, the grant
by it of the Lien and security interest in favor of the Administrative Agent
provided for herein, or the exercise by the Administrative Agent of its rights
and remedies hereunder, except for the filings described in SECTION 3.2, any
notices required under the Federal Assignment of Claims Act and similar state
statutes and any notice filing with state tax or revenue authorities required to
be made by account creditors in order to enforce any Accounts in such state,
and, in the case of Investments, except as may be required in connection with a
disposition of any such Collateral by laws affecting the offering and sale of
securities generally.
3.5 No Restrictions. There are no statutory or regulatory restrictions,
---------------
prohibitions or limitations on the Pledgor's ability to grant to the
Administrative Agent a Lien upon and security
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interest in the Collateral pursuant to this Agreement or on the exercise by the
Administrative Agent of its rights and remedies hereunder (including any
foreclosure upon or collection of the Collateral, assuming compliance with any
notice and other procedural requirements applicable to such action under law),
and there are no contractual restrictions on the Pledgor's ability so to grant
such Lien and security interest.
3.6 Accounts. Each Account is, or at the time it arises will be, a bona
--------
fide, valid and legally enforceable indebtedness of the account debtor according
to its terms, arising out of or in connection with the sale, lease or
performance of goods or services by the Pledgor.
3.7 Investments. As of the date hereof, the Investments required to be
-----------
pledged by the Pledgor hereunder consist of the number and type of shares of
capital stock (in the case of issuers that are corporations) or the percentage
and type of equity interests (in the case of issuers other than corporations) as
described in Annex A. All of the Investments have been duly and validly issued
-------
and are fully paid and nonassessable (or, in the case of Interests, not subject
to any capital call or other additional capital requirement) and not subject to
any preemptive rights, warrants, options or similar rights or restrictions in
favor of third parties or any contractual or other restrictions upon transfer.
3.8 Material Contracts. As to each Investment Agreement, each Contract
------------------
listed on Annex D, each Contract specified in writing by the Administrative
-------
Agent to the Pledgor at any time after the date hereof, and each other Contract
to which the Pledgor is or hereafter becomes a party and that is material to its
business (the foregoing, collectively, "Material Contracts"), (i) the Pledgor is
not in default in any material respect under such Material Contract, and to the
knowledge of the Pledgor, none of the other parties to such Material Contract is
in default in any material respect thereunder (except as shall have been
disclosed in writing to the Administrative Agent), (ii) such Material Contract
is, or at the time of execution will be, the legal, valid and binding obligation
of all parties thereto, enforceable against such parties in accordance with the
respective terms thereof, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and no defense, offset, deduction or counterclaim will exist in any
material respect thereunder in favor of any such party, (iii) the performance by
the Pledgor of its obligations under such Material Contract in accordance with
its terms will not contravene any Requirement of Law or any contractual
restriction binding on or affecting the Pledgor or any of its properties, and
will not result in or require the creation of any Lien upon or with respect to
any of its properties, and (iv) the Pledgor has (or at the time of execution
will have) furnished the Administrative Agent with a correct and complete copy
of each Material Contract to which it is a party as then in effect.
3.9 Intellectual Property. Annexes E, F and G correctly set forth all
--------------------- ------------ -
registered Copyrights, Patents and Trademarks owned by the Pledgor and as of the
date hereof used or proposed to be used in its business. The Pledgor owns or
possesses the valid right to use all such Copyrights, Patents and Trademarks
listed under its name; all registrations therefor have been validly issued under
applicable law and are in full force and effect; no claim has been made in
writing or, to the knowledge of the Pledgor, orally, that any of such
Copyrights, Patents or Trademarks is invalid or unenforceable or violates or
infringes the rights of any other Person, and there is no such violation or
infringement in existence; and to the knowledge of the Pledgor, no other Person
is presently infringing upon the rights of the Pledgor with regard to any of
such Copyrights, Patents or Trademarks.
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3.10 Documents of Title. No bill of lading, warehouse receipt or other
------------------
document or instrument of title is outstanding with respect to any Collateral
other than Mobile Goods and other than Inventory in transit in the ordinary
course of business to a location set forth on Annex C or to a customer of the
-------
Pledgor.
ARTICLE IV
COVENANTS
4.1 Use and Disposition of Collateral. So long as no Event of Default
---------------------------------
shall have occurred and be continuing, the Pledgor may, in any lawful manner not
inconsistent with the provisions of this Agreement and the other Credit
Documents, use, control and manage the Collateral in the operation of its
business, and receive and use the income, revenue and profits arising therefrom
and the Proceeds thereof, in the same manner and with the same effect as if this
Agreement had not been made; provided, however, that the Pledgor will not sell
-------- -------
or otherwise dispose of, grant any option with respect to, or mortgage, pledge,
grant any Lien with respect to or otherwise encumber any of the Collateral or
any interest therein, except for the security interest created in favor of the
Administrative Agent hereunder and except as may be otherwise expressly
permitted in accordance with the terms of this Agreement and the Credit
Agreement (including any applicable provisions therein regarding delivery of
proceeds of sale or disposition to the Administrative Agent).
4.2 Change of Name, Locations, etc. The Pledgor will not (i) change its
-------------------------------
name, identity or corporate structure, (ii) change its chief executive office or
principal place of business from the location thereof listed on Annex C, or
-------
(iii) remove any Collateral (other than Mobile Goods and goods in transit), or
any books, records or other information relating to Collateral, from the
applicable location thereof listed on Annex C, or keep or maintain any
-------
Collateral at a location not listed on Annex C, unless in each case the Pledgor
-------
has (1) given twenty (20) days' prior written notice to the Administrative Agent
of its intention to do so, together with information regarding any such new
location and such other information in connection with such proposed action as
the Administrative Agent may reasonably request, and (2) delivered to the
Administrative Agent ten (10) days prior to any such change or removal such
documents, instruments and financing statements as may be required by the
Administrative Agent, all in form and substance satisfactory to the
Administrative Agent, paid all necessary filing and recording fees and taxes,
and taken all other actions reasonably requested by the Administrative Agent
(including, at the reasonable request of the Administrative Agent, delivery of
opinions of counsel reasonably satisfactory to the Administrative Agent to the
effect that all such actions have been taken), in order to perfect and maintain
the Lien upon and security interest in the Collateral provided for herein in
accordance with the provisions of SECTION 3.2.
4.3 Records; Inspection. (a) The Pledgor will keep and maintain at its
-------------------
own cost and expense satisfactory and complete records of the Accounts and all
other Collateral, including, without limitation, records of all payments
received, all credits granted thereon, all merchandise returned and all other
documentation relating thereto, and will furnish to the Administrative Agent
from time to time such statements, schedules and reports (including, without
limitation, accounts receivable aging schedules) with regard to the Collateral
as the Administrative Agent may reasonably request.
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(b) The Pledgor shall, from time to time at such times as may be
reasonably requested and upon reasonable notice, (i) make available to the
Administrative Agent for inspection and review at the Pledgor's offices copies
of all invoices and other documents and information relating to the Collateral
(including, without limitation, itemized schedules of all collections of
Accounts, showing the name of each account debtor, the amount of each payment
and such other information as the Administrative Agent shall reasonably
request), and (ii) permit the Administrative Agent or its representatives to
visit its offices or the premises upon which any Collateral may be located,
inspect its books and records and make copies and memoranda thereof, inspect the
Collateral, discuss its finances and affairs with its officers, employees and
independent accountants and take any other actions necessary for the protection
of the interests of the Secured Parties in the Collateral. At the request of the
Administrative Agent, the Pledgor will legend, in form and manner satisfactory
to the Administrative Agent, the books, records and materials evidencing or
relating to the Collateral with an appropriate reference to the fact that the
Collateral has been assigned to the Administrative Agent and that the
Administrative Agent has a security interest therein. The Administrative Agent
shall have the right to make test verifications of Accounts in any reasonable
manner and through any reasonable medium, and the Pledgor agrees to furnish all
such reasonable assistance and information as the Administrative Agent may
require in connection therewith.
4.4 Accounts. Unless notified otherwise by the Administrative Agent in
--------
accordance with the terms hereof, the Pledgor shall endeavor to collect its
Accounts and all amounts owing to it thereunder in the ordinary course of its
business consistent with reasonable business practices and shall apply forthwith
upon receipt thereof all such amounts as are so collected to the outstanding
balances thereof, and in connection therewith shall, at the request of the
Administrative Agent, take such action as the Administrative Agent may deem
necessary or advisable (within applicable laws) to enforce such collection. The
Pledgor shall not, except to the extent done in the ordinary course of its
business consistent with reasonable business practices and in accordance with
sound business judgment and provided that no Event of Default shall have
occurred and be continuing, (i) grant any extension of the time for payment of
any Account, (ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, in whole or in part, any Person or property liable for
the payment of any Account, or (iv) allow any credit or discount on any Account.
The Pledgor shall promptly inform the Administrative Agent of any disputes with
any account debtor or obligor and of any claimed offset and counterclaim that
may be asserted with respect thereto involving, in each case, $100,000 or more,
where the Pledgor reasonably believes that the likelihood of payment by such
account debtor is materially impaired, indicating in detail the reason for the
dispute, all claims relating thereto and the amount in controversy.
4.5 Equipment. The Pledgor will, in accordance with sound business
---------
practices, maintain all Equipment used by it in its business (other than
obsolete Equipment) in good repair, working order and condition (normal wear and
tear excepted) and make all necessary repairs and replacements thereof so that
the value and operating efficiency thereof shall at all times be maintained and
preserved. The Pledgor shall not knowingly permit any Equipment to become a
fixture to any real property.
4.6 Inventory. The Pledgor will, in accordance with sound business
---------
practices, maintain all Inventory held by it or on its behalf in good saleable
or useable condition. Unless notified otherwise by the Administrative Agent in
accordance with the terms hereof, the Pledgor may, in any lawful manner not
inconsistent with the provisions of this Agreement and the other Credit
Documents, process, use and, in the ordinary course of business but not
otherwise, sell its Inventory. Without
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limiting the generality of the foregoing, the Pledgor agrees that it shall not
permit any material amount of Inventory to be in the possession of any bailee,
warehouseman, agent or processor at any time unless such bailee, warehouseman,
agent or processor shall have been notified of the security interest created by
this Agreement and the Pledgor shall have exercised its reasonable best efforts
to obtain, at the Pledgor's sole cost and expense, a written agreement to hold
such Inventory subject to the security interest created by this Agreement and
the instructions of the Administrative Agent and to waive and release any Lien
(whether arising by operation of law or otherwise) it may have with respect to
such Inventory, such agreement to be in form and substance reasonably
satisfactory to the Administrative Agent.
4.7 Contracts. The Pledgor will, at its expense, at all times perform and
---------
comply with, in all material respects, all terms and provisions of each Material
Contract to which it is or hereafter becomes a party required to be performed or
complied with by it and enforce in all material respects the terms and
provisions thereof in accordance with its terms, and will not waive, amend or
modify any provision thereof in any manner other than in the ordinary course of
business of the Pledgor in accordance with reasonable business practices and for
a valid economic reason benefitting the Pledgor (provided that in no event may
--------
any waiver, amendment or modification be made that would materially adversely
affect the interests of the Administrative Agent and the Secured Parties). The
Pledgor will deliver copies of each Material Contract and each material
amendment or modification thereof to the Administrative Agent promptly upon the
execution and delivery thereof. With regard to all leases, contracts, licenses
and agreements that are excluded from the definition of the term "Contracts,"
the Pledgor covenants and agrees to exercise all of its material rights and
remedies under such leases, agreements, licenses and contracts in a commercially
reasonable manner consistent with the interests of the Administrative Agent and
the Secured Parties. The Pledgor will not enter into any Material Contract that
by its terms prohibits the assignment of the Pledgor's rights and interest
thereunder in the manner contemplated by this Agreement, other than as may be
entered into in the ordinary course of business of the Pledgor in accordance
with reasonable business practices and for a valid economic reason benefitting
the Pledgor. The Pledgor further covenants and agrees to use its reasonable
best efforts to obtain any required consent to the collateral assignment of any
Material Contract, in form and substance reasonably satisfactory to the
Administrative Agent, upon the request of the Administrative Agent, and will
deliver copies thereof to the Administrative Agent promptly upon execution and
delivery thereof. The Pledgor will notify the Administrative Agent promptly in
writing upon any termination of any Material Contract, in whole or in part, or
any material breach, default or event of default by any party thereunder.
4.8 Taxes. The Pledgor will pay and discharge (i) all taxes, assessments
-----
and governmental charges or levies imposed upon it, upon its income or profits
or upon any of its properties, prior to the date on which penalties would attach
thereto, and (ii) all lawful claims that, if unpaid, might become a Lien upon
any of its properties; provided, however, that the Pledgor shall not be required
-------- -------
to pay any such tax, assessment, charge, levy or claim that is being contested
in good faith and by proper proceedings and as to which the Pledgor has
maintained adequate reserves with respect thereto in accordance with Generally
Accepted Accounting Principles, unless and until any tax lien notice has become
effective with respect thereto or until any Lien resulting therefrom attaches to
its properties and becomes enforceable against its other creditors.
4.9 Insurance. (a) The Pledgor will, and will cause each of its
---------
Subsidiaries to, maintain and pay for, or cause to be maintained and paid for,
insurance covering commercial general liability, property and casualty, business
interruption and such other risks, and in such amounts and with such
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financially sound and reputable insurance companies, as are usually and
customarily carried by companies of similar size engaged in similar businesses
(and in any event, insuring all Inventory and Equipment against such losses and
risks), and will, and will cause each of its Subsidiaries to, deliver
certificates of such insurance to the Administrative Agent with standard loss
payable endorsements naming the Administrative Agent as loss payee (on property
and casualty policies) and additional insured (on liability policies) as its
interests may appear. Each such policy of insurance shall contain a clause
requiring the insurer to give not less than thirty (30) days' prior written
notice to the Administrative Agent before any cancellation of the policies for
any reason whatsoever and shall provide that any loss shall be payable in
accordance with the terms thereof notwithstanding any act of the Pledgor or any
Subsidiary that might result in the forfeiture of such insurance.
(b) The Pledgor will, and will cause each of its Subsidiaries to, direct
all insurers under policies of property and casualty insurance on the Collateral
to pay all proceeds payable thereunder in excess of $1,000,000 for each loss
directly to the Administrative Agent. The Administrative Agent shall hold all
such proceeds for the account of the Pledgor. So long as no Event of Default
has occurred and is continuing, and subject to Section 2.6(g) of the Credit
Agreement, the Administrative Agent shall, at the Pledgor's request, disburse
such proceeds as payment for the purpose of replacing or repairing destroyed or
damaged assets, as and when required to be paid and upon presentation of
evidence satisfactory to the Administrative Agent of such required payments and
such other documents as the Administrative Agent may reasonably request. As and
to the extent required by Section 2.6(g) of the Credit Agreement, and in any
event upon and during the continuance of an Event of Default, the Administrative
Agent shall be entitled to receive all proceeds of property and casualty
insurance directly from the insurers and shall apply such proceeds as a
prepayment of the Term Loans in the order and manner provided in the Credit
Agreement. The Pledgor hereby irrevocably makes, constitutes and appoints the
Administrative Agent at all times during the continuance of an Event of Default,
its true and lawful attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of insurance, endorsing its
name on any check, draft, instrument or other item or payment for the proceeds
of such policies of insurance and for making all determinations and decisions
with respect to such policies of insurance.
(c) If the Pledgor fails to, or to cause any of its Subsidiaries to,
obtain and maintain any of the policies of insurance required to be maintained
hereunder or to pay any premium in whole or in part, the Administrative Agent
may, without waiving or releasing any obligation or Default, at the Pledgor'
expense, but without any obligation to do so, procure such policies or pay such
premiums. All sums so disbursed by the Administrative Agent, including
reasonable attorneys' fees, court costs, expenses and other charges related
thereto, shall be payable by the Pledgor to the Administrative Agent on demand
and shall be additional Obligations hereunder, secured by the Collateral.
(d) The Pledgor will, and will cause each of its Subsidiaries to, deliver
to the Administrative Agent, promptly as rendered, true copies of all material
claims and reports made in any reporting forms to insurance companies. Not less
than 30 days prior to the expiration date of the insurance policies required to
be maintained by the Pledgor and its Subsidiaries hereunder, the Pledgor will,
and will cause each of its Subsidiaries to, deliver to the Administrative Agent
one or more certificates of insurance evidencing renewal of the insurance
coverage required hereunder plus such other evidence of payment of premiums
therefor as the Administrative Agent may request. Upon the reasonable request of
the Administrative Agent from time to time, the Pledgor will, and will cause
each of its Subsidiaries to, deliver to the Administrative Agent evidence that
the insurance required to be maintained pursuant to this Section is in effect.
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4.10 Intellectual Property. (a) The Pledgor will, at its own expense,
---------------------
execute, deliver and record, as promptly as possible (but in any event within 10
days) after the date hereof fully completed assignments in the forms of Exhibits
--------
B and C, as applicable, in the U.S. Copyright Office or the U.S. Patent and
- - -
Trademark Office pursuant to 35 U.S.C. (S)261, 15 U.S.C. (S)1060 or 17 U.S.C.
(S)205, as applicable, with regard to any Copyright Collateral, Patent
Collateral or Trademark Collateral, as the case may be, described in Annex E, F
------- -
or G hereto. In the event that after the date hereof the Pledgor shall acquire
-
any registered Copyright, Patent or Trademark, or effect any registration of any
Copyright, Patent or Trademark or file any application for registration thereof,
whether within the United States or any other country or jurisdiction, the
Pledgor shall promptly furnish written notice thereof to the Administrative
Agent together with information sufficient to permit the Administrative Agent,
upon its receipt of such notice, to (and the Pledgor hereby authorizes the
Administrative Agent to) modify this Agreement, as appropriate, by amending
Annexes E, F and G hereto or to add additional exhibits hereto to include any
- --------- - -
Copyright, Patent or Trademark that becomes part of the Collateral under this
Agreement, and the Pledgor shall additionally, at its own expense, execute,
deliver and record, as promptly as possible (but in any event within 10 days)
after the date of such acquisition, registration or application, as applicable,
with regard to United States Patents, Trademarks and Copyrights, fully completed
assignments in the forms of Exhibits B and C, as applicable, in the U.S.
---------- -
Copyright Office or the U.S. Patent and Trademark Office as more fully described
hereinabove (provided that, notwithstanding the foregoing, the Pledgor may at
--------
its election furnish such notices and execute, deliver and record such documents
and instruments on a quarterly basis with respect to all Copyrights, Patents and
Trademarks that become part of the Collateral during such quarter), together in
all instances with any other agreements, instruments and documents that the
Administrative Agent may reasonably request from time to time to further effect
and confirm the assignment and security interest created by this Agreement in
such Copyrights, Patents and Trademarks, and the Pledgor hereby appoints the
Administrative Agent its attorney-in-fact to execute, deliver and record any and
all such agreements, instruments and documents for the foregoing purposes, all
acts of such attorney being hereby ratified and confirmed and such power, being
coupled with an interest, shall be irrevocable for so long as this Agreement
shall be in effect with respect to the Pledgor (except that compliance with this
subsection shall not be required with respect to any Copyright, Patent or
Trademark that the Pledgor has elected to abandon).
(b) The Pledgor (either itself or through its licensees or its
sublicensees) will, for each material Trademark used in the conduct of its
business, use its best efforts to (i) maintain such Trademark in full force and
effect, free from any claim of abandonment or invalidity for non-use, (ii)
maintain the quality of products and services offered under such Trademark,
(iii) display such Trademark with notice of federal registration to the extent
required by applicable law and (iv) not knowingly use or knowingly permit the
use of such Trademark in violation of any third-party rights.
(c) The Pledgor (either itself or through its licensees or sublicensees)
will refrain from committing any act, or omitting any act, whereby any material
Patent used in the conduct of the Pledgor's business may become invalidated or
dedicated to the public, and shall continue to mark any products covered by a
material Patent with the relevant patent number as required by applicable patent
laws.
(d) The Pledgor (either itself or through its licensees or sublicensees)
will, for each work covered by a material Copyright, continue to publish,
reproduce, display, adopt and distribute the work with appropriate copyright
notice as required under applicable copyright laws.
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<PAGE>
(e) The Pledgor shall notify the Administrative Agent immediately if it
knows or has reason to know that any material Patent, Trademark or Copyright
used in the conduct of its business may become abandoned or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the U.S. Patent and Trademark Office, U.S. Copyright Office or any court)
regarding the Pledgor's ownership of any material Patent, Trademark or
Copyright, its right to register the same, or to keep and maintain the same.
(f) The Pledgor will take all necessary steps that are consistent with the
practice in any proceeding before the U.S. Patent and Trademark Office, U.S.
Copyright Office or any office or agency in any political subdivision of the
United States or in any other country or any political subdivision thereof, to
maintain and pursue each application relating to any material Patents,
Trademarks or Copyrights (and to obtain the relevant grant or registration) and
to maintain each registration of any material Patents, Trademarks and Copyrights
used in the conduct of the Pledgor's business, including the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
maintenance fees, and, if consistent with sound business judgment, to initiate
opposition, interference and cancellation proceedings against third parties.
(g) In the event that any Collateral consisting of a material Patent,
Trademark or Copyright used in the conduct of the Pledgor's business is believed
infringed, misappropriated or diluted by a third party, the Pledgor shall notify
the Administrative Agent promptly after it learns thereof and shall, if
consistent with sound business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.
(h) Upon the occurrence and during the continuance of any Event of
Default, the Pledgor shall use its reasonable best efforts to obtain all
requisite consents or approvals from the licensor of each material License
included within the Copyright Collateral, Patent Collateral or Trademark
Collateral to effect the assignment of all of the Pledgor's right, title and
interest thereunder to the Administrative Agent or its designee.
4.11 Mobile Goods. Upon the request of the Administrative Agent at any
------------
time (and promptly upon the occurrence of any Event of Default), the Pledgor
will deliver to the Administrative Agent originals of the certificates of title
or ownership for all Mobile Goods owned by it, together (in the case of motor
vehicles) with the manufacturer's statement of origin with the Administrative
Agent listed as lienholder and odometer statements and together in all other
cases with appropriate instruments or certificates of transfer and delivery,
duly completed and executed, and will take such other action as the
Administrative Agent may deem necessary to perfect the security interest created
by this Agreement in all such Mobile Goods.
4.12 Delivery of Collateral. All certificates or instruments representing
----------------------
or evidencing any Accounts, Intercompany Obligations or other Collateral (other
than checks or drafts, except during the continuance of an Event of Default)
shall be delivered to and held by or on behalf of the Administrative Agent
pursuant hereto, shall be in form suitable for transfer by delivery and shall be
delivered together with undated stock powers duly executed in blank, appropriate
endorsements or other necessary instruments of registration, transfer or
assignment, duly executed and in form and
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substance satisfactory to the Administrative Agent, and in each case such other
instruments or documents as the Administrative Agent may reasonably request.
4.13 Protection of Security Interest. The Pledgor agrees that it will, at
-------------------------------
its own cost and expense, take any and all actions necessary to warrant and
defend the right, title and interest of the Secured Parties in and to the
Collateral against the claims and demands of all other Persons.
ARTICLE V
CERTAIN PROVISIONS RELATING TO INVESTMENTS
5.1 Ownership; After-Acquired Investments. (a) If the Pledgor shall, at
-------------------------------------
any time and from time to time after the date hereof, acquire any additional
capital stock or other equity interests in any Person of the types described in
the definition of the terms "Stock" or "Interests," the same shall be
automatically deemed to be Stock or Interests, as the case may be, and to be
pledged to the Administrative Agent pursuant to SECTION 2.1 (but subject, in the
case of Foreign Subsidiaries, to the provisions of SECTION 6.10 of the Credit
Agreement), and the Pledgor will forthwith pledge and deposit the same with the
Administrative Agent and deliver to the Administrative Agent any certificates or
instruments therefor, together with the endorsement of the Pledgor (in the case
of any promissory notes or other instruments), undated stock powers (in the case
of Stock evidenced by certificates) or other necessary instruments of transfer
or assignment, duly executed in blank and in form and substance satisfactory to
the Administrative Agent, together with such other certificates and instruments
as the Administrative Agent may reasonably request (including Uniform Commercial
Code financing statements or appropriate amendments thereto), and will promptly
thereafter deliver to the Administrative Agent a fully completed and duly
executed amendment to this Agreement in the form of Exhibit A (each, a "Pledge
---------
Amendment") in respect thereof. The Pledgor hereby authorizes the
Administrative Agent to attach each Pledge Amendment to this Agreement, and
agrees that all such Collateral listed on any Pledge Amendment shall for all
purposes be deemed Collateral hereunder and shall be subject to the provisions
hereof; provided that the failure of the Pledgor to execute and deliver any
--------
Pledge Amendment with respect to any such additional Collateral as required
hereinabove shall not impair the security interest of the Administrative Agent
in such Collateral or otherwise adversely affect the rights and remedies of the
Administrative Agent hereunder with respect thereto.
(b) If any Investments (whether now owned or hereafter acquired) included
in the Collateral are "uncertificated securities" within the meaning of the
applicable Uniform Commercial Code or are otherwise not evidenced by any
certificate or instrument, the Pledgor will promptly notify the Administrative
Agent thereof and will promptly take and cause to be taken all actions required
under applicable law, including, as applicable, under Article 8 or 9 of the
applicable Uniform Commercial Code, to perfect the security interest of the
Administrative Agent therein.
5.2 Voting Rights. So long as no Event of Default shall have occurred and
-------------
be continuing, the Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Investments (subject to its obligations
under SECTION 5.1), and for that purpose the Administrative Agent will execute
and deliver or cause to be executed and delivered to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably request in writing
to enable the Pledgor to exercise such voting and other consensual rights;
provided, however, that the Pledgor will not cast
- -------- -------
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<PAGE>
any vote, give any consent, waiver or ratification, or take or fail to take any
action, in any manner that would, or could reasonably be expected to, violate or
be inconsistent with any of the terms of this Agreement, the Credit Agreement or
any other Credit Document, or have the effect of impairing in any material
respect the position or interests of the Administrative Agent or any other
Secured Party.
5.3 Dividends and Other Distributions. So long as no Event of Default
---------------------------------
shall have occurred and be continuing (or would occur as a result thereof), and
except as provided otherwise herein, all interest, income, dividends,
distributions and other amounts payable in cash in respect of the Investments
may be paid to and retained by the Pledgor; provided, however, that all such
-------- -------
interest, dividends, distributions and other amounts shall, at all times after
the occurrence and during the continuance of an Event of Default, be paid to the
Administrative Agent and retained by it as part of the Collateral (except to the
extent applied upon receipt to the repayment of the Obligations). The
Administrative Agent shall also be entitled at all times (whether or not during
the continuance of an Event of Default) to receive directly, and to retain as
part of the Collateral, (i) all interest, income, dividends, distributions or
other amounts paid or payable in cash or other property in respect of any
Investments included in the Collateral in connection with the dissolution,
liquidation, recapitalization or reclassification of the capital of the
applicable issuer to the extent representing (in the reasonable judgment of the
Administrative Agent) an extraordinary, liquidating or other distribution in
return of capital, (ii) all additional membership interests, warrants, options
or other securities or property (other than cash) paid or payable or distributed
or distributable in respect of any Investments included in the Collateral in
connection with any noncash dividend, distribution, return of capital, spin-off,
stock split, split-up, reclassification, combination of shares or interests or
similar rearrangement, and (iii) without affecting any restrictions against such
actions contained in the Credit Agreement, all additional membership interests,
warrants, options or other securities or property (including cash) paid or
payable or distributed or distributable in respect of any Investments included
in the Collateral in connection with any consolidation, merger, exchange of
securities, liquidation or other reorganization. All interest, income,
dividends, distributions or other amounts that are received by the Pledgor in
violation of the provisions of this Section shall be received in trust for the
benefit of the Administrative Agent, shall be segregated from other property or
funds of the Pledgor and shall be forthwith delivered to the Administrative
Agent as Collateral in the same form as so received (with any necessary
endorsements).
ARTICLE VI
REMEDIES
6.1 Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Administrative Agent shall be entitled to exercise in respect of
the Collateral all of its rights, powers and remedies provided for herein or
otherwise available to it under any other Credit Document, by law, in equity or
otherwise, including all rights and remedies of a secured party under the
Uniform Commercial Code as in effect in each relevant jurisdiction, and shall be
entitled in particular, but without limitation of the foregoing, to exercise the
following rights, which the Pledgor agrees to be commercially reasonable:
(a) To notify any or all account debtors or obligors under any Accounts,
Contracts or other Collateral of the security interest in favor of the
Administrative Agent created hereby and to direct all such Persons to make
payments of all amounts due thereon or thereunder directly to the
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<PAGE>
Administrative Agent or to an account designated by the Administrative Agent;
and in such instance and from and after such notice, all amounts and Proceeds
(including wire transfers, checks and other instruments) received by the Pledgor
in respect of any Accounts or other Collateral shall be received in trust for
the benefit of the Administrative Agent hereunder, shall be segregated from the
other funds of the Pledgor and shall be forthwith deposited into such account or
paid over or delivered to the Administrative Agent in the same form as so
received (with any necessary endorsements or assignments), to be held as
Collateral and applied to the Obligations as provided herein; and by this
provision, the Pledgor irrevocably authorizes and directs each Person who is or
shall be a party to or liable for the performance of any Contract, upon receipt
of notice from the Administrative Agent to the effect that an Event of Default
has occurred and is continuing, to attorn to or otherwise recognize the
Administrative Agent as owner under such Contract and to pay, observe and
otherwise perform the obligations under such Contract to or for the
Administrative Agent or the Administrative Agent's designee as though the
Administrative Agent or such designee were the Pledgor named therein, and to do
so until otherwise notified by the Administrative Agent;
(b) To take possession of, receive, endorse, assign and deliver, in its own
name or in the name of the Pledgor, all checks, notes, drafts and other
instruments relating to any Collateral, including receiving, opening and
properly disposing of all mail addressed to the Pledgor concerning Accounts and
other Collateral; to verify with account debtors or other contract parties the
validity, amount or any other matter relating to any Accounts or other
Collateral, in its own name or in the name of the Pledgor; to accelerate any
indebtedness or other obligation constituting Collateral that may be accelerated
in accordance with its terms; to take or bring all actions and suits deemed
necessary or appropriate to effect collections and to enforce payment of any
Accounts or other Collateral; to settle, compromise or release in whole or in
part any amounts owing on Accounts or other Collateral; and to extend the time
of payment of any and all Accounts or other amounts owing under any Collateral
and to make allowances and adjustments with respect thereto, all in the same
manner and to the same extent as the Pledgor might have done;
(c) To notify any or all depository institutions with which any Deposit
Accounts are maintained to remit and transfer all monies, securities and other
property on deposit in such Deposit Accounts or deposited or received for
deposit thereafter to the Administrative Agent, for deposit in a Collateral
Account or such other accounts as may be designated by the Administrative Agent,
for application to the Obligations as provided herein;
(d) To transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to the
Pledgor and with or without disclosing that such Collateral is subject to the
security interest created hereunder;
(e) To assign any Copyright Collateral, Patent Collateral or Trademark
Collateral, for such term or terms, on such conditions and in such manner as the
Administrative Agent shall determine; and to license and (to the extent
permitted by applicable law) sublicense, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any Copyright Collateral,
Patent Collateral or Trademark Collateral, throughout the world, for such term
or terms, on such conditions and in such manner as the Administrative Agent
shall determine;
(f) To require the Pledgor to, and the Pledgor hereby agrees that it will
at its expense and upon request of the Administrative Agent forthwith, assemble
all or any part of the Collateral as
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directed by the Administrative Agent and make it available to the Administrative
Agent at a place designated by the Administrative Agent;
(g) To enter and remain upon the premises of any of the Pledgor and take
possession of all or any part of the Collateral, with or without judicial
process; to use the materials, services, books and records of the Pledgor for
the purpose of liquidating or collecting the Collateral, whether by foreclosure,
auction or otherwise; and to remove the same to the premises of the
Administrative Agent or any designated agent for such time as the Administrative
Agent may desire, in order to effectively collect or liquidate the Collateral;
(h) To exercise (i) all voting, consensual and other rights and powers
pertaining to the Investments (whether or not transferred into the name of the
Administrative Agent), at any meeting of shareholders, partners, members or
otherwise, and (ii) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Investments as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Investments upon the merger,
consolidation, reorganization, reclassification, combination of shares or
interests, similar rearrangement or other similar fundamental change in the
structure of the applicable issuer, or upon the exercise by the Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
Investments, and in connection therewith, the right to deposit and deliver any
and all of the Investments with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may determine, and give all consents, waivers and
ratifications in respect of the Investments, all without liability except to
account for any property actually received by it, but the Administrative Agent
shall have no duty to exercise any such right, privilege or option or give any
such consent, waiver or ratification and shall not be responsible for any
failure to do so or delay in so doing; and for the foregoing purposes the
Pledgor will promptly execute and deliver or cause to be executed and delivered
to the Administrative Agent, upon request, all such proxies and other
instruments as the Administrative Agent may reasonably request to enable the
Administrative Agent to exercise such rights and powers; AND IN FURTHERANCE OF
THE FOREGOING AND WITHOUT LIMITATION THEREOF, THE PLEDGOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE ADMINISTRATIVE AGENT AS THE TRUE AND LAWFUL PROXY
AND ATTORNEY-IN-FACT OF THE PLEDGOR, WITH FULL POWER OF SUBSTITUTION IN THE
PREMISES, TO EXERCISE ALL SUCH VOTING, CONSENSUAL AND OTHER RIGHTS AND POWERS TO
WHICH ANY HOLDER OF ANY INVESTMENTS WOULD BE ENTITLED BY VIRTUE OF HOLDING THE
SAME, WHICH PROXY AND POWER OF ATTORNEY, BEING COUPLED WITH AN INTEREST, IS
IRREVOCABLE AND SHALL BE EFFECTIVE FOR SO LONG AS THIS AGREEMENT SHALL BE IN
EFFECT; and
(i) To sell, resell, assign and deliver, in its sole discretion, all or
any of the Collateral, in one or more parcels, on any securities exchange on
which any Investments may be listed, at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, upon credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as the Administrative Agent may deem satisfactory. If any of the
Collateral is sold by the Administrative Agent upon credit or for future
delivery, the Administrative Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Administrative Agent may resell such Collateral. In no event shall the
Pledgor be credited with any part of the Proceeds of sale of any Collateral
until and to the extent cash payment in respect thereof has actually been
received by the Administrative Agent. Each purchaser at any such sale shall hold
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the property sold absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Pledgor, and the Pledgor
hereby expressly waives all rights of redemption, stay or appraisal, and all
rights to require the Administrative Agent to marshal any assets in favor of the
Pledgor or any other party or against or in payment of any or all of the
Obligations, that it has or may have under any rule of law or statute now
existing or hereafter adopted. No demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law, as referred to below),
all of which are hereby expressly waived by the Pledgor, shall be required in
connection with any sale or other disposition of any part of the Collateral. If
any notice of a proposed sale or other disposition of any part of the Collateral
shall be required under applicable law, the Administrative Agent shall give the
Pledgor at least ten (10) days' prior notice of the time and place of any public
sale and of the time after which any private sale or other disposition is to be
made, which notice the Pledgor agrees is commercially reasonable. The
Administrative Agent shall not be obligated to make any sale of Collateral if it
shall determine not to do so, regardless of the fact that notice of sale may
have been given. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. Upon each public sale and, to the extent permitted by applicable law,
upon each private sale, the Administrative Agent may purchase all or any of the
Collateral being sold, free from any equity, right of redemption or other claim
or demand, and may make payment therefor by endorsement and application (without
recourse) of the Obligations in lieu of cash as a credit on account of the
purchase price for such Collateral.
6.2 Application of Proceeds. (a) All Proceeds collected by the
-----------------------
Administrative Agent upon any sale, other disposition of or realization upon any
of the Collateral, together with all other moneys received by the Administrative
Agent hereunder, shall be applied as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, all amounts advanced by the Administrative Agent
for the account of the Pledgor, and all other amounts payable to the
Administrative Agent under SECTION 8.1;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Obligations owing to
the Secured Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Pledgor or any other Person lawfully entitled to receive
such surplus.
(b) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Secured Party that has
entered into an Interest Rate Protection Agreement with the Pledgor for a
determination (which such Secured Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding
Obligations owed to such Secured Party under any such Interest Rate Protection
Agreement. Unless it has actual knowledge (including by way of written notice
from any such Secured Party) to the contrary, the Administrative Agent, in
acting hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Obligations in respect thereof are in existence between any
Secured Party and the Pledgor.
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(c) The Pledgor shall remain liable to the extent of any deficiency
between the amount of all Proceeds realized upon sale or other disposition of
the Collateral pursuant to this Agreement and the aggregate amount of the sums
referred to in clauses (i) and (ii) of subsection (a) above. Upon any sale of
any Collateral hereunder by the Administrative Agent (whether by virtue of the
power of sale herein granted, pursuant to judicial proceeding, or otherwise),
the receipt of the Administrative Agent or the officer making the sale shall be
a sufficient discharge to the purchaser or purchasers of the Collateral so sold,
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Administrative
Agent or such officer or be answerable in any way for the misapplication
thereof.
6.3 Collateral Accounts. Upon the occurrence and during the continuance
-------------------
of an Event of Default, the Administrative Agent shall have the right to cause
to be established and maintained, at its principal office or such other location
or locations as it may establish from time to time in its discretion, one or
more cash collateral bank accounts (collectively, "Collateral Accounts") for the
collection of Proceeds of the Collateral. Such Proceeds, when deposited, shall
continue to constitute Collateral for the Obligations and shall not constitute
payment thereof until applied as herein provided. The Administrative Agent
shall have sole dominion and control over all funds deposited in any Collateral
Account, and such funds may be withdrawn therefrom only by the Administrative
Agent. Upon the occurrence and during the continuance of an Event of Default,
the Administrative Agent shall have the right to (and, if directed by the
Required Lenders pursuant to the Credit Agreement, shall) apply amounts held in
the Collateral Accounts in payment of the Obligations in the manner provided for
in SECTION 6.2.
6.4 Grant of License. For the purpose of enabling the Administrative
----------------
Agent to exercise rights and remedies under SECTION 6.1 at such time as the
Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, the Pledgor hereby grants to the Administrative Agent an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to the Pledgor) to use, license or sublicense any Patent
Collateral, Trademark Collateral or Copyright Collateral now owned or licensed
or hereafter acquired or licensed by the Pledgor, and wherever the same may be
located, and including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of such
license or sublicense by the Administrative Agent shall be exercised, at the
option of the Administrative Agent, only upon the occurrence and during the
continuation of an Event of Default; provided that any license, sublicense or
--------
other transaction entered into by the Administrative Agent in accordance
herewith shall be binding upon the Pledgor notwithstanding any subsequent cure
of an Event of Default.
6.5 Registration; Private Sales. (a) If, at any time after the
---------------------------
occurrence and during the continuance of an Event of Default, the Pledgor shall
have received from the Administrative Agent a written request or requests that
the Pledgor cause any registration, qualification or compliance under any
federal or state securities law or laws to be effected with respect to all or
any part of the Investments, the Pledgor will, as soon as practicable and at its
expense, use its best efforts to cause such registration to be effected and be
kept effective and will use its best efforts to cause such qualification and
compliance to be effected and be kept effective as may be so requested and as
would permit or facilitate the sale and distribution of such Investments,
including, without limitation, registration under the Securities Act of 1933, as
amended (the "Securities Act"), appropriate qualifications under applicable blue
sky or other state securities laws and appropriate compliance with any other
applicable requirements of Governmental Authorities; provided, that the
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Administrative
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Agent shall furnish to the Pledgor such information regarding the Administrative
Agent as the Pledgor may reasonably request in writing and as shall be required
in connection with any such registration, qualification or compliance. The
Pledgor will cause the Administrative Agent to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Administrative
Agent such number of prospectuses, offering circulars or other documents
incident thereto as the Administrative Agent from time to time may reasonably
request, and will indemnify the Administrative Agent and all others
participating in the distribution of such Pledged Securities against all claims,
losses, damages and liabilities caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to the Pledgor by the Administrative Agent or
any other Secured Party expressly for use therein.
(b) The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws as in
effect from time to time, the Administrative Agent may be compelled, with
respect to any sale of all or any part of the Investments conducted without
registration or qualification under the Securities Act and such state securities
laws, to limit purchasers to any one or more Persons who will represent and
agree, among other things, to acquire such Investments for their own account,
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges that any such private sales may be made in such manner and
under such circumstances as the Administrative Agent may deem necessary or
advisable in its sole and absolute discretion, including at prices and on terms
less favorable than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and agrees that the Administrative
Agent shall have no obligation to conduct any public sales and no obligation to
delay the sale of any Investments for the period of time necessary to permit its
registration for public sale under the Securities Act and applicable state
securities laws, and shall not have any responsibility or liability as a result
of its election so not to conduct any such public sales or delay the sale of any
Investments, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after such registration. The
Pledgor hereby waives any claims against the Administrative Agent or any Secured
Party arising by reason of the fact that the price at which any Investments may
have been sold at any private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Administrative Agent accepts the first offer received
and does not offer such Investments to more than one offeree.
(c) The Pledgor agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgor.
6.6 The Pledgor Remains Liable. Notwithstanding anything herein to the
--------------------------
contrary, (i) the Pledgor shall remain liable under all Contracts included
within the Collateral (including, without
<PAGE>
limitation, all Investment Agreements) to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Administrative Agent of any of its rights or remedies
hereunder shall not release the Pledgor from any of its obligations under any of
such Contracts, and (iii) except as specifically provided for hereinbelow, the
Administrative Agent shall not have any obligation or liability by reason of
this Agreement under any of such Contracts, nor shall the Administrative Agent
be obligated to perform any of the obligations or duties of the Pledgor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder. This Agreement shall not in any way be deemed to obligate
the Administrative Agent, any other Secured Party or any purchaser at a
foreclosure sale under this Agreement to assume any of the Pledgor's
obligations, duties or liabilities under any Investment Agreement, including,
without limitation, the Pledgor's obligations, if any, to manage the business
and affairs of the applicable partnership, joint venture, limited liability
company or other issuer (collectively, the "Partner Obligations"), unless the
Administrative Agent or such other Secured Party or purchaser otherwise agrees
in writing to assume any or all of such Partner Obligations. In the event of
foreclosure by the Administrative Agent hereunder, then except as provided in
the preceding sentence, the Pledgor shall remain bound and obligated to perform
its Partner Obligations and neither the Administrative Agent nor any other
Secured Party shall be deemed to have assumed any Partner Obligations. In the
event the Administrative Agent, any other Secured Party or any purchaser at a
foreclosure sale elects to become a substitute member in place of the Pledgor,
the party making such election shall adopt in writing such Investment Agreement
and agree to be bound by the terms and provisions thereof; and subject to the
execution of such written agreement, the Pledgor hereby irrevocably consents in
advance to the admission of the Administrative Agent, any other Secured Party or
any such purchaser as a substitute member to the extent of the Investments
acquired pursuant to such sale, and agrees to execute any documents or
instruments and take any other action as may be necessary or as may be
reasonably requested in connection therewith. The powers, rights and remedies
conferred on the Administrative Agent hereunder are solely to protect its
interest and privilege in such Contracts, as Collateral, and shall not impose
any duty upon it to exercise any such powers, rights or remedies.
ARTICLE VII
THE ADMINISTRATIVE AGENT
7.1 The Administrative Agent; Standard of Care. The Administrative Agent
------------------------------------------
will hold all items of the Collateral at any time received under this Agreement
in accordance with the provisions hereof. The obligations of the Administrative
Agent as holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement and the other Credit
Documents, are only those expressly set forth in this Agreement and the other
Credit Documents. The Administrative Agent shall act hereunder at the direction,
or with the consent, of the Required Lenders on the terms and conditions set
forth in the Credit Agreement. The powers conferred on the Administrative Agent
hereunder are solely to protect its interest, on behalf of the Secured Parties,
in the Collateral, and shall not impose any duty upon it to exercise any such
powers. Except for treatment of the Collateral in its possession in a manner
substantially equivalent to that which the Administrative Agent, in its
individual capacity, accords its own property of a similar nature, and the
accounting for moneys actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to the Collateral. Neither the Administrative Agent nor any other
Secured Party shall be liable to the Pledgor (i) for any loss or damage
sustained by the Pledgor, or
-23-
<PAGE>
(ii) for any loss, damage, depreciation or other diminution in the value of any
of the Collateral that may occur as a result of or in connection with or that is
in any way related to any exercise by the Administrative Agent or any other
Secured Party of any right or remedy under this Agreement, any failure to
demand, collect or realize upon any of the Collateral or any delay in doing so,
or any other act or failure to act on the part of the Administrative Agent or
any other Secured Party, except to the extent that the same is caused by its own
gross negligence or willful misconduct.
7.2 Further Assurances; Attorney-in-Fact. (a) The Pledgor agrees that it
------------------------------------
will join with the Administrative Agent to execute and, at its own expense, file
and refile under any applicable Uniform Commercial Code such financing
statements, continuation statements and other documents and instruments in such
offices as the Administrative Agent may reasonably deem necessary or
appropriate, and wherever required or permitted by law, in order to perfect and
preserve the Administrative Agent's security interest in the Collateral, and
hereby authorizes the Administrative Agent to file financing statements and
amendments thereto relating to all or any part of the Collateral without the
signature of the Pledgor where permitted by law, and agrees to do such further
acts and things (including, without limitation, making any notice filings with
state tax or revenue authorities required to be made by account creditors in
order to enforce any Accounts in such state) and to execute and deliver to the
Administrative Agent such additional conveyances, assignments, agreements and
instruments as the Administrative Agent may reasonably require or deem advisable
to perfect, establish, confirm and maintain the security interest and Lien
provided for herein, to carry out the purposes of this Agreement or to further
assure and confirm unto the Administrative Agent its rights, powers and remedies
hereunder.
(b) The Pledgor hereby irrevocably appoints the Administrative Agent its
lawful attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor, the Administrative Agent or otherwise,
and with full power of substitution in the premises (which power of attorney,
being coupled with an interest, is irrevocable for so long as this Agreement
shall be in effect), from time to time in the Administrative Agent's discretion
after the occurrence and during the continuance of an Event of Default to take
any action and to execute any instruments that the Administrative Agent may deem
necessary or advisable to accomplish the purpose of this Agreement, including,
without limitation:
(i) to sign the name of the Pledgor on any financing statement,
continuation statement, notice or other similar document that, in the
Administrative Agent's opinion, should be made or filed in order to perfect
or continue perfected the security interest granted under this Agreement
(including, without limitation, any title or ownership applications for
filing with applicable state agencies to enable any motor vehicles now or
hereafter owned by the Company to be retitled and the Administrative Agent
listed as lienholder thereon);
(ii) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(iii) to receive, endorse and collect any checks, drafts,
instruments, chattel paper and other orders for the payment of money made
payable to the Pledgor representing any interest, income, dividend,
distribution or other amount payable in respect of any of the Collateral
and to give full discharge for the same;
-24-
<PAGE>
(iv) to obtain, maintain and adjust any property or casualty
insurance required to be maintained by the Pledgor under SECTION 4.9 and
direct the payment of proceeds thereof to the Administrative Agent;
(v) to pay or discharge taxes, Liens or other encumbrances levied
or placed on or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
the Administrative Agent in its sole discretion, any such payments made by
the Administrative Agent to become Obligations of the Pledgor to the
Administrative Agent, due and payable immediately and without demand;
(vi) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or advisable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral;
and
(vii) to use, sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with any and all of the Collateral as
fully and completely as though the Administrative Agent were the absolute
owner of the Collateral for all purposes, and to do from time to time, at
the Administrative Agent's option and the Pledgors' expense, all other acts
and things deemed necessary by the Administrative Agent to protect,
preserve or realize upon the Collateral and to more completely carry out
the purposes of this Agreement.
(c) If the Pledgor fails to perform any covenant or agreement contained in
this Agreement after written request to do so by the Administrative Agent
(provided that no such request shall be necessary at any time after the
--------
occurrence and during the continuance of an Event of Default), the
Administrative Agent may itself perform, or cause the performance of, such
covenant or agreement and may take any other action that it deems necessary and
appropriate for the maintenance and preservation of the Collateral or its
security interest therein, and the reasonable expenses so incurred in connection
therewith shall be payable by the Pledgor under SECTION 8.1.
ARTICLE VII
MISCELLANEOUS
8.1 Indemnity and Expenses. The Pledgor agrees:
----------------------
(a) To indemnify and hold harmless the Administrative Agent, each other
Secured Party and each of their respective directors, officers, employees,
agents and affiliates from and against any and all claims, damages, demands,
losses, obligations, judgments and liabilities (including, without limitation,
reasonable attorneys' fees and expenses) in any way arising out of or in
connection with this Agreement and the transactions contemplated hereby, except
to the extent the same shall arise as a result of the gross negligence or
willful misconduct of the party seeking to be indemnified; and
(b) To pay and reimburse the Administrative Agent upon demand for all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) that the Administrative Agent may incur in
connection with (i) the custody, use or preservation of, or the sale of,
collection from or other realization upon, any of the Collateral, including the
reasonable expenses
-25-
<PAGE>
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, (ii) the exercise or enforcement of
any rights or remedies granted hereunder (including, without limitation, under
ARTICLE VI), under any of the other Credit Documents or otherwise available to
it (whether at law, in equity or otherwise), or (iii) the failure by the Pledgor
to perform or observe any of the provisions hereof. The provisions of this
SECTION 8.1 shall survive the execution and delivery of this Agreement, the
repayment of any of the Obligations, the termination of the Commitments under
the Credit Agreement and the termination of this Agreement or any other Credit
Document.
8.2 No Waiver. The rights and remedies of the Secured Parties expressly
---------
set forth in this Agreement and the other Credit Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No failure or delay on the part of any Secured
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege or be construed to be a waiver of any Default or
Event of Default. No course of dealing between the Pledgor and the Secured
Parties or their agents or employees shall be effective to amend, modify or
discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon the Pledgor in any case shall entitle the Pledgor to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
right of any Secured Party to exercise any right or remedy or take any other or
further action in any circumstances without notice or demand.
8.3 Enforcement. By its acceptance of the benefits of this Agreement,
-----------
each Lender agrees that this Agreement may be enforced only by the
Administrative Agent, acting upon the instructions or with the consent of the
Required Lenders as provided for in the Credit Agreement, and that no Lender
shall have any right individually to enforce or seek to enforce this Agreement
or to realize upon any Collateral or other security given to secure the payment
and performance of the Obligations.
8.4 Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by the Pledgor from,
any provision of this Agreement, shall be effective unless in a writing executed
and delivered in accordance with SECTION 11.6 of the Credit Agreement, and then
the same shall be effective only in the specific instance and for the specific
purpose for which given.
8.5 Continuing Security Interest; Term; Successors and Assigns;
-----------------------------------------------------------
Assignment; Termination and Release; Survival. This Agreement shall create a
- ---------------------------------------------
continuing security interest in the Collateral and shall secure the payment and
performance of all of the Obligations as the same may arise and be outstanding
at any time and from time to time from and after the date hereof, and shall (i)
remain in full force and effect until the occurrence of (x) the payment in full
of the Obligations (other than indemnity obligations not then due and payable
and that survive termination of the Credit Documents), (y) the termination or
expiration of all Letters of Credit under the Credit Agreement and (z) the
termination of the Commitments under the Credit Agreement (the events in clauses
(x), (y) and (z) above, collectively, the "Termination Requirements"), (ii) be
binding upon and enforceable against the Pledgor and its successors and assigns
(provided, however, that the Pledgor may not sell, assign or transfer any of its
-------- -------
rights, interests, duties or obligations hereunder without the prior written
consent of the Lenders) and (iii) inure to the benefit of and be enforceable by
each Secured Party and its successors and assigns. Upon any sale or other
disposition by the Pledgor of any Collateral in a
-26-
<PAGE>
transaction expressly permitted hereunder or under or pursuant to the Credit
Agreement or any other applicable Credit Document, the Lien and security
interest created by this Agreement in and upon such Collateral shall be
automatically released, and upon the satisfaction of all of the Termination
Requirements, this Agreement and the Lien and security interest created hereby
shall terminate; and in connection with any such release or termination, the
Administrative Agent, at the request and expense of the Pledgor, will execute
and deliver to the Pledgor such documents and instruments evidencing such
release or termination as the Pledgor may reasonably request and will assign,
transfer and deliver to the Pledgor, without recourse and without representation
or warranty, such of the Collateral as may then be in the possession of the
Administrative Agent (or, in the case of any partial release of Collateral, such
of the Collateral so being released as may be in its possession). All
representations, warranties, covenants and agreements herein shall survive the
execution and delivery of this Agreement and any Pledge Amendment.
8.6 Notices. All notices and other communications provided for hereunder
-------
shall be given to the parties in the manner and subject to the other notice
provisions set forth in the Credit Agreement.
8.7 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
8.8 Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
8.9 Construction. The headings of the various sections and subsections of
------------
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular.
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ???????????????
-----------------------------
Title: Chief Executive Officer
--------------------------
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Administrative Agent
By: _______________________________
Title: ______________________________
-28-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: _____________________________
Title: __________________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Administrative Agent
By: ?????????
-----------------------------
Title: SVP
--------------------------
-29-
<PAGE>
Annex A to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
______________________________
<TABLE>
<CAPTION>
Pledged Investments
- -------------------
Percentage of
Outstanding
Type of Certificate No. of shares Interests
Name of Issuer Interests Number (if applicable) in Issuer
-------------- ---------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
</TABLE>
None.
<PAGE>
Annex B to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
______________________________
FILING LOCATIONS
Secretary of State of California
Secretary of State of Colorado
Secretary of State of Connecticut
Secretary of State of Florida
Fulton County, Georgia
Secretary of State of Illinois
Secretary of State of Michigan
Secretary of State of New Jersey
Secretary of State of New York
New York County, New York
Secretary of State of North Carolina
Secretary of State of Ohio
Secretary of State of Tennessee
Secretary of State of Texas
<PAGE>
Annex C to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
______________________________
LOCATIONS OF CHIEF EXECUTIVE OFFICE, PLACES OF BUSINESS,
RECORDS RELATING TO COLLATERAL, AND EQUIPMENT AND INVENTORY
1. Chief executive office/principal place
of business:
6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
a. 6420 Wilshire Blvd.
Los Angeles, California
b. 437 Madison Avenue
New York, New York 10022
c. 333 West Fort Street
Detroit, Michigan
d. 800 West Airport Freeway
Irving, Texas 75062
e. Union Plaza
Lakewood, Colorado
f. Corporate Center Five
Five Concourse Pkwy.
Fulton County, Georgia
g. 815 N. LaSalle Street
Chicago, Illinois
h. c/o Willis Stein & Partners, L.P.
227 West Monroe
Chicago, Illinois 60606
i. 217 Braeside Drive
Hamden, Connecticut 06514
j. 6 West Laurelwood Drive
Lawrenceville, New Jersey 08648
<PAGE>
k. 2 Sunset Court
Montville, New Jersey 07045
l. 1750 N. Mohawk
Chicago, Illinois 60614
m. 2435 Central Park
Evanston, Illinois 60201
n. 7124 W. Main
Niles, Illinois 60714
o. 2516 N.E. 37th Drive
Fort Lauderdale, Florida 33308
p. 9503 N.W. 52nd Court
Sunrise, Florida 33351
q. Post Office Box 38
Roggen, Colorado 80652
r. 206 Walnut Bend Lane
Houston, Texas 77042
3. Equipment or Inventory:
a. 6420 Wilshire Blvd.
Los Angeles, California
b. 437 Madison Avenue
New York, New York 10022
c. 333 West Fort Street
Detroit, Michigan
d. 800 West Airport Freeway
Irving, Texas 75062
e. Union Plaza
Lakewood, Colorado
f. Corporate Center Five
Five Concourse Pkwy.
Fulton County, Georgia
g. 815 N. LaSalle Street
Chicago, Illinois
h. inventory located at:
<PAGE>
World Color Press
2030 Sylvan Road
Dyersburg, Tennessee 38025
i. inventory located at:
Johnson & Hardin Company
760 Fujitech Road
Lebanon, Ohio 45036
j. inventory located at:
3-Z Printing
U.S. Route 40 West
Teutopolis, Illinois 62467
4. Other places of business:
None.
<PAGE>
Annex D to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
______________________________
CERTAIN CONTRACTS
1. License Agreement, dated as of August 15, 1996, by and between Robert
E. Petersen and Petersen Publishing Company, as licensor, and Brightview
Communications Group, Inc., as licensee.
2. Agreements, dated May 3, 1996, with World Color Press, Inc., regarding
paper purchasing program.
3. Agreement, dated December 19, 1995, with World Color Press, Inc., as
modified, regarding printing services.
4. Agreement, dated January 12, 1996, with Johnson & Hardin Company,
regarding printing services.
5. Circulation Fulfillment Agreement, dated September 1, 1995, with
Neodata Services, Inc.
6. Agreement, dated December 1981, with Compuname, Inc.
7. Distribution Agreement, dated January 10, 1994, with Warner Publisher
Services, Inc.
