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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AFFINITY GROUP HOLDING, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7900 59-2922099
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of Classification Code Identification
incorporation or organization) No.)
</TABLE>
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64 Inverness Drive East
Englewood, CO 80112
(303) 790-2267
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
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Mark J. Boggess
Vice President and Chief Financial Officer
Affinity Group Holding, Inc.
64 Inverness Drive East
Englewood, CO 80112
(303) 790-2267
(Name, address, including zip code, and telephone number,
including area code, of agent for service for the registrants)
------------------------
WITH COPIES TO:
Bruce J. Parker
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
Minneapolis, Minnesota 55402
(612) 375-1138
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
11% Senior Notes due 2007............ $130,000,000 100% $130,000,000 $39,394
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION DATED APRIL , 1997
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
SOLLICITATION 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.
<PAGE>
PROSPECTUS
AFFINITY GROUP HOLDING, INC.
OFFER TO EXCHANGE THEIR 11% SENIOR NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF THEIR OUTSTANDING
11% SENIOR NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
---------------------
The 11% Senior Notes due 2007 are being offered (the "Offering") by Affinity
Group Holding, Inc., a Delaware corporation (the "Company"), and the Company
hereby offers to exchange (the "Exchange Offer") up to $130,000,000 in aggregate
principal amount of the Company's new 11% Senior Notes due 2007 (the "New
Notes") for $130,000,000 in aggregate principal amount of the Company's
outstanding 11% Senior Notes due 2007 (the "Original Notes"). The Original Notes
and the New Notes are sometimes referred to herein collectively as the "Notes."
The terms of the New Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the New Notes will be freely transferable by holders thereof (other
than as provided in the next paragraph) and issued free of any covenant
restricting transfer absent registration. The New Notes will evidence the same
debt as the Original Notes and contain terms which are substantially identical
to the terms of the Original Notes for which they are to be exchanged. For a
complete description of the terms of the Notes, see "Description of the Notes."
There will be no cash proceeds to the Company from the Exchange Offer.
The Original Notes were sold on April 2, 1997, in a transaction not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon the exception provided in Section 4(2) of the Securities Act.
Accordingly, the Original Notes may not be offered, resold or otherwise pledged,
hypothecated or 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
to satisfy the obligations of the Company under a Registration Rights Agreement
relating to the Original Notes. See "The Exchange Offer--Purposes and Effects of
the Exchange Offer." New Notes issued pursuant to the Exchange Offer in exchange
for the Original Notes may be offered for resale, resold or otherwise
transferred by the holders thereof (other than any holder which is an affiliate
of the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement with any person
to participate in the distribution of such New Notes. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer."
Each broker-dealer that receives New Notes or 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 so delivering a prospectus, a 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 broker-dealer in connection with resales of New Notes
received 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. The Company has agreed that, for a period of 165 days after the date
hereof, it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
The Notes constitute securities for which there is no established trading
market. Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding. The Company does not currently intend to list the New Notes
on any securities exchange. To the extent that any Original Notes are tendered
and accepted in the Exchange Offer, a holder's ability to sell untendered
Original Notes could be adversely affected. No assurances can be given as to the
liquidity of the trading market for either the Original Notes or the New Notes.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York time, on , 1997, unless extended to a
date not later than 60 days from the effective date of the Registration
Statement of which this Prospectus is a part (the "Expiration Date"). The date
of acceptance for exchange of the Original Notes will be the first business day
following the Expiration Date. Original Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date, otherwise, such
tenders are irrevocable. The Company will pay all expenses incident to the
Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES
OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the New Notes offered hereby (the
"Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain portions of which are omitted from the
Prospectus as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, and financial statements and notes filed as a part thereof. Statements
made in the Prospectus concerning the contents of any document referred to
herein are not necessarily complete. With respect to each such document filed
with the Commission as an exhibit to the Registration Statement, reference is
made to the exhibit fora more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement, including the exhibits and schedules thereto,
may be inspected and copied at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and at
the regional offices of the commission located at Seven World Trade Center, New
York, NY 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549, and from its public reference
facilities in New York, NY and Chicago, IL, at the prescribed rates. The
Registration Statement can be accessed over the Commission's web site located at
http://www.sec.gov.
As a result of the Exchange Offer, the Company will be subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Also, under the Indenture
dated as of April 2, 1997 (the "Indenture"), between the Company and United
States Trust Company of New York, as Trustee (the "Trustee"), under which the
Old Notes were issued and the New Notes will be issued, the Company is required
to file with the Commission the periodic reports which would be required if it
were subject to such requirements. In addition, the Indenture requires the
Company to file copies of such reports with the Trustee and mail copies of such
reports to the registered holders of the Old Notes and New Notes.
THE DISTRIBUTION OF THIS PROSPECTUS AND THE EXCHANGE OFFER DESCRIBED HEREIN
MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS, PERSONS INTO WHOSE POSSESSION
THIS PROSPECTUS COMES MUST INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH
RESTRICTIONS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES TO ANY PERSON IN ANY JURISDICTION WHERE IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus contains statements that are "forward looking statements,"
and includes, among other things, discussions of the Company's business strategy
and expectations concerning market position, future operations, margins,
profitability, liquidity and capital resources, as well as statements concerning
the integration of acquired operations and the achievement of financial benefits
and operational efficiencies in connection with acquisitions. Forward looking
statements are included in "Offering Memorandum Summary," "The Acquisitions,"
"Selected Financial Data," "Selected Pro Forma Combined Financial Statements,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and "Business Business Strategy." Although the Company
believes that the expectations reflected in such forward looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies, number of acquisitions
2
<PAGE>
and projected or anticipated benefits from acquisitions made by or to be made by
the Company (including the acquisitions of Camping World, Inc. and the Ehlert
Publishing companies), or projections involving anticipated revenues, expenses,
earning, levels of capital expenditures or other aspects of operating results.
All phases of the operations of the Company are subject to a number of
uncertainties, risks and other influences, many of which are outside the control
of the Company and any one of which, or a combination of which, could materially
affect the results of the Company's operations and whether the forward looking
statements made by the Company ultimately prove to be accurate. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in "Risk Factors" and elsewhere in this Offering
Memorandum. The term the "Company" in this paragraph refers to the Company, any
of its subsidiaries and any acquired operations, including the Acquisitions (as
defined herein).
3
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS OFFERING
MEMORANDUM. EXCEPT WHERE THE CONTEXT INDICATES OTHERWISE, THE TERM "COMPANY"
MEANS AFFINITY GROUP HOLDING, INC., ITS WHOLLY OWNED SUBSIDIARY AFFINITY GROUP,
INC. AND ITS PREDECESSORS AND SUBSIDIARIES, TOGETHER WITH CAMPING WORLD, INC.
AND THE EHLERT PUBLISHING COMPANIES AFTER THEIR RESPECTIVE ACQUISITIONS, BUT
EXCLUDES THE OPERATIONS OF THE NATIONAL ASSOCIATION OF FEMALE EXECUTIVES
("NAFE") CLUB WHICH IS CLASSIFIED AS A DISCONTINUED OPERATION.
OVERVIEW
The Company is a member-based direct marketing organization primarily
engaged in selling club memberships to selected recreational affinity groups
principally comprised of recreational vehicle owners, campers, outdoor
vacationers and, to a lesser extent, golfers. The Company's club members form a
receptive audience to which it sells products and services, merchandise and
publications targeted to the recreational interests of such members. The
Company's three principal lines of business are (i) club memberships and related
products, services and club magazines, (ii) specialty retail merchandise
distributed primarily through retail supercenters and mail order catalogs, and
(iii) subscription magazines and other publications including directories.
The Company conducts its operations through: Affinity Group, Inc. ("AGI");
Camping World, Inc. ("Camping World"); and the Ehlert Publishing companies
("Ehlert"). On April 2, 1997, AGI acquired the stock of Camping World, a
specialty retailer offering merchandise and services through retail supercenters
and mail order catalogs primarily to members of its buying club. On March 6,
1997, AGI acquired the stock of Ehlert, a specialty sports and recreation
magazine publisher. Pro forma for the acquisitions of Camping World and Ehlert
(the "Acquisitions"), the Company would have had revenues of $324.0 million and
EBITDA (defined below) of $58.2 million for fiscal 1996. See "--Summary Pro
Forma Combined Financial Data."
Including the Camping World acquisition, the Company has over 1.7 million
paying members enrolled in its recreational affinity clubs, including
approximately 465,000 Camping World President's Club members, and over 3.9
million names in its proprietary database targeted to the recreational
activities of the Company's club members, including approximately 1.0 million
new names from Camping World. Including the Ehlert acquisition, the circulation
of the Company's publications exceeds 4.7 million.
Management believes that the acquisition of Camping World will further its
business strategy and enhance its competitive prospects by providing the
following benefits: (i) opportunities to cross sell club memberships between
AGI's Good Sam Club and Camping World's President's Club through both Camping
World's supercenters and catalog operations as well as AGI's direct mail
operations; (ii) access to Camping World's retail and mail order catalog
distribution channels to increase the penetration of AGI's products and
services, such as its emergency road service program and the recently introduced
extended vehicle warranty program, and access to Camping World's recreational
vehicle ("RV") merchandise which will be marketed to AGI's Good Sam Club
members; and (iii) opportunities to reduce membership, products and services
solicitation costs resulting from the Company's ability to: (a) market through
Camping World's retail and catalog distribution channels, (b) capitalize on the
overlap of the Good Sam Club and the President's Club memberships, and (c)
consolidate the administrative support for certain products and services. The
Company believes that these opportunities will enable it to eliminate workforce
redundancies and to reduce printing, paper, fulfillment and mailing costs.
Management believes the acquisition of Ehlert will allow the Company to increase
advertising revenues for certain of AGI's magazines due to higher combined
circulation of recreational activity publications and will result in cost
savings associated with headcount reductions, reorganization of certain
marketing activities and through the consolidation of publishing operations.
4
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BUSINESSES
AGI
AGI is a member-based direct marketing company that sells club memberships,
products, services and publications to selected recreational affinity groups.
For the year ended December 31, 1996, AGI generated revenues of $140.0 million
and EBITDA of $37.1 million. AGI's two principal segments are: (i) membership
services, in which AGI offers membership clubs and related products and services
primarily to RV owners, campers, outdoor vacationers and golf enthusiasts, and
(ii) publications in which AGI offers general circulation magazines, annual
campground and travel directories and books. Approximately 1.3 million members
are currently enrolled in AGI's clubs and AGI maintains a proprietary mailing
list of approximately 2.9 million names. AGI believes that its average annual
club renewal rate of approximately 72% during the period 1992 to 1996 compares
favorably with other for-profit subscription-based businesses. AGI's publication
business provides an additional revenue source and serves as the primary vehicle
to promote its membership clubs and to market its products and services.
AGI's club membership revenues, which include revenues from club dues,
products, services and advertising in club magazines, were $98.9 million in
1996. AGI's clubs consist of the Good Sam Club and Coast to Coast clubs, which
are targeted to RV owners, campers and outdoor vacationers, and the Golf Card
club, which is targeted to golf enthusiasts. Members of each club pay dues,
which varies by club, length of enrollment and available club benefits. Good Sam
Club membership provides discounts for overnight stays at participating RV parks
and campgrounds and discounts on membership-sponsored products and services.
Coast to Coast membership provides reciprocal-use privileges and discounts for
overnight stays at approximately 82% of the private RV resorts nationwide and
discounts on membership-sponsored products and services. Golf Card membership
provides discounted playing privileges at over 3,100 golf courses in the U.S.
and Canada. Based on typical usage patterns, AGI estimates that the average
savings derived from club membership represents a multiple of at least two to
three times the annual membership fee for each club.
AGI's approximately 1.3 million club members provide a focused and receptive
group of customers to which it markets products and services. The products and
services either address special needs arising from the activities of club
members or are generally appealing to consumers with demographic characteristics
similar to club members. The two most established programs marketed by AGI are
its emergency road service ("ERS") and its vehicle insurance program ("VIP").
Other products and services marketed by AGI include vehicle financing,
supplemental health and life insurance, credit cards and the recently introduced
extended vehicle warranty program. These products and services are generally
provided to club members by third parties that pay AGI a marketing fee and
assume all fulfillment obligations and underwriting risk.
AGI is the leading publisher for the RV industry in the United States and
Canada. AGI's revenues from publishing operations were $41.1 million in 1996.
AGI's monthly magazines, TRAILER LIFE and MOTORHOME, have a combined paid
circulation exceeding 415,000 copies per issue. Distribution of AGI's annual
directories, the TRAILER LIFE CAMPGROUNDS/RV PARKS AND SERVICE DIRECTORY and the
WOODALL CAMPGROUND DIRECTORY, approximated 320,000 and 284,000 copies,
respectively, in 1996. In addition, the Company publishes separate magazines for
its membership clubs, trade publications targeted to the RV industry, specialty
magazines targeted to motorcycle enthusiasts and other special interest
publications.
CAMPING WORLD
Camping World is the only national specialty retailer of merchandise and
services for RV owners. For its fiscal year ended September 30, 1996, Camping
World generated total revenues of $169.8 million and EBITDA of $12.7 million.
The 26 Camping World retail supercenters, which are located in 17 states,
accounted for approximately 66% of fiscal 1996 revenues while approximately 21%
were derived from catalog sales and approximately 13% were derived from fees or
non-merchandise revenues. Approximately
5
<PAGE>
86% of Camping World's fiscal 1996 revenues were derived from sales to the
members of its President's Club buying group.
The Company believes that Camping World's leading position in the RV
accessory industry results from a high level of name recognition, an effective
dual channel distribution strategy and a commitment to offer a broad selection
of specialized RV products and services at competitive prices combined with
technical assistance and on-site installation. Camping World's supercenters
offer over 8,000 stock keeping units ("SKUs"), approximately 80% of which are
not regularly available in general merchandise stores. In addition, general
merchandise stores do not provide installation or repair services for RV
products. Products sold by Camping World include specialty-sized refrigerators,
housewares and other appliances, bedding and furniture, generators and hydraulic
leveling systems, awnings, folding boats, chairs, bicycles, and sanitation
products. Camping World also markets emergency road service and vehicle
insurance products similar to the products offered by AGI. Camping World
supercenters are strategically located in areas where many RV owners live or in
proximity to destinations frequented by RV users. Camping World's supercenters
are designed to provide one-stop shopping by combining broad product selection,
technical assistance and on-site installation services.
Camping World's mail order operations generate significant revenues and
enhance retail sales by serving as the primary advertising vehicle for the
supercenters and by increasing Camping World's name recognition among RV owners
nationwide. The Company believes that Camping World has the leading share of the
mail order catalog segment for specialty RV products. Camping World's mail order
catalog sales complement its retail sales by targeting customers with limited
access to its retail supercenters and by facilitating purchases of higher
turnover items by regular supercenter customers. Camping World established its
President's Club in 1986 as a means of building customer loyalty and revenues.
President's Club members pay a membership fee, which varies with the length of
membership, and receive a 10% discount on merchandise purchased from Camping
World as well as special mailings including newsletters and flyers offering
selected products and services at reduced prices. At December 31, 1996, the
President's Club had approximately 465,000 members of which approximately
250,000 were also Good Sam Club members. The average annual renewal rate for the
President's Club for the five year period ended September 30, 1996 was 60.7%.
The majority of club memberships are for one year. Camping World recently
upgraded its point-of-sale system, which management believes will increase
sales, generate new club members and increase club renewal rates through
improved customer data collection.
EHLERT
Ehlert is a specialty publisher of sports and recreation magazines focusing
on four niches: snowmobiling, personal watercraft, archery and all-terrain
vehicles ("ATV's"). For the year ended December 31, 1996, Ehlert generated
revenues of $14.2 million and EBITDA of $2.2 million. For the twelve months
ended December 31, 1996, the paid circulation for Ehlert's publications was
approximately 290,000 and controlled circulation for industry and consumer
publications was approximately 1.1 million.
The Company estimates that in 1996, the snowmobile, personal watercraft and
archery groups had advertising revenue shares of approximately 62.3%, 39.6% and
27.5%, respectively, in their applicable sports and recreation magazine segment.
Ehlert's market share leadership position in its magazine segments, its close
contact with manufacturers, distributors, dealers and industry associations, and
its reputation as an advocate for responsible sporting practices has enabled
Ehlert to increase its advertising revenue by approximately 111% over the five
years ended December 31, 1996.
6
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BUSINESS STRATEGY
The Company's business strategy is to: (i) enhance the enrollment of its
clubs through internal growth and acquisitions; (ii) increase the sales of its
products and services by marketing to club members through the most effective
distribution channels and by developing and enhancing its product and service
offerings; and (iii) expand the circulation of its publications by introducing
new magazines and acquiring publications which are complementary to the
Company's recreational market niches. The Company also seeks to realize
operational efficiencies through the integration of acquired businesses such as
occurred as a result of the Golf Card club and Woodall Publishing acquisitions
in 1990 and 1994, respectively.
ENHANCE CLUB MEMBERSHIP ENROLLMENT
The Company seeks to increase the number of its club members by maximizing
renewals, establishing an optimal mix of channels for soliciting new members and
re-acquiring inactive members. Management believes that the participation levels
and renewal rates of club members reflect the benefits derived from membership.
In order to maintain high participation rates in its clubs, the Company
continuously evaluates member satisfaction and actively responds to changing
member preferences through the enhancement or introduction of new membership
benefits including products and services. The Company also seeks to optimize its
use of alternative channels for acquiring club members. Management believes that
Camping World's supercenters and catalog operations will provide low cost and
highly effective channels for acquiring club members. Camping World has
effectively used these channels to increase its President's Club membership by
approximately 75% during the five years ended September 30, 1996. Camping
World's supercenters and catalog operations can also be used to market
memberships to inactive club members. As a result of the Camping World
acquisition, the Company will add approximately 1.0 million new names to its
existing database. Additionally, Camping World recently upgraded its
point-of-sale system to sell President's Club memberships and renewals at the
check-out register and to record names of prospective club members.
INCREASE SALES OF PRODUCTS AND SERVICES
The Company seeks to increase the sale of its products and services due to
their profitability and the favorable impact such programs have on club
membership growth and retention. Management believes that a substantial
opportunity exists to market its products and services through the national
network of Camping World supercenters and mail order catalogs. A significant
percentage of Good Sam Club members currently subscribe to one or more of its
products and services, such as the emergency road service program and the
recently introduced extended vehicle warranty program. Management believes it
can successfully market such products and services to Camping World President's
Club members who have interests and demographic characteristics similar to those
of Good Sam Club members and for whom there is limited penetration of such
products and services. Management also believes that the Good Sam Club members
who are not currently President's Club members represent a focused group of
customers to which it can sell Camping World's RV accessory merchandise. The
Company regularly studies the feasibility of introducing new products and
services. For example, in 1995, AGI introduced its extended vehicle warranty
program which had approximately 1,600 policies in force as of December 31, 1996.
IMPROVE OPERATING PERFORMANCE
The Company seeks to achieve operating efficiencies by selectively acquiring
and developing recreational affinity groups which enable the Company to increase
membership enrollment and to realize cost savings. The Company also seeks to
enhance its importance with third party providers of products and services by
maintaining high membership enrollment levels in such programs, thereby
increasing the fees it receives from such vendors. Where appropriate, the
Company may consider directly providing certain products and services which had
been provided by third parties.
7
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Through the Acquisitions, the Company expects to realize $6.2 million in
annual cost savings and operating efficiencies. These anticipated cost
reductions consist of $3.8 million in annual salary and related benefits savings
associated with headcount reductions at AGI and Ehlert and $2.4 million in
annual reductions of operating costs associated with more efficient membership
services, products and services and publishing operations (including reduced
printing and paper costs).
Headcount reductions resulting in estimated annual savings of $2.8 million
were effected at AGI in December 1996 in anticipation of the Camping World
acquisition. Additional annual savings of $1.0 million from headcount reductions
are expected as a result of the Ehlert acquisition. Specific actions to reduce
consolidated operating costs will include: (i) reducing mailing, postage, paper
and fulfillment expenses due in part to the membership overlap between the Good
Sam Club and President's Club; (ii) using lower cost channels for soliciting
club members and selling products and services; and (iii) eliminating
duplicative publication and membership service operations.
ACQUIRE AND DEVELOP AFFINITY GROUPS
The Company believes the experience it has accumulated in managing its
existing recreational affinity groups is applicable to the management of other
recreational activity organizations. In 1990, AGI acquired the Golf Card club
and has successfully grown membership by approximately 47% since its
acquisition. As a result, the Company conducts ongoing evaluations for
developing or acquiring affinity groups for which it can build membership
enrollment and to which it can market products and services. The Company expects
to concentrate its efforts over the near term on integrating the operations of
the Camping World President's Club with AGI's Good Sam Club.
EXPAND NICHE RECREATIONAL PUBLICATIONS
The Company seeks to expand its presence as a leading publisher in select
recreational niches through the introduction of new magazine formats and the
acquisition of other publications in its market or in complementary recreational
market niches. Publications in complementary niches may also provide the Company
with the opportunity to launch new membership clubs, to market its products and
services to members of the new clubs and to develop other products and services
which meet the special needs of such members. The Company believes overall
circulation of its magazines is an important factor in determining the amount of
revenues it can obtain from advertisers. In addition, since paper and printing
costs are a significant part of operating expenses, management also believes
that the Company will achieve improved economies of scale when purchasing these
items following the Acquisitions.
THE ACQUISITIONS
On April 2, 1997, AGI acquired the stock of Camping World. The consideration
for the Camping World acquisition consists of $108.0 million in cash at closing
(including $19.0 million to be paid pursuant to non-competition and consulting
agreements with certain Camping World executives) and $15.0 million to be paid
over the five years following closing pursuant to management incentive
agreements with certain Camping World executives. On March 6, 1997, AGI acquired
the stock of Ehlert for $22.3 million, of which $20.8 million was paid in cash.
In addition, a $1.5 million note was issued by the Company to the seller (the
"Ehlert Note").
The Company used the proceeds from the sale of the Original Notes, net of
discounts, closing costs and repayment of approximately $7.5 million of the
Company's indebtedness to make an equity capital contribution to AGI. In
addition, simultaneous with completion of the sale of the Original Notes, AGI
entered into a new senior secured credit facility (the "AGI Credit Facility")
consisting of a revolving line of credit of $45.0 million and a term loan of
$30.0 million. See "Description of Other Indebtedness AGI Credit Facility." AGI
used borrowings under the AGI Credit Facility together with the equity
contribution made by the Company to AGI to finance the Acquisitions and pay
related transaction fees and expenses.