8. Distribution Agreement, dated October 18, 1995, with Worldwide
Distribution Services.
9. Publisher Distribution Agreement, dated May 21, 1996, with Retail
Vision.
<PAGE>
ANNEX E TO PLEDGE AND
SECURITY AGREEMENT
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, AS
ADMINISTRATIVE AGENT
PETERSEN PUBLISHING COMPANY, L.L.C.
SEPTEMBER 30, 1996
-----------------------------------
U.S. COPYRIGHT REGISTRATIONS
----------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Image magic TX15188 03/27/78
- --------------------------------------------------------------------------------
The .22 TX15189 03/15/78
- --------------------------------------------------------------------------------
Petersen Action Group street TX15190 03/15/78
machines & bracket racing:
no. 2
- --------------------------------------------------------------------------------
Creative customizing TX15191 03/15/78
- --------------------------------------------------------------------------------
Big-bore handguns TX15192 02/23/78
- --------------------------------------------------------------------------------
Petersen Action Group TX15193 02/23/78
Chevrolet
- --------------------------------------------------------------------------------
[Mini cars] TX18055 03/13/78
- --------------------------------------------------------------------------------
Mini-truck repair manual TX21709 04/03/78
- --------------------------------------------------------------------------------
[Varmints] TX35891 05/15/78
- --------------------------------------------------------------------------------
Corvette, an American TX64836 06/22/78
classic
- --------------------------------------------------------------------------------
Guns for big game TX66296 07/10/78
- --------------------------------------------------------------------------------
Increasing film speed TX72172 06/12/78
- --------------------------------------------------------------------------------
Petersen's How to build a TX72173 06/12/78
street rod
- --------------------------------------------------------------------------------
Discover yourself II TX79514 07/17/78
- --------------------------------------------------------------------------------
Motor Trend's Sports car TX84338 07/27/78
graphic
- --------------------------------------------------------------------------------
Adding storage space TX85097 07/17/78
- --------------------------------------------------------------------------------
Remodeling kitchens & baths TX85098 07/17/78
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Blueprint series: v.II TX99507 05/24/78
- --------------------------------------------------------------------------------
Deer hunting TX113120 09/20/78
- --------------------------------------------------------------------------------
Petersen's Chevrolet tune-up TX113121 09/14/78
& repair
- --------------------------------------------------------------------------------
Basic automotive tune-up & TX131091 09/14/78
test equipment
- --------------------------------------------------------------------------------
Mechanical specifications, TX144653 11/03/78
special units & ads
- --------------------------------------------------------------------------------
The Exotic world of custom TX149108 11/14/78
handguns
- --------------------------------------------------------------------------------
Sports photography TX149560 11/22/78
- --------------------------------------------------------------------------------
Honda tune-up & repair TX150333 11/13/78
- --------------------------------------------------------------------------------
A Gallery of waterfowl and TX171443 01/05/79
upland birds/paintings
- --------------------------------------------------------------------------------
Guns & ammo's Complete TX199877 01/22/79
new guide to blackpowder
- --------------------------------------------------------------------------------
`Teen great looks health & TX208097 02/05/79
beauty guide
- --------------------------------------------------------------------------------
Petersen's Ford tune-up & TX216497 03/12/79
repair: Fords, Lincolns, and
Mercury since 1970
- --------------------------------------------------------------------------------
Hunting big game TX216498 03/14/79
- --------------------------------------------------------------------------------
Petersen's Chevy/G M C TX216499 11/22/78
pickup repair
- --------------------------------------------------------------------------------
Vans: no. 7 TX223252 02/09/78
- --------------------------------------------------------------------------------
Petersen's Ford pickup repair TX233270 04/03/79
- --------------------------------------------------------------------------------
Photo retouching and TX233271 04/03/79
restoration
- --------------------------------------------------------------------------------
Hot rod magazine custom TX241958 04/27/79
painting
- --------------------------------------------------------------------------------
Modern handguns TX244308 05/14/79
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. No. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Car craft: Chevy Camaro TX258552 04/27/79
celebration!
- --------------------------------------------------------------------------------
Photographic self-assignments TX290541 07/06/79
- --------------------------------------------------------------------------------
Petersen's Toyota tune-up & TX309374 08/06/79
repair
- --------------------------------------------------------------------------------
Petersen's Datsun tune-up & TX309375 08/06/79
repair
- --------------------------------------------------------------------------------
Pinto tune-up & repair TX311435 08/09/79
- --------------------------------------------------------------------------------
Jeff Cooper on handguns TX322003 07/20/79
- --------------------------------------------------------------------------------
Hell, I was there! TX331615/1/ 09/04/79
- --------------------------------------------------------------------------------
Petersen's VW Rabbit tune- TX341456 09/28/79
up & repair
- --------------------------------------------------------------------------------
Petersen's Dodge pickup TX342696 09/28/79
repair
- --------------------------------------------------------------------------------
Petersen's How to tune your TX342697 09/28/79
car
- --------------------------------------------------------------------------------
A Complete guide to handgun TX382650 11/28/79
hunting
- --------------------------------------------------------------------------------
Planning your future TX418869 02/20/80
- --------------------------------------------------------------------------------
.22 rimfire, the world's TX455657 04/18/80
number 1 cartridge
- --------------------------------------------------------------------------------
The Paintings of Franz A. TX458192 04/18/80
Bischoff (1864-1929): a
retrospective exhibition from
March 27, through April 19,
1980
- --------------------------------------------------------------------------------
Petersen's Chevrolet high- TX461024 04/18/80
performance
- --------------------------------------------------------------------------------
The Darkroom guide TX461374 04/29/80
- --------------------------------------------------------------------------------
</TABLE>
_______________
/1/ Search results indicate this copyright registration is owned by the Company
and Elmer Keith.
3
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. No REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Guns and ammo book of the TX464246 04/28/80
.45 auto, king of handguns!
- --------------------------------------------------------------------------------
Hot rod magazine Kit car TX479564 05/22/80
annual : giant buyer's guide
- --------------------------------------------------------------------------------
Magnum handguns TX486871 05/22/80
- --------------------------------------------------------------------------------
Magnum rifles : powerhouse TX513603 07/11/80
cartridges from .22 to .460
- --------------------------------------------------------------------------------
Money-making photography TX513655 07/21/80
- --------------------------------------------------------------------------------
`Teen total fitness : good TX516243 07/21/80
looks guide
- --------------------------------------------------------------------------------
Petersen's big Book of kit TX538034 08/25/80
cars
- --------------------------------------------------------------------------------
Motor trend's Complete auto TX556977 09/29/80
guide for the `80s
- --------------------------------------------------------------------------------
Deer hunting across North TX556978 09/29/80
America
- --------------------------------------------------------------------------------
How to build a street TX557931 10/07/80
machine
- --------------------------------------------------------------------------------
Electronic flash TX566123 10/06/80
- --------------------------------------------------------------------------------
Method modeling TX566124 10/06/80
- --------------------------------------------------------------------------------
Available light TX581002 10/27/80
- --------------------------------------------------------------------------------
Rifles & cartridges for TX581003 11/17/80
North American game
- --------------------------------------------------------------------------------
Mechanical specifications TX632981 01/26/81
and postal regulations for
catalog inserts
- --------------------------------------------------------------------------------
Great looks : II : health & TX632982 02/02/81
beauty guide
- --------------------------------------------------------------------------------
The Guns & Ammo Complete TX659690 03/24/81
book of test fire
- --------------------------------------------------------------------------------
Petersen's Hot rod shop TX668632 04/02/81
series engine swapping
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- -----------------------------------------------------------------------------
<S> <C> <C>
Photo filters and lens TX668633 03/24/81
attachments
- -----------------------------------------------------------------------------
Basic automotive tune-up & TX668634 04/15/81
test equipment
- -----------------------------------------------------------------------------
Special purpose handguns TX670248 04/06/81
- -----------------------------------------------------------------------------
General Motors X-cars, TX693113 05/06/81
Citation, Omega, Phoenix,
Skylark: Petersen's tune-up
& repair
- -----------------------------------------------------------------------------
`Teen's great looks summer TX721978 06/23/81
beauty guide
- -----------------------------------------------------------------------------
Petersen's Basic bodywork & TX728458 06/24/81
painting
- -----------------------------------------------------------------------------
Gunlore, the complete TX731039 06/22/81
shooter's almanac
- -----------------------------------------------------------------------------
Hot rod magazine drag racing TX735011 06/22/81
- -----------------------------------------------------------------------------
Gun & ammo centerfire TX751440 08/05/81
revolvers
- -----------------------------------------------------------------------------
Hot rod Volkswagen classics TX752838 08/05/81
: 30 pages of outrageous
beetles!
- -----------------------------------------------------------------------------
Hot rod magazine shop series TX756275 08/31/81
- -----------------------------------------------------------------------------
Guide to camera equipment TX763355 08/31/81
- -----------------------------------------------------------------------------
Petersen's Family & home TX765063 08/28/81
protection
- -----------------------------------------------------------------------------
Deer hunting TX791126 11/04/81
- -----------------------------------------------------------------------------
Medium format photography TX801364 11/09/81
- -----------------------------------------------------------------------------
The Best of Hot rod TX801933 11/09/81
- -----------------------------------------------------------------------------
Petersen's History of drag TX806586 11/13/81
racing
- -----------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- ----------------------------------------------------------------------------
<S> <C> <C>
Western masters; a TX817452 11/31/81
comprehensive exhibition,
October 30 through
November 28, 1981
- ----------------------------------------------------------------------------
Guns & ammo : all around TX843564 01/21/82
rifles : hunting
- ----------------------------------------------------------------------------
Petersen's Action group TX889484 04/09/82
sports car classics
- ----------------------------------------------------------------------------
Guns & ammo : assault rifles TX897645 03/05/82
- ----------------------------------------------------------------------------
Guns & Ammo's Famous TX898410 03/05/81
firearms : guns that shaped
our century!
- ----------------------------------------------------------------------------
How to build an off-road TX915289 04/09/82
vehicle
- ----------------------------------------------------------------------------
Petersen's Porsche classics TX915969 05/10/82
- ----------------------------------------------------------------------------
The Guns & ammo book of TX977644 09/20/82
.22 rimfire
- ----------------------------------------------------------------------------
Petersen's Three wheeler : TX1016489 12/02/82
torture tests! : Honda,
Yamaha, Kawasaki : special
3-wheel buyers' guide!
- ----------------------------------------------------------------------------
Camaro TX1016490 12/02/82
- ----------------------------------------------------------------------------
Car Craft pro street machines TX1016491 12/02/82
- ----------------------------------------------------------------------------
Custom cars : the mild TX1016492 12/02/82
custom craze
- ----------------------------------------------------------------------------
Motorcyclist's Dirt bike TX1017771 12/02/82
guide
- ----------------------------------------------------------------------------
Petersen's Circle track TX1018075 12/02/82
- ----------------------------------------------------------------------------
Handguns for home defense TX1018077 12/02/82
- ----------------------------------------------------------------------------
Hot rod magazine drag TX1018078 12/02/82
racing : the funny car story
- ----------------------------------------------------------------------------
Petersen's Personal security TX1028538 12/02/82
- ----------------------------------------------------------------------------
`Teen modeling TX1029134 12/02/82
- ----------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Petersen's Circle track TX1100649 04/11/83
- --------------------------------------------------------------------------------
Demands attention, Motor VA136886/2/ 10/05/83
Trend
- --------------------------------------------------------------------------------
Demands attention, Motor VA141530/2/ 10/05/83
Trend
- --------------------------------------------------------------------------------
Alson S. Clark TX1318493 02/21/84
- --------------------------------------------------------------------------------
Jane Wooster Scott at TX1465291 10/09/84
Petersen Galleries 1984:
May 17 through June 9
- --------------------------------------------------------------------------------
Motor trend presents 100 TX1704430 11/21/85
years of the automobile
- --------------------------------------------------------------------------------
Petersen's The Best of Hot TX1762008 02/27/86
rod
- --------------------------------------------------------------------------------
Carroll Shelby's Racing TX1839765 06/03/86
cobra
- --------------------------------------------------------------------------------
Motor trend Dodge truckin' TX1927852 10/14/86
- --------------------------------------------------------------------------------
Chevrolet celebrating TX2009792 03/13/87
seventy-five years of
performance
- --------------------------------------------------------------------------------
Mechanical specifications-- TX2021133 10/20/86
special units & ads
- --------------------------------------------------------------------------------
Corvettes: how to buy, TX3309073 06/10/92
restore, customize
- --------------------------------------------------------------------------------
Chevrolet small-block TX3346672 07/08/92
engines
- --------------------------------------------------------------------------------
Hot rod hot Chevy: buyer's TX3416083 10/23/92
guide to performance parts
- --------------------------------------------------------------------------------
Hot rod swimsuit spectacular: TX3480989 02/18/93
the nation's top speed and
beauty combinations
- --------------------------------------------------------------------------------
</TABLE>
_______________________
/2/ Search results indicate these copyright registrations are owned by the
Company and Mirage Editions.
7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
How to build a street rod: TX3481033 02/18/93
step-by-step installation &
source guides
- --------------------------------------------------------------------------------
Petersen's Performance cars TX3506893 03/31/93
- --------------------------------------------------------------------------------
`93 new car buyer's guide TX3519007 12/21/92
- --------------------------------------------------------------------------------
Hot Rod hot customs & Rod TX3524903 04/27/93
& custom fat fender rods
- --------------------------------------------------------------------------------
The best of street machine TX3531371 04/27/93
nationals
- --------------------------------------------------------------------------------
Home defense firearms TX3558060 05/14/93
- --------------------------------------------------------------------------------
4-wheel tech tips & how-to's TX3558066 05/14/93
- --------------------------------------------------------------------------------
Hot rod Harleys: bitchin' TX3559386 07/02/93
bikes and babes
- --------------------------------------------------------------------------------
Hot rod Chevrolet small- TX3574079 06/02/93
block engines: giant parts &
accessories buyer's guide
- --------------------------------------------------------------------------------
Hot Chevys TX3587322 07/19/93
- --------------------------------------------------------------------------------
Performance cars TX3606664 08/30/93
- --------------------------------------------------------------------------------
Hot rod hot trucks: wild 08/20/93
pickup special!
- --------------------------------------------------------------------------------
Hot rod hot trucks: wild TX3632653 08/20/93
pickup special
- --------------------------------------------------------------------------------
NSRA street rod nationals, TX3648727 10/07/93
1993
- --------------------------------------------------------------------------------
Rifles and cartridges for big TX3648730 10/07/93
game
- --------------------------------------------------------------------------------
Hot rod Harleys TX3681139 12/23/93
- --------------------------------------------------------------------------------
How to build a hot rod TX3685008 12/22/93
- --------------------------------------------------------------------------------
High-tech firearms TX3688992 12/23/93
- --------------------------------------------------------------------------------
Car craft drag racing TX3746164 01/14/94
- --------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Hot rod 1994 truck shopper's TX3753076 02/14/94
guide: pickups, SUV's &
accessories
- --------------------------------------------------------------------------------
Motor trend giant buyer's TX3753077 02/14/94
guide: `94 performance cars
- --------------------------------------------------------------------------------
Engines TX3757772 04/06/94
- --------------------------------------------------------------------------------
Home Defense TX3757779 04/06/94
- --------------------------------------------------------------------------------
High-performance buyer's TX3773683 02/03/94
guide
- --------------------------------------------------------------------------------
Hot Chevys TX3773684 02/03/94
- --------------------------------------------------------------------------------
Truck & Van Buyer's Guide TX3794857 04/26/94
- --------------------------------------------------------------------------------
Motorcycle Buyer's Guide TX3794858 04/26/94
1994
- --------------------------------------------------------------------------------
How to Build Your First TX3801037 04/15/94
Race Car
- --------------------------------------------------------------------------------
Pro Baseball TX3801044 04/15/94
- --------------------------------------------------------------------------------
Performance Musclecars TX3801046 04/15/94
- --------------------------------------------------------------------------------
Fastest Street Cars in TX3801047 04/15/94
America
- --------------------------------------------------------------------------------
Motor Trend performance TX3843038 03/30/95
cars: complete `95 buyer's
guide
- --------------------------------------------------------------------------------
Petersen's Football 1994 Pro TX3844562 07/15/94
Preview
- --------------------------------------------------------------------------------
Road Tests TX3885057 07/15/94
- --------------------------------------------------------------------------------
Rod & Custom Annual TX3885059 07/15/94
- --------------------------------------------------------------------------------
Specialty Car TX3885418 07/15/96
- --------------------------------------------------------------------------------
1995 Hunting Annual TX3902025 10/07/94
- --------------------------------------------------------------------------------
Handguns for home defense TX3906265 10/07/94
- --------------------------------------------------------------------------------
How to build a budget street TX3906267 10/07/94
machine
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Hot rod Harleys pictorial TX3906268 10/07/94
- --------------------------------------------------------------------------------
`55, `56, `57 classic Chevy TX3906270 10/07/94
builders' guide
- --------------------------------------------------------------------------------
4Wheel Tech Tips & How-To's TX3906378 10/07/94
- --------------------------------------------------------------------------------
How to Build a Street Machine TX3906379 10/07/94
- --------------------------------------------------------------------------------
Shooting Tips TX3906538 10/07/94
- --------------------------------------------------------------------------------
Sport Truck - Mini Trucks TX3906542 10/07/94
- --------------------------------------------------------------------------------
1994 Rifle Shotgun Annual TX3943342 12/01/94
- --------------------------------------------------------------------------------
4Wheel & Off-Road 1994 Annual TX3943475 12/01/94
- --------------------------------------------------------------------------------
Guns & Ammo Annual TX3943905 12/01/94
- --------------------------------------------------------------------------------
New Car Buyer's Guide 1995 TX3943933 12/01/94
- --------------------------------------------------------------------------------
Photographic Buyer's Guide 1995 TX3947200 12/01/94
- --------------------------------------------------------------------------------
How to build a 4x4 : hands-on TX3985162 02/22/95
projects
- --------------------------------------------------------------------------------
Hot rod bikes pictorial TX4036632 05/31/95
- --------------------------------------------------------------------------------
Photographic-Big Book of TX4038907 08/01/95
Photography
- --------------------------------------------------------------------------------
Motor Trend Road Tests TX4053066 07/06/95
- --------------------------------------------------------------------------------
Chevy High Performance Annual TX4077034 08/01/95
- --------------------------------------------------------------------------------
Pro Football TX4093696 09/07/95
- --------------------------------------------------------------------------------
Hot Rod Bikes Pictorial TX4093717 09/07/95
- --------------------------------------------------------------------------------
Hot Rod Junior TX4093718 09/07/95
- --------------------------------------------------------------------------------
Double Action Auto TX4093722 09/07/95
- --------------------------------------------------------------------------------
4Wheel Tech Tips & How-To's TX4132945 10/12/95
- --------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Rifle & Shotgun 1995 TX4132947 10/12/95
Annual
- --------------------------------------------------------------------------------
1996 Photographic Buyer's TX4154156 12/14/95
Guide
- --------------------------------------------------------------------------------
Pro Basketball TX4154157 12/14/95
- --------------------------------------------------------------------------------
1996 Hunting Annual TX4154158 12/14/95
- --------------------------------------------------------------------------------
Pocket Pistols TX4154454 12/14/95
- --------------------------------------------------------------------------------
High Power Handguns TX4173030 12/14/95
- --------------------------------------------------------------------------------
Hot Rod-Hot tips & How TX4173032 12/14/95
To's
- --------------------------------------------------------------------------------
Hot Rod 1996 Annual TX4173033 12/14/95
- --------------------------------------------------------------------------------
Guns & Ammo 1996 Annual TX4173037 12/14/95
- --------------------------------------------------------------------------------
Motor Trend's 1996 New Car TX4176397 03/19/96
Buyer's Guide
- --------------------------------------------------------------------------------
Event Scene TX4176400 03/19/96
- --------------------------------------------------------------------------------
Dirt Rider TX4176401 03/19/96
- --------------------------------------------------------------------------------
5.0 Mustang TX4176403 03/19/96
- --------------------------------------------------------------------------------
Rod & Custom TX4176404 03/19/96
- --------------------------------------------------------------------------------
Custom Arms TX4176407 03/19/96
- --------------------------------------------------------------------------------
Custom & Classic Trucks TX4176410 03/19/96
- --------------------------------------------------------------------------------
Photographic TX4179399 04/30/96
- --------------------------------------------------------------------------------
Sassy TX4179900 04/30/96
- --------------------------------------------------------------------------------
Sport TX4179903 04/30/96
- --------------------------------------------------------------------------------
Sport Rider TX4179904 04/30/96
- --------------------------------------------------------------------------------
Sport Truck TX4179905 04/30/96
- --------------------------------------------------------------------------------
`Teen TX4179906 04/30/96
- --------------------------------------------------------------------------------
Kit Car TX4203559 03/04/96
- --------------------------------------------------------------------------------
Mustang & Fords TX4203589 03/04/96
- --------------------------------------------------------------------------------
Golfing TX4203590 03/04/96
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- ------------------------------------------------------------------------------
<S> <C> <C>
All About You TX4205056 03/19/96
- ------------------------------------------------------------------------------
Mountain Biker TX4206253 03/04/96
- ------------------------------------------------------------------------------
Chevy High Performance TX4212949 04/09/96
- ------------------------------------------------------------------------------
Hunting TX4212950 04/09/96
- ------------------------------------------------------------------------------
Drag Racing TX4212964 04/09/96
- ------------------------------------------------------------------------------
Bicycle Guide TX4214174 02/05/96
- ------------------------------------------------------------------------------
Familyphoto TX4214404 04/09/96
- ------------------------------------------------------------------------------
Complete Book of the .45 TX4214405 04/09/96
- ------------------------------------------------------------------------------
High-Tech Firearms TX4214406 04/09/96
- ------------------------------------------------------------------------------
5.0 Mustang Hop UPS TX4214407 04/09/96
- ------------------------------------------------------------------------------
Motor Trend's Performance Cars TX4214408 04/09/96
- ------------------------------------------------------------------------------
Motor Trend's Performance Cars TX4214408 04/09/96
- ------------------------------------------------------------------------------
Engines TX4214409 04/09/96
- ------------------------------------------------------------------------------
Handguns TX4214813 04/09/96
- ------------------------------------------------------------------------------
Guns & Ammo TX4214814 04/09/96
- ------------------------------------------------------------------------------
Hot Rod Bikes TX4214815 04/09/96
- ------------------------------------------------------------------------------
Motorcyclist TX4214816 04/09/96
- ------------------------------------------------------------------------------
Motor Trend TX4214817 04/09/96
- ------------------------------------------------------------------------------
4 Wheel & Off-Road TX4214818 04/09/96
- ------------------------------------------------------------------------------
Bowhunting TX4224713 04/09/96
- ------------------------------------------------------------------------------
Circle Track TX4224751 04/09/96
- ------------------------------------------------------------------------------
Car Craft TX4224752 04/09/96
- ------------------------------------------------------------------------------
Hot Rod TX4224753 04/09/96
- ------------------------------------------------------------------------------
1996 Handguns Annual TX4224754 04/09/96
- ------------------------------------------------------------------------------
Sport Truck Annual 1995 TX4226490 01/29/96
- ------------------------------------------------------------------------------
Skin Diver TX4227913 04/30/96
- ------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TITLE REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Surplus Firearms TX4230123 01/29/96
- --------------------------------------------------------------------------------
Rod & Custom 1995 Annual TX4230124 01/29/96
- --------------------------------------------------------------------------------
Motor Trend's Sport Utility TX4230125 01/29/96
Truck & Van Buyer's Guide
- --------------------------------------------------------------------------------
40th Anniversary Chevy TX4230127 01/29/96
Small-Block Engine
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Annex F to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
----------------------------------
PATENTS AND PATENT APPLICATIONS
Application or Issue or
Registration No. Country Inventor Filing Date
---------------- ------- -------- -----------
None.
<PAGE>
Annex G to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
TRADEMARKS AND TRADEMARK APPLICATIONS
I. TRADEMARKS
U.S. TRADEMARK REGISTRATIONS
----------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARK REG. NO. REG. DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
HOT ROD (Stylized Letters) 572,151 03/17/53
- --------------------------------------------------------------------------------
TRUE (Stylized Letters) 681,508 07/07/59
- --------------------------------------------------------------------------------
MISS TEENAGE AMERICA 712,636 03/14/61
- --------------------------------------------------------------------------------
TEEN (Stylized Letters) 789,364 05/11/65
- --------------------------------------------------------------------------------
MISS TEENAGE AMERICA 1,009,579 04/29/75
- --------------------------------------------------------------------------------
SPORT (Stylized Letters) 1,024,658 11/11/75
- --------------------------------------------------------------------------------
BICYCLE GUIDE/1/ 1,357,412 08/27/85
- --------------------------------------------------------------------------------
SASSY (Stylized Letters) 1,617,573 10/16/90
- --------------------------------------------------------------------------------
SASSY 1,698,439 06/30/92
- --------------------------------------------------------------------------------
SASSY 1,743,913 12/29/92
- --------------------------------------------------------------------------------
SASSY (Stylized Letters) 1,782,749 07/20/93
- --------------------------------------------------------------------------------
GREAT MODEL SEARCH 1,789,697 08/24/93
- --------------------------------------------------------------------------------
</TABLE>
__________________________
/1/ According to our search results the Company was assigned this trademark
registration from Winning International, Inc. ("WII"). Search results indicate
that an assignment from the previous owner Raben/Bicycle Guide Partners to WII
was never filed with the U.S. Patent and Trademark Office ("PTO").
<PAGE>
II. TRADEMARK APPLICATIONS
U.S. TRADEMARK APPLICATION
--------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARK SERIAL NO. FILING DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
ALL ABOUT YOU! 75/034,232 12/13/95
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit A to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
-----------------------------------
PLEDGE AMENDMENT
THIS PLEDGE AMENDMENT, dated as of _______________, 19___, is delivered by
PETERSEN PUBLISHING COMPANY, L.L.C. (the "Pledgor") pursuant to SECTION 5.1 of
the Pledge Agreement referred to hereinbelow. The Pledgor hereby agrees that
this Pledge Amendment may be attached to the Pledge and Security Agreement,
dated as of __________, 1996, made by the Pledgor in favor of First Union
National Bank of North Carolina, as Administrative Agent (as amended, modified,
supplemented or restated from time to time, the "Pledge Agreement," capitalized
terms defined therein being used herein as therein defined), and that the
Investments listed on Annex A to this Pledge Amendment shall be deemed to be
-------
part of the Investments within the meaning of the Pledge Agreement and shall
become part of the Collateral and shall secure all of the Obligations as
provided in the Pledge Agreement. This Pledge Amendment and its attachments are
hereby incorporated into the Pledge Agreement and made a part thereof.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: ___________________________
<PAGE>
Annex A to Exhibit A (Pledge
Amendment)
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
Pledged Investments
- -------------------
Percentage of
Outstanding
Type of Certificate No. of shares Interests
Name of Issuer Interests Number (if applicable) in Issuer
-------------- --------- ---------- --------------- ---------
<PAGE>
Exhibit B to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
ASSIGNMENT AND GRANT OF SECURITY INTEREST
IN COPYRIGHTS
WHEREAS, PETERSEN PUBLISHING COMPANY, L.L.C. (the "Grantor") is the owner
of the copyrights listed on Schedule A attached hereto, which copyrights are
----------
registered or have pending registrations in the United States Copyright Office
as set forth on Schedule A attached hereto (all such copyrights, registrations
----------
and applications, collectively, the "Copyrights"); and
WHEREAS, the Grantor has entered into a Pledge and Security Agreement (as
amended, modified, restated or supplemented from time to time, the "Security
Agreement"), dated as of _____________, 1996, in which the Grantor has agreed
with First Union National Bank of North Carolina, as Administrative Agent (the
"Administrative Agent"), with offices at One First Union Center, 301 South
College Street, Charlotte, North Carolina 28288-0735, to execute this
Assignment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, as security for the payment and
performance of the Obligations (as defined in the Security Agreement), the
Grantor does hereby assign and grant to the Administrative Agent a security
interest in all of its right, title and interest in and to the Copyrights, and
the use thereof, together with all proceeds and products thereof and the
goodwill of the businesses symbolized by the Copyrights. This Assignment has
been given in conjunction with the assignment and security interest granted to
the Administrative Agent under the Security Agreement, and the provisions of
this Assignment are without prejudice to and in addition to the provisions of
the Security Agreement, which are incorporated herein by this reference.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
<PAGE>
Schedule A
----------
COPYRIGHTS AND COPYRIGHT APPLICATIONS
Application or Issue or
Grantor Registration No. Country Filing Date
------- ---------------- ------- -----------
<PAGE>
Exhibit C to Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
ASSIGNMENT AND GRANT OF SECURITY INTEREST
IN PATENTS AND TRADEMARKS
WHEREAS, PETERSEN PUBLISHING COMPANY, L.L.C. (the "Grantor") is the owner
of the trademarks and service marks listed on Schedule A attached hereto, which
----------
marks are registered or have pending registrations in the United States Patent
and Trademark Office as set forth on Schedule A attached hereto (all such
----------
trademarks, service marks, registrations and applications, collectively, the
"Trademarks") and is the owner of the patents listed on Schedule A attached
----------
hereto, which patents are registered or have pending applications in the United
States Patent and Trademark Office as set forth on Schedule A attached hereto
----------
(all such patents, registrations and applications, collectively, the "Patents");
and
WHEREAS, the Grantor has entered into a Pledge and Security Agreement (as
amended, modified, restated or supplemented from time to time, the "Security
Agreement"), dated as of _____________, 1996, in which the Grantor has agreed
with First Union National Bank of North Carolina, as Administrative Agent (the
"Administrative Agent"), with offices at One First Union Center, 301 South
College Street, Charlotte, North Carolina 28288-0735, to execute this
Assignment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, as security for the payment and
performance of the Obligations (as defined in the Security Agreement), the
Grantor does hereby assign and grant to the Administrative Agent a security
interest in all of its right, title and interest in and to the Trademarks and
the Patents, and the use thereof, together with all proceeds and products
thereof and the goodwill of the businesses symbolized by the Trademarks and the
Patents. This Assignment has been given in conjunction with the assignment and
security interest granted to the Administrative Agent under the Security
Agreement, and the provisions of this Assignment are without prejudice to and in
addition to the provisions of the Security Agreement, which are incorporated
herein by this reference.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
<PAGE>
Schedule A
----------
TRADEMARKS AND TRADEMARK APPLICATIONS
Application or Issue or
Grantor Mark Registration No. Country Filing Date
------- ---- ---------------- ------- -----------
PATENTS AND PATENT APPLICATIONS
Patent No. Date Issued Country Description
---------- ----------- ------- -----------
<PAGE>
PARENT PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the 30th day of September,
1996 (this "Agreement"), is made by PETERSEN HOLDINGS, L.L.C., a Delaware
limited liability company ("Holdings"), and BRIGHTVIEW COMMUNICATIONS GROUP,
INC., a Delaware corporation ("BrightView"; each of Holdings and BrightView, a
"Pledgor," and collectively, the "Pledgors"), in favor of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, as administrative agent for the banks and other
financial institutions (collectively, the "Lenders") party to the Credit
Agreement referred to below (in such capacity, the "Administrative Agent"), for
the benefit of the Secured Parties (as hereinafter defined). Capitalized terms
used herein without definition shall have the meanings given to them in the
Credit Agreement referred to below.
RECITALS
A. Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Borrower"), the Lenders, CIBC Inc., as Documentation Agent, and
First Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent, are parties to a Credit Agreement, dated as of September 30,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Borrower upon the terms and subject to the conditions set forth therein. The
Pledgors own all of the membership interests in the Borrower.
B. As a condition to the extension of credit to the Borrower under the
Credit Agreement, the Pledgors have executed and delivered a Guaranty Agreement,
dated as of the date hereof (as amended, modified or supplemented from time to
time, the "Parent Guaranty"), pursuant to which each Pledgor has guaranteed to
the Secured Parties the payment in full of the Obligations of the Borrower under
the Credit Agreement and the other Credit Documents.
C. It is a further condition to the extension of credit to the Borrower
under the Credit Agreement that each Pledgor shall have agreed, by executing and
delivering this Agreement, to secure the payment in full of its obligations
under the Parent Guaranty. The Secured Parties are relying on this Agreement in
their decision to extend credit to the Borrower under the Credit Agreement, and
would not enter into the Credit Agreement without this Agreement.
D. The Pledgors will obtain benefits as a result of the extension of
credit to the Borrower under the Credit Agreement, which benefits are hereby
acknowledged, and, accordingly, desire to execute and deliver this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Secured Parties to enter into the Credit Agreement
and to induce the Lenders to extend credit to the Borrower thereunder, each
Pledgor hereby agrees as follows:
1. Pledge and Grant of Security Interest. Each Pledgor hereby pledges,
-------------------------------------
assigns and delivers to the Administrative Agent, for the ratable benefit of the
Lenders (including the Issuing
<PAGE>
Lender and the Swingline Lender in their capacities as such, and including any
Lender in its capacity as a counterparty to any Interest Rate Protection
Agreement with the Borrower), the Documentation Agent and the Administrative
Agent (collectively, the "Secured Parties"), and grants to the Administrative
Agent, for the ratable benefit of the Secured Parties, a Lien upon and security
interest in, all of such Pledgor's right, title and interest in and to the
following, in each case whether now owned or existing or hereafter acquired or
arising (collectively, the "Collateral"):
(i) all of the issued and outstanding membership interests in the
Borrower owned by such Pledgor, and all rights, powers and privileges
relating thereto or arising therefrom, including, without limitation, such
Pledgor's right to vote and to manage and administer the business of the
Borrower pursuant to the Limited Liability Company Agreement, dated as of
September 30, 1996, among the Pledgors and the Borrower (as amended,
modified, supplemented, restated or replaced from time to time, the
"Operating Agreement"), together with all other rights, interests, claims
and other property of such Pledgor in any manner arising out of or relating
to its interest as a member of the Borrower, whether now existing or
hereafter arising or acquired, of whatever kind or character (including any
tangible or intangible property or interests therein), and further
including, without limitation (but subject to the provisions of SECTION 8),
all rights of such Pledgor to receive amounts due and to become due
(including, without limitation, dividends, distributions, interest, income
and returns of capital) under or in respect of the Operating Agreement, to
receive payments or other amounts upon termination of the Operating
Agreement, and to receive any other payments or distributions, whether in
cash, securities, property, or a combination thereof, in respect of such
Pledgor's interest as a member of the Borrower, all of such Pledgor's
rights of access to the Borrower's books and records, and all rights
granted or available under applicable law in connection therewith, and all
additional equity interests in the Borrower (including all warrants,
options and other rights to acquire, and all securities convertible into,
equity interests in the Borrower), whether now or hereafter existing and
any time owned by such Pledgor, together with all certificates, instruments
and entries upon the books of financial intermediaries at any time
evidencing any of the foregoing (collectively, the "Pledged Interests");
(ii) all indebtedness, obligations and other amounts at any time
owing to such Pledgor from the Borrower or from any holder of equity
interests in such Pledgor and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness, obligations
or other amounts (collectively, "the Pledged Indebtedness"); and
(iii) all Proceeds of any of the foregoing. For purposes of this
Agreement, the term "Proceeds" shall mean and include all cash, securities
and other property of any nature received or receivable upon the sale,
exchange or other disposition of or realization upon any Collateral,
whether voluntary or involuntary, together with all other payments and
distributions in respect of any Collateral, including pursuant to any
insurance, indemnity or guaranty with respect to any Collateral and
pursuant to any liquidation, reorganization or similar proceeding with
respect to any Pledgor or any issuer of or obligor on any Collateral.
2. Security for Secured Obligations. This Agreement and the Collateral
--------------------------------
secure the full and prompt payment, at any time and from time to time as and
when due (whether at the stated maturity, by acceleration or otherwise), of all
liabilities and obligations of each Pledgor, whether now existing or hereinafter
incurred, under, arising out of or in connection with the Parent Guaranty, this
-2-
<PAGE>
Agreement or any of the other Credit Documents to which it is a party,
including, without limitation, each Pledgor's liabilities and obligations as
guarantor in respect of all principal of and interest on the Loans, all
Reimbursement Obligations in respect of Letters of Credit, all fees, expenses,
indemnities and other amounts payable by the Borrower under the Credit Agreement
or any other Credit Document (including interest accruing after the filing of a
petition or commencement of a case by or with respect to the Borrower seeking
relief under any applicable federal and state laws pertaining to bankruptcy,
reorganization, arrangement, moratorium, readjustment of debts, dissolution,
liquidation or other debtor relief, specifically including, without limitation,
the Bankruptcy Code and any fraudulent transfer and fraudulent conveyance laws,
whether or not the claim for such interest is allowed in such proceeding), all
obligations of the Borrower to any Lender under any Interest Rate Protection
Agreement, all Obligations that, but for the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due, and all fees,
costs and expenses payable by each Pledgor under SECTION 13, in each case
whether now existing or hereafter created or arising and whether direct or
indirect, absolute or contingent, due or to become due (the liabilities and
obligations of the Pledgors described in this SECTION 2, collectively, the
"Secured Obligations").
3. Delivery of Collateral. All certificates or instruments representing
----------------------
or evidencing any Collateral (other than checks or drafts, except during the
continuance of an Event of Default) shall be delivered to and held by or on
behalf of the Administrative Agent pursuant hereto, shall be in form suitable
for transfer by delivery and shall be delivered together with undated stock
powers duly executed in blank, appropriate endorsements or other necessary
instruments of registration, transfer or assignment, duly executed and in form
and substance satisfactory to the Administrative Agent, and in each case such
other instruments or documents as the Administrative Agent may reasonably
request.
4. Representations and Warranties. Each Pledgor represents and warrants
------------------------------
as follows:
(a) As of the date hereof, the Pledged Interests being pledged by each
Pledgor hereunder consist of the percentage and type of equity membership
interests in the Borrower as described beneath such Pledgor's name in Annex A.
-------
The Pledged Interests described in Annex A collectively represent 100% of the
-------
issued and outstanding equity membership interests in the Borrower.
(b) Each Pledgor is, or at the time when pledged hereunder will be, the
sole legal, record and beneficial owner of all Pledged Interests purported to be
pledged by it hereunder, free and clear of any Lien whatsoever other than the
security interest created by this Agreement. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any government or public office, and no
Pledgor has filed or consented to the filing of any such statement or notice,
except for Uniform Commercial Code financing statements naming the
Administrative Agent as secured party.
(c) This Agreement, together with (i) the filing, with regard to each
Pledgor, of duly completed and executed Uniform Commercial Code financing
statements naming such Pledgor as debtor, the Administrative Agent as secured
party, and describing the Collateral, in the jurisdictions set forth beneath
such Pledgor's name on Annex B hereto, (ii) in the case of uncertificated
-------
Pledged Interests, compliance with Section 8-313 (or its successor provision) of
the applicable Uniform Commercial Code, and (iii) the delivery to the
Administrative Agent of all certificates, chattel paper, promissory notes and
other instruments included in the Collateral, creates, and at all times will
constitute, a valid and perfected security interest in and Lien upon the
Collateral owned by such Pledgor in favor of the Administrative Agent, for the
benefit of the Secured Parties, to the extent a security interest therein can be
perfected by such filings or possession of such chattel paper,
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<PAGE>
promissory notes or instruments, as applicable, superior and prior to the rights
of all other Persons therein (except for Permitted Liens), and no other or
additional filings, registrations, recordings or actions are or shall be
necessary or appropriate in order to maintain the perfection and priority of
such Lien and security interest, other than continuation statements required
under the applicable Uniform Commercial Code.
(d) All of the Pledged Interests have been duly and validly issued and are
fully paid and not subject to any preemptive rights, warrants, options or
similar rights or restrictions in favor of third parties, any capital call or
other additional capital requirement or any contractual or other restrictions
upon transfer, except as expressly set forth in the Operating Agreement.
(e) No consent, approval, authorization, exemption or other action by,
notice to, or filing with, any Governmental Authority is required in connection
with the due execution, delivery and performance by each Pledgor of this
Agreement, the pledge of the Collateral hereunder or the exercise by the
Administrative Agent of the voting or other rights and remedies in respect of
the Collateral provided for herein, except as expressly set forth in the
Operating Agreement and except as may be required in connection with a
disposition of any Collateral by laws affecting the offering and sale of
securities generally.
(f) The Pledgors have furnished the Administrative Agent with a correct
and complete copy of the Operating Agreement as in effect as of the date hereof.
The Operating Agreement is in full force and effect and there exists no default,
breach or event of default thereunder by any party. The Operating Agreement sets
forth the entire agreement and understanding of the parties thereto in respect
of the subject matter thereof, and there are no other agreements or
understandings, written or oral, relating to the matters covered thereby.
(g) Annex C lists, as to each Pledgor, (i) the address of its chief
-------
executive office and principal place of business and (ii) the address of each
location of all chattel paper, instruments and other records or information
evidencing or relating to the Collateral of such Pledgor. No Pledgor presently
conducts business under any prior or other corporate or limited liability
company name or under any trade or fictitious name, except as indicated beneath
its name on Annex C, and no Pledgor has entered into any contract or granted any
-------
Lien within the past five years under any name other than its legal corporate or
limited liability company name or a trade or fictitious name indicated beneath
its name on Annex C.
-------
5. Additional Collateral. If either Pledgor shall, at any time and from
---------------------
time to time after the date hereof, acquire any additional membership interests
in the Borrower or Indebtedness of the types described in clauses (i) and (ii)
of SECTION 1, the same shall be automatically deemed to be Pledged Interests or
Pledged Indebtedness, as the case may be, and to be pledged to the
Administrative Agent pursuant to SECTION 1, and such Pledgor will forthwith
pledge and deposit the same with the Administrative Agent and deliver to the
Administrative Agent any certificates or instruments therefor, together with the
endorsement of such Pledgor (in the case of any promissory notes or other
instruments), undated stock powers (in the case of Pledged Interests evidenced
by certificates) or other necessary instruments of transfer or assignment, duly
executed in blank and in form and substance satisfactory to the Administrative
Agent, together with such other certificates and instruments as the
Administrative Agent may reasonably request (including Uniform Commercial Code
financing statements or appropriate amendments thereto), and will promptly
thereafter deliver to the Administrative Agent a fully completed and duly
executed amendment to this Agreement in the form of Exhibit A (each, a "Pledge
---------
Amendment") in respect thereof. Each Pledgor hereby authorizes
-4-
<PAGE>
the Administrative Agent to attach each Pledge Amendment to this Agreement, and
agrees that all such Collateral listed on any Pledge Amendment shall for all
purposes be deemed Collateral hereunder and shall be subject to the provisions
hereof; provided that the failure of such Pledgor to execute and deliver any
--------
Pledge Amendment with respect to any such additional Collateral as required
hereinabove shall not impair the security interest of the Administrative Agent
in such Collateral or otherwise adversely affect the rights and remedies of the
Administrative Agent hereunder with respect thereto. If any Pledged Interests
(whether now owned or hereafter acquired) are "uncertificated securities" within
the meaning of the applicable Uniform Commercial Code or are otherwise not
evidenced by any certificate or instrument, each applicable Pledgor will
promptly notify the Administrative Agent thereof and will promptly take and
cause to be taken all actions required under applicable law, including, as
applicable, under Article 8 or 9 of the applicable Uniform Commercial Code, to
perfect the security interest of the Administrative Agent therein.
6. Certain Covenants of the Pledgors. (a) The Pledgors will cause the
---------------------------------
Pledged Interests to constitute at all times 100% of the equity membership
interests in the Borrower, and unless the Administrative Agent shall have given
its prior written consent, neither Pledgor will cause or permit the Borrower to
issue or sell any new equity membership interests, any warrants, options or
rights to acquire its equity membership interests, or other equity securities of
any nature to any Person other than the Pledgors, or cause, permit or consent to
the admission of any other Person as a member of the Borrower.
(b) Neither Pledgor will sell or otherwise dispose of, grant any options,
warrants or other rights with respect to, or mortgage, pledge, grant any Lien
with respect to or otherwise encumber, any of its Pledged Interests or any other
Collateral or any interest therein, except for the security interest created by
this Agreement.
(c) Neither Pledgor will (i) amend, modify, waive or forgive any provision
of or right arising under the Operating Agreement in a manner that would, or
could reasonably be expected to, have the effect of impairing the position or
interests of the Administrative Agent or any other Secured Party, (ii) cancel or
terminate the Operating Agreement or petition, request or take any other action
that seeks, or that could reasonably be expected, to rescind, terminate, cancel
or suspend the Operating Agreement, to obtain any partition with respect to the
Borrower or to dissolve or liquidate the Borrower. The Pledgors will deliver to
the Administrative Agent from time to time copies of all amendments or
modifications to the Operating Agreement promptly upon completion thereof;
provided that nothing herein shall be deemed to permit any amendment or
- --------
modification not otherwise permitted hereunder.
(d) Each Pledgor will perform and comply in all material respects with all
terms of the Operating Agreement required to be performed or complied with by
it, will maintain the Operating Agreement in full force and effect, will enforce
the Operating Agreement in accordance with its terms and will take all such
action to that end as may from time to time be reasonably requested by the
Administrative Agent.
(e) Each Pledgor will pay and discharge (i) all taxes, assessments and
governmental charges or levies imposed upon it, upon its income or profits or
upon any of its properties, prior to the date on which penalties would attach
thereto, and (ii) all lawful claims that, if unpaid, might become a Lien upon
any of its properties; provided, however, that no Pledgor shall be required to
-------- -------
pay any such tax, assessment, charge, levy or claim that is being contested in
good faith and by proper proceedings and as to which such Pledgor has maintained
adequate reserves with respect
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<PAGE>
thereto in accordance with Generally Accepted Accounting Principles, unless and
until any tax lien notice has become effective with respect thereto or until any
Lien resulting therefrom attaches to its properties and becomes enforceable
against its other creditors.
(f) Neither Pledgor will (i) change its name, identity or corporate
structure, (ii) change its chief executive office or principal place of business
from the applicable location thereof listed on Annex C, or (iii) remove any
-------
books, records or other information relating to Collateral from the applicable
location thereof listed on Annex C, unless in each case such Grantor has (1)
-------
given twenty (20) days' prior written notice to the Administrative Agent of its
intention to do so, together with information regarding any such new location
and such other information in connection with such proposed action as the
Administrative Agent may reasonably request, and (2) delivered to the
Administrative Agent ten (10) days prior to any such change or removal such
documents, instruments and financing statements as may be required by the
Administrative Agent, all in form and substance satisfactory to the
Administrative Agent, paid all necessary filing and recording fees and taxes,
and taken all other actions reasonably requested by the Administrative Agent
(including, at the reasonable request of the Administrative Agent, delivery of
opinions of counsel reasonably satisfactory to the Administrative Agent to the
effect that all such actions have been taken), in order to perfect and maintain
the Lien upon and security interest in the Collateral provided for herein in
accordance with the provisions of SECTION 4(C).
(g) Each Pledgor shall, from time to time at such times as may be
reasonably requested and upon reasonable notice, (i) make available to the
Administrative Agent for inspection and review at such Pledgor's offices copies
of all documents and information relating to the Collateral, and (ii) permit the
Administrative Agent or its representatives to visit its offices or the premises
upon which any Collateral may be located, inspect its books and records and make
copies and memoranda thereof, inspect the Collateral, discuss its finances and
affairs with its officers, employees and independent accountants and take any
other actions necessary for the protection of the interests of the Secured
Parties in the Collateral.
(h) Each Pledgor agrees that it will, at its own cost and expense, take
any and all actions necessary to warrant and defend the right, title and
interest of the Secured Parties in and to the Collateral against the claims and
demands of all other Persons.
7. Voting Rights. So long as no Event of Default shall have occurred and
-------------
be continuing, each Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Pledged Interests (subject to its
obligations under SECTION 5), and for that purpose the Administrative Agent will
execute and deliver or cause to be executed and delivered to each applicable
Pledgor all such proxies and other instruments as such Pledgor may reasonably
request in writing to enable such Pledgor to exercise such voting and other
consensual rights; provided, however, that neither Pledgor will cast any vote,
-------- -------
give any consent, waiver or ratification, or take or fail to take any action, in
any manner that would, or could reasonably be expected to, violate or be
inconsistent with any of the terms of this Agreement, the Credit Agreement or
any other Credit Document, or have the effect of impairing in any material
respect the position or interests of the Administrative Agent or any other
Secured Party.
8. Dividends and Other Distributions. So long as no Event of Default
---------------------------------
shall have occurred and be continuing (or would occur as a result thereof), and
except as provided otherwise herein, all interest, income, dividends,
distributions and other amounts payable in cash in respect of the Pledged
Interests may be paid to and retained by the Pledgors; provided, however, that
-------- -------
all such
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<PAGE>
interest, dividends, distributions and other amounts shall, at all times after
the occurrence and during the continuance of an Event of Default, be paid to the
Administrative Agent and retained by it as part of the Collateral (except to the
extent applied upon receipt to the repayment of the Secured Obligations); but
provided, further, that Holdings and BrightView may receive and distribute to
- -------- -------
their respective members any distributions made by the Borrower pursuant to
SECTION 8.6(A)(III) of the Credit Agreement that are not prohibited by such
Section from being made during such Event of Default. The Administrative Agent
shall also be entitled at all times (whether or not during the continuance of an
Event of Default) to receive directly, and to retain as part of the Collateral,
(i) all interest, income, dividends, distributions or other amounts paid or
payable in cash or other property in respect of any Pledged Interests in
connection with the dissolution, liquidation, recapitalization or
reclassification of the capital of the Borrower to the extent representing (in
the reasonable judgment of the Administrative Agent) an extraordinary,
liquidating or other distribution in return of capital, (ii) all additional
membership interests, warrants, options or other securities or property (other
than cash) paid or payable or distributed or distributable in respect of any
Pledged Interests in connection with any noncash dividend, distribution, return
of capital, spin-off, split-up, reclassification, combination of interests or
similar rearrangement, and (iii) without affecting any restrictions against such
actions contained in the Credit Agreement, all additional membership interests,
warrants, options or other securities or property (including cash) paid or
payable or distributed or distributable in respect of any Pledged Interests in
connection with any consolidation, merger, exchange of securities, liquidation
or other reorganization. All interest, income, dividends, distributions or other
amounts that are received by either Pledgor in violation of the provisions of
this Section shall be received in trust for the benefit of the Administrative
Agent, shall be segregated from other property or funds of the Pledgors and
shall be forthwith delivered to the Administrative Agent as Collateral in the
same form as so received (with any necessary endorsements).
9. Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Administrative Agent shall be entitled to exercise in respect of
the Collateral all of its rights, powers and remedies provided for herein or
otherwise available to it under any other Credit Document, by law, in equity or
otherwise, including all rights and remedies of a secured party under the
Uniform Commercial Code as in effect in each relevant jurisdiction, and shall be
entitled in particular, but without limitation of the foregoing, to exercise the
following rights, which each Pledgor agrees to be commercially reasonable:
(a) To notify the parties obligated on any of the Collateral to make
payment to the Administrative Agent of any amount due or to become due
thereunder and receive all such amounts;
(b) To transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to the
Pledgors and with or without disclosing that such Collateral is subject to the
security interest created hereunder;
(c) To accelerate any Pledged Indebtedness that may be accelerated in
accordance with its terms, and take any other lawful action to collect upon any
Pledged Indebtedness;
(d) To exercise (i) all voting, consensual and other rights and powers
pertaining to the Pledged Interests (whether or not transferred into the name of
the Administrative Agent), at any meeting of the members of the Borrower or
otherwise, and (ii) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Pledged Interests as
if it were the absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Interests upon the
merger, consolidation, reorganization,
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<PAGE>
reclassification, combination of interests, similar rearrangement or other
similar fundamental change in the structure of the Borrower, or upon the
exercise by either Pledgor or the Administrative Agent of any right, privilege
or option pertaining to such Pledged Interests, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Interests with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine, and give
all consents, waivers and ratifications in respect of the Pledged Interests, all
without liability except to account for any property actually received by it,
but the Administrative Agent shall have no duty to exercise any such right,
privilege or option or give any such consent, waiver or ratification and shall
not be responsible for any failure to do so or delay in so doing; and for the
foregoing purposes each Pledgor will promptly execute and deliver or cause to be
executed and delivered to the Administrative Agent, upon request, all such
proxies and other instruments as the Administrative Agent may reasonably request
to enable the Administrative Agent to exercise such rights and powers; AND IN
FURTHERANCE OF THE FOREGOING AND WITHOUT LIMITATION THEREOF, EACH PLEDGOR HEREBY
IRREVOCABLY CONSTITUTES AND APPOINTS THE ADMINISTRATIVE AGENT AS THE TRUE AND
LAWFUL PROXY AND ATTORNEY-IN-FACT OF SUCH PLEDGOR, WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES, TO EXERCISE ALL SUCH VOTING, CONSENSUAL AND OTHER
RIGHTS AND POWERS TO WHICH ANY MEMBER OF THE BORROWER HOLDING THE PLEDGED
INTERESTS WOULD BE ENTITLED BY VIRTUE OF HOLDING THE SAME, WHICH PROXY AND POWER
OF ATTORNEY, BEING COUPLED WITH AN INTEREST, IS IRREVOCABLE AND SHALL BE
EFFECTIVE FOR SO LONG AS THIS AGREEMENT SHALL BE IN EFFECT; and
(e) To sell, resell, assign and deliver, in its sole discretion, all or
any of the Collateral, in one or more parcels, on any securities exchange on
which the Pledged Interests may be listed, at public or private sale, at any of
the Administrative Agent's offices or elsewhere, for cash, upon credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as the Administrative Agent may deem satisfactory. If any of the
Collateral is sold by the Administrative Agent upon credit or for future
delivery, the Administrative Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Administrative Agent may resell such Collateral. In no event shall the
Pledgors be credited with any part of the Proceeds of sale of any Collateral
until and to the extent cash payment in respect thereof has actually been
received by the Administrative Agent. Each purchaser at any such sale shall hold
the property sold absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Pledgors, and each Pledgor
hereby expressly waives all rights of redemption, stay or appraisal, and all
rights to require the Administrative Agent to marshal any assets in favor of
such Pledgor or any other party or against or in payment of any or all of the
Secured Obligations, that it has or may have under any rule of law or statute
now existing or hereafter adopted. No demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law, as
referred to below), all of which are hereby expressly waived by each Pledgor,
shall be required in connection with any sale or other disposition of any part
of the Collateral. If any notice of a proposed sale or other disposition of any
part of the Collateral shall be required under applicable law, the
Administrative Agent shall give the applicable Pledgor at least ten (10) days'
prior notice of the time and place of any public sale and of the time after
which any private sale or other disposition is to be made, which notice each
Pledgor agrees is commercially reasonable. The Administrative Agent shall not be
obligated to make any sale of Collateral if it shall determine not to do so,
regardless of the fact that notice of sale may have been given. The
Administrative Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without
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<PAGE>
further notice, be made at the time and place to which the same was so
adjourned. Upon each public sale and, to the extent permitted by applicable law,
upon each private sale, the Administrative Agent may purchase all or any of the
Collateral being sold, free from any equity, right of redemption or other claim
or demand, and may make payment therefor by endorsement and application (without
recourse) of the Secured Obligations in lieu of cash as a credit on account of
the purchase price for such Collateral.
10. Application of Proceeds. (a) All Proceeds collected by the
-----------------------
Administrative Agent upon any sale, other disposition of or realization upon any
of the Collateral, together with all other moneys received by the Administrative
Agent hereunder, shall be applied as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, all amounts advanced by the Administrative Agent
for the account of the Pledgors, and all other amounts payable to the
Administrative Agent under SECTION 13;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Secured Obligations
owing to the Secured Parties; and
(ii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Pledgors or any other Person lawfully entitled to receive
such surplus.
(b) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Secured Party that has
entered into an Interest Rate Protection Agreement with the Borrower for a
determination (which such Secured Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding Secured
Obligations owed to such Secured Party under any such Interest Rate Protection
Agreement. Unless it has actual knowledge (including by way of written notice
from any such Secured Party) to the contrary, the Administrative Agent, in
acting hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Obligations in respect thereof are in existence between any
Secured Party and the Borrower.
(c) The Pledgors shall remain jointly and severally liable to the extent
of any deficiency between the amount of all Proceeds realized upon sale or other
disposition of the Collateral pursuant to this Agreement and the aggregate
amount of the sums referred to in clauses (i) and (ii) of subsection (a) above.
Upon any sale of any Collateral hereunder by the Administrative Agent (whether
by virtue of the power of sale herein granted, pursuant to judicial proceeding,
or otherwise), the receipt of the Administrative Agent or the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Administrative Agent or such officer or be answerable in any way for the
misapplication thereof.