8
<PAGE>
The following table sets forth the estimated sources and uses of funds in
connection with the Acquisitions and the sale of the Original Notes:
<TABLE>
<CAPTION>
<S> <C>
Sources:
AGI Credit Facility......................................................... $ 30,000,000
Original Notes.............................................................. 130,000,000
Acquisition earnest money deposits.......................................... 3,500,000
Ehlert Note (1)............................................................. 1,500,000
--------------
Total sources............................................................. $ 165,000,000
--------------
--------------
Uses:
Repayment of AGI's prior credit facility (2)................................ $ 26,050,000
Camping World acquisition................................................... 108,000,000
Ehlert acquisition (1)...................................................... 22,300,000
Repayment of 9% subordinated note (3)....................................... 2,500,000
Transaction fees and expenses............................................... 6,150,000
--------------
Total uses................................................................ $ 165,000,000
--------------
--------------
</TABLE>
- ------------------------
(1) On April 2, 1997, the Company repaid $1.0 million of the Ehlert Note and the
balance of $0.5 million is due on March 6, 1999 together with interest at 5%
per annum. Of the cash paid at closing of the Ehlert acquisition, $4.0
million was funded from a bridge loan to the Company from AGI Holding Corp.
("Holding") which owns all of the Company's outstanding capital stock. The
bridge loan, together with interest thereon at the rate of 9% per annum, was
repaid from the net proceeds from the sale of the Original Notes. The $22.3
million purchase price for Ehlert does not include $200,000 in non-compete
payments to the principal shareholders of Ehlert which are payable in twelve
equal monthly installments following closing.
(2) Subsequent to December 31, 1996, AGI borrowed an additional $1.0 million
under its existing credit facility to fund a portion of the earnest money
deposit made in February 1997 in connection with the execution of the
acquisition agreement for Camping World. As a result the amount to be repaid
under AGI's existing credit facility has been increased by $1.0 million from
the amount outstanding at December 31, 1996. See "Capitalization."
(3) The 9% subordinated note due December 31, 1998 represents loans to the
Company from an affiliate of several of the initial purchasers of the
Original Notes in January and February 1997. The proceeds from such loans
were used by the Company to fund a portion of the earnest money deposits for
the Acquisitions.
9
<PAGE>
SUMMARY OF CORPORATE STRUCTURE
The chart set forth below is a summary of the corporate structure of the
Company (including its parent corporation) after giving effect to the
Acquisitions. The Company is a recently-formed intermediate holding company
whose sole asset consists of all of the stock of AGI.
<TABLE>
<S> <C> <C>
AGI Holding Corp.
("Holding")
100%
Affinity Group Holding, Inc. --Issuer of the Notes
(the "Company") -- Obligor under Camping
World management incentive
agreements and Ehlert Note
100%
Affinity Group, Inc. --Borrower under the AGI
("AGI") Credit Facility
--Issuer of the AGI Notes
100% 100% 100%
Camping World, Inc. Ehlert Publishing companies Other AGI Subsidiaries
("Camping World") ("Ehlert")
</TABLE>
10
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Purpose of Exchange Offer......... The Original Notes were sold in a private placement (the
"Private Offering") by the Company on April 2, 1997 to
certain accredited institutions through Citicorp
Securities, Inc., Citibank Canada Securities Limited,
Citibank International plc, and CIBC Wood Gundy
Securities Corp., the initial purchasers (the "Initial
Purchasers"). In connection therewith, the Company
executed and delivered, for the benefit of the holders
of the Original Notes, a Registration Rights Agreement
dated April 2, 1997 (the "Registration Rights
Agreement"), which is filed as an exhibit to the
Registration Statement of which this Prospectus is a
part, providing for, among other things, the Exchange
Offer so that the New Notes will be freely transferable
by the holders thereof without registration or any
prospectus delivery requirements under the Securities
Act, except that a "dealer" or any of their "affiliates"
as such terms are defined under the securities Act, who
exchanges Original Notes held for its own account 9a
"Restricted Holder") will be required to deliver copies
of this Prospectus in connection with any resale of the
New Notes issued in exchange for such Original Notes.
See "The Exchange Offer--Purposes and Effects of the
Exchange Offer" and "Plan of Distribution" and "Risk
Factors--Consequences of Failure to Exchange."
The Exchange Offer................ The Company is offering to exchange pursuant to the
Exchange Offer up to $130,000,000 aggregate principal
amount of the Company's new 11% Senior Notes due 2007
(the "New Notes") for $130,000,000 aggregate principal
amount of the Company's outstanding 11% Senior Notes due
2007 (the "Original Notes"). The Original Notes and the
New Notes are collectively referred to herein as the
"Notes." The terms of the New Notes, are substantially
identical in all respects (including principal amount,
interest rate and maturity) to the terms of the Original
Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the New Notes are freely
transferable by holders thereof (other than as provided
herein), and are not subject to any covenant regarding
registration under the Securities Act. See "The Exchange
Offer--Terms of the Exchange Offer" and "The Exchange
Offer--Procedures for Tendering."
The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Original Notes being
tendered for exchange.
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York
City time on , 1997, unless extended to a date
not later than 60 days from the effective date of the
Registration Statement of which this Prospectus is a
par, (the "Expiration Date").
Conditions of the Exchange
Offer........................... The Company's obligation to consummate the Exchange
Offer will be subject to certain conditions. See "The
Exchange Offer-- Conditions of the Exchange Offer." The
Company reserves the right to terminate or amend the
Exchange Offer at any time
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
prior to the Expiration Date upon the occurrence of any
such conditions.
Procedures for Tendering Old
Notes........................... Each holder of Original Notes wishing to accept the
Exchange Offer must complete, sign and date the Letter
of 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, together with the Original Notes and any
other required documentation to the exchange agent (the
"Exchange Agent") at the address set forth herein.
Original Notes may be physically delivered, but physical
delivery is not required if a confirmation of a
book-entry of such Original Notes to the Exchange
Agent's account at The Depository Trust Company ("DTC"
or the "Depositary") is delivered in a timely fashion.
By executing the Letter of Transmittal, each holder will
represent to the Company 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 is engaged in, or intends to engage
in, or has an arrangement or understanding with any
person to participate in, the distribution of such New
Notes and that neither the holder nor any such other
person is an "affiliate", as defined under Rule 405 of
the Securities Act, of the Company. Each broker or
dealer that receives New Notes for its own account in
exchange for Original Notes, where such Original Notes
were acquired by such broker or 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 "The
Exchange Offer--Procedures for Tendering" and "Plan of
Distribution."
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Original 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 his Original Notes, either
make appropriate arrangements to register ownership of
the Original 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. See "The Exchange Offer--Procedures
for Tendering."
Guaranteed Delivery Procedures.... Holders of Original Notes who wish to tender their
Original Notes and whose Original Notes are not entirely
available or who cannot deliver their Original Notes
must complete, sign and deliver, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
prior to the Expiration Date and must tender their
Original 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. See "The
Exchange Offer--Withdrawal of Tenders."
Acceptance of Original Notes and
Delivery of New Notes........... The Company will accept for exchange any and all
Original 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."
Exchange Agent.................... United States Trust Company of New York is serving as
Exchange Agent in connection with the Exchange Offer.See
The Exchange Offer--Exchange Agent.
Effect on Holders of the Original
Notes........................... As a result of the making of, and upon acceptance for
exchange of all validly tendered Original Notes pursuant
to the terms of this Exchange Offer, the Company will
have fulfilled one of the covenants contained in the
Registration Rights Agreement and, accordingly, there
will be no increase in the interest rate on the Original
Notes pursuant to the applicable terms of the
Registration Rights Agreement due to the Exchange Offer.
Holders of the Original Notes who do not tender their
Original Notes will be entitled to all the rights and
limitations applicable thereto under the Indenture dated
as of April 2, 1997, among the Company and United States
Trust Company of New York, as trustee (the "Trustee")
relating to the Original Notes and the New Notes (the
"Indenture"), except for any rights under the Indenture
or the Registration Rights Agreement, which by their
terms, terminate or cease to have further effectiveness
as a result of the making of, and the acceptance for
exchange of all validly tendered Original Notes pursuant
to, the Exchange Offer. All untendered Original Notes
will continue to be subject to the restrictions on
transfer provided for in the Original Notes and in the
Indenture. To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the trading
market for untendered Original Notes could be adversely
affected.
Use of Proceeds................... There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
</TABLE>
13
<PAGE>
TERMS OF NOTES
The Exchange Offer applies to $130,000,000 principal amount of Original
Notes. The terms of the New Notes are identical in all material respects to the
Old Notes, except for certain transfer restrictions and registration and other
rights relating to the exchange of the Original Notes for New Notes. The New
Notes will evidence the same debt as the Original Notes and will be entitled to
the benefits of the Indenture under which both the Original Notes were, and the
New Notes will be, issued. See "Description of the Notes."
<TABLE>
<S> <C>
Maturity Date..................... April 1, 2007.
Interest Payment Dates............ Interest will accrue from the date of original issuance
and will be payable semi-annually on each October 1 and
April 1, commencing on October 1, 1997.
Optional Redemption............... The Notes are redeemable, in whole or in part, at the
option of the Company at any time on or after April 1,
2002 at the redemption prices set forth herein plus
accrued interest to the redemption date. In addition, at
any time prior to April 1, 2000, with the net cash
proceeds from Public Equity Offerings (as defined
herein), up to 30% of the originally issued aggregate
principal amount of the Notes may be redeemed at the
option of the Company at the redemption price set forth
herein, plus accrued interest to the redemption date.
Change of Control................. In the event of a Change of Control, the Company is
obligated to make an offer to purchase all of the
outstanding Notes at a redemption price of 101% of the
principal amount thereof plus accrued interest to the
redemption date. No assurance can be given that the
Company will have sufficient funds to repurchase the
Notes upon a Change of Control. The Change of Control
provisions do not, however, apply to transactions with
Stephen Adams, the owner of approximately 96% of the
outstanding shares of the Company's parent corporation,
AGI Holding Corp. "Holding", or affiliates of Mr. Adams.
See "Description of the Notes--Change of Control."
Asset Sale Proceeds............... The Company is obligated in certain instances to make
offers to purchase the Notes at a redemption price of
100% of the principal amount thereof plus accrued
interest to the redemption date with the net cash
proceeds of certain sales or other dispositions of
assets. See "Description of the Notes--Certain
Covenants--Disposition of Proceeds of Asset Sales."
Ranking........................... The Notes will be general unsecured obligations of the
Company and will rank PARI PASSU in right of payment
with all existing and future unsubordinated indebtedness
of the Company. The Notes will rank senior in right of
payment to all existing and future subordinated
indebtedness of the Company. The Notes will be
effectively subordinated to all existing and future
claims of creditors of the subsidiaries of the Company,
including AGI. As of December 31, 1996, after giving pro
forma effect to the Offering and the application of the
proceeds therefrom, the Company would have had $294.0
million of consolidated
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
indebtedness (excluding trade payables) outstanding and
the Company's subsidiaries would have had $152.5 million
of indebtedness (excluding trade payables) outstanding.
Certain Covenants................. The Indenture contains certain covenants that, among
others, limit the type and amount of additional
indebtedness that may be incurred by the Company or any
of its subsidiaries and impose limitations on
investments loans, advances, the payment of dividends
and the making of certain other payments, the creation
of liens, certain transactions with affiliates and
certain mergers. See "Description of the Notes--Certain
Covenants."
</TABLE>
RISK FACTORS
The information set forth under "Risk Factors" should be carefully
considered in evaluating the Notes and the Company.
15
<PAGE>
SUMMARY FINANCIAL DATA
AFFINITY GROUP HOLDING, INC.
The summary financial data presented below are derived from audited
consolidated financial statements of the Company. The results of operations for
the years ended December 31, 1994 and 1995 have been restated to give effect to
the reclassification of NAFE as a discontinued operation. The summary financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company's Consolidated
Financial Statements and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1992 1993 1994(1) 1995(1) 1996
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Membership services revenues............. $ 80,491 $ 86,405 $ 91,185 $ 99,194 $ 98,901
Publications revenues.................... 24,561 29,224 37,601 40,043 41,078
------------ ------------ ------------ ------------ ------------
Total revenues........................... 105,052 115,629 128,786 139,237 139,979
Gross profit............................. 40,610 45,721 49,843 55,334 53,405
General and administrative............... 12,907 13,113 13,615 18,376 16,326
Depreciation and amortization............ 11,574 11,396 11,020 9,013 8,340
Other operating expenses................. 1,500 1,531 -- -- --
------------ ------------ ------------ ------------ ------------
Income from operations................... $ 14,629 $ 19,681 $ 25,208 $ 27,945 $ 28,739
------------ ------------ ------------ ------------ ------------
BALANCE SHEET DATA (AT PERIOD END):
Working capital (2)...................... $ 11,014 $ 10,301 $ 1,001 $ 11,374 $ 6,879
Total assets............................. 175,044 166,620 180,790 197,699 184,128
Deferred revenues (3).................... 62,729 67,236 67,448 68,702 70,113
Total debt............................... 151,624 160,643 157,270 164,496 147,375
Total stockholder's (deficit)............ (82,672) (89,072) (74,279) (77,963) (79,434)
OTHER DATA:
EBITDA (4)............................... $ 26,203 $ 31,077 $ 36,228 $ 36,958 $ 37,079
EBITDA margin............................ 24.94% 26.88% 28.13% 26.54% 26.49%
Capital expenditures..................... $ 1,027 $ 2,680 $ 3,167 $ 4,713 $ 1,743
STATISTICAL DATA:
Total club membership.................... 1,286,800 1,341,800 1,345,000 1,316,634 1,304,828
Total paid circulation................... 569,000 560,500 598,000 578,504 578,625
</TABLE>
- ------------------------
(1) Restated to give effect to the reclassification of NAFE as a discontinued
operation.
(2) Excludes current portion of long-term debt and customer deposits in AGI
Thrift and Loan at December 31, 1995 and 1996.
(3) Deferred revenues represent cash received by AGI in advance of the
recognition of revenues in accordance with generally accepted accounting
principles. Deferred revenues primarily reflect club membership dues, annual
ERS fees and publication subscriptions. These revenues are recognized at the
time the goods or services are provided or over the membership period which
is generally over a twelve month period.
(4) "EBITDA" represents income from operations plus depreciation and
amortization. The Company has included information concerning EBITDA as it
understands that it is used by certain investors as one measure of an
issuer's ability to service or incur indebtedness. EBITDA should not be
construed as an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the
Company's performance or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity.
16
<PAGE>
CAMPING WORLD, INC.
The summary financial data presented below are derived from the audited
consolidated financial statements for the years ended September 30, 1992 through
1996 and the unaudited financial statements for the three months ended December
31, 1995 and 1996 of Camping World. In the opinion of management, the unaudited
financial statements include all adjustments, consisting of normal and recurring
accruals, which management considers necessary for a fair presentation of the
financial position and results of operations for these periods. The summary
financial data should be read in conjunction with Camping World's Consolidated
Financial Statements and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Merchandise sales..................... $ 112,088 $ 129,612 $ 137,712 $ 143,344 $ 147,255 $ 25,110 $ 28,425
Other revenues........................ 9,910 12,978 16,321 19,079 22,515 4,398 5,152
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues........................ 121,998 142,590 154,033 162,423 169,770 29,508 33,577
Gross profit.......................... 41,710 47,718 53,936 57,472 61,001 10,872 12,007
Selling, general and administrative
expenses............................ 31,930 38,846 42,748 47,531 48,795 10,638 12,132
Depreciation and amortization......... 2,273 2,459 2,007 2,137 2,380 531 694
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations......... $ 7,507 $ 6,413 $ 9,181 $ 7,804 $ 9,826 $ (297) $ (819)
---------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA AT PERIOD END:
Working capital (1)................... $ 14,701 $ 13,844 $ 13,751 $ 13,907 $ 17,791 $ 17,451 $ 20,554
Property and equipment, net........... 27,832 27,993 28,221 29,118 32,005 31,093 31,687
Total assets.......................... 64,333 64,622 68,005 71,172 77,698 71,445 79,235
Total debt............................ 39,397 36,513 33,658 30,919 33,623 37,364 37,168
Shareholders' equity.................. 6,898 7,926 10,565 12,654 16,669 11,975 15,698
OTHER DATA:
EBITDA (2)............................ $ 10,064 $ 9,274 $ 11,559 $ 10,359 $ 12,688 $ 322 $ 31
EBITDA margin......................... 8.25% 6.51% 7.50% 6.38% 7.47% 1.09% 0.09%
Gross profit.......................... 34.19% 33.47% 35.02% 35.38% 35.93% 36.84% 35.76%
Capital expenditures.................. $ 1,321 $ 1,878 $ 1,655 $ 3,266 $ 5,109 $ 1,767 $ 922
RETAIL STORE OPERATING DATA:
Retail stores at period end (3)....... 21 23 23 24 27 25 27
Retail store sales.................... $ 88,548 $ 101,155 $ 108,572 $ 109,783 $ 111,971 $ 19,757 $ 21,562
Percent of retail store sales to club
members............................. 78.70% 79.20% 81.00% 83.30% 84.30% 84.10% 85.20%
Comparable store sales increase
(decrease).......................... (0.70)% 6.50% 6.20% (0.70)% (4.80)% (2.90)% 1.40%
CATALOG STATISTICAL DATA:
Catalogs distributed during period
(000 omitted)....................... 8,076 8,783 9,292 9,573 9,075 1,831 1,980
Mail order sales...................... $ 23,540 $ 28,457 $ 29,140 $ 33,561 $ 35,284 $ 5,353 $ 6,863
Percent of mail order sales to club
members............................. 82.90% 88.70% 87.10% 86.10% 88.10% 82.85% 80.60%
Orders processed during period........ 329,000 386,000 386,600 426,000 420,000 62,100 76,300
Catalog response rate................. 4.10% 4.40% 4.20% 4.50% 4.60% 3.40% 3.85%
Average order size (in dollars)....... $ 72 $ 74 $ 75 $ 79 $ 84 $ 86 $ 90
</TABLE>
- ------------------------------
(1) Excludes short-term borrowings, current maturities of long-term debt and
deferred income.
(2) "EBITDA" represents income (loss) from operations plus depreciation and
amortization and purchase discounts equal to $284,000 in 1992, $402,000 in
1993, $371,000 in 1994, $418,000 in 1995, $482,000 in 1996 and $88,000 and
$156,000 for the three months ended December 31, 1995 and 1996,
respectively, which were recorded as interest income in the Camping World
statement of operations. The Company has included information concerning
EBITDA as it understands that it is used by certain investors as one measure
of an issuer's ability to service or incur indebtedness. EBITDA should not
be construed as an alternative to operating income (as determined in
accordance with generally accepted accounting principles) as an indicator of
Camping World's performance or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity.
(3) Includes supercenters and one 1,800 square foot retail showroom located
within the Bakersfield, California distribution center.
17
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
The summary pro forma combined financial data presented below for the year
ended December 31, 1996 are derived from the Company's Consolidated Financial
Statements and the notes thereto, Camping World's Consolidated Financial
Statements and the notes thereto and Ehlert's Consolidated Financial Statements,
all of which, with the exception of Ehlert's Consolidated Financial Statements,
are included elsewhere herein. This summary should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company's Consolidated Financial Statements and the notes
thereto, and Camping World's Consolidated Financial Statements and the notes
thereto. See "Selected Pro Forma Combined Financial Statements." The pro forma
combined balance sheet data and the pro forma combined statement of operations
data adjust historical financial data to give pro forma effect to (i) the
Private Offering and the application of the net proceeds therefrom, (ii) the
Acquisitions, and (iii) identified cost savings, as if they had occurred as of
December 31, 1996 with respect to the pro forma balance sheet and January 1,
1996 with respect to the pro forma combined statement of operations.
The summary pro forma combined financial data do not purport to be
indicative of the results that would have been obtained had the above-described
transactions been completed on the indicated dates or that may be obtained in
the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996(1)
------------------------------------------------
CAMPING PRO FORMA
COMPANY WORLD EHLERT COMBINED(2)
---------- ---------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................... $ 139,979 $ 169,770 $ 14,249 $ 323,998
Income from operations..................................... 28,739 9,826 2,065 42,958
Income from continuing operations.......................... 5,081 3,975 2,098 5,106
BALANCE SHEET DATA:
Total assets............................................... $ 184,128 $ 79,235 $ 1,437 $ 363,228
Deferred revenues (3)...................................... 70,113 2,695 2,290 75,098
Long-term debt (including current portion)................. 147,375 37,168 -- 294,025
Stockholders' equity (deficit)............................. (79,434) 15,698 (994) (79,434)
OTHER DATA:
EBITDA (4)................................................. $ 37,079 $ 12,688 $ 2,243 $ 58,189
EBITDA margin.............................................. 26.49% 7.47% 15.74% 17.96%
Interest expense, net (5).................................. $ 16,518 $ 3,078 $ 15 $ 31,797
Capital expenditures....................................... 1,743 5,109 32 6,884
RATIO DATA:
EBITDA to interest expense, net............................ 1.83x
EBITDA less capital expenditures to interest expense,
net...................................................... 1.61
Total debt to EBITDA....................................... 5.05
</TABLE>
- ------------------------
(1) For Camping World, the statement of operations and other data is for its
fiscal year ended September 30, 1996.
(2) Pro forma results include estimated cost savings which the Company expects
to realize through: specific headcount reductions undertaken at AGI in
anticipation of the Camping World acquisition; reductions in redundant costs
associated with member acquisition, retention and renewal efforts
principally related to reduced printing, paper, and fulfillment and mailing
expenses; consolidation of
18
<PAGE>
the emergency road service programs; consolidation of publishing operations;
and elimination of Ehlert salaries, incentives, travel, entertainment,
insurance, automobile and 401(k) costs.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Headcount reductions--salaries............................................. $ 2,250
Headcount reductions--benefits............................................. 563
Reduction in redundant cost associated with member acquisition, program
administration and publishing operation expense.......................... 2,369
Elimination of Ehlert salaries, incentives, travel, entertainment,
insurance, automobile and 401(k) costs................................... 997
------
$ 6,179
------
------
</TABLE>
(3) Deferred revenues represent cash received by the Company in advance of the
recognition of revenues in accordance with generally accepted accounting
principles. Deferred revenues primarily reflect club membership dues, annual
ERS fees and publications subscriptions. These revenues are recognized at
the time the goods or services are provided or over the membership period
which is generally twelve months.