11. Each Pledgor Remains Liable. Notwithstanding anything herein to the
---------------------------
contrary, (i) the Pledgors shall remain liable under the Operating Agreement to
perform all of their respective obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Administrative
Agent of any of its rights or remedies hereunder shall not release either
Pledgor from any of its obligations under the Operating Agreement, and (iii)
except as specifically provided
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<PAGE>
for hereinbelow, the Administrative Agent shall not have any obligation or
liability by reason of this Agreement under the Operating Agreement, nor shall
the Administrative Agent be obligated to perform any of the obligations or
duties of the Pledgors thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder. This Agreement shall not in any way be
deemed to obligate the Administrative Agent, any other Secured Party or any
purchaser at a foreclosure sale under this Agreement to assume any of either
Pledgor's obligations, duties or liabilities under the Operating Agreement,
including, without limitation, each Pledgor's obligations, if any, to manage the
business and affairs of the Borrower (collectively, the "Member Obligations"),
unless the Administrative Agent or such other Secured Party or purchaser
otherwise agrees in writing to assume any or all of such Member Obligations. In
the event of foreclosure by the Administrative Agent hereunder, then except as
provided in the preceding sentence, each Pledgor shall remain bound and
obligated to perform its Member Obligations and neither the Administrative Agent
nor any other Secured Party shall be deemed to have assumed any Member
Obligations. In the event the Administrative Agent, any other Secured Party or
any purchaser at a foreclosure sale elects to become a substitute member in
place of either Pledgor, the party making such election shall adopt in writing
the Operating Agreement and agree to be bound by the terms and provisions
thereof; and subject to the execution of such written agreement, each Pledgor
hereby irrevocably consents in advance, pursuant to the Operating Agreement, to
the admission of the Administrative Agent, any other Secured Party or any such
purchaser as a substitute member to the extent of the Pledged Interests acquired
pursuant to such sale, and agrees to execute any documents or instruments and
take any other action as may be necessary or as may be reasonably requested in
connection therewith. The powers, rights and remedies conferred on the
Administrative Agent hereunder are solely to protect its interest and privilege
in the Operating Agreement, as Collateral, and shall not impose any duty upon it
to exercise any such powers, rights or remedies.
12. Registration; Private Sales. (a) If, at any time after the
---------------------------
occurrence and during the continuance of an Event of Default, either Pledgor
shall have received from the Administrative Agent a written request or requests
that such Pledgor cause any registration, qualification or compliance under any
federal or state securities law or laws to be effected with respect to all or
any part of the Pledged Interests, such Pledgor will, as soon as practicable and
at its expense, use its best efforts to cause such registration to be effected
and be kept effective and will use its best efforts to cause such qualification
and compliance to be effected and be kept effective as may be so requested and
as would permit or facilitate the sale and distribution of such Pledged
Interests, including, without limitation, registration under the Securities Act
of 1933, as amended (the "Securities Act"), appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliance
with any other applicable requirements of Governmental Authorities; provided,
--------
that the Administrative Agent shall furnish to such Pledgor such information
regarding the Administrative Agent as such Pledgor may reasonably request in
writing and as shall be required in connection with any such registration,
qualification or compliance. Such Pledgor will cause the Administrative Agent to
be kept reasonably advised in writing as to the progress of each such
registration, qualification or compliance and as to the completion thereof, will
furnish to the Administrative Agent such number of prospectuses, offering
circulars or other documents incident thereto as the Administrative Agent from
time to time may reasonably request, and will indemnify the Administrative Agent
and all others participating in the distribution of such Pledged Securities
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon
-10-
<PAGE>
information furnished in writing to such Pledgor by the Administrative Agent or
any other Secured Party expressly for use therein.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws as in
effect from time to time, the Administrative Agent may be compelled, with
respect to any sale of all or any part of the Pledged Interests conducted
without registration or qualification under the Securities Act and such state
securities laws, to limit purchasers to any one or more Persons who will
represent and agree, among other things, to acquire such Pledged Interests for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sales may be
made in such manner and under such circumstances as the Administrative Agent may
deem necessary or advisable in its sole and absolute discretion, including at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and agrees that the
Administrative Agent shall have no obligation to conduct any public sales and no
obligation to delay the sale of any Pledged Interests for the period of time
necessary to permit its registration for public sale under the Securities Act
and applicable state securities laws, and shall not have any responsibility or
liability as a result of its election so not to conduct any such public sales or
delay the sale of any Pledged Interests, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after such registration. Each Pledgor hereby waives any claims against the
Administrative Agent or any Secured Party arising by reason of the fact that the
price at which any Pledged Interests may have been sold at any private sale was
less than the price that might have been obtained at a public sale or was less
than the aggregate amount of the Secured Obligations, even if the Administrative
Agent accepts the first offer received and does not offer such Pledged Interests
to more than one offeree.
(c) Each Pledgor agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgors.
13. Indemnity and Expenses. The Pledgors agree jointly and severally:
----------------------
(a) To indemnify and hold harmless the Administrative Agent, each other
Secured Party and each of their respective directors, officers, employees,
agents and affiliates from and against any and all claims, damages, demands,
loses, obligations, judgments and liabilities (including, without limitation,
reasonable attorneys' fees and expenses) in any way arising out of or in
connection with this Agreement and the transactions contemplated hereby, except
to the extent the same shall arise as a result of the gross negligence or
willful misconduct of the party seeking to be indemnified; and
(b) To pay and reimburse the Administrative Agent upon demand for all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) that the Administrative Agent may incur in
connection with (i) the custody, use or preservation of, or the sale of,
collection from or other realization upon, any of the Collateral, including the
reasonable expenses of re-taking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, (ii) the exercise or
enforcement of any rights or remedies granted hereunder (including, without
limitation, under SECTION 12), under any of the other Credit Documents or
otherwise available
-11-
<PAGE>
to it (whether at law, in equity or otherwise), or (iii) the failure by either
Pledgor to perform or observe any of the provisions hereof. The provisions of
this SECTION 13 shall survive the execution and delivery of this Agreement, the
repayment of any of the Obligations, the termination of the Commitments under
the Credit Agreement and the termination of this Agreement or any other Credit
Document.
14. Further Assurances; Attorney-in-Fact. (a) Each Pledgor agrees that
------------------------------------
it will join with the Administrative Agent to execute and, at its own expense,
file and refile under any applicable Uniform Commercial Code such financing
statements, continuation statements and other documents and instruments in such
offices as the Administrative Agent may reasonably deem necessary or
appropriate, and wherever required or permitted by law, in order to perfect and
preserve the Administrative Agent's security interest in the Collateral, and
hereby authorizes the Administrative Agent to file financing statements and
amendments thereto relating to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Administrative Agent such
additional conveyances, assignments, agreements and instruments as the
Administrative Agent may reasonably require or deem advisable to perfect,
establish, confirm and maintain the security interest and Lien provided for
herein, to carry out the purposes of this Agreement or to further assure and
confirm unto the Administrative Agent its rights, powers and remedies hereunder.
(b) Each Pledgor hereby irrevocably appoints the Administrative Agent its
lawful attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, the Administrative Agent or otherwise,
and with full power of substitution in the premises (which power of attorney,
being coupled with an interest, is irrevocable for so long as this Agreement
shall be in effect), from time to time in the Administrative Agent's discretion
after the occurrence and during the continuance of an Event of Default to take
any action and to execute any instruments that the Administrative Agent may deem
necessary or advisable to accomplish the purpose of this Agreement, including,
without limitation:
(i) to sign the name of such Pledgor on any financing statement,
continuation statement, notice or other similar document that, in the
Administrative Agent's opinion, should be made or filed in order to perfect
or continue perfected the security interest granted under this Agreement;
(ii) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(iii) to receive, endorse and collect any checks, drafts,
instruments, chattel paper and other orders for the payment of money made
payable to such Pledgor representing any interest, income, dividend,
distribution or other amount payable in respect of any of the Collateral
and to give full discharge for the same;
(iv) to pay or discharge taxes, Liens or other encumbrances levied
or placed on or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
the Administrative Agent in its sole discretion, any such payments made by
the Administrative Agent to become Secured Obligations of the Pledgors to
the Administrative Agent, due and payable immediately and without demand;
-12-
<PAGE>
(v) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or advisable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral;
and
(vi) to use, sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with any and all of the Collateral as
fully and completely as though the Administrative Agent were the absolute
owner of the Collateral for all purposes, and to do from time to time, at
the Administrative Agent's option and the Pledgors' expense, all other acts
and things deemed necessary by the Administrative Agent to protect,
preserve or realize upon the Collateral and to more completely carry out
the purposes of this Agreement.
(c) If either Pledgor fails to perform any covenant or agreement
contained in this Agreement after written request to do so by the Administrative
Agent (provided that no such request shall be necessary at any time after the
--------
occurrence and during the continuance of an Event of Default), the
Administrative Agent may itself perform, or cause the performance of, such
covenant or agreement and may take any other action that it deems necessary and
appropriate for the maintenance and preservation of the Collateral or its
security interest therein, and the reasonable expenses so incurred in connection
therewith shall be payable by the Pledgors under SECTION 13.
15. The Administrative Agent; Standard of Care. The Administrative
------------------------------------------
Agent will hold all items of the Collateral at any time received under this
Agreement in accordance with the provisions hereof. The obligations of the
Administrative Agent as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement and the
other Credit Documents, are only those expressly set forth in this Agreement and
the other Credit Documents. The Administrative Agent shall act hereunder at the
direction, or with the consent, of the Required Lenders on the terms and
conditions set forth in the Credit Agreement. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest, on behalf of
the Secured Parties, in the Collateral, and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Administrative
Agent, in its individual capacity, accords its own property of a similar nature,
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to the Collateral. Neither the Administrative Agent nor any
other Secured Party shall be liable to either Pledgor (i) for any loss or damage
sustained by such Pledgor, or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral that may occur as a result of
or in connection with or that is in any way related to any exercise by the
Administrative Agent or any other Secured Party of any right or remedy under
this Agreement, any failure to demand, collect or realize upon any of the
Collateral or any delay in doing so, or any other act or failure to act on the
part of the Administrative Agent or any other Secured Party, except to the
extent that the same is caused by its own gross negligence or willful
misconduct.
16. Security Interest Absolute. Each Pledgor agrees that its obligations,
--------------------------
and the security interest granted to and all rights of the Administrative Agent,
hereunder are irrevocable, absolute and unconditional and shall not be
discharged, limited or otherwise affected by reason of any of the following,
whether or not such Pledgor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in
any other term of, any Secured Obligations, or any amendment, modification
or supplement to, restatement
-13-
<PAGE>
of, or consent to any rescission or waiver of or departure from, any
provisions of the Credit Agreement, any other Credit Document or any
agreement or instrument delivered pursuant to any of the foregoing;
(ii) the invalidity or unenforceability of any Secured Obligations
or any provisions of the Credit Agreement, any other Credit Document or any
agreement or instrument delivered pursuant to any of the foregoing;
(iii) any sale, exchange, release, substitution, compromise,
nonperfection or other action or inaction in respect of any other
collateral pledged as direct or indirect security for any Secured
Obligations, or any discharge, modification, settlement, compromise or
other action or inaction in respect of any guaranty or other direct or
indirect liability for any Secured Obligations; or
(iv) any other circumstance that might otherwise constitute a legal
or equitable discharge of, or a defense, set-off or counterclaim available
to, either Pledgor, other than the occurrence of (x) the payment in full of
the Secured Obligations (other than indemnity obligations not then due and
payable and that survive termination of the Credit Documents), (y) the
termination or expiration of all Letters of Credit under the Credit
Agreement and (z) the termination of the Commitments under the Credit
Agreement (the events in clauses (x), (y) and (z) above, collectively, the
"Termination Requirements").
17. No Waiver. The rights and remedies of the Secured Parties expressly
---------
set forth in this Agreement and the other Credit Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No failure or delay on the part of any Secured
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege or be construed to be a waiver of any Default or
Event of Default. No course of dealing between the Pledgors and the Secured
Parties or their agents or employees shall be effective to amend, modify or
discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon either Pledgor in any case shall entitle such Pledgor or the other Pledgor
to any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of any Secured Party to exercise any right or
remedy or take any other or further action in any circumstances without notice
or demand.
18. Enforcement. By its acceptance of the benefits of this Agreement,
-----------
each Lender agrees that this Agreement may be enforced only by the
Administrative Agent, acting upon the instructions or with the consent of the
Required Lenders as provided for in the Credit Agreement, and that no Lender
shall have any right individually to enforce or seek to enforce this Agreement
or to realize upon any Collateral or other security given to secure the payment
and performance of the Secured Obligations.
19. Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by either Pledgor from,
any provision of this Agreement, shall be effective unless in a writing executed
and delivered in accordance with Section 11.6 of the Credit Agreement, and then
the same shall be effective only in the specific instance and for the specific
purpose for which given.
-14-
<PAGE>
20. Continuing Security Interest; Term; Successors and Assigns;
-----------------------------------------------------------
Assignment; Termination and Release; Survival. This Agreement shall create a
- ---------------------------------------------
continuing security interest in the Collateral and shall secure the payment and
performance of all of the Secured Obligations as the same may arise and be
outstanding at any time and from time to time from and after the date hereof,
and shall (i) remain in full force and effect until the satisfaction of all of
the Termination Requirements, (ii) be binding upon and enforceable against each
Pledgor and its successors and assigns (provided, however, that neither Pledgor
-------- -------
may sell, assign or transfer any of its rights, interests, duties or obligations
hereunder without the prior written consent of the Lenders) and (iii) inure to
the benefit of and be enforceable by each Secured Party and its successors and
assigns. Upon any sale or other disposition by any Pledgor of any Collateral in
a transaction expressly permitted hereunder or under or pursuant to the Credit
Agreement or any other applicable Credit Document, the Lien and security
interest created by this Agreement in and upon such Collateral shall be
automatically released, and upon the satisfaction of all of the Termination
Requirements, this Agreement and the Lien and security interest created hereby
shall terminate; and in connection with any such release or termination, the
Administrative Agent, at the request and expense of the applicable Pledgor, will
execute and deliver to such Pledgor such documents and instruments evidencing
such release or termination as such Pledgor may reasonably request and will
assign, transfer and deliver to such Pledgor, without recourse and without
representation or warranty, such of the Collateral as may then be in the
possession of the Administrative Agent (or, in the case of any partial release
of Collateral, such of the Collateral so being released as may be in its
possession). All representations, warranties, covenants and agreements herein
shall survive the execution and delivery of this Agreement and any Pledge
Amendment.
21. Notices. All notices and other communications provided for hereunder
-------
shall be given to the parties in the manner and subject to the other notice
provisions set forth in the Parent Guaranty.
22. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
23. Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
24. Construction. The headings of the various sections and subsections of
------------
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular. All terms in this Agreement that are not
capitalized shall have the meanings provided by the applicable Uniform
Commercial Code to the extent the same are used or defined therein.
25. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first above written.
PETERSEN HOLDINGS, L.L.C.
By: ??????
------------------------------
Title: President
--------------------------
BRIGHTVIEW COMMUNICATIONS GROUP, INC.
By: ??????
------------------------------
Title: _______________________________
Accepted and agreed to:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Administrative Agent
By: ??????
----------------------------------
Title: SVP
-------------------------------
-16-
<PAGE>
Annex A to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
Pledged Interests pledged by Holdings
- -------------------------------------
<TABLE>
<CAPTION>
Percentage of
Outstanding
Type of Interests
Name of Issuer Interests in Issuer
-------------- --------- ---------
<S> <C> <C>
Petersen Publishing Company, L.L.C. Common 99.9%
</TABLE>
Pledged Interests pledged by BrightView
- ---------------------------------------
<TABLE>
<CAPTION>
Percentage of
Outstanding
Type of Interests
Name of Issuer Interests in Issuer
-------------- --------- ---------
<S> <C> <C>
Petersen Publishing Company, L.L.C. Common 0.1%
</TABLE>
<PAGE>
Annex B to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
FILING LOCATIONS
A. Petersen Holdings, L.L.C.
-------------------------
Secretary of State of California
Secretary of State of Illinois
B. BrightView Communications Group, Inc.
-------------------------------------
Secretary of State of California
Secretary of State of Illinois
<PAGE>
Annex C to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
LOCATIONS OF CHIEF EXECUTIVE OFFICE
AND RECORDS RELATING TO COLLATERAL
A. Petersen Holdings, L.L.C.
1. Chief executive office/principal place
--------------------------------------
of business:
-----------
a) 6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
------------------------------
a) 6420 Wilshire Blvd.
Los Angeles, California
b) c/o Willis Stein & Partners, L.P.
227 West Monroe, Suite 4300
Chicago, Illinois 60606
A. BrightView Communications Group, Inc.
1. Chief executive office/principal place
--------------------------------------
of business:
-----------
a) 6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
------------------------------
a) 6420 Wilshire Blvd.
Los Angeles, California
b) c/o Willis Stein & Partners, L.P.
227 West Monroe, Suite 4300
Chicago, Illinois 60606
<PAGE>
Exhibit A to Parent Pledge and
Security Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
PLEDGE AMENDMENT
THIS PLEDGE AMENDMENT, dated as of _______________, 19___, is delivered by
______________________ (the "Pledgor") pursuant to SECTION 5 of the Pledge
Agreement referred to hereinbelow. The Pledgor hereby agrees that this Pledge
Amendment may be attached to the Pledge and Security Agreement, dated as of
__________, 1996, made by the Pledgor in favor of First Union National Bank of
North Carolina, as Administrative Agent (as amended, modified, supplemented or
restated from time to time, the "Pledge Agreement," capitalized terms defined
therein being used herein as therein defined), and that the Pledged Interests
listed on Annex A to this Pledge Amendment shall be deemed to be part of the
-------
Pledged Interests within the meaning of the Pledge Agreement and shall become
part of the Collateral and shall secure all of the Secured Obligations as
provided in the Pledge Agreement. This Pledge Amendment and its attachments are
hereby incorporated into the Pledge Agreement and made a part thereof.
__________________________
By: _______________________________
Title: ______________________________
<PAGE>
Annex A to Exhibit A (Pledge
Amendment)
First Union National Bank
of North Carolina, as
Administrative Agent
Petersen Publishing Company, L.L.C.
September 30, 1996
------------------------------
Pledged Interests
- -----------------
<TABLE>
<CAPTION>
Percentage of
Outstanding
Type of Certificate Interests
Name of Issuer Interests Number in Issuer
-------------- --------- --------- ---------
<S> <C> <C> <C>
</TABLE>
<PAGE>
PARENT GUARANTY
THIS GUARANTY AGREEMENT (this "Guaranty"), dated as of the 30th day of
September, 1996 (this "Guaranty"), is made between (a) PETERSEN HOLDINGS,
L.L.C., a Delaware limited liability company ("Holdings"), and BRIGHTVIEW
COMMUNICATIONS GROUP, INC., a Delaware corporation ("BrightView"; each of
Holdings and BrightView, a "Guarantor," and collectively, the "Guarantors"), and
(b) FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as administrative agent for the
banks and other financial institutions (collectively, the "Lenders") party to
the Credit Agreement referred to below (in such capacity, the "Administrative
Agent"), for the benefit of the Guaranteed Parties (as hereinafter defined).
Capitalized terms used herein without definition shall have the meanings given
to them in the Credit Agreement referred to below.
RECITALS
A. Petersen Publishing Company, L.L.C., a Delaware limited liability
company (the "Borrower"), the Lenders, CIBC Inc., as Documentation Agent, and
First Union National Bank of North Carolina, as Administrative Agent and as
Syndication Agent, are parties to a Credit Agreement, dated as of September 30,
1996 (as amended, modified or supplemented from time to time, the "Credit
Agreement"), providing for the availability of certain credit facilities to the
Borrower upon the terms and subject to the conditions set forth therein. The
Guarantors own all of the membership interests in the Borrower.
B. It is a condition to the extension of credit to the Borrower under the
Credit Agreement that each Guarantor shall have agreed, by executing and
delivering this Guaranty, to guarantee to the Guaranteed Parties the payment in
full of the Guaranteed Obligations (as hereinafter defined). The Guaranteed
Parties are relying on this Guaranty in their decision to extend credit to the
Borrower under the Credit Agreement, and would not enter into the Credit
Agreement without this Guaranty.
C. The Guarantors will obtain benefits as a result of the extension of
credit to the Borrower under the Credit Agreement, which benefits are hereby
acknowledged, and, accordingly, desire to execute and deliver this Guaranty.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Guaranteed Parties to enter into the Credit
Agreement and to induce the Lenders to extend credit to the Borrower thereunder,
each Guarantor hereby agrees as follows:
1. Guaranty. (a) Each Guarantor hereby irrevocably, absolutely and
--------
unconditionally, and jointly and severally:
(i) guarantees to the Lenders (including the Issuing Lender and
the Swingline Lender in their capacities as such, and including any Lender
in its capacity as a counterparty
<PAGE>
to any Interest Rate Protection Agreement with the Borrower), the
Documentation Agent and the Administrative Agent (collectively, the
"Guaranteed Parties") the full and prompt payment, at any time and from
time to time as and when due (whether at the stated maturity, by
acceleration or otherwise), of all Obligations of the Borrower under the
Credit Agreement and the other Credit Documents, including, without
limitation, all principal of and interest on the Loans, all Reimbursement
Obligations in respect of Letters of Credit, all fees, expenses,
indemnities and other amounts payable by the Borrower under the Credit
Agreement or any other Credit Document (including interest accruing after
the filing of a petition or commencement of a case by or with respect to
the Borrower seeking relief under any applicable federal and state laws
pertaining to bankruptcy, reorganization, arrangement, moratorium,
readjustment of debts, dissolution, liquidation or other debtor relief,
specifically including, without limitation, the Bankruptcy Code and any
fraudulent transfer and fraudulent conveyance laws (collectively,
"Insolvency Laws"), whether or not the claim for such interest is allowed
in such proceeding), all obligations of the Borrower to any Lender under
any Interest Rate Protection Agreement, and all Obligations that, but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, would become due, in each case whether now existing or hereafter
created or arising and whether direct or indirect, absolute or contingent,
due or to become due (all liabilities and obligations described in this
clause (i), collectively, the "Guaranteed Obligations"); and
(ii) agrees to pay or reimburse upon demand all reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred or paid by (y) any Guaranteed Party in connection with
any suit, action or proceeding to enforce or protect any rights of the
Guaranteed Parties hereunder and (z) the Administrative Agent in connection
with any amendment, modification or waiver hereof or consent pursuant
hereto (all liabilities and obligations described in this clause (ii),
collectively, the "Other Obligations"; and the Other Obligations, together
with the Guaranteed Obligations, the "Total Obligations").
(b) The guaranty of each Guarantor set forth in this SECTION 1 is a
guaranty of payment as a primary obligor, and not a guaranty of collection.
2. Guaranty Absolute. Each Guarantor agrees that its obligations
-----------------
hereunder are irrevocable, absolute and unconditional, are independent of the
Guaranteed Obligations and any Collateral or other security therefor or other
guaranty or liability in respect thereof, whether given by such Guarantor or any
other Person, and (to the full extent permitted by applicable law) shall not be
discharged, limited or otherwise affected by reason of any of the following,
whether or not such Guarantor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or
in any other term of, any Guaranteed Obligations or any guaranty or other
liability in respect thereof, or any amendment, modification or supplement
to, restatement of, or consent to any rescission or waiver of or departure
from, any provisions of the Credit Agreement, any other Credit Document or
any agreement or instrument delivered pursuant to any of the foregoing;
(ii) the invalidity or unenforceability of any Guaranteed
Obligations, any guaranty or other liability in respect thereof or any
provisions of the Credit Agreement, any other Credit Document or any
agreement or instrument delivered pursuant to any of the foregoing;
-2-
<PAGE>
(iii) the release of either Guarantor hereunder or the taking,
acceptance or release of other guarantees of any Guaranteed Obligations or
additional Collateral or other security for any Guaranteed Obligations or
for any guaranty or other liability in respect thereof;
(iv) any renewal, extension, increase, decrease, release,
discharge, modification, settlement, compromise or other action or inaction
in respect of any Guaranteed Obligations or any guaranty or other liability
in respect thereof (other than satisfaction of the Termination Requirements
(as hereinafter defined)), including any acceptance or refusal of any offer
or performance with respect to the same or the subordination of the same to
the payment of any other obligations;
(v) any agreement not to pursue or enforce or any failure to
pursue or enforce (whether voluntarily or involuntarily as a result of
operation of law, court order or otherwise) any right or remedy in respect
of any Guaranteed Obligations, any guaranty or other liability in respect
thereof or any Collateral or other security for any of the foregoing; any
sale, exchange, release, substitution, compromise or other action in
respect of any such Collateral or other security; or any failure to create,
protect, perfect, secure, insure, continue or maintain any Liens in any
such Collateral or other security;
(vi) the exercise of any right or remedy available under the
Credit Documents, at law, in equity or otherwise in respect of any
Collateral or other security for any Guaranteed Obligations or for any
guaranty or other liability in respect thereof, in any order and by any
manner thereby permitted, including, without limitation, foreclosure on any
such Collateral or other security by any manner of sale thereby permitted,
whether or not every aspect of such sale is commercially reasonable;
(vi) any bankruptcy, reorganization, arrangement, liquidation,
insolvency, dissolution, termination, reorganization or like change in the
corporate structure or existence of the Borrower or any other Person
directly or indirectly liable for any Guaranteed Obligations (it being
understood and agreed that, as between each Guarantor, on the one hand, and
the Guaranteed Parties, on the other hand, (a) the maturity of the
Guaranteed Obligations may be accelerated as provided in the Credit
Agreement for the purposes of such Guarantor's guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (b) in
the event of any declaration of acceleration of such Obligations as
provided in the Credit Agreement, such Obligations (whether or not due and
payable) shall forthwith become due and payable in full by such Guarantor
for purposes of this Guaranty);
(vi) any manner of application of any payments by or amounts
received or collected from any Person, by whomsoever paid and howsoever
realized, whether in reduction of any Guaranteed Obligations or any other
obligations of the Borrower or any other Person directly or indirectly
liable for any Guaranteed Obligations, regardless of what Guaranteed
Obligations may remain unpaid after any such application; or
(ix) any other circumstance that might otherwise constitute a
legal or equitable discharge of, or a defense, set-off or counterclaim
available to, the Borrower, either Guarantor or a surety or guarantor
generally, other than the occurrence of all of the following: (x) the
payment in full of the Total Obligations (other than indemnity obligations
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<PAGE>
not then due and payable and that survive termination of the Credit
Documents), (y) the termination or expiration of all Letters of Credit
under the Credit Agreement and (z) the termination of the Commitments under
the Credit Agreement (the events in clauses (x), (y) and (z) above,
collectively, the "Termination Requirements").
3. Waivers. Each Guarantor hereby knowingly, voluntarily and expressly
-------
waives to the full extent permitted by applicable law:
(i) presentment, demand for payment, demand for performance,
protest and notice of any other kind, including, without limitation, notice
of nonpayment or other nonperformance (including notice of default under
any Credit Document with respect to any Guaranteed Obligations), protest,
dishonor, acceptance hereof, extension of additional credit to the Borrower
and of any of the matters referred to in SECTION 2 and of any rights to
consent thereto;
(ii) any right to require the Guaranteed Parties or any of them,
as a condition of payment or performance by the Guarantors hereunder, to
proceed against, or to exhaust or have resort to any Collateral or other
security from or any deposit balance or other credit in favor of, the
Borrower or any other Person directly or indirectly liable for any
Guaranteed Obligations, or to pursue any other remedy or enforce any other
right; and any other defense based on an election of remedies with respect
to any Collateral or other security for any Guaranteed Obligations or for
any guaranty or other liability in respect thereof, notwithstanding that
any such election (including any failure to pursue or enforce any rights or
remedies) may impair or extinguish any right of indemnification,
contribution, reimbursement or subrogation or other right or remedy of
either Guarantor against the Borrower or any other Person directly or
indirectly liable for any Guaranteed Obligations or any such Collateral or
other security; and, without limiting the generality of the foregoing, each
Guarantor hereby specifically waives the benefits of Sections 26-7 through
26-9, inclusive, of the General Statutes of North Carolina, as amended from
time to time, and any similar statute or law of any other jurisdiction, as
the same may be amended from time to time;
(ii) any right or defense based on or arising by reason of any
right or defense of the Borrower or any other Person, including, without
limitation, any defense based on or arising from a lack of authority or
other disability of the Borrower or any other Person, the invalidity or
unenforceability of any Guaranteed Obligations, any Collateral or other
security therefor or any Credit Document or other agreement or instrument
delivered pursuant thereto, or the cessation of the liability of the
Borrower for any reason other than the satisfaction of the Termination
Requirements;
(iv) any defense based on the acts or omissions of any
Guaranteed Party in the administration of the Guaranteed Obligations, any
guaranty or other liability in respect thereof or any Collateral or other
security for any of the foregoing, and promptness, diligence or any
requirement that any Guaranteed Party create, protect, perfect, secure,
insure, continue or maintain any Liens in any such Collateral or other
security;
(v) any right to assert against any Guaranteed Party, as a
defense, counterclaim, crossclaim or set-off, any defense, counterclaim,
claim, right of recoupment or set-off that it
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<PAGE>
may at any time have against any Guaranteed Party (including, without
limitation, failure of consideration, statute of limitations, payment,
accord and satisfaction and usury), other than compulsory counterclaims;
and
(vi) any defense based on or afforded by any applicable law that
limits the liability of or exonerates guarantors or sureties or that may in
any other way conflict with the terms of this Guaranty.
4. Waiver of Subrogation; Subordination. Each Guarantor hereby
------------------------------------
knowingly, voluntarily and expressly waives, until satisfaction of the
Termination Requirements, all claims and rights that it may have against the
Borrower at any time as a result of any payment made under or in connection with
this Guaranty or the performance or enforcement hereof, including all rights of
subrogation to the rights of any Guaranteed Party against the Borrower, all
rights of indemnity, contribution or reimbursement against the Borrower, all
rights to enforce any remedies of any Guaranteed Party against the Borrower, and
any benefit of, and any right to participate in, any Collateral or other
security held by any Guaranteed Party to secure payment of the Guaranteed
Obligations, in each case whether such claims or rights arise by contract,
statute (including, without limitation, the Bankruptcy Code), common law or
otherwise. Each Guarantor agrees that all indebtedness and other obligations,
whether now or hereafter existing, of the Borrower to such Guarantor, including,
without limitation, any such indebtedness in any proceeding under the Bankruptcy
Code and any intercompany receivables, together with any interest thereon, shall
be, and hereby are, subordinated and made junior in right of payment to the
Total Obligations. Each Guarantor agrees further that if any amount shall be
paid to or any distribution received by such Guarantor (i) on account of any
such indebtedness at any time after the occurrence and during the continuance of
an Event of Default, or (ii) on account of any such rights of subrogation,
indemnity, contribution or reimbursement at any time prior to the satisfaction
of the Termination Requirements, such amount or distribution shall be deemed to
have been received and to be held in trust for the benefit of the Guaranteed
Parties, and shall forthwith be delivered to the Administrative Agent in the
form received (with any necessary endorsements in the case of written
instruments), to be applied against the Guaranteed Obligations, whether or not
matured, in accordance with the terms of the applicable Credit Documents and
without in any way discharging, limiting or otherwise affecting the liability of
such Guarantor under any other provision of this Guaranty.
5. Representations and Warranties. Each Guarantor represents and
------------------------------
warrants to the Guaranteed Parties as follows:
(a) Such Guarantor (i) is a limited liability company or corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the full limited liability company or
corporate power and authority to execute, deliver and perform this Guaranty and
the other Transaction Documents to which it is or will be a party, to own and
hold its property and to engage in its business as presently conducted, and
(iii) is duly qualified to do business as a foreign limited liability company or
corporation and is in good standing in each jurisdiction where the nature of its
business or the ownership of its properties requires it to be so qualified,
except where the failure to be so qualified could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
(b) Such Guarantor has taken, or on the Closing Date will have taken, all
necessary limited liability company or corporate action to execute, deliver and
perform this Guaranty and each
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<PAGE>
of the other Transaction Documents to which it is or will be a party, and has,
or on the Closing Date (or any later date of execution and delivery) will have,
validly executed and delivered this Guaranty and each of the other Transaction
Documents to which it is or will be a party. This Guaranty constitutes, and upon
execution and delivery thereof each of such other Transaction Documents will
constitute, the legal, valid and binding obligation of such Guarantor,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general equitable
principles or principles of good faith and fair dealing.
(c) The execution, delivery and performance by such Guarantor of this
Guaranty and each of the other Transaction Documents to which it is or will be a
party, compliance by it with the terms hereof and thereof, and the consummation
of the Transactions, do not and will not (i) violate any provision of its
articles of organization, certificate of incorporation, operating agreement or
bylaws, as applicable, or contravene any other Requirement of Law applicable to
it, (ii) conflict with, result in a breach of or constitute (with notice, lapse
of time or both) a default under any indenture, agreement or other instrument to
which it is a party, by which it or any of its properties is bound or to which
it is subject, (iii) require any approval of its stockholders or members or any
approval or consent of any Person under any agreement to which it is a party,
except for such approvals or consents which will be obtained on or before the
Closing Date and disclosed in writing to the Lenders or such approvals or
consents the failure of which to obtain could not reasonably be expected, singly
or in the aggregate, to have a Material Adverse Effect, or (iv) except for the
Liens granted pursuant to the Security Documents, result in or require the
creation or imposition of any Lien upon any of its properties or assets.
(d) No consent, approval, authorization or other action by, notice to, or
registration or filing with, any Governmental Authority or other Person is or
will be required as a condition to or otherwise in connection with the due
execution, delivery and performance by such Guarantor of this Guaranty or any of
the other Transaction Documents to which it is or will be a party or the
legality, validity or enforceability hereof or thereof, other than (i) consents,
authorizations and filings in connection with the Petersen Acquisition that have
been (or on or prior to the Closing Date will have been) made or obtained and
that are (or on the Closing Date will be) in full force and effect, which
consents, authorizations and filings are listed on SCHEDULE 5.4 to the Credit
Agreement, and (ii) filings of Uniform Commercial Code financing statements and
other instruments and actions necessary to perfect the Liens created by the
Security Documents.
(e) There are no actions, investigations, suits or proceedings pending or,
to the knowledge of such Guarantor (after due investigation) threatened, at law,
in equity or in arbitration, before any court, other Governmental Authority or
other Person, (i) against or affecting such Guarantor or any of its properties
that could, if adversely determined, be reasonably expected to have a Material
Adverse Effect, or (ii) with respect to this Guaranty, any of the other
Transaction Documents or any of the Transactions.
(f) All representations and warranties contained in the Credit Agreement
or any of the other Credit Documents that relate to such Guarantor are true and
correct in all material respects.
(g) Such Guarantor has been provided with a true and complete copy of the
executed Credit Agreement, as in effect as of the date hereof, and its principal
officers are familiar with the contents thereof, particularly insofar as the
contents thereof relate or apply to such Guarantor.
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<PAGE>
6. Financial Condition of the Borrower. Each Guarantor represents that
-----------------------------------
it has knowledge of the Borrower's financial condition and affairs and that it
has adequate means to obtain from the Borrower on an ongoing basis information
relating thereto and to the Borrower's ability to pay and perform the Guaranteed
Obligations, and agrees to assume the responsibility for keeping, and to keep,
so informed for so long as this Guaranty is in effect with respect to such
Guarantor. Each Guarantor agrees that the Guaranteed Parties shall have no
obligation to investigate the financial condition or affairs of the Borrower for
the benefit of either Guarantor nor to advise either Guarantor of any fact
respecting, or any change in, the financial condition or affairs of the Borrower
that might become known to any Guaranteed Party at any time, whether or not such
Guaranteed Party knows or believes or has reason to know or believe that any
such fact or change is unknown to either Guarantor, or might (or does)
materially increase the risk of either Guarantor as guarantor, or might (or
would) affect the willingness of either Guarantor to continue as a guarantor of
the Guaranteed Obligations.
7. Negative Covenants. Each Guarantor covenants and agrees that, until
------------------
the termination of the Commitments and all Letters of Credit and the payment in
full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
under the Credit Agreement:
(a) Such Guarantor will not incur, create, assume or suffer to exist any
Indebtedness (including, without limitation, any Contingent Obligations), except
for (i) the Indebtedness created by this Guaranty, (ii) guaranties of the
Subordinated Bridge Indebtedness, the Subordinated Term Indebtedness and any
Permitted Refinancing Indebtedness (provided that such guaranties are
--------
subordinated to the obligations of the Guarantors under this Guaranty to at
least the same extent and in the same manner as the Subordinated Bridge
Indebtedness, the Subordinated Term Indebtedness or Permitted Refinancing
Indebtedness, as the case may be, is (or are) subordinated to the Guaranteed
Obligations), and (iii) Indebtedness in an aggregate principal amount not
exceeding $5,000,000 outstanding at any time issued to repurchase its 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 the Guaranteed Obligations on terms and conditions satisfactory to
the Administrative Agent in its sole discretion (which terms and conditions may,
at the sole discretion of the Administrative Agent, provide that such
Indebtedness shall not mature or require any cash payment of principal or
interest at any time prior to the first anniversary of the Tranche B Maturity
Date)).
(b) Such Guarantor shall not own, lease, manage or otherwise operate any
assets or properties, or make any investments, loans or advances to any Person,
in each case other than in connection with the activities described in
subsection (c) below.
(c) Such Guarantor shall not conduct, transact or otherwise engage, or
commit to transact, conduct or otherwise engage, in any business or operations
other than (i) the consummation of the Transactions, (ii) the ownership of
equity interests in the Borrower (and, as to BrightView, also the ownership of
equity interests in Holdings) and the exercise of rights and performance of
obligations in connection therewith, (iii) the entry into, and exercise of
rights and performance of obligations in respect of, (A) this Guaranty and any
other Transaction Documents to which it is or may become a party, (B) contracts
and agreements with or for the benefit of officers, directors and employees of
it or any Subsidiary thereof relating to their employment or directorships, (C)
insurance policies and related contracts and agreements and (D) equity
subscription agreements, registration
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<PAGE>
rights agreements, warrant agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, (iv) the
offering, issuance and sale of its equity securities to the extent such
offering, issuance or sale does not constitute a Default or Event of Default,
(v) the filing of registration statements, and compliance with applicable
reporting and other obligations, under federal, state or other securities laws,
(vi) the performance of obligations under and compliance with its articles of
organization and operating agreement, or certificate of incorporation and by-
laws, or any applicable law, ordinance, regulation, rule, order, judgment,
decree or permit, including, without limitation, as a result of or in connection
with the activities of its Subsidiaries, (vii) the performance of contractual
obligations not otherwise prohibited hereunder, (viii) the incurrence and
payment of its business expenses and any taxes for which it may be liable, and
(ix) other activities reasonably incidental or related to the foregoing.
(d) Such Guarantor will (i) maintain and preserve in full force and effect
its limited liability company or corporate existence, as applicable, and (ii)
comply in all respects with all Requirements of Law applicable in respect of the
conduct of its business and the ownership and operation of its properties,
except to the extent the failure so to comply could not be reasonably expected
to have a Material Adverse Effect.
(e) Such Guarantor will contribute to the Borrower, promptly upon its
receipt thereof, such of the Net Cash Proceeds received by it from any Debt
Issuance or Equity Issuance as shall enable the Borrower to comply with its
obligations under SECTION 2.6(F) of the Credit Agreement arising as a result of
such Debt Issuance or Equity Issuance.
(f) Such Guarantor will deliver to the Lenders, promptly upon the sending,
filing or receipt thereof, all reports and other information sent, filed or
received by it of the types described in SECTIONS 6.2(D) and 6.2(E) of the
Credit Agreement.
(g) Such Guarantor shall not take or omit to take any action if such
action or omission would result in a violation of any of the covenants of the
Borrower contained in ARTICLE VI, ARTICLE VII or ARTICLE VIII of the Credit
Agreement.
8. Payments; Application; Set-Off. (a) Each Guarantor agrees that, upon
------------------------------
the failure of the Borrower to pay any Guaranteed Obligations when and as the
same shall become due (whether at the stated maturity, by acceleration or
otherwise), and without limitation of any other right or remedy that any
Guaranteed Party may have at law, in equity or otherwise against such Guarantor,
such Guarantor will forthwith pay or cause to be paid to the Administrative
Agent, for the benefit of the Guaranteed Parties, an amount equal to the amount
of the Guaranteed Obligations then due and owing as aforesaid.
(b) All payments made by each Guarantor hereunder will be made in Dollars
to the Administrative Agent, without set-off, counterclaim or other defense and,
in accordance with SECTION 2.17 of the Credit Agreement, free and clear of and
without deduction for any Taxes, each Guarantor hereby agreeing to comply with
and be bound by the provisions of SECTION 2.17 of the Credit Agreement in
respect of all payments made by it hereunder and the provisions of which Section
are hereby incorporated into and made a part of this Guaranty by this reference
as if set forth herein at length.
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<PAGE>
(c) All payments made hereunder shall be applied upon receipt as follows:
(i) first, to the payment of all Other Obligations owing to the
Administrative Agent;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Total Obligations
owing to the Guaranteed Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this Guaranty,
to the Guarantors or any other Person lawfully entitled to receive such
surplus.
(d) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Guaranteed Party that
has entered into an Interest Rate Protection Agreement with the Borrower for a
determination (which such Guaranteed Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding Guaranteed
Obligations owed to such Guaranteed Party under any such Interest Rate
Protection Agreement. Unless it has actual knowledge (including by way of
written notice from any such Guaranteed Party) to the contrary, the
Administrative Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements or Obligations in respect thereof are in
existence between any Guaranteed Party and the Borrower.
(e) The Guarantors shall remain jointly and severally liable to the extent
of any deficiency between the amount of all payments made hereunder and the
aggregate amount of the sums referred to in clauses (i) and (ii) of subsection
(c) above.
(f) In addition to all other rights and remedies available under the
Credit Documents or applicable law or otherwise, upon and at any time after the
occurrence and during the continuance of any Event of Default, each Guaranteed
Party may, and is hereby authorized by each Guarantor, at any such time and from
time to time, to the fullest extent permitted by applicable law, without
presentment, demand, protest or other notice of any kind, all of which are
hereby knowingly and expressly waived by each Guarantor, to set off and to apply
any and all deposits (general or special, time or demand, provisional or final)
and any other property at any time held (including at any branches or agencies,
wherever located), and any other indebtedness at any time owing, by such
Guaranteed Party to or for the credit or the account of such Guarantor against
any or all of the obligations of such Guarantor to such Guaranteed Party
hereunder now or hereafter existing, whether or not such obligations may be
contingent or unmatured, each Guarantor hereby granting to each Guaranteed Party
a continuing security interest in and Lien upon all such deposits and other
property as security for such obligations. Each Guaranteed Party agrees to
notify any affected Guarantor promptly after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
- -------- -------
validity of such set-off and application.
9. Enforcement. The Guaranteed Parties agree that, except as provided in
-----------
SECTION 8(F), this Guaranty may be enforced only by the Administrative Agent,
acting upon the instructions or with the consent of the Required Lenders as
provided for in the Credit Agreement, and that no Guaranteed Party shall have
any right individually to enforce or seek to enforce this Guaranty or to realize
upon any Collateral or other security given to secure the payment and
performance of the Guarantors' obligations hereunder. The obligations of each
Guarantor hereunder are independent of the
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<PAGE>
Guaranteed Obligations, and a separate action or actions may be brought against
either Guarantor whether or not action is brought against the Borrower or the
other Guarantor and whether or not the Borrower or the other Guarantor is joined
in any such action. Each Guarantor agrees that to the extent all or part of any
payment of the Guaranteed Obligations made by any Person is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid by or on behalf of any Guaranteed Party to a trustee, receiver or any
other party under any Insolvency Laws (the amount of any such payment, a
"Reclaimed Amount"), then, to the extent of such Reclaimed Amount, this Guaranty
shall continue in full force and effect or be revived and reinstated, as the
case may be, as to the Guaranteed Obligations intended to be satisfied as if
such payment had not been received; and each Guarantor acknowledges that the
term "Guaranteed Obligations" includes all Reclaimed Amounts that may arise from
time to time. Notwithstanding any other provisions contained herein or in any
other Credit Document, no provision of this Guaranty shall require or permit the
collection from either Guarantor of interest in excess of the maximum rate or
amount that such Guarantor may be required or permitted to pay pursuant to
applicable law.
10. Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by either Guarantor
from, any provision of this Guaranty, shall be effective unless in a writing
executed and delivered in accordance with SECTION 11.6 of the Credit Agreement,
and then the same shall be effective only in the specific instance and for the
specific purpose for which given.
11. Continuing Guaranty; Term; Successors and Assigns; Assignment;
--------------------------------------------------------------
Survival. This Guaranty is a continuing guaranty and covers all of the
- --------
Guaranteed Obligations as the same may arise and be outstanding at any time and
from time to time from and after the date hereof, and shall (i) remain in full
force and effect until satisfaction of all of the Termination Requirements, (ii)
be binding upon and enforceable against each Guarantor and its successors and
assigns (provided, however, that no Guarantor may sell, assign or transfer any
-------- -------
of its rights, interests, duties or obligations hereunder without the prior
written consent of all of the Lenders) and (iii) inure to the benefit of and be
enforceable by each Guaranteed Party and its successors and assigns. All
representations, warranties, covenants and agreements herein shall survive the
execution and delivery of this Guaranty.
12. Governing Law; Consent to Jurisdiction. THIS GUARANTY SHALL BE
--------------------------------------
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE GUARANTEED PARTIES AND THE
GUARANTORS DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, EACH GUARANTOR HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR
ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH
CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER
CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY
OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH ANY GUARANTEED PARTY
OR SUCH GUARANTOR IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF,
OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY GUARANTEED PARTY OR SUCH GUARANTOR.
EACH GUARANTOR IRREVOCABLY
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<PAGE>
AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT
RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY
HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
--------------------
THE CONDUCT OF ANY SUCH PROCEEDING. EACH GUARANTOR CONSENTS THAT ALL SERVICE OF
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS
ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) BUSINESS DAYS
AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY
ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY GUARANTEED PARTY
TO BRING ANY ACTION OR PROCEEDING AGAINST EITHER GUARANTOR IN THE COURTS OF ANY
OTHER JURISDICTION.
13. Arbitration; Preservation and Limitation of Remedies. (a) Upon
----------------------------------------------------
demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Guaranty or any other Credit Document ("Disputes")
between or among the Guarantors and the Guaranteed Parties, or any of them,
shall be resolved by binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from documents
executed in the future, or claims arising out of or connected with the
transactions contemplated by this Guaranty, the Credit Agreement and the other
Credit Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA"), as in effect from time to time,
and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be
conducted in the city in which the principal office of the Administrative Agent
is located. The expedited procedures set forth in Rule 51 et seq. of the
-- ---
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or, if such person is not available to serve, the
single arbitrator may be a licensed attorney. Notwithstanding the foregoing,
this arbitration provision does not apply to Disputes under or related to
Interest Rate Protection Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, independently or in connection with
an arbitration proceeding or after an arbitration action is brought. Any party
hereto shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any Collateral by exercising a power of sale
granted pursuant to any of the Credit Documents or under applicable law or by
judicial foreclosure and sale, including a proceeding to confirm the sale; (ii)
all rights of self-help, including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies, including injunctive relief,
sequestration, garnishment, attachment, appointment of a receiver and filing an
involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of
-11-
<PAGE>
judgment. Preservation of these remedies does not limit the power of an
arbitrator to grant similar remedies that may be requested by a party in a
Dispute. The parties hereto agree that no party shall have a remedy of punitive
or exemplary damages against any other party in any Dispute, and each party
hereby waives any right or claim to punitive or exemplary damages that it has
now or that may arise in the future in connection with any Dispute, whether such
Dispute is resolved by arbitration or judicially.
14. Notices. All notices and other communications provided for hereunder
-------
shall be given in the manner set forth in and subject to the provisions of
SECTION 11.5 of the Credit Agreement and shall be addressed (a) if to either
Guarantor, in care of the Borrower and at the Borrower's address for notices set
forth in SECTION 11.5 of the Credit Agreement, and (b) if to any Guaranteed
Party, at its address for notices set forth in SECTION 11.5 of the Credit
Agreement; or to such other address as any of the Persons listed above may
designate for itself by like notice to the other Persons listed above; and in
each case, with copies to such other Persons as may be specified under the
provisions of the Credit Agreement.
15. No Waiver. The rights and remedies of the Guaranteed Parties
---------
expressly set forth in this Guaranty and the other Credit Documents are
cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of any Guaranteed Party in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Default or Event of Default. No course of dealing between either
Guarantor and any Guaranteed Party or their agents or employees shall be
effective to amend, modify or discharge any provision of this Guaranty or any
other Credit Document or to constitute a waiver of any Default or Event of
Default. No notice to or demand upon either Guarantor in any case shall entitle
such Guarantor or the other Guarantor to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the right of any
Guaranteed Party to exercise any right or remedy or take any other or further
action in any circumstances without notice or demand.
16. Severability. To the extent any provision of this Guaranty is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Guaranty in any jurisdiction.
17. Construction. The headings of the various sections and subsections of
------------
this Guaranty have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular.
18. Counterparts. This Guaranty may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their duly authorized officers as of the date first above written.
PETERSEN HOLDINGS, L.L.C.
By: ?????????
----------------------------------
Title: President
-------------------------------
BRIGHTVIEW COMMUNICATIONS GROUP, INC.
By: ??????????
----------------------------------
Title: Chief Financial Officer
-------------------------------
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as
Administrative Agent
?????????
By: ------------------------------
Title: SVP
------------------------------
-13-
<PAGE>
SENIOR SUBORDINATED CREDIT AGREEMENT
dated as of
September 30, 1996
among
PETERSEN PUBLISHING COMPANY, L.L.C.,
as Borrower,
THE GUARANTORS named herein,
THE LENDERS named herein
and
FIRST UNION CORPORATION, as Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
RECITALS.................................................................................. 1
SECTION 1 DEFINITIONS.................................................................... 1
1.1 Certain Defined Terms........................................................... 1
1.2 Accounting Terms................................................................ 31
1.3 Other Definitional Provisions; Construction..................................... 31
SECTION 2 AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTE............................. 31
2.1 Bridge Loan and Bridge Note..................................................... 31
A. Bridge Loan Commitment...................................................... 31
B. Notice of Borrowing......................................................... 31
C. Disbursement of Funds....................................................... 32
D. Bridge Notes................................................................ 32
E. Scheduled Payment of Bridge Loan............................................ 32
F. Termination of Bridge Loan Commitment....................................... 32
G. Pro Rata Borrowings......................................................... 32
2.2 Term Loan and Term Note......................................................... 33
A. Term Loan Commitment........................................................ 33
B. Notice of Conversion/Borrowing.............................................. 33
C. Making of Term Loan......................................................... 33
D. Maturity of Term Loan....................................................... 33
E. Term Notes.................................................................. 33
2.3 Interest on the Loans........................................................... 34
A. Rate of Interest............................................................ 34
B. Interest Payments........................................................... 35
C. PostMaturity Interest....................................................... 35
D. Computation of Interest..................................................... 35
2.4 Fees............................................................................ 36
2.5 Prepayments and Payments........................................................ 36
A. Prepayments................................................................. 36
B. Manner and Time of Payment.................................................. 38
C. Payments on NonBusiness Days................................................ 38
D. Notation of Payment......................................................... 38
2.6 Use of Proceeds................................................................. 38
A. Bridge Loan................................................................. 38
B. Term Loan................................................................... 39
C. Margin Regulations.......................................................... 39
SECTION 3 CONDITIONS..................................................................... 39
3.1 Conditions to Bridge Loan....................................................... 39
3.2 Conditions to Term Loan......................................................... 46
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
SECTION 4 REPRESENTATIONS AND WARRANTIES................................................. 48
4.1 Corporate Organization and Power................................................ 48
4.2 Authorization; Enforceability................................................... 48
4.3 No Violation.................................................................... 49
4.4 Governmental Authorization; Permits............................................. 49
4.5 Litigation...................................................................... 50
4.6 Taxes........................................................................... 50
4.7 Subsidiaries.................................................................... 51
4.8 Full Disclosure................................................................. 51
4.9 Margin Regulations.............................................................. 51
4.10 Financial Matters.............................................................. 51
4.11 Ownership of Properties........................................................ 54
4.12 ERISA.......................................................................... 55
4.13 Environmental Matters.......................................................... 55
4.14 Compliance With Governing Documents, Decrees and Laws.......................... 57
4.15 Labor Relations................................................................ 57
4.16 Regulated Industries........................................................... 58
4.17 Insurance...................................................................... 58
4.18 Certain Contracts.............................................................. 58
4.19 Capitalization................................................................. 59
4.20 Transaction Documents.......................................................... 59
4.21 Broker's or Finder's Fees...................................................... 59
4.22 Guarantees..................................................................... 60
4.23 Senior Subordinated Indenture; Etc............................................. 60
SECTION 5 AFFIRMATIVE COVENANTS.......................................................... 61
5.1 Financial Statements............................................................ 61
5.2 Other Business and Financial Information........................................ 64
5.3 Existence; Franchise; Maintenance of Properties................................. 67
5.4 Compliance with Laws............................................................ 68
5.5 Payment of Obligations.......................................................... 68
5.6 Insurance....................................................................... 68
5.7 Maintenance of Books and Records; Inspection.................................... 68
5.8 Fiscal Year..................................................................... 69
5.9 Exchange of Term Notes.......................................................... 69
5.10 Payments in U.S. Dollars....................................................... 70
5.11 Register....................................................................... 70
5.12 Lenders Meeting................................................................ 71
5.13 Additional Guarantors.......................................................... 71
5.14 Permitted Acquisitions......................................................... 71
5.15 Creation or Acquisition of Subsidiaries......................................... 74
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
SECTION 6 NEGATIVE COVENANTS.............................................................. 75
6.1 Indebtedness.................................................................... 75
6.2 Liens........................................................................... 76
6.3 Restricted Payments............................................................. 79
6.4 Investments..................................................................... 80
6.5 Senior Subordinated Indebtedness................................................ 82
6.6 Merger; Consolidation........................................................... 82
6.7 Limitation on Certain Restrictions.............................................. 83
6.8 Transactions with Affiliates.................................................... 84
6.9 Permitted Lines of Business..................................................... 84
6.10 Amendments or Waivers of Certain Documents..................................... 85
6.11 Refinancing of the Loans in Part............................................... 85
6.12 Asset Dispositions............................................................. 85
SECTION 7 EVENTS OF DEFAULT.............................................................. 85
7.1 Failure To Make Payments When Due............................................... 85
7.2 Default in Other Agreements..................................................... 86
7.3 Breach of Certain Covenants..................................................... 86
7.4 Breach of Warranty.............................................................. 86
7.5 Other Defaults Under Agreement or Loan Documents................................ 86
7.6 Voluntary Bankruptcy; Appointment of Custodian, Etc............................. 86
7.7 Involuntary Bankruptcy; Appointment of Custodian................................ 87
7.8 Judgments and Attachments....................................................... 87
7.9 Dissolution..................................................................... 87
7.10 Guarantee...................................................................... 87
7.11 Foreclosure.................................................................... 88
SECTION 8 SUBORDINATION.................................................................. 89
8.1 Obligations Subordinated to Senior Indebtedness of the Borrower................. 89
8.2 Priority and Payment Over of Proceed in Certain Events.......................... 89
8.3 Payments May Be Paid Prior to Dissolution....................................... 92
8.4 Rights of Holders of Senior Indebtedness of the Borrower Not To Be Impaired..... 92
8.5 Subrogation..................................................................... 93
8.6 Obligations of the Borrower Unconditional....................................... 93
8.7 Lenders Authorize Agent To Effectuate Subordination............................. 94
SECTION 9 THE AGENT...................................................................... 95
9.1 Appointment..................................................................... 95
9.2 Delegation of Duties............................................................ 95
9.3 Exculpatory Provisions.......................................................... 95
9.4 Reliance by Agent............................................................... 96
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
9.5 Notice of Default.............................................................. 97
9.6 Non-Reliance on Agent and Other Lenders........................................ 97
9.7 Indemnification................................................................ 98
9.8 Agent in Its Individual Capacity............................................... 98
9.9 Resignation of the Agent; Successor Agent...................................... 98
SECTION 10 GUARANTEE.................................................................... 99
10.1 Unconditional Guarantee....................................................... 99
10.2 Subordination of Guarantee.................................................... 100
10.3 Severability.................................................................. 100
10.4 Release of a Guarantor........................................................ 100
10.5 Limitation of Guarantor's Liability........................................... 101
10.6 Guarantors May Consolidate, etc., on Certain
Term.......................................................................... 101
10.7 Contribution.................................................................. 102
10.8 Waiver of Subrogation......................................................... 102
10.9 Evidence of Guarantee......................................................... 103
10.10 Waiver of Stay, Extension or Usury Laws...................................... 103
10.11 Guarantor Covenant........................................................... 103
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS....................................... 104
11.1 Guarantee Obligations Subordinated to Senior
Indebtedness.................................................................. 104
11.2 Priority and Payment Over of Proceeds in Certain
Events........................................................................ 104
11.3 Payments May Be Paid Prior to Dissolution..................................... 107
11.4 Rights of Holders of Guarantor Senior Indebtedness
Not To Be Impaired............................................................. 107
11.5 Subrogation................................................................... 108
11.6 Obligations of the Guarantors Unconditional................................... 108
11.7 Lenders Authorize Agent to Effectuate
Subordination................................................................. 109
SECTION 12 MISCELLANEOUS................................................................ 110
12.1 Representation of the Lenders................................................. 110
12.2 Participations in and Assignments of Loans and
Notes......................................................................... 110
12.3 Fees and Expenses............................................................. 112
12.4 Indemnity..................................................................... 113
12.5 Setoff........................................................................ 113
12.6 Amendments and Waivers........................................................ 114
12.7 Independence of Covenants..................................................... 115
12.8 Entirety...................................................................... 115
12.9 Notices....................................................................... 115
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Section Heading Page
- ------- ------- ----
<S> <C> <C>
12.10 Survival of Warranties and Certain Agreements................................ 116
12.11 Failure or Indulgence Not Waiver; Remedies Cumulative........................ 116
12.12 Severability................................................................. 116
12.13 Headings..................................................................... 116
12.14 Applicable Law............................................................... 117
12.15 Successors and Assigns; Subsequent Holders of Notes.......................... 117
12.16 Counterparts; Effectiveness.................................................. 117
12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial......................... 117
12.18 Payments Pro Rata............................................................ 118
12.19 Taxes........................................................................ 119
12.20 Replacement of Lenders....................................................... 121
12.21 Waiver of Stay, Extension or Usury Laws...................................... 122
12.22 Requirements of Law.......................................................... 122
12.23 Confidentiality.............................................................. 123
</TABLE>
-v-
<PAGE>
SCHEDULES
A EXISTING LIENS
B CONSOLIDATED OPERATING CASH FLOW
C CONSENTS AND APPROVALS
D TAXES
E LEASES
F INSURANCE
G CERTAIN CONTRACTS
H CAPITAL STOCK
I INVESTMENTS
J TRANSACTIONS WITH AFFILIATES
EXHIBITS
I FORM OF BRIDGE NOTE
II FORM OF TERM NOTE
III FORM OF COMPLIANCE CERTIFICATE
IV-A FORM OF NOTICE OF BORROWING
IV-B FORM OF NOTICE OF CONVERSION
V TERM SHEET FOR REGISTRATION RIGHTS AGREEMENT AND SENIOR SUBORDINATED
INDENTURE
VII FORM OF OPINION OF KIRKLAND & ELLIS - COUNSEL FOR THE
BORROWER AND THE GUARANTORS
VIII FORM OF OPINION OF CAHILL GORDON & REINDEL - COUNSEL
FOR THE LENDERS
IX FORM OF NOTATION OF GUARANTEE
X FORM OF FINANCIAL CONDITION CERTIFICATE
-vi-
<PAGE>
This Senior Subordinated Credit Agreement is dated as of September 30,
1996, and entered into by and among Petersen Publishing Company, L.L.C., a
Delaware limited liability corporation with its principal offices in Los
Angeles, California (the "Borrower"), the Guarantors named on the signature
pages hereto, the Lenders named on the signature pages hereto (the "Lenders")
and First Union Corporation ("First Union"), as agent for the Lenders (in such
capacity, the "Agent").
RECITALS
WHEREAS, the Borrower is owned by Petersen Holdings, L.L.C., a
Delaware limited liability company ("Holdings"), which holds a 99.9% managing
membership interest in the Borrower), and by BrightView Communications Group,
Inc., a Delaware corporation ("BrightView"), which holds a 0.1% passive
membership interest in the Borrower.
WHEREAS, the Borrower proposes to acquire from Petersen Publishing
Company, a California corporation ("Petersen"), the assets and certain
liabilities relating to Petersen's publishing and media businesses (the
"Petersen Acquisition"), pursuant to an Asset Purchase Agreement, dated as of
August 15, 1996, by and between BrightView and Petersen (as amended, modified or
supplemented from time to time in accordance with the terms of this Agreement,
the "Asset Purchase Agreement").
WHEREAS, the Borrower desires that the Lenders extend a senior
subordinated credit facility to the Borrower in connection with the Petersen
Acquisition (as defined herein);
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereby agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this
---------------------
Agreement shall have the following meanings:
"Acquisition" shall mean any transaction or series of related
transactions, consummated on or after the date hereof, by
<PAGE>
-2-
which the Borrower directly, or indirectly through one or more Subsidiaries, (i)
acquires any ongoing business, any publication or brand name and the related
rights and assets, or all or substantially all of the assets, of any Person,
whether through purchase of assets, merger or otherwise, or (ii) acquires
securities or other ownership interests of any Person having at least a majority
of combined voting power of the then outstanding securities or other ownership
interests of such Person.
"Acquisition Amount" shall mean, with respect to any Acquisition, the
sum (without duplication) of (i) the amount of cash paid by the Borrower and its
Subsidiaries in connection with such Acquisition, (ii) the Fair Market Value of
all Capital Stock of the Borrower issued or given in connection with such
Acquisition, (iii) the amount (determined by using the face amount or the amount
payable at maturity, whichever is greater) of all Indebtedness incurred, assumed
or acquired by the Borrower and its Subsidiaries in connection with such
Acquisition, (iv) all additional purchase price amounts in connection with such
Acquisition in the form of earnouts and other contingent obligations that should
be recorded as a liability on the balance sheet of the Borrower and its
Subsidiaries or expensed, in either event in accordance with GAAP, Regulation S-
X under the Securities Act of 1933, as amended, or any other rule or regulation
of the Securities and Exchange Commission, (v) all amounts paid in respect of
covenants not to compete, consulting agreements and other affiliated contracts
in connection with such Acquisition, (vi) the amount of all transaction fees and
expenses (including, without limitation, legal, accounting and finders' fees and
expenses) incurred by the Borrower and its Subsidiaries in connection with such
Acquisition and (vii) the aggregate fair market value of all other consideration
given by the Borrower and its Subsidiaries in connection with such Acquisition.
"Adjusted Net Assets" shall have the meaning provided in SECTION 10.7.
"Affiliate" shall mean, as to any Person, each other Person that
directly, or indirectly through one or more
<PAGE>
-3-
intermediaries, owns or controls, is controlled by or under common control with,
such Person or is a director or officer of such Person. For purposes of this
definition, with respect to any Person "control" shall mean (i) the possession,
direct or indirect, 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 contract or otherwise, or (ii) the beneficial ownership of
securities or other ownership interests of such Person having 10% or more of the
combined voting power of the then outstanding securities or other ownership
interests of such Person ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors or
other governing body of such Person; provided that none of First Union, CIBC or
--------
any of their respective Affiliates shall be treated as an Affiliate of the
Borrower or of any Subsidiary of the Borrower.
"Agent" has the meaning ascribed to such term in the introduction to
this Agreement.
"Agreement" means this Senior Subordinated Credit Agreement dated as
of September 30, 1996, as it may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof.
"Applicable Interest Rate" means (i) for each Quarterly Period prior
to the Conversion Date, the Applicable Prime Rate then in effect and (ii) for
each Quarterly Period on and after the Conversion Date, the greatest of, as of
the Interest Rate Determination Date, (a) the Applicable Prime Rate then in
effect, (b) the Applicable LIBOR Rate then in effect and (c) the Application
Treasury Rate then in effect in each case as determined on the applicable
Interest Rate Determination Date; provided, however, that in no event shall the
-------- -------
Applicable Interest Rate exceed 18% per annum.
"Applicable LIBOR Rate" means (i) an interest rate per annum equal to
the rate of interest appearing on Telerate Page 3750 (or any successor page) or
if no such rate is available, or at the
<PAGE>
-4-
option of the Agent in any event, the rate of interest determined by the Agent
to be the rate or the arithmetic mean of rates (rounded upward, if necessary, to
the nearest 1/16 of one percentage point) at which Dollar deposits in
immediately available funds are offered by First Union to first-tier banks in
the London interbank Eurodollar market, at approximately 11:00 a.m., London
time, on the Interest Rate Determination Date for a 3-month period at the amount
of the Loans outstanding plus (ii) the Applicable LIBOR Rate Spread.
"Applicable LIBOR Rate Spread" means 8.50% per annum for the period
from and including the Conversion Date to but excluding the 90th day following
the Conversion Date and for each subsequent 90-day period the Applicable LIBOR
Rate Spread in effect for the immediately preceding 90-day period plus .50% per
annum.
"Applicable Prime Rate" means (i) the rate which First Union
Corporation announces from time to time as its prime lending rate, the
Applicable Prime Rate to change when and as such prime lending rate changes,
plus (ii) the Applicable Prime Rate Spread. The Applicable Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. First Union Corporation or its affiliates may
make commercial loans or other loans at rates of interest at, above or below the
Applicable Prime Rate.
"Applicable Prime Rate Spread" means 4.25% per annum for the period
from and including the Closing Date to but excluding the 90th day following the
Closing Date and for each subsequent 90-day period the Applicable Prime Rate
Spread in effect for the immediately preceding 90-day period plus .50% per
annum.
"Applicable Treasury Rate" means (i) the rate equal to the yield
(expressed as a rate per annum) in the secondary market on United States
Treasury securities of substantially the same principal amount as the Loans and
having a term to maturity of (a) one year, (b) three years, (c) five years and
(d) ten years, whichever of (a), (b), (c) and (d) has the greatest yield as of
the Interest Rate Determination Date (the determination of yield to be
<PAGE>
-5-
based upon quotes obtained by the Agent from at least two established dealers in
such market), plus (ii) the Applicable Treasury Rate Spread.
"Applicable Treasury Rate Spread" means 8.50% per annum for the period
from and including the Conversion Date to but excluding the 90th day following
the Conversion Date and for each subsequent 90-day period the Applicable
Treasury Rate Spread for the immediately preceding 90-day period plus .50% per
annum.
"Asset Disposition" shall mean any sale, assignment, lease,
conveyance, transfer or other disposition (whether in one or a series of
transactions) of all or any portion of its assets, business or properties
(including, without limitation, any Capital Stock of any Subsidiary), or enter
into any arrangement with any Person providing for the lease by the Borrower or
any of its Subsidiaries as lessee of any asset that has been sold or transferred
by the Borrower or such Subsidiary to such Person, or agree to do any of the
foregoing, except for:
(i) sales of inventory and other assets and licenses or leases
of intellectual property, in each case in the ordinary course of
business;
(ii) the sale or exchange of used or obsolete equipment to the
extent (y) the proceeds of such sale are applied towards, or such
equipment is exchanged for, replacement equipment or (z) such
equipment is no longer necessary for the operations of the Borrower or
its applicable Subsidiary in the ordinary course of business;
(iii) the sale or other disposition of any or all right, title and
interest of the Borrower and its Subsidiaries in and to the assets and
properties (other than cash) directly associated with the publications
listed in SCHEDULE 8.4 to the Senior Credit Facility (such assets and
properties, collectively, the "Scheduled Titles"), and the sale or
other disposition of any Investments made by the contribution of any
of the
<PAGE>
-6-
Scheduled Titles to a joint venture, partnership or other
Person (which may be a Subsidiary) as permitted by clause (xi) of
SECTION 6.4, in each case provided that, in the good faith judgment of
--------
the Borrower, fair value is received in exchange for such sale or
other disposition; and
(iv) the sale, lease or other disposition of assets by a
Subsidiary of the Borrower to the Borrower or to another Wholly Owned
Subsidiary if, immediately after giving effect thereto, no Potential
Event Default or Event of Default would exist.
"Asset Purchase Agreement" shall have the meaning given such term in
the recitals hereof.
"Bankruptcy Code" shall mean 11 U.S.C. (S)(S) 101 et seq., as amended
-- ----
from time to time, and any successor statute.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any duly authorized committee of that Board.
"Borrower" has the meaning ascribed to such term in the introduction
to this Agreement.
"Bridge Loan" means, collectively, the loans made by the Lenders
pursuant to SECTION 2.1A.
"Bridge Loan Commitment" means the commitment of the Lenders to make
the Bridge Loan as set forth in Section 2.1A.
"Bridge Notes" has the meaning ascribed to such term in SECTION 2.1D.
"Business Day" shall mean (i) any day other than a Saturday or Sunday,
a legal holiday or a day on which commercial banks in New York, New York or Los
Angeles are required by law to be closed and (ii) in respect of any
determination relevant to a
<PAGE>
-7-
LIBOR Loan, any such day that is also a day on which trading in U.S. Dollars is
conducted in the London interbank Eurodollar market.
"Capital Lease," as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is required to be accounted for as a capital lease on the
balance sheet of that Person.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in corporate stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants or options to
purchase any of the foregoing.
"Capitalized Lease Obligation" means obligations under a Capital
Lease, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within one year from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing within 270 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc., (iii) time deposits and certificates of deposit
maturing within one year from the date of issuance and issued by a bank or trust
company organized under the laws of the United States of America or any state
thereof that has combined capital and surplus of at least $500,000,000 and that
has (or is a subsidiary of a bank
<PAGE>
-8-
holding company that has) a long-term unsecured debt rating of at least A or the
equivalent thereof by Standard & Poor's Rating Services or at least A2 or the
equivalent thereof by Moody's Investors Service, Inc., (iv) repurchase
obligations with a term not exceeding seven (7) days with respect to underlying
securities of the types described in clause (i) above entered into with any bank
or trust company meeting the qualifications specified in clause (iii) above, and
(v) money market funds at least 95% of the assets of which are continuously
invested in securities of the type described in clause (i) above.
"Cash Proceeds" means, with respect to any Asset Disposition, cash
payments (including any cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise but only as and when so
received) received from such Asset Disposition.
"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 Borrower; (ii) prior to a Qualified
IPO, (x) Holdings shall cease to be the managing member of the Borrower or shall
otherwise cease to have the sole right and authority to exercise control over
the management of Borrower; (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; (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; (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
<PAGE>
-9-
from rights accruing under special circumstances) having the right to vote in
the election of directors, managers or other members of its governing body.
"CIBC" shall mean Canadian Imperial Bank of Commerce.
"Closing Date" means the date on or before October 18, 1996 on which
the Original Bridge Loan is made.
"Commission" means the Securities and Exchange Commission or any
successor thereto.
"Commitment Letter" means the letter agreement dated August 8, 1996,
between Willis Stein & Partners, L.P. and First Union pursuant to which First
Union and CIBC committed to provide the Bridge Loan to the Borrower, subject to
the terms and conditions thereof, and the Borrower committed to pay First Union
certain fees and to satisfy certain other obligations to First Union in respect
of such commitments.
"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 any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's common stock including common membership
interests in a limited liability company, whether outstanding on the Closing
Date or issued after the Closing Date, and includes, without limitation, all
series and classes of such common stock.
"Compliance Certificate" means a certificate substantially in the form
of EXHIBIT III delivered to the Agent by the Borrower pursuant to SECTION
-----------
5.2(A).
"Contested Claim" means any Tax, Indebtedness or other claim or
liability (i) the validity or amount of which is being diligently contested in
good faith, (ii) for which adequate
<PAGE>
-10-
reserve, or other appropriate provision, if any, as required in conformity with
GAAP shall have been made, and (iii) with respect to which any right to execute
upon or sell any assets of the Borrower or of any of its Subsidiaries has not
matured or has been and continues to be effectively enjoined, superseded or
stayed.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Indebtedness,
liability or other obligation (the "primary obligation") of another Person (the
"primary obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or provide funds (i) for the payment
or discharge of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in the
respect thereof; provided, however, that, with respect to the Borrower and its
-------- -------
Subsidiaries, the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"Controlled Group" means (i) a controlled group of corporations as
defined in Section 1563(a) of the Internal Revenue Code or (ii) a group of
trades or businesses under common control, as defined in Section 414(c) of the
Internal Revenue Code, of which
<PAGE>
-11-
the Borrower or any of its Subsidiaries is a part or becomes a part.
"Conversion Date" means the one year anniversary of the Closing Date
or such later date to which the Conversion Date may be deferred pursuant to
SECTION 3.2D.
"Covered Taxes" has the meaning ascribed to it in SECTION 12.19.
"Credit Party" shall mean any of the Borrower, any of its
Subsidiaries, Holdings and BrightView.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect Borrower or any of its
Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, interim receiver, receiver and
manager, trustee, assignee, liquidator, sequestrator or similar official charged
with maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
"Designated Non-Guarantor Subsidiary" shall mean (i) any Foreign
Subsidiary, (ii) a Subsidiary formed by the Borrower solely to become a co-
issuer of the Take-Out Securities and that has no assets (other than nominal
capitalization) and conducts no business other than the performance of its
obligation with regard to such Take-Out Securities or (iii) any other Subsidiary
of the Borrower that is not a Wholly Owned Subsidiary and that has elected, by
written notice to the Agent given not less than ten (10) Business Days after the
creation or acquisition thereof by the Borrower or any other Subsidiary, not to
become a guarantor under a Guarantee.
"Disqualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person that, by its terms (or by the terms of any security
into which it is convertible or for which
<PAGE>
-12-
it is exchangeable), or upon the happening of any event or otherwise, (i)
matures or is mandatorily redeemable or subject to any mandatory repurchase
requirement, pursuant to a sinking fund obligation or otherwise, (ii) is
redeemable or subject to any mandatory repurchase requirement at the sole option
of the holder thereof, or (iii) is convertible into or exchangeable for (whether
at the option of the issuer or the holder thereof) (a) debt securities or (b)
any Capital Stock referred to in (i) or (ii) above, in each case under (i), (ii)
or (iii) above at any time on or prior to the Maturity Date; provided, however,
-------- -------
that only the portion of Capital Stock that so matures or is mandatorily
redeemable, is so redeemable at the option of the holder thereof, or is so
convertible or exchangeable on or prior to such date shall be deemed to be
Disqualified Capital Stock.
"Dollars" or the sign "$" means the dollars of the United States of
America.
"Eligible Assignee" means (A) (i) a commercial bank organized under
the laws of the United States of America or any state thereof; (ii) a savings
and loan association or savings bank organized under the laws of the United
States or any state thereof; (iii) a commercial bank organized under the laws of
any other country or a political subdivision thereof; provided that (x) such
--------
bank is acting through a branch or agency located in the United States or (y)
such bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political subdivision
of such country; and (iv) any other entity which is an "accredited investor" (as
defined in Regulation D under the Securities Act of 1933) which extends credit
or buys loans as one of its businesses including, but not limited to, insurance
companies, mutual funds and lease financing companies, in each case (under
clauses (i) through (iv) above) that is reasonably acceptable to the Agent; and
(B) any Lender and any Affiliate of any Lender.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA (i) which is, or, at any time within the five calendar
years immediately preceding the date
<PAGE>
-13-
hereof, was at any time, maintained or contributed to by the Borrower or its
Subsidiaries or any of their respective ERISA Affiliates or (ii) with respect to
which the Borrower or its Subsidiaries retains any liability, including any
potential joint and several liability as a result of an affiliation with an
ERISA Affiliate or a party that would be an ERISA Affiliate except for the fact
the affiliation ceased more than five calendar years prior to the date hereof.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
accusations, allegations, notices of noncompliance or violation, investigations
(other than internal reports prepared by any Person in the ordinary course of
its business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any actual or alleged violation of a
liability under any Environmental Law or relating to any permit issued, or any
approval given, under any such Environmental Law (collectively, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
rules of common law and orders of courts or Governmental Authorities, relating
to the protection of human health or occupational safety or the environment, now
or hereafter in effect and in each case as amended from time to time, including,
without limitation, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
<PAGE>
-14-
"Environmental Lien" means a Lien in favor of a Tribunal or other
Person (i) for any liability under an Environmental Law or (ii) for damages
arising from or costs incurred by such Tribunal or other Person in response to a
release or threatened release of hazardous or toxic waste, substance or
constituent into the environment.
"Equity Financing" shall mean the contribution to the capital of
BrightView and Holdings effected pursuant to the sale of BrightView's and
Holdings' Capital Stock pursuant to the Securities Purchase Agreement, as
defined in the Senior Credit Facility.
"Equity Financing Documents" shall mean each of the documents related
to the consummation of the Equity Financing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or
business, whether or not incorporated) that would be deemed to be under "common
control" with, or a member of the same "controlled group" as, the Borrower or
any of its Subsidiaries, within the meaning of Section 414(b), (c), (m) or (o)
of the Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan
or Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a
Plan or a Multiemployer Plan, (ii) a complete or partial withdrawal by the
Borrower or any ERISA Affiliate from a Multiemployer Plan that results in
liability under Section 4201 or 4204 of ERISA, or the receipt by the Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section 4041A of ERISA, (iii)
the distribution by the Borrower or any ERISA Affiliate under Section 4041 or
4041A of ERISA of a notice of intent to terminate any Plan or the taking of any
action
<PAGE>
-15-
to terminate any Plan, (iv) the commencement of proceedings by the PBGC under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate of a
notice from any Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan, (v) the institution of a proceeding by
any fiduciary of any Multiemployer Plan against the Borrower or any ERISA
Affiliate to enforce Section 515 of ERISA, which is not dismissed within thirty
(30) days, (vi) the imposition upon the Borrower or any ERISA Affiliate of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, or the imposition or threatened
imposition of any Lien upon any asset of the Borrower or any ERISA Affiliate as
a result of any alleged failure to comply with the Internal Revenue Code or
ERISA in respect of any Plan, (vii) the engaging in or otherwise becoming liable
for a nonexempt Prohibited Transaction by the Borrower or any ERISA Affiliate,
(viii) a violation of the applicable requirements of Section 404 or 405 of ERISA
or the exclusive benefit rule under Section 401(a) of the Internal Revenue Code
by any fiduciary of any Plan for which the Borrower or any of its ERISA
Affiliates may be directly or indirectly liable or (ix) the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Internal
Revenue Code or Section 307 of ERISA, would result in the loss of tax-exempt
status of the trust of which such Plan is a part if the Borrower or an ERISA
Affiliate fails to timely provide security to such Plan in accordance with the
provisions of such sections.
"Event of Default" means each of the events set forth in SECTION 7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute and all rules and regulations from
time to time promulgated thereunder.
"Exchange Notes" has the meaning ascribed to it in SECTION 5.9(II).
<PAGE>
-16-
"Exchange Request" has the meaning ascribed to it in SECTION 5.9.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by the Borrower, its
Subsidiaries or any of their respective predecessors in interest.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate equal for each day during such period to the weighted average of the rates
on overnight Federal Funds transactions with members of the Federal Reserve
System arranged by Federal Funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Financial Condition Certificate" shall mean a financial condition
certificate, substantially in the form of EXHIBIT X, duly executed by a
Financial Officer of the Borrower.
"Financial Officer" shall mean, with respect to the Borrower, the
chief financial officer, vice president - finance, principal accounting officer
or treasurer of the Borrower.
"Fixed Rate" has the meaning ascribed to it in SECTION 2.3(A)(II).
"Fixed Rate Loan Redemption Price" shall mean the redemption price
(expressed as a percentage of principal amount) equal to 100% of the aggregate
principal amount of the Fixed Rate Loans plus (i) for any redemptions on or
after September 30, 2002 and prior to October 1, 2003, 50% of the interest rate
borne by the Fixed Rate Loans, (ii) for any redemptions on or after September
30, 2003 and prior to October 1, 2004, 33.3% of the interest rate borne by the
Fixed Rate Loans and (iii) for any redemptions on or
<PAGE>
-17-
after September 30, 2004 and prior to October 1, 2005, 16.7% of the interest
rate borne by the Fixed Rate Loans. For any redemptions on or after September
30, 2005, the Fixed Rate Loan Redemption Price shall mean 100% of the aggregate
principal amount thereof.
"Fixed Rate Loans" means Loans described in SECTION 2.3A(II).
"Floating Rate Loans" means Loans described in SECTION 2.3A(I).
"Foreign Subsidiary" shall mean any Subsidiary of the Borrower that is
organized under the laws of any nation, state or jurisdiction other than the
United States of America or any state thereof.
"Funded Debt" shall mean any Indebtedness other than (i) Indebtedness
arising under Interest Rate Protection Agreements or Commodity Hedge Agreements
and (ii) accrued expenses, current trade or other accounts payable (it being
understood that such expenses and accounts payable that are 90 days or more past
due (except to the extent such items are being disputed by the obligor on
reasonable grounds and in good faith) shall be considered to be "Funded Debt")
and other current liabilities arising in the ordinary course of business and not
incurred through the borrowing of money.
"Funding Guarantor" has the meaning ascribed to it in SECTION 10.7.
"GAAP" shall mean generally accepted accounting principles, as set
forth in the statements, opinions and pronouncements of the Accounting
Principles Board, the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board (or, to the extent not so set forth in such
statements, opinions and pronouncements, as generally followed by entities
similar in size to the Borrower and engaged in generally similar lines of
business), consistently applied and maintained and in conformity with those used
in the preparation of
<PAGE>
-18-
the most recent financial statements of Petersen referred to in SECTION 4.10(A).
"Guarantee Obligations" has the meaning ascribed to it in SECTION
11.1.
"Guarantees" means, collectively, the guarantees delivered to the
Lenders by the Guarantors pursuant to SECTION 10 which are evidenced by
notations of guarantee substantially in the form of EXHIBIT IX.
----------
"Guarantor Payment Blockage Period" has the meaning ascribed to it in
SECTION 11.2(B).
"Guarantor Senior Indebtedness" means, with respect to any Guarantor,
the principal of, premium, if any, and interest on, and all amounts payable in
respect of, all obligations of every nature of such Guarantor from time to time
owed to the lenders under the Senior Credit Facility, including, without
limitation, all obligations with respect to letters of credit and principal of
and interest on, and all fees, indemnities and expenses payable under, the
Senior Credit Facility and all obligations under Interest Rate Protection
Agreements entered into with lenders under the Senior Credit Facility and their
respective Affiliates and any guarantees thereof. Without limiting the
generality of the foregoing, "Guarantor Senior Indebtedness" shall include
interest accruing thereon subsequent to the occurrence of any Event of Default
specified in SECTIONS 7.6 and 7.7 relating to the Guarantors, whether or not the
claim for such interest is allowed under any applicable Bankruptcy Law.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
that portion of any Indebtedness which is incurred by such Guarantor in
violation of this Agreement.
"Guarantors" has the meaning ascribed to such term in the introduction
to this Agreement.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and
<PAGE>
-19-
any central bank thereof, any municipal, local, city or county government, and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Hazardous Substances" shall mean any substances or materials (i) that
are or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) that constitute
a nuisance, trespass or health or safety hazard to Persons or neighboring
properties, or (iv) that contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or wastes, crude oil, nuclear fuel, natural gas or synthetic
gas.
"High Yield Notes" shall mean the securities to be issued in the
contemplated offering for the purpose of redeeming the Bridge Notes or the Term
Notes, as the case may be.
"Holdings" shall have the meaning given to such term in the recitals
hereof.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness, obligations and liabilities of such Person
for borrowed money or in respect of loans or advances (including, in the case of
the Borrower, pay-in-kind interest, if any, on Indebtedness permitted under
clause (iii) of SECTION 6.1), (ii) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments, (iii) all reimbursement
obligations of such Person with respect to surety bonds, letters of credit and
bankers' acceptances (in each case, whether or not drawn or matured and in the
stated amount thereof), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all indebtedness
<PAGE>
-20-
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person, (vi) all obligations of such
Person as lessee under leases that are or are required to be, in accordance with
GAAP, recorded as capital leases, to the extent such obligations are required to
be so recorded, (vii) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any (for
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Agreement, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value to be determined reasonably and in good
faith by the board of directors or other governing body of the issuer of such
Disqualified Capital Stock), (viii) the net termination obligations of such
Person under any Interest Rate Protection Agreements or Commodity Hedge
Agreements, calculated as of any date as if such agreement or arrangement were
terminated as of such date, (ix) all Contingent Obligations of such Person and
(x) all indebtedness referred to in clauses (i) through (ix) above secured by
any Lien on any property or asset owned or held by such Person regardless of
whether the indebtedness secured thereby shall have been assumed by such Person
or is nonrecourse to the credit of such Person.
"Indemnified Liabilities" has the meaning ascribed to such term in
SECTION 12.4.
"Indemnitees" has the meaning ascribed to such term in SECTION 12.4.
"Independent Financial Advisor" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the
<PAGE>
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Borrower and (ii) which, in the judgment of the Board of Directors of the
Borrower, is otherwise independent and qualified to perform the task for which
it is to be engaged.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of the Borrower as currently conducted that are material
to the condition (financial or otherwise), business, operations or prospects of
the Borrower and its Subsidiaries, taken as a whole.
"Intercompany Indebtedness" means any Indebtedness of the Borrower or
any Subsidiary of the Borrower which, in the case of the Borrower, is owing to
any Subsidiary of the Borrower and which, in the case of any such Subsidiary, is
owing to the Borrower or any Subsidiary of the Borrower; provided that if as of
--------
any date any Person other than the Borrower or a Subsidiary of the Borrower or
any lender under the Senior Credit Facility owns or holds such Indebtedness, or
holds any Lien in respect thereof, such Indebtedness shall no longer be
Intercompany Indebtedness permitted to be incurred pursuant to SECTION 6.1(VI).
"Interest Rate Determination Date" means, with respect to any
Quarterly Period, the second Business Day on which banks in New York and London
are open prior to the first Business Day of such Quarterly Period.
"Interest Rate Protection 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.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor code or statute and all rules and
regulations promulgated from time to time thereunder.
<PAGE>
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"Investments" shall have the meaning set forth in SECTION 6.4.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided
--------
that, as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to be
a Joint Venture to which such Person is a party.
"Laws" means all applicable statutes, laws, ordinances, regulations,
rules, orders, judgments, writs, injunctions or decrees of any state,
commonwealth, nation, territory, possession, province, county, parish, town,
township, village, municipality or Tribunal, and "Law" means each of the
foregoing.
"Lenders" has the meaning ascribed to that term in the introduction to
this Agreement and shall include any assignee of any Loan, Note or Loan
Commitment to the extent of such assignment.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or other encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Litigation" means any action, suit, proceeding, claim or lawsuit by
or before any Tribunal.
"Loan Commitment" means the Bridge Loan Commitment and the Term Loan
Commitment.
"Loan Documents" means this Agreement, the Bridge Notes, the Term
Notes, the Guarantees, the Senior Subordinated Indenture, the Exchange Notes and
the Registration Rights Agreement.
"Loans" means the Bridge Loan and the Term Loan as each may be
outstanding.
<PAGE>
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"Maturity Date" has the meaning set forth in SECTION 2.2D.
"Margin Stock" has the meaning assigned to that term in Regulation U.
"Material Adverse Change" shall mean (i) with reference to any time or
period prior to the Closing Date, a material adverse change in the condition
(financial or otherwise), operations, business, properties or assets of
Petersen, and (ii) with reference to any time or period from and after the
Closing Date, a material adverse change in the condition (financial or
otherwise), operations, business, properties or assets of the Borrower and its
Subsidiaries taken as a whole. For purposes of this definition, determination
of whether a change is a "Material Adverse Change" shall be made by the Required
Lenders.
"Material Adverse Effect" shall mean (i) with reference to any time
period prior to the Closing Date, a material adverse effect upon the condition
(financial or otherwise), operations, business, properties or assets of
Petersen, and (ii) with reference to any time or period from and after the
Closing Date, a material adverse effect upon (A) the condition (financial or
otherwise), operations, business, properties or assets of the Borrower and its
Subsidiaries taken as a whole, (B) to the extent not covered under clause (A)
above, the ability of any Credit Party to consummate the Transactions or perform
its obligations under this Agreement or any of the other Loan Documents to which
it is a party or (C) the legality, validity or enforceability of (y) this
Agreement or any of the other Loan Documents or the rights and remedies of the
Agent and the Lenders hereunder and thereunder, or (z) any other document or
instrument to be delivered in connection with the Transactions that is executed
or to be executed by any Credit Party. For purposes of this definition,
determinations of whether an effect is a "Material Adverse Effect" shall be made
by the Required Lenders.
"Material Subsidiary" means, with respect to any accounting period,
any Subsidiary of the Borrower (i) whose revenues constitute greater than 10% of
the aggregate dollar value
<PAGE>
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of the revenues of Borrower and its Subsidiaries, taken as a whole, for such
accounting period or (ii) the fair market value of whose assets at any time
during such accounting period is greater than 10% of the fair market value of
all of the assets of Borrower and its Subsidiaries at such time.
"Maximum Cash Interest Rate" means an interest rate of 12.50% per
---
annum; provided that in computing such interest rate, fees paid to the Lenders
- ----- --------
(whether in cash or otherwise) shall not be deemed an interest payment; and
provided, further, that at any time prior to the Conversion Date the Maximum
- -------- -------
Cash Interest Rate shall be reduced to such an interest rate below 12.50% per
annum as is required for the Borrower's Interest Coverage Ratio (as defined in
the Senior Credit Facility) not to be less than, on a pro forma basis as if such
reduced interest rate was in effect for the period of calculation of such
Interest Coverage Ratio for any Quarterly Interest Period, 1.55 to 1.00 but in
no event shall the Maximum Cash Interest Rate be less than 7% per annum.
--- -----
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate makes, is making or is obligated to make contributions or has made or
been obligated to make contributions.
"Net Cash Proceeds" means, with respect to any Asset Disposition, Cash
Proceeds of such Asset Disposition net of bona fide direct costs of sale
including, but not limited to, the aggregate amount of all cash payments
received by the Borrower and its Subsidiaries in connection with such Asset
Disposition less (x) reasonable fees and expenses incurred by the Borrower and
its Subsidiaries in connection therewith, (y) Indebtedness to the extent the
amount thereof is secured by a Lien on the property that is the subject of such
Asset Disposition and the transferee of (or holder of the Lien on) such Property
requires that such Indebtedness be repaid as a condition to such Asset
Disposition, and (z) any income or transfer taxes paid or reasonably estimated
by the Borrower to be payable by the Borrower and its Subsidiaries as a result
of such Asset Disposition.
<PAGE>
-25-
"Non-payment Default" means any event (other than a Payment Default)
the occurrence of which entitles one or more Persons to act to accelerate the
maturity of any Senior Indebtedness.
"Notes" means, collectively, the Bridge Notes and the Term Notes,
whichever is then outstanding.
"Notice of Borrowing" means a notice substantially in the form of
EXHIBIT IV-A with respect to a proposed borrowing.
- ------------
"Notice of Conversion" means a notice substantially in the form of
EXHIBIT IV-B with respect to a proposed conversion.
- ------------
"Obligations" means all obligations of every nature of the Borrower
from time to time owed to the Lenders and the Agent under the Loan Documents,
whether for principal, reimbursements, interest, fees, expenses, indemnities or
otherwise, and whether primary, secondary, direct, indirect, contingent, fixed
or otherwise (including obligations of performance).
"Officer" means the Chairman of the Board, the President, any Vice
President, the Chief Financial Officer, the Controller, the Treasurer, the
Secretary or Assistant Secretary of each of the Borrower and the Guarantors.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by two Officers; provided
--------
that every Officers' Certificate with respect to the compliance with a condition
precedent to the making of the Loans hereunder shall include (i) a statement
that the officer or officers making or giving such Officers' Certificate have
read such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to
<PAGE>
-26-
whether, in the opinion of the signers, such condition has been complied with.
"Original Bridge Notes" has the meaning ascribed to such term in
SECTION 2.1D.
"Original Term Notes" has the meaning ascribed to such term in SECTION
2.2E.
"Other Taxes" has the meaning ascribed to such term in SECTION
12.19(B).
"Payment Blockage Period" has the meaning ascribed to such term in
SECTION 8.2(B).
"Payment Default" means any default in the payment of principal,
premium, if any, or interest on any Senior Indebtedness beyond any applicable
grace period with respect thereto.
"Payment Office" shall mean the office of the Agent located at One
First Union Center, TW-10, Charlotte, NC 28288-0604 or such other office as the
Agent may designate to the Borrower and the Lenders from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA which is subject to the provisions of Title IV of ERISA
and which is maintained for employees of the Borrower, any Subsidiary of the
Borrower or any member of the Controlled Group.
"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) each business acquired
shall be within the Permitted Lines of Business, (ii) any Capital Stock given as
consideration in connection therewith shall be Capital Stock of Holdings or
BrightView, (iii) in the case of an Acquisition involving the
<PAGE>
-27-
acquisition of control of Capital Stock of any Person, immediately after giving
effect to such Acquisition such Person (or the surviving Person, if the
Acquisition is effected through a merger or consolidation) shall be the Borrower
or a Guarantor (provided that such Person (or the surviving Person) may be a
--------
Designated Non-Guarantor Subsidiary, but only so long as after giving effect to
such Acquisition the Borrower is in compliance with the applicable provisions of
SECTION 6.4), and (iv) all of the conditions and requirements of SECTIONS 5.14
and 5.15 applicable to such Acquisition are satisfied; or (b) any other
Acquisition to which the Required Lenders (or the Agent on their behalf) have
given their prior written consent (which consent may be in their sole discretion
and may be given subject to such additional terms and conditions as the Required
Lenders shall establish) and with respect to which all of the conditions and
requirements set forth in this definition and in SECTION 5.14, and in or
pursuant to any such consent, have been satisfied or waived in writing by the
Required Lenders (or the Agent on their behalf).
"Permitted Holders" shall mean, collectively, Neil Vitale and each
Person purchasing Capital Stock of Holdings, Brightview or Petersen Investment
Corp. pursuant to the Securities Purchase Agreement as of the Closing Date.
"Permitted Investments" means (a) Cash Equivalents; (b) Investments
consisting of (i) purchases and acquisitions of inventory, supplies, materials
and equipment, or (ii) licenses or leases of intellectual property and other
assets, in each case in the ordinary course of business; (c) 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; (d) without duplication, Investments consisting of
Indebtedness permitted under clause (v) of SECTION 6.1; (e) Investments existing
on the Closing Date and described in SCHEDULE I; (f) Investments of
the Borrower under Interest Rate Protection Agreements required pursuant to
SECTION 6.8 of the Senior Credit Facility; (g) Investments under Commodity Hedge
Agreements entered into in
<PAGE>
-28-
the ordinary course of business consistent with reasonable business requirements
and not for speculation; (h) Investments consisting of endorsements for
collection or deposit in the ordinary course of business; (i) Investments
consisting of the making of capital contributions or the purchase of Capital
Stock (i) by the Borrower or any Subsidiary in any other Subsidiary that is (or
after giving effect to such Investment will be) a Guarantor (including all such
Investments constituting Permitted Acquisitions, but subject to compliance with
the provisions of SECTION 5.14, and (ii) by any Subsidiary in the Borrower; (j)
Investments consisting of the contribution by the Borrower to partnerships,
joint ventures or other Persons (including Subsidiaries) of the Scheduled
Titles, as defined in the Senior Credit Facility, in exchange for equity
interests in such Persons, provided that all such Investments are made within
365 days after the Closing Date; (k) Investments consisting of the licensing of
publication titles and other assets pursuant to joint marketing arrangements
with other Persons; and (l) Investments (other than Investments specified in
clauses (a) through (k) 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 Closing Date (which Investments shall include, without
limitation, (i) Investments in Designated Non-Guarantor Subsidiaries, as defined
in the Senior Credit Facility, (ii) Investments in Persons holding Scheduled
Titles, as defined in the Senior Credit Facility, to the extent such Investments
are made with cash or other property not consisting of such Scheduled Titles,
and (iii) consideration received by any Person other than the Borrower or a
Wholly Owned Subsidiary in a transaction permitted by SECTION 6.8.
"Permitted Liens" shall have the meaning given to such term in SECTION
6.2.
"Permitted Lines of Business" shall have the meaning given to such
term in SECTION 6.9.
"Permitted Tax Distributions" means, subject to the limitations set
forth in SECTION 6.3(C), distributions by the Borrower to Holdings and
BrightView from time to time in an amount
<PAGE>
-29-
approximately equal to the income tax liability of such member (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
Borrower (after taking into account all of the Borrower's prior tax losses,
to the extent such losses have not previously been deemed to reduce the taxable
income of the Borrower and thereby reduce distributions for taxes pursuant to
this clause (iii)); such distribution for taxes shall be based on the
approximate highest combined tax rate that applies to any one of the members of
the Borrower.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Petersen" shall have the meaning given to such term in the recitals
hereof.
"Petersen Acquisition" shall have the meaning given to such term in
the recitals hereof.
"Petersen Assets" means the assets of Petersen to be acquired by the
Borrower in the Petersen Acquisition pursuant to the Asset Purchase Agreement.
"Petersen License Agreement" shall mean the License Agreement, dated
as of August 15, 1996, between Robert E. Petersen and Petersen, as licensor, and
BrightView, as licensee, as amended, modified or supplemented from time to time
in accordance with the terms of this Agreement.
"Petersen Purchase Price Adjustment" shall mean the post-closing
adjustment to the cash portion of the purchase price for the Purchased Assets
(as defined in the Asset Purchase
<PAGE>
-30-
Agreement), as contemplated by Section 1.5 of the Asset Purchase Agreement.
"PIK Interest Amount" has the meaning ascribed to such term in SECTION
2.3B.
"Plan" shall mean any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA that is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which the Borrower or any
ERISA Affiliate may have any liability.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights (as compared to any other Capital Stock of such
Person) with respect to dividends or redemptions or upon liquidation.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of this Agreement, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act as interpreted by the
Borrower's chief financial officer or Board of Directors in consultation with
its independent certified public accountants.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified IPO" shall have the meaning given to such term in the
Securityholders Agreement.
"Quarterly Period" shall mean the period commencing on the first
calendar day of each three-month period, if such day is a Business Day, or the
first Business Day succeeding the first
<PAGE>
-31-
calendar day of each three-month period and ending on the day next preceding the
first Business Day of the following Quarterly Period.
"Real Property Assets" means interests in land, buildings,
improvements, and fixtures attached thereto or used in the operation thereof, in
each case owned or leased (as lessee) by the Borrower or its Subsidiaries.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund or defease, or to issue a security or
Indebtedness in exchange or replacement for, such security or Indebtedness in
whole or in part. "Refinanced" and "Refinancing" shall have correlative
meanings.
"Register" has the meaning ascribed to such term in SECTION 5.11.
"Registration Rights Agreement" means a registration rights agreement
substantially in the form contemplated by EXHIBIT V (with such changes therein
---------
as the Agent and the Borrower shall approve).
"Reportable Event" shall mean (i) any "reportable event" within the
meaning of Section 4043(c) of ERISA for which the 30-day notice under Section
4043(a) of ERISA has not been waived by the PBGC (including any failure to meet
the minimum funding standard of, or timely make any required installment under,
Section 412 of the Internal Revenue Code or Section 302 of ERISA, regardless of
the issuance of any waivers in accordance with Section 412(d) of the Internal
Revenue Code), (ii) any such "reportable event" subject to advance notice to the
PBGC under Section 4043(b)(3) of ERISA, (iii) any application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code, and (iv) a cessation of operations described in Section
4062(e) of ERISA.
"Required Lenders" means Lenders holding in the aggregate more than
66-2/3% of the outstanding principal amount of Notes.
<PAGE>
-32-
"Requirement of Law" shall mean, with respect to any Person, the
charter, articles or certificate of organization or incorporation and bylaws or
other organizational or governing documents of such Person, and any statute,
law, treaty, rule, regulation, order, decree, writ, injunction or determination
of any arbitrator or court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject or otherwise pertaining to any or
all of the transactions contemplated by this Agreement and the other Loan
Documents.
"Responsible Officer" shall mean, with respect to the Borrower, the
president, the chief executive officer, the chief financial officer, any
executive officer, or any other Financial Officer of the Borrower, and any other
officer or similar official thereof responsible for the administration of the
obligations of the Borrower in respect of this Agreement.
"Restricted Payment" has the meaning ascribed to such term in SECTION
6.3.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any profit
sharing agreement or arrangement, bonds, debentures, options, warrants, notes,
or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of September 30, 1996, among Holdings, Petersen Investment
Corp., BrightView and the Persons listed on SCHEDULE A to the Senior Credit
Facility, providing for the purchase and sale of Capital Stock of Holdings,
BrightView and Petersen Investment Corp., as amended, modified or supplemented
from time to time.
<PAGE>
-33-
"Securityholders Agreement" shall mean the Securityholders Agreement,
dated as of September 30, 1996, among Petersen Investment Corp., Holdings,
BrightView and the securityholders named therein, as amended, modified or
supplemented from time to time.
"Senior Credit Facility" means the Amended and Restated Credit
Agreement dated as of September 30, 1996 among the Borrower, the lenders listed
therein and First Union, 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 Borrower 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 for any Person the principal of, premium,
if any, and interest on, and all amounts payable in respect of, all obligations
of every nature of such Person from time to time owed to the lenders under the
Senior Credit Facility, including, without limitation, any Refinancings, all
obligations in respect of letters of credit and principal of and interest on and
all fees, indemnities, and expenses payable under the Senior Credit Facility and
all obligations under Interest Rate Protection Agreements entered into with
lenders under the Senior Credit Facility and their respective Affiliates and any
guarantees thereof. Without limiting the generality of the foregoing, "Senior
Indebtedness" shall include interest accruing thereon subsequent to the
occurrence of any Event of Default specified in SECTIONS 7.6 and 7.7 relating to
the Borrower, whether or not the claim for such interest is allowed under any
applicable Bankruptcy Law. Notwithstanding the foregoing, "Senior Indebtedness"
of any Person shall not include that portion of any Indebtedness which is
incurred by such Person in violation of this Agreement.
<PAGE>
-34-
"Senior Subordinated Indenture" means an indenture among the Borrower,
the guarantors named therein and a trustee substantially in the form
contemplated by EXHIBIT V (with such changes therein as the Agent and the
---------
Borrower shall approve, and, at such time as notes issued thereunder are sold in
a public offering, with other appropriate changes to reflect such public
offering), as the same may at any time be amended, modified and supplemented and
in effect.
"Subordinated Indebtedness" means Indebtedness of the Borrower or any
Guarantor which is expressly subordinated in right of payment to the Notes or
the Guarantee of such Guarantor, as the case may be.
"Subsequent Bridge Notes" has the meaning ascribed to such term in
SECTION 2.1D.
"Subsequent Term Notes" has the meaning ascribed to such term in
SECTION 2.2E.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other Person of which more than fifty percent (50%) of the outstanding
Capital Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and one or more
of its other Subsidiaries or a combination thereof (irrespective of whether, at
the time, securities of any other class or classes of any such corporation or
other Person shall or might have voting power by reason of the happening of any
contingency). When used without reference to a parent entity, the term
"Subsidiary" shall be deemed to refer to a Subsidiary of the Borrower.
"Take-Out Banks" has the meaning ascribed to such term in SECTION
3.1R.
"Take-Out Securities" means (i) any High-Yield Notes of the Borrower
and/or the Guarantors the proceeds of which are used to repay the Notes in full
and (ii) any High-Yield Notes of the
<PAGE>
-35-
Borrower issued in accordance with SECTION 2.5A(II)(B) the proceeds of which are
used to Refinance the Notes in part.
"Taxes" means all taxes, assessments, fees, levies, imposts, duties,
penalties, deductions, liabilities, withholdings or other charges of any nature
whatsoever, including interest penalties, from time to time or at any time
imposed by any Law or any Tribunal.
"Term Loan Commitment" has the meaning ascribed to such term in
SECTION 2.2A.
"Term Notes" has the meaning ascribed to such term in SECTION 2.2E.
"Transaction Costs" means the fees, costs and expenses payable by the
Borrower pursuant hereto and other fees, costs and expenses payable by the
Borrower or a Subsidiary of the Borrower in connection with the Transactions.
"Transaction Documents" means all documents in connection with the
consummation of the Transactions.
"Transactions" shall mean, collectively, (i) the Equity Financing,
(ii) the incurrence of the loans drawn down on the Closing Date under the Senior
Credit Facility, (iii) the incurrence of the Bridge Loans hereunder on the
Closing Date, (iv) the Petersen Acquisition, (v) any other transaction on the
Closing Date contemplated in relation to the foregoing and (vi) the payment of
fees and expenses in connection with the foregoing.
"Transferee" has the meaning ascribed to such term in SECTION
12.19(A).
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency, authority or
instrumentality of the United States or any state, province, commonwealth,
nation, territory,
<PAGE>
-36-
possession, county, parish, town, township, village or municipality, whether now
or hereafter constituted and/or existing.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unfunded Pension Liability" shall mean, with respect to any Plan of
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors or other governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
"Wholly Owned" shall mean, with respect to any Subsidiary of any
Person, that 100% of the outstanding Capital Stock of such Subsidiary (excluding
directors' qualifying shares and shares required to be held by foreign
nationals, in the case of a Foreign Subsidiary) is owned, directly or
indirectly, by such Person.
"Willis Stein" shall mean Willis Stein & Partners, L.P., a Delaware
limited partnership.
<PAGE>
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1.2 Accounting Terms. Except as specifically provided otherwise in
----------------
this Agreement, all accounting terms used herein that are not specifically
defined shall have the meanings customarily given them, and all financial
computations hereunder shall be made, in accordance with GAAP. Notwithstanding
the foregoing, in the event that any changes in GAAP after the date hereof are
required to be applied to the Borrower and would affect the computation of the
financial covenants contained in SECTIONS 7.1 through 7.4 of the Senior Credit
Facility, as applicable, such changes shall be followed only from and after the
date this Agreement shall have been amended to take into account any such
changes.
1.3 Other Definitional Provisions; Construction. Any of the terms
-------------------------------------------
defined in SECTION 1.1 may, unless the context otherwise requires, be used in
the singular or the plural depending on the reference.
SECTION 2 AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS; NOTES
2.1 Bridge Loan and Bridge Note
---------------------------
A. Bridge Loan Commitment. Subject to the terms and conditions of
----------------------
this Agreement, the Lenders hereby agree to lend to the Borrower on the Closing
Date $100,000,000 in the aggregate (the "Bridge Loan"), each such Lender
committing to lend the amount set forth next to such Lender's name on the
signature pages hereto. The Lenders' commitments to make the Bridge Loan to the
Borrower pursuant to this SECTION 2.1A are herein called individually, the
"Bridge Loan Commitment" and collectively, the "Bridge Loan Commitments."
B. Notice of Borrowing. When the Borrower desires to borrow under
-------------------
this SECTION 2.1, it shall deliver to the Agent a Notice of Borrowing no later
than 1:00 P.M. (New York time), at least two Business Days in advance of the
Closing Date or such later date as shall be agreed to by the Agent. The Notice
of Borrowing shall specify the applicable date of borrowing (which shall be a
Business Day). Upon receipt of such Notice of
<PAGE>
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Borrowing, the Agent shall promptly notify each Lender of its share of the
Bridge Loan and the other matters covered by the Notice of Borrowing.
C. Disbursement of Funds. (a) No later than 1:00 P.M. (New York
---------------------
time) on the Closing Date, each Lender will make available its pro rata share of
the Bridge Loan requested to be made on such date in the manner provided below.
All amounts shall be made available to the Agent in U.S. Legal Tender and
immediately available funds at the Payment Office and the Agent promptly will
make available to the Borrower by depositing to its account at the Payment
Office the aggregate of the amounts so made available in the type of funds
received.
(b) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its Bridge Loan Commitment hereunder or to prejudice any
rights which the Borrower may have against any Lender as a result of any default
by such Lender hereunder.
D. Bridge Notes. The Borrower shall execute and deliver to each
------------
Lender on the Closing Date a Bridge Note dated the Closing Date substantially in
the form of EXHIBIT I to evidence such Lender's portion of the Bridge Loan
---------
Commitment and with appropriate insertions (the "Original Bridge Notes"). On
each interest payment date prior to the Conversion Date on which the Borrower
elects to pay a PIK Interest Amount pursuant to SECTION 2.3B, the Borrower shall
execute and deliver to each Lender on such interest payment date a Bridge Note
dated such interest payment date substantially in the form of Exhibit I annexed
hereto in a principal amount equal to such Lender's pro rata portion of such PIK
Interest Amount and with other appropriate insertions (each a "Subsequent Bridge
Note" and, together with the Original Bridge Notes, the "Bridge Notes"). A
Subsequent Bridge Note shall bear interest from the date of its issuance at the
same rate borne by all Bridge Notes.
E. Scheduled Payment of Bridge Loan. Subject to Section 2.2, the
--------------------------------
Borrower shall pay in full the outstanding amount
<PAGE>
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of the Bridge Loan and all other Obligations owing hereunder no later than the
Conversion Date.
F. Termination of Bridge Loan Commitment. The Bridge Loan
-------------------------------------
Commitment hereunder shall terminate on the earlier of (i) the date on which the
Asset Purchase Agreement is terminated in accordance with its terms or (ii)
October 18, 1996 if the Bridge Loan is not made on or before such date.
G. Pro Rata Borrowings. The Bridge Loan made under this Agreement
-------------------
shall be made by the Lenders pro rata on the basis of their respective Bridge
--- ----
Loan Commitments. It is understood that no Lender shall be responsible for any
default by any other Lender of its obligation to make its portion of the Bridge
Loan hereunder and that each Lender shall be obligated to make its portion of
the Bridge Loan hereunder, regardless of the failure of any other Lender to
fulfill its commitments hereunder.
2.2 Term Loan and Term Note.
-----------------------
A. Term Loan Commitment. Subject to the terms and conditions of
--------------------
this Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, the Lenders hereby agree, on the Conversion Date,
upon the request of the Borrower, to convert the then outstanding principal
amount of the Bridge Notes into a term loan (the "Term Loan"), such Term Loan to
be in the aggregate principal amount of the then outstanding principal amount of
the Bridge Notes. The Lenders' commitments under this SECTION 2.2A are herein
called collectively the "Term Loan Commitment."
B. Notice of Conversion/Borrowing. If the Borrower has not repaid
------------------------------
the Bridge Loan in full on or prior to the Conversion Date, then the Borrower
shall convert the then outstanding principal amount of the Bridge Notes into a
Term Loan under this SECTION 2.2. The Borrower shall deliver to the Lenders a
Notice of Conversion no later than 1:00 P.M. (New York time), at least two
Business Days in advance of the Conversion Date. The Notice of Conversion shall
specify the principal amount of the Bridge Notes
<PAGE>
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outstanding on the Conversion Date to be converted into a Term Loan.
C. Making of Term Loan. Upon satisfaction or waiver of the
-------------------
conditions precedent specified in SECTION 3.2, each Lender shall extend to the
Borrower the Term Loan to be issued on the Conversion Date by such Lender by
cancelling on its records a corresponding principal amount of the Bridge Notes
held by such Lender.
D. Maturity of Term Loan. The Term Loan shall mature and the
---------------------
Borrower shall pay in full the outstanding principal amount thereof and accrued
interest thereon on the tenth anniversary of the Conversion Date (the "Maturity
Date").
E. Term Notes. The Borrower, as borrower, shall execute and deliver
----------
to each Lender on the Conversion Date a Term Note dated the Conversion Date
substantially in the form of EXHIBIT II to evidence the Term Loan made on such
----------
date, in the principal amount of the Bridge Notes held by such Lender on such
date and with other appropriate insertions (collectively the "Original Term
Notes") and each Lender shall return the Bridge Notes then held by such Lender.
On or after the Conversion Date, on each interest payment date on which the
Borrower elects to pay a PIK Interest Amount pursuant to SECTION 2.3B, the
Borrower shall execute and deliver to each Lender on such interest payment date
a Term Note dated such interest payment date substantially in the form of
EXHIBIT II annexed hereto in a principal amount equal to such Lender's pro rata
- ----------
portion of such PIK Interest Amount and with other appropriate insertions (each
a "Subsequent Term Note" and, together with the Original Term Notes, the "Term
Notes"). A Subsequent Term Note shall bear interest from the date of its
issuance at the same rate borne by all Term Notes.
2.3 Interest on the Loans.
---------------------
A. Rate of Interest. The Loans shall bear interest on the unpaid
----------------
principal amount thereof from the date made through
<PAGE>
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maturity (whether by prepayment, acceleration or otherwise) at a rate determined
as set forth below.
(i) Floating Rate Loans. Subject to SECTION 2.3A(II), the Loans
-------------------
shall bear interest for each Quarterly Period at a rate per annum equal to the
Applicable Interest Rate for such period.
(ii) Fixed Rate Loans. At any time on or after the Conversion Date,
----------------
at the request of any Lender in connection with the sale of all or any portion
of the Term Loan owing to such Lender to a Person who is not an Affiliate of
such Lender or any other Lender, all or a portion of the Term Loan to be so sold
shall bear interest at a fixed rate per annum equal to the rate of interest
borne by the Term Loans at the time of such request (the "Fixed Rate"),
effective as of the first interest payment date with respect to such Term Loan
after such notice so long as the 10 Business Days' notice set forth below is
given; provided that no such conversion shall be permitted in respect of amounts
--------
to be voluntarily prepaid following receipt of a notice of prepayment pursuant
to SECTION 2.5A. In order to request the conversion of a Floating Rate Loan to a
Fixed Rate Loan, the Lender shall notify the Agent and the Borrower in writing
of its intention to do so at least 10 Business Days prior to an interest payment
date indicating the amount of the Term Loan for which it is requesting
conversion to a Fixed Rate Loan. Upon the conversion of a portion of a Floating
Rate Loan to a Fixed Rate Loan an appropriate notation will be made on the Term
Note and, on and after the first interest payment date following the receipt by
the Borrower of a notice hereunder, such portion of the Term Loan which is
converted to a Fixed Rate Loan shall bear interest at the Fixed Rate until
repaid.
(iii) Notwithstanding clause (i) or (ii) of this SECTION 2.3A or any
other provision herein, in no event will the combined sum of interest on the
Loans exceed 18.00% per annum.