(4) EBITDA represents income from operations plus depreciation and amortization
and purchase discounts. See Note 2 to "--Summary Financial Data--Camping
World, Inc." The Company has included information concerning EBITDA as it
understands that it is used by certain investors as one measure of an
issuer's ability to service or incur indebtedness. EBITDA should not be
construed as an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the
Company's performance or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity.
(5) Includes additional interest expense resulting from the issuance of the
Notes and borrowings under the AGI Credit Facility used to fund the
Acquisitions.
19
<PAGE>
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the following
factors, as well as other information set forth in the Private Offering, before
making an investment in the Notes.
HOLDING COMPANY STRUCTURE
The Company is a holding company which has no significant assets other than
its investment in AGI. Accordingly, the Company must rely entirely upon
distributions from AGI to generate the funds necessary to make interest payments
on the Notes, management incentive payments to certain Camping World executives
of up to $15.0 million which are payable $1.0 million per year on the first four
anniversaries of the closing of the Camping World acquisition and $11.0 million
on the fifth anniversary, and payments under the $1.5 million Ehlert Note.
Pursuant to the terms of the indenture (the "AGI Indenture") governing the
$120 million 11 1/2% Senior Subordinated Notes due 2003 of AGI (the "AGI
Notes"), AGI is precluded from declaring or paying any dividend or making any
distribution on its capital stock or making any payment on account of the
purchase or redemption of any of its capital stock unless AGI could incur at
least $1.00 in indebtedness in accordance with the covenants in the AGI
Indenture restricting AGI's ability to incur indebtedness and the aggregate
amount of all such dividends, distributions and payments after October 29, 1993
does not exceed the sum of (1) 50% of AGI's consolidated net income (as defined
in the AGI Indenture) (or in the event such consolidated net income is a
deficit, minus 100% of such deficit) after October 29, 1993, and (2) 100% of the
aggregate net proceeds and the fair market value of marketable securities and
property received by AGI from (x) the issue or sale after October 29, 1993 of
capital stock of AGI or any indebtedness or other securities of AGI convertible
into or exercisable or exchangeable for capital stock of AGI which has been so
converted, exercised or exchanged, as the case may be, and (y) dividends or
other distributions received by AGI from any unrestricted subsidiary (as defined
in the AGI Indenture). After giving pro forma effect to the application of the
net proceeds from the Private Offering, the aggregate amount available for
distribution from AGI to the Company under the above provision of the AGI
Indenture would have been $122.4 million as of December 31, 1996.
The AGI Credit Facility contains covenants which are more numerous and more
restrictive regarding the payment of dividends by AGI than are contained in the
AGI Indenture. Substantially all of the assets of AGI and its subsidiaries,
including Ehlert and Camping World, will be pledged as collateral under the AGI
Credit Facility. If the Acquisitions, the Private Offering and the AGI Credit
Facility were consummated at December 31, 1996, AGI would have had $30.0 million
outstanding under the AGI Credit Facility and $45.0 million of undrawn
commitments under the revolving line of credit. Of such undrawn commitments,
$22.3 million could have been borrowed under the limitations on additional
indebtedness in the AGI Indenture. The AGI Credit Facility will expire March 31,
2002.
NET LOSSES AND DEFICIENCY OF EARNINGS TO FIXED CHARGES
AGI acquired its recreation travel membership clubs and publications
business in December 1988, its golf membership club in September 1990, the
Woodall publishing group in May 1994, the NAFE membership club (which is
currently classified as a discontinued operation) in October 1994 and its
financial services business through the acquisitions of Affinity Thrift and Loan
("ATL") in October 1995 and Affinity Insurance Group, Inc. ("AINS") in June
1995. From the initial acquisition in December 1988 through December 31, 1996,
AGI incurred cumulative net losses of approximately $59.0 million. The losses
resulted primarily from (i) interest expense of $128.9 million on debt incurred
to finance these acquisitions or refinance such indebtedness, (ii) interest
expense related to warrants of $32.6 million resulting from valuation of
warrants issued in connection with the 1988 acquisition, which was refinanced in
1993 with the AGI Notes, and (iii) depreciation and amortization of $90.7
million primarily from the amortization of goodwill recorded as a result of such
acquisitions. For the years ended December 31, 1992 and 1993, the
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Company's earnings were insufficient to cover fixed charges by $19.2 million and
$970,000, respectively. See "Selected Financial Data--Affinity Group Holding,
Inc." and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
LEVERAGE AND LIMITED ABILITY OF THE COMPANY TO OBTAIN ADDITIONAL FINANCING
At December 31, 1996, after giving pro forma effect to the Private Offering
and the Acquisitions, the Company's total consolidated debt would have been
$294.0 million, and its stockholder's deficit would have been $79.4 million. See
"Capitalization." In the future, the Company intends to use cash generated by
operations to reduce its indebtedness. However, the Company may from time to
time, subject to restrictions imposed by the terms of its indebtedness, pay
dividends or find it more advantageous to employ cash generated by operations
for capital investments and acquisitions. In addition, the Company may, subject
to restrictions imposed by the terms of its indebtedness, incur additional
indebtedness from time to time to finance expansion either through capital
expenditures or additional acquisitions. Such additional indebtedness may be
incurred by AGI, in which case the Notes would be structurally subordinated to
any such indebtedness, and the terms of such indebtedness may impose
restrictions on payments from AGI to the Company.
The degree to which the Company is leveraged could have important
consequences to holders of the Notes including the following: (i) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other purposes
may be impaired; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of interest and principal on its
indebtedness; (iii) the Company's high degree of leverage may make it more
vulnerable to economic downturns and may limit its ability to withstand
competitive pressures, to consummate acquisitions or to capitalize on
significant business opportunities; (iv) certain of the Company's borrowings are
at variable rates of interest, which causes the Company to be vulnerable to
increases in interest rates; and (v) borrowings under the AGI Credit Facility
are subject to compliance with various covenants under the AGI Credit Facility
and the limitations on the incurrence of additional indebtedness under the AGI
Indenture. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The Company's ability to satisfy its debt service obligations will depend
primarily upon its future operating performance, including the successful
integration of Camping World and Ehlert. The operating performance of the
Company will be subject to prevailing business, financial and economic
conditions, many of which are beyond the Company's control. Future debt
repayments by the Company, including the principal amount of the Notes, may
require funds in excess of its available cash flow. There can be no assurance
that the Company will be able to raise additional funds, if necessary, through
future financings. The Indenture pursuant to which the Notes will be issued
imposes several restrictions upon the Company, including restrictions on the
ability of the Company to incur additional indebtedness and pledge assets. These
restrictions under the Indenture and the Company's substantial amount of debt
could limit the Company's ability to obtain additional financing in the future,
if required. See "Capitalization," "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Liquidity and Capital Resources,"
and "Description of the Notes."
STRUCTURAL SUBORDINATION
The Notes will be general unsecured obligations of the Company and will rank
PARI PASSU in right of payment to all existing and future unsubordinated
indebtedness of the Company. However, the Notes will be effectively subordinated
to the claims of secured creditors of the Company to the extent of the value of
the assets securing any secured indebtedness. The Notes will be effectively
subordinated to claims of creditors of AGI, including the lenders under the AGI
Credit Facility, the holders of the AGI Notes and trade creditors. The rights of
the Company and its creditors, including the holders of the Notes, to realize
upon the assets of AGI upon AGI's liquidation or reorganization (and the
consequent rights of the holders
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of the Notes to participate in the realization of those assets) will be subject
to the prior claims of AGI's creditors, including the lenders under the AGI
Credit Facility and the holders of the AGI Notes. In such event, there may not
be sufficient assets remaining to pay amounts due on any or all of the Notes
then outstanding. See "Description of Other Indebtedness." The Indenture will
permit AGI to incur additional indebtedness subject to the limitations contained
in the Indenture on the incurrence of additional indebtedness.
INTEGRATION OF OPERATIONS
The Company's future operations and earnings will be somewhat dependent upon
the Company's ability to integrate the operations of Camping World and Ehlert
into the current operations of AGI. There can be no assurance that management
will be able to implement its integration plans without delay or that, when
implemented, its efforts will result in the operational efficiencies and cost
savings currently anticipated by management. In addition, although the Company
believes that the operations of Camping World are complementary to AGI's current
operations, AGI's management does not have extensive experience in retail store
and catalog operations. Accordingly, there can be no assurance that the Company
will be able to successfully integrate such operations with those of the
Company, and a failure to do so could have a material adverse effect on the
Company's financial position, results of operations and cash flows.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to purchase such Notes at a price equal to 101%
of the principal amount thereof plus accrued interest to the redemption date. In
the event of a Change of Control, there can be no assurance that the Company
would have access to sufficient funds to purchase all the tendered Notes. The
AGI Indenture contains similar provisions in the event of a Change of Control.
See "Description of the Notes--Change of Control."
GENERAL ECONOMIC CONDITIONS
The Company's activities, including those operations acquired as a result of
the Acquisitions, relate significantly to the amount of leisure time and the
amount of disposable income available to users of its products and services. The
Company's business may, therefore, be sensitive to general economic conditions
affecting the willingness of consumers to purchase club memberships and related
products and services and of advertisers to place advertisements in the
Company's publications. In particular, during the gasoline shortages and
resulting price increases in 1973, 1980 and 1990, there was a reduction in
advertising revenues for AGI's RV publications. For the year ended December 31,
1996, and assuming the Acquisitions occurred on January 1, 1996, the Company's
publishing business accounted for approximately 17% of pro forma revenues.
CONTROL BY PRINCIPAL SHAREHOLDER
The Company is a wholly-owned subsidiary of Holding, a privately-held
company. Stephen Adams, the Chairman of the Company, will continue to own
approximately 96% of the outstanding shares of Holding after giving effect to
the Private Offering. Accordingly, Mr. Adams will be able to elect the Company's
directors and to control matters submitted to the vote of the Company's
shareholders. See "Principal Shareholders and Security Ownership of Management."
REGULATORY
The Company's operations (including the operations of Camping World and
Ehlert) are subject to varying degrees of federal, state and local regulation.
The Company's outbound telemarketing, direct mail,
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emergency road service program, insurance and thrift and loan activities are
currently subject to regulation. Specifically, a principal source of leads for
the Company's direct response marketing efforts is new vehicle registrations
provided by motor vehicle departments in various states. Currently, nineteen
states, including California, restrict access to motor vehicle registration
information. California, the state with the Company's largest number of members,
discontinued providing access to motor vehicle registration information in 1989.
If many other states adopt a similar restriction, direct response marketing
costs could significantly increase.
In addition to the existing regulatory framework, new regulatory efforts
impacting the Company's operations may be proposed from time to time in the
future at the federal, state and local level. There can be no assurance that
such regulatory efforts will not have a material adverse effect on the Company's
ability to operate its businesses or its results of operations.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities act, except pursuant to an exemption from, or in a transaction
not subject to, the securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Original Notes
under the Securities Act. New Notes issued pursuant to the Exchange Offer in
exchange for Original Notes may be offered for resale, resold or otherwise
transferred by Holders 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 holders' business and such holders have not arrangements with any
person to participate in the distribution of such Notes. Each 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 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
broker-dealer in connection with resales of New Notes received in exchange for
Original Notes where such Original Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 165 days after the effective date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution." However, to
comply with the securities laws of certain jurisdictions, if applicable, the New
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with. To the extent that Original
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Original Notes will be adversely
affected.
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THE EXCHANGE OFFER
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on April 2, 1997 to the Initial
Purchasers, who resold the Original Notes to "qualified institutional buyers"
(as defined in Rule 144A under the Securities Act) and other institutional
"accredited investors" (as defined in Rule 501(a) under the Securities Act). In
connection with the sale of the Original Notes, the Company and the Initial
Purchasers entered into a Registration Rights Agreement dated as of April 2,
1997 (the "Registration Rights Agreement") pursuant to which the Company agreed
to file with the Commission a registration statement (the "Exchange Offer
Registration Statement") with respect to an offer to exchange the Original Notes
for New Notes within 30 days following the issuance of the Original Notes. In
addition, the Company agreed to use its best efforts to cause the Exchange Offer
Registration Statement to become effective under the Securities Act and to issue
the New Notes pursuant to the Exchange Offer. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement to satisfy the Company's obligations thereunder. The term "holder,"
with respect to the Exchange Offer, means any person in whose name Original
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, or any
person whose Original Notes are held of record by the Depository. The Company is
generally not required to file any registration statement to register any
outstanding Original Notes. Holders of Original Notes who do not tender their
Original Notes or whose Original Notes are tendered but not accepted would have
to rely on exemptions to registration requirements under the securities laws,
including the Securities Act, if they wish to sell their Original Notes.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties unrelated to the Company, the Company
believes that the New Notes issued pursuant to the Exchange Offer in exchange
for Original Notes may be offered for resale, resold and otherwise transferred
by any holder of such New Notes (other than a person that is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act and except
as set forth in the next paragraph) 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 is not participating and does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of such New Notes.
If any person were to be participating in the Exchange Offer for the purpose
of distributing securities in a manner not permitted by the Commission's
interpretation (i) the position of the staff of the Commission enunciated in
interpretive letters would be inapplicable to such person and (ii) such person
would 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
Original Notes, where such Original 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."
The Exchange Offer is not being made to, nor will the Issuer accept
surrenders for exchange from, holders of Original Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or Blue Sky laws of such jurisdiction. Prior to the Exchange
Offer, however, the Company will use their best efforts to register or qualify
the New News for Offer and sale under the securities or Blue Sky laws of such
jurisdiction as is necessary to permit consummation of the Exchange Offer and do
any and all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the New Notes.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept any and
all Original Notes validly tendered prior to 5:00 p.m., New York City time, on
the Expiration Date (as defined below). The Company will issue up to
$130,000,000 aggregate principal amount of New Notes in exchange for a like
principal amount of outstanding Original Notes which are validly tendered and
accepted in the Exchange Offer. Subject to the conditions of the Exchange Offer
described below, the Company will accept any and all Original Notes which are so
tendered. Holders may tender some or all of their Original Notes pursuant to the
Exchange Offer.
The form and terms of the New Notes will be the same in all material
respects as the form and terms of Original Notes, except that the New Notes will
be registered under the Securities Act and hence will not bear legends
restricting the transfer thereof.
Holders of Original Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Company intends
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement. Original Notes which are not tendered for
exchange or are tendered but not accepted in the Exchange Offer will remain
outstanding and be entitled to the benefits of the Indenture, but will not be
entitled to any registration rights under the Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Original Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent for the Exchange Offer. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the New Notes from the
Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letters of Transmittal, transfer taxed with respect to the exchange of Original
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 p.m., New York City Time, on
, 1997, subject to extension by the Company by notice to the Exchange
Agent as herein provided. The Issuer reserves the right to so extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the time and date on which the Exchange Offer as so extended shall
expire. The Company will notify the Exchange Agent of any extension by oral or
written notice and will make a public 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 Company reserves the right (i) to delay accepting for exchange any
Original Notes for any New Notes or to extend or terminate the Exchange Offer
and not accept for exchange any Original Notes for any New Notes if any of the
events set forth below under the caption "Conditions of the Exchange Offer"
shall have occurred and shall not have been waived by the Company by giving oral
or written notice of such delay or termination to the Exchange Agent, or (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance for exchange, extension or amendment will be followed as promptly as
practicable by public announcement thereof. If the Exchange Offer is amended in
a manner determined by the Issuers to constitute a material change, the Issuers
will promptly disclose such amendment in a
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manner reasonably calculated to inform the holder of New Notes of such amendment
and the Company will extend the Exchange Offer for a period of five to 10
business days, depending upon the significance of the amendment and the manner
of disclosure to the holders of the New Notes, if the Exchange Offer would
otherwise expire during the such five to 10 business-day period. The rights
reserved by the Company in this paragraph are in addition to the Company's
rights set forth below under the caption "Conditions of the Exchange Offer."
PROCEDURES FOR TENDERING
Only a holder of Original Notes may tender such Original 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 Original Notes (unless such tender is being effected pursuant to the
procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to 5:00 P.M., New York City time, on the
Expiration Date.
Any financial institution that is a participant in the Depositary's
Book-Entry Transfer Facility system may make book-entry deliver of the Original
Notes by causing the Depositary to transfer such Original Notes into the
Exchange Agent's account in accordance with the Depositary's procedure for such
transfer. Although delivery of Original notes may be effected through book-entry
transfer into the Exchange Agent's account at the Depositary, the Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
or confirmed by the Exchange Agent at its addresses set forth in "Exchange
Agent" below prior to 5:00 P.M., New York City time, on the Expiration Date.
DELIVERY OF DOCUMENTS TO THE DEPOSITARY IN ACCORDANCE WITH ITS PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Original Notes will constitute an 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 Original Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Original Notes should be sent to the Company. Holders
may request their respective brokers, dealers, commercial banks, trust companies
or nominees to effect the tenders for such holders.
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 Original Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Issuance 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 of a signature guarantee program
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal or any Original 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 unless waived by the Issuers,
evidence satisfactory to the Issuers of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which
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determination will be final and binding. The Company reserves the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Issuers' acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Company's 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 Original Notes must be cured within such times as the
Company shall determine. Although the Issuers intend to request the Exchange
Agent to notify holders of defects or irregularities with respect to tenders of
Original Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Original Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Original 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 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.
In addition, the Company reserves the right in its sole discretion (subject
to limitations contained in the Indenture) (i) to purchase or make offers for
any original Notes that remain outstanding subsequent to the Expiration Date and
(ii) to the extent permitted by applicable law, purchase Original Notes in the
open market, in privately negotiated transactions or otherwise. The terms of any
such purchase or offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company 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 and that neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the holder
nor any such other person is an "affiliate", ad defined in Rule 405 under the
Securities Act, of the Company. If the holder is a broker-dealer that will
receive New Notes for its own account in exchange for Original Notes that were
acquired as a result of market-making activities or other trading activities,
such holder by tendering will acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original Notes
are not immediately available, or (ii) who cannot deliver their Original Notes
and other required documents to the Exchange Agent, or cannot complete the
procedure 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 Original Notes (if available) and the principal amount
of Original Notes tendered together with a duly executed Letter of
Transmittal (or a facsimile thereof), stating that the tender is being
made thereby and guaranteeing that, within three business days after the
Expiration Date, the certificate(s) representing the Original Notes to be
tendered in proper form for transfer (or a confirmation of a book-entry
transfer into the Exchange Agent's account at the Depositary of Original
Notes delivered electronically) with any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) Such certificate(s) representing all tendered Original Notes in proper
form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at the Depositary of Original Notes delivered
electronically) and all other documents required by the Letter of
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Transmittal are received by the Exchange agent within three business days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holder who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 P.M., New York City time, on the Expiration
Date, unless previously accepted for exchange.
To withdraw a tender of Original Notes in the Exchange Offer, a written 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, and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Original Notes to be withdrawn (the "Depositor"), (ii)
identify the Original Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Original Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Original Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Original Notes registered the transfer of
such Original Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Original 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 withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Original 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 Original Notes so withdrawn are validly re-tendered.
Any Original Notes which have been tendered but which are not accepted for
exchange or which are withdrawn 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 Original Notes may be
re-tendered by following one of the procedures described above under "Procedures
for Tendering" at any time prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
In addition, and notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange any Original Notes for any
New Notes tendered and may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Original Notes, if any of the following
conditions exist:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency or regulatory authority with respect to
the Exchange Offer which, in the sole judgment of the Company, might
materially impair the ability of the Issuers to proceed with the Exchange
Offer or have a material adverse effect on the contemplated benefits of
the Exchange Offer to the Issuers; or
(b) there shall have occurred any change, or any development involving a
prospective change, in the business or financial affairs of the Issuers,
which in the sole judgment of the Company, 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) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the sole judgment of the Issuers, might
materially impair the ability of the Issuers to proceed with the Exchange
Offer or have a material adverse effect on the contemplated benefits of
the Exchange Offer to the Company; or
28
<PAGE>
(d) there shall have occurred (i) any general suspension of, shortening of
hours for, or limitation on prices for trading in securities on the New
York Stock Exchange (whether or not mandatory), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States (whether or not
mandatory), (iii) a commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any
governmental authority on, or other event having a reasonable likelihood
of affecting, the extension of credit by banks or other lending
institutions in the United States, or (v) in the case of any of the
foregoing existing at the time of the commencement of the Exchange Offer,
a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
conditions or may be waived by the Issuers in whole or in part at any time and
from time to time in its sole discretion. If the Company waives or amends the
foregoing conditions, the Company will, if required by applicable law, extend
the Exchange Offer for a minimum of five business days from the date the Company
first give notice, by public announcement or otherwise, of such waiver or
amendment, if the Exchange Offer would otherwise expire within such five
business-day period. Any waiver or amendment, if the Exchange Offer would
otherwise expire within such five business-day period. Any determination by the
Company concerning the events described above will be final and binding upon all
parties.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
the Issuers and their affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
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
Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this Prospectus, Letters of Transmittal and related documents to the
beneficial owners of the Original Notes and in handling or forwarding tenders
for exchange. The Company will pay the other expenses to be incurred in
connection with the Exchange Offer, including fees and expenses of the Trustee,
accounting and legal fees and printing costs.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Original Notes for Principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Original Notes tendered,
or if tendered Original Notes are registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Original Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any to her persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
Generally, holders (other than any holder who is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who exchange
their Original Notes for New Notes pursuant to the
29
<PAGE>
Exchange Offer may offer such New Notes for resale, resell such New Notes, and
otherwise transfer such New Notes without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided such New Notes
are acquired in the ordinary course of the holders' business, and such holders
have no arrangement with any person to participate in a distribution of such New
Notes. Each broker-dealer that receives New Notes for its own account in
exchange for Original Notes, where such Original 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 comply with
the securities laws of certain jurisdictions, it may be necessary to qualify for
sale or register the New Notes prior to offering or selling such New Notes. Upon
request by Holders prior to the Exchange Offer, the Company will register or
qualify the New Notes in certain jurisdictions subject to the conditions in the
Registration Rights Agreement. If a holder does not exchange such Original Notes
for New Notes pursuant to the Exchange Offer, such Original Notes will continue
to be subject to the restrictions on transfer contained in the legend thereon
and will not have the benefit of any covenant regarding registration under the
Securities Act. In general, the Original Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to the exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. To the extent that Original Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Original
Notes could be adversely affected.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Original
Notes, as reflected in the Issuers' accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purpose will be recognized
by the Issuers upon the consummation of the Exchange Offer. The expenses of the
Exchange Offer will be amortized by the Company over the term of the New Notes
under generally accepted accounting principles.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. All correspondence in connection with the Exchange Offer
and the Letter of Transmittal should be addressed to the Exchange Agent, as
follows:
<TABLE>
<S> <C>
By Hand: By Overnight Courier/Mail:
United States Trust Company
United States Trust Company of New York
Of New York 770 Broadway, 13th Floor
Receipt and Delivery Window New York, New York 10007
111 Broadway, Lower Level Attention: Corporate Trust
New York, New York 10006 Department
</TABLE>
Facsimile Transmission:
(212) 420-6152
(For Eligible Institutions Only)
Confirm by Telephone:
(800) 548-6565
Requests for additional copies of this Prospectus or the Letter of
Transmittal should be directed to the Exchange Agent.