--- -----
B. Interest Payments. (i) Interest shall be payable (x) with
-----------------
respect to the Bridge Loan, in arrears on December 31, 1996, March 31, 1997,
June 30, 1997, September 30, 1997, and upon any prepayment of the Bridge Loan
(to the extent accrued on the
<PAGE>
-42-
amount being prepaid) and at maturity of the Bridge Loan in respect of any
amounts paid on such date and not converted to Term Loans and (y) with respect
to the Term Loan, in arrears on each December 31, March 31, June 30 and
September 30 of each year, commencing on the first of such dates to follow the
Conversion Date, upon any prepayment of the Term Loan (to the extent accrued on
the amount being prepaid) and at maturity of the Term Loan; provided, however,
-------- -------
that if for any Quarterly Period the interest rate borne by the Bridge Loan or
the Term Loan, as the case may be, exceeds the Maximum Cash Interest Rate, the
Borrower shall pay all or a portion of the interest payable in excess of the
Maximum Cash Interest Rate by the issuance of Subsequent Bridge Notes, or
Subsequent Term Notes, as the case may be, in an aggregate principal amount
equal to the amount of such interest being so paid (the "PIK Interest Amount").
(ii) Payment of Interest Based on Maximum Cash Interest Rate. For
-------------------------------------------------------
each Quarterly Interest Period prior to the Conversion Date, interest shall be
paid by the Credit Parties in cash at 7.00% per annum; provided, however that
within 45 days following the end of such Quarterly Interest Period, the Credit
Parties shall remit to the Lenders additional cash interest to the maximum
extent that the Borrower could have paid such interest as of the end of the most
recent fiscal quarter without causing the Interest Coverage Ratio (as defined in
the Senior Credit Facility) to exceed 1.55 to 1.
C. Post-Maturity Interest. Any principal payments on the Loans not
----------------------
paid when due and, to the extent permitted by applicable law, any interest
payment on the Loans not paid when due, in each case whether at stated maturity,
by notice of prepayment, by acceleration or otherwise, shall thereafter bear
interest payable upon demand at a rate which is 2.00% per annum in excess of the
rate of interest otherwise payable under this Agreement for the Loans.
D. Computation of Interest. Interest on the Loans shall be computed
-----------------------
on the basis of a 360-day year and, with respect to any amount of the Loans
which are Floating Rate Loans, the
<PAGE>
-43-
actual number of days elapsed in the period during which it accrues or, with
respect to any amount of the Loans which are Fixed Rate Loans, twelve 30-day
months. In computing interest on the Loans, the date of the making of the Loans
shall be included and the date of payment shall be excluded; provided that if a
--------
Loan is repaid on the same day on which it is made, one day's interest shall be
paid on that Loan.
2.4 Fees. The Borrower agrees to pay to [the Lenders] all fees and
----
other obligations in accordance with, and at the times specified by, the
Commitment Letter.
2.5 Prepayments and Payments.
------------------------
A. Prepayments
-----------
(i) Voluntary Prepayments. The Borrower may, upon not less than
---------------------
ten Business Days' prior written or telephonic notice confirmed in writing
to the Agent at any time and from time to time, prepay without premium or
penalty the Loans made to the Borrower in whole or in part in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess of
that amount; provided, that at such time as all or part of the Term Loan
--------
bears interest at the Fixed Rate, the Term Loan or such part that bears
interest at the Fixed Rate, as the case may be, will be redeemable at the
option of the Borrower at any time prior to October 1, 1998 at a redemption
price of 101% of principal amount plus accrued and unpaid interest to the
redemption date and will not be redeemable at the option of the Borrower at
any time commencing October 1, 1998 and prior to October 1, 2002, and
thereafter will be redeemable at the option of the Borrower, in whole or in
part, at any time at the Fixed Rate Loan Redemption Price plus accrued and
unpaid interest to the redemption date. Prepayments in this Section may be
designated, pro rata, to either Fixed Rate Loans or Floating Rate Loans.
Notice of prepayment having been given as aforesaid, the principal
amount of the Loans to be prepaid shall become due
<PAGE>
-44-
and payable on the prepayment date. Amounts of the Loans so prepaid may not
be reborrowed.
(ii) Mandatory Prepayments
---------------------
(a) Prepayments from Asset Dispositions. Upon receipt by the
Borrower or any Subsidiary of the Borrower of Cash Proceeds of any Asset
Disposition occurring after the Closing Date, (i) the Borrower or any
Subsidiary of the Borrower may, or may cause its Subsidiaries to, apply the
Net Cash Proceeds of such Asset Disposition to acquire assets or properties
or other reinvestments in the businesses of the Borrower and (ii) the
Borrower or any Subsidiary of the Borrower shall apply any Net Cash
Proceeds remaining after application pursuant to clause (i) above to prepay
(x) the term loans outstanding under the Senior Credit Facility or (y)
revolving loans outstanding under the Senior Credit Facility; provided that
--------
the commitment thereunder is permanently reduced to the extent of the
prepayment. Concurrently with the consummation of an Asset Disposition, the
Borrower shall deliver to the Agent an Officer's Certificate demonstrating
the derivation of Net Cash Proceeds from the gross sales price of such
Asset Disposition.
To the extent not used as above, the Borrower shall, or shall cause
its Subsidiaries to, prepay the Floating Rate Loans with the Net Cash
Proceeds received from any Asset Disposition on a date not later than the
Business Day next succeeding (i) the third Business day after the receipt
thereof if such date of receipt is on or prior to the Conversion Date and
(ii) the 180th day after the consummation of such Asset Disposition if and
to the extent that such Net Cash Proceeds are not applied by the Borrower
or any Subsidiary of the Borrower within 180 days to acquire assets or
properties or other reinvestments in the businesses of the Borrower if such
date of receipt is after the Conversion Date; provided that at such time as
--------
the Term Loan bears interest at the Fixed Rate, any such Net Cash Proceeds
not so applied to prepay the Floating Rate Loans shall be used to make an
offer
<PAGE>
-45-
to purchase the Fixed Rate Loans from each Lender on a pro rata basis
--- ----
at 100% of the principal amount thereof plus accrued and unpaid interest
thereon to the date of repurchase.
(b) Prepayments from Issuances of Take-Out Securities. Concurrently
-------------------------------------------------
with the receipt by the Borrower of proceeds from the issuance of Take-Out
Securities, the Borrower shall prepay the Loans (at a price per Note equal
to the principal amount of such Note plus accrued interest to the date of
payment) in a principal amount equal to the lesser of the proceeds thereof
(net of fees and expenses payable by the Borrower to any Person other than
an Affiliate of the Borrower in connection with the issuance thereof) or
the aggregate principal amount of the Notes then outstanding; provided,
however that the redemption price shall be 103.0% of principal amount plus
accrued interest if the Bridge Notes are redeemed with or in anticipation
of funds raised by any means other than a transaction in which the Agent
and CIBC have acted as exclusive agents or lead managers for the Company.
(c) Prepayments upon a Change of Control. Within 10 days following
------------------------------------
any Change of Control, the Borrower shall prepay the Loans in full at a
redemption price equal to 103% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption.
(d) Notice. The Borrower shall notify the Agent of any prepayment to
------
be made pursuant to this Section 2.5A(ii) at least ten Business Days prior
to such prepayment date (unless shorter notice is satisfactory to the
Required Lenders).
(iii) Borrower's Mandatory Prepayment Obligation; Application of
------------------------------------------- --------------
Prepayments. All prepayments shall include payment of accrued interest on
-----------
the principal amount so prepaid and shall be applied to payment of interest
before application to principal.
B. Manner and Time of Payment. All payments of principal and
--------------------------
interest hereunder and under the Notes by the
<PAGE>
-46-
Borrower shall be made without defense, set-off or counterclaim and in same-day
funds and delivered to the Agent, unless otherwise specified, not later than
12:00 Noon (New York time) on the date due at the Payment Office for the account
of the Lenders; funds received by the Agent after that time shall be deemed to
have been paid by the Borrower on the next succeeding Business Day. The Borrower
hereby authorizes the Agent to charge its account with the Agent in order to
cause timely payment to be made of all principal, interest and fees due
hereunder (subject to sufficient funds being available in its account for that
purpose).
C. Payments on Non-Business Days. Whenever any payment to be made
-----------------------------
hereunder or under the Notes shall be stated to be due on a day which is not a
Business Day, the payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Notes or of the commitment and other fees
hereunder, as the case may be.
D. Notation of Payment. Each Lender agrees that before disposing of
-------------------
any Note held by it, or any part thereof (other than by granting participations
therein), such Lender will make a notation thereon of all principal payments
previously made thereon and of the date to which interest thereon has been paid
and will notify the Borrower of the name and address of the transferee of that
Note; provided that the failure to make (or any error in the making of) such a
--------
notation or to notify the Borrower of the name and address of such transferee
shall not limit or otherwise affect the obligation of the Borrower hereunder or
under such Notes with respect to the Loans and payments of principal or interest
on any such Note.
2.6 Use of Proceeds.
---------------
A. Bridge Loan. The proceeds of the Bridge Loan shall be applied by
-----------
the Borrower, together with borrowings under the Senior Credit Facility and
funds raised in the Equity Financing, to the payment of the Transaction Costs
and to pay the consideration for the Petersen Acquisition.
<PAGE>
-47-
B. Term Loan. Upon the extension of a Term Loan by a Lender, the
---------
Borrower shall cancel a corresponding principal amount of Bridge Notes held by
such Lender.
C. Margin Regulations. No portion of the proceeds of any borrowing
------------------
under this Agreement shall be used by the Borrower in any manner which might
cause the borrowing or the application of such proceeds to violate the
applicable requirements of Regulation G, Regulation U, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve System or any
other regulation of the Board of Governors or to violate the Exchange Act, in
each case as in effect on the date or dates of such borrowing and such use of
proceeds.
SECTION 3 CONDITIONS
3.1 Conditions to Bridge Loan. The obligation of the Lenders to make
-------------------------
the Bridge Loan is subject to prior or concurrent satisfaction of each of the
following conditions:
A. On or before the Closing Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by the Agent shall be reasonably satisfactory in form and substance
to the Agent, and the Agent shall have received on behalf of the Lenders the
following items, each of which shall be in form and substance satisfactory to
the Agent and, unless otherwise noted, dated the Closing Date:
1. the Agent shall have received a certificate, signed by the
president, the chief executive officer or the chief financial officer of
the Borrower, in form and substance satisfactory to the Agent, certifying
that (i) all representations and warranties of the Borrower contained in
this Agreement and the other Loan Documents are true and correct as of the
Closing Date, both immediately before and after giving effect to the
consummation of the Transactions, the Loans hereunder and the application
of the proceeds
<PAGE>
-48-
thereof, (ii) no Potential Event of Default or Event of Default has
occurred and is continuing, both immediately before and after giving effect
to the consummation of the Transactions, the Loans and the Bridge Notes
hereunder and the application of the proceeds thereof, (iii) both
immediately before and after giving effect to the consummation of the
Transactions, the Loans and the Bridge Notes hereunder and the application
of the proceeds thereof, no Material Adverse Change has occurred since May
31, 1995, and there exists no event, condition or state of facts that could
reasonably be expected to result in a Material Adverse Change, and (iv) all
conditions to the consummation of the Petersen Acquisition have been
satisfied in all material respects and have not been waived or amended
without the prior written consent of the Agent;
2. the Agent shall have received a certificate of the secretary or
an assistant secretary of the Borrower, in form and substance satisfactory
to the Agent, certifying (i) that attached thereto is a true and complete
copy of the articles of organization and all amendments thereto of the
Borrower, certified as of a recent date by the Secretary of State of the
State of Delaware, and that the same has not been amended since the date of
such certification and (ii) that attached thereto is a true and complete
copy of the limited liability company operating agreement of the Borrower
and all amendments thereto, as then in effect, and as to the incumbency and
genuineness of the signature of each officer of [the Borrower] executing
this Agreement or any of the other Loan Documents on behalf of the
Borrower, and attaching all such copies of the documents described above;
3. the Agent shall have received a certificate of the secretary or
an assistant secretary of Holdings, in form and substance satisfactory to
the Agent, certifying (i) that attached thereto is a true and complete copy
of the articles of organization and all amendments thereto of Holdings,
certified as of a recent date by the Secretary of State of the State of
Delaware, and that the same has not been amended
<PAGE>
-49-
since the date of such certification, and (ii) that attached thereto is a
true and complete copy of the limited liability company operating agreement
of Holdings and all amendments thereto, as then in effect, and as to the
incumbency and genuineness of the signature of each officer of Holdings
executing any of such Loan Documents on behalf of Holdings, and attaching
all such copies of the documents described above;
4. the Agent shall have received a certificate of the secretary or
an assistant secretary of BrightView, in form and substance satisfactory to
the Agent, certifying (i) that attached thereto is a true and complete copy
of the certificate of incorporation and all amendments thereto of
BrightView, certified as of a recent date by the Secretary of State of the
State of Delaware, and that the same has not been amended since the date of
such certification, (ii) that attached thereto is a true and complete copy
of the bylaws of BrightView, as then in effect and as in effect at all
times from the date on which the resolutions referred to in clause (iii)
below were adopted to and including the date of such certificate and (iii)
that attached thereto is a true and complete copy of the resolutions
adopted by the board of directors of BrightView (x) authorizing the
execution, delivery and performance by BrightView of the Loan Documents to
which it is a party, (y) authorizing in its capacity as the managing member
of Holdings, the execution, delivery and performance by Holdings of the
Loan Documents to which Holdings is a party, and (z) authorizing, in its
capacity as the managing member of Holdings (in Holdings capacity as the
managing member of the Borrower), the execution, delivery and performance
by the Borrower of the Loan Documents to which the Borrower is a party, and
as to the incumbency and genuineness of the signature of each officer of
BrightView executing any of such documents, and attaching all such copies
of the documents described above;
5. the Agent shall have received (i) a certificate as of a recent
date of the good standing of each of the Borrower,
<PAGE>
-50-
Holdings and BrightView under the laws of the State of Delaware, from the
Secretary of State of Delaware, and (ii) certificates as of a recent date
of the qualification of the Borrower to conduct business as a foreign
corporation in the States of Illinois and California, from the Secretaries
of State of Illinois and California;
6. executed copies of this Agreement and the Bridge Notes
substantially in the form of EXHIBIT I executed in accordance with SECTION
---------
2.1D drawn to the order of the Lenders and with appropriate insertions;
7. an originally executed Notice of Borrowing substantially in the
form of EXHIBIT IV-A, signed by the President or a Vice President of the
------------
Borrower on behalf of the Borrower in writing delivered to the Agent;
8. the favorable opinions of (A) Kirkland & Ellis, special counsel
to the Credit Parties, in substantially the form of EXHIBIT VII-A, and (B)
Cahill Gordon & Reindel, counsel for the Lenders, in substantially the form
of Exhibit VIII in each case addressed to the Agent and the Lenders and
addressing such matters as the Agent or any Lender may reasonably request;
9. a certificate, delivered by the Borrower and signed by the
President or a Vice President and the Chief Financial or Accounting Officer
of the Borrower and addressed to the Lenders in form and substance
reasonably satisfactory to the Agent, with appropriate attachments, stating
that, after giving effect to the consummation of the Transactions, the fair
saleable value of the assets of the Borrower and its Subsidiaries will not
be less than the probable liability on their debts, that each of the
Borrower and its Subsidiaries will be able to pay its debts as they mature
and that each will not have unreasonably small capital to conduct its
business, and the Agent shall have received such opinions of value, other
appropriate factual information and expert advice supporting the
conclusions reached in such letter as the Agent
<PAGE>
-51-
may reasonably request, all in form and substance reasonably satisfactory
to the Agent;
10. (i) executed or conformed copies of the Senior Credit Facility
and any amendments thereto made on or prior to the Closing Date and a copy
of each legal opinion delivered in connection with the Senior Credit
Facility, and the terms and provisions of the Senior Credit Facility and
all documents and instruments relating thereto shall be reasonably
satisfactory to the Agent, (ii) an Officers' Certificate from the Borrower
certifying that the Senior Credit Facility is in full force and effect on
the Closing Date and no material term or condition thereof has been
amended, modified or waived from the form most recently provided to the
Agent a reasonable time prior to the Closing Date except with the prior
written consent of the Agent (which consent shall not be unreasonably
withheld or delayed) and (iii) an Officers' Certificate from the Borrower
to the effect that such party has performed or complied with all agreements
and conditions contained in the Senior Credit Facility and any agreements
or documents referred to therein, and the Borrower is not in default in the
performance or compliance with any of the terms or provisions thereof;
11. a notation of Guarantee, executed and delivered by each
Guarantor, dated the date of this Agreement, substantially in the form of
EXHIBIT IX, as applicable; and
----------
12. a copy of all closing documents relating to the Petersen
Acquisition and all such counterpart originals or certified copies of such
documents, instruments, certificates and opinions as the Agent may
reasonably request.
13. the execution and delivery of the escrow letter dated September
30, 1996 from Holdings and BrightView to First Union and CIBC in connection
with the prospective issuance (upon the occurrence of certain events and
the passage of time) of warrants representing up to 10% of the common
equity
<PAGE>
-52-
of Holdings and BrightView at the Closing Date upon the occurrence of
certain events.
B. Except as set forth on SCHEDULE C, all approvals, permits and
consents of any Governmental Authorities or other Persons required in connection
with the execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the Transactions shall have been obtained
(without the imposition of conditions that are not reasonably acceptable to the
Agent), and all related filings, if any, shall have been made, and all such
approvals, permits, consents and filings shall be in full force and effect, and
the Agent shall have received such copies thereof as it shall have requested;
all applicable waiting periods shall have expired without any adverse action
being taken by any Governmental Authority having jurisdiction; and no action,
proceeding, investigation, regulation or legislation shall have been instituted,
threatened or proposed before, and no order, injunction or decree shall have
been entered by, any court or other Governmental Authority, in each case to
enjoin restrain or prohibit, to obtain substantial damages in respect of, or
that is otherwise related to or arises out of, this Agreement, any of the
other Transaction Documents or the consummation of the Transactions, or that, in
the opinion of the Agent, could reasonably be expected to have a Material
Adverse Effect.
C. No default or event of default shall have occurred under the
Senior Credit Facility, all conditions to borrowing thereunder shall have been
satisfied without waiver (except for any written waivers delivered in respect of
a condition that in the opinion of the Agent is immaterial) and, after giving
effect to borrowing thereunder to consummate the Petersen Acquisition, the
Borrower shall have undrawn availability under the revolving credit portion of
the Senior Credit Facility of at least $15,000,000.
D. On or before the Closing Date, the Borrower shall have paid to
the Lenders the fees payable on the Closing Date pursuant to SECTION 2.4.
<PAGE>
-53-
E. The Agent shall have received evidence in form and substance
reasonably satisfactory to it that the Equity Financing shall have been made,
that Holdings and BrightView shall have contributed to the capital of the
Borrower gross proceeds of not less than $163,000,000 therefrom, (including cash
proceeds of not less than $138,000,000) and that Willis Stein shall have
contributed not less than $50,000,000 of the Equity Financing, all on terms and
conditions reasonably satisfactory to the Agent.
F. Simultaneously with the making of the Bridge Loan by the Lenders,
the Borrower shall have delivered to the Agent an Officers' Certificate from the
Borrower in form and substance reasonably satisfactory to the Agent to the
effect that (i) the representations and warranties in SECTION 4 and the
representations and warranties of the Borrower in the Senior Credit Facility are
true, correct and complete in all material respects on and as of the Closing
Date to the same extent as though made on and as of that date, (ii) on or prior
to the Closing Date, the Borrower has performed and complied with in all
material respects all covenants and conditions to be performed and observed by
the Borrower on or prior to the Closing Date and (iii) all conditions to the
consummation of the Petersen Acquisition in the Asset Purchase Agreement have
been satisfied substantially on the terms set forth therein and have not been
waived or amended without the Agent's prior written consent.
G. The Asset Purchase Agreement shall not have been amended,
modified or supplemented, nor any provision thereof waived, in any material
respect since the date thereof, except as shall have been approved in writing by
the Agent; BrightView shall have duly complied with and performed in all
material respects all of its agreements and conditions set forth in the Asset
Purchase Agreement required to be complied with or performed by it on or prior
to the closing date thereunder; the Asset Purchase Agreement and the Petersen
License Agreement and the other documents and instruments executed and delivered
by Petersen in connection with the Asset Purchase Agreement shall be in full
force and effect, and BrightView's rights and interest thereunder shall have
been assigned to the Borrower in compliance with the terms thereof and
<PAGE>
-54-
pursuant to documentation acceptable to the Agent; the Agent shall have received
evidence satisfactory to it that, concurrently with the making of the Loans
hereunder, the Petersen Acquisition shall be consummated in accordance with the
terms of the Asset Purchase Agreement in all material respects and in compliance
with all applicable Requirements of Law, including any necessary stockholder
approvals; the Agent shall have received a letter from O'Melveny & Myers LLP,
counsel to Petersen, addressed to the Agent and the Lenders and in sufficient
copies for each Lender, to the effect that the Agent and the Lenders are
entitled to rely on their opinion delivered to the Borrower in connection with
the Petersen Acquisition as if such opinion were addressed to them and attaching
a copy thereof; and after giving effect to the Petersen Acquisition, senior
management of the Borrower shall be reasonably acceptable to the Agent.
H. Immediately following the making of the Bridge Loan by the
Lenders, the Petersen Acquisition shall be consummated without the waiver of any
material conditions precedent thereto.
I. Since November 30, 1995, the Petersen Assets shall not have
sustained any loss or interference with respect to its businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental proceeding,
which loss or interference, in the sole judgment of the Agent, has had or could
reasonably be expected to have a Material Adverse Effect on the ability of the
Borrower to consummate the Transactions and to execute, deliver and perform its
obligations under the Loan Documents, the Senior Credit Facility and each other
document or instrument to be delivered in connection with the Transactions
executed or to be executed by it; there shall not have been any Material Adverse
Change.
J. No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by the Notice of Borrowing
which would constitute an Event of Default or Potential Event of Default.
<PAGE>
-55-
K. No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain the Lenders from
making the Bridge Loan.
L. There shall not be pending or, to the knowledge of the Borrower,
threatened any action, suit, proceeding, governmental investigation or
arbitration against the Borrower or, to its knowledge, Petersen or any property
or asset of the Borrower or the Petersen Assets which has not been disclosed by
the Borrower in writing to the Agent (and the Agent shall have received on the
Closing Date an Officer's Certificate dated the Closing Date attesting to the
same) and there shall have occurred no development not so disclosed in any such
action, suit, proceeding, governmental investigation or arbitration so
disclosed, which, in each case, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or a material adverse effect on the
Borrower, the Petersen Assets, the Transactions or the making of the Bridge
Loans.
M. The making of the Bridge Loan in the manner contemplated in this
Agreement shall not violate the applicable provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve Board or any other regulation
of the Board.
N. The Agent shall have received a Financial Condition Certificate,
together with the Pro Forma Balance Sheet and the Projections as described in
SECTIONS 4.10(C) and 4.10(D) substantially in the form of EXHIBIT X, all of
which shall be in form and substance satisfactory to the Agent.
O. The pro forma consolidated capital structure of the Borrower and
its Subsidiaries, after giving effect to the Transactions, shall be consistent
with the capital structure contemplated in the Commitment Letter.
P. All transaction fees and expenses payable by or on behalf of the
Borrower in connection with the Transactions shall be in an aggregate amount
acceptable to the Agent, and the Agent shall have received such evidence thereof
in form and substance
<PAGE>
-56-
satisfactory to it (including itemizations thereof) as it shall have reasonably
requested.
Q. The Agent shall be satisfied that audited, unaudited and pro
forma financial statements meeting the requirements of Regulation S-X under the
Securities Act of 1933, as amended, of the Borrower and each Guarantor will be
available.
R. The Agent and its counsel shall be reasonably satisfied that the
consummation of the Petersen Acquisition and the related financing, including
the funding of the Bridge Loan, shall be in compliance in all material respects
with all applicable Laws. There shall not have been any statute, rule,
regulation, injunction or order applicable to the Petersen Acquisition, or the
financing thereof, promulgated, enacted, entered or enforced by any state or
federal government or governmental or regulatory authority or agency or by any
federal or state court, or by any Tribunal, nor shall there be pending any
action or proceeding by or before any such authority, court or tribunal,
involving a substantial likelihood of an order, that would prohibit, restrict,
delay or otherwise materially affect the Petersen Acquisition or the financing
thereof.
3.2 Conditions to Term Loan. The obligation of the Lenders to make
-----------------------
the Term Loan on the Conversion Date is subject to the prior or concurrent
satisfaction or waiver of the following conditions precedent:
A. The Agent shall have received in accordance with the provisions
of SECTION 2.2B an originally executed Notice of Conversion.
B. The Borrower or any of its Material Subsidiaries shall not be
subject to a Bankruptcy Order or a bankruptcy or other insolvency proceeding and
an Event of Default or Potential Event of Default shall not have occurred and be
continuing under SECTION 7.6, 7.7 or 7.9.
<PAGE>
-57-
C. No Event of Default or Potential Event of Default (whether
matured or not) shall have occurred and be continuing under SECTION 7.1.
D. No Event of Default or Potential Event of Default shall have
occurred and be continuing under SECTION 7.2; provided that if an event
--------
described in this SECTION 3.2D is continuing at the Conversion Date but 30 days
has not passed since the date of written notice of the commencement of such 30-
day period from the holder or holders of not less than 50% in aggregate
principal amount of the Loans then outstanding (the "Grace Period"), the
Conversion Date shall be deferred until the earlier to occur of (x) the cure of
such event or (y) the expiration of such Grace Period.
E. On the Conversion Date, the Agent shall have received an
Officers' Certificate from the Borrower, dated the Conversion Date and
reasonably satisfactory in form and substance to the Agent, to the effect that
the conditions in this SECTION 3.2 are satisfied on and as of the Conversion
Date.
F. The Borrower shall have executed and delivered to the Agent on
the Conversion Date for delivery to the Lenders Term Notes dated the Conversion
Date substantially in the form of EXHIBIT II to evidence the Term Loan, in the
----------
principal amount of (which principal amount shall be the aggregate principal
amount of the Bridge Loan outstanding immediately prior to issuance of the Term
Notes) the Term Loan less amounts paid and with other appropriate insertions.
G. The Borrower shall have paid any fees owing pursuant to Section
2.4 to the Lenders.
H. The making of the Term Loan shall not violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve Board or any other
regulation of the Board.
<PAGE>
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SECTION 4 REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and
to induce the Lenders to extend the credit contemplated hereby, the Borrower
represents and warrants to the Agent and the Lenders, both before and after
giving effect to the Transactions, as follows:
4.1 Corporate Organization and Power. Each Credit Party (i) is a
--------------------------------
limited liability company, corporation, partnership or other business
organization duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) has the full limited
liability company, corporate, partnership or other applicable power and
authority to execute, deliver and perform the Transaction Documents to which it
is or will be a party, to own and hold its property and to engage in its
business as presently conducted, and (iii) is duly qualified to do business as a
foreign limited liability company, corporation, partnership or other business
organization and is in good standing in each jurisdiction where the nature of
its business or the ownership of its properties requires it to be so qualified,
except where the failure to be so qualified could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
4.2 Authorization; Enforceability. Each Credit Party has taken, or
-----------------------------
on the Closing Date will have taken, all necessary limited liability company or
corporate action to execute, deliver and perform each of the Transaction
Documents to which it is or will be a party, and has, or on the Closing Date (or
any later date of execution and delivery) will have, validly executed and
delivered each of the Transaction Documents to which it is or will be a party.
This Agreement constitutes, and each of the other Transaction Documents upon
execution and delivery will constitute, the legal, valid and binding obligation
of each of the Credit Parties that is a party hereto or thereto, enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by
<PAGE>
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general equitable principles or principles of good faith and fair dealing.
4.3 No Violation. The execution, delivery and performance by each
------------
Credit Party of this Agreement and each of the other Transaction Documents to
which it is or will be a party, compliance by it with the terms hereof and
thereof, and the consummation of the Transactions, do not and will not (i)
violate any provision of its articles of organization, certificate of
incorporation, certificate of partnership, operating agreement, bylaws,
partnership agreement or other constituent documents, as applicable, or
contravene any other Requirement of Law applicable to it, (ii) conflict with,
result in a breach of or constitute (with notice, lapse of time or both) a
default under any indenture, agreement or other instrument to which it is a
party, by which it or any of its properties is bound or to which it is subject,
(iii) require any approval of stockholders, members or partners of any Credit
Party or any approval or consent of any Person under any agreement to which any
Credit Party is party, except for such approvals or consents which will be
obtained on or before the Closing Date and disclosed in writing to the Lenders
or such approvals or consents the failure of which to obtain could not
reasonably be expected, singly or in the aggregate, to have a Material Adverse
Effect, (iv) except for the Liens granted pursuant to the security documents in
connection with the Senior Credit Facility, result in or require the creation or
imposition of any Lien upon any of its properties or assets. No Subsidiary is
subject to any restriction or encumbrance on its ability to make dividend
payments or other distributions in respect of its Capital stock, to repay
Indebtedness owed to the Borrower or any other Subsidiary, or to transfer any of
its assets or properties to the Borrower or any other Subsidiary, in each case
other than such restrictions or encumbrances existing under or by reason of (i)
the Credit Documents, (ii) the Senior Credit Facility and any other agreement or
instrument evidencing or governing any Indebtedness permitted under clause (ii)
of SECTION 6.1, (iii) applicable Requirements of Law, (iv) customary non-
assignment provisions in any lease governing a leasehold interest, (v) the terms
of licenses of trademarks and copyrights entered into in the ordinary course of
<PAGE>
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business, (vi) the contracts set forth on SCHEDULE G and (vii) other contractual
restrictions in respect of assets not material to the business of Credit
Parties, taken as a whole.
4.4 Governmental Authorization; Permits. (a) No consent, approval,
-----------------------------------
authorization or other action by, notice to, or registration or filing with, any
Governmental Authority or other Person is or will be required as a condition to
or otherwise in connection with the due execution, delivery and performance by
any Credit Party of this Agreement or any of the other Transaction Documents to
which it is or will be a party or the legality, validity or enforceability
hereof or thereof, other than (i) consents, authorizations and filings in
connection with the Petersen Acquisition that, except as indicated on Schedule
C, have been (or on or prior to the Closing Date will have been) made or
obtained and that are (or on the Closing Date will be) in full force and effect,
which consents, authorizations and filings are listed thereon, (ii) filings of
Uniform Commercial Code financing statements and other instruments necessary to
perfect the Liens created by the security documents in connection with the
Senior Credit Facility, (iii) consents that would be required in respect of the
leases referred to in clause (iv) of SECTION 4.3 and (iv) consents the failure
of which to obtain would not, individually or in the aggregate, have a Material
Adverse Effect.
(b) Each Credit Party has, and is in good standing with respect to,
all governmental approvals, licenses, permits and authorizations necessary to
conduct its business as presently conducted and to own or lease and operate its
properties, except for those the failure to obtain which could not be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.
4.5 Litigation. There are no actions, investigations, suits or
----------
proceedings pending or, to the knowledge of the Borrower (after due
investigation) threatened, at law, in equity or in arbitration, before any
court, other Governmental Authority or other Person ("Litigation"), (i) against
or affecting any Credit Party or any of such Person's properties that could, if
adversely
<PAGE>
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determined, be reasonably expected to have a Material Adverse Effect, or (ii)
with respect to this Agreement, any of the other Transaction Documents or any of
the Transactions. The Borrower has not been advised that there is a reasonable
likelihood of an adverse determination of any Litigation, which adverse
determination, should it occur, would have a Material Adverse Effect.
4.6 Taxes. Each Credit Party has timely filed all federal and all
-----
material state and local tax returns and reports required to be filed by it and
has paid all taxes, assessments, fees and other charges levied upon it or upon
its properties that are shown thereon as due and payable, other than those that
are being contested in good faith and by proper proceedings and for which
adequate reserves have been established in accordance with GAAP. Such returns
accurately reflect in all material respects all liability for taxes of the
Borrower and its Subsidiaries for the periods covered thereby. Except as
described in SCHEDULE D, there is no ongoing audit or examination or, to the
knowledge of the Borrower, other investigation by any Governmental Authority of
the tax liability of any Credit Party and there is no unresolved claim by any
Governmental Authority concerning the tax liability of any Credit Party for any
period for which tax returns have been or were required to have been filed,
other than claims for which adequate reserves have been established in
accordance with GAAP. No Credit Party has waived or extended or has been
requested to waive or extend the statute of limitations relating to the payment
of any taxes. As of the Closing Date, no federal income tax return or report
has been required to have been filed by any Credit Party.
4.7 Subsidiaries. As of the Closing Date and after giving effect to
------------
the Transactions, the Borrower has no Subsidiaries and does not otherwise have
any equity or other ownership interest in any corporation, partnership, joint
venture or other Person.
4.8 Full Disclosure. All factual information furnished to the Agent
---------------
or any Lender on or prior to the Closing Date in writing by or on behalf of any
Credit Party for purposes of or in connection with this Agreement, the
transactions contemplated
<PAGE>
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hereby and the other Transactions is, and all other such factual information
hereafter furnished to the Agent or any Lender in writing by or on behalf of any
Credit Party will be, true and accurate in all material respects on the date as
of which such information is dated or certified (or, if such information has
been amended or supplemented, on the date as of which any such amendment or
supplement is dated or certified) and not made incomplete by omitting to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which such information was provided, not misleading. No
fact is known, no condition exists nor has any event occurred which has not been
disclosed herein or in any other document, certificate or statement furnished to
the Agent or the Lenders for use in the transactions contemplated hereby which,
singly or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
4.9 Margin Regulations. Neither the Borrower nor any of its
------------------
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock. No proceeds of the Loans will be used, directly or indirectly, to
purchase or carry any Margin Stock, to extend credit for such purpose or for any
other purpose that would violate or be inconsistent with Regulations G, T, U or
X or any provision of the Exchange Act.
4.10 Financial Matters. (a) To the knowledge of the Borrower, the
-----------------
audited consolidated balance sheets of Petersen at November 30, 1995, 1994 and
1993 and the related consolidated statements of income, stockholders equity and
cash flows of Petersen for the three-year period ended November 30, 1995
certified by Ernst & Young, L.L.P., copies of which have been delivered to the
Agent, were prepared in accordance with GAAP, have been prepared from, and are
consistent with, the books and records of Petersen and fairly present the
consolidated financial position of Petersen as at the respective dates thereof
and the consolidated results of operations and cash flows of Petersen for the
periods then ended. No events which have had or could reasonably be expected to
have a Material Adverse Effect have occurred since November 30, 1995 (it being
understood that, with regard solely to
<PAGE>
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the period from November 30, 1995 to the Closing Date, such representation is
made as to the knowledge of the Borrower).
(b) To the knowledge of the Borrower, the unaudited consolidated
balance sheets of Petersen at August 31, 1996 and the related consolidated
statements of income, stockholders equity and cash flows of Petersen for the
nine-month period then ended, copies of which have been delivered to the Agent,
were prepared in accordance with GAAP consistently applied (except to the extent
noted therein), have been prepared from, and are consistent with, the books and
records of Petersen and fairly present the consolidated financial position of
Petersen as of such date and the consolidated results of operations and cash
flows of Petersen for the period covered thereby, in each case subject to normal
year-end audit adjustments (including footnotes), consistent with past
practices.
(c) The unaudited pro forma sheet of the Borrower as of August 31,
1996, a copy of which has heretofore been delivered to the Agent (the "Pro Forma
Balance Sheet"), gives pro forma effect to the consummation of the Petersen
Acquisition, the issuance of the Senior Indebtedness, the completion of the
Equity Financing, the extensions of credit made under this Agreement, the
payment of transaction fees and expenses incident to the foregoing, and the
consummation of all other Transactions, all as if such events had occurred on
such date. The Pro Forma Balance Sheet has been prepared in accordance with GAAP
(subject to the absence of footnotes required by GAAP and subject to normal
year-end adjustments) and, subject to stated assumptions made in good faith and
having a reasonable basis set forth therein, presents fairly in all material
respects the financial condition of the Borrower on an unaudited pro forma basis
as of the date set forth therein after giving effect to the consummation of the
Transactions as described above. Prior to the Closing Date, the Borrower has not
engaged in any business, owned any assets or incurred or assumed any liabilities
except in connection with the execution and performance of the Transaction
Documents.
<PAGE>
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(d) The Borrower has prepared, and has heretofore furnished to the
Agent a copy of, annual projected balance sheets and statements of income and
cash flows of the Borrower for the six-year period beginning with the year ended
December 31, 1996, giving effect to the consummation of the Petersen
Acquisition, the issuance of the Senior Indebtedness, the completion of the
Equity Financing, the extensions of credit made under this Agreement, the
payment of transaction fees and expenses related to the foregoing, and the
consummation of the other Transactions (the "Projections"). In the opinion of
management of the Borrower, the assumptions used in the preparation of the
Projections were fair, complete and reasonable when made and continue to be
fair, complete and reasonable as of the date hereof. The Projections have been
prepared in good faith by the executive and financial personnel of the Borrower,
are complete and represent a reasonable estimate of the future performance and
financial condition of the Borrower, subject to the uncertainties and
approximations inherent in any projections and without any representation or
warranty that the projected results will be achieved.
(e) Upon consummation of the Transactions and as of the Closing Date:
(i) The fair saleable value of the assets of the Borrower and each
of its Subsidiaries, on a stand-alone basis, exceeds the amount that will
reasonably be required to be paid on or in respect of the existing debts
and other liabilities (including Contingent Obligations) of such Person as
they mature.
(ii) The assets of each of the Borrower and each of its
Subsidiaries, on a stand-alone basis, do not constitute unreasonably small
capital for any such Person to carry out its business as conducted as of
the Closing Date and as proposed to be conducted, including the capital
needs of any such Person, taking into account the particular capital
requirements of the business conducted and to be conducted by such Person,
and the availability of capital in respect
<PAGE>
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thereof (with reference, without limitation, to the Projections).
(iii) The Borrower does not intend to, and does not intend to permit
any of its Subsidiaries to, incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of debt of each of such Person). As of the
Closing Date, the anticipated cash flow of the Borrower and each of its
Subsidiaries, after taking into account all presently anticipated uses of
the cash of each such Person, will at all times be sufficient to pay all
amounts on or in respect of Indebtedness of each such Person when such
amounts are, as anticipated as of the Closing Date, required to be paid.
(iv) The Borrower does not intend, and does not believe, that final
judgments against any of the Borrower or its Subsidiaries in actions for
money damages will be rendered at a time when, or in an amount such that,
any such Person will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum reasonable
amount of such judgments in any such actions and the earliest reasonable
time at which such judgments might be rendered). The anticipated cash flow
of the Borrower and each of its Subsidiaries, on a stand-alone basis, after
taking into account all other anticipated uses of the cash of each such
Person (including the payments on or in respect of debt referred to in
clause (iii) of this SECTION 4.10(E)), will at all times be sufficient to
pay all such judgments promptly in accordance with their terms.
4.11 Ownership of Properties. Each Credit Party (i) has good and
-----------------------
marketable title to all real property owned by it, (ii) holds interests as
lessee under valid leases in full force and effect with respect to all material
leased real and personal property used in connection with its business, (iii)
possesses or has rights to use licenses, patents, copyrights, trademarks,
service marks, trade names and other assets sufficient to enable it to continue
to conduct its business substantially as heretofore
<PAGE>
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conducted (including, to the knowledge of the Borrower, as conducted by Petersen
prior to the Closing Date) and without any material conflict with the rights of
others, and (iv) after giving effect to the Petersen Acquisition, has good title
to all of its other properties and assets reflected in the most recent financial
statements referred to in SECTION 4.10(A) (except as sold or otherwise disposed
of since the date thereof in the ordinary course of business), in each case
under (i), (ii), (iii) and (iv) above free and clear of all Liens other than
Permitted Liens, and other than for encumbrances or restrictions that could not
reasonably be expected to have a Material Adverse Effect. SCHEDULE E lists, as
of the Closing Date and after giving effect to the Transactions, all real
property leasehold interests of each Credit Party, indicating in each case the
identity of the owner, the nature of the leased premises and the address of the
property. As of the Closing Date and after giving effect to the Transactions, no
Credit Party owns any fee interest in any real property.
4.12 ERISA. Each Plan is and has been administered in compliance in
-----
all material respects with all applicable Requirements of Law, including,
without limitation, the applicable provisions of ERISA and the Internal Revenue
Code. No ERISA Event has occurred and is continuing or, to the knowledge of the
Borrower, is reasonably expected to occur with respect to any Plan, in either
case that could be reasonably expected, individually or in the aggregate, to
have a Material Adverse Effect. No Plan has any Unfunded Pension Liability, and
neither the Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA, in either instance where
the same could be reasonably expected, individually or in the aggregate, to have
a Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate is
required to contribute to or has, or has at any time had, any liability to a
Multiemployer Plan.
4.13 Environmental Matters. (a) No Hazardous Substances are or have
---------------------
been generated, used, located, released, treated, disposed of or stored by any
Credit Party or, to the knowledge of the Borrower, by any other Person
(including any predecessor in interest) or otherwise in, on or under any portion
<PAGE>
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of any real property, leased or owned, of any Credit Party, as could not
reasonably be expected to have a Material Adverse Effect, and no portion of any
such real property or, to the knowledge of the Borrower, any other real property
at any time leased, owned or operated by any Credit Party, has been contaminated
by any Hazardous Substance; and no portion of any real property, leased or
owned, of any Credit Party has been or is presently the subject of an
environmental audit, assessment or remedial action, except for any such
contamination, audit, assessment or remedial action that could not reasonably be
expected to have a Material Adverse Effect.
(b) No portion of any real property leased or owned by any Credit
Party, as of the Closing Date, has been used by a Credit Party or, to the
knowledge of the Borrower, any other Person, as or for a mine, a landfill, a
dump or other disposal facility, a gasoline service station, or (other than for
petroleum substances stored in the ordinary course of business) a petroleum
products storage facility; no portion of such real property or any other real
property at any time leased, owned or operated by any Credit Party has, pursuant
to any Environmental Law, been placed on the "National Priorities List" or
"CERCLIS List" (or any similar federal or state list) of sites subject to
possible environmental problems; and there are not and to Borrower's knowledge
have never been any underground or above-ground storage tanks situated on any
real property currently leased or owned by any Credit Party.
(c) Each Credit Party has obtained all licenses and permits under
Environmental Laws necessary to their respective operations, and all such
licenses and permits are being maintained in good standing, and each Credit
Party is in compliance with all material terms and conditions of such licenses
and permits, except for any such failure to obtain, maintain or comply which
could not reasonably be expected to have a Material Adverse Effect.
(d) No Credit Party has received (i) any notice or claim to the
effect that it is or may be liable to any Person under any Environmental Law,
including without limitation, any claim relating to any Hazardous Materials
except as could not reasonably be expected to have a Material Adverse Effect or
(ii) any letter or
<PAGE>
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request for information under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. (S) 9604) or comparable
foreign or state laws regarding any matter which could reasonably be expected to
result in a Material Adverse Effect, and, to the best of the Borrower's
knowledge, no Credit Party is involved in any investigation, response or
corrective action relating to or in connection with any Hazardous Materials at
any real property occupied by such Person or at any other location except for
such of the foregoing which could not reasonably be expected to have a Material
Adverse Effect.
(e) No Credit Party is subject to any judicial or administrative
proceeding alleging the violation of or liability under any Environmental Laws
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect.
(f) No Credit Party nor any of its respective properties or
operations is subject to any outstanding written order or agreement with any
governmental authority or private party relating to (a) any actual or potential
violation of or liability under any Environmental Laws or (b) any Environmental
Claims except for such of the foregoing which could not reasonably be expected
to have a Material Adverse Effect.
(g) No Credit Party or, to the best of the Borrower's knowledge any
predecessor of any Credit Party, has filed any notice under any Environmental
Law indicating past or present ownership or operation of a hazardous waste
treatment, storage or disposal facility, as defined under 40 C.F.R. Parts 260-
270 or any state equivalent.
(h) No Lien in favor of any Person relating to or in connection with
any Environmental Claim has attached to any property currently owned by any
Credit Party, except for any such Lien which could not reasonably be expected to
have a Material Adverse Effect.
(i) All activities and operations of each Credit Party are in
compliance with the requirements of all applicable
<PAGE>
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Environmental Laws, except to the extent the failure so to comply, individually
or in the aggregate, could not be reasonably expected to have a Material Adverse
Effect. No Credit Party is involved in any suit, action or proceeding, or has
received any notice, complaint or other request for information from any
Governmental Authority or other Person, in either case with respect to any
actual, alleged or threatened Environmental Claims that, if adversely
determined, could be reasonably expected, individually or in the aggregate, to
have a Material Adverse Effect.
(j) To the Borrower's knowledge, no event or condition has occurred
which may interfere with present compliance by any Credit Party with any
Environmental Law, or which may give rise to any liability of any Credit Party
under any Environmental Law, which individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect.
4.14 Compliance With Governing Documents, Decrees and Laws. (a) No
-----------------------------------------------------
Credit Party is in violation of (i) its articles of incorporation, articles of
organization, bylaws, operating agreement or any other organizational documents
or (ii) any order, decree or judgment of any Governmental Authority having
jurisdiction over any such Person.
(b) Each Credit Party has timely filed all material reports,
documents and other materials required to be filed by it under all applicable
Requirements of Law with any Governmental Authority, has retained all material
records and documents required to be retained by it under all applicable
Requirements of Law, and is otherwise in compliance with all applicable
Requirements of Law in respect of the conduct of its business and the ownership
and operation of its properties, except for such Requirements of Law the failure
to comply with which, individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect.
4.15 Labor Relations. Except as could not reasonably be expected to
---------------
have a Material Adverse Effect: (a) no Credit Party is engaged in any unfair
labor practice within the meaning of the National Labor Relations Act of 1947,
as amended; (b) there is
<PAGE>
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(i) no unfair labor practice complaint before the National Labor Relations
Board, or grievance or arbitration proceeding arising out of or under any
collective bargaining agreement, pending or, to the knowledge of the Borrower,
threatened against any Credit Party, (ii) no strike, lock-out, slowdown,
stoppage, walkout or other labor dispute pending or, to the knowledge of the
Borrower, threatened against any Credit Party and (iii) to the knowledge of the
Borrower, no petition for certification or union election or union organizing
activities with respect to any Credit Party and the Borrower is not aware of any
existing or imminent labor disturbance by the employees of any Credit Party's
principal suppliers, manufacturers or customers that could, singly or in the
aggregate, have a Material Adverse Effect.
4.16 Regulated Industries. No Credit Party is (i) an "investment
--------------------
company," a company "controlled" by an "investment company," or an "investment
advisor," within the meaning of the Investment Company Act of 1940, as amended,
or (ii) a "holding company," a "subsidiary company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended or (iii) subject to regulation under the Federal Power Act.
4.17 Insurance. SCHEDULE F sets forth a summary (that is true and
---------
correct in all material respects) of all insurance policies or arrangements
carried or maintained by any Credit Party as of the Closing Date and after
giving effect to the Transactions. The assets, properties and business of the
Credit Parties are insured against such hazards and liabilities, under such
coverages and in such amounts, as are customarily maintained by prudent
companies of established repute engaged in the same or similar businesses and
under policies issued by insurers of recognized responsibility.
4.18 Certain Contracts. SCHEDULE G lists, as of the Closing Date and
-----------------
after giving effect to the Transactions, each contract, agreement or commitment,
written or oral, to which any Credit Party is a party, by which any of them or
their respective
<PAGE>
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properties is bound or to which any of them is subject and that (i) relates to
employment of senior executives of a Credit Party or labor matters, (ii)
evidences Funded Debt of a Credit Party or (iii) the termination or breach of
which by a Credit Party could reasonably be expected to have a Material Adverse
Effect, in each case other than purchase orders in the ordinary course of
business and the Transaction Documents, and also indicates the parties, subject
matter and term thereof. As of the Closing Date, each such contract is in full
force and effect, and no Credit Party or, to the knowledge of the Borrower, any
other party thereto, is in default under any such contract.
4.19 Capitalization. As of the Closing Date and after giving effect
--------------
to the Transactions, the capitalization of each Credit Party is set forth on
SCHEDULE H. All issued and outstanding Capital Stock of the Borrower and each
Subsidiary has been duly authorized and validly issued and, to the extent
applicable, is fully paid and nonassessable. As of the Closing Date and after
giving effect to the Transactions, there will be no outstanding securities
convertible into or exchangeable for Capital Stock of any Credit Party or
options, warrants or other rights to purchase or subscribe for Capital Stock of
any Credit Party or contracts, commitments, agreements, understandings or
arrangements of any kind to which any Credit Party is a party relating to the
issuance of any Capital Stock of such Credit Party, any such convertible or
exchangeable securities or any such options, warrants or rights other than
warrants which may be issued to the Lenders in certain events. As of the
Closing Date, no stockholder or member of the Borrower or any of its
Subsidiaries has or will have any preemptive rights to subscribe for any
additional equity securities of such Credit Party. Any issuance and sale of
Capital Stock of the Borrower and any Subsidiary, upon such issuance and sale,
will either (a) have been registered or qualified under applicable federal and
state securities laws or (b) be exempt therefrom.
4.20 Transaction Documents. The Borrower has heretofore furnished to
---------------------
each Lender a true and complete copy of each of the Securities Purchase
Agreement, the Securityholders Agreement as
<PAGE>
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defined in the Senior Credit Facility, in each case together with all schedules
and exhibits referred to therein or delivered pursuant thereto and all
amendments, modifications and waivers relating thereto. As of the Closing Date,
none of such Transaction Documents has been amended, modified or supplemented,
nor have any of the provisions thereof been waived, in any material respect
other than as approved in writing by the Agent. All representations and
warranties of any Credit Party contained in any of such Transaction Documents
were true and correct in all material respects on and as of the date made and
will be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, except as
contemplated by the terms of such Transaction Documents.
4.21 Broker's or Finder's Fees. No broker's or finder's fees or
-------------------------
commissions will be payable by any Credit Party with respect to any transaction
contemplated hereby or in connection with the Transactions and no similar fees
or commissions will be payable by any Credit Party for any other services
rendered to a Credit Party in connection with the transactions contemplated
hereby and thereby.
4.22 Guarantees. Each Guarantor shall, on the date it executes and
----------
delivers a Guarantee hereunder, have the full corporate power, authority and
capacity to execute and deliver such Guarantee and to perform all of its
obligations to be performed thereunder; all corporate and other acts, conditions
and things required to be done and performed or to have occurred prior to such
execution and delivery to constitute such Guarantee as a valid and legally
binding obligation of such Guarantor enforceable in accordance with its terms
shall have been done and performed and shall have occurred in due compliance
with all applicable Laws; on the date of such execution and delivery, the
execution, delivery and performance of such Guarantee by such Guarantor will not
(i) violate any provision of Law or any provision of the charter or bylaws of
such Guarantor, or (ii) result in a breach of, a default under (including,
without limitation, any event which with notice or lapse of time, or both, would
constitute a breach of or a default under), or the creation of any Lien on the
properties or
<PAGE>
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assets of such Guarantor, the Borrower or any Subsidiary of the Borrower under
any Contract to which such Guarantor or the Borrower or the Borrower is a party
or by which the properties or assets of such Guarantor or the Borrower may be
bound or affected; on the date of such execution and delivery, each Guarantee
executed and delivered by a Guarantor shall constitute legal, valid, binding and
unconditional obligations of the Guarantor executing and delivering it to the
Lenders hereunder, enforceable in accordance with its terms, except to the
extent that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law); and
the foregoing representations and warranties of the Borrower shall be deemed for
all purposes to have been made on each date when a Guarantee is delivered
hereunder with respect solely to that Guarantee and the Guarantor so issuing
such Guarantee.
4.23 Senior Subordinated Indenture; Etc. Each of the Borrower and
----------------------------------
the Guarantors shall (to the extent such documents are executed), on the date it
executes and delivers the Senior Subordinated Indenture and the Exchange Notes
and the Take-Out Securities and the indenture governing the Take-Out Securities
(or the guarantees related thereto, as the case may be), have the full corporate
power, authority and capacity to do so and to perform all of its obligations to
be performed thereunder; all corporate and other acts, conditions and things
required to be done and performed or to have occurred prior to such execution
and delivery to constitute them as valid and legally binding obligations of the
Borrower enforceable against the Borrower and the Guarantors in accordance with
their respective terms except to the extent that the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law), shall have been done and performed and shall
have occurred in due compliance with all applicable Laws; on the date, if any,
of such execution and delivery by the Borrower and the Guarantors, the Senior
<PAGE>
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Subordinated Indenture and the Exchange Notes and the Take-Out Securities (and
the guarantees) and the indenture governing the Take-Out Securities shall
constitute legal, valid, binding and unconditional obligations of the Borrower
and the Guarantors, as the case may be, enforceable against the Borrower and the
Guarantors, as the case may be, in accordance with their respective terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
SECTION 5 AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the Loans and the Notes
and all other amounts due under this Agreement have been paid in full it shall
perform all covenants in this Section 5 required to be performed by it:
5.1 Financial Statements. The Borrower will deliver to the Agent:
--------------------
(a) As soon as available and in any event within thirty (30) days
after the end of each month ending after the Closing Date, (i) unaudited
consolidated balance sheets of the Borrower and its Subsidiaries as of the end
of such month and unaudited consolidated statements of income and cash flows for
the Borrower and its Subsidiaries for the month then ended and for that portion
of the fiscal year then ended, in each case setting forth comparative
consolidated figures as of the end of and for the corresponding period in the
preceding fiscal year, all in reasonable detail and prepared in accordance with
GAAP (subject to the absence of notes required by GAAP and subject to normal
year-end adjustments) applied on a basis consistent with that of the preceding
month or containing disclosure of the effect on the financial condition or
results of operations of any change in the application of accounting principles
and practices during such
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month, and certified by a Financial Officer of the Borrower as fairly presenting
the financial condition and results of operations of the Borrower and its
Subsidiaries on a consolidated basis as of the dates and for the periods
indicated;
(b) As soon as available and in any event within forty-five (45) days
after the end of each of the first three fiscal quarters of each fiscal year,
beginning with the fiscal quarter ended September 30, 1996, (i) unaudited
consolidated balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal quarter and unaudited consolidated statements of income and cash
flows for the Borrower and its Subsidiaries for the fiscal quarter then ended
and for that portion of the fiscal year then ended, in each case setting forth
comparative consolidated figures as of the end of and for the corresponding
period in the preceding fiscal year, all in reasonable detail and prepared in
accordance with GAAP (subject to the absence of notes required by GAAP and
subject to normal year-end adjustments) applied on a basis consistent with that
of the preceding quarter or containing disclosure of the effect on the financial
condition or results of operations of any change in the application of
accounting principles and practices during such quarter (and, in the case of the
financial statements as of and for the period ended September 30, 1996, which
are not required by this Agreement to be delivered together with a Compliance
Certificate, such statements shall be certified by a Financial Officer of the
Borrower as fairly presenting the financial condition and results of operations
of the Borrower and its Subsidiaries on a consolidated basis as of the dates and
for the periods indicated) and (ii) if applicable, the Borrower's quarterly
report on Form 10-Q for such quarterly period; and
(c) As soon as available and in any event within 100 days after the
end of each fiscal year, beginning with the fiscal year ending December 31,
1996, (i) an audited consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal year and audited consolidated
statements of income and cash flows for the Borrower and its Subsidiaries for
the fiscal year then ended, in each case setting forth comparative figures as of
the end of and for the preceding fiscal year, all in reasonable
<PAGE>
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detail, together with (y) a report thereon by Ernst & Young, L.L.P. or another
certified public accounting firm of recognized national standing reasonably
acceptable to the Required Lenders that is not qualified as to going concern or
scope of audit and to the effect that (A) such financial statements present
fairly the consolidated financial condition and results of operations of the
Borrower and its Subsidiaries as of the dates and for the periods indicated in
accordance with GAAP applied on a basis consistent with that of the preceding
year or containing disclosure of the effect on the financial position or results
of operations of any change in the application of accounting principles and
practices during such year and (B) the examination by such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards, and (z) a report by such accountants to
the effect that, based on and in connection with their examination of the
financial statements of the Borrower and its Subsidiaries, such accountants
obtained no knowledge of the occurrence or existence of any Potential Event of
Default or Event of Default relating to accounting or financial reporting
matters, or a statement specifying the nature and period of existence of any
such Potential Event of Default or Event of Default disclosed by their audit;
provided, however, that such accountants shall not be liable by reason of the
- -------- -------
failure to obtain knowledge of any Potential Event of Default or Event of
Default that would not be disclosed or revealed in the course of their audit
examination, and (ii) if applicable, the Borrower's annual report on Form 10-K
for such year; and
(d) As soon as available and in any event within sixty (60) days
after the end of each fiscal quarter of each fiscal year, beginning with the
fiscal quarter ended September 30, 1996, unaudited statements of profit and loss
(listing revenues, contribution profit and circulation figures) for each of the
top twenty publications (ranked by revenues) of the Borrower and its
Subsidiaries (and to the extent not already included in such group, the
Scheduled Titles) for such fiscal quarter.
<PAGE>
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At the Borrower's option the financial statements described in
subsections (a), (b) (c) and (d) above may be consolidated financial statements
of Holdings and its Subsidiaries, provided that not less than 99% of the assets,
liabilities, revenues, income and other financial items contained in the
financial statements of Holdings and its Subsidiaries shall be attributable to
the Borrower and its Subsidiaries.
5.2 Other Business and Financial Information. The Borrower will
----------------------------------------
deliver to the Agent:
(a) Concurrently with each delivery of the financial statements
described in SECTION 5.1(B) or SECTION 5.1(C), beginning with the delivery of
financial statements with respect to the fiscal quarter ending September 30,
1996, a Compliance Certificate in the form of Exhibit III with respect to the
period covered by the financial statements then being delivered, executed by a
Financial Officer of the Borrower.
(b) As soon as available and in any event within thirty (30) days
after the end of each fiscal year, beginning with the fiscal year ending
December 31, 1996, a consolidated operating budget for the Borrower and its
Subsidiaries for the succeeding fiscal year (prepared on a quarterly basis)
together with a certificate of a Financial Officer of the Borrower to the effect
that such budget has been prepared in good faith and is a reasonable estimate of
the financial position and results of operations of the Borrower and its
Subsidiaries for the period covered thereby and that such Financial Officer has
no reason to believe that such budget is misleading in any material respect in
light of the circumstances existing at the time of preparation or delivery
thereof (but without representation or warranty that the results reflected
therein will actually be achieved); and as soon as available from time to time
thereafter, any modifications or revisions to or restatements of such budget;
(c) Promptly upon receipt thereof, copies of all reports in final
form (other than reports of a routine or ministerial nature which are not
material) submitted to the Borrower by its
<PAGE>
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independent certified public accountants in connection with each annual, interim
or special audit, including, without limitation, any comment letter submitted by
such accountants to management in connection with their annual audit, and
promptly upon completion thereof, any response reports from the Borrower in
respect thereof;
(d) Promptly upon the sending, filing or receipt thereof, copies of
(i) all financial statements, reports, notices and proxy statements that the
Borrower or any of its Subsidiaries shall send or make available generally to
the members of Holdings in their capacity as such or to the stockholders of
BrightView, (ii) all regular, periodic and special reports, registration
statements and prospectuses (other than on Form S-8) that the Borrower or any of
its Subsidiaries shall render to or file with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any national
securities exchange and (iii) all press releases and other statements made
available generally by the Borrower or any of its Subsidiaries to the public
concerning material developments in the business of the Borrower or any of its
Subsidiaries.
(e) Promptly upon (and in any event within (5) Business Days after) a
Responsible Officer obtains knowledge thereof, written notice of any of the
following:
(i) the occurrence of any Potential Event of Default or Event of
Default or of any condition or event that would be required to be disclosed
in a current report filed with the Commission on Form 8-K (whether or not
the Borrower is required to file such reports under the Exchange Act),
together with a written statement of a Responsible Officer of the Borrower
specifying the nature and period of existence of such event or condition
and the action that the Borrower has taken, is taking and proposes to take
with respect thereto;
(ii) the institution or threatened institution of any action, suit,
investigation or proceeding against or affecting the Borrower or any of its
Subsidiaries, including any such investigation or proceeding by any
Governmental Authority
<PAGE>
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(other than routine periodic inquiries, investigations or reviews), that
seeks to enjoin or otherwise prevent the consummation of, or to recover
damages or obtain relief as a result of, any of the Transactions, or that
could, if adversely determined, be reasonably expected, individually or in
the aggregate, to have a Material Adverse Effect, and any material
development in any litigation or other proceeding previously reported
pursuant to SECTION 4.5 or this SECTION 5.2(E)(II);
(iii) the receipt by the Borrower or any of its Subsidiaries from
any Governmental Authority of any notice asserting any failure by the
Borrower or any of its Subsidiaries to be in compliance with applicable
Requirements of Law or that threatens the taking of any action against the
Borrower or such Subsidiary or sets forth circumstances that, if taken or
adversely determined, could be reasonably expected to have a Material
Adverse Effect;
(iv) the occurrence of any ERISA Event that could be reasonably
expected to have a Material Adverse Effect, together with (i) a written
statement of a Responsible Officer of the Borrower specifying the details
of such ERISA Event and the action that the Borrower has taken, is taking
and proposes to take with respect thereto, (ii) a copy of any notice with
respect to such ERISA Event that may be required to be filed with the PBGC
and (iii) a copy of any notice delivered by the PBGC to the Borrower or
such ERISA Affiliate with respect to such ERISA Event;
(v) the termination, resignation or replacement of any of the
chairman, chief executive officer, president or chief operating officer of
the Borrower, and (together with copies thereof) the execution of any
modification of any existing employment agreement, or any new employment
agreement, with any such officer;
(vi) the occurrence of any material default under, or any proposed
or threatened termination or cancellation of, any
<PAGE>
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material contract or agreement to which the Borrower or any of its
Subsidiaries is a party, the termination or cancellation of which could be
reasonably expected to have a Material Adverse Effect;
(vii) the occurrence of any of the following: (i) the assertion of
any Environmental Claim against or affecting the Borrower, any of its
Subsidiaries or any of their respective real property, leased or owned;
(ii) the receipt by the Borrower or any of its Subsidiaries of notice of
any alleged violation of or noncompliance with any Environmental Laws; or
(iii) the taking of any remedial action by the Borrower, any of its
Subsidiaries or any other Person in response to the actual or alleged
generation, storage, release, disposal or discharge of any Hazardous
Substance on, to, upon or from any real property leased or owned by the
Borrower or any of its Subsidiaries; but in each case under clauses (i),
(ii) and (iii) above, only to the extent the same could be reasonably
expected to have a Material Adverse Effect; and
(viii) any other matter or event that has, or could be reasonably
expected to have, a Material Adverse Effect, together with a written
statement of a Responsible Officer of the Borrower setting forth the nature
and period of existence thereof and the action that the Borrower has taken,
is taking and proposes to take with respect thereto;
(f) At the same time provided to the holders of the Bridge Notes or
the Term Notes, any information provided to such holders pursuant to SECTION 5.1
of this Agreement;
(g) Promptly upon (and in any event not later than two (2) Business
Days after) determination of the Petersen Purchase Price Adjustment, a
certificate signed by a Financial Officer of the Borrower, in form and substance
satisfactory to the Agent, attaching or setting forth the calculation of the
Petersen Purchase Price Adjustment;
<PAGE>
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(h) Not later than the last day of each fiscal year of the Borrower,
a report in form and substance satisfactory to the Agent outlining all material
insurance coverage maintained as of the date of such report by the Borrower and
its Subsidiaries and all material insurance coverage planned to be maintained by
such Persons in the subsequent fiscal year;
(i) Promptly after the availability thereof, copies of all material
amendments to the articles of organization, operating agreement or other
organizational documents of the Borrower or any of its Subsidiaries; and
(j) As promptly as reasonably possible, such other information about
the business, condition (financial or otherwise), operations or properties of
the Borrower or any of its Subsidiaries (including any Plan and any information
required to be filed under ERISA, and including any statements, audits or other
reports submitted by or on behalf of the Borrower or any of its Subsidiaries to
any state Governmental Authority) as the Agent or any Lender may from time to
time reasonably request.
5.3 Existence; Franchise; Maintenance of Properties. The Borrower
-----------------------------------------------
will, and will cause each of its Subsidiaries to, (i) maintain and preserve in
full force and effect its limited liability company or corporate existence, as
applicable, except as expressly permitted otherwise by SECTION 6.6, (ii) obtain,
maintain and preserve in full force and effect all other rights, franchises,
licenses, permits, certifications, approvals and authorizations required by
Governmental Authorities and necessary to the ownership, occupation or use of
its properties or the conduct of its business, except to the extent the failure
to do so could not be reasonably expected to have a Material Adverse Effect, and
(iii) keep all material properties in good working order and condition (normal
wear and tear excepted) and from time to time make all necessary repairs to and
renewals and replacements of such properties, except to the extent that any of
such properties are obsolete or are being replaced.
<PAGE>
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5.4 Compliance with Laws. The Borrower will, and will cause each of
--------------------
its Subsidiaries to, comply in all respects with all Requirements of Law
applicable in respect of the conduct of its business and the ownership and
operation of its properties, except to the extent the failure so to comply could
not be reasonably expected to have a Material Adverse Effect.
5.5 Payment of Obligations. The Borrower will, and will cause each
----------------------
of its Subsidiaries to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so could not be reasonably expected to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
the Borrower or any of its Subsidiaries; provided, however, that neither the
-------- -------
Borrower nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good faith and by
proper proceedings and as to which the Borrower or such Subsidiary is
maintaining adequate reserves with respect thereto in accordance with GAAP,
unless and until any tax lien notice has become effective with respect thereto
or until any lien resulting therefrom attaches to its properties and becomes
enforceable against its other creditors.
5.6 Insurance. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance with respect to its assets, properties and business, against
such hazards and liabilities, of such types and in such amounts, as is
customarily maintained by companies of established reputation engaged in the
same or similar businesses similarly situated, and maintain such other or
additional insurance on such terms and subject to such conditions as may be
required under any security documents in connection with the Senior Credit
Facility.
<PAGE>
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5.7 Maintenance of Books and Records; Inspection. The Borrower will,
--------------------------------------------
and will cause each of its Subsidiaries to, (i) maintain adequate books,
accounts and records, in which full, true and correct entries in all material
respects shall be made of all financial transactions in relation to its business
and properties, and prepare all financial statements required under this
Agreement, in each case in accordance with GAAP and in compliance with the
requirements of any Governmental Authority having jurisdiction over it, and (ii)
permit employees or agents of the Agent or any Lender to inspect its properties
and examine or audit its books, records, working papers and accounts and make
copies and memoranda of them, and to discuss its affairs, finances and accounts
with its officers and employees and, upon notice to the Borrower, the
independent public accountants of the Borrower and its Subsidiaries (and by this
provision the Borrower authorizes such accountants, in the presence of a
Responsible Officer, to discuss the finances and affairs of the Borrower and its
Subsidiaries), all at such times and from time to time, upon reasonable notice
and during business hours, as may be reasonably requested.
5.8 Fiscal Year. The Borrower will, within thirty (30) days after
-----------
the Closing Date, cause the ending date of its fiscal year to be December 31.
5.9 Exchange of Term Notes. (a) Borrower will, at any time during
----------------------
the period commencing 60 days prior to the Conversion Date and continuing for so
long as any Term Notes bearing interest at the Fixed Rate remain outstanding, if
so requested in writing by the Agent (the "Exchange Document Request"):
(i) Subject to SECTIONS 5.9(II) below, as promptly as practicable after
receipt of the Exchange Document Request, (a) execute and deliver,
cause each Guarantor to execute and deliver, and cause a bank or
trust company acting as trustee thereunder to execute and deliver,
the Senior Subordinated Indenture, and (b) execute and deliver, and
cause each Guarantor to execute and deliver for the benefit of any
holder of a note issued under the
<PAGE>
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Senior Subordinated Indenture (the "Exchange Notes"), the
Registration Rights Agreement.
(ii) The Senior Subordinated Indenture and Registration Rights Agreement
shall have the terms as are generally set forth in the Term Sheet
attached hereto as EXHIBIT V. The Borrower and Agent shall cooperate
---------
and negotiate in good faith as to the precise terms of the Senior
Subordinated Indenture and the Registration Rights Agreement, both
of which shall be in form, scope and substance as is customary for
indentures and registration right agreements relating to high-yield
debt securities issued for cash in the then prevailing market. In
the event that the Borrower and Agent have not reached agreement as
to the precise terms of the Senior Subordinated Indenture or the
Registration Rights Agreement within 30 days after the receipt of
the Exchange Document Request as provided in paragraph (i) above,
then upon the written request of either the Borrower or the Lender,
such unresolved terms shall be determined by binding arbitration
conducted in accordance with the Rules of the Center for Public
Resources Institute for Dispute Resolution by a sole arbitrator. To
the extent not governed by such rules, such arbitrator shall be
directed by the Agent to set a schedule for determination of such
dispute that is reasonable under the circumstances. The arbitration
will be conducted in New York City. The arbitration will be governed
by the United States Arbitration Act, 9 U.S.C. (S)(S) 1-16. Judgment
upon the award rendered by the arbitrator may be entered by any
court having jurisdiction. The cost of such arbitration shall be
borne equally among the Borrower and Agent.
(b) The Borrower will, on the 5th Business Day following the written
request (the "Exchange Request") of the holder of any Term Note bearing interest
at the Fixed Rate (or beneficial owner of a portion thereof) execute and deliver
to such holder or beneficial owner in accordance with the Senior Subordinated
Indenture, if such Senior Subordinated Indenture has been executed and
delivered, an
<PAGE>
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Exchange Note in the form attached to the Senior Subordinated Indenture bearing
interest at the Fixed Rate in exchange for such Term Note dated the date of the
issuance of such Exchange Note, payable to the order of such holder or owner, as
the case may be, in the same principal amount as such Term Note (or portion
thereof) being exchanged, and cause each Guarantor to endorse its guarantee
thereon.
5.10 Payments in U.S. Dollars. All payments of any Obligations to be
------------------------
made hereunder or under the Notes by the Borrower or any other obligor with
respect thereto shall be made solely in U.S. Dollars or such other currency as
is then legal tender for public and private debts in the United States of
America.
5.11 Register. The Borrower hereby designates the Agent to serve as
--------
the Borrower's agent, solely for purposes of this SECTION 5.11, to maintain a
register (the "Register") on which it will record the Loans made by each of the
Lenders and each repayment in respect of the principal amount of the Loans of
each Lender. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Lender, the transfer of the Loan Commitments of such
Lender and the rights to the principal of, and interest on, any Loan made
pursuant to such Loan Commitments shall not be effective until such transfer is
recorded on the Register maintained by the Agent with respect to ownership of
such Loan Commitments and Loans and prior to such recordation all amounts owing
to the transferor with respect to such Loan Commitments and Loans shall remain
owing to the transferor. The registration of assignment or transfer of all or
part of any Loan Commitments and Loans shall be recorded by the Agent on the
Register only upon the receipt by the Agent of a properly executed and delivered
assignment and assumption agreement pursuant to SECTION 12.2A. Coincident with
the delivery of such an assignment and assumption agreement to the Agent for
acceptance and registration of assignment or transfer of all or part of a Loan,
or as soon thereafter as practicable, the assigning or transferor Lender shall
surrender the Note evidencing such Loan, and thereupon one or more new Notes of
the same type and in the same aggregate
<PAGE>
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principal amount shall be issued to the assigning or transferor Lender and/or
the new Lender.
5.12 Lenders Meeting. The Borrower will participate in a meeting
---------------
with the Lenders once during each fiscal year during which any Obligations are
outstanding hereunder to be held at a location and a time selected by the
Borrower and reasonably satisfactory to the Lenders.
5.13 Additional Guarantors. The Borrower will cause any Person which
---------------------
becomes a Subsidiary (other than Designated Non-Guarantor Subsidiaries) of the
Borrower (whether by creation, acquisition or otherwise) to execute and deliver
a guarantee, in form and substance satisfactory to the Agent (and with such
documentation relating thereto as the Agent shall reasonably require, including,
without limitation, a supplement or amendment to this Agreement and opinions of
counsel as to the enforceability of such guarantee) pursuant to which such
Subsidiary shall become a Guarantor under the Bridge Notes and this Agreement in
accordance with Section 10 with the same effect and to the same extent as if
such Person had been named herein as a Guarantor.
5.14 Permitted Acquisitions. (a) Subject to the provisions of
----------------------
subsection (b) below and the requirements contained in the definition of
Permitted Acquisition, and subject to the other terms and conditions of this
Agreement, the Borrower may from time to time on or after the Closing Date
effect Permitted Acquisitions, provided that, with respect to each Permitted
--------
Acquisition:
(i) no Potential Event of Default or Event of Default shall have
occurred and be continuing at the time of the consummation of such
Permitted Acquisition or would exist immediately after giving effect
thereto;
(ii) if, after giving pro forma effect to such Permitted Acquisition
and any incurrence of Indebtedness in connection therewith (determined as
if such Permitted Acquisition had been consummated and such Indebtedness
incurred as of the
<PAGE>
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first day of the period of four consecutive fiscal quarters ending on the
last day of the Borrower's most recently ended fiscal quarter), the
Leverage Ratio, as defined in the Senior Credit Facility, as of the last
day of the Borrower's most recently ended fiscal quarter is equal to or
greater than 5.0 to 1.0, the Acquisition Amount with respect thereto (x) to
the extent paid or payable in cash (other than cash contributed by Holdings
or BrightView to the Borrower specifically for the purpose of paying all or
a portion of the Acquisition Amount and which is in fact used solely for
such purpose ("Designated Acquisition Funds")), shall not exceed
$10,000,000, (y) together with the aggregate of the Acquisition Amounts (to
the extent paid or payable in cash other than Designated Acquisition Funds)
for all other Permitted Acquisitions consummated during the same fiscal
quarter or the period of three consecutive fiscal quarters immediately
prior thereto, shall not exceed $20,000,000, and (z) together with the
aggregate of the Acquisition Amounts (regardless of the form of
consideration) for all other Permitted Acquisitions consummated during the
same fiscal quarter or the period of three consecutive fiscal quarters
immediately prior thereto, shall not exceed $80,000,000; and
(iii) if, after giving pro forma effect to such Permitted Acquisition
and any incurrence of Indebtedness in connection therewith (determined as
if such Permitted Acquisition had been consummated and such Indebtedness
incurred as of the first day of the period of four consecutive fiscal
quarters ending on the last day of the Borrower's most recently ended
fiscal quarter), the Leverage Ratio (as defined in the Senior Credit
Facility) as of the last day of the Borrower's most recently ended fiscal
quarter is less than 5.0 to 1.0, the Acquisition Amount with respect
thereto (to the extent paid or payable in cash other than Designated
Acquisition Funds), together with the aggregate of the Acquisition Amounts
(to the extent paid or payable in cash other than Designated Acquisition
Funds) for all other Permitted Acquisitions consummated during the same
fiscal quarter or the period of
<PAGE>
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three consecutive fiscal quarters immediately prior thereto, shall not
exceed $20,000,000.
(b) The Borrower shall have delivered to the Agent and each Lender
the items listed in clauses (i) and (ii) below not less than ten (10) Business
Days prior to the consummation of any Permitted Acquisition with respect to
which the Acquisition Amount exceeds $10,000,000, and the items listed in
clauses (iii) and (iv) below not less than three (3) Business Days prior
thereto:
(i) a reasonably detailed description of the material terms of such
Permitted Acquisition (including, without limitation, the purchase price
and method and structure of payment) and of each Person or business that is
the subject of such Permitted Acquisition (each, a "Target");
(ii) historical financial statements of the Target (or, if there are
two or more Targets that are the subject of such Permitted Acquisition and
that are part of the same consolidated group, consolidated historical
financial statements for all such Targets) for the two (2) most recent
fiscal years available and, if available, for any interim periods since the
most recent fiscal year-end;
(iii) consolidated projected income statements of the Borrower and
its Subsidiaries (giving effect to such Permitted Acquisition and the
consolidation with the Borrower of each relevant Target) for the three-year
period following the consummation of such Permitted Acquisition, in
reasonable detail, together with any appropriate statement of assumptions
and pro forma adjustments; and
(iv) a certificate in form and substance reasonably satisfactory to
the Agent and to the extent it is still a Lender, CIBC, executed by a
Financial Officer of the Borrower setting forth the Acquisition Amount and
further to the effect that, to the best of such individual's knowledge, (x)
the consummation of such Permitted Acquisition will not result in a
violation of any provision of this SECTION 5.14, and after
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giving effect to such Permitted Acquisition and any Borrowings made in
connection therewith, the Borrower will be in compliance with the financial
covenants contained in SECTIONS 7.1 through 7.4 of the Senior Credit
Facility (and, additionally, in the case of a Permitted Acquisition subject
to clause (iii) of subsection (a) of SECTION 6.9 of the Senior Credit
Facility, that the Borrower will be in compliance with the requirements set
forth in such clause (iii) as to the Leverage Ratio as defined in the
Senior Credit Facility), such compliance determined with regard to
calculations made on a pro forma basis in accordance with GAAP as if each
--- -----
Target had been consolidated with the Borrower for those periods applicable
to such covenants (such calculations to be attached to the certificate),
(y) the Borrower believes in good faith that it will continue to comply
with such financial covenants for a period of one year following the date
of the consummation of such Permitted Acquisition, and (z) after giving
effect to such Permitted Acquisition and any Borrowings in connection
therewith, the Borrower believes in good faith that it will have sufficient
availability under the Revolving Credit Commitments as defined in the
Senior Credit Facility to meet its ongoing working capital requirements.
(c) As soon as reasonably practicable after the consummation of any
Permitted Acquisition, the Borrower will deliver to the Agent and each Lender a
copy of the fully executed acquisition agreement (including schedules and
exhibits thereto) and other material documents and closing papers delivered in
connection therewith.
The consummation of each Permitted Acquisition shall be deemed to be a
representation and warranty by the Borrower that (except as shall have been
approved by the Required Lenders) all conditions thereto set forth in this
SECTION 5.14 and in the description furnished under clause (i) of subsection (b)
above have been satisfied in all material respects, that the same is permitted
in accordance with the terms of this Agreement and that the matters certified to
by the Financial Officer of the Borrower in the certificate referred to in
clause (iv) of subsection (b) above are,
<PAGE>
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to the best of such individual's knowledge, true and correct in all material
respects as of the date such certificate is given, which representation and
warranty shall be deemed to be a representation and warranty as of the date
thereof for all purposes hereunder, including, without limitation, for purposes
of Sections 4.2 and 9.1 of the Senior Credit Facility.
5.15 Creation or Acquisition of Subsidiaries. Subject to the
---------------------------------------
provisions of SECTION 6.4, the Borrower may from time to time create or acquire
new Subsidiaries in connection with Permitted Acquisitions or otherwise, and the
Subsidiaries of the Borrower may create or acquire new Subsidiaries, provided
--------
that:
Concurrently with (and in any event within ten (10) Business Days
thereafter) the creation or direct or indirect acquisition by the Borrower
thereof, each such new Subsidiary (unless such Subsidiary is a Designated Non-
Guarantor Subsidiary) will execute and deliver to the Agent a Guarantee (or an
appropriate joinder to an existing Guarantee), pursuant to which such new
Subsidiary shall guarantee the payment in full of the Obligations of the
Borrower under this Agreement and the other Loan Documents.
SECTION 6 NEGATIVE COVENANTS
Each of the Borrower and Holdings covenants and agrees that until the
satisfaction in full of the Loans and the Notes and all other monetary
Obligations then due under this Agreement it will fully and timely perform all
covenants in this SECTION 6.
6.1 Indebtedness. The Borrower shall not, and shall not cause or
------------
permit any of its Subsidiaries, create, incur, assume or suffer to exist any
Indebtedness, except for the following ("Permitted Indebtedness"):
(i) the Borrower and the Guarantors may incur and remain liable
with respect to the Obligations;
<PAGE>
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(ii) the Borrower and the Guarantors may incur and remain liable
with respect to Indebtedness under the Senior Credit Facility and the
Guarantees thereunder; provided that the aggregate principal amount of
--------
Indebtedness outstanding under the Senior Credit Facility at any one time
shall not exceed the sum of (x) $260,000,000 less the sum of (a) the
aggregate amount of scheduled amortization payments of the principal amount
thereof actually made; provided that the commitments thereunder are
--------
permanently reduced, (b) the aggregate amount of mandatory prepayments of
the principal amount thereof actually made, (c) each permanent reduction of
commitments to extend credit thereunder not otherwise caused pursuant to
clause (a) or (b); plus any amount of Indebtedness permitted under clause
(vii) below which is incurred under the Senior Credit Facility;
(iii) the Borrower and the Guarantors may incur and remain liable
with respect to the Bridge Notes, Term Notes, Take-Out Securities and
Exchange Notes;
(iv) Indebtedness of the Borrower and its Subsidiaries incurred
solely to finance the payment of all or part of the purchase price of any
equipment, real property or other fixed assets acquired in the ordinary
course of business after the Closing Date, including Indebtedness in
respect of capital lease obligations ("Purchase Money Indebtedness") 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 (iii) above and
(v) through (x) below, which Purchase Money Indebtedness and other
unsecured Indebtedness shall not exceed $10,000,000 in the aggregate at any
time.
(v) the Borrower and its Subsidiaries may incur and remain liable
with respect to Intercompany Indebtedness;
<PAGE>
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(vi) accrued expenses (including salaries accrued and other
compensation), current trade or other accounts payable and other current
liabilities arising in the ordinary course of business and not incurred
through the borrowing of money, provided that the same shall be paid within
90 days of when due except to the extent being contested in good faith and
by appropriate proceedings;
(vii) Indebtedness of the Borrower under Interest Rate Protection
Agreements required pursuant to Section 6.8 of the Senior Credit Facility
or entered into for the purpose of hedging interest rate rises and not for
speculation;
(viii) Indebtedness under Commodity Hedge Agreements entered into in
the ordinary course of business consistent 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 (iv) and (v) of the definition of Permitted
Liens;
(x) Indebtedness consisting of guarantees made in the ordinary
course of business by the Borrower or any of its Subsidiaries of
obligations of the Borrower or any of its Subsidiaries, which obligations
are otherwise permitted under this Agreement; and
(xi) the Borrower and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with the Petersen Acquisition, additional acquisitions of assets
or stock, Asset Dispositions or other sales of assets; provided that the
--------
maximum assumable liability in respect of all such obligations shall at no
time exceed the gross proceeds actually received by the Borrower and its
Subsidiaries in connection with such Asset Dispositions and other sales.
<PAGE>
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6.2 Liens. The Borrower shall not, and shall not cause or permit any
-----
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien on or with respect to any of its property or assets, whether
now owned or hereafter acquired, or file or permit the filing of, or permit to
remain in effect, any financing statement or other similar notice of any Lien
with respect to any such property, asset, income or profits under the Uniform
Commercial Code of any State or under any similar recording or notice statute,
other than the following (collectively, the "Permitted Liens"):
(i) Liens granted to secure the Senior Credit Facility and to
secure obligations under any Interest Rate Protection Agreement entered
into with any lender under the Senior Credit Facility or their respective
Affiliates and any guarantees thereof;
(ii) Liens existing on the Closing Date and set forth on SCHEDULE
A;
(iii) 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);
(iv) Liens (other than any Lien imposed by ERISA, the creation or
incurrence of which would result in an Event of Default under Section
9.1(j) of the Senior Credit Facility 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
<PAGE>
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obligations for borrowed money) entered into in the ordinary course of
business;
(v) Liens for taxes, assessments or other governmental charges or
statutory obligations that are not delinquent or remain payable without any
penalty 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);
(vi) Liens securing the Purchase Money Indebtedness permitted
under clause (iv) of SECTION 6.2; provided that the aggregate principal
--------
amount at any time outstanding of all Indebtedness secured by such Liens,
when combined with the aggregate amount of all other unsecured Indebtedness
outstanding at such time incurred pursuant to clause (iv) of SECTION 6.2,
does not exceed $10,000,000, and provided further that any such Lien (i)
-------- -------
shall attach to such property concurrently with or within twenty (20) days
after the acquisition thereof by the Borrower or such Subsidiary, (ii)
shall not exceed the lesser of (y) the fair market value of such property
or (z) the cost thereof to the Borrower or such Subsidiary and (iii) shall
not encumber any other property of the Borrower or any of its Subsidiaries;
and the replacement, extension or renewal of any such Lien, provided that
such replacement, extension or renewal Lien shall not extend to or cover
any property other than the property subject to such Lien immediately prior
to such replacement, extension or renewal, and provided further that the
Indebtedness secured by such replacement, extension or renewal Lien is
permitted under this Agreement;
(vii) any attachment or judgment Lien not constituting an Event of
Default under Section 9.1(i) of the Senior Credit Facility 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);
<PAGE>
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(viii) Liens arising from the filing, for notice purposes only, of
financing statements in respect of operating leases;
(ix) Liens arising by operation of law in favor of depositary banks
and collecting banks, incurred in the ordinary course of business;
(x) Liens consisting of restrictions on the transfer of securities
pursuant to applicable federal and state securities laws;
(xi) interests of lessors and licensors under leases and licenses to
which the Borrower or any of its Subsidiaries is a party;
(xii) with respect to any real property occupied by the Borrower or any
of its Subsidiaries, all easements, rights of way, licenses and similar
encumbrances on title that do not materially impair the use of such
property for its intended purposes; and
(xiii) Liens in favor of the trustee or agent under any agreement or
indenture relating to Indebtedness of the Borrower issued in accordance
with clause (iii) of SECTION 6.1.
(xiv) Liens on (a) Real Property Assets or (b) equipment, fixtures
and other similar property of Borrower and any of its Subsidiaries, in each
case securing Indebtedness described in SECTION 6.1(IV); provided that such
--------
Liens shall extend only to the equipment, fixtures, and other similar
property so financed (and improvements or attachments thereto) and the
proceeds thereof;
(xv) the replacement, extension or renewal of any Lien permitted by
this SECTION 6.2 upon or in the same property or replacement property
subject to such Lien and as security for the same obligations or any
refinancings thereof to the extent such refinancings are permitted under
SECTION 6.1; provided
--------
<PAGE>
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that such Lien does not extend to or cover any property other than the
property covered by such Lien immediately prior to such replacement,
extension or renewal of such Lien (and improvements or attachments thereto)
and the principal of the obligations secured thereby is not increased; and
(xvi) additional Liens securing Indebtedness at any one time
outstanding not exceeding $5,000,000.
6.3 Restricted Payments.
-------------------
(a) Except as set forth in Section 8.6(a)(ii) of the Senior Credit
Facility, The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly (i) declare or pay any dividend, or make
any distribution, on any Capital Stock of the Borrower (other than dividends or
distributions payable solely in Qualified Capital Stock of the Borrower), (ii)
purchase, redeem or otherwise acquire or retire for value any of the Borrower's
Capital Stock, or any warrants, rights or options to acquire shares of any class
of such Capital Stock or (iii) make any principal payment on, purchase, defease,
redeem, prepay, or otherwise acquire or retire for value, other than any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Subordinated Indebtedness of the Borrower or of a Guarantor (any such
dividend, distribution, purchase, redemption, acquisition, retirement,
defeasance or prepayment set forth in clauses (i), (ii) and (iii) above a
"Restricted Payment").
(b) Notwithstanding the foregoing, if no Potential Event of Default
or Event of Default shall have occurred and be continuing or shall be caused as
a consequence thereof, the provisions set forth in the immediately preceding
paragraph will not prevent (1) the acquisition of any shares of Capital Stock of
the Borrower or the repurchase, redemption or other repayment of any
Subordinated Indebtedness of the Borrower or of a Guarantor in exchange for or
solely out of the proceeds of the substantially concurrent sale (other than to
the Borrower or a Subsidiary of the Borrower) of shares of Qualified Capital
Stock of the Borrower, (2) the repurchase, redemption or other repayment of any
<PAGE>
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Subordinated Indebtedness of the Borrower in exchange for or solely out of the
proceeds of the substantially concurrent sale (other than to the Borrower or a
Subsidiary of the Borrower) of Subordinated Indebtedness of the Borrower with a
Weighted Average Life to Maturity equal to or greater than the then remaining
Weighted Average Life to Maturity of the Subordinated Indebtedness repurchased,
redeemed or repaid, and (3) dividend payments or other distributions of cash by
the Borrower in an amount not in excess of (y) $1,000,000 per fiscal year solely
for the purpose of paying fees and expenses of the Credit Parties, including
directory fees, less (z) the amount of any management, advisory, consulting and
similar fees, paid by the Borrower to Willis Stein and its Affiliates during
such fiscal year.
(c) Notwithstanding the foregoing, if no Event of Default pursuant to
Sections 7.1, 7.6 or 7.7 shall have occurred and be continuing, or would result
from any such distribution, the Borrower may make a Permitted Tax Distribution.
6.4 Investments. The Borrower will not, and will not permit or cause
-----------
any of its Subsidiaries to, directly or indirectly, purchase, own, invest in or
otherwise acquire any Capital Stock, evidence of indebtedness or other
obligation or security or any interest whatsoever in any other Person, or make
or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any other Person, or purchase
or otherwise acquire (whether in one or a series of related transactions) any
portion of the assets, business or properties of another Person (including
pursuant to an Acquisition), or create or acquire any Subsidiary, or become a
partner or joint venturer in any partnership or joint venture (collectively,
"Investments"), or make a commitment or otherwise agree to do any of the
foregoing, other than:
(i) Cash Equivalents;
(ii) Investments consisting of (a) purchases and acquisitions of
inventory, supplies, materials and equipment,
<PAGE>
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or (b) licenses or leases of intellectual property and other assets, in
each case in the ordinary course of business,
(iii) 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;
(iv) without duplication, Investments consisting of Indebtedness
permitted under clause (v) of SECTION 8.2 of the Senior Credit Facility;
(v) Investments existing on the Closing Date and described in
SCHEDULE 8.5 of the Senior Credit Facility;
(vi) Investments of the Borrower under Interest Rate Protection
Agreements;
(vii) Investments under Commodity Hedge Agreements entered into in the
ordinary course of business consistent with reasonable business
requirements and not for speculation;
(viii) Investments consisting of endorsements for collection or deposit
in the ordinary course of business;
(ix) Investments consisting of the making of capital contributions
or the purchase of Capital Stock (a) by the Borrower or any Subsidiary in
any other Subsidiary that is (or after giving effect to such Investment
will be) a Guarantor (including all such Investments constituting Permitted
Acquisitions, but subject to compliance with the provisions of SECTION 6.9
of the Senior Credit Facility and SECTION 5.14 hereof), and (b) by any
Subsidiary in the Borrower;
(x) Permitted Acquisitions;
(xi) Investments consisting of the contribution by the Borrower to
partnerships, joint ventures or other Persons
<PAGE>
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(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 Closing Date;
(xii) Investments consisting of the licensing of publication titles and
other assets pursuant to joint marketing arrangements with other Persons;
(xiii) Investments in the Borrower or any Subsidiary consisting of
Designated Acquisition Funds (as defined in the Senior Credit Facility);
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 Closing Date (which Investments shall include, without
limitation, (a) Investments in Foreign Subsidiaries as defined in the
Senior Credit Facility and other Designated Non-Guarantor Subsidiaries, (b)
Investments in Persons holding Scheduled Titles, to the extent such
Investments are made with cash or other property not consisting of
Scheduled Titles, and (c) cash or other assets of the Borrower or any of
its Subsidiaries received as consideration by any Person other than the
Borrower or a Wholly Owned Subsidiary in a transaction permitted by SECTION
8.1 of the Senior Credit Facility); provided that the permitted aggregate
--------
amount of such Investments shall increase to (A) $10,000,000 upon delivery
pursuant to SECTION 6.2(A) of the Senior Credit Facility of a Compliance
Certificate indicating a Leverage Ratio as defined in the Senior Credit
Facility of less than 5.0 to 1.0, and (B) $15,000,000 upon delivery
pursuant to SECTION 6.2(A) of the Senior Credit Facility of a Compliance
Certificate evidencing a Leverage Ratio as defined in the Senior Credit
Facility of less than 4.0 to 1.0; and provided further that for purposes of
-------- -------
determining compliance with the limitations set forth in this clause (xiv),
the amount of any such Investment shall be reduced (but not below zero) by
the amount of any cash distributions or cash proceeds (in the case
<PAGE>
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of a sale or other disposition of such Investment) actually received from
time to time by the Borrower or any Subsidiary in respect thereof.
6.5 Senior Subordinated Indebtedness. Neither the Borrower nor any
--------------------------------
of the Guarantors shall, directly or indirectly, incur any Indebtedness (other
than the Notes, the Exchange Notes and the Take-Out Securities) that is by its
terms (or by the terms of any agreement governing such Indebtedness)
subordinated in right of payment to any other Indebtedness of the Borrower or of
such Guarantor unless such Indebtedness is also by its terms (or by the terms of
any agreement governing such Indebtedness) made expressly subordinate to the
Loans and the Notes and the Guarantees to substantially the same extent and in
substantially the same manner as such Loans and Notes and Guarantees are
subordinated to the Senior Credit Facility.
6.6 Merger; Consolidation. The Borrower will not, and will not
---------------------
permit or cause any of its Subsidiaries to, liquidate, wind up or dissolve, or
enter into any consolidation, merger or other combination, or agree to do any of
the foregoing; provided, however, that:
-------- -------
(i) the Borrower may merge or consolidate with another Person so
long as (w) the Borrower is the surviving entity, (x) if such other Person
is a Subsidiary immediately prior to giving effect thereto, the aggregate
of any cash or other assets of the Borrower or any of its Subsidiaries
received as consideration pursuant to such transaction by Persons other
than the Borrower or a Wholly Owned Subsidiary shall be deemed to
constitute an Investment made by the Borrower pursuant to clause (xiv) of
Section 8.5 of the Senior Credit Facility, (y) if such other Person is not
a Subsidiary immediately prior to giving effect thereto, such merger or
consolidation shall constitute a Permitted Acquisition and the applicable
conditions and requirements of Sections 6.9 and 6.10 of the Senior Credit
Facility shall be satisfied, and (z) immediately after giving effect
thereto, no Potential Event of Default or Event of Default would exist; and
<PAGE>
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(ii) any Subsidiary may merge or consolidate with another Person so
long as (w) the surviving entity is the Borrower or a Guarantor (which may
be the acquired entity), (x) if such other Person is a Subsidiary
immediately prior to giving effect thereto, the aggregate of any cash or
other assets of the Borrower or any of its Subsidiaries received as
consideration pursuant to such transaction by Persons other than the
Borrower or a Wholly Owned Subsidiary shall be deemed to constitute an
Investment made by the Borrower pursuant to clause (xiv) of SECTION 8.5 of
the Senior Credit Facility, (y) if such other Person is not a Subsidiary
immediately prior to giving effect thereto, such merger or consolidation
shall constitute a Permitted Acquisition and the applicable conditions and
requirements of SECTIONS 6.9 and 6.10 of the Senior Credit Facility shall
be satisfied, and (z) immediately after giving effect thereto, no Potential
Event of Default or Event of Default would exist.
6.7 Limitation on Certain Restrictions. The Borrower will not, and
----------------------------------
will not permit or cause any of its Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any restriction
or encumbrance on (i) the right of the Borrower and its Subsidiaries to perform
and comply with their respective obligations under the Loan Documents or (ii)
the ability of any Subsidiary of the Borrower to make any dividend payments or
other distributions in respect of its Capital Stock, to repay Indebtedness owed
to the Borrower or any other Subsidiary, to make loans or advances to the
Borrower or any other Subsidiary, or to transfer any of its assets or properties
to the Borrower or any other Subsidiary, in each case other than such
restrictions or encumbrances existing under or by reason of (i) the Loan
Documents, (ii) the Senior Credit Facility and any other agreement or instrument
evidencing or governing any Indebtedness permitted under clause (ii) of SECTION
8.2 of the Senior Credit Facility, (iii) applicable Requirements of Law and,
(iv) customary non-assignment provisions in any lease governing a leasehold
interest, (v) the terms of licenses or trademarks and copyrights entered into in
the ordinary course of business and (vi) other
<PAGE>
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contractual restrictions in respect of assets not material to the business of
the Credit Parties, taken as a whole.
6.8 Transactions with Affiliates. The Borrower will not, and will
----------------------------
not permit or cause any of its Subsidiaries to, enter into any material
transaction (including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service) with any officer,
director, stockholder or other Affiliate of the Borrower or any Subsidiary,
except in the ordinary course of its business and upon fair and reasonable terms
that are no less favorable to it than would obtain in a comparable arm's length
transaction with a Person other than an Affiliate of the Borrower or such
Subsidiary; provided, however, that nothing contained in this Section shall
-------- -------
prohibit:
(i) transactions described on SCHEDULE J or otherwise expressly
permitted under this Agreement;
(ii) the consummation on the Closing Date of the Transactions; and
(iii) transactions after the Closing Date that are expressly
contemplated by the Securities Purchase Agreement, the Securityholders
Agreement and the Securities Purchase Agreement (including any registration
rights described therein) and that are not prohibited by any other
provision of this Agreement or any other Credit Document, provided that the
--------
aggregate management, advisory, consulting and similar fees paid by the
Borrower 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 Borrower
during such fiscal year pursuant to Section 6.3(b)(3) and provided further
-------- -------
that any such fees may accrue but shall not be paid by the Borrower at any
time after the occurrence and during the continuance of a Potential Event
of Default or Event of Default.
<PAGE>
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6.9 Permitted Lines of Business. The Borrower will not, and will
---------------------------
not permit or cause any of its Subsidiaries to, engage in any businesses other
than the publication, sale, distribution and licensing of publications and brand
names, copyrights, patents, service marks and trademarks for the conduct of a
publishing, programming, events and media business (including, without
limitation, electronic media), and including new or additional publications,
media, programming or events and the business and activities ancillary thereto
(the "Permitted Lines of Business").
6.10 Amendments or Waivers of Certain Documents. The Borrower will
------------------------------------------
not, and will not permit or cause any of its Subsidiaries to, (i) amend, modify
or waive, or permit the amendment, modification or waiver of, any provision of
the Senior Credit Facility as in effect on the Closing Date, the effect of which
would be to increase the principal amount due thereunder, shorten the time of
payment of any amount due thereunder, increase the applicable interest rate or
amount of fees or costs due thereunder, or make any covenant thereunder more
restrictive as such covenant directly relates to the prompt and timely payment
of any of the Obligations under this Agreement.
6.11 Refinancing of the Loans in Part. Except as set forth in
--------------------------------
Section 12.20, the Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, incur any Indebtedness to Refinance the Loans in part other
than the Exchange Notes, unless the terms, conditions, covenants, events of
default and other provisions in respect of the instruments evidencing the
Indebtedness incurred to Refinance the Loans in part shall have been approved in
writing by the Agent prior to the incurrence of any such Indebtedness.
6.12 Asset Dispositions. The Borrower will not, and will not permit
------------------
or cause any of its Subsidiaries to directly or indirectly consummate any Asset
Disposition except for the sale or disposition of assets outside the ordinary
course of business for cash, provided that (i) the Net Cash Proceeds from such
--------
sales or dispositions, when aggregated with the Net Cash Proceeds from all other
sales and dispositions not otherwise specifically excluded
<PAGE>
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under the definition of Asset Disposition that are consummated during the same
fiscal quarter or the period of three consecutive fiscal quarters immediately
prior thereto, do not exceed (A) $5,000,000 in the aggregate for the Borrower
and its Subsidiaries if at the time of such sale or disposition the Leverage
Ratio as defined in the Senior Credit Facility (determined with reference to the
Compliance Certificate then most recently delivered to the Lenders) is greater
than or equal to 5.0 to 1.0, and (B) $10,000,000 in the aggregate for the
Borrower and its Subsidiaries if at the time of such sale or disposition the
Leverage Ratio as defined in the Senior Credit Facility (determined with
reference to the Compliance Certificate then most recently delivered to the
Lenders) is less than 5.0 to 1.0, (ii) to the extent not theretofore expended or
committed to be expended within a reasonable period to acquire assets or
properties or otherwise reinvested in the businesses of the Borrower, such Net
Cash Proceeds are applied to the prepayment of the Loans as defined in the
Senior Credit Facility in accordance with the provisions of SECTION 2.6(H)
thereto, (iii) to the extent not expended or committed to be expended in (ii),
such Net Cash Proceeds are delivered to the Agent within 180 days after receipt
thereof for application in prepayment of the Loans hereunder in accordance with
Section 2.5A(ii), (iv) in no event shall the Borrower or any of its Subsidiaries
sell or otherwise dispose of any of the Capital Stock of any Subsidiary (other
than a Subsidiary to which the Borrower has contributed no assets or properties
other than assets consisting of Scheduled Titles as defined in the Senior Credit
Facility), and (v) immediately after giving effect thereto, no Potential Event
of Default or Event of Default would exist.
Nothing in this covenant shall be deemed to prevent the exercise of
remedies by secured creditors of the Borrower or any Subsidiary of the Borrower.
SECTION 7 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur and be continuing:
<PAGE>
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7.1 Failure To Make Payments When Due. Failure to pay any
---------------------------------
installment of principal of the Loans when due, whether at stated maturity, by
acceleration, by notice of prepayment or otherwise (whether or not such payment
is prohibited by SECTION 8); or failure to pay any interest on the Loans or any
other amount due under this Agreement within five days or more after the date
due (whether or not such payment is prohibited by SECTION 8); or
7.2 Default in Other Agreements. The Borrower or any other Credit
---------------------------
Party shall (i) fail to pay when due (whether by scheduled maturity,
acceleration or otherwise and after giving effect to any applicable grace
period) any principal of or interest on any Indebtedness (other than the
Indebtedness incurred pursuant to this Agreement) having an aggregate principal
amount of at least $1,000,000; or (ii) fail to observe, perform or comply with
any condition, covenant or agreement contained in any agreement or instrument
evidencing or relating to any such Indebtedness, or any other event shall occur
or condition exist in respect thereof, and the effect of such failure, event or
condition is to cause such Indebtedness to become due, or to be prepaid,
redeemed, purchased or defeased, prior to its stated maturity; or
7.3 Breach of Certain Covenants. Failure of the Borrower or Holdings
---------------------------
to perform or comply with any covenant, term or condition contained in SECTION
5.2 or any agreements or obligations set forth in the Commitment Letter; or
7.4 Breach of Warranty. Any representation, warranty or
------------------
certification made by the Borrower or Holdings in any Loan Document or in any
statement or certificate at any time given by the Borrower in writing pursuant
hereto or thereto or in connection herewith or therewith shall be false or
incorrect in any material respect on the date as of which made or deemed made;
or
7.5 Other Defaults Under Agreement or Loan Documents. The Borrower
------------------------------------------------
or Holdings shall default in the performance of or compliance with any covenant,
term or condition contained in this Agreement or the other Loan Documents (other
than those covered by
<PAGE>
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SECTION 7.1, 7.3, 7.4, 7.10 or 7.11) and such default shall not have been
remedied or waived in accordance with this Agreement within 30 days after the
date of written notice from the holder or holders of not less than 25% in
aggregate principal amount of the Loans then outstanding of such default; or
7.6 Voluntary Bankruptcy; Appointment of Custodian, Etc. The
---------------------------------------------------
Borrower or any other Credit Party (other than a Designated Non-Guarantor
Subsidiary) shall (i) file a voluntary petition or commence a voluntary case
seeking liquidation, winding-up, reorganization, dissolution, arrangement,
readjustment of debts or any other relief under the Bankruptcy Code or under any
other applicable bankruptcy, insolvency or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to controvert in a timely
and appropriate manner, any petition or case of the type described in section
7.7, (iii) apply for or consent to the appointment of or taking possession by a
custodian, trustee, receiver or similar official for or of itself or all or a
substantial part of its properties or assets, (iv) fail generally, or admit in
writing its inability, to pay its debts generally as they become due, (v) make a
general assignment for the benefit of creditors or (vi) take any corporate
action to authorize or approve any of the foregoing; or
7.7 Involuntary Bankruptcy; Appointment of Custodian, Etc. Any
-----------------------------------------------------
involuntary petition or case shall be filed or commenced against the Borrower or
any other Credit Party (other than a Designated Non-Guarantor Subsidiary)
seeking liquidation, winding-up, reorganization, dissolution, arrangement,
readjustment of debts, the appointment of a custodian, trustee, receiver or
similar official for it or all or a substantial part of its properties or any
other relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, and such petition or case
shall continue undismissed and unstayed for a period of sixty (60) days; or an
order, judgment or decree approving or ordering any of the foregoing shall be
entered in any such proceeding; or
<PAGE>
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7.8 Judgments and Attachments. Any one or more money judgments,
-------------------------
writs or warrants of attachment, executions or similar processes involving an
aggregate amount (exclusive of amounts fully bonded or covered by insurance as
to which the surety or insurer, as the case may be, has acknowledged its
liability in writing) in excess of $1,000,000 shall be entered or filed against
the Borrower or any other Credit Party or any of their respective properties and
the same shall not be dismissed, stayed or discharged for a period of thirty
(30) days or in any event later than five days prior to the date of any proposed
sale thereunder; or
7.9 Dissolution. Any order, judgment or decree shall be entered
-----------
against the Borrower, any Material Subsidiary or Holdings decreeing the
dissolution or split-up of the Borrower, that Material Subsidiary or Holdings
and such order shall remain undischarged or unstayed for a period in excess of
30 days; or
7.10 Guarantee. (i) Any Guarantee or any provision thereof shall
---------
cease to be in full force or effect (other than in accordance with its express
terms or in accordance with this Agreement), or (ii) any Guarantor or any Person
acting by or on behalf of such Guarantor shall deny or disaffirm such
Guarantor's obligations under its Guarantee, or (iii) any Guarantor shall
default in any material respect in the due performance or observance of any
term, covenant or agreement on its part to be performed or observed, after
giving effect to any applicable grace periods, pursuant to its Guarantee; or
7.11 Foreclosure. The agent under the Senior Credit Facility or any
-----------
other party entitled to act thereunder commences judicial proceedings to
foreclose on the collateral securing the Senior Credit Facility or exercises any
right under applicable law or any instrument evidencing a security interest or
other encumbrance in respect of such collateral to take ownership or effect the
transfer of such collateral in lieu of foreclosure.
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 7.6 or 7.7, all of the unpaid principal amount of and accrued
interest on the Loans and all other
<PAGE>
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outstanding Obligations shall automatically become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by the Borrower, and the commitments of the
Lenders hereunder shall thereupon terminate, and (ii) upon the occurrence of any
other Event of Default, the Agent shall, upon written notice of the holder or
holders of a majority in aggregate principal amount of the Loans then
outstanding, by written notice to the Borrower, declare all of the unpaid
principal amount of and accrued interest on the Loans and all other outstanding
Obligations to be, and the same shall forthwith become, due and payable, and the
obligations of the Lenders hereunder shall thereupon terminate; provided that,
--------
for so long as the Senior Credit Facility is in effect, such declaration shall
not become effective until the earlier of (a) 5 days after receipt by the
Borrower and the agent under the Senior Credit Facility of notice of such
acceleration and (b) acceleration of such of the Indebtedness under the Senior
Credit Facility; and provided further that if any declaration of acceleration
----------------
under this Agreement occurs solely because an Event of Default set forth in
Section 7.2 has occurred and is continuing, such declaration of acceleration
shall be automatically annulled if the holders of the Indebtedness which is the
subject of such Event of Default have rescinded their declaration of
acceleration in respect of such Indebtedness within thirty days of such
acceleration of such Indebtedness and the Agent has received written notice
thereof within such time and if no other Event of Default has occurred during
such thirty-day period which has not been cured or waived in accordance with
this Agreement. Nevertheless, if at any time after acceleration of the maturity
of the Loans, the Borrower shall pay all arrears of interest and all payments on
account of the principal thereof which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement or the Notes) and all
Events of Default and Potential Events of Default (other than non-payment of
principal of and accrued interest on the Loans and the Notes due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
SECTION 12.6, then the Agent shall, upon written notice of the holders of a
majority in aggregate principal amount of the
<PAGE>
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Loans then outstanding, by written notice to the Borrower rescind and annul the
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon.
SECTION 8 SUBORDINATION
8.1 Obligations Subordinated to Senior Indebtedness of the Borrower.
---------------------------------------------------------------
The Lenders covenant and agree that payments in respect of the Obligations by
the Borrower shall be subordinated in accordance with the provisions of this
SECTION 8 to the prior payment in full, in cash or Cash Equivalents, of all
amounts payable in respect of Senior Indebtedness of the Borrower, whether now
outstanding or hereafter created (including any interest accruing subsequent to
an event specified in SECTION 7.6 or 7.7 whether or not such interest is an
allowed claim against the Borrower), that the subordination is for the benefit
of the holders of Senior Indebtedness of the Borrower, and that each holder of
Senior Indebtedness of the Borrower whether now outstanding or hereafter
created, incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness of the Borrower in reliance upon the covenants and provisions
contained in this Agreement.
8.2 Priority and Payment Over of Proceeds
-------------------------------------
in Certain Events.
- -----------------
(a) Subordination on Dissolution, Liquidation or Reorganization of
--------------------------------------------------------------
the Borrower. Upon any payment or distribution of assets or securities of the
- ------------
Borrower of any kind or character, whether in cash, property or securities, upon
any dissolution or winding up or total or partial liquidation or reorganization
of the Borrower, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Indebtedness of the Borrower
(including any interest accruing subsequent to an event specified in SECTION 7.6
or 7.7 whether or not such interest is an allowed claim enforceable against the
Borrower) shall first be paid in full in cash or Cash Equivalents, before the
Lenders shall be entitled to receive any payment or
<PAGE>
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distribution by the Borrower in respect of any Obligations and upon any such
dissolution or winding up or liquidation or reorganization, any payment or
distribution of assets or securities of the Borrower of any kind or character,
whether in cash, property or securities, to which the Lenders would be entitled
except for the provisions of this SECTION 8 shall be made by the Borrower or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior
Indebtedness of the Borrower or their representatives to the extent necessary to
pay all of the Senior Indebtedness of the Borrower in full and in Cash or Cash
Equivalents to the holders of such Senior Indebtedness of the Borrower.
(b) Subordination on Default on Senior Indebtedness. Upon the
-----------------------------------------------
maturity of any Senior Indebtedness of the Borrower by lapse of time,
acceleration or otherwise, all Senior Indebtedness of the Borrower then due and
payable shall first be paid in full in cash or Cash Equivalents, before any
payment or distribution is made by the Borrower or any Person acting on behalf
of the Borrower with respect to the Obligations. No direct or indirect payment
or distribution by the Borrower or any Person acting on behalf of the Borrower
of or in respect of any Obligations whether pursuant to the terms of the Loans
or upon acceleration or otherwise shall be made, if at the time of such payment,
there exists a default in the payment of all or any portion of any principal,
interest, fees, letter of credit reimbursement obligations or other amounts
payable in respect of any Senior Indebtedness of the Borrower and such default
shall not have been cured or waived or the benefits of this sentence waived by
or on behalf of the holders of such Senior Indebtedness. In addition, during the
continuation of any Non-Payment Default, upon the receipt by the Agent of
written notice from the agent or representative of the holders of such Senior
Indebtedness, no such payment may be made by the Borrower upon or in respect of
the Obligations, for a period ("Payment Blockage Period") commencing on the date
of receipt of such notice and ending 179 days after receipt of such notice
(unless such Payment Blockage Period shall be terminated by written notice to
the Agent from such agent or representative). Notwithstanding anything
<PAGE>
-111-
herein to the contrary, (x) in no event will a Payment Blockage Period or
successive Payment Blockage Periods with respect to the same payment on the
Obligations extend beyond 179 days from the date the payment on the Obligations
was due and (y) there must be 180 consecutive days in any 365-day period during
which no Payment Blockage Period is in effect. For all purposes of this SECTION
8.2(B), no Non-Payment Default which existed or was continuing on the date of
the commencement of any Payment Blockage Period with respect to the Senior
Indebtedness of the Borrower initiating such Payment Blockage Period shall be,
or be made, the basis for the commencement of a second Payment Blockage Period
by the holders or by the agent or other representative of such Senior
Indebtedness whether or not within a period of 365 consecutive days, unless such
Non-Payment Default shall have been cured or waived for a period of not less
than 90 consecutive days.
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agent or any Lender shall have received any payment or
distribution in respect of any Obligation (other than as permitted by Sections
(a) and (b) of this SECTION 8.2) at a time when such payment is prohibited by
this SECTION 8.2, then and in such event such payment or distribution shall be
received and held in trust for the holders of the Senior Indebtedness of the
Borrower and shall be paid over or delivered to the holders of the Senior
Indebtedness of the Borrower remaining unpaid to the extent necessary to pay in
full in cash or Cash Equivalents all Senior Indebtedness of the Borrower in
accordance with its terms after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness of the Borrower.
If payment in respect of the Obligations is accelerated because of an
Event of Default, the Borrower shall promptly notify the agent or other
representatives for Senior Indebtedness of the Borrower of such acceleration.
Upon any payment or distribution of assets or securities referred to
in this SECTION 8, the Lenders (notwithstanding any
<PAGE>
-112-
other provision of this Agreement) shall be entitled to rely upon any order or
decree of a court of competent jurisdiction in which such dissolution, winding
up, liquidation or reorganization proceedings are pending, and upon a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making any such payment or distribution, delivered to the
Lenders for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of Senior Indebtedness of the Borrower, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this SECTION 8.
The Borrower shall promptly give written notice to each of the Lenders
of any default or event of default under the Senior Credit Facility and, in the
event of any such event of default, shall provide to the Agent the name and
address of the agent under the Senior Credit Facility.
With respect to the holders and owners of Senior Indebtedness of the
Borrower, each Lender undertakes to perform only such obligations on the part
of such Lender as are specifically set forth in this SECTION 8, and no implied
covenants or obligations with respect to the holders or owners of Senior
Indebtedness of the Borrower shall be read into this Agreement against the
Lenders. The Lenders shall not be deemed to owe any fiduciary duty to the
holders or owners of Senior Indebtedness of the Borrower or to any agent under
the Senior Credit Facility.