30
<PAGE>
THE ACQUISITIONS
On April 2, 1997, AGI acquired the stock of Camping World. The consideration
for the Camping World acquisition consisted of $108.0 million in cash at
closing, including $19.0 million for non-competition and consulting agreements
with certain Camping World executives. In addition, the Company entered into
management incentive agreements with certain Camping World executives pursuant
to which up to an additional $15.0 million will be paid subsequent to closing
subject to Camping World achieving certain operating goals. Such contingent
amounts will be payable in $1.0 million annual installments on the first four
anniversaries of the closing and $11.0 million on the fifth anniversary of the
closing. This obligation is treated as indebtedness of the Company at its
discounted present value ($10.0 million as of the closing). The purchase price
for the Camping World will be subject to certain adjustments. As a result of the
acquisition of Camping World, David B. Garvin, the Chairman and founder of
Camping World, and Thomas A. Donnelly, the President of Camping World, have
joined the Company's Board of Directors.
On March 6, 1997, AGI acquired the stock of Ehlert for $22.3 million, of
which $20.8 million was paid in cash at closing. In addition, the Company issued
a note for $1.5 million to the seller (the "Ehlert Note"), of which $1.0 million
was recently paid. The balance of the Ehlert Note is payable on March 6, 1999
together with interest at 5% per annum. In addition, AGI entered into
non-competition agreements with Ehlert's principal stockholders for $200,000
payable in twelve equal monthly installments following closing. The purchase
price for Ehlert's stock is subject to adjustment to the extent that EBITDA (as
defined in the acquisition agreement) for the year ended December 31, 1996 is
less than $2.8 million and any adjustments will be offset against amounts due
under the Ehlert Note. As a result of the acquisition of Ehlert, John Ehlert,
the founder and principal stockholder of Ehlert, joined the Company's Board of
Directors.
31
<PAGE>
USE OF PROCEEDS
The Company used the proceeds from the sale of the Original Notes, net of
discounts, closing costs and repayment of approximately $7.5 million of the
Company's indebtedness to make an equity capital contribution to AGI. AGI used
such contribution together with borrowings under the AGI Credit Facility to pay
the cash portion of the consideration for the Acquisitions and related
transaction fees and expenses.
The following table sets forth the estimated sources and uses of funds in
connection with the Acquisitions and the Private Offering:
<TABLE>
<S> <C>
Sources:
AGI Credit Facility (1)..................................... $30,000,000
Original Notes.............................................. 130,000,000
Acquisition earnest money deposits (2)...................... 3,500,000
Ehlert Note (3)............................................. 1,500,000
-----------
Total sources........................................... $165,000,000
-----------
-----------
Uses:
Repayment of AGI's existing credit facility (4)............. $26,050,000
Camping World acquisition (5)............................... 108,000,000
Ehlert acquisition (6)...................................... 22,300,000
Repayment of 9% subordinated note (7)....................... 2,500,000
Transaction fees and expenses (8)........................... 6,150,000
-----------
Total uses.............................................. $165,000,000
-----------
-----------
</TABLE>
- ------------------------
(1) Simultaneous with completion of the Private Offering, AGI entered into the
AGI Credit Facility which provides a senior secured credit facility
consisting of a revolving line of credit of $45.0 million and a term loan of
$30.0 million. See "Description of Other Indebtedness AGI--Credit Facility."
(2) Consists of a $2.5 million earnest money deposit made in connection with the
Camping World acquisition and a $1.0 million earnest money deposit made in
connection with the Ehlert acquisition. See Notes (6) and (7) below.
(3) The Company paid a portion of the consideration for the Ehlert acquisition
by issuance of the Ehlert Note. On April 2, 1997, the Company repaid $1.0
million of the Ehlert Note and the balance of $0.5 million is due on March
6, 1999 together with interest at 5% per annum. The Ehlert Note is subject
to reduction for any adjustments to the purchase price for Ehlert and may be
offset against for indemnity claims under the acquisition agreement.
(4) Subsequent to December 31, 1996, AGI borrowed an additional $1.0 million
under its existing credit facility to fund a portion of the earnest money
deposit made in February 1997 in connection with the execution of the
acquisition agreement for Camping World. As a result the amount to be repaid
under AGI's existing credit facility has been increased by $1.0 million from
the amount outstanding at December 31, 1996. See "Capitalization."
(5) Includes $19.0 million of non-competition and consulting payments made at
closing of the Camping World acquisition. Does not include management
incentive payments to certain Camping World executives in the aggregate of
up to $15.0 million which are payable $1.0 million per year on the first
four anniversaries of the closing of the Camping World acquisition and $11.0
million on the fifth anniversary, subject to achieving certain operating
results for Camping World.
(6) Includes repayment of a bridge loan (bearing interest at the rate of 9% per
annum) of $4.0 million from Holding, the proceeds of which were used to pay
a portion of the cash consideration for Ehlert.
32
<PAGE>
See Note (8) below. Of the $22.3 million purchase price for Ehlert, $20.8
million was paid in cash at closing and the balance by issuance of the
Ehlert Note by the Company. See Note (3) above. Does not include $200,000 in
non-compete payments to the principal shareholders of Ehlert which are
payable in twelve equal monthly installments following the Ehlert closing.
(7) The 9% subordinated note due December 31, 1998 is held by an affiliate of
several of the Initial Purchasers, the proceeds of which were used to fund a
portion of the earnest money deposits for the Acquisitions. See Note (8)
below.
(8) Represents estimated transaction fees and expenses, including the Initial
Purchasers' discount, printing expenses, attorneys' fees, accounting fees,
and interest related to the bridge loan, the 9% subordinated note and the
Ehlert acquisition.
33
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 and as adjusted to reflect the Private Offering and the
Acquisitions. This table should be read in conjunction with the "Use of
Proceeds," "Selected Financial Data" and the financial statements contained
herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total debt (including current portion of long-term debt):
AGI's existing credit facility......................................................... $ 25,050 --
AGI Credit Facility.................................................................... -- $ 30,000(1)
Mortgages and other long-term obligations.............................................. 2,325 2,325
AGI Notes.............................................................................. 120,000 120,000
Original Notes......................................................................... -- 130,000
Ehlert Note............................................................................ -- 1,500(2)
Management incentive and non-compete obligations....................................... -- 10,200(3)
---------- -----------
Total debt........................................................................... $ 147,375 $ 294,025
Stockholder's deficit:
Common stock, $.01 par value, 1,000 shares authorized, 100 shares outstanding.......... 1 1
Additional paid-in capital............................................................. 12,021 12,021
Accumulated deficit.................................................................... (91,456) (91,456)
---------- -----------
Total stockholder's deficit.......................................................... (79,434) (79,434)
---------- -----------
Total capitalization............................................................... $ 67,941 $ 214,591
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Simultaneous with completion of the Private Offering, AGI entered into the
AGI Credit Facility which provides a senior secured credit facility
consisting of a revolving line of credit of $45.0 million and a term loan of
$30.0 million. If the Acquisitions, the Private Offering and the AGI Credit
Facility were consummated at December 31, 1996, AGI would have had $30.0
million outstanding under the AGI Credit Facility and $45.0 million of
undrawn commitments under the revolving line of credit. Of such undrawn
commitments, $22.3 million could have been borrowed under the limitations on
additional indebtedness in the AGI Indenture. The AGI Credit Facility
expires March 31, 2002. See "Use of Proceeds," "Management's Discussion and
Analysis and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources," and "Description of Other
Indebtedness--AGI Credit Facility."
(2) The Ehlert Note was issued by the Company as a portion of the purchase price
for the Ehlert acquisition. On April 2, 1997, the Company repaid $1.0
million of the Ehlert Note and the balance of the $0.5 million is due on
March 6, 1999 together with interest at 5% per annum. The Ehlert Note is
subject to reduction for adjustments to the purchase price for Ehlert and
may be offset against for indemnity claims under the acquisition agreement.
(3) Consists of (i) the present value (using a 10% discount rate) of the $15.0
million in management incentive payments to certain Camping World executives
which are, subject to achievement of certain operating results for Camping
World, payable $1.0 million per year on the first four anniversaries of the
closing of the Camping World acquisition and $11.0 million on the fifth
anniversary, and (ii) non-compete payments of $200,000 to the principal
shareholders of Ehlert which are payable in twelve equal monthly
installments following the Ehlert closing.
34
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data of the Company for each of the five years ended
December 31, 1996 and as of December 31 for each year are derived from the
audited consolidated financial statements of the Company. The results of
operations for the years ended December 31, 1994 and 1995 have been restated to
give effect to the reclassification of NAFE as a discontinued operation. The
selected financial data of the Company should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and the notes
thereto included elsewhere herein.
The selected financial data of Camping World for each of the five years
ended September 30, 1996 and as of September 30 for each year are derived from
the audited consolidated financial statements of Camping World. The selected
financial data of Camping World for the three months ended December 31, 1995 and
1996 and as of December 31, 1995 and 1996 are derived from the unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal and recurring accruals,
considered necessary for a fair presentation of the financial position and the
results of operations for these periods. The selected financial data should be
read in conjunction with the Consolidated Financial Statements of Camping World
and notes thereto included elsewhere herein.
35
<PAGE>
AFFINITY GROUP HOLDING, INC.
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1992 1993 1994(1) 1995(1) 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Membership services revenues................... $ 80,491 $ 86,405 $ 91,185 $ 99,194 $ 98,901
Publications revenues.......................... 24,561 29,224 37,601 40,043 41,078
---------- ---------- ---------- ---------- ----------
Total revenues................................. 105,052 115,629 128,786 139,237 139,979
Membership services expense.................... 45,595 47,751 51,795 54,203 57,003
Publications expense........................... 18,847 22,157 27,148 29,700 29,571
---------- ---------- ---------- ---------- ----------
Gross profit................................... 40,610 45,721 49,843 55,334 53,405
General and administrative..................... 12,907 13,113 13,615 18,376 16,326
Depreciation and amortization.................. 11,574 11,396 11,020 9,013 8,340
Other operating expenses....................... 1,500 1,531 -- -- --
---------- ---------- ---------- ---------- ----------
Total operating expenses....................... 25,981 26,040 24,635 27,389 24,666
Income from operations......................... 14,629 19,681 25,208 27,945 28,739
Interest expense, net debt..................... (15,191) (13,111) (16,716) (16,433) (16,518)
Interest expense warrants...................... (18,257) (6,990) -- -- --
Other non-operating expense, net............... (331) (550) (811) (1,579) (996)
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations before
income taxes................................. (19,150) (970) 7,681 9,933 11,225
Income tax benefit (expense)................... (375) 1,970 13,255 (5,047) (6,144)
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations....... $ (19,525) $ 1,000 $ 20,936 $ 4,886 $ 5,081
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of earnings to fixed
charges (2).................................. -- -- 1.43 1.58 1.66
BALANCE SHEET DATA (AT PERIOD END):
Working capital (3)............................ $ 11,014 $ 10,301 $ 1,001 $ 11,374 $ 6,879
Total assets................................... 175,044 166,620 180,790 197,699 184,128
Deferred revenues (4).......................... 62,729 67,236 67,448 68,702 70,113
Total debt..................................... 151,624 160,643 157,270 164,496 147,375
Warrants subject to put rights................. 25,645 -- -- -- --
Total stockholder's (deficit).................. (82,672) (89,072) (74,279) (77,963) (79,434)
OTHER DATA:
EBITDA (5)..................................... $ 26,203 $ 31,077 $ 36,228 $ 36,958 $ 37,079
EBITDA margin.................................. 24.94% 26.88% 28.13% 26.54% 26.49%
Capital expenditures........................... $ 1,027 $ 2,680 $ 3,167 $ 4,713 $ 1,743
STATISTICAL DATA:
Total club membership.......................... 1,286,800 1,341,800 1,345,000 1,316,634 1,304,828
Total paid magazine circulation................ 569,000 560,500 598,000 578,504 578,625
</TABLE>
- ------------------------
(1) Restated to give effect to the reclassification of NAFE as a discontinued
operation.
(2) Earnings consist of income from continuing operations before income taxes
plus fixed charges. The Company's fixed charges consist of interest expense,
net plus amortization of deferred financing costs. Earnings were not
sufficient to cover fixed charges by $19,150,000 and $970,000 for the years
ended December 31, 1992 and 1993, respectively.
36
<PAGE>
(3) Excludes current portion of long-term debt and customer deposits in AGI
Thrift and Loan at December 31, 1995 and 1996.
(4) Deferred revenues represent cash received by AGI in advance of the
recognition of revenues in accordance with generally accepted accounting
principles. Deferred revenues primarily reflect club membership dues, annual
ERS fees and publication subscriptions. These revenues are recognized at the
time the goods or services are provided or over the membership period which
is generally over a twelve month period.
(5) "EBITDA" represents income from operations plus depreciation and
amortization. The Company has included information concerning EBITDA as it
understands that it is used by certain investors as one measure of an
issuer's ability to service or incur indebtedness. EBITDA should not be
construed as an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the
Company's performance or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity.
37
<PAGE>
CAMPING WORLD, INC.
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Merchandise sales........................ $ 112,088 $ 129,612 $ 137,712 $ 143,344 $ 147,255 $ 25,110 $ 28,425
Other revenues........................... 9,910 12,978 16,321 19,079 22,515 4,398 5,152
--------- --------- --------- --------- --------- --------- ---------
Total revenues........................... 121,998 142,590 154,033 162,423 169,770 29,508 33,577
Gross profit............................. 41,710 47,718 53,936 57,472 61,001 10,872 12,007
Selling, general and administrative
expense................................ 31,930 38,846 42,748 47,531 48,795 10,638 12,132
Depreciation and amortization............ 2,273 2,459 2,007 2,137 2,380 531 694
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations............ 7,507 6,413 9,181 7,804 9,826 (297) (819)
Interest expense, net.................... (5,081) (4,583) (3,962) (3,424) (3,078) (853) (759)
Other non-operating expense.............. (490) (89) (144) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes........ 1,936 1,741 5,075 4,380 6,748 (1,150) (1,578)
Income tax benefit (expense)............. (794) (714) (2,081) (1,796) (2,773) 471 607
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item
of $346 in 1994........................ $ 1,142 $ 1,027 $ 2,994 $ 2,584 $ 3,975 $ (679) $ (971)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA AT PERIOD END:
Working capital (1)...................... $ 14,701 $ 13,844 $ 13,751 $ 13,907 $ 17,791 $ 17,451 $ 20,554
Property and equipment, net.............. 27,832 27,993 28,221 29,118 32,005 31,093 31,687
Total assets............................. 64,333 64,622 68,005 71,172 77,698 71,445 79,235
Total debt............................... 39,397 36,513 33,658 30,919 33,623 37,364 37,168
Shareholders' equity..................... 6,898 7,926 10,565 12,654 16,669 11,975 15,698
OTHER DATA:
EBITDA (2)............................... $ 10,064 $ 9,274 $ 11,559 $ 10,359 $ 12,688 $ 322 $ 31
EBITDA margin............................ 8.25% 6.51% 7.50% 6.38% 7.47% 1.09% 0.09%
Gross profit............................. 34.19% 33.47% 35.02% 35.38% 35.93% 36.84% 35.76%
Capital expenditures..................... $ 1,321 $ 1,878 $ 1,655 $ 3,266 $ 5,109 $ 1,767 $ 922
RETAIL STORE OPERATING DATA:
Retail stores at period end (3).......... 21 23 23 24 27 25 27
Retail store sales....................... $ 88,548 $ 101,155 $ 108,572 $ 109,783 $ 111,971 $ 19,757 $ 21,562
Percent of retail store sales to club
members................................ 78.70% 79.20% 81.00% 83.30% 84.30% 84.10% 85.20%
Comparable store sales increase
(decrease)............................. (0.70)% 6.50% 6.20% (0.70)% (4.80)% (2.90)% 1.40%
CATALOG STATISTICAL DATA:
Catalogs distributed during period (000
omitted)............................... 8,076 8,783 9,292 9,573 9,075 1,831 1,980
Mail order sales......................... $ 23,540 $ 28,457 $ 29,140 $ 33,561 $ 35,284 $ 5,353 $ 6,863
Percent of mail order sales to club
members................................ 82.90% 88.70% 87.10% 86.10% 88.10% 82.85% 80.60%
Orders processed during period........... 329,000 386,000 386,600 426,000 420,000 62,100 76,300
Catalog response rate.................... 4.10% 4.40% 4.20% 4.50% 4.60% 3.40% 3.85%
Average order size (in dollars).......... $ 72 $ 74 $ 75 $ 79 $ 84 $ 86 $ 90
</TABLE>
- ------------------------------
(1) Excludes short-term borrowings, current maturities of long-term debt and
deferred income.
(2) "EBITDA" represents income (loss) from operations plus depreciation and
amortization and purchase discounts equal to $284,000 in 1992, $402,000 in
1993, $371,000 in 1994, $418,000 in 1995, $482,000 in 1996 and $88,000 and
$156,000 for the three months ended December 31, 1995 and 1996,
respectively, which were recorded as interest income in the Camping World
statement of operations. The Company has included information concerning
EBITDA as it understands that it is used by certain investors as one measure
of an issuer's ability to service or incur indebtedness. EBITDA should not
be construed as an alternative to operating income (as determined in
accordance with generally accepted accounting principles) as an indicator of
Camping World's performance or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity.
(3) Includes supercenters and one 1,800 square foot retail showroom located
within the Bakersfield, California distribution center.
38
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma combined financial statements presented below for
the year ended December 31, 1996 are derived from the Company's Consolidated
Financial Statements and the notes thereto, Camping World's Consolidated
Financial Statements and the notes thereto and Ehlert's Consolidated Financial
Statements and the notes thereto, all of which, with the exception of Ehlert's
Consolidated Financial Statements, are included elsewhere herein. This summary
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Company's Consolidated
Financial Statements and the related notes thereto, and Camping World's
Consolidated Financial Statements and the notes thereto. The unaudited pro forma
combined statement of operations has been adjusted to give pro forma effect to
(i) the Private Offering and the application of the net proceeds therefrom, (ii)
the Acquisitions, and (iii) identified cost savings, as if they had occurred as
of January 1, 1996. The unaudited pro forma combined balance sheet has been
adjusted to give pro forma effect to (i) the Private Offering and the
application of the net proceeds therefrom and (ii) the Acquisitions, as if they
had occurred as of December 31, 1996.
The Acquisitions will be accounted for using the purchase method of
accounting. Under purchase accounting, the total purchase price and fair value
of liabilities assumed will be allocated to the tangible and intangible assets
and liabilities based on their respective fair values as of the closing of such
acquisitions. The unaudited pro forma combined balance sheet reflects
preliminary estimates, which are subject to final determinations of the
allocation of the purchase price. The pro forma adjustments represent
management's preliminary determination of purchase accounting adjustments and
are based upon available information and certain assumptions that the Company
considers reasonable under the circumstances. Consequently, the amounts
reflected in the unaudited pro forma combined balance sheet are subject to
change. Management does not expect that differences between the preliminary and
final purchase price allocation will have a material impact on the Company's
financial position and/or results of operations.
The unaudited pro forma combined financial statements do not purport to be
indicative of the results that would have been obtained had the above-described
transactions been completed on the indicated dates or that may be obtained in
the future.