8.3 Payments May Be Paid Prior to Dissolution. Nothing contained in
-----------------------------------------
this SECTION 8 or elsewhere in this Agreement shall prevent or delay (i) the
Borrower, except under the conditions described in SECTION 8.2, from making
payments at any time for the purpose of making payments in respect of its
Obligations, or from depositing with the Agent any moneys for such payments, or
(ii) subject to SECTION 8.2, the application by the Agent of any moneys
deposited with it for the purpose of making payments in respect of Obligations.
<PAGE>
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8.4 Rights of Holders of Senior Indebtedness of the Borrower Not To
---------------------------------------------------------------
Be Impaired. No right of any present or future holder of any Senior
- -----------
Indebtedness of the Borrower to enforce subordination as provided in this
SECTION 8 shall at any time in any way be prejudiced or impaired by any act or
failure to act by any such holder, or by any noncompliance by the Borrower with
the terms and provisions and covenants herein, regardless of any knowledge
thereof any such holder may have or otherwise be charged with. Without in any
way limiting the generality of the foregoing Section, such holders of Senior
Indebtedness of the Borrower may, at any time and from time to time without
impairing or releasing the subordination provided in this SECTION 8 or the
obligations of the Lenders hereunder to the holders of Senior Indebtedness of
the Borrower, do any one or more of the following: (i) change the manner, place,
terms or time of payment of, or renew or alter, Senior Indebtedness of the
Borrower or otherwise amend or supplement in any manner Senior Indebtedness of
the Borrower or any instrument evidencing the same or any agreement under which
any Senior Indebtedness of the Borrower is outstanding; (ii) sell, exchange,
release, or otherwise deal with any property pledged, mortgaged, or otherwise
securing Senior Indebtedness of the Borrower or fail to perfect or delay in the
perfection of the security interest in such property; (iii) release any Person
liable in any manner for the collection of Senior Indebtedness of the Borrower;
and (iv) exercise or refrain from exercising any rights against the Borrower and
any other Person. Each Lender by purchasing or accepting a Note waives any and
all notice of the creation, modification, renewal, extension or accrual of any
Senior Indebtedness of the Borrower and notice of or proof of reliance by any
holder or owner of Senior Indebtedness of the Borrower upon this SECTION 8 and
the Senior Indebtedness of the Borrower shall conclusively be deemed to have
been created, contracted or incurred in reliance upon this SECTION 8, and all
dealings between the Borrower and the holders and owners of the Senior
Indebtedness of the Borrower shall be deemed to have been consummated in
reliance upon this SECTION 8.
<PAGE>
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The provisions of this SECTION 8 are intended to be for the benefit
of, and shall be enforceable directly by, the holders of the Senior Indebtedness
of the Borrower.
8.5 Subrogation. Upon the payment in full in accordance with the
-----------
terms of SECTION 8.2 of all amounts payable under or in respect of the Senior
Indebtedness of the Borrower, the Lenders shall be subrogated to the rights of
the holders of such Senior Indebtedness of the Borrower to receive payments or
distributions of assets of Borrower made on such Senior Indebtedness of the
Borrower until the Obligations shall be paid in full in cash or Cash
Equivalents; and for purposes of such subrogation no payments or distributions
to holders of such Senior Indebtedness of the Borrower of any cash, property or
securities to which the Lenders would be entitled except for the provisions of
this SECTION 8, and no payment over pursuant to the provisions of this SECTION 8
to holders of such Senior Indebtedness of the Borrower by the Lenders, shall, as
between the Borrower, its creditors other than holders of such Senior
Indebtedness of the Borrower and the Lenders, be deemed to be a payment by the
Borrower to or on account of such Senior Indebtedness of the Borrower, it being
understood that the provisions of this SECTION 8 are solely for the purpose of
defining the relative rights of the holders of such Senior Indebtedness of the
Borrower, on the one hand, and the Lenders, on the other hand. A release of any
claim by any holder of Senior Indebtedness of the Borrower shall not limit the
Lenders' rights of subrogation under this SECTION 8.5.
If any payment or distribution to which the Lenders would otherwise
have been entitled but for the provisions of this SECTION 8 shall have been
applied, pursuant to the provisions of this SECTION 8, to the payment of all
amounts payable under the Senior Indebtedness of the Borrower, then and in such
case, the Lenders shall be entitled to receive from the holders of such Senior
Indebtedness of the Borrower at the time outstanding the full amount of any such
payments or distributions received by such holders of Senior Indebtedness of the
Borrower in excess of the amount sufficient to pay all Senior Indebtedness of
the Borrower payable under or in respect of the Senior Indebtedness of the
<PAGE>
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Borrower in full in cash or Cash Equivalents in accordance with the terms of
SECTION 8.2.
8.6 Obligations of the Borrower Unconditional. Nothing contained in
-----------------------------------------
this SECTION 8 or elsewhere in this Agreement is intended to or shall impair as
between the Borrower and the Lenders the obligations of the Borrower, which are
absolute and unconditional, to pay to the Lenders the Obligations as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Lenders and creditors of
the Borrower other than the holders of the Senior Indebtedness of the Borrower,
nor shall anything herein or therein prevent the Lenders from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this SECTION 8 of the holders of
such Senior Indebtedness of the Borrower in respect of cash, property or
securities of the Borrower received upon the exercise of any such remedy.
The failure to make a payment in respect of Obligations by reason of
any provision of this SECTION 8 shall not prevent the occurrence of an Event of
Default under SECTION 7.
8.7 Lenders Authorize Agent To Effectuate Subordination. Each Lender
---------------------------------------------------
hereby authorizes and expressly directs the Agent on its behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this SECTION 8 and appoints the Agent its attorney in fact for such
purpose, including, without limitation, in the event of any dissolution, winding
up, liquidation or reorganization of the Borrower (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or any other similar remedy or
otherwise) tending towards liquidation of the business and assets of the
Borrower, the immediate filing of a claim for the unpaid balance of the
Obligations in the form required in said proceedings and causing said claim to
be approved. If the Agent does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the
<PAGE>
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holders of the Senior Indebtedness of the Borrower are hereby authorized to have
the right to file and are hereby authorized to file, but shall have no
obligation to file, an appropriate claim for and on behalf of the Lenders. In
the event of any such proceeding, until the Senior Indebtedness of the Borrower
is paid in full in cash or Cash Equivalents, without the consent of the holders
of a majority in principal amount outstanding of Senior Indebtedness of the
Borrower, no Lender shall waive, settle or compromise any such claim or claims
relating to the Obligations that such Lender now or hereafter may have against
the Borrower.
SECTION 9 THE AGENT
9.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints First Union as Agent of such Lender to act as specified herein and in
the other Loan Documents, and each Lender hereby irrevocably authorizes First
Union as the Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such upon the express
conditions contained in this SECTION 9. Notwithstanding any provision to the
contrary elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein or in the other Loan Documents, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Agent. The provisions of this SECTION 9 are solely for the benefit
of the Agent and the Lenders, and neither the Borrower nor any of its
Subsidiaries shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
the Agent shall act solely as agent of the Lenders and the Agent does not assume
and shall not be deemed to have assumed any obligation or relationship of agent
or trust with or for the Borrower or any of its Subsidiaries.
<PAGE>
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9.2 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement or any other Loan Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by SECTION 9.3.
9.3 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or the other Loan Documents
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower, any of its
Subsidiaries, Holdings or any of their respective officers contained in this
Agreement, any other Loan Documents, or in any certificate, report, statement or
other document referred to or provided for in, or received by the Agent under or
in connection with, this Agreement or any other Loan Document or for any failure
of the Borrower, any of its Subsidiaries, Holdings or any of their respective
officers to perform its obligations hereunder or thereunder. The Agent shall
not be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or the other Loan Documents, or to inspect the properties,
books or records of the Borrower or any of its Subsidiaries. The Agent shall
not be responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Lenders or by or on behalf of the Borrower, any of its Subsidiaries or
Holdings to the Agent or any Lender or be required to ascertain or inquire as to
the
<PAGE>
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performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the use of the proceeds of
the Loans or of the existence or possible existence of any Potential Event of
Default or Event of Default.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower or any of its
Subsidiaries or Holdings), independent accountants and other experts selected by
the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. As between the Agent and the
Lenders, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.
9.5 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Potential Event of Default or Event
of Default hereunder unless the Agent has actually received notice from a Lender
or the Borrower referring to this Agreement, describing such Potential Event of
Default or Event of Default and stating that such notice is a "notice of
default." In the event that the Agent receives such a notice, the Agent shall
give prompt notice thereof to the Lenders. The Agent shall take such action
with respect to such Potential Event of Default or Event of Default as shall be
reasonably directed by the Required
<PAGE>
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Lenders; provided that, as between the Agent and the Lenders unless and until
--------
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Potential Event of Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
9.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
---------------------------------------
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrower and its Subsidiaries. The Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial and other
condition, prospects or creditworthiness of the Borrower, any of its
Subsidiaries or Holdings which may come into the possession of the Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
<PAGE>
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9.7 Indemnification. The Lenders agree to indemnify the Agent in its
---------------
capacity as such ratably according to their respective "percentages" as used in
determining the Required Lenders at such time, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment in
full of the Obligations) be imposed on, incurred by or asserted against the
Agent in its capacity as such in any way relating to or arising out of this
Agreement or any other Loan Document, or any documents contemplated by or
referred to herein or the transactions contemplated hereby of any action taken
or omitted to be taken by the Agent under or in connection with any of the
foregoing, but only to the extent that any of the foregoing is not paid by the
Borrower, any of its Subsidiaries or Holdings; provided that no Lender shall be
--------
liable to the Agent for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of the Agent. If any indemnity furnished to the Agent for any
purpose shall, in the opinion of the Agent be insufficient or become impaired,
the Agent may call for additional indemnity and cease, or not commence, to do
the acts indemnified against until such additional indemnity is furnished.
The agreements in this SECTION 9.7 shall survive the payment in full of all
Obligations.
9.8 Agent in Its Individual Capacity. The Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower, its Subsidiaries and Holdings as though the Agent
were not the Agent hereunder. With respect to the Loans made by it and all
Obligations owing to it, the Agent shall have the same rights and powers under
this Agreement as any Lender and may exercise the same as though it were not the
Agent and the terms "Lender" and "Lenders" shall include the Agent in its
individual capacity.
9.9 Resignation of the Agent; Successor Agent. The Agent may resign
-----------------------------------------
as the Agent upon 20 days' notice to the Lenders
<PAGE>
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and the Borrower. Upon the resignation of the Agent, the Required Lenders shall
appoint from among the Lenders a successor Agent which is a bank or a trust
company for the Lenders subject to prior approval by the Borrower (such approval
not to be unreasonably withheld or delayed), whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall include such successor agent effective upon its appointment, and
the resigning Agent's rights, powers and duties as the Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement. After the resignation of the
Agent hereunder, the provisions of this SECTION 9 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 10 GUARANTEE
10.1 Unconditional Guarantee. Each Guarantor hereby unconditionally,
-----------------------
jointly and severally, guarantees (such guarantee to be referred to herein as
the "Guarantee"), subject to SECTION 11, to each of the Lenders and to the Agent
and their respective successors and assigns that (i) the principal of and
interest on the Loans will be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any interest, to the
extent lawful, of the Loans and all other obligations of the Borrower to the
Lenders or the Agent hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (ii) in case
of any extension of time of payment or renewal of any of the Loans or of any
such other obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject to
any applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in SECTION 10.5. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the
<PAGE>
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Loans or this Agreement, the absence of any action to enforce the same, any
waiver or consent by any of the Lenders with respect to any provisions hereof or
thereof, the recovery of any judgment against the Borrower, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Borrower, any right to require a
proceeding first against the Borrower, protest, notice and all demands
whatsoever and covenants that this Guarantee will not be discharged except by
complete performance of the obligations contained in the Loans, this Agreement
and in this Guarantee. If any Lender or the Agent is required by any court or
otherwise to return to the Borrower, any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Borrower or any
Guarantor, any amount paid by the Borrower or any Guarantor to the Agent or such
Lender, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor further agrees that, as
between each Guarantor, on the one hand, and the Lenders and the Agent, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in SECTION 7 for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in SECTION 7, such
obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of this Guarantee.
10.2 Subordination of Guarantee. The obligations of each Guarantor
--------------------------
to the Lenders and to the Agent pursuant to the Guarantee of such Guarantor and
this Agreement are expressly subordinate and subject in right of payment to the
prior payment in full of all Guarantor Senior Indebtedness of such Guarantor, to
the extent and in the manner provided in SECTION 11.
10.3 Severability. In case any provision of this Guarantee shall be
------------
invalid, illegal or unenforceable, the validity,
<PAGE>
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legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.4 Release of a Guarantor. Upon (i) the release by the lenders
----------------------
under the Senior Credit Facility, related documents and future refinancings
thereof of all guarantees of a Guarantor and all Liens on the property and
assets of such Guarantor relating to such Indebtedness, or (ii) the sale or
disposition (whether by merger, stock purchase, asset sale or otherwise) of a
Guarantor (or all or substantially all its assets) to an entity which is not a
Subsidiary of the Borrower and which sale or disposition is otherwise in
compliance with the terms of this Agreement, such Guarantor shall be deemed
released from all obligations under this SECTION 10 without any further action
required on the part of the Agent or any Lender; provided that any such
--------
termination shall occur only to the extent that all obligations of such
Guarantor under all of its guarantees of, and under all of its pledges of assets
or other security interests which secure, such Indebtedness of the Borrower
shall also terminate upon such release, sale or transfer.
The Agent shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Borrower accompanied by an Officers'
Certificate certifying as to the compliance with this SECTION 10.4. Any
Guarantor not so released remains liable for the full amount of principal of and
interest on the Loans as provided in this SECTION 10.
10.5 Limitation of Guarantor's Liability. Each Guarantor and by its
-----------------------------------
acceptance hereof each of the Lenders hereby confirms that it is the intention
of all such parties that the guarantee by such Guarantor pursuant to its
Guarantee not constitute a fraudulent transfer or conveyance for purposes of any
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law. To effectuate the foregoing
intention, the Lenders and such Guarantor hereby irrevocably agree that the
obligations of such Guarantor under the Guarantee shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor (including, but not limited to, the Guarantor
<PAGE>
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Senior Indebtedness of such Guarantor) 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 SECTION 10.7, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.
10.6 Guarantors May Consolidate, etc., on Certain Terms.
--------------------------------------------------
(a) Nothing contained in this Agreement or in the Loans shall prevent
any consolidation or merger of a Guarantor with or into the Borrower or another
Guarantor or shall prevent any sale or conveyance of the property of a Guarantor
as an entirety or substantially as an entirety, to the Borrower or another
Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Guarantor shall no longer have any force or effect.
(b) Except as set forth in SECTION 6.7, nothing contained in this
Agreement or in the Loans shall prevent any consolidation or merger of a
Guarantor with or into a corporation or corporations other than the Borrower or
another Guarantor (whether or not affiliated with the Guarantor); provided that,
--------
subject to SECTIONS 10.4 and 10.6(A), (i) immediately after such transaction,
and giving effect thereto, no Potential Event of Default or Event of Default
shall have occurred as a result of such transaction and be continuing, and (ii)
upon any such consolidation, merger, sale or conveyance, the Guarantee of such
Guarantor set forth in this SECTION 10, and the due and punctual performance and
observance of all of the covenants and conditions of this Agreement to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture satisfactory in form to the Agent, executed and delivered to the
Agent, by the corporation formed by such consolidation, or into which the
Guarantor shall have merged, or by the corporation that shall have acquired such
property. In the case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture
executed
<PAGE>
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and delivered to the Agent and satisfactory in form and substance to the Agent
of the due and punctual performance of all of the covenants and conditions of
this Agreement to be performed by the Guarantor, such successor corporation
shall succeed to and be substituted for the Guarantor with the same effect as if
it had been named herein as a Guarantor.
10.7 Contribution. In order to provide for just and equitable
------------
contribution among the Guarantors, the Guarantors agree, inter se, that in the
----- --
event any payment or distribution is made by any Guarantor (a "Funding
Guarantor") under its Guarantee, such Funding Guarantor shall be entitled to a
contribution from all other Guarantors in a pro rata amount based on the
--- ----
Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Borrower's obligations with respect to the Obligations. "Adjusted Net
Assets" of such Guarantor at any date shall mean the lesser of (x) the amount by
which 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 incurred or assumed
on such date (other than liabilities of such Guarantor under Subordinated
Indebtedness)), but excluding liabilities under the Guarantee, of such Guarantor
at such date and (y) the amount by which 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 liabilities of such Guarantor on its debts including,
without limitation, Guarantor Senior Indebtedness (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date 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
debt in respect of the Guarantee of such Guarantor, as they become absolute and
matured.
10.8 Waiver of Subrogation. Each Guarantor hereby irrevocably waives
---------------------
any claim or other rights which it may now or hereafter acquire against the
Borrower that arise from the existence, payment, performance or enforcement of
such Guarantor's
<PAGE>
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obligations under its Guarantee and this Agreement, including, without
limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Lender against the Borrower, whether or not such claim, remedy or right arises
in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Guarantor in violation of the preceding sentence and the
Loans shall not have been paid in full, such amount shall be deemed to have been
paid to such Guarantor for the benefit of, and held in trust for the benefit of,
the Lenders, and shall, subject to the provisions of SECTION 8, SECTION 10.2 and
SECTION 11, forthwith be paid to the Agent for the benefit of such Lenders to be
credited and applied upon the Loans, whether matured or unmatured, in accordance
with the terms of this Agreement. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Agreement and that the waiver set forth in this SECTION
10.8 is knowingly made in contemplation of such benefits.
10.9 Evidence of Guarantee. To evidence their guarantees to the
---------------------
Lenders set forth in this SECTION 10, each Guarantor hereby agrees to execute
the notation of Guarantee in substantially the form included in EXHIBIT IX.
Each such notation of Guarantee shall be signed on behalf of each Guarantor by
two Officers, or an Officer and an assistant Secretary or one Officer shall sign
and one Officer or an assistant Secretary (each of whom shall, in each case,
have been duly authorized by all requisite corporate actions) shall attest to
such notation of Guarantee.
10.10 Waiver of Stay, Extension or Usury Laws. Each Guarantor
---------------------------------------
covenants that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive such Guarantor from
performing its Guarantee as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or
<PAGE>
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the performance of this Agreement; and each Guarantor hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Agent, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
10.11 Guarantor Covenant. Holdings shall not, directly or
------------------
indirectly, incur or remain or become directly or indirectly liable with respect
to any Indebtedness except that Holdings (a) may guarantee (i) the Obligations,
(ii) the Bridge Notes, Term Notes, Take-Out Securities and Exchange Notes and
(iii) the indebtedness of the Borrower under the Senior Credit Facility and the
other Credit documents, as defined in the Senior Credit Facility and (b) may
incur Indebtedness in an aggregate principal amount not exceeding $5,000,000
outstanding at any time issued to repurchase its 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)
through (iii) of (a) above on terms and conditions satisfactory to the Agent in
its sole discretion (which terms and conditions may, at the sole discretion of
the Agent, provided that such Indebtedness shall not mature or require any cash
payment of principal or interest at any time prior to the first anniversary of
the Tranche B Maturity Date as defined in the Senior Credit Facility)).
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS
11.1 Guarantee Obligations Subordinated to Senior Indebtedness. The
---------------------------------------------------------
Lenders covenant and agree that payments in respect of the obligations by a
Guarantor in respect of its Guarantee (collectively, as to any Guarantor, its
"Guarantee Obligations") shall be subordinated in accordance with the provisions
of this SECTION 11 to the prior payment in full, in cash or Cash Equivalents, of
all amounts payable in respect of Guarantor Senior Indebtedness of such
Guarantor whether now outstanding or hereafter created (including any interest
accruing subsequent to an event specified in SECTION 7.6 or 7.7 whether or not
such interest
<PAGE>
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is an allowed claim against such Guarantor), that the subordination is for the
benefit of the holders of Guarantor Senior Indebtedness, and that each holder of
Guarantor Senior Indebtedness whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Guarantor
Senior Indebtedness in reliance upon the covenants and provisions contained in
this Agreement.
11.2 Priority and Payment Over of Proceeds in Certain Events.
-------------------------------------------------------
(a) Subordination of Guarantee Obligations on Dissolution, Liquidation
------------------------------------------------------------------
or Reorganization of Such Guarantor. Upon any payment or distribution of assets
- -----------------------------------
or securities of any Guarantor of any kind or character, whether in cash,
property or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of such Guarantor, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings
(other than a liquidation or dissolution of such Guarantor into the Borrower or
another Guarantor), all Guarantor Senior Indebtedness of such Guarantor
(including any interest accruing subsequent to an event specified in SECTION 7.6
or 7.7 whether or not such interest is an allowed claim enforceable against such
Guarantor) shall first be paid in full in cash or Cash Equivalents, before the
Lenders shall be entitled to receive any payment or distribution with respect to
any Guarantee Obligations of such Guarantor and upon any such dissolution or
winding up or liquidation or reorganization, any payment or distribution of
assets or securities of such Guarantor of any kind or character, whether in
cash, property or securities, to which the Lenders would be entitled except for
the provisions of this SECTION 11 shall be made by such Guarantor or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, directly to the holders of the Guarantor
Senior Indebtedness of such Guarantor or their representatives to the extent
necessary to pay all of the Guarantor Senior Indebtedness of such Guarantor in
full and in cash or Cash Equivalents to the holders of such Guarantor Senior
Indebtedness.
<PAGE>
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(b) Subordination of Guarantee Obligations on Default on Senior
-----------------------------------------------------------
Indebtedness. Upon the maturity of any Senior Indebtedness of a Guarantor by
- ------------
lapse of time, acceleration or otherwise, all Senior Indebtedness of such
Guarantor then due and payable shall first be paid in full in cash or Cash
Equivalents, before any payment or distribution is made by such Guarantor or any
Person acting on behalf of such Guarantor with respect to the Guarantee
Obligations of such Guarantor. No direct or indirect payment or distribution by
any Guarantor or any Person acting on behalf of such Guarantor of or in respect
of any Guarantee Obligations of such Guarantor whether pursuant to the terms of
the Loans or upon acceleration or otherwise shall be made, if at the time of
such payment, there exists a default in the payment of all or any portion of any
principal, interest, fees, letter of credit reimbursement obligations or other
amounts payable in respect of any Senior Indebtedness of such Guarantor and such
default shall not have been cured or waived or the benefits of this sentence
waived by or on behalf of the holders of such Senior Indebtedness. In addition,
during the continuation of any Non-Payment Default, upon the receipt by the
Agent of written notice from the agent or representative of the holders of such
Senior Indebtedness, no such payment may be made by such Guarantor under its
Guarantee for a period ("Guarantor Payment Blockage Period") commencing on the
date of receipt of such notice and ending 179 days after receipt of such written
notice by the Agent (unless such Guarantor Payment Blockage Period shall be
terminated by written notice to the Agent from such agent), as the case may be
(provided such Guarantor Senior Indebtedness shall theretofore not have been
accelerated). Notwithstanding anything herein to the contrary, (x) in no event
will a Guarantor Payment Blockage Period or successive Guarantor Payment
Blockage Periods with respect to the same payment on such Guarantee extend
beyond 179 days from the date the payment on such Guarantee was due and (y)
there must be 180 consecutive days in any 365-day period during which no
Guarantor Payment Blockage Period is in effect. For all purposes of this SECTION
11.2(B), no Non-Payment Default which existed or was continuing on the date of
the commencement of any Guarantor Payment Blockage Period with respect to the
Senior Indebtedness initiating such Guarantor Payment Blockage Period shall be,
or be made, the basis for the
<PAGE>
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commencement of a second Guarantor Payment Blockage Period by the holders or by
the agent or other representative of such Senior Indebtedness whether or not
within a period of 365 consecutive days, unless such Non-Payment Default shall
have been cured or waived for a period of not less than 90 consecutive days.
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agent or any Lender shall have received any payment or
distribution in respect of any Guarantee Obligation with respect to the Loans
(other than as permitted by Sections (a) and (b) of this SECTION 11.2) at a time
when such payment is prohibited by this SECTION 11.2, then and in such event
such payment or distribution shall be received and held in trust for the holders
of the Guarantor Senior Indebtedness and shall be paid over or delivered to the
holders of the Guarantor Senior Indebtedness remaining unpaid to the extent
necessary to pay in full in cash or Cash Equivalents all Guarantor Senior
Indebtedness in accordance with its terms after giving effect to any concurrent
payment or distribution to the holders of such Guarantor Senior Indebtedness.
Nothing contained in this SECTION 11 will limit the right of the
Lenders to take any action to accelerate the maturity of the Loans pursuant to
SECTION 7 or to pursue any rights or remedies hereunder or otherwise.
Upon any payment or distribution of assets or securities referred to
in this SECTION 11, the Lenders (notwithstanding any other provision of this
Agreement) shall be entitled to rely upon any order or decree of a court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Lender for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Guarantor Senior Indebtedness, the amount thereof or payable thereon,
the amount or amounts paid
<PAGE>
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or distributed thereon and all other facts pertinent thereto or to this SECTION
11.
The Guarantors shall promptly give written notice to each of the
Lenders of any default or event of default under the Senior Credit Facility,
and, in the event of any such event of default, shall provide to the Agent the
name and address of the agent under the Senior Credit Facility.
With respect to the holders and owners of Guarantor Senior
Indebtedness, each Lender undertakes to perform only such obligations on the
part of such Lender as are specifically set forth in this SECTION 11, and no
implied covenants or obligations with respect to the holders or owners of
Guarantor Senior Indebtedness shall be read into this Agreement against the
Lenders. The Lenders shall not be deemed to owe any fiduciary duty to the
holders or owners of Guarantor Senior Indebtedness or to the agent under the
Senior Credit Facility or any other representative of the holders of the
Guarantor Senior Indebtedness.
11.3 Payments May Be Paid Prior to Dissolution. Nothing contained in
-----------------------------------------
this SECTION 11 or elsewhere in this Agreement shall prevent or delay (i)
Guarantors, except under the conditions described in SECTION 11.2, from making
payments at any time for the purpose of making payments in respect of their
respective Guarantee Obligations, or from depositing with the Agent any moneys
for such payments, or (ii) subject to SECTION 11.2, the application by the Agent
of any moneys deposited with it for the purpose of making payments in respect of
Guarantee Obligations.
11.4 Rights of Holders of Guarantor Senior Indebtedness Not To Be
------------------------------------------------------------
Impaired. No right of any present or future holder of any Guarantor Senior
- --------
Indebtedness to enforce subordination as provided in this SECTION 11 shall at
any time in any way be prejudiced or impaired by any act or failure to act by
any such holder, or by any noncompliance by the Guarantors with the terms and
provisions and covenants herein, regardless of any knowledge thereof any such
holder may have or otherwise be charged with. Without in any way limiting the
generality of the foregoing
<PAGE>
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Section, such holders of Guarantor Senior Indebtedness may, at any time and from
time to time without impairing or releasing the subordination provided in this
SECTION 11 or the obligations of the Lenders hereunder to the holders of
Guarantor Senior Indebtedness, do any one or more of the following: (i) change
the manner, place, terms or time of payment of, or renew or alter, Guarantor
Senior Indebtedness or otherwise amend or supplement in any manner Guarantor
Senior Indebtedness or any instrument evidencing the same or any agreement under
which any Guarantor Senior Indebtedness is outstanding; (ii) sell, exchange,
release, or otherwise deal with any property pledged, mortgaged, or otherwise
securing Guarantor Senior Indebtedness or fail to perfect or delay in the
perfection of the security interest in such property; (iii) release any Person
liable in any manner for the collection of Guarantor Senior Indebtedness; and
(iv) exercise or refrain from exercising any rights against the Guarantors and
any other Person. Each Lender by purchasing or accepting a Note waives any and
all notice of the creation, modification, renewal, extension or accrual of any
Guarantor Senior Indebtedness and notice of or proof of reliance by any holder
or owner of Guarantor Senior Indebtedness upon this SECTION 11 and the Guarantor
Senior Indebtedness shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this SECTION 11, and all dealings
between the Guarantors and the holders and owners of the Guarantor Senior
Indebtedness shall be deemed to have been consummated in reliance upon this
SECTION 11.
The provisions of this SECTION 11 are intended to be for the benefit
of, and shall be enforceable directly by, the holders of the Guarantor Senior
Indebtedness.
11.5 Subrogation. Upon the payment in full in accordance with the
-----------
terms of SECTION 11.2 of all amounts payable under or in respect of the
Guarantor Senior Indebtedness, the Lenders shall be subrogated to the rights of
the holders of such Guarantor Senior Indebtedness to receive payments or
distributions of assets of the Guarantors made on such Guarantor Senior
Indebtedness until the Guarantee Obligations shall be paid in full in cash or
Cash Equivalents in a manner satisfactory to the holders
<PAGE>
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of such Guarantor Senior Indebtedness in accordance with the terms of SECTION
11.2; and for purposes of such subrogation no payments or distributions to
holders of such Guarantor Senior Indebtedness of any cash, property or
securities to which the Lenders would be entitled except for the provisions of
this SECTION 11, and no payment over pursuant to the provisions of this SECTION
11 to holders of such Guarantor Senior Indebtedness by the Lenders, shall, as
between such Guarantor, its creditors other than holders of such Guarantor
Senior Indebtedness and the Lenders, be deemed to be a payment by such Guarantor
to or on account of such Guarantor Senior Indebtedness, it being understood that
the provisions of this SECTION 11 are solely for the purpose of defining the
relative rights of the holders of such Guarantor Senior Indebtedness, on the one
hand, and the Lenders, on the other hand. A release of any claim by any holder
of Guarantor Senior Indebtedness shall not limit the Lenders' rights of
subrogation under this SECTION 11.5.
If any payment or distribution to which the Lenders would otherwise
have been entitled but for the provisions of this SECTION 11 shall have been
applied, pursuant to the provisions of this SECTION 11, to the payment of all
amounts payable under the Guarantor Senior Indebtedness, then and in such case,
the Lenders shall be entitled to receive from the holders of such Guarantor
Senior Indebtedness at the time outstanding the full amount of any payments or
distributions received by such holders of Guarantor Senior Indebtedness in
excess of the amount sufficient to pay all Guarantor Senior Indebtedness payable
under or in respect of the Guarantor Senior Indebtedness in full in cash or Cash
Equivalents in accordance with the terms of SECTION 11.2.
11.6 Obligations of the Guarantors Unconditional. Nothing contained
-------------------------------------------
in this SECTION 11 or elsewhere in this Agreement or in the Guarantees is
intended to or shall impair as between the Guarantors and the Lenders the
obligations of the Guarantors, which are absolute and unconditional, to pay to
the Lenders the Guarantee Obligations as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the Lenders and creditors of the Guarantors other than the
holders of the Guarantor Senior Indebtedness, nor
<PAGE>
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shall anything herein or therein prevent the Lenders from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this SECTION 11 of the holders
of such Guarantor Senior Indebtedness in respect of cash, property or securities
of the Guarantors received upon the exercise of any such remedy.
The failure to make a payment in respect of Guarantee Obligations by
reason of any provision of this SECTION 11 shall not prevent the occurrence of
an Event of Default under SECTION 7.
11.7 Lenders Authorize Agent to Effectuate Subordination. Each
---------------------------------------------------
Lender hereby authorizes and expressly directs the Agent on its behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this SECTION 11 and appoints the Agent its attorney in fact for such
purpose, including, without limitation, in the event of any dissolution, winding
up, liquidation or reorganization of any Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or any other similar remedy or
otherwise) tending towards liquidation of the business and assets of any
Guarantor, the immediate filing of a claim for the unpaid balance of the
Guarantee Obligations in the form required in said proceedings and causing said
claim to be approved. If the Agent does not file a proper claim or proof of
debt in the form required in such proceeding prior to 30 days before the
expiration of the time to file such claim or claims, then the holders of the
Guarantor Senior Indebtedness are hereby authorized to have the right to file
and are hereby authorized to file, but shall have no obligation to file, an
appropriate claim for and on behalf of the Lenders. In the event of any such
proceeding, until the Guarantor Senior Indebtedness is paid in full in cash or
Cash Equivalents, without the consent of the holders of a majority in principal
amount outstanding of Guarantor Senior Indebtedness, no Lender shall waive,
settle or compromise any such claim or claims relating to the Obligations that
such Lender now or hereafter may have against the Guarantors.
<PAGE>
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SECTION 12 MISCELLANEOUS
12.1 Representation of the Lenders. Each Lender hereby represents
-----------------------------
that it is a commercial lender which makes loans in the ordinary course of its
business and that it will make the Loans hereunder for its own account or the
account of its affiliates in the ordinary course of such business.
12.2 Participations in and Assignments of Loans and Notes.
----------------------------------------------------
A. Each Lender shall have the right at any time to sell, assign,
transfer or negotiate all or any portion of its Notes or its Loan Commitment in
an aggregate amount of not less than $2,500,000 to any Eligible Assignee. In the
case of any sale, transfer or negotiation of all or part of the Notes or any
Loan Commitment authorized under this SECTION 12.2A, the assignee, transferee or
recipient shall become a party to this Agreement as a Lender by execution of an
assignment and assumption agreement; provided that (i) at such time SECTION 2.1
--------
A OR 2.2A, as the case may be, shall be deemed modified to reflect the Loan
Commitment of such new Lender and of the existing Lenders and (ii) upon
surrender of the Notes, new Notes will be issued, at the Borrower's expense, to
such new Lender and to the assigning Lender, such new Notes to be in conformity
with the requirements of SECTION 2.1D OR 2.2E as the case may be (with
appropriate modifications) to the extent needed to reflect the revised Loan
Commitment; provided, further, that such transfer or assignment will not be
-------- -------
effective until recorded by the Agent on the Register pursuant to SECTION 5.11.
To the extent of any assignment pursuant to this SECTION 12.2A, the assigning
Lender shall be relieved of its obligations hereunder with respect to its
assigned Loan Commitment, and the assignee, transferee or recipient shall have,
to the extent of such sale, assignment, transfer or negotiation, the same
rights, benefits and obligations as it would if it were a Lender with respect to
such Notes or Loan Commitment, including, without limitation, the right to
approve or disapprove actions which, in accordance with the terms hereof,
require the approval of a Lender. At the time of each assignment pursuant to
this SECTION 12.2A to an Eligible
<PAGE>
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Assignee which is not already a Lender hereunder and which is not a United
States Person (as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code) for Federal income tax purposes, the respective Eligible Assignee
shall provide to the Borrower and the Agent the appropriate Internal Revenue
Service Forms (and, if applicable, a SECTION 12.2E(II) Certificate) described in
SECTION 12.2E. Any such sale, assignment, transfer or negotiation shall be
subject to compliance with applicable provisions of federal and state securities
laws.
B. Each Lender may grant participations in all or any part of its
Notes or its Loan Commitment in an aggregate amount of not less than $1,000,000
to any Eligible Assignee.
C. The Borrower shall, at its own cost and expense, provide such
certificates, acknowledgments and further assurances in respect of this
Agreement and the Loans as any Lender may reasonably require in connection with
any participation, transfer or assignment pursuant to this SECTION 12.2.
D. Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loan and Notes hereunder to a Federal Reserve Bank in support
of borrowings made by such Lender from such Federal Reserve Bank.
E. Each Lender that is an assignee or transferee of an interest
under this Agreement pursuant to SECTION 12.2A (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or transfer) and
that is not a United States Person (as such term is defined in Section
7701(a)(30) of the Internal Revenue Code) agrees to deliver to the Borrower and
the Agent, on the date of such assignment or transfer to such Lender, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Agreement and under any Note, or (ii) if the Lender is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code
and cannot deliver either Internal Revenue Service
<PAGE>
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Form 1001 or 4224 pursuant to clause (i) above, two accurate and complete
original signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Lender's entitlement to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note. In addition, each Lender agrees that, when a
lapse in time or change in circumstances renders the previous certification
obsolete or inaccurate in any material respect, it will deliver to the Borrower
and the Agent two new accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001, or Form W-8, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement
of such Lender to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Borrower and the Agent of its inability to
deliver any such Form or Certificate. Subject to SECTION 12.2A and the
immediately succeeding sentence, the Borrower shall be entitled, to the extent
it is required to do so by law, to deduct or withhold income or similar taxes
imposed by the United States (or any political subdivision or taxing authority
thereof or therein) from interest, fees or other amounts payable hereunder or
made on any other Loan Document for the account of any Lender which is not a
United States Person (as such term is defined in Section 7701(a)(30) of the
Internal Revenue Code) for U.S. Federal income tax purposes to the extent that
such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms
that establish a complete exemption from such deduction or withholding.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this SECTION 12.2E and except as set forth in SECTION 12.2A, the
Borrower agrees to pay additional amounts and to indemnify and hold harmless
each Lender (without regard to the identity of the jurisdiction requiring the
deduction or withholding), and reimburse such Lender upon its written request,
in respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the date of any
assignment or transfer in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Taxes.
<PAGE>
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12.3 Fees and Expenses. The Borrower agrees (i) whether or not the
-----------------
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Agent (including,
without limitation, the reasonable fees and expenses of counsel to the Agent,
and the allocated costs of internal counsel) in connection with the preparation,
negotiation, execution, delivery and syndication of this Agreement and the other
Loan Documents, and all reasonable out-of-pocket costs and expenses of the Agent
(including, without limitation, the reasonable fees and expenses of counsel to
the Agent, and the allocated costs of internal counsel) in connection with any
amendment, modification or waiver hereof or thereof or consent with respect
hereto or thereto, (ii) to pay upon demand all reasonable out-of-pocket costs
and expenses of the Agent and each Lender (including, without limitation, the
reasonable fees and expenses of counsel to the Agent or any Lender, including
the allocated costs of internal counsel) in connection with (y) after the
occurrence and during the continuance of an Event of Default, any refinancing or
restructuring of the credit arrangement provided under this Agreement, whether
in the nature of a "work-out," in any insolvency or bankruptcy proceeding or
otherwise and whether or not consummated, and (z) the enforcement, attempted
enforcement or preservation of any rights or remedies under this Agreement or
any of the other Loan Documents, whether in any action, suit or proceeding
(including any bankruptcy or insolvency proceeding) or otherwise, and (iii) to
pay and hold harmless the Agent and each Lender from and against all liability
for any intangibles, documentary, stamp or other similar taxes, fees and
excises, if any, including any interest and penalties, and any finder's or
brokerage fees, commissions and expenses (other than any fees, commissions or
expenses of finders or brokers engaged by the Agent or any Lender), that may be
payable in connection with the transactions contemplated by this Agreement and
the other Loan Documents.
12.4 Indemnity. In addition to the payment of expenses pursuant to
---------
SECTION 12.3, whether or not the transactions contemplated hereby shall be
consummated, the Borrower agrees to indemnify, pay and hold each of the Lenders,
the Agent and any
<PAGE>
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holder of any of the Notes, and each of their respective officers, directors,
employees, agents, representatives and affiliates (collectively called the
"Indemnitees"), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for such Indemnitees
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated as a
party thereto), which may be suffered by, imposed on, incurred by, or asserted
against that Indemnitee, in any manner resulting from, connected with, in
respect of, relating to or arising out of this Agreement, the other Loan
Documents, the Commitment Letter, the Lenders' agreements to make the Loans or
the use or intended use of any of the proceeds of the Loans hereunder, the
issuance of the Exchange Notes or the Take-Out Securities or the Petersen
Acquisition (the "Indemnified Liabilities"); provided that the Borrower shall
--------
have no obligation to an Indemnitee hereunder with respect to Indemnified
Liabilities (i) to the extent such liabilities are finally judicially determined
to have resulted solely from (A) the gross negligence or willful misconduct of
that Indemnitee or (B) the failure of such Indemnitee to perform its obligations
under any Loan Document or (C) such Indemnitee's violation of law or (ii) in
connection with the obligations of any Indemnitee under any Loan Document or for
any transfer fees. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.
12.5 Setoff. Subject to SECTION 8, in addition to any rights now or
------
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence of any Event of Default, each Lender, the Agent and
each subsequent holder of any Note is hereby authorized by the Borrower at any
time or from time to time, without notice to the Borrower, or to any other
<PAGE>
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Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured but not including trust accounts or any other accounts held
for the benefit of another Person) and any other Indebtedness at any time held
or owing by such Person or any such subsequent holder to or for the credit or
the account of the Borrower against and on account of the obligations and
liabilities of the Borrower to such Person or such subsequent holder under this
Agreement and the Notes, including, but not limited to, all claims of any nature
or description arising out of or connected with this Agreement or the Notes,
irrespective of whether or not (a) such Person or such subsequent holder shall
have made any demand hereunder or (b) such Person or such subsequent holder
shall have declared the principal of or the interest on its portion of the Loans
and its Notes and other amounts due hereunder to be due and payable as permitted
by Section 7 and although said obligations and liabilities, or any of them, may
be contingent or unmatured.
12.6 Amendments and Waivers. No amendment, modification, termination
----------------------
or waiver of any term or provision of this Agreement, of the Notes, any
Guarantee or, prior to the execution and delivery thereof, of the form of the
Registration Rights Agreement or the form of the Senior Subordinated Indenture
or consent to any departure by the Borrower or any Guarantor therefrom, shall in
any event be effective without the prior written concurrence of the Borrower or
such Guarantor, as the case may be, and the Required Lenders, and, upon the
request of any Lender, the receipt of a written opinion of counsel of the
Borrower addressed to the Lenders to the effect that such amendment,
modification, termination, waiver or consent does not violate or conflict with
any of the terms and provisions of the Senior Credit Facility or any other
Contractual Obligation of the Borrower; provided that, notwithstanding the third
--------
sentence of SECTION 12.15, without the prior written consent of each Lender
affected, an amendment, modification, termination or waiver of this Agreement,
any Notes, any Guarantee, and, prior to the execution and delivery thereof, of
the form of Registration Rights Agreement and the form
<PAGE>
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of Senior Subordinated Indenture or consent to departure from a term or
provision hereof or thereof may not: (i) reduce the principal amount of Notes
whose holders must consent to any such amendment, modification, termination,
waiver or consent; (ii) reduce the rate of or extend the time for payment of
principal or interest on any Note; (iii) reduce the principal amount of any
Note; (iv) make any Note payable in money other than that stated in the Note;
(v) make any change in SECTION 2.5 or in the definition of Change of Control, in
the last paragraph of SECTION 7 or in SECTION 8.5, 11.5 OR 12.6; (vi) reduce the
rate or extend the time of payment of fees or other compensation payable to the
Lenders hereunder; or (vii) modify the provisions of SECTION 8 or any of the
defined terms related thereto in any manner adverse to the Lenders; and
provided, further, that without the consent of the Agent, no such amendment,
modification, termination or waiver may amend, modify, terminate or waive any
provision of Section 9 as the same applies to the Agent or any other provision
of this Agreement as it relates to the rights or obligations of the Agent. No
amendment, modification or waiver of any provision of this Agreement, the Notes,
any Guarantee or the form of the Senior Subordinated Indenture shall adversely
affect the rights of the holders of Senior Indebtedness or the holders of
Guarantor Senior Indebtedness without their consent. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this SECTION 12.6 shall be binding upon each holder
of the Notes at the time outstanding, each further holder of the Notes, and, if
signed by the Borrower or a Guarantor, on the Borrower and such Guarantor.
12.7 Independence of Covenants. All covenants hereunder shall be
-------------------------
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence
<PAGE>
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of an Event of Default or Potential Event of Default if such action is taken or
condition exists.
12.8 Entirety. The Loan Documents and the Commitment Letter embody
--------
the entire agreement of the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
12.9 Notices. Unless otherwise provided herein, any notice or other
-------
communications herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by mail and shall be
deemed to have been given when delivered in person, upon receipt of telecopy or
telex against receipt of answer back or four Business Days after depositing it
in the mail, registered or certified, with postage prepaid and properly
addressed; provided that notices shall not be effective until received. For the
--------
purposes hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this SECTION 12.9) shall be set forth under
each party's name on the signature pages hereto.
12.10 Survival of Warranties and Certain Agreements.
---------------------------------------------
A. All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement and the Commitment Letter,
the making of the Loans hereunder and the execution and delivery of the Notes
and, notwithstanding the making of the Loans, the execution and delivery of the
Notes or any investigation made by or on behalf of any party, shall continue in
full force and effect. The closing of the transactions herein contemplated shall
not prejudice any right of one party against any other party in respect of
anything done or omitted hereunder or in respect of any right to damages or
other remedies.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of the Borrower set forth in SECTIONS 12.3, 12.4,
12.14, 12.15, 12.17, 12.19 AND 12.22 shall survive the payment of the Loans and
the Notes and the termination of this Agreement.
<PAGE>
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12.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
-----------------------------------------------------
failure or delay on the part of the Agent or any Lender or any holder of any
Note in the exercise of any power, right or privilege hereunder, under a
Guarantee or under the Notes shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement, under a Guarantee or the
Notes are cumulative to and not exclusive of any rights or remedies otherwise
available.
12.12 Severability. In case any provision in or obligation under
------------
this Agreement, under a Guarantee or the Notes shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
12.13 Headings. Section and Section headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
12.14 Applicable Law. THIS AGREEMENT, EACH GUARANTEE AND THE NOTES
--------------
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAW.
12.15 Successors and Assigns; Subsequent Holders of Notes. This
---------------------------------------------------
Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of the Lenders. The terms and provisions of this
Agreement and each Guarantee shall inure to the benefit of any assignee or
transferee of the Notes pursuant to SECTION 12.2A, and in the event of such
transfer or assignment, the rights and privileges herein conferred upon the
Lenders shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and
<PAGE>
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conditions hereof. Except as provided in SECTION12.6, in determining whether
the holders of a sufficient aggregate principal amount of the Loans shall have
consented to any action under this Agreement, any amount of the Loans owned or
held by the Borrower, any Guarantor or any of their respective Affiliates shall
be disregarded. The Borrower's rights or any interest therein hereunder may not
be assigned without the prior express written consent of each of the Lenders.
12.16 Counterparts; Effectiveness. This Agreement and any
---------------------------
amendments, waivers, consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto, and delivery thereof to the Agent or, in the case of
the Lenders, written telex or facsimile notice or telephonic notification
(confirmed in writing) of such execution and delivery. The Agent will give the
Borrower and each Lender prompt notice of the effectiveness of this Agreement.
12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial.
----------------------------------------------------
A. Any legal action or proceeding with respect to this Agreement,
any Note or any Guarantee may be brought in the courts of the State of New York
or of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, each of the parties to this Agreement hereby
irrevocably accepts for itself and in respect of its respective property,
generally and unconditionally, the nonexclusive jurisdiction of the aforesaid
courts. Each of the parties to this Agreement hereby further irrevocably waives
any claim that any such courts lack jurisdiction over such party, and agrees not
to plead or claim, in any legal action or proceeding with respect to this
Agreement, the Notes or the Guarantees brought in any of the aforesaid courts,
that any such court lacks jurisdiction over such party. Each of the parties to
this Agreement irrevocably consents to the service
<PAGE>
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of process in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party, at its respective
address for notices pursuant to SECTION 12.9, such service to become effective
30 days after such mailing. To the extent permitted by law, each of the parties
to this Agreement hereby irrevocably waives any objection to such service of
process and further irrevocably waives and agrees not to plead or claim in any
action or proceeding commenced hereunder or under any Note or any Guarantee that
service of process was in any way invalid or ineffective. Nothing herein shall
affect the right of any party to this Agreement to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against any party in any other jurisdiction.
B. Each of the parties to this Agreement hereby irrevocably waives
any objection which it may now or hereafter have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection with
this Agreement, the Notes or the Guarantees brought in the courts referred to in
clause A above and hereby further irrevocably waives and agrees not to plead or
claim in any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
C. Each of the parties to this Agreement hereby irrevocably waives
all right to a trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement, the Notes or the Guarantees or the
transactions contemplated hereby or thereby.
12.18 Payments Pro Rata.
-----------------
A. The Agent agrees that promptly after its receipt of each payment
of any interest or premium on or principal of the Notes from or on behalf of the
Borrower or any Guarantor, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Lenders (other than any Lender that
has consented in writing to waive its pro rata share of such payment) pro rata
--- ---- --- ----
based upon their respective pro rata shares, if any, of such payment.
--- ----
<PAGE>
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B. Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents, or otherwise)
which is applicable to the payment of the principal of, or interest on, the
Loans of a sum which with respect to the related sum or sums received by other
Lenders is in a greater proportion than the total of such Obligation then owed
and due to such Lender bears to the total of such Obligation then owed and due
to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the Borrower
to such Lenders in such amount as shall result in a proportional participation
by all of the Lenders in such amount; provided that, if all or any portion of
--------
such excess amount is thereafter recovered from such Lender, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest.
12.19 Taxes.
-----
A. Any and all payments by the Borrower hereunder or under any of
the other Loan Documents shall be made free and clear of and without deduction
or withholding for any and all present or future Taxes, unless such Taxes are
required by law or the administration thereof to be deducted or withheld and
excluding (i) in the case of each Lender and the Agent, Taxes imposed on its net
income and franchise taxes imposed on it by the jurisdiction under the laws of
which such Person is organized or any political subdivision thereof, (ii) in the
case of each such Lender and the Agent, any Taxes that are in effect and that
would apply to a payment to such Person, as applicable, as of the Closing Date,
and (iii) if any Person acquires any interest in this Agreement (a
"Transferee"), any Taxes to the extent that they are in effect and would apply
to a payment to such Transferee as of the date of the acquisition of such
interest, as the case may be (all such nonexcluded Taxes being hereinafter
referred to as "Covered Taxes"). If the Borrower shall be required by Law or
the
<PAGE>
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administration thereof to deduct or withhold any Covered Taxes from or in
respect of any sum payable hereunder or under any other Loan Document, (a)
unless such requirement results from the failure of the payee to perform its
obligations under SECTION 12.2E, the sum payable shall be increased as may be
necessary so that after making all required deductions or withholdings
(including deductions or withholdings applicable to additional amounts paid
under this paragraph), the Lender receives an amount equal to the sum it would
have received if no such deduction or withholding had been made; (b) the
Borrower shall make such deductions or withholdings; and (c) the Borrower
forthwith shall pay the full amount deducted or withheld to the relevant
taxation or other authority in accordance with applicable Law.
B. The Borrower agrees to pay forthwith any present or future stamp
documentary taxes or any other excise or property taxes, charges or similar
levies (all such taxes, charges and levies being herein referred to as "Other
Taxes") imposed by any jurisdiction (or any political subdivision or taxing
authority thereof or therein) which arise from any payment made by the Borrower
hereunder or under any of the other Loan Documents or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
of the other Loan Documents.
C. The Borrower agrees to indemnify the Agent and each of the
Lenders for the full amount of Covered Taxes or Other Taxes not deducted or
withheld and paid by the Borrower in accordance with SECTIONS 12.2A AND 12.10B
to the relevant taxation or other authority and any Taxes other than Covered
Taxes or Other Taxes imposed by any jurisdiction on amounts payable by the
Borrower under this SECTION 12.19 paid by the Lender or the Agent and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not any such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days from the date the Agent or such Lender makes written demand therefor. A
certificate as to the amount of such Taxes or Other Taxes and evidence of
payment thereof submitted to the Borrower shall be prima facie
<PAGE>
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evidence, absent manifest error, of the amount due from the Borrower to the
Agent or such Lender.
D. The Borrower shall furnish to the Agent and each of the Lenders
the original or a certified copy of a receipt evidencing any payment of Taxes or
Other Taxes made by the Borrower as soon as such receipt becomes available.
E. The provisions of this SECTION 12.19 shall survive the
termination of the Agreement and repayment of all Obligations.
F. Each of the Agent and Lenders agrees that if it subsequently
recovers, or receives a permanent net tax benefit with respect to, any amount of
Taxes (i) previously paid by it and as to which it has been indemnified by or on
behalf of the Borrower or (ii) previously deducted by the Borrower (including,
without limitation, any Taxes deducted from any additional sums payable under
clause 12.19A above), the Agent or such Lender, as the case may be, shall
reimburse the Borrower to the extent of the amount of any such recovery or
permanent net tax benefit (but only to the extent of indemnity payments made, or
additional amounts paid, by or on behalf of the Borrower under this SECTION
12.19 with respect to the Taxes giving rise to such recovery or tax benefit);
provided, however, that the Borrower, upon the request of the Agent or such
- -------- -------
Lender, agrees to repay to the Agent or such Lender, as the case may be, the
amount paid over to the Borrower (together with any penalties, interest or other
charges), in the event the Agent or such Lender is required to repay such amount
to the relevant taxing authority or other Governmental Authority. The
determination by the Agent or any Lender of the amount of any such recovery or
permanent net tax benefit shall, in the absence of manifest error, be conclusive
and binding.
12.20 Replacement of Lenders. The Borrower may, at any time and so
----------------------
long as no Potential Event of Default or Event of Default has then occurred and
is continuing, replace any Lender that has requested additional amounts from the
Borrower under SECTION 12.2E, 12.19 OR 12.22 by written notice to such Lender
and the Agent given not more than thirty (30) days after any such event
<PAGE>
-149-
and identifying one or more Persons each of which shall be reasonably acceptable
to the Agent (each, a "Replacement Lender," and collectively, the "Replacement
Lenders") to replace such Lender (the "Replaced Lender"), provided that (i) the
--------
notice from the Borrower to the Replaced Lender and the Agent provided for
hereinabove shall specify an effective date for such replacement (the
"Replacement Effective Date"), which shall be at least five (5) Business Days
after such notice is given, (ii) as of the relevant Replacement Effective Date,
each Replacement Lender shall enter into an Assignment and Acceptance with the
Replaced Lender pursuant to SECTION 12.2A pursuant to which such Replacement
Lenders collectively shall acquire, in such proportion among them as they may
agree with the Borrower and the Agent, all (but not less than all) of the
Commitments and outstanding Loans of the Replaced Lender, and, in connection
therewith, shall pay to the Replaced Lender, as the purchase price in respect
thereof, an amount equal to the sum as of the Replacement Effective Date
(without duplication) of (y) the unpaid principal amount of, and all accrued but
unpaid interest on, all outstanding Loans of the Replaced Lender and (z) the
Replaced Lender's ratable share of all accrued but unpaid fees owing to the
Replaced Lender hereunder, and (iii) all other obligations of the Borrower owing
to the Replaced Lender under this Agreement (other than those specifically
described in clause (ii) above in respect of which the assignment purchase price
has been, or is concurrently being, paid), including, without limitation,
amounts payable under SECTION 12.2 as a result of the actions required to be
taken under this SECTION 12.20, shall be paid in full by the Borrower to the
Replaced Lender on or prior to the Replacement Effective Date.
12.21 Waiver of Stay, Extension or Usury Laws. The Borrower
---------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive the Borrower from paying all or any portion of the
principal of or interest on the Loans as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Agreement; and
<PAGE>
-150-
(to the extent that it may lawfully do so) the Borrower hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Agent, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
12.22 Requirements of Law.
-------------------
(a) In the event that any change in law occurring after the date that
any lender becomes a Lender party to this Agreement with respect to such Lender
shall, in the opinion of such Lender, require that any Bridge Loan Commitment of
such Lender be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by such Lender or
any corporation controlling such Lender, and such change in law shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital, as the case may be, as a consequence of such Lender's obligations
hereunder to a level below that which such Lender or such corporation, as the
case may be, could have achieved but for such change in law (taking into account
such Lender's or such corporation's policies, as the case may be, with respect
to capital adequacy) by an amount deemed by such Lender to be material, then
from time to time following notice by such Lender to the Borrower of such change
in law as provided in paragraph (b) of this SECTION 12.21, within 15 days after
demand by such Lender, the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender or such corporation, as the
case may be, for such reduction.
(b) The Borrower shall not be required to make any payments to any
Lender for any additional amounts pursuant to this SECTION 12.21 unless such
Lender has given written notice to the Borrower, through the Agent, of its
intent to request such payments prior to or within 60 days after the date on
which such Lender became entitled to claim such amounts. If any Lender requests
compensation from the Borrower under this SECTION 12.21, the Borrower may, by
notice to such Lender (with a copy to the Agent), suspend the obligation of such
Lender thereafter to make or
<PAGE>
-151-
continue Loans, until the requirement of law giving rise to such request ceases
to be in effect; provided that such suspension shall not affect the right of
--------
such Lender to receive the compensation so requested.
12.23 Confidentiality. Each Lender shall hold all non-public
---------------
information obtained pursuant to the requirements of or in connection with this
Agreement which has been identified as confidential by the Borrower or Petersen
in accordance with such Lender's customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, it being understood and agreed by Petersen and the Borrower that (i)
in any event a Lender may make disclosures reasonably required by any bona fide
assignee, transferee or participant in connection with the contemplated
assignment or transfer by such Lender of any Loans or any participation therein
or as required or requested by any governmental agency or representative thereof
or pursuant to legal process; provided that unless specifically prohibited by
--------
applicable law or court order, each Lender shall notify the Borrower of any
request by any prospective transferee or governmental agency or representative
thereof (other than any such request in connection with any examination of the
financial condition of such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such information and
(ii) a Lender may share with any of its affiliates, and such affiliates may
share with any Lender, any information related to the Borrower, Petersen or the
Borrower's or their respective affiliates (including information relating to
creditworthiness), the Petersen Acquisition or the financing therefor; and
provided, further, that in no event shall any Lender be obligated or required to
- -------- -------
return any materials furnished by the Borrower or Petersen. In connection with
any proposed sales, assignments or transfers referred to in SECTION 12.2A (and
prior to any delivery of non-public information hereunder), a Lender shall
obtain agreements from the purchasers, assignees or transferees, as the case may
be, reasonably satisfactory to the Borrower, that such parties will comply with
this SECTION 12.22.
<PAGE>
-152-
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
COMPANY:
PETERSEN PUBLISHING COMPANY L.L.C.
By: _____________________________
Name:
Title:
Notice Address:
Attention:
Telephone:
Telecopy:
<PAGE>
-153-
GUARANTORS:
PETERSEN HOLDINGS, L.L.C.
By: ______________________________
Name:
Title:
Notice Address:
Attention:
Telephone:
Telecopy:
BRIGHTVIEW COMMUNICATIONS GROUP,
INC.
By: ______________________________
Name:
Title:
Notice Address:
Attention:
Telephone:
Telecopy:
<PAGE>
-154-
AGENT:
FIRST UNION CORPORATION,
as agent
By: ________________________________
Name:
Title:
Notice Address:
One First Union Center, TW-10
Charlotte, NC 28288-0604
Attention: Jay Braden
Telephone: (704) 383-8218
Telecopy: (704) 383-9527
<PAGE>
-155-
LENDERS:
Commitment: $ FIRST UNION CORPORATION
By: ________________________________
Name:
Title:
Notice Address:
One First Union Center, TW-10
Charlotte, NC 28288-0604
Attention: Jay Braden
Telephone: (704) 383-8218
Telecopy: (704) 383-9527
Commitment: $ CIBC Inc.
By: ________________________________
Name:
Title:
Notice Address:
425 Lexington Avenue
New York, New York 10017
Attention: Timothy Doyle
Telephone: (212) 856-3650
Telecopy: (212) 856-3991
<PAGE>
_____________________________________________________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of November 25, 1996
by and among
PETERSEN PUBLISHING COMPANY, L.L.C.
and
PETERSEN CAPITAL CORP.,
THE GUARANTOR
named herein
and
FIRST UNION CAPITAL MARKETS CORP.
and
CIBC WOOD GUNDY SECURITIES CORP.
as Initial Purchasers
_____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions......................................................... 1
2. Exchange Offer...................................................... 5
3. Shelf Registration.................................................. 4
4. Additional Interest................................................. 10
5. Registration Procedures............................................. 11
6. Registration Expenses............................................... 22
7. Indemnification..................................................... 23
8. Rules 144 and 144A.................................................. 27
9. Underwritten Registrations.......................................... 27
10. Miscellaneous....................................................... 28
a. Remedies...................................................... 28
b. Enforcement................................................... 28
c. No Inconsistent Agreements.................................... 28
d. Adjustments Affecting Registrable Notes....................... 28
e. Amendments and Waivers........................................ 28
f. Notices....................................................... 29
g. Successors and Assigns........................................ 29
h. Counterparts.................................................. 29
i. Headings...................................................... 30
j. Governing Law................................................. 30
k. Severability.................................................. 30
l. Entire Agreement.............................................. 30
m. Joint and Several Obligations................................. 30
n. Notes Held by the Company or Its Affiliates................... 30
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of November
25, 1996, by and 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, the "Issuers"), PETERSEN
HOLDINGS, L.L.C., as guarantor (the "Guarantor"), and FIRST UNION CAPITAL
MARKETS CORP. ("First Union") and CIBC WOOD GUNDY SECURITIES CORP. ("CIBC"), as
initial purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Securities
Purchase Agreement, dated as of November 20, 1996 among the Issuers, the
Guarantor and the Initial Purchasers (the "Purchase Agreement") relating to the
sale by the Issuers to the Initial Purchasers of $100,000,000 aggregate
principal amount of the Issuer's 11 1/8% Senior Subordinated Notes due 2006 (the
"Notes") and the guarantee of the Notes by the Guarantor (the "Guarantee"). In
order to induce the Initial Purchasers to enter into the Purchase Agreement, the
Issuers and the Guarantor have agreed to provide the registration rights set
forth in this Agreement for the benefit of the Initial Purchasers. The execution
and delivery of this Agreement is a condition to the Initial Purchasers'
obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
-------------------
Advice: See Section 5.
------
Applicable Period: See Section 2(b).
-----------------
Closing: See the Purchase Agreement.
-------
Company: See the introductory paragraph to this Agreement.
-------
Effectiveness Date: The 135th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
Event Date: See Section 4(b).
----------
<PAGE>
-2-
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
--------------
Exchange Offer: See Section 2(a).
--------------
Exchange Registration Statement: See Section 2(a).
-------------------------------
Filing Date: The 45th day after the Issue Date.
-----------
Guarantee: See the introductory paragraph of this Agreement.
---------
Guarantor: See the introductory paragraph of this Agreement.
---------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c).
------------------
Indemnifying Person: See Section 7(c).
-------------------
Indenture: The Indenture, dated as of November 15, 1996, among the
---------
Issuers, the Guarantor and United States Trust Company of New York, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this Agreement.
------------------
Initial Shelf Registration: See Section 3(a).
--------------------------
Inspectors: See Section 5(o).
----------
Issue Date: The date on which the original Notes are sold to the
----------
Initial Purchasers pursuant to the Purchase Agreement.
Issuers: See the introductory paragraph to this Agreement.
-------
Lien: See the Indenture.
----
NASD: See Section 5(t).
----
<PAGE>
-3-
Notes: See the introductory paragraphs to this Agreement.
-----
Participant: See Section 7(a).
-----------
Participating Broker-Dealer: See Section 2(b).
---------------------------
Person: An individual, corporation, limited liability company,
------
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
Private Exchange: See Section 2(b).
----------------
Private Exchange Notes : See Section 2(b).
-----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs to this
------------------
Agreement.
Records: See Section 5(o).
-------
Registrable Notes: The Notes upon original issuance of the Notes and
-----------------
at all times subsequent thereto and, if issued, the Private Exchange Notes,
until in the case of any such Notes or any such Private Exchange Notes, as the
case may be, (i) a Registration Statement covering such Notes or such Private
Exchange Notes has been declared effective by the SEC and such Notes or such
Private Exchange Notes, as the case may be, have been disposed of in accordance
with such effective Registration Statement, (ii) such Notes or such Private
Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii)
in the case of any Note, such Note has been exchanged for an Exchange Note or
Exchange Notes pursuant to an Exchange Offer or (iv) such Notes or such Private
Exchange Notes, as the case may be, cease to be outstanding.
<PAGE>
-4-
Registration Default: See Section 4(a).
--------------------
Registration Statement: Any registration statement of the Issuers or
----------------------
the Guarantor, including, but not limited to, the Exchange Registration
Statement, which covers any of the Registrable Notes pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
------------
Shelf Registration: See Section 3(b).
------------------
Subsequent Shelf Registration: See Section 3(b).
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
<PAGE>
-5-
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of one or more of the Issuers are sold to an underwriter(s) for
reoffering to the public.
2. Exchange Offer
--------------
(a) Each of the Issuers and the Guarantor jointly and severally agrees
to use its best efforts to file with the SEC as soon as practicable after the
Closing, but in no event later than the Filing Date, an offer to exchange (the
"Exchange Offer") any and all of the Registrable Notes for a like aggregate
principal amount of debt securities of the Issuers, guaranteed by the Guarantor,
which are identical to the Notes (the "Exchange Notes") (and which are entitled
to the benefits of the Indenture or a trust indenture which is substantially
identical to the Indenture (other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification thereof under the TIA) and
which, in either case, has been qualified under the TIA), except that the
Exchange Notes shall have been registered pursuant to an effective Registration
Statement under the Securities Act and will not contain terms with respect to
transfer restrictions. The Exchange Offer will be registered under the
Securities Act on the appropriate form (the "Registration Statement") and will
comply with all applicable tender offer rules and regulations under the Exchange
Act. Each of the Issuers and the Guarantor jointly and severally agrees to use
its best efforts to (x) cause the Registration Statement to become effective
under the Securities Act on or before the Effectiveness Date; (y) keep the
Exchange Offer open for at least 20 days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is mailed to Holders; and
(z) consummate the Exchange Offer on or prior to the 60th day following the date
on which the Registration Statement is declared effective. Each Holder who
participates in the Exchange Offer will be required to represent that any
Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, and that such Holder is not an affiliate of
any of the Issuers or the Guarantor within the meaning of Rule 405 promulgated
under the Securities Act or if it is such an affiliate, that it will comply with
the registration and
<PAGE>
-6-
prospectus delivery requirements of the Securities Act, to the extent
applicable. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
-------
mutandis, solely with respect to Registrable Notes that are Private Exchange
- --------
Notes and Exchange Notes held by Participating Broker-Dealers (as defined
below), and the Issuers and the Guarantor shall have no further obligation to
register Registrable Notes (other than Private Exchange Notes and Exchange Notes
held by Participating Broker-Dealers) pursuant to Section 3 of this Agreement.
(b) The Issuers and the Guarantor shall include within the Prospectus
contained in the Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any broker-
dealer that is the beneficial owner (as defined in Rule 13d-3 promulgated under
the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the reasonable judgment of the Initial Purchasers,
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also allow the use of the Prospectus by all persons
subject to the prospectus delivery requirements of the Securities Act, including
all Participating Broker-Dealers, and include a statement describing the means
by which Participating Broker-Dealers may resell the Exchange Notes.
Each of the Issuers and the Guarantor shall use its best efforts to
keep the Registration Statement effective and to amend and supplement the
Prospectus contained therein, in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Notes, provided that such period
--------
shall not exceed 180 days (or such longer period if extended pursuant to the
last paragraph of Section 5) (the "Applicable Period"). Notwithstanding the
foregoing, each of the Issuers and the Guarantor shall not have a duty to amend
or supplement the Prospectus contained in the Registration Statement unless any
one of them has received written notice from any such person of their prospectus
delivery requirement prior to or within 5 business days following the
consummation of the Exchange Offer; provided that the Company shall prominently
--------
disclose such notice requirement in the Exchange Registration Statement and in
the letter of transmittal related thereto.
<PAGE>
-7-
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the status as an unsold allotment in the
initial distribution, the Issuers and the Guarantor upon the request of either
Initial Purchaser shall, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer, issue and deliver to such Initial Purchaser, in exchange
(the "Private Exchange") for the Notes held by such Initial Purchaser, a like
principal amount of debt securities of the Issuers guaranteed by the Guarantor,
that are identical in all material respects to the Exchange Notes (the "Private
Exchange Notes") (and which are issued pursuant to the same indenture as the
Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes. Interest on the Exchange Notes and Private Exchange Notes
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the date of original issue.
In connection with the Exchange Offer, the Issuers and the Guarantor
shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Issuers and the Guarantor shall:
(i) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
<PAGE>
-8-
(iii) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case
may be, equal in principal amount to the Notes of such Holder so accepted
for exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture substantially identical to the Indenture,
which in either event will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that the Exchange
Notes, the Private Exchange Notes and the Notes will vote and consent together
on all matters as one class and that neither the Exchange Notes, the Private
Exchange Notes nor the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the
Issuers and the Guarantor or Holders of at least a majority in aggregate
principal amount of the Registrable Notes reasonably determine in good faith
that (i) the Exchange Notes would not, upon receipt, be tradeable by such
Holders which are not affiliates (within the meaning of the Securities Act) of
the Issuers or the Guarantor without restriction under the Securities Act and
without restrictions under applicable state securities laws, (ii) the interests
of the Holders under this Agreement would be adversely affected by the
consummation of the Exchange Offer or (iii) after conferring with counsel, the
SEC is unlikely to permit the consummation of the Exchange Offer prior to the
Effectiveness Date, (2) subsequent to the consummation of the Private Exchange,
any holder of the Private Exchange Notes so requests or (3) the Exchange Offer
is commenced and not consummated within 195 days of the date of this Agreement,
then the Issuers and the Guarantor shall promptly deliver to the Holders and the
Trustee written notice thereof (the "Shelf Notice") and shall file an Initial
Shelf Registration pursuant to Section 3. Following the delivery of a Shelf
Notice to the Holders of Registrable Notes (in the circumstances contemplated by
clauses (1) and (3) of the preceding sentence), the Issuers and the Guarantor
shall not have any further obligation to conduct the Exchange Offer or the
Private Exchange under this Section 2.
3. Shelf Registration
------------------
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
<PAGE>
-9-
(a) Initial Shelf Registration. The Issuers and the Guarantor shall
--------------------------
prepare and file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Notes (the "Initial Shelf Registration"). If the Issuers or the Guarantor shall
have not yet filed an Registration Statement, each of the Issuers and the
Guarantor shall use its best efforts to file with the SEC the Initial Shelf
Registration on or prior to the Filing Date. In any other instance, each of the
Issuers and the Guarantor shall use its best efforts to file with the SEC the
Initial Shelf Registration within 30 days of the delivery of the Shelf Notice.
The Initial Shelf Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Notes for resale by such Holders in
the manner or manners designated by them (including, without limitation, one or
more underwritten offerings). The Issuers and the Guarantor shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration (as defined below).
Each of the Issuers and the Guarantor shall use its best efforts to cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is 36
months from the date on which such Initial Shelf Registration is declared
effective (subject to extension pursuant to the last paragraph of Section 5
hereof), or such shorter period ending when (i) all Registrable Notes covered by
the Initial Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Notes has been declared effective
under the Securities Act (the "Effectiveness Period").
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
------------------------------
or any Subsequent Shelf Registration ceases to be effective for any reason at
any time during the Effectiveness Period, each of the Issuers and the Guarantor
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration Statement
pursuant to Rule 415 covering all of the Registrable Notes (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed, each of the
Issuers and the Guarantor shall use its best efforts to cause the Subsequent
Shelf Registration to be declared effective as soon as practicable after such
filing and to keep such Registration
<PAGE>
-10-
Statement continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers and the Guarantor shall
--------------------------
promptly supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if requested by the
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter(s) of such
Registrable Notes.
4. Additional Interest
-------------------
(a) The Issuers and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Issuers, jointly and severally, agree to pay additional interest on the
Notes ("Additional Interest") under the circumstances set forth below:
(i) if the Exchange Registration Statement or the Initial Shelf
Registration has not been filed on or prior to the Filing Date;
(ii) if the Exchange Registration Statement or the Initial Shelf
Registration has not been declared effective on or prior to the
Effectiveness Date; and/or
(iii) if either (A) the Issuers have not exchanged the Exchange
Notes for all Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to 60 days after the date on which the Exchange
Registration Statement was declared effective or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if applicable, the Shelf
Registration has been declared effective and such Shelf Registration ceases
to be effective at any time during the Effectiveness Period;
<PAGE>
-11-
(each such event referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to Holders of the Notes will
be the immediate accrual of Additional Interest as follows: the per annum
interest rate on the Notes will increase by 50 basis points; and the per annum
interest rate will increase by an additional 25 basis points for each subsequent
90-day period during which the Registration Default remains uncured, up to a
maximum additional interest rate of 200 basis points per annum, provided,
--------
however, that (1) upon the filing of the Exchange Registration Statement or the
- -------
Initial Shelf Registration (in the case of (i) above), (2) upon the
effectiveness of the Exchange Registration Statement or a Shelf Registration (in
the case of (ii) above) or (3) upon the exchange of Exchange Notes for all Notes
tendered (in the case of (iii)(A) above), or upon the effectiveness of the
Exchange Registration Statement which had ceased to remain effective (in the
case of (iii)(B) above), or upon the effectiveness of the Shelf Registration
which had ceased to remain effective (in the case of (iii)(C) above), Additional
Interest on the Notes as a result of such clause (i), (ii) or (iii) (or the
relevant subclause thereof), as the case may be, shall cease to accrue and the
interest rate on the Notes will revert to the interest rate originally borne by
the Notes.
(b) The Issuers and the Guarantor shall notify the Trustee within one
business day after each and every date on which an event occurs in respect of
which Additional Interest is required to be paid (an "Event Date"). Any amounts
of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable in cash semi-annually on each May 15 and November 15
(to the Holders of record on the May 1 and November 1 immediately preceding such
dates), commencing with the first such date occurring after any such Additional
Interest commences to accrue, by depositing with the Trustee, in trust for the
benefit of such Holders, immediately available funds in sums sufficient to pay
such Additional Interest. The amount of Additional Interest will be determined
by multiplying the applicable Additional Interest rate by the principal amount
of the Registrable Notes, multiplied by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the registration of any Registrable Notes or
Private Exchange Notes pursuant to Section 2 or 3 hereof, the Issuers and the
Guarantor shall effect such
<PAGE>
-12-
registrations to permit the sale of such Registrable Notes or Private Exchange
Notes in accordance with the intended method or methods of disposition thereof,
and pursuant thereto the Issuers and the Guarantor shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section
2 or 3, and to use their respective best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein, provided that, if (1) such filing is pursuant to Section 3, or (2)
--------
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Issuers and the Guarantor
shall, if requested, furnish to and afford the Holders of the Registrable
Notes and each such Participating Broker-Dealer, as the case may be,
covered by such Registration Statement, their counsel and the managing
underwriter(s), if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least
5 business days prior to such filing). The Issuers and the Guarantor shall
not file any Registration Statement or Prospectus or any amendments or
supplements thereto in respect of which the Holders must be afforded an
opportunity to review prior to the filing of such document, if the Holders
of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement, or such Participating Broker-
Dealer, as the case may be, their counsel, or the managing underwriter(s),
if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Registration Statement, as the
case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented
by any prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the provisions of
the Securities Act, the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to them
<PAGE>
-13-
with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities
being sold by a Participating Broker-Dealer covered by any such Prospectus;
the Issuers and the Guarantor shall be deemed not to have used their best
efforts to keep a Registration Statement effective during the Applicable
Period if any of them voluntarily takes any action that would result in
selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless such
action is required by applicable law or unless the Issuers comply with this
Agreement, including without limitation, the provisions of clause 5(c)(v)
below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, notify the selling Holders of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriter(s), if any, promptly (but in any event within two
business days), and confirm such notice in writing, (i) when a Prospectus
or any prospectus supplement or post-effective amendment thereto has been
filed, and, with respect to a Registration Statement or any post-effective
amendment thereto, when the same has become effective (including in such
notice a written statement that any Holder may, upon request, obtain,
without charge, one conformed copy of such Registration Statement or post-
effective amendment thereto including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary Prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of
the Registrable Notes the representations and warranties of the Issuers
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv) of
the receipt by any of the Issuers or the Guarantor of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or
<PAGE>
-14-
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in, or amendments or supplements to, such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (vi) of any Issuer's or Guarantor's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use their best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Notes or the Exchange Notes to be sold by any Participating Broker-Dealer,
for sale in any jurisdiction, and, if any such order is issued, to use
their best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter(s), if any, or the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment thereto such information
as the managing underwriter(s), if any, or such Holders reasonably request
to be included therein, (ii) make all required filings of such Prospectus
supplement
<PAGE>
-15-
or such post-effective amendment thereto as soon as practicable after the
Issuers have received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment thereto and (iii)
supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, furnish to each selling Holder of Registrable Notes who
so requests and to each such Participating Broker-Dealer who so requests
and to counsel and the managing underwriter(s), if any, without charge, one
conformed copy of the Registration Statement or Registration Statements and
each post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, deliver to each selling Holder of Registrable Notes, or
each such Participating Broker-Dealer, as the case may be, their counsel,
and the managing underwriter or underwriters, if any, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
preliminary Prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, each Issuer
and the Guarantor hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may
be, and the managing underwriter or underwriters or agents, if any, and
dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by or the sale by Participating Broker-Dealers
of the Exchange Notes pursuant to such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer
<PAGE>
-16-
who seeks to sell Exchange Notes during the Applicable Period, to use its
best efforts to register or qualify, and to cooperate with the selling
Holders of Registrable Notes or each such Participating Broker-Dealer, as
the case may be, the managing underwriter or underwriters, if any, and
their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriter or underwriters,
if any, reasonably request in writing, provided that where Exchange Notes
--------
held by Participating Broker-Dealers or Registrable Notes are offered other
than through an underwritten offering, the Issuers and the Guarantor agree
to cause their counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the Registrable Notes covered by the applicable Registration Statement;
provided that none of the Issuers or the Guarantor shall be required to (A)
--------
qualify generally to do business in any jurisdiction where it is not then
so qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes and the managing underwriter
or underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Use their best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or
<PAGE>
-17-
authorities as may be necessary to enable the seller or sellers thereof or
the managing underwriter or underwriters, if any, to consummate the
disposition of such Registrable Notes, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which
case each of the Issuers and the Guarantor will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of
such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) above, as promptly as reasonably practicable
prepare and (subject to Section 5(a) above) file with the SEC, at the joint
and several expense of each of the Issuers and the Guarantor, a supplement
or post-effective amendment to the Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes
being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a Participating Broker-Dealer, any
such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(l) Use their best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered
by such Registration Statement or the Exchange Notes, as the case may be,
or the managing underwriter or underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with printed
certificates for the Registrable Notes in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
<PAGE>
-18-
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection, (i) make such representations and warranties to the managing
underwriter or underwriters on behalf of any underwriters, with respect to
the business of the Issuers and their respective subsidiaries and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings of
debt securities, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Issuers and the Guarantor and updates thereof in
form and substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the managing underwriter or underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities and such other matters as may be
reasonably requested by underwriters; (iii) obtain "cold comfort" letters
and updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Issuers and the Guarantor (and, if necessary, any other
independent certified public accountants of any subsidiary of any of the
Issuers or of any business acquired by any of the Issuers for which
financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to the managing
underwriter or underwriters on behalf of any underwriters, such letters to
be in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with underwritten offerings of debt
securities and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The
<PAGE>
-19-
above shall be done at each closing under such underwriting agreement, or
as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, make available for inspection by any selling Holder of
such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, the managing underwriter or underwriters
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Issuers and the Guarantor and their
respective subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees
of the Issuers and the Guarantor and their respective subsidiaries to
supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement. Records which
the Issuers and the Guarantor determine, in good faith, to be confidential
and any Records which they notify the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a material misstatement or material omission
in such Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer or underwriter will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuers unless
and until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating Broker-Dealer
will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Issuers and allow the Issuers to undertake appropriate
action to
<PAGE>
-20-
prevent disclosure of the Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange Offer
Registration Statement or the first Registration Statement relating to the
Registrable Notes; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Registrable Notes, to
effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute,
and use its best efforts to cause such trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Issuers
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers and the Guarantor, in a form
customary for underwritten offerings of debt securities similar to the
Notes, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i) each
of the Issuers and the Guarantor has duly authorized, executed and
delivered the Exchange Notes and Private Exchange Notes and the related
indenture and (ii) each of the Exchange Notes or the Private Exchange
Notes, as the case may be, and related indenture constitute
<PAGE>
-21-
a legal, valid and binding obligation of each of the Issuers and the
Guarantor, enforceable against each of the Issuers and the Guarantor in
accordance with its respective terms (with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers and the
Guarantor (or to such other Person as directed by the Issuers and the
Guarantor) in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be, the Issuers and the Guarantor shall mark, or
cause to be marked, on such Registrable Notes that such Registrable Notes
are being cancelled in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be; and, in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their respective best efforts to take all other steps
necessary to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Issuers and the Guarantor may require each seller of Registrable
Notes or Participating Broker-Dealer as to which any registration is being
effected to furnish to the Issuers and the Guarantor such information regarding
such seller or Participating Broker-Dealer and the distribution of such
Registrable Notes or Exchange Notes to be sold by such Participating Broker-
Dealer, as the case may be, as the Issuers and the Guarantor may, from time to
time, reasonably request. The Issuers may exclude from such registration the
Registrable Notes of any seller or Participating Broker-Dealer who unreasonably
fails to furnish such information within a reasonable time after receiving such
request.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuers of the happening of any event of the kind described in
<PAGE>
-22-
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Holder or
Participating Broker-Dealer, as the case may be, until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Issuers that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Issuers shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, shall
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers and the Guarantor shall be borne by the
Issuers and the Guarantor, jointly and severally, whether or not the Exchange
Offer or a Shelf Registration is filed or becomes effective, including, without
limitation, (i) all registration and filing fees (including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with an underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions in the United States (x) where the Holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h), in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal
<PAGE>
-23-
amount of the Registrable Notes included in any Registration Statement or of
such Exchange Notes, as the case may be), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements (not to exceed $25,000 in the
aggregate) of counsel for the Issuers and fees and disbursements of special
counsel for the sellers of Registrable Notes (subject to the provisions of
Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Issuers desire such insurance, (viii) fees and expenses of the
Trustee, (ix) fees and expenses of all other Persons retained by the Issuers,
(x) internal expenses of the Issuers and the Guarantor (including, without
limitation, all salaries and expenses of officers and employees of the Issuers
and the Guarantor performing legal or accounting duties), (xi) the expense of
any annual audit, (xii) the fees and expenses incurred in connection with any
listing of the securities to be registered on any securities exchange and (xiii)
the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuers
and the Guarantor, jointly and severally, shall reimburse the Holders of the
Registrable Notes being registered in such registration for the reasonable fees
and disbursements (not to exceed $25,000 in the aggregate) of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other reasonable out-of-pocket expenses of
the Holders of Registrable Notes incurred in connection with the registration of
the Registrable Notes.
7. Indemnification
---------------
(a) Each of the Issuers and the Guarantor, jointly and severally, will
be required to agree to indemnify and hold harmless each Holder of Registrable
Notes and each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the officers and directors of each such person, and each
person, if any, who controls any such person within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a
"Participant"), from and against any and all losses, claims, damages and
liabilities (including, without
<PAGE>
-24-
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused by,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement or Prospectus (as
amended or supplemented if the Issuers shall have furnished any amendments or
supplements thereto) or any preliminary Prospectus, or caused by, arising out of
or based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Participant furnished to
the Issuers in writing by such Participant expressly for use therein; provided
--------
that the foregoing indemnity with respect to any preliminary Prospectus shall
not inure to the benefit of any Participant (or to the benefit of any person
controlling such Participant) from whom the person asserting any such losses,
claims, damages or liabilities purchased Registrable Notes or Exchange Notes if
such untrue statement or omission or alleged untrue statement or omission made
in such preliminary Prospectus is eliminated or remedied in the related
Prospectus (as amended or supplemented if the Issuers shall have furnished any
amendments or supplements thereto) and a copy of the related Prospectus (as so
amended or supplemented) shall have been furnished to such Participant at or
prior to the sale of such Registrable or Exchange Notes, as the case may be, to
such person.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Issuers and the Guarantor, their
respective directors and officers and each person who controls any of the
Issuers or the Guarantor within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Issuers and the Guarantor to each Participant, but only with reference
to information relating to such Participant furnished to the Issuers and the
Guarantor in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes giving rise to such obligations.
<PAGE>
-25-
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such person (the "Indemnified Person")
shall promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person and representations of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes sold by all such Participants and any such separate firm
for the Issuers and the Guarantor, their directors, their officers and such
control persons of the Issuers and the Guarantor shall be designated in writing
by the Issuers. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for reasonable fees and
expenses incurred by counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent
<PAGE>
-26-
if (i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement; provided, however, that the Indemnifying
-------- -------
Person shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Party is contesting, in good
faith, the request for reimbursement. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement includes an unconditional
release of such Indemnified Person from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in paragraphs (a) and (b) of this
Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Issuers and
the Guarantor on the one hand and the Participants on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Issuers and the Guarantor on the one hand and the
Participants on the other 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 Issuers and the Guarantor or by the Participants and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include,
<PAGE>
-27-
subject to the limitations set forth above, any reasonable legal or other
expenses actually incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall a Participant be required to
contribute any amount in excess of the amount by which proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes exceeds the
amount of any damages that such Participant has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
Each of the Issuers and the Guarantor covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
and, if at any time any of the Issuers is not required to file such reports, it
will, upon the request of any Holder of Registrable Notes, make publicly
available other information of a like nature so long as necessary to permit
sales pursuant to Rule 144 or Rule 144A. Each of the Issuers and the Guarantor
further covenants that so long as any Registrable Notes remain outstanding to
make available to any Holder of Registrable Notes in connection with any sale
thereof, the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Registrable Notes pursuant to (a) such Rule
144A, or (b) any similar rule or regulation hereafter adopted by the SEC.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Issuers and the Guarantor.
<PAGE>
-28-
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous
-------------
(a) Remedies. In the event of a breach by any Issuer or Guarantor of
--------
any of its obligations under this Agreement, Additional Interest, each Holder
of Registrable Notes, in addition to being entitled to exercise all rights
provided herein, in the Indenture or, in the case of the Initial Purchasers, in
the Purchase Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Each
Issuer jointly and severally agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees, jointly and severally,
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(b) Enforcement. The Trustee shall be authorized to enforce the
-----------
provisions of this Agreement for the ratable benefit of the Holders.
(c) No Inconsistent Agreements. None of the Issuers or the Guarantor
--------------------------
has, as of the date hereof, and the Issuers and the Guarantor shall not, after
the date of this Agreement, enter into any agreement with respect to any of
their securities that is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. None of the Issuers or the Guarantor has entered or will enter into any
agreement with respect to any of its securities which will grant to any Person
piggy-back rights with respect to a Registration Statement.
(d) Adjustments Affecting Registrable Notes. Neither the Issuers nor
---------------------------------------
the Guarantor shall, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a registration
undertaken pursuant to this Agreement.
<PAGE>
-29-
(e) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuers and the Guarantor have obtained the written
consent of Holders of at least a majority of the then outstanding aggregate
principal amount of Registrable Notes. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold by such Holders
pursuant to such Registration Statement, provided that the provisions of this
--------
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) Notices. All notices and other communications (including without
-------
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current
address given by the Trustee to the Issuers; and
(ii) if to the Issuers, Petersen Publishing Company, L.L.C., 6420
Wilshire Boulevard, Los Angeles, California, 90048, Attention: Executive
Vice President - Chief Financial Officer, with a copy to Kirkland & Ellis,
200 East Randolph Drive, Chicago, IL 60601, Attention: John A.
Weissenbach, Esq.
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day air courier; and (iv)
when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
<PAGE>
-30-
(g) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Notes.
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT 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 PROCEED ING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(m) Joint and Several Obligations. Unless otherwise stated herein,
-----------------------------
each of the obligations of the Issuers and the Guarantor under this Agreement
shall be joint and several obligations of each of them.
<PAGE>
-31-
(n) Notes Held by the Issuers or their Affiliates. Whenever the
---------------------------------------------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuers or their affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
<PAGE>
-32-
IN WITNESS WHEREOF, the parties have executed this Agreement 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.
By: ____________________________________
Name:
Title:
<PAGE>
-33-
The foregoing Agreement is hereby conformed and accepted as of the date first
above written.
FIRST UNION CAPITAL MARKETS CORP.
By: ______________________________
Name:
Title:
CIBC WOOD GUNDY SECURITIES CORP.
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT 12.1
PETERSEN PUBLISHING COMPANY, L.L.C.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
TEN MONTHS ENDED
YEARS ENDED NOVEMBER 30, SEPTEMBER 30,
-------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income before taxes..... $4,417 $13,781 $ 9,473 $19,994 $14,907 $15,105 $17,657
Fixed Charges:
Interest in Rent
Expense............... 1,720 1,676 1,647 1,690 1,817 1,479 1,802
Interest Expense....... -- -- -- -- -- -- 185
------ ------- ------- ------- ------- ------- -------
Earnings................ $6,137 $15,457 $11,120 $21,684 $16,724 $16,584 $19,644
====== ======= ======= ======= ======= ======= =======
Fixed Charges:
Interest in Rent
Expense............... $1,720 $ 1,676 $ 1,647 $ 1,690 $ 1,817 $ 1,479 $ 1,802
Interest Expense....... -- -- -- -- -- -- 185
------ ------- ------- ------- ------- ------- -------
Fixed Charges........... $1,720 $ 1,676 $ 1,647 $ 1,690 $ 1,817 $ 1,479 $ 1,987
====== ======= ======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges.......... 3.6 9.2 6.8 12.8 9.2 11.2 9.9
====== ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 12.2
PETERSEN PUBLISHING COMPANY, L.L.C.
COMPUTATION OF RATIO OF PRO FORMA EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Pro Forma Earnings:
Pro Forma Income before taxes...................... $(48,424) $(35,044)
Fixed Charges:
Interest in Rent Expense......................... 1,745 1,444
Interest Expense................................. 34,815 29,691
-------- --------
Pro Forma Earnings................................. $(11,864) $ (3,909)
-------- --------
Pro Forma Fixed Charges:
Interest in Rent Expense......................... $ 1,745 $ 1,444
Interest Expense................................. 34,815 29,691
-------- --------
Pro Forma Fixed Charges............................ $ 36,560 $ 31,135
======== ========
Pro Forma Fixed Charges in Excess of Pro Forma
Earnings.......................................... $(48,424) $(35,044)
======== ========
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 16, 1996, in the Registration Statement
(Amendment No. 1 to Form S-4 No. 333-18017) and related Prospectus of Petersen
Publishing Company, L.L.C. for the registration of $100,000,000 of its 11 1/8%
Series B Senior Subordinated Notes due 2006.
Ernst & Young LLP
January 31, 1997
Los Angeles, California
<PAGE>
FORM T-1
==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
__________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
(212) 852-1000
(Agent for Service)
__________________
Petersen Publishing Company, L.L.C.
(Exact name of obligor as specified in its charter)
Delaware 95-4597937
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
6420 Wilshire Boulevard
Los Angeles, CA 90048
(Address of principal executive offices) (Zip Code)
__________________
<PAGE>
- 2 -
__________________
Petersen Capital Corp.
(Exact name of obligor as specified in its charter)
Delaware 95-4608878
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
6420 Wilshire Boulevard
Los Angeles, CA 90048
(Address of principal executive offices) (Zip Code)
__________________
Petersen Holdings, L.L.C.
(Exact name of obligor as specified in its charter)
Delaware 95-4597939
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
6420 Wilshire Boulevard
Los Angeles, CA 90048
(Address of principal executive offices) (Zip Code)
__________________
11-1/8% Series B Senior Subordinated Notes
Due 2006
(Title of the indenture securities)
==============================================
<PAGE>
- 3 -
GENERAL
1. GENERAL INFORMATION
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Petersen Publishing Company, L.L.C., Petersen Capital Corp. and Petersen
Holdings, L.L.C. currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and
15 of Form T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
----------------
T-1.1 -- Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust Company,
is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
<PAGE>
- 4 -
<TABLE>
<CAPTION>
16. LIST OF EXHIBITS
----------------
(cont'd)
<C> <C> <S>
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to T-1.4 to Form T-1
filed on September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
</TABLE>
NOTE
====
As of January 7, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 7th day
of January, 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Christine C. Collins
-----------------------------
Christine C. Collins
Assistant Vice President
<PAGE>
EXHIBIT T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
January 7, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1996
------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and Due from Banks $ 38,257
Short-Term Investments 82,377
Securities, Available for Sale 861,975
Loans 1,404,930
Less: Allowance for Credit Losses 13,048
----------
Net Loans 1,391,882
Premises and Equipment 60,012
Other Assets 133,673
----------
TOTAL ASSETS $2,568,176
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 466,849
Interest Bearing 1,433,894
----------
Total Deposits 1,900,743
Short-Term Credit Facilities 369,045
Accounts Payable and Accrued Liabilities 143,604
----------
TOTAL LIABILITIES $2,413,392
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock $ 14,995
Capital Surplus 42,394
Retained Earnings 98,402
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,007)
----------
TOTAL STOCKHOLDER'S EQUITY 154,784
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,568,176
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
October 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Petersen Publishing Co. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001029075
<NAME> PETERSEN PUBLISHING COMPANY, L.L.C.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 10-MOS
<FISCAL-YEAR-END> NOV-30-1995 NOV-30-1996
<PERIOD-START> DEC-01-1994 DEC-01-1995
<PERIOD-END> NOV-30-1995 SEP-30-1996
<CASH> 9,938 12,453
<SECURITIES> 3,744 55
<RECEIVABLES> 20,755 20,648
<ALLOWANCES> (2,220) (1,871)
<INVENTORY> 21,347 8,518
<CURRENT-ASSETS> 54,777 41,234
<PP&E> 21,129 18,682
<DEPRECIATION> (13,345) (13,441)
<TOTAL-ASSETS> 66,808 50,541
<CURRENT-LIABILITIES> 49,017 44,025
<BONDS> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 8,627 (1,672)
<TOTAL-LIABILITY-AND-EQUITY> 66,808 50,541
<SALES> 205,262 181,520
<TOTAL-REVENUES> 213,615 189,114
<CGS> 171,112 148,713
<TOTAL-COSTS> 171,112 148,713
<OTHER-EXPENSES> 28,145 24,650
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 185
<INCOME-PRETAX> 14,907 17,657
<INCOME-TAX> 549 331
<INCOME-CONTINUING> 14,358 14,358
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 14,358 14,358
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
To Tender for Exchange
11-1/8% Senior Subordinated Notes due 2006
of
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
Pursuant to the Prospectus Dated _________, 1997
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FEBRUARY __,
1997 UNLESS EXTENDED.
- --------------------------------------------------------------------------------
To: United States Trust Company of New York, The Exchange Agent
By Registered or Certified Mail:
United States Trust Company of New York
844 Cooper Station
New York, New York 10274-0844
Attn: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attn: Corporate Trust Operations
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attn: Lower Level Corporate Trust Window
By Facsimile: (212) 420-6152
Attn: Corporate Trust Operations
Confirm by telephone: (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF THIS INSTRUMENT VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED
The undersigned acknowledges receipt of the Prospectus, dated February __,
1997 (the "Prospectus") of Petersen Publishing Company, L.L.C. and Petersen
Capital Corp. (collectively, the "Company") (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 11-1/8 Senior Subordinated Notes due 2006, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement, for
each $1,000 principal amount of its outstanding 11-1/8% Senior Subordinated
Notes due 2006 (the "Notes"), of which $100,000,000 principal amount is
outstanding. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on February __, 1997, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended. The term "Holder" with respect to the
Exchange Offer means any person in whose name Notes are registered on the books
of the Company or any other person who has obtained a properly completed bond
power from the registered holder. Capitalized terms used but not defined herein
have the respective meanings set forth in the Prospectus.
This Letter of Transmittal is to be used by holders of Notes if (i)
certificates representing the Notes are to be physically delivered to the
Exchange Agent herewith, (ii) tender of the Notes is to be made by book entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the
<PAGE>
procedures set forth in the Prospectus under the caption "The Exchange Offer -
Procedures for Tendering" by any financial institution that is a participant in
the Book-Entry Transfer Facility and whose name appears on a security position
listing as the owner of Notes (such participants acting on behalf of holders,
are referred to herein, together with such holders, as "Authorized Holders") or
(iii) tender of the Notes is to be made according to the guaranteed delivery
procedures described in the Prospectus under the caption "The Exchange Offer-
Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete
this letter in its entirety.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
Principal Amount of Tendered Notes: _______________________________________
If Holders desire to tender Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing Notes
or other required document to reach the Exchange Agent prior to the Expiration
Date, or (ii) the procedures for book-entry transfer cannot be completed prior
to the Expiration Date, such Holders may effect a tender of such Notes in
accordance with the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer-Guaranteed Delivery Procedures." See
Instruction 2 below.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (See Instruction 2):
Name of Registered or Acting Holder(s): ___________________________________
Window Ticket No. (if any): _______________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Eligible Institution
that Guaranteed Delivery: _________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: _______________________________________________________
Transaction Code Number: __________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES; PROVIDED, HOWEVER, THAT THE COMPANY HAS NO OBLIGATION TO
AMEND OR SUPPLEMENT THE PROSPECTUS UNLESS IT HAS RECEIVED WRITTEN NOTICE
FROM A PARTICIPATING BROKER-DEALER OF ITS PROSPECTUS DELIVERY
-2-
<PAGE>
REQUIREMENTS UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WITHIN
FIVE DAYS FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER.
Name:
-------------------------------------------------------------------
Address:
----------------------------------------------------------------
------------------------------------------------------------------------
Attention:
--------------------------------------------------------------
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal amount
of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006*
-------------------------------------------------------------------------------------------------------
Principal Amount
Name(s) and Address(es) of Aggregate Principal Tendered (must be)
Registered Holder(s) Certificate Amount Represented an Integral Multiple
(Please fill in, if blank) Number(s) by Certificate(s) of $1,000)***
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Total
-------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of 11 1/8% Senior
Subordinated Notes due 2006 will be deemed to have tendered the entire aggregate principal amount
represented by the column labeled "Aggregate Principal Amount Represented by Certificate(s)." If
the space provided above is inadequate, list the certificate numbers and principal amounts on a
separate signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of 11 1/8% Senior Subordinated Notes due 2006.
All other tenders must be in integral multiples of $1,000.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
- --------------------------------------------------
BOX 2
SPECIAL REGISTRATION
INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Notes
in a principal amount not tendered, or
Exchange Notes issued in exchange for Notes
accepted for exchange, are to be issued in the
name of someone other than the undersigned.
Issue certificate(s) to:
Name
----------------------------------------------
(Please Print)
Address
-------------------------------------------
(Include Zip Code)
- --------------------------------------------------
(Tax Indemnification or Social Security Number)
- --------------------------------------------------
- --------------------------------------------------
BOX 3
SPECIAL REGISTRATION
INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Notes
in a principal amount not tendered, or Exchange
Notes issued in exchange for Notes accepted Notes
accepted for exchange, are to be sent to someone
other than the undersigned, or to the undersigned
at an address other than that shown above.
Deliver certificate(s) to:
Name
----------------------------------------------
(Please Print)
Address
-------------------------------------------
(Include Zip Code)
- --------------------------------------------------
(Tax Indemnification or Social Security Number)
- --------------------------------------------------
- ------------------------------------------------------------------------------
BOX 4
BROKER-DEALER STATUS
[_] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THIS LETTER OF
TRANSMITTAL TO RICHARD S. WILLIS, CHIEF FINANCIAL OFFICER OF THE COMPANY,
VIA FACSIMILE: (213) 782-2041.
- ----- ------------------------------------------------------------------------
-4-
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Petersen Publishing Company, L.L.C. and Petersen Capital Corp.
(collectively, the "Company"), the principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (iii) present such Notes for transfer on the books
of the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claims, when the same are acquired by the Company.
The undersigned hereby further represents that any Exchange Notes acquired in
exchange for Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, that neither the undersigned nor any other such
person has any arrangement or understanding with any person to participate in
the distribution of such Exchange Notes and that neither the undersigned nor any
such other person is an "affiliate," as defined in Rule 405 under the Securities
Act of 1933, as amended, of the Company. In addition, the undersigned and any
such person acknowledge that (a) any person participating in the Exchange Offer
for the purpose of distributing the Exchange Notes must, in the absence of an
exemption therefrom, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale of the
Exchange Notes and cannot rely on the position of the Staff of the Securities
and Exchange Commission enunciated in no-action letters and (b) failure to
comply with such requirements in such instance could result in the undersigned
or such person incurring liability under the Securities Act for which the
undersigned or such person is not indemnified by the Company. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
assignment, transfer and purchase of the Notes tendered hereby. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in and does not intend to engage in, a distribution of Exchange Notes.
If the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Notes that were acquired as a result of market-
making activities or other trading activities, it acknowledges that it will
deliver a Prospectus in connection with any resale of such Exchange Notes,
however, by so acknowledging and by delivering a Prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Unless otherwise notified in accordance with the
instructions set forth herein in Box 3 under "Broker-Dealer Status," the Company
will assume that the undersigned is not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Notes
will be returned, without expense, to the undersigned at the address shown below
or to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
-5-
<PAGE>
The undersigned understands that tenders of Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates (or electronic transfers)
representing the Exchange Notes issued in exchange for the Notes accepted for
exchange and any certificates (or electronic transfers) for Notes not tendered
or not exchanged, in the name(s) of the undersigned. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates, if any, representing the Exchange Notes issued in exchange for the
Notes accepted for exchange and any certificates for Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below in the undersigned's signature(s). In the event that both
"Special Registration Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the Exchange Notes issued
in exchange for the Notes accepted for exchange in the name(s) of, and return
any certificates for Notes not tendered or not exchanged to, the person(s) so
indicated. The undersigned understands that the Company has no obligation
pursuant to the "Special Registration Instructions" and "Special Delivery
Instructions" to transfer any Notes from the name of the registered Holder(s)
thereof if the Company does not accept for exchange any of the Notes so
tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2 regarding the
completion of this Letter of Transmittal printed below.
The below lines must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by a participant in the Book-Entry Transfer
Facility, exactly as such participant's name appears on a security position
listing as the owner of the Notes, or by person(s) authorized to become
registered holder(s) by a properly completed bond power from the registered
holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If Notes to which this Letter of Transmittal relate are held of record by two or
more joint holders, then all such holders must sign this Letter of Transmittal.
PLEASE SIGN HERE WHETHER OR NOT
NOTES ARE BEING PHYSICALLY TENDERED HEREBY
x
-------------------------------------------------- ------------
Date
x
-------------------------------------------------- ------------
Date
Area Code and Telephone Number:
--------------------
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of this
Letter of Transmittal printed below.
-6-
<PAGE>
Name(s):
-------------------------------------------------------------------
(Please Print)
Capacity:
------------------------------------------------------------------
Address:
-------------------------------------------------------------------
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution:
------------------------
(Authorized Signature)
- ---------------------------------------------------------------------------
(Title)
- ---------------------------------------------------------------------------
(Name of Firm)
- ---------------------------------------------------------------------------
(Address, Include Zip Code)
- ---------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated:
---------------------------------------------------------------------
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer into the Exchange Agent's account with the
Book-Entry Transfer Facility for tendered Notes transferred electronically), as
well as a properly completed and duly executed copy of this Letter of
Transmittal (or facsimile thereof), a Substitute Form W-9 (or facsimile thereof)
and any other documents required by this Letter of Transmittal must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of certificates for Notes and all other required
documents is at the election and sole risk of the tendering holder and delivery
will be deemed made only when actually received by the Exchange Agent. If
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. As an alternative to delivery by mail, the holder may
wish to use an overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure timely delivery. Neither the Company nor the
Exchange Agent is under an obligation to notify any tendering holder of the
Company's acceptance of tendered Notes prior to the completion of the Exchange
Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other documents
required by the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Notes according to the guaranteed delivery
procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member
of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having
an office or correspondent in the United States (an "Eligible
Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the 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 or numbers of the tendered Notes, and the principal amount of tendered
Notes and 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 tendered Notes
(or a confirmation of book-entry transfer into the Exchange Agent's account with
the Book-Entry Transfer Facility for Notes transferred electronically) and any
other required documents will be deposited by the Eligible Institution with the
Exchange Agent; and
(iii) such properly completed and executed Letter of Transmittal and
certificates representing the tendered Notes in proper form for transfer (or a
confirmation of book-entry transfer into the Exchange Agent's account with the
Book-Entry Transfer Facility for Notes transferred electronically) must be
received by the Exchange Agent within three New York Stock Exchange trading days
after the Expiration Date.
Any holder who wishes to tender Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery relating to such Notes prior to the Expiration
Date. Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery person.
3. TENDER BY HOLDER. Only a holder of Notes may tender such Notes in the
Exchange Offer. Any beneficial owner of Notes who is not the registered holder
and who wishes to tender should arrange with such holder to execute and deliver
this Letter of Transmittal on such owner's behalf or must, prior to completing
and executing this Letter of Transmittal and delivering such Notes, either make
appropriate arrangements to register ownership of the Notes in such owner's name
or obtain a properly completed bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Aggregate Principal Amount Tendered" of
the box entitled "Description of
-8-
<PAGE>
Notes" (Box 1) above. The entire principal amount of Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of Notes is not tendered, Notes for the principal
amount of Notes not tendered and Exchange Notes exchanged for any Notes tendered
will be sent to the holder at his or her registered address (or transferred to
the account of the Book-Entry Facility designated above), unless a different
address (or account) is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal
is signed by the registered holder(s) of the Notes tendered herewith, the
signatures must correspond with the name(s) as written on the face of the
tendered Notes without alteration, enlargement, or any change whatsoever. If
this Letter of Transmittal is signed by a participant in the Book-Entry Transfer
Facility, the signature must correspond with the name as it appears on the
security position listing as the owner of the Notes.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of Transmittal
documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder or
Acting Holder, and Exchange Notes are to be issued and any untendered or
unaccepted principal amount of Notes are to be reissued or returned to the
registered holder or Acting Holder, then, the registered holder or Acting Holder
need not and should not endorse any tendered Notes nor provide a separate bond
power. In any other case (including if this Letter of Transmittal is not signed
by the Acting Holder), the registered holder or Acting Holder must either
properly endorse the Notes tendered or transmit a properly completed separate
bond power with this Letter of Transmittal (in either case, executed exactly as
the name(s) of the registered holder(s) appear(s) on such Notes, and, with
respect to a participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Notes, exactly as the name(s) of
the participant(s) appear(s) on such security position listings), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations, or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No medallion signature guarantee is required if (i) this Letter of
Transmittal is signed by the registered holder(s) of the Notes tendered herewith
(or by a participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of the Tendered Notes) and the issuance
of Exchange Notes (and any Notes not tendered or not accepted) are to be issued
directly to such registered holder(s) (or, if signed by a participant in the
Book-Entry Transfer Facility, any Exchange Notes or Notes not tendered or not
accepted are to be deposited to such participant's account at such Book-Entry
Transfer Facility) and neither the "Special Delivery Instructions" (Box 3) nor
the "Special Registration Instructions" (Box 2) has been completed, or (ii) such
Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box, the name and address (or account at the
Book-Entry Transfer Facility) in which the Exchange Notes and/or substitute
Notes for principal amounts not tendered or not accepted for exchange are to be
sent (or deposited), if different from the name and address or account of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification number or social security number of
the person named must also be indicated and the indicated and the tendering
holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes
not tendered or not accepted) will be issued in the name of and sent to the
Acting Holder of the Notes or deposited at such Acting Holders' account at the
Book-Entry Transfer Facility.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to the
Exchange Offer. If, however, a transfer tax is imposed for any reason other
than the transfer and sale of Notes to the Company or its order pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or on any other person) will be payable by the tendering
holder.
-9-
<PAGE>
If satisfactory evidence of payment of such taxes or exemption from taxes
therefrom is not submitted with this Letter of Transmittal, the amount of
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a
holder of any Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number. If
the Company is not provided with the correct TIN, the Holder may be subject to a
$50 penalty imposed by Internal Revenue Service. (If withholding results in an
over-payment of taxes, a refund may be obtained.) Certain holders (including,
among other, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report a interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Notes are registered in more than one name or are not in the name of the
actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered Notes will
be determined by the Company, in its sole discretion, which determination will
be final and binding. The Company reserves the right to reject any and all
Notes not validly tendered or any Notes, the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the right to waive any conditions of the Exchange Offer or defects
or irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (includes this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall determine.
The Company will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Notes, but shall not incur any
liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive, or modify specified conditions in the Exchange Offer in the case
of any tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular,
or contingent tender of Notes on transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering
holder whose Notes have been mutilated, lost, stolen, or destroyed should
contact the Exchange Agent at the address indicated above for further
instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus may
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Notes when, as and if the Company has
given written and oral notice thereof to the Exchange Agent. If any tendered
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Notes will be returned, without expense, to the
-10-
<PAGE>
undersigned at the address shown above (or credited to the undersigned's account
at the Book-Entry Transfer Facility designated above) or at a different address
as may be indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuit to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
-11-
<PAGE>
- -------------------------------------------------------------------------------
PAYOR'S NAME: PETERSEN PUBLISHING COMPANY, L.L.C. AND PETERSEN CAPITAL CORP.
- -------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION
NUMBER (TIN)
- -------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part I below. See instructions if your name has
changed.)
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
City, State and ZIP Code
- --------------------------------------------------------------------------------
List account number(s) here (optional)
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TAXPAYER Social Security Number
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
- --------------------------------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup withholding under the
provisions of section 3408(a)(1)(C) of the Internal Revenue Code because (1) you
have not been notified that you are subject to backup withholding as a result of
failure to report all interest of dividends or (2) the Internal Revenue Service
has notified you that you are no longer subject to backup withholding. [_]
- -------------------------------------------------------------------------------
CERTIFICATION--UNDER THE
PENALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PROVIDED
ON THIS FORM IS TRUE, CORRECT
AND COMPLETE. Part 3--
SIGNATURE DATE Awaiting TIN [_]
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-12-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 1 OF 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply for
a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501 (a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
. Payments of interest not generally subject to backup withholding include
the following:
. Payments of interest and obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payor.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041 A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest,
or other payments to give taxpayer identification numbers to payors who must
report the payments to the IRS. The IRS uses the number for identification
purposes. Payors must be given the numbers whether or not recipients are
required to file tax returns. Payors must generally withhold 20% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payor. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 5% on any portion of
an under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Certifications or affirmations
may subject you to criminal penalties including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
-13-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2 OF 2
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR--
Social Security numbers have nine digits separated by two hyphens:
e.g. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: e.g. 00-0000000. The table below will help determine the number
to give the Payor.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF:
- -------------------------------------------------------------------------------
<S> <C>
1. For an individual account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is
the only contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
9. A valid trust, estate, or pension The legal entity (Do not
trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity itself
is not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public safety
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
</TABLE>
- -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish the
ward's, minor's or incompetent person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
-14-
<PAGE>
NOTICE OF GUARANTEED DELIVERY
With Respect to
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11-1/8% Senior Subordinated Notes due 2006
This form must be used by a holder of 11-1/8% Senior Subordinated Notes due
2006 (the "Notes") of Petersen Publishing, L.L.C. and Petersen Capital Corp.
(collectively, the "Company"), who wishes to tender Notes to the Exchange Agent
pursuant to the guaranteed delivery procedures described in the "The Exchange
Offer--Guaranteed Delivery Procedures" of the Prospectus, dated _____________
(the "Prospectus"), and in Instruction 2 to the related Letter of Transmittal.
Any holder who wishes to tender Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms not defined herein have the meanings ascribed to them in the
Prospectus or the Letter of Transmittal.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
To: United States Trust Company of New York
(the "Exchange Agent")
By Registered or Certified Mail:
United States Trust Company of New York
844 Cooper Station
New York, New York 10274-0844
Attn: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attn: Corporate Trust Operations
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attn: Lower Level Corporate Trust Window
By Facsimile: (212) 420-6152
Attn: Corporate Trust Operations
Confirm by Telephone: (800) 548-6565
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR ACCOUNT AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ------------------------------------------------------------------------------------------------------------------
Signatures of Registered Holder(s) or Date: , 1997
Authorized Signatory: Address:
------------------------------------------- -----------------------------
- ---------------------------------------------------------------- -------------------------------------
- ---------------------------------------------------------------- Area Code and Telephone No.:
---------
Name of Registered Holder(s):
-----------------------------------
- ----------------------------------------------------------------
- ----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as their name(s) appear on
certificates for Notes or on a security position listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Capacity:
---------------------------------------------------------------------------------------------------------
Address(es):
------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
- --------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at Book-Entry Transfer Facility described in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, on the third New York Stock Exchange
trading day following the Expiration Date.
Name of Firm:
----------------------------------- ----------------------------
Address: Authorized Signature
----------------------------------------
- ------------------------------------------------
Area Code and Telephone No.: Name:
-------------------- -----------------------
Title:
----------------------
Date:
-----------------,1997
- -------------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
-3-
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
-4-
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
PETERSEN PUBLISHING COMPANY, L.L.C.
PETERSEN CAPITAL CORP.
11% SENIOR SUBORDINATED NOTES DUE 2006
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
_____________ (the "Prospectus"), of Petersen Publishing Company, L.L.C. and
Petersen Capital Corp. (collectively, the "Company"), and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), that together constitute
the Company's offer (the "Exchange Offer"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the 11% Senior Subordinated Notes due 2006 (the
"Notes") held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 11% Senior Subordinated Notes due 2006.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED,
IF ANY): $
[_] NOT TO TENDER any Notes held by you for the account of the
undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of (fill in state)
______________, (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) the undersigned acknowledges that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospects delivery requirements of the Securities Act
of 1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission set forth in no-
action letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer--Resales of the Exchange Notes," and (v) the undersigned is not
an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and (c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Notes.
- --------------------------------------------------------------------------------
[_] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THESE
INSTRUCTIONS TO RICHARD S. WILLIS, CHIEF FINANCIAL OFFICER OF THE COMPANY,
VIA FACSIMILE: (213) 782-2041.
- --------------------------------------------------------------------------------
SIGN HERE
Name of beneficial owner(s):
---------------------------------------------------
Signature(s):
------------------------------------------------------------------
Name (please print):
-----------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone number:
--------------------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
--------------------------------------------------------------------------
- -------------------------------------------------------------------------------