39
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------
CAMPING PRO FORMA
COMPANY WORLD EHLERT ADJUSTMENTS COMBINED
---------- --------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............................. $ 4,278 $ 3,107 $ 25 $ -- $ 7,410
Inventories............................................ 2,473 31,284 -- 189(1) 33,946
Other current assets................................... 23,591 4,713 654 -- 28,958
---------- --------- --------- -------------- -----------
Total current assets................................... 30,342 39,104 679 189 70,314
Property and equipment................................. 10,550 31,687 208 10,000(2) 52,445
Intangible assets...................................... 109,065 6,136 550 90,209(3) 205,960
Other non-current assets............................... 34,171 2,308 -- (1,970)(4) 34,509
---------- --------- --------- -------------- -----------
Total assets........................................... $ 184,128 $ 79,235 $ 1,437 $ 98,428 $ 363,228
---------- --------- --------- -------------- -----------
---------- --------- --------- -------------- -----------
Short-term debt and current portion of long-term
debt................................................. $ 5,344 $ 12,522 $ -- $ (8,422)(5) $ 9,444
Other current liabilities.............................. 38,442 18,550 141 (350)(6) 56,783
---------- --------- --------- -------------- -----------
Total current liabilities.............................. 43,786 31,072 141 (8,772) 66,227
Deferred revenue, including current portion............ 70,113 2,695 2,290 -- 75,098
Long-term debt, net of current portion................. 142,031 24,646 -- 117,904(5) 284,581
Other non-current liabilities.......................... 7,632 5,124 -- 4,000(7) 16,756
Stockholder's equity (deficit)......................... (79,434) 15,698 (994) (14,704)(8) (79,434)
---------- --------- --------- -------------- -----------
Total liabilities and stockholder's equity (deficit)... $ 184,128 $ 79,235 $ 1,437 $ 98,428 $ 363,228
---------- --------- --------- -------------- -----------
---------- --------- --------- -------------- -----------
</TABLE>
40
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996(9)
-----------------------------------------------------------
CAMPING PRO FORMA
COMPANY WORLD EHLERT ADJUSTMENTS COMBINED
---------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net revenues............................ $ 139,979 $ 169,770 $ 14,249 $ $ 323,998
Cost applicable to net revenues......... 86,574 108,769 7,209 (5,182) 10) 197,370
---------- ---------- --------- ----------- -----------
Gross profit............................ 53,405 61,001 7,040 5,182 126,628
Selling, general and administrative
expense............................... 16,326 48,795 4,797 (997) 11) 68,921
Depreciation and amortization........... 8,340 2,380 178 3,851 (12 14,749
---------- ---------- --------- ----------- -----------
Income from operations.................. 28,739 9,826 2,065 2,328 42,958
Interest expense, net................... (16,518) (3,078) (15) (12,186) 13) (31,797)
Other non-operating expense, net........ (996) -- 48 (948)
---------- ---------- --------- ----------- -----------
Income from continuing operations before
income taxes.......................... 11,225 6,748 2,098 (9,858) 10,213
Income tax expense...................... (6,144) (2,773) -- 3,810 (14 (5,107)
---------- ---------- --------- ----------- -----------
Income from continuing operations....... $ 5,081 $ 3,975 $ 2,098 $ (6,048) $ 5,106
---------- ---------- --------- ----------- -----------
---------- ---------- --------- ----------- -----------
OTHER DATA:
EBITDA(15).............................. $ 37,079 $ 12,688 $ 2,243 $ 6,179 $ 58,189
EBITDA margin........................... 26.49% 7.47% 15.74% 17.96%
Capital expenditures.................... $ 1,743 $ 5,109 $ 32 $ 6,884
RATIO DATA:
EBITDA to interest expense, net......................................................... 1.83x
EBITDA less capital expenditures to interest expense, net............................... 1.61
Total debt to EBITDA.................................................................... 5.05
</TABLE>
41
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
The aggregate purchase price of Camping World and Ehlert, including related fees
and expenses, is approximately $179.1 million. The purchase price has been
allocated on a preliminary basis to the assets acquired based on estimated fair
values at the date of acquisition with the excess of cost over fair value
allocated to goodwill. The purchase price allocation to property and equipment,
excluding land, will be amortized over the estimated useful lives ranging from 3
to 25 years. Goodwill will be amortized on a straight line basis over 40 years.
Noncompete and consulting agreements will be amortized over fifteen years.
Financing costs will be amortized over the life of the debt (5 to 10 years).
The preliminary allocation of the total purchase price to the assets
acquired is as follows:
<TABLE>
<CAPTION>
CAMPING
WORLD EHLERT COMBINED
---------- --------- ----------
<S> <C> <C> <C>
PURCHASE PRICE:
Cash paid at closing for stock and debt repayment............................ $ 89,000 $ 22,300 $ 111,300
Non-competition and/or consulting agreements................................. 19,000 200 19,200
Incentive management agreements, discounted to present value................. 10,000 -- 10,000
Fees and expenses............................................................ 5,050 1,100 6,150
Liabilities, at fair value................................................... 30,019 2,431 32,450
---------- --------- ----------
Total...................................................................... $ 153,069 $ 26,031 $ 179,100
---------- --------- ----------
---------- --------- ----------
PRELIMINARY ALLOCATION OF PURCHASE PRICE:
Cash......................................................................... $ 3,107 $ 25 $ 3,132
Inventories.................................................................. 31,473 -- 31,473
Other current assets......................................................... 4,713 654 5,367
Property and equipment....................................................... 41,687 208 41,895
Other non-current assets..................................................... 338 -- 338
Intangible (including combined goodwill of $71,545).......................... 71,751 25,144 96,895
---------- --------- ----------
Total...................................................................... $ 153,069 $ 26,031 $ 179,100
---------- --------- ----------
---------- --------- ----------
</TABLE>
Pro forma adjustments reflect estimates which will be refined as additional
information is obtained, particularly in the areas of fair value of property and
equipment and related depreciation expense, and any adjustment to be made to the
purchase price in accordance with the purchase agreements.
Pro forma adjustments have been made to the Pro Forma Combined Balance Sheet
to reflect the following:
(1) Record write-up of Camping World inventory from LIFO cost to estimated fair
value in accordance with the purchase method of accounting.
(2) Record write-up in Camping World property and equipment acquired to
estimated fair market value in accordance with the purchase method of
accounting.
(3) Elimination of previously recorded Camping World and Ehlert goodwill ($6.2
million and $555,000, respectively) and the recording of goodwill,
noncompete, consulting and management incentive payments and fees and
expenses resulting from the Acquisitions in accordance with the purchase
method of accounting.
(4) Elimination of previously recorded Camping World deferred financing cost.
42
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
(5) Record issuance of debt in connection with the repayment of AGI's existing
credit facility and the Acquisitions consisting of $130.0 million of the
Notes, $30.0 million of borrowings under the AGI Credit Facility in
connection with the repayment of AGI's existing credit facility and the
Acquisitions, $10.0 million of discounted management incentive payments and
the Ehlert Note, net of Camping World's long-term debt to be paid at
closing.
(6) Elimination of Camping World liabilities to be paid at closing.
(7) Establishment of deferred income tax liability in accordance with the
purchase method accounting.
(8) Elimination of shareholders' equity in accordance with the purchase method
of accounting.
Pro forma adjustments have been made to the Pro Forma Combined Statement of
Operations to reflect the following:
(9) Amounts for Camping World are for its fiscal year ended September 30, 1996.
(10) Pro forma results include estimated cost savings which the Company expects
to realize through: specific headcount reductions undertaken at AGI in
anticipation of the Camping World acquisition; reductions in redundant costs
associated with member acquisition, retention and renewal efforts
principally related to reduced printing, paper, and fulfillment and mailing
expenses; consolidation of the emergency road service programs; and
consolidation of publishing operations. Although management intends to
implement its cost savings prudently, there can be no assurance that all of
the anticipated cost savings associated with these measures will be
realized.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Headcount reduction--salaries.............................................. $ 2,250(a)
Headcount reduction benefits............................................... 563(a)
Reduction in redundant cost associated with member acquisition, retention,
renewals and magazine production......................................... 2,369(b)
-----------------
$ 5,182
-----------------
-----------------
</TABLE>
- ------------------------
(a) In anticipation of the Camping World acquisition, AGI eliminated 58
employees in December 1996 resulting in annual pro forma savings of
$2,250 in salary expense and an estimated $563 of related benefits
expense savings.
(b) The Company estimates that it can achieve $2,369 in annual cost savings
from the following:
- As a result of the estimated 250,000 overlapping club members in the
Good Sam Club and the President's Club and through availability of
lower cost channels from which to solicit club members, the Company
expects to realize $1,474 in annual savings on printing, fulfillment
and mailing expenses.
- The Company expects to realize $387 in annual savings as a result of
the consolidation of its emergency road service program.
- Through the consolidation of publishing operations, the Company
expects to realize $508 in savings principally on paper costs.
43
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT AS NOTED)
(UNAUDITED)
(11) Elimination of Ehlert salaries, incentives, travel, entertainment,
insurance, automobile and 401(k) costs.
(12) Record incremental amortization of intangible assets over 5 to 40 years and
depreciation on write-up of property and equipment.
(13) Record incremental interest expense:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Notes at 11%............................................................... $ 14,300
Increase in senior secured indebtedness at 8.5%............................ 421
Discounted management incentive payments at 10% and other.................. 1,040
-------
15,761
Less: interest on acquired indebtedness repaid at closing.................. (3,575)
-------
$ 12,186
-------
-------
</TABLE>
(14) Record income tax effect on pro forma combined operations at an assumed
effective rate of 50%.
(15) EBITDA represents income from operations plus depreciation, amortization
and purchase discounts. See Note 2 to "Selected Financial Data--Camping
World, Inc." The Company has included information concerning EBITDA as it
understands that it is used by certain investors as one measure of an
issuer's ability to service or incur indebtedness. EBITDA should not be
construed as an alternative to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the
Company's performance or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) as a
measure of liquidity.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion is based on the Company's Consolidated Financial
Statements included elsewhere herein. The Company's revenues are derived
principally from membership services, including club membership dues and
marketing fees paid to the Company for services provided by third parties, and
from publications, including subscriptions and advertising. In the fourth
quarter of 1996, the Company adopted a plan to dispose of the operations of the
NAFE club which was acquired in 1994. The "Results of Operations" discussion
below excludes the operations of NAFE since it has been classified as a
discontinued operation. During the three years ended December 31, 1996, the
Company completed three other acquisitions: (i) Woodall Publishing, a publisher
of an annual campground directory and other camping and RV publications, in May
1994, (ii) AINS, an insurance company domiciled in the state of Colorado, in
June 1995, and (iii) ATL, a thrift and loan company based in California, in
October 1995.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
REVENUES
Revenues for 1996 of $140.0 million increased slightly from $139.2 million
for 1995 due to a $1.0 million increase in publications revenues partially
offset by a $0.3 million decrease in membership services revenues. Excluding the
ATL and AINS operations acquired in October and June of 1995, respectively,
revenues were $138.9 million in 1996 compared to $139.0 million in 1995.
Membership services revenues for 1996 of $98.9 million decreased slightly
from $99.2 million for 1995. The $0.3 million decrease in membership services
revenues resulted from $0.8 million in additional revenues from the financial
services operations of ATL and AINS which were acquired in 1995 and an increase
in RV financing and extended vehicle warranty program income, which were offset
by a net decrease of $0.9 million in club membership revenues due primarily to
reduced membership enrollment in the Coast to Coast clubs and a $0.2 million net
decrease in marketing and commission fee income largely composed of a decrease
in the emergency road service program income.
Publications revenues for 1996 of $41.1 million increased 2.8% from $40.0
million for 1995. This increase was primarily due to higher advertising income
associated with higher advertising lineage and advertising rates.
COSTS APPLICABLE TO REVENUES
Costs applicable to revenues (membership services and publications expenses)
for 1996 were $86.6 million or 61.8% of revenues compared to $83.9 million or
60.3% of revenues for 1995. Excluding the ATL and AINS operations acquired in
1995, costs applicable to revenues were $84.0 million or 60.5% of revenues for
1996 compared to $83.3 million or 59.9% of revenues for 1995. Costs associated
with operations acquired in 1995 contributed $2.0 million of the $2.7 million
overall increase. The balance of the increase related to increased expenses
associated with the development of an Internet web site, the introduction of an
extended warranty program and higher club development, membership service and
marketing costs. Such increases were only partially offset by savings from the
discontinuance of a direct mail catalog in 1996, a reduction in marketing
expense for the VIP program and reduced membership enrollment expense in the
Coast to Coast clubs.
45
<PAGE>
OPERATING EXPENSES
Operating expenses for 1996 of $24.7 million or 17.6% of revenues decreased
by $2.7 million or 9.9% from $27.4 million or 19.7% of revenues for 1995. The
$2.7 million decrease in operating expenses was attributed to recording no
phantom stock expense in 1996, a net decrease in other administrative costs as
well as lower amortization expenses as certain customer lists and other
intangibles were amortized in full in 1995.
INCOME FROM OPERATIONS
Income from operations of $28.7 million or 20.5% of revenues for 1996
increased by $0.8 million or 2.8% compared to $27.9 million or 20.1% of revenues
for 1995. Excluding the operations of ATL and AINS which were acquired in 1995,
income from operations of $30.4 million or 21.9% of revenues for 1996 increased
by $2.1 million or 7.4% compared to $28.3 million or 20.3% of revenues for 1995.
The improvement in operating income excluding operations acquired in 1995 is
primarily a result of lower operating expenses as discussed above.
NON-OPERATING EXPENSES
Non-operating expenses for 1996 were $17.5 million compared to $18.0 million
for 1995. The decrease is primarily due to non-recurring expenses in the amount
of a $1.0 million provision for management restructuring charges in 1996
compared to a $1.2 million facility relocation expense and a $0.4 million loss
on sale of assets in 1995. The slight increase in interest expense resulted from
higher average borrowings which were largely offset by lower interest rates.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
Income from continuing operations before income taxes for 1996 was $11.2
million compared to $9.9 million for 1995. The increase was primarily due to
lower operating expenses as discussed above which were only partially offset by
costs associated with ATL and AINS which were acquired in 1995.
INCOME TAXES
Income taxes for 1996 increased by $1.1 million to $6.1 million from $5.0
million in 1995 as a result of higher pre-tax income. The effective income tax
rate in both 1996 and 1995 is higher than statutory rates due primarily to the
amortization of non-deductible goodwill.
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations for 1996 was $5.1 million compared to $4.9
million for 1995. The increase was primarily due to lower operating expenses
which were only partially offset by costs associated with ATL and AINS which
were acquired in 1995.
DISCONTINUED OPERATIONS
As further described in Note 18 to the consolidated financial statements,
AGI adopted a plan to dispose of the assets of NAFE in the fourth quarter of
1996. Aggregate losses of $6.6 million, net of taxes, were recognized in 1996
from such discontinued operations. The loss from NAFE in 1996 resulted from a
27% decrease in membership revenues in 1996 compared to 1995 while the
percentage of costs applicable to revenues increased in 1996 compared to 1995.
NET LOSS
Net loss for 1996 was $1.5 million compared to net income of $5.3 million
for 1995. This difference resulted from a $2.0 million decrease in gross profit
from club membership services, a $1.1 million decrease
46
<PAGE>
in gross profit for ATL and AINS, a $1.1 million increase in income taxes and a
$7.0 million increase in the loss from NAFE. These losses were partially offset
by a $1.2 million increase in gross profit from publications and a $3.2 million
decrease in operating and non-operating expenses.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
REVENUES
Revenues for 1995 of $139.2 million increased by 8.1% from $128.8 million
for 1994. Excluding the operations acquired in 1995 (ATL and AINS) and in 1994
(Woodall Publishing), revenues were $128.6 million in 1995 compared to $121.3
million in 1994, an increase of 6.0%.
Membership services revenues for 1995 of $99.2 million increased 8.8% from
$91.2 million for 1994. Excluding revenues from the operations acquired in 1995
and 1994, membership service revenues were $98.9 million for 1995 and $91.2
million for 1994, an increase of 8.4%. The increase reflects additional revenues
associated with the introduction of a new overnight camping card in July 1994
and an increase in products and services sold to club members, primarily
marketing fees from the VIP program. The increase was partially offset by lower
club dues associated with a 2.1% decline in club membership enrollment.
Publications revenues for 1995 of $40.0 million increased 6.5% from $37.6
million for 1994. Excluding the revenues from operations acquired in 1995 and
1994, publication revenues for 1995 were $29.7 million compared to $30.1 million
for 1994, a decrease of 1.3%. The overall increase in publication revenues
reflects $2.8 million in additional revenues associated with Woodall Publishing
acquired in 1994 which more than offset a net decrease of $0.4 million in
revenues from certain existing general circulation magazines and the campground
directory.
COSTS APPLICABLE TO REVENUES
Costs applicable to revenues (membership services and publication expenses)
for 1995 were $83.9 million or 60.3% of revenues compared to $78.9 million or
61.3% of revenues in 1994. Excluding costs from the operations acquired in 1995
and 1994, costs applicable to revenues for 1995 were $75.7 million or 58.9% of
revenues compared to $74.3 million or 61.3% of revenues for 1994. Costs
associated with the operations acquired in 1995 and 1994 contributed $3.8
million of the $5.0 million overall increase. The balance of the increase was
associated with increases in membership service costs, new product development
costs and higher publishing costs which were partially offset by a decrease in
costs associated with the VIP program.
OPERATING EXPENSES
Operating expenses for 1995 were $27.4 million or 19.7% of revenues compared
to $24.6 million or 19.1% of revenues for 1994. Excluding operating expenses
from the operations acquired in 1995 and 1994, operating expenses for 1995 were
$26.0 million or 20.2% of revenues compared to $23.9 million or 19.7% of
revenues for 1994. General and administrative expenses associated with the
operations acquired in 1995 and 1994 accounted for $0.7 million of the overall
increase. Other increases in operating expenses were related primarily to
increases in amortization expense associated with the newly acquired businesses
and upgrades to the membership information system which were partially offset by
reduced expenses associated with management's deferred phantom stock plan and
decreases in amortization expenses for certain customer lists and financing
fees.
INCOME FROM OPERATIONS
Income from operations was $27.9 million or 20.1% of revenues for 1995
compared to $25.2 million or 19.6% for 1994. Excluding operations acquired in
1995 and 1994, income from operations in 1995 was $27.2 million or 20.9% of
revenues compared to $23.1 million or 19.0% in 1994. The overall $2.7 million
47
<PAGE>
increase was due to a $4.1 million increase from operations other than from
businesses acquired in 1995 or 1994 primarily from increased marketing fees for
the VIP program which was partially offset by a $1.4 million reduction in income
from operations of the businesses acquired in 1995 and 1994.
NON-OPERATING EXPENSES
Non-operating expenses for 1995 were $18.0 million compared to $17.5 million
for 1994. A decrease in interest expense as a result of a reduction in interest
rates was more than offset by a $0.8 million net increase in facility relocation
expenses in 1995.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
Income from continuing operations before income taxes for 1995 was $9.9
million compared to $7.7 million in 1994. This $2.2 million increase is
primarily due to additional revenues recognized on the sale of certain products
and services as discussed above.
INCOME TAXES
The Company's effective income tax rate in 1995 was higher than statutory
rates due primarily to amortization of non-deductible goodwill. Income tax
expense in 1995 was $5.0 million compared to an income tax benefit of $13.3
million in 1994. The tax benefits recognized in 1994 were primarily the result
of the recognition of deferred tax assets for which valuation allowances had
been previously provided.
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations was $4.9 million in 1995 compared with
$20.9 million in 1994. This reduction reflects the impact of a one-time gain
associated with the recognition of deferred tax assets in 1994 offset in part by
higher income before taxes.
DISCONTINUED OPERATIONS
As further described in Note 18 to the Company's consolidated financial
statements, NAFE's income from operations was $0.7 million in 1995 compared to
$0.4 million in 1994. The increase is a result of only two months of operations
in 1994 and a gross profit percentage of 23.9% in 1995 compared to 45.9% in
1994.
EXTRAORDINARY ITEM
In October 1994, the Company entered into a new senior credit agreement. Due
to the new credit facility, unamortized discounts and fees related to previous
borrowing arrangements were written off as an extraordinary item in 1994. The
total write-off of $2.1 million was recognized net of a tax benefit of $800,000.
NET INCOME
Net income for 1995 was of $5.3 million compared to $19.9 million for 1994.
Increases in income from operations in 1995 compared to 1994 were more than
offset by the difference between the income tax expense recognized in 1995 of
$5.3 million and the $13.9 million income tax benefit recognized in 1994.
48
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company whose only asset is the capital stock of
AGI. Cash dividends from AGI are expected to be the sole source of funds to pay
(i) interest payments on the Notes, (ii) management incentive payments to
certain Camping World executives in the aggregate of up to $15.0 million which
are payable $1.0 million per year on the first four anniversaries of the closing
of the Camping World acquisition and $11.0 million on the fifth anniversary,
subject to achievement of certain operating results for Camping World and (iii)
the $1.5 million Ehlert Note. After giving pro forma effect to the application
of the net proceeds from the Private Offering, AGI would have had the ability to
make a distribution to the Company in the amount of $122.4 million as of
December 31, 1996 under the terms of the AGI Indenture.
If the Acquisitions had been completed on December 31, 1996, the Company
would have had consolidated cash and cash equivalents of $7.4 million of which
$4.3 million was held by ATL and AINS and is not available to the Company due to
regulatory restrictions. If the Acquisitions, the Private Offering and the AGI
Credit Facility were consummated as of December 31, 1996, AGI would have had
$30.0 million outstanding under the AGI Credit Facility and $45.0 million of
undrawn commitments under the revolving line of credit. Of such undrawn
commitments, $22.3 million could have been borrowed under the limitations on
indebtedness in the AGI Indenture. The AGI Indenture limits borrowings under the
AGI Credit Facility to 150% of AGI's consolidated cash flow (as defined) for the
preceding four fiscal quarters. For the purposes of this calculation, the
results of Camping World and Ehlert are only included for periods after their
acquisition. If the results of Camping World and Ehlert were included on a pro
forma basis for 1996, the full amount of the AGI Credit Facility would have been
available for borrowing at December 31, 1996.
As a result of the Camping World, Ehlert and other acquisitions and related
financings, the Company is highly leveraged and expects to continue to be highly
leveraged for the foreseeable future. As of December 31, 1996 and giving pro
forma effect to the Acquisitions, the issuance of the Notes offered hereby and
the consummation of the AGI Credit Facility, the Company's consolidated debt
would have consisted of $130.0 million of the Notes, $10.2 million of management
incentive and non-compete payments, $120.0 million of the AGI Notes, $30.0
million outstanding under the AGI Credit Facility, $2.3 million in mortgages and
other indebtedness, and the $1.5 million Ehlert Note. See "Capitalization." The
AGI Credit Facility will allow (subject to certain limits and covenant
restrictions) the transfer of funds from AGI to the Company through the payment
of dividends. See "Description of Other Indebtedness-- AGI Credit Facility." The
AGI Indenture also contains restrictions on the payment of dividends by AGI. See
"Description of Other Indebtedness--AGI Notes."
The Company intends to fund its consolidated cash needs through cash flow
from operations and borrowings under the AGI Credit Facility. A substantial
portion of the Company's available cash will be required to be applied to
service indebtedness, which is expected to include approximately $31.8 million
in annual net interest expense and $1.5 million of quarterly principal
amortization on the term loan under the AGI Credit Facility. During calendar
year 1997, the Company also expects to spend approximately $7.0 million for
capital expenditures. The Company does not plan to open any new Camping World
retail supercenters in 1997. The Company plans to invest up to $5.0 million in
its ATL and AINS subsidiaries in 1997 to satisfy regulatory capital requirements
relating to anticipated growth of these subsidiaries. Additionally, during 1997
the Company anticipates making $1.6 million in payments under the terms of
management's deferred phantom stock plan, up to $1.0 million to certain senior
Camping World executives under management incentive agreements entered into in
connection with the Camping World acquisition, $1.0 million in principal
repayment on the Ehlert Note and $200,000 to the principal shareholders of
Ehlert under non-competition agreements entered into in connection with the
Ehlert acquisition. As a result of these expenditures, investments, and
payments, the Company may periodically have low levels of working capital or be
required to finance working capital deficits.
49
<PAGE>
The Indenture contains financial and operating covenants and significant
restrictions on the ability of the Company to complete acquisitions, pay
dividends, incur indebtedness, make investments and take certain other corporate
actions. The AGI Indenture and the AGI Credit Facility also contain financial
and operating covenants and significant restrictions on the ability of the
Company and its subsidiaries to complete acquisitions, pay dividends, incur
indebtedness, make investments and take certain other corporate actions. See
"Description of Other Indebtedness" and "Description of the Notes."
The Company's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness (including the Notes), depends to
some extent on the successful integration of the Camping World operations and
its future performance, which, in part, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control. Based upon the current level of operations and anticipated growth,
management of the Company believes that available cash flow from operations,
together with available borrowings under the AGI Credit Facility and other
sources of liquidity, will be adequate to meet the Company's anticipated
requirements for working capital, capital expenditures, investment activities,
payments to certain employees under phantom stock and consulting agreements, and
scheduled payments of principal and interest on its indebtedness. However, the
principal payment of the Notes and the AGI Notes may require that such
indebtedness be refinanced prior to their respective maturities. There can be no
assurance that the Company's business will generate sufficient cash flow from
operations or that future financings will be available in an amount sufficient
to enable the Company to service its indebtedness, including the Notes and the
AGI Notes or to make necessary capital expenditures, or that any refinancing
would be available on commercially reasonable terms, if at all. See "Risk
Factors--Leverage and Limited Ability of the Company to Obtain Additional
Financing."
FACTORS AFFECTING FUTURE PERFORMANCE
Although increases in operating costs could adversely affect the Company's
operations, management does not believe that inflation has had a material effect
on operating profit during the past several years. However, fuel shortages and
substantial increases in propane and gasoline costs could have a significant
impact on the Company's travel-related membership services and publications
revenues. Historically such events have caused declines in advertisements but
have not significantly affected club membership enrollment. The Company is
unable to predict at what point fluctuating fuel prices may begin to adversely
impact revenues or cash flow. The Company believes it will partially offset any
cost increases with price increases to its members and certain cost reducing
measures.
SEASONALITY
After giving effect to the Acquisitions, the Company expects that cash flow
from operations will be highest in the third and fourth quarters. Camping
World's cash flow has historically been the greatest in the Company's third
quarter due to the purchasing patterns of its customers. AGI's cash flow has
historically been the highest in the fourth quarter due to the annual membership
renewals for the Coast to Coast clubs which occur in that quarter.
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BUSINESS
The Company is a member-based direct marketing organization primarily
engaged in selling club memberships to selected recreational affinity groups
principally comprised of recreational vehicle owners, campers, outdoor
vacationers and, to a lesser extent, golfers. The Company's club members form a
receptive audience to which it sells products and services, merchandise and
publications targeted to the recreational interests of such members. The
Company's three principal lines of business are (i) club memberships and related
products, services and club magazines, (ii) specialty retail merchandise
distributed primarily through retail supercenters and mail order catalogs, and
(iii) subscription magazines and other publications including directories.
The Company conducts its operations through: AGI; Camping World; and Ehlert.
On April 2, 1997, AGI acquired the stock of Camping World, a specialty retailer
offering merchandise and services through retail supercenters and mail order
catalogs primarily to members of its buying club. On March 6, 1997, AGI acquired
the stock of Ehlert, a specialty sports and recreation magazine publisher. Pro
forma for the Acquisitions, the Company would have had revenues of $324.0
million and EBITDA of $58.2 million for fiscal 1996. See "Offering Memorandum
Summary--Summary Pro Forma Combined Financial Data."
Including the Camping World acquisition, the Company has over 1.7 million
paying members enrolled in its recreational affinity clubs, including
approximately 465,000 Camping World President's Club members, and will have over
3.9 million names in its proprietary database targeted to the recreational
activities of the Company's club members, including approximately 1.0 million
new names from Camping World. Including the Ehlert acquisition, the circulation
of the Company's publications exceeds 4.7 million.
Management believes that the acquisition of Camping World will further its
business strategy and enhance its competitive prospects by providing the
following benefits: (i) opportunities to cross sell club memberships between
AGI's Good Sam Club and Camping World's President's Club through both Camping
World's supercenters and catalog operations as well as AGI's direct mail
operations; (ii) access to Camping World's retail and mail order catalog
distribution channels to increase the penetration of AGI's products and
services, such as its emergency road service program and the recently introduced
extended vehicle warranty program, and access to Camping World's RV merchandise
which will be marketed to AGI's Good Sam Club members; and (iii) opportunities
to reduce membership, products and services solicitation costs resulting from
the Company's ability to: (a) market through Camping World's retail and catalog
distribution channels, (b) capitalize on the overlap of the Good Sam Club and
the President's Club memberships, and (c) consolidate the administrative support
for certain products and services. The Company believes that these opportunities
will enable it to eliminate workforce redundancies and to reduce printing,
paper, fulfillment and mailing costs. Management believes the acquisition of
Ehlert will allow the Company to increase advertising revenues for certain of
AGI's magazines due to higher combined circulation of publications of
recreational activity publications and will result in cost savings associated
with headcount reductions, reorganization of certain marketing activities and
through the consolidation of publishing operations.
BUSINESS STRATEGY
The Company's business strategy is to increase (i) the enrollment of its
clubs through internal growth and acquisitions; (ii) the sales of its products
and services by marketing to club members through the most effective
distribution channels and by developing and enhancing its product and service
offerings; and (iii) the circulation of its publications by introducing new
magazines and acquiring publications which are complementary to the Company's
recreational market niches. The Company also seeks to realize operational
efficiencies through the integration of acquired businesses such as occurred as
a result of the Golf Card club and Woodall Publishing in 1990 and 1994,
respectively.
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ENHANCE CLUB MEMBERSHIP ENROLLMENT
The Company seeks to increase the number of its club members by maximizing
renewals, establishing an optimal mix of channels for soliciting new members and
re-acquiring inactive members. Management believes that the participation levels
and renewal rates of club members reflect the benefits derived from membership.
In order to maintain high participation rates in its clubs, the Company
continuously evaluates member satisfaction and actively responds to changing
member preferences through the enhancement or introduction of new membership
benefits including products and services. The Company also seeks to optimize its
use of alternative channels for acquiring club members. Management believes that
Camping World's supercenters and catalog operations will provide low cost and
highly effective channels for the acquisition of new club members. Camping World
has effectively used these channels to increase its President's Club membership
by approximately 75% during the five years ended September 30, 1996. Camping
World's supercenters and catalog operations can also be used to market
memberships to inactive club members. As a result of the Camping World
acquisition, the Company will add approximately 1.0 million new names to its
existing database. Additionally, Camping World recently upgraded its point-of-
sale system to sell President's Club memberships and renewals at the check-out
register and to record names of prospective club members.
INCREASE SALES OF PRODUCTS AND SERVICES
The Company seeks to increase the sale of its products and services due to
their profitability and the favorable impact such programs have on club
membership growth and retention. Management believes that a substantial
opportunity exists to market its products and services through the national
network of Camping World supercenters and mail order catalogs. A significant
percentage of Good Sam Club members currently subscribe to one or more of its
products and services, such as the emergency road service program and the
recently introduced extended vehicle warranty program. Management believes it
can successfully market such products and services to Camping World President's
Club members who have interests and demographic characteristics similar to those
of Good Sam Club members and for whom there is limited penetration of such
products and services. Management also believes that the Good Sam Club members
who are not currently President's Club members represent a focused group of
customers to which it can sell Camping World's RV accessory merchandise. The
Company regularly studies the feasibility of introducing new products and
services. For example, in 1995, AGI introduced its extended vehicle warranty
program which had approximately 1,600 policies in force as of December 31, 1996.
IMPROVE OPERATING PERFORMANCE
The Company seeks to achieve operating efficiencies by selectively acquiring
and developing recreational affinity groups which enable the Company to increase
membership enrollment and to realize cost savings. The Company also seeks to
enhance its importance with third party providers of products and services by
maintaining high membership enrollment levels in such programs, thereby
increasing the fees it receives from such vendors. Where appropriate, the
Company may consider directly providing certain products and services which had
been provided by third parties.
Through the Acquisitions, the Company expects to realize $6.2 million in
annual cost savings and operating efficiencies. These anticipated cost
reductions consist of $3.8 million in annual salary and related benefits savings
associated with headcount reductions at AGI and Ehlert and $2.4 million in
annual reductions of operating costs associated with more efficient membership
services, products and services and publishing operations (including reduced
printing and paper costs).
Headcount reductions resulting in estimated annual savings of $2.8 million
were effected at AGI in December 1996 in anticipation of the Camping World
acquisition. Additional annual savings of $1.0 million from headcount reductions
are expected as a result of the Ehlert acquisition. Specific actions to reduce
consolidated operating costs will include: (i) reducing mailing, postage, paper
and fulfillment expenses due
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in part to the membership overlap between the Good Sam Club and President's
Club; (ii) using lower cost channels for soliciting club members and selling
products and services; and (iii) eliminating duplicative publication and
membership service operations.
ACQUIRE AND DEVELOP AFFINITY GROUPS
The Company believes the experience it has accumulated in managing its
existing recreational affinity groups is applicable to the management of other
recreational interest organizations. In 1990, AGI acquired the Golf Card club
and has successfully grown membership by approximately 47% since its
acquisition. As a result, the Company conducts ongoing evaluations for
developing or acquiring affinity groups for which it can build membership
enrollment and to which it can market products and services. The Company expects
to concentrate its efforts over the near term on integrating the operations of
the Camping World President's Club with AGI's Good Sam Club.
EXPAND NICHE RECREATIONAL PUBLICATIONS
The Company seeks to expand its presence as a dominant publisher in select
recreational niches through the introduction of new magazine formats and the
acquisition of other publications in its market or in complementary recreational
market niches. Publications in complementary niches may also provide the Company
with the opportunity to launch new membership clubs, to market its products and
services to members of the new clubs and to develop other products and services
which meet the special needs of such members. The Company believes overall
circulation of its magazines is an important factor in determining the amount of
revenues it can obtain from advertisers. In addition, since paper and printing
costs are a significant part of operating expenses, management also believes
that the Company will achieve improved economies of scale when purchasing these
items following the Acquisitions.
RV MARKET AND THE DEMAND FOR MEMBERSHIPS,
PRODUCTS AND SERVICES
The use of RVs and the demand for club memberships and related products and
services may be influenced by a number of factors including general economic
conditions, the availability and price of propane and gasoline, and the total
number of RVs. The Company believes that both the installed base of RVs and the
type of RV owned (full service vehicles excluding van conversions) are the most
important factors affecting the demand for its membership clubs, merchandise and
products and services. Based on the most recent survey (the "Survey"), which was
conducted by the Survey Research Center of the University of Michigan in 1994,
the number of households owning RVs increased from 7.3 million in 1984 to 8.2
million in 1993. The Survey also indicates that the percentage of households
owning RVs during this period was unchanged at approximately 10%.
According to the Survey, the average RV owner was 48 years old. RV ownership
also rose with age reaching its highest percentage level among those 55 to 74
years old. According to the 1994 U. S. Census, households in this age group are
projected to increase from 23.8 million to 28.9 million in 2005. RV ownership
also is concentrated in the western United States in which area the population
growth rate is expected to be greater than the national average through 2005.
The Survey also indicates that RV ownership is associated with higher than
average annual household income which among RV owners was approximately $39,000
per annum as compared to the national average of $31,000 per annum according to
the 1994 U.S. Census.
The median age and annual household income of AGI club members were 65 years
and $49,000 in 1995 based on member survey data. The Company believes that the
demographic profile of its typical club member, coupled with a demographic trend
towards an aging population will have a favorable impact on RV ownership and the
demand for club memberships and related merchandise, products and services.
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AGI
MEMBERSHIP CLUBS
AGI operates the Good Sam Club and Coast to Coast clubs for RV owners,
campers and outdoor vacationers and the Golf Card Club for golf enthusiasts. The
membership clubs form a receptive audience to which AGI markets its products and
services. The following table sets forth the number of members at December 31,
1996, annual membership dues and average annual renewal rates during the period
1992 to 1996 for each club:
<TABLE>
<CAPTION>
AVERAGE RENEWAL
NUMBER OF MEMBERS ANNUAL FEE(1) RATE(2)
------------------- ------------- ---------------------
<S> <C> <C> <C>
Good Sam Club..................................... 911,430 $ 10 - $25 70%
Coast to Coast clubs.............................. 257,236 $ 43 - $60 80%
Golf Card club.................................... 136,162 $ 76 - $95 68%
</TABLE>
- ------------------------
(1) Subject to special discounts and promotions.
(2) Excludes members having lifetime memberships.
GOOD SAM CLUB
The Good Sam Club, founded in 1966, is a membership organization for owners
of recreation vehicles. The Good Sam Club is the largest for-profit RV club in
North America with over 910,000 member families and over 2,100 local chapters as
of December 31, 1996. The average annual renewal rate for Good Sam Club members
was approximately 70% during the period 1992 to 1996. AGI has focused on selling
higher margin multi-year memberships which, among other advantages, reduces the
cost of membership renewals. At December 31, 1996, the average length of time
for participation in the Good Sam Club was approximately 7 years with most club
members purchasing annual memberships.
Membership fees range from $10 to $59 subject to the term and type (new vs.
renewal). The benefits of club memberships include: discounts for overnight
stays at 1,700 participating RV parks and campgrounds; discounts on the purchase
of supplies and accessories for recreational vehicles at approximately 900 RV
service centers; a free annual subscription to HIGHWAYS, the club's regular news
magazine; discounts on other publications; access to group tours and travel
services; trip routing and mail-forwarding; and access to products and services
developed for club members. Based on typical usage patterns, AGI estimates that
Good Sam Club members realize estimated annual savings from these discounts of
$156. The Good Sam Club establishes quality standards for RV parks and
campgrounds participating in its discount program. Campgrounds and parks
participating in the Good Sam program benefit from increased occupancy and sales
of camping related products. AGI believes it has established considerable
penetration of those for-profit RV parks and campgrounds which meet its quality
standards for network affiliation.
COAST TO COAST
Coast to Coast clubs operate the largest reciprocal use network of private
RV resorts in North America. AGI offers a series of membership benefits
depending on pricing and program type under the Coast to Coast name. Members of
Coast to Coast clubs belong to a private RV resort owned and operated by parties
unrelated to the Company. Club members may use any of the participating resorts
in the Coast to Coast network subject to availability. At December 31, 1996,
there were approximately 257,000 member families in Coast to Coast clubs, and
461 private RV resorts nationwide participated in the Coast to Coast reciprocal
use programs, representing approximately 82% of such resorts in the US. These
private resorts are designed primarily for RV owners, but typically provide
camping or lodging facilities, comprised of RVs, cabins and condominiums. For an
initial membership fee plus annual maintenance fees, both paid by the customer
to the resort, the private resorts provide an RV site with water, sanitary and
electrical hook-ups and recreational amenities, such as swimming, tennis or
fishing, or proximity to theme parks or other
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recreational activities. AGI has established quality criteria for resorts to
join and remain in the Coast to Coast networks.
For the standard annual renewal dues from $60 for a single year membership
to $255 for a multiple-year membership, Coast to Coast club members receive the
following benefits: discounts for overnight stays at participating resorts,
hotels and campgrounds; an annual subscription to Coast to Coast Magazine; the
Coast to Coast Directory providing information on the participating resorts;
discounts on other AGI publications; access to discount travel services; trip
routing; and access to products and services developed for club members. Coast
to Coast Resort Club members also have the right to use, subject to
availability, the lodging facilities at 461 participating resorts at a
discounted rate.
AGI believes that resorts participating in the Coast to Coast networks view
access to reciprocating member resorts as an incentive for their customers to
join their resort. Because a majority of members of Coast to Coast clubs own
RVs, access to participating resorts throughout North America can be an
important complement to local resort membership. During 1996, Coast to Coast
members utilized over 1.4 million nightly stays under the reciprocal use
program. Based on typical use patterns, AGI estimates that Coast to Coast
members realize estimated annual savings from these discounts of over $200 from
discounted overnight stay accommodations at participating resorts. The average
annual renewal rate for members of the Coast to Coast clubs after the initial
one year membership (which is generally paid by the member resort not the club
member) was approximately 80% during the period 1992 to 1996.
GOLF CARD CLUB
The Golf Card club, founded in 1974, had approximately 136,000 members at
December 31, 1996. The major attraction for membership is the financial savings
which members receive when playing at one of over 3,100 participating golf
courses located throughout the U.S. and Canada. The annual membership fee varies
with the length and type (single or double) of membership. Based on AGI
conducted surveys, members realize savings on green fees ranging from $150 to
$250 annually which significantly exceed the cost of membership. Members of the
Golf Card club receive the following benefits: the right to play two rounds of
golf each year at each participating golf course either without green fees or
with reduced fees; discounts on vacation packages at over 300 participating
"Stay and Play" resorts and at over 2,000 hotels in North America; an annual
subscription to The Golf Traveler, published six times per year; and access to
products and services developed for club members. The average annual renewal
rate for Golf Card club members was approximately 68% during the period from
1992 to 1996. The Company believes that the participating golf courses providing
playing privileges to club members represents the largest number of golf courses
participating in a discount program in North America. None of the participating
golf courses is owned or operated by the Company.
Both municipal and privately-owned golf courses participate in the Golf Card
program. The program is attractive to participating courses because club members
must rent a golf cart when exercising the playing privileges and the members
playing time may be limited to off-peak hours. Members may purchase other
merchandise or services when exercising their playing privileges. In this
manner, the Golf Card members provide incremental revenue to the golf course.
MEMBERSHIP PRODUCTS AND SERVICES
AGI's 1.3 million club members form a receptive audience to which it sells
products and services targeted to the recreational interests of its club
members. AGI promotes products and services which either address special needs
arising in the activities of the club members or appeal generally to persons
with the demographic characteristics of club members. The two most established
products are the emergency road service program and the vehicle insurance
program, which were introduced in 1984 and in 1978, respectively. Most of AGI's
products and services are provided by third parties who pay AGI a marketing fee,
except for ERS where AGI pays a third party to administer the program.
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EMERGENCY ROAD SERVICE
AGI developed the ERS program for Good Sam Club members to address the
special towing requirements of RV owners in the event of mechanical breakdown
and to enhance the availability of such services. AGI also markets the ERS
program to members of the Coast to Coast clubs. At December 31, 1996, 209,177
and 9,988 members of the Good Sam Club and Coast to Coast clubs, respectively,
participated in the ERS program, representing penetration rates for each club of
23.0% and 3.7%, respectively. During the period 1992 to 1996, the average annual
renewal rate of members enrolled in the ERS program was approximately 73%.
The ERS program is marketed nationally through direct mail and advertising
in AGI's RV magazines and annual campground directories. Under the ERS program,
a subscriber pays an annual fee ranging from $79.95 to $99.95 for which the
member receives roadside repair and towing at no additional cost to the
subscriber. AGI's emergency road service provider administers the program,
provides dispatching services for roadside service and satisfies applicable
regulatory requirements pursuant to a contract which expires December 31, 1997.
VEHICLE INSURANCE PROGRAM
AGI initiated a vehicle insurance program to facilitate the availability of
cost-effective vehicle insurance suitable to the demographic characteristics and
vehicle usage patterns of its club members. At December 31, 1996, the VIP
program had 215,052 members which represented a 20.5% and 3.9% penetration,
respectively, of the Good Sam Club and Coast to Coast clubs. During the period
1992 to 1996, the average annual renewal rate of members participating in the
VIP program was more than 90%. AGI's marketing fee is based on the amount of
premiums written, the number of policies in force and the profitability of the
program. The insurance provider, National General Insurance Company ("NGIC"), a
subsidiary of General Motors Corporation is rated A+ by A.M. Best's Rating
Service and assumes all claim risks. In 1996, NGIC received premiums under the
VIP programs totaling $208.7 million which generated marketing fees to AGI of
$17.1 million.
OTHER PRODUCTS AND SERVICES
Other products and services marketed to club members include credit cards,
vehicle financing, supplemental health and life insurance, financial services
and extended vehicle warranties. Most of these services are provided to club
members by third parties who pay AGI a marketing fee. AGI also sells
subscriptions to its various publications, including TRAILER LIFE, MOTORHOME and
the annual CAMPGROUNDS & RV SERVICES DIRECTORY.
ATL was acquired by AGI in October 1995 and AINS was acquired in June, 1995.
These businesses will facilitate the vertical integration of financial services
provided to club members. Through ATL and AINS, AGI offers its club members
various depository products (such as thrift certificates and passbook accounts)
and intends to offer loan products (such as consumer, installment, small
business and home equity loans) and property and casualty insurance in the state
in which it is licensed. At December 31, 1996, ATL had total assets and
stockholders equity of $17.7 million and $2.2 million, respectively and AINS had
total assets and stockholders equity of $3.4 million and $2.1 million,
respectively.
In addition, AGI is evaluating other products and services that club members
may find attractive. When introducing new products and services, AGI
concentrates on products and services provided by third parties which it can
market without significant capital investment by AGI and for which it receives a
marketing fee from the service provider based on sales volume. AGI seeks to
utilize the purchasing power of its club members to obtain products and services
at attractive prices. During 1995, AGI introduced its extended vehicle warranty
program, which had approximately 1,600 policies in force as of December 31,
1996.
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PUBLICATIONS
AGI produces and distributes a variety of publications for select markets in
the recreation and leisure industry, including general circulation periodicals,
club magazines, directories, and RV industry trade magazines. Revenues are
recognized from the sale of advertising, subscriptions and direct sales of some
of the publications. AGI believes that the focused audience of each publication
is an important factor in attracting advertisers. The following chart sets forth
the circulation and frequency of the Company's publications:
<TABLE>
<CAPTION>
NUMBER OF
1996 ISSUES PUBLISHED
PUBLICATION CIRCULATION EACH YEAR
- --------------------------------------------------------- --------------- ---------------------
<S> <C> <C>
Trailer Life............................................. 275,082(1) 12
MotorHome................................................ 140,123(1) 12
Rider.................................................... 106,906(1) 12
American Rider........................................... 56,514(1) 6
Roads to Adventure....................................... 370,000(3) 1(2)
Trailer Life Campground/RV Park & Services Directory..... 320,000(1) 1
Trailer Life's RV Buyers Guide........................... 40,746(1) 1
Woodall Campground Directory............................. 284,000(3) 1
Woodall's Regional News Tabloids......................... 185,000(4) 12
Woodall's Specials....................................... 165,000(4) 1
Woodall's RV Buyer's Guide............................... 33,000(1) 1
Woodall Plan-it Pack-it Go............................... 62,261(3) 1
Touring Rider............................................ 25,600(1)(5) 1
RV Business.............................................. 12,603(6) 12
Campground Management.................................... 10,000(7) 12
Highways................................................. 912,214(8) 11
Coast to Coast Magazine.................................. 271,562(8) 8
Golf Traveler............................................ 103,000(8)(9) 6
</TABLE>
- ------------------------
(1) Paid circulation.
(2) Introduced in 1996 and currently scheduled for quarterly publication.
(3) Includes sales and free distribution.
(4) Distributed to RV outlets, including campgrounds and dealerships.
(5) Debuted in 1995.
(6) Free to qualifying RV manufacturers, distributors, suppliers and dealers.
(7) Trade publication distributed primarily to campground owners.
(8) Circulation is limited to club members and the price is included in the
annual membership fee.
(9) Only one magazine is issued when two members are from the same household.
GENERAL CIRCULATION MAGAZINES
TRAILER LIFE, initially published in 1941, is the leading consumer magazine
for the RV industry with a paid circulation averaging 275,000 copies per issue
in 1996. TRAILER LIFE features articles on subjects including product tests,
travel and tourist attractions.
MOTORHOME is a monthly periodical for owners and prospective buyers of motor
homes which has been published since 1968 with a paid circulation averaging
140,000 copies per issue in 1996. MOTORHOME features articles on subjects
including product tests, travel and tourist attractions.
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RIDER is a monthly magazine for motorcycle touring enthusiasts and has been
published since 1974. Each issue focuses on the motorcycles, personalities,
technical subjects, travel notes and other features of interest to this
recreational affinity group.
AMERICAN RIDER, introduced in November 1993 and in 1995 was increased from
four to six issues per year, is targeted to owners and operators of
Harley-Davidson motorcycles.
ROADS TO ADVENTURE, introduced in 1996, is targeted to younger families
pursuing camping and other outdoor recreation activities and is currently
published quarterly.
ANNUAL DIRECTORIES
TRAILER LIFE CAMPGROUND/RV PARK & SERVICES DIRECTORY, initially published in
1972, is an annually updated directory which provides information on and ratings
for 12,250 public and private campgrounds, 2,200 RV service centers, and over
1,000 tourist attractions in North America. In 1996, 320,000 directories were
distributed. The publication features Good Sam Parks that offer discounts on
overnight camping fees for AGI's club members. This directory is sold by direct
mail to Good Sam Club members, at RV dealerships and in bookstores.
WOODALL CAMPGROUND DIRECTORY, initially published in 1948, are annual
consumer directories offered in both national and regional editions. In 1996,
approximately 284,000 directories were distributed. The Woodall directories are
primarily distributed through book stores.
CLUB OR TRADE MAGAZINES AND BOOKS
Each of AGI's membership clubs has its own publication, which provides
information on club activities and events, feature stories and other articles.
AGI publishes HIGHWAYS for the Good Sam Club, COAST TO COAST MAGAZINE for Coast
to Coast clubs, and THE GOLF TRAVELER for the Golf Card club. AGI also publishes
RV BUSINESS, the leading trade magazine for the RV industry, and CAMPGROUND
MANAGEMENT, the leading trade magazine for the campground industry. AGI also
periodically publishes books targeted for its club membership which address the
RV lifestyle.
MARKETING
AGI is a direct marketer of club memberships and related products and
services. Direct response promotions include direct mail, target marketing
inserts, advertisements, promotional events and telemarketing. Direct response
marketing efforts account for approximately 84% of new enrollments with the
remaining 16% derived from miscellaneous other sources. AGI uses a variety of
commercially available mailing lists of RV owners in its direct mail efforts.
The most useful lists are compiled from vehicle registrations provided by the
motor vehicle departments in over 30 states, direct response lists from RV
industry participants, and in-house lists.
AGI solicits advertisements for its publications through its internal sales
force and by paying commissions to advertising agencies and independent
contractors which place advertisements. Many advertisers are repeat customers
with whom AGI has long-standing relationships.
OPERATIONS
AGI's member service operations are located in Denver, Colorado. The primary
focus of member services is to handle information requests from club members
through AGI's toll-free telephone number. Member service representatives market
products and services to existing and potential club members in response to
telephone inquiries. On average, the member service department processes
approximately 5,000 telephone inquiries daily. AGI expects to increase sales
through better management of its member service operations coupled with greater
efficiency in its telemarketing efforts. Fulfillment operations involve the
processing of orders and checks principally received by mail. Certain
fulfillment operations are
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performed by third parties. AGI's publication operations develop the layout for
publications and outsource printing to third parties.
INFORMATION SUPPORT SERVICES
AGI utilizes integrated computer systems to support its membership club and
publishing operations. Comprehensive information on each member, including a
profile of the purchasing activities of members, is available to customer
service representatives when responding to member requests and when sales
representatives market AGI's products and services. AGI employs publishing
software for publication makeup and content and for advertising to support its
publications operations. An area wide network facilitates communication within
and between AGI's offices. AGI also utilizes information technology, including
list segmentation and merge and purge programs, to select prospects for direct
mail solicitations and other direct marketing efforts.
CAMPING WORLD
GENERAL
Camping World is the only national specialty retailer of merchandise and
services for RV owners. For its fiscal year ended September 30, 1996, Camping
World generated total revenues of $169.8 million and EBITDA of $12.7 million.
The 26 Camping World retail supercenters which are located in 17 states,
accounted for approximately 66% of fiscal 1996 revenues while approximately 21%
were derived from catalog sales and approximately 13% were derived from fees or
non-merchandise revenues. Approximately 86% of Camping World's revenues were
derived from sales to the 465,000 members of its President's Club buying group.
The Company believes that Camping World's leading position in the RV
accessory industry results from a high level of name recognition, an effective
dual channel distribution strategy and a commitment to offer a broad selection
of specialized RV products and services at competitive prices combined with
technical assistance and on-site installation. Camping World's supercenters
offer over 8,000 SKUs, approximately 80% of which are not regularly available in
general merchandise stores. In addition, general merchandise stores do not
provide installation or repair services for RV products, which are available at
Camping World's supercenters. Products sold by Camping World include
specialty-sized refrigerators, housewares and other appliances, bedding and
furniture, generators and hydraulic leveling systems, awnings, folding boats,
chairs, bicycles, and sanitation products. Camping World also markets emergency
road service and vehicle insurance products similar to the products offered by
AGI. Camping World supercenters are strategically located in areas where many RV
owners live or in proximity to destinations frequented by RV users. Camping
World's supercenters are designed to provide one-stop shopping by combining
broad product selection, technical assistance and on-site installation services.
Camping World's mail order operations generate significant revenues and
enhance retail sales by serving as the primary advertising vehicle for the
supercenters and by increasing Camping World's name recognition among RV owners
nationwide. The Company believes that Camping World has the leading share of the
mail order catalog segment for specialty RV products. Camping World's mail order
catalog sales complement its retail sales by targeting customers with limited
access to its retail supercenters and by facilitating purchases of higher
turnover items by regular supercenter customers. Camping World established its
President's Club in 1986 as a means of building customer loyalty and revenues.
President's Club members pay a membership fee, which varies with the length of
membership, and receive a 10% discount on merchandise purchased from Camping
World as well as special mailings including newsletters and flyers offering
selected products and services at reduced prices. At December 31, 1996, the
President's Club had approximately 465,000 members of which approximately
250,000 were also Good Sam Club members. The average annual renewal rate for the
President's Club for the five year period ended September 30, 1996 was 60.7%.
The majority of club memberships are for one year. Camping World recently
upgraded its
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point-of-sale system, which management believes will increase sales, generate
new club members and increase club renewal rates through improved customer data
collection.
SUPERCENTERS
OPERATIONS
Camping World's supercenters generally range in size from approximately
18,000 to 36,000 square feet. Approximately 40% of each supercenter is devoted
to a retail sales floor, a customer service area, and a technical information
counter; 40% comprises the installation facility which contains 4 to 16 drive-
through installation bays; and 20% is allocated to office and warehouse space.
Large parking areas provide sufficient space and facilitate maneuvering of RVs.
By combining broad product selection, technical assistance and installation and
repair services, Camping World's supercenters provide one-stop shopping for RV
owners. Camping World maintains toll-free telephone numbers for customers to
schedule installation and repair appointments. All supercenters are open seven
days a week.
SUPERCENTER SITE SELECTION
Camping World intends to continue the controlled, limited expansion of its
supercenter store network. Camping World's expansion strategy is based on a
comprehensive process which analyzes the sales trends and travel patterns of
existing and potential customers as well as the sales patterns of RV vehicles.
Camping World researches the travel routes used by RV owners and the location of
camping areas in order to ensure the convenient location of its supercenters.
Sales and shipment of new RVs together with analysis of demographic data derived
from its customer database and mail order shipments and RV ownership lists from
other sources are used to identify high concentrations of RV owners. Once an
area has been identified, Camping World surveys its customers to select specific
locations for a new supercenter. Camping World credits this detailed analytical
approach with the fact that it has closed only one store since inception.
Camping World does not plan to open a new supercenter in 1997.
The aggregate cost to construct and open an 18,000 square foot supercenter
(the anticipated typical size of new supercenters) is estimated to be
$2,750,000. It typically takes six months to complete construction of a store.
Camping World has generally funded construction with internally generated funds
and has subsequently entered into sale-leaseback transactions to obtain
long-term financing.
MAIL ORDER OPERATIONS
Camping World initiated its mail order operations in 1967. Camping World
currently has a proprietary mailing list of approximately 1.7 million RV owners,
all of whom have made a purchase or requested a catalog from Camping World
within the prior 60 months. Camping World maintains a database of these names,
which includes information such as order frequency, size of order, date of most
recent order and type of merchandise purchased. Camping World analyzes its
database to determine those customers most likely to order from Camping World's
catalogs. As a result, Camping World is able to target catalog mailings more
effectively than direct marketers of catalogs offering general merchandise. From
fiscal 1992 to fiscal 1996, Camping World's catalog mailing response rate has
increased from 4.1% to 4.6% as a result of more effective target marketing.
Camping World continually expands its proprietary mailing list through in-store
subscriptions and requests for catalogs in response to advertisements in
regional publications directed to RV owners. In addition, Camping World rents
mailing lists of RV owners from third parties including AGI.
During fiscal 1996, Camping World distributed 9.1 million catalogs, of which
7.6 million were mailed in 12 separate mailings, and the remaining 1.4 million
catalogs were distributed in supercenters, at campgrounds, by request and as
package inserts. In fiscal 1996, Camping World processed over 420,000 catalog
orders at an average net order size of $84, excluding postage and handling
charges. The average net order size has increased over 15% since fiscal 1992.
Camping World distributes seven major high
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<PAGE>
quality, full color catalogs each year: master, spring, fall, holiday, two sale
editions and a prospecting catalog. Camping World also distributes specialty
catalogs directed to targeted customers in order to develop market niches.
Camping World's mail order operations, located at its headquarters in
Bowling Green, Kentucky, offer toll-free customer service seven days a week 24
hours a day. Camping World has established a sales training program for its
customer service personnel and also provides experienced technical advisors to
answer specific questions by telephone. Orders are usually processed and shipped
within 24 hours of receipt.
MARKETING
Camping World's principal marketing strategy is to capitalize on its broad
name recognition among RV owners. Camping World solicits customers through mail
order catalogs, direct mail retail flyers, advertisements in national and
regional industry publications, vendor coop advertising programs, promotional
events, President's Club direct mailings and personal solicitations and
referrals.
Camping World's President's Club program, which was established in 1986, has
grown to approximately 465,000 members. President's Club memberships may
initially be obtained for one, two or three years at a cost of $20, $35 or $50,
respectively. The average life (including renewals) of club membership is three
years and approximately 94% of club members are enrolled for one year.
President's Club members receive a 10% discount on the purchase of all of
Camping World's merchandise and installation fees and receive special mailings,
including newsletters and flyers offering selected products and services at
special prices. In fiscal 1996, President's Club members accounted for
approximately 86.0% of Camping World's merchandise sales and service revenues.
The average order size was $124 for President's Club members as compared to $23
for non-club members.
PURCHASING
Camping World sources over 8,000 products from approximately 800 vendors.
Camping World attends regional, national and international trade shows to
determine the products it will offer. The purchasing activities of Camping World
are focused on RV parts and accessories, electronics, housewares, hardware,
automotive, crafts, clothing, home furnishings, gifts, camping and sporting
goods. Camping World has developed an automated plan-o-gram system to provide
merchandising plans to each supercenter and a minimum/maximum inventory system
for its operations to improve fulfillment rates on key items. Camping World
believes that the volume of merchandise it purchases and its ability to buy
direct from manufacturers together with the utilization of its transportation
fleet enables Camping World to obtain merchandise at costs which compare
favorably to local RV dealers and retailers. Camping World does not enter into
material long-term contracts or commitments with its vendors. Camping World's
largest vendor, a supplier of awnings, refrigerators and air conditioners,
accounted for approximately 12% to 13% of Camping World's total purchases during
the last two fiscal years.
MANAGEMENT INFORMATION SYSTEMS
Camping World's management information systems and electronic data
processing systems consist of an extensive range of retail, mail order,
financial and merchandising systems, including purchasing, inventory
distribution and control, sales reporting, accounts payable and merchandise
management. Camping World's management information system includes point-of-sale
registers which are equipped with bar code readers in each supercenter. These
registers are polled nightly by a central computer. With this point-of-sale
information and the information from Camping World's on-line distribution
centers, Camping World compiles comprehensive data, including detailed sales
volume and inventory information by product, merchandise transfers and receipts,
special orders, supply orders and returns of product purchases to vendors. In
conjunction with its nightly polling, Camping World's central computer sends
price changes
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to registers at the point of sale. The registers capture President's Club member
numbers and associated sales and references to specific promotional campaigns.
Management monitors the performance of each supercenter and mail order operation
to evaluate inventory levels, determine markdowns and analyze gross profit
margins by product. Camping World has installed a new computer system and plans
to integrate all of its computerized functions over the next three years.
Recently, Camping World upgraded its point-of-sale system to sell President's
Club memberships and renewals at the check-out register and to capture names of
prospective club members.
Camping World's catalog operations also utilize a computerized management
system allowing on-line desktop access to information which previously required
manual retrieval. Screen prompts which provide product, promotional, and revenue
potential have allowed Camping World to maintain high service levels during
seasonal sales peaks. The installation of an automatic call distribution switch
with scheduling software has facilitated more effective management of customer
inquiries and reduced set-up time for call processing.
EHLERT
Ehlert is a specialty publisher of sports and recreation magazines focusing
on four niches: snowmobiling, personal watercraft, archery and ATV's. For the
year ended December 31, 1996, Ehlert generated revenues of $14.2 million and
EBITDA of $2.2 million. For twelve months ended December 31, 1996, the paid
circulation for Ehlert's publications was approximately 290,000 and controlled
circulation for industry and consumer publications was approximately 1.1
million.
The Company estimates that in 1996, the snowmobile, personal watercraft and
archery groups had advertising revenue shares of approximately 62.3%, 39.6% and
27.5%, respectively, in their applicable sports and recreation magazine segment.
Ehlert's market share leadership position in its magazine segments, its close
contact with manufacturers, distributors, dealers and industry associations, and
its reputation as an advocate for responsible sporting practices has enabled
Ehlert to increase its advertising revenue by approximately 111% over the five
years ended December 31, 1996.
Ehlert produces several differentiated publications for its snowmobile,
personal watercraft and archery magazine segments and plans to do so for its
recently launched ATV magazine segment. Ehlert's strategy is to target
specialized sporting and recreational niches through multiple publications. This
strategy has resulted in further segmentation within its market and has
positioned several of Ehlert's magazines as leaders in their respective
segments. Advertisers have demonstrated a willingness to support Ehlert's
multiple and controlled publication strategy and special merchandising programs
as evidenced by the growth rates achieved in advertising revenues.
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The eleven magazines published by Ehlert and their industry groups are as
follows:
<TABLE>
<CAPTION>
NUMBER OF
ISSUES
1996 PUBLISHED
PUBLICATION CIRCULATION EACH YEAR
- --------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Snowmobile Group:
Snowmobile................................................... 579,208(1)(3) 4
SnowGoer..................................................... 76,797(1) 5
Snow Week.................................................... 22,975(1) 18
Snowmobile Business.......................................... 6,000(2) 6
Personal Watercraft Group:
PWC Magazine................................................. 302,786(1)(3) 3
Watercraft World............................................. 32,076(1) 9
Watercraft Business.......................................... 6,000(2) 6
Archery Group:
Bowhunting World............................................. 119,358(1)(3) 8
3-D & Target Archery......................................... 12,223(1) 7
Archery Business............................................. 11,000(2) 7
ATV Group:
ATV Magazine................................................. 191,693(1)(3) 3
</TABLE>
- ------------------------
(1) Paid circulation.
(2) Controlled circulation to trade.
(3) Controlled circulation to consumer.
SNOWMOBILE GROUP
SNOWMOBILE magazine delivers broad-based editorial and snowmobile-related
information to its audience of active snowmobile enthusiasts, including reviews
of new machines, clothing and accessories, and articles on responsible riding
practices, snowmobiling vacation destinations and special events, and serves as
the front-end medium for all snowmobile-related product promotions.
SNOWGOER is designed for the sport's highly active participants and provides
detailed equipment and product critiques and maintenance tips.
SNOW WEEK is the central source of information for the competition and
high-performance snowmobiling market segment. The publication provides timely,
year-round stories on racing, performance enhancing products, technical
assistance, new product introductions, and industry general information.
SNOWMOBILE BUSINESS presents a mix of news, opinion, trends, and sales tips
designed to improve the financial performance of snowmobile dealers.
PERSONAL WATERCRAFT GROUP
PWC MAGAZINE is the complete guide for the personal watercraft owner and
provides reviews of personal watercraft, gear and accessories as well as
information on maintenance procedures, safety tips and travel destinations. PWC
Magazine was first published in January 1995.
WATERCRAFT WORLD is targeted to avid personal watercraft enthusiasts and
provides detailed critiques of watercraft, in-depth gear and accessory
evaluations, technical tips and racing information.
WATERCRAFT BUSINESS serves industry professionals and focuses on new
products, sales techniques, recent developments and industry news.
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ARCHERY GROUP
BOWHUNTING WORLD is the archery equipment authority which provides
information on new equipment reviews and maintenance techniques, and features
articles which discuss ethical hunting, hunting rights, and pertinent
legislative issues.
3-D & TARGET ARCHERY is geared to recreational and competitive archery
participants and provides tournament information, reviews, technical tips, and
human interest features associated with this recreational activity.
ARCHERY BUSINESS is the leading trade publication for archery dealers and
presents a mix of industry news and trends, product reviews and sales tips
designed to improve financial performance of archery product dealers.
ATV GROUP
ATV MAGAZINE'S first issue was published in October 1995. The publication is
designed to reach large numbers of active ATV owners with comprehensive product
information during periods when equipment is purchased.
REGULATION
The Company's operations (including the operations of Camping World and
Ehlert) are subject to varying degrees of federal, state and local regulation.
Specifically, the Company's outbound telemarketing, direct mail, emergency road
service program, insurance and thrift and loan activities are currently subject
to regulation and may be subjected to increased scrutiny in the future. The
Company does not believe that such federal, state and local regulations
currently have a material impact on its operations. However, new regulatory
efforts impacting the Company's operations may be proposed from time to time in
the future at the federal, state and local level. There can be no assurance that
such regulatory efforts will not have a material adverse effect on the Company's
ability to operate its businesses or its results of operations.
COMPETITION
In general the Company's membership clubs, retail and catalog operations and
publications compete with numerous organizations in the recreation industry for
disposable income spent on leisure activities. By offering significant
membership benefits at a reasonable cost and actively marketing to club members,
the Company believes that it has been able to maintain a loyal following for its
membership organizations as evidenced by such clubs' high renewal rates. The
products and services marketed by the Company compete with similar products and
services offered by other providers. However, management believes that it is
able to use the large volume of purchases by its club members to secure
attractive pricing for the products and services marketed by the Company.
EMPLOYEES
As of December 31, 1996, AGI had 428 full-time and 19 part-time employees.
As of December 31, 1996, Camping World had 777 full-time and 176 part-time or
seasonal employees. As of December 31, 1996, Ehlert had 57 full-time and 2
part-time employees. The Company believes the relations with its employees are
good. None of the Company's employees is covered by a collective bargaining
agreement.
TRADEMARKS AND COPYRIGHTS
The Company owns a variety of registered trademarks, logos and service marks
for the names of its clubs, magazines and other publications. The Company also
owns the copyrights to certain articles in its publications. The Company
believes that its trademarks have significant value and are important to its
marketing efforts.
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PROPERTIES
In 1995, AGI moved its marketing, accounting and editorial functions from
Camarillo, California to a 74,100 square foot office in Ventura, California
leased through July, 2005 from an affiliate of AGI. The remainder of AGI's
continuing operations are conducted from 3,000 square feet of leased office
space in Tallahassee, Florida, 672 square feet of leased offices in Seattle,
Washington, 4,076 square feet of leased space in Elkhart, Indiana, 20,000 square
feet of leased office space in Lake Forest, Illinois and 2,000 square feet of
leased office space in Greenville, Michigan, and 60,000 square feet of owned
office space in Denver, Colorado (for its customer service, warehousing
fulfillment, and information system functions). AGI also leases data processing
and other office equipment. The previously occupied 49,500 square feet of office
space in Camarillo, California is under a lease expiring in 1998.
Camping World owns its corporate headquarters, comprised of approximately
26,000 square feet, in Bowling Green, Kentucky. The administrative offices and
mail order operations are located in the corporate headquarters. Camping World
leases the East Coast Distribution Center in Bowling Green, Kentucky, consisting
of approximately 104,000 square feet and 19 of Camping World's supercenters
pursuant to leases with terms generally ranging from 14 to 40 years and expire
in 2010 or later, including renewal terms, except as noted in the table below.
Camping World's leases generally provide for fixed monthly rentals with annual
escalation clauses. Camping World owns the remaining seven supercenters and owns
the approximately 81,500 square foot West Coast Distribution Center, including a
1,800 square foot retail showroom, in Bakersfield, California.
The table below sets forth certain information concerning Camping World's
supercenters:
<TABLE>
<CAPTION>
SQUARE OWNED/ LEASE
FEET ACRES LEASED EXPIRATION
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Location:
Mesa, AZ............................................................... 27,500 3.140 Leased 2010
La Mirada, CA.......................................................... 30,647 4.450 Owned --
El Cajon, CA........................................................... 33,892 3.068 Leased 1997(1)
Fairfield, CA.......................................................... 43,434 3.780 Leased 2020
Rocklin, CA............................................................ 29,085 4.647 Leased 2037
San Bernardino, CA..................................................... 18,126 1.665 Leased 2012
San Martin, CA......................................................... 29,486 5.000 Leased 2023
Valencia, CA........................................................... 58,800 9.310 Owned --
Denver, CO............................................................. 27,085 4.132 Leased 2037
Ft. Myers, FL.......................................................... 22,886 4.217 Leased 2012
Kissimmee, FL.......................................................... 56,850 6.043 Owned --
Tampa, FL.............................................................. 40,334 3.711 Leased 2026
Bolingbrook, IL........................................................ 25,126 5.299 Leased 2036
Bowling Green, KY...................................................... 38,368 2.895 Owned --
Belleville, MI......................................................... 44,197 8.790 Owned --
Rogers, MN............................................................. 24,700 6.303 Leased 2025
Bridgeport, NJ......................................................... 24,581 6.920 Leased 2031
Las Vegas, NV.......................................................... 25,850 4.400 Leased 2025
Brunswick, OH.......................................................... 17,900 4.087 Leased 2038
Wilsonville, OR........................................................ 32,850 4.653 Leased 2016
Myrtle Beach, SC....................................................... 38,935 5.690 Owned --
Nashville, TN.......................................................... 30,000 3.238 Owned --
Denton, TX............................................................. 22,984 6.887 Leased 2037
Mission, TX............................................................ 23,094 3.430 Leased 2015
Salt Lake City, UT..................................................... 27,675 8.031 Leased 2026
Fife, WA............................................................... 35,659 5.840 Leased 2032
</TABLE>
- ------------------------
(1) Camping World is relocating its El Cajon supercenter to a 26,000 square foot
facility located in San Marcos, CA leased until March 31, 2012.
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Ehlert leases its executive offices, comprised of 12,186 square feet, in
Minnetonka, Minnesota and a research facility of approximately 8,000 square feet
on 60 acres in Wisconsin.
LEGAL PROCEEDINGS
From time to time, AGI is involved in litigation arising in the normal
course of business operations. None of such current litigation is expected,
individually or in the aggregate, to have a material adverse effect on AGI.
From time to time, Camping World is involved in litigation arising in the
normal course of business operations. Camping World feels that its insurance
coverage is sufficient for its protection for liability. None of such litigation
is expected, individually or in the aggregate, to have a material adverse effect
on Camping World.
On February 7, 1997, Affinity Group Plans, Inc. (an entity not affiliated
with the Company) and National Alliance Insurance Company filed a complaint in
the United States District Court for the Eastern District of Missouri against
Camping World, a subsidiary of Camping World, and two of the directors of
Camping World (who were directors of Affinity Group Plans, Inc.) seeking damages
in excess of $125 million (and punitive damages in a like amount) alleging
breaches of contract, misrepresentations, misappropriation of information and
breaches of fiduciary duty in connection with the Company's preliminary
discussions with Camping World to purchase certain assets of Camping World
(excluding insurance marketing arrangements and related assets in which the
plaintiffs have an interest). The Company and the owners of Camping World have
structured the acquisition of Camping World by AGI as a stock purchase, which
will result in the insurance marketing arrangements and related assets in
dispute to remain as the assets and liabilities of Camping World. The Company
has advised the plaintiffs in this litigation that it recognizes the contractual
obligations of Camping World relating to such marketing arrangements and that it
intends to comply (and to cause Camping World to comply) with the terms of such
insurance marketing arrangements. The Company, Camping World and the defendant
directors believe the complaint to be without merit and that such litigation
will not have a material adverse effect on the Company.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- ------------------------------------------------------------------------
<S> <C> <C>
Stephen Adams............... 59 Chairman of the Board of the Company and AGI
Joe McAdams................. 53 President, Chief Executive Officer of the Company and AGI and Director
Wayne Boysen................ 66 Chairman of ATL and AINS and Director
David Frith-Smith........... 51 Director
Mark J. Boggess............. 41 Vice President and Chief Financial Officer of the Company and Senior
Vice President and Chief Financial Officer of AGI
Michael Schneider........... 43 Chief Operating Officer of AGI
David Block................. 48 Senior Vice President of AGI
Mark Dowis.................. 39 Senior Vice President of AGI
Roger Ryman................. 59 President of the Coast to Coast Clubs
Keith Urry.................. 60 President of the Golf Card Club
Thomas A. Donnelly.......... 40 President and Chief Executive Officer of Camping World and Director
John Ehlert................. 51 Director
David B. Garvin............. 53 Director
</TABLE>
Stephen Adams has been Chairman of the Company since its inception and of
AGI since its acquisition in December, 1988. Since the 1970's, Mr. Adams has
served as Chairman of privately-owned banking, bottling, publishing, outdoor
advertising, television and radio companies in which he holds a controlling
ownership interest. Mr. Adams is also Chairman and the controlling shareholder
of Adams Outdoor Advertising, Inc., the managing general partner of Adams
Outdoor Advertising Limited Partnership.
Joe McAdams has been President and Chief Executive Officer of the Company
since its inception and of AGI since July, 1991. Prior thereto and since
December of 1988, Mr. McAdams was President of Adams Publishing Corporation, a
newspaper and magazine publishing company controlled by Mr. Adams. From October,
1987 through November, 1988, Mr. McAdams was President and Publisher of Southern
California Publishing Co. Prior to October, 1987 and since 1961, Mr. McAdams has
held various management positions with publishing and direct marketing
companies, including Senior Vice President and Chief Operating Officer of ADVO
Systems, Inc. from August, 1981 to April, 1983.
Wayne Boysen was Senior Vice President of AGI since June, 1991 until his
retirement on January 1, 1996 and has supervised the staff of the risk
management divisions of businesses owned by Stephen Adams, including the
Company, since July, 1988. In addition, since their acquisition by AGI in 1995,
Mr. Boysen has served as Chairman of ATL and AINS. From 1966 through July, 1988,
Mr. Boysen owned or managed insurance agencies and provided consulting services
to property and casualty insurance agencies. Mr. Boysen has been a director of
the Company since its inception.
David Frith-Smith has served as managing partner of Biller, Frith-Smith &
Archibald, Certified Public Accountants, since 1988. Mr. Frith-Smith was a
principal in Maidy and Lederman, Certified Public
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Accountants, from 1980 to 1984, and with Maidy Biller Frith-Smith & Brenner,
Certified Public Accountants, from 1984 to 1988. Mr. Frith-Smith has been a
director of the Company since its inception. Mr. Frith-Smith is a director of
Adams Outdoor Advertising, Inc., the managing general partner of Adams Outdoor
Advertising Limited Partnership which is controlled by Stephen Adams, and
various private and non-profit corporations.
Mark J. Boggess has been Vice President and Chief Financial Officer of the
Company since its inception and Senior Vice President and Chief Financial
Officer of AGI since June, 1993. From June, 1992 through May, 1993, Mr. Boggess
was Vice President and Chief Financial Officer of Hypro Corporation, a privately
owned manufacturer of fluid transfer pumps. From June, 1989 through June, 1992,
Mr. Boggess was Treasurer of Adams Communications Corporation, a holding company
controlled by Stephen Adams which owned television and radio station operations
throughout the United States. From April, 1988 through May, 1989, Mr. Boggess
was Vice President and Chief Financial Officer of Econocom U.S.A., Inc., a
privately owned computer leasing company.
Michael Schneider has been Chief Operating Officer of AGI since 1996. Prior
thereto, Mr. Schneider served as Senior Vice President and General Counsel of
AGI since January 1993 and was responsible for administrative areas, development
of new corporate ventures, portions of the RV publication business and the
advertising and sales departments. Prior to January, 1993 and since 1977, Mr.
Schneider has held a variety of senior management positions in AGI's publication
business.
David Block has been Senior Vice President AGI since January, 1993 and is in
charge of member services, fulfillment, management information systems and
administration of AGI. Prior thereto and since 1988, Mr. Block held various
senior management positions with the Company or its predecessor in the areas of
management information systems and administration.
Mark Dowis has been Senior Vice President of AGI since January 1, 1995 and
is responsible for strategic and business planning, marketing, new business
development and venture initiatives for AGI. Prior to 1995 and since 1992, Mr.
Dowis was General Manager, Business Markets Division of the American Automobile
Association ("AAA") and prior to that post, he was the Managing Director of
Marketing and Research of the AAA. From 1989 to 1992, Mr. Dowis was an Associate
Administrator with the U.S. Department of Transportation in Washington, D.C.
Roger Ryman has been President of the Company's subsidiary which operates
the Coast to Coast clubs, since January, 1993 and was Executive Vice President
of such subsidiary since January, 1989. From September, 1986 through December,
1988, Mr. Ryman served as Vice President and Director of Resort Services for
Coast to Coast.
Keith W. Urry has been President of the Company's subsidiary which operates
the Golf Card club since January, 1991 and prior thereto was Executive Vice
President of such subsidiary since 1982. Mr. Urry is also on the Board of
Directors of the National Golf Foundation, an industry information organization.
Thomas A. Donnelly has served as President of Camping World since 1986 and
as its Chief Executive Officer since 1988. Mr. Donnelly joined Camping World in
1971 and served in various management positions until 1984, at which time he was
promoted to Senior Vice President, Operations. Mr. Donnelly and Mr. Garvin are
first cousins.
John Ehlert is the founder of Ehlert and has served as its President and
Chief Executive Officer since 1976 until its acquisition by AGI. Mr. Ehlert
serves on the board of directors of various trade, private and charitable
organizations.
David B. Garvin founded Camping World in 1966 and served as President of
Camping World from 1966 to 1986 and as its Chairman of the Board of Directors
since 1986. Mr. Garvin is also a director of Trans Financial Bancorp, Inc. Mr.
Garvin and Mr. Donnelly are first cousins.
Directors are elected for a term of one year or until their successors have
been duly elected.
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EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation paid by the Company to the Company's Chief Executive Officer and
each of the four other highest compensated current executive officers
(determined as of the end of the Company's year ended December 31, 1996) for the
years ended December 31, 1994, 1995 and 1996. All of the compensation was paid
by AGI or its subsidiaries during these periods since the Company was only
recently formed.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND ------------------------ OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- -------------------------------------------- --------- ---------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Stephen Adams............................... 1996 $ 699,992 $ 1,199,999 $ 53,953
Chairman of the Board 1995 699,992 1,200,000 25,555
1994 700,000 1,139,992 4,158
Joe McAdams, President...................... 1996 99,996 400,000 $ 1,226,933(3) 6,334
Chief Executive Officer 1995 99,996 390,000 240,000(3) 6,038
1994 99,996 370,000 5,860
Michael Schneider........................... 1996 182,145 138,350 7,482
Chief Operating Officer 1995 165,072 107,157 7,287
1994 156,829 148,070 7,289
Mark Boggess................................ 1996 173,326 115,000 7,482
Chief Financial Officer 1995 165,072 55,250 7,411
1994 157,187 75,000 3,544
David Block................................. 1996 173,326 8,112 7,860
Senior Vice President 1995 165,072 31,885 7,613
1994 157,212 35,000 6,930
</TABLE>
- ------------------------
(1) Personal benefits are the lesser of (i) 10% of total annual salary and bonus
(ii) $50,000, except as described in Note (3) below.
(2) Represents company contributions to 401(k) and split dollar life insurance
economic benefit.
(3) Under the terms of his phantom stock agreement, Mr. McAdams received
$1,226,933 in 1996 and $240,000 in 1995.
The Company does not have any outstanding stock options or restricted stock
grants. AGI has phantom stock agreements for certain of its officers. See
"--Agreements with Executive Officers."
AGREEMENTS WITH EXECUTIVE OFFICERS
Mr. Adams and AGI are parties to an employment agreement providing for his
employment as the Chairman of the Company through September 1, 1997. The base
salary for Mr. Adams is $700,000 and his incentive compensation is 3% of
operating profits (as defined in the agreement).
In January, 1992, AGI introduced a phantom stock incentive program for key
employees. Since that time, certain employees have been granted awards at
various interest levels and over varying vesting periods. The value of the
phantom stock interest is based on the increase in the value of AGI over the
base value at the award date. In accordance with the formula set forth in the
agreements, which formula approximates a multiple of operating profits and is
intended to approximate the fair market value of AGI, earned incentives are paid
in three annual installments following the earlier of (a) termination of
69
<PAGE>
employment, (b) sale of AGI, or (c) five years after the grant of the phantom
stock interest. The phantom stock agreements also set forth the terms of
employment for the executive.
The following table sets forth the current awards outstanding under the
program as of December 31, 1996. As of December 31, 1996, the aggregated accrued
liability under AGI's phantom stock incentive program was approximately $4.0
million.
<TABLE>
<CAPTION>
FULL VESTED
OFFICER/DIRECTOR INTEREST AMOUNT
- --------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Joe McAdams (1)............................................................ 2.00% 1.00%
Mike Schneider............................................................. 1.33% 1.31%
Mark Boggess............................................................... 0.33% 0.33%
David Block (2)............................................................ 0.10% 0.08%
Mark Dowis................................................................. 0.33% 0.02%
Roger Ryman................................................................ 0.10% 0.08%
All Other Employees........................................................ 0.20% 0.16%
</TABLE>
- ------------------------
(1) In October, 1995, AGI amended and extended the terms of Mr. McAdams' phantom
stock agreement. Under the amended agreement, Mr. McAdams is entitled to
$3.6 million payable in three equal installments beginning January, 1996. In
addition, Mr. McAdams was awarded a 2.0% phantom stock interest in October
1995 which vests in equal installments on the first two anniversaries of the
award.
(2) In addition, Mr. Block entered into a phantom stock agreement with a
subsidiary of AGI. Under the terms of such agreement, Mr. Block was granted
a 5% phantom interest in such subsidiary vesting 1% annually beginning
December 1996. The value of such phantom interest is based on the increase
in the value of such subsidiary and is based on formulas that are intended
to approximate the fair market value of the subsidiary.
The executive's base salary and annual bonus are determined from time to
time by the Board of Directors of AGI. In the event the executive's employment
is terminated without cause, the agreements provide for severance benefits of up
to one year's base salary plus the accrued bonus for the year in which such
termination occurs.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
AGI's Board of Directors determines the compensation of the executive
officers. The executive officers of the Company that serve on AGI's Board of
Directors are Stephen Adams and Joe McAdams. In addition, until his retirement
on January 1, 1996, Wayne Boysen was an executive officer of AGI.
BONUS PLAN
AGI annually adopts bonus programs for employees, including executive
officers other than Mr. Adams. Bonus payments are made based on achievement of
specified operating results.
401(K) SAVINGS AND PROFIT PLAN
AGI sponsors a deferred savings and profit sharing plan (the "401(k) Plan")
qualified under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"). All employees over age 21 who have completed one year
of service are eligible to participate in the 401(k) Plan. Eligible employees
may contribute to the 401(k) Plan up to 10% of their salary subject to an annual
maximum established under the Code and the Company matches these employee
contributions at the rate of 75% up to the first 6% of the employee's salary.
Employees may also make additional voluntary contributions.
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<PAGE>
OTHER BENEFIT PLANS
The Company employees receive certain medical and dental benefits during
their employment. A predecessor to the Company also provided eligible employees
with medical, dental and life insurance coverage after retirement. The estimated
future costs associated with such coverage to retirees is reserved as a
liability in the Company's consolidated financial statements. Current employees
are not provided with future medical and dental benefits upon retirement.
DIRECTOR COMPENSATION
The Company pays directors who are not also employees (Messrs. Boysen,
Ehlert, Frith-Smith and Garvin) director fees of $1,500 per month.
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<PAGE>
CERTAIN TRANSACTIONS
Effective June 1995, AGI entered into a lease agreement for its corporate
facilities in Ventura, California with AGI Real Estate Holdings, Inc. The owners
of AGI Real Estate Holdings, Inc. are minority shareholders of Holding, the
Company's parent company, and are also related to Stephen Adams, the Company's
Chairman. The lease extends for an initial term of 20 years. Upon execution of
the lease, the Company paid $1,650,000 as initial rent and pays monthly base
rent, commencing at $369,000 annually and increasing to $492,000, through year
ten of the lease. On the tenth anniversary of the lease, and extending through
the term of the initial lease, either party may compel the other party to enter
into a twenty year extension. The rental rate will be set based on the fair
value of the leased premises at the time of the extension. The Company believes
that such lease contain lease terms as favorable as lease terms that would be
obtained from independent third parties.
In 1995, AGI purchased $3.0 million of subordinated notes of Adams Outdoor
Advertising Limited Partnership ("AOALP") from Holding. Stephen Adams, the
Company's Chairman, is the principal owner of Holding and AOALP. The investment
and related accrued interest are included in note receivable from affiliate in
the accompanying balance sheet. On March 12, 1996 the notes were paid in full.
Included in income in the accompanying statement of operations for 1996 and 1995
is $54,000 and $113,000, respectively, of interest income related to these
notes.
Certain facilities used by AGI were leased until April, 1994 from
partnerships in which Stephen Adams was a majority partner. Aggregate rental
payments under the terms of the leases were approximately $101,000, and $305,000
during 1994, and 1993, respectively.
In 1992, Radio Group Corporation and Adams Radio of Charlotte, Inc.,
entities in which Stephen Adams was the Chairman and controlling shareholder,
consented to the appointment of receivers to effect a transfer of control of the
radio operations of such entities as part of a consensual restructuring of the
debt of such entities. In 1993, Adams Outdoor of Atlanta, Inc. ("Adams
Atlanta"), a corporation controlled by Stephen Adams, entered into a consensual
foreclosure agreement with its lenders. Adams Atlanta was acquired in 1988 in a
leveraged transaction, and ownership was transferred to its secured lender in
July 1993. In addition, in July 1993, a party whose claim was being disputed
filed an involuntary bankruptcy petition against Adams Atlanta. The petition was
withdrawn and dismissed three days after the filing.
Camping World leases seven facilities under long-term leases with
partnerships in which David B. Garvin, the founder and Chairman of Camping
World, and Thomas A. Donnelly, President of Camping World, are partners. For
Camping World's fiscal year ended September 30, 1996, payments under these
leases were approximately $2.1 million. The Company believes that such leases
contain lease terms as favorable as lease terms that would be obtained from
independent third parties.
Ehlert leases its research facility pursuant to a long-term lease with a
partnership in which John Ehlert, President of Ehlert, is a partner. For the
year ended December 31, 1996, the rental payments for such facility were
$42,000.
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<PAGE>
PRINCIPAL SHAREHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT
The Company is a wholly-owned subsidiary of Holding, a privately-owned
corporation. The following table sets forth, as of December 31, 1996 certain
information with respect to the beneficial ownership of the Common Stock of
Holding by each shareholder who is known to the Company to beneficially own more
than 5% of the outstanding shares, each executive officer and director of the
Company, and all executive officers and directors of the Company.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NAME AND ADDRESS COMMON STOCK PERCENT OF COMMON
OF BENEFICIAL OWNER OWNED(1) STOCK
- ---------------------------------------------------------------------------------- -------------- -----------------
<S> <C> <C>
Stephen Adams..................................................................... 1,404.7(2) 95.7%
2575 Vista Del Mar Drive
Ventura, CA 93001
Joe McAdams....................................................................... 3.0 (3)
Wayne Boysen...................................................................... -- --
David Frith-Smith................................................................. -- --
Mark J. Boggess................................................................... 0.2 (3)
Michael Schneider................................................................. -- --
David Block....................................................................... -- --
Mark Dowis........................................................................ -- --
Keith Urry........................................................................ -- --
Thomas A. Donnelly................................................................ -- --
John Ehlert....................................................................... -- --
David B. Garvin................................................................... -- --
All executive officers and directors as a group (12 persons)...................... 1,407.9 95.9%
</TABLE>
- ------------------------
(1) The beneficial owners have sole voting and investment power with respect to
the shares listed in the table.
(2) Does not include 50 shares owned by members of Mr. Adams' family who do not
reside with him.
(3) Less than 1.0%.
73
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
AGI CREDIT FACILITY
The AGI Credit Facility is a senior secured credit facility consisting of a
revolving line of credit of $45.0 million and a term loan of $30.0 million. The
interest rate on borrowings under the AGI Credit Facility is at variable rates
based on the ratio of total cash flow to outstanding indebtedness (as defined)
and AGI will pay a commitment fee of 0.5% per annum on the unused amount of its
revolving credit line.
If the Acquisitions, the Private Offering and the AGI Credit Facility were
consummated as of December 31, 1996, AGI would have had $30.0 million
outstanding under the AGI Credit Facility and $45.0 million of undrawn
commitments under the revolving line of credit. Of such undrawn commitments,
$22.3 million could have been borrowed under the limitations on indebtedness in
the AGI Indenture. The term loan will be amortized in equal quarterly
installments of $1.5 million. The AGI Credit Facility expires March 31, 2002.
The Company has guaranteed the obligations of AGI under the AGI Credit Facility
and pledged the stock of AGI to secure its guaranty.
The AGI Credit Facility contains certain restrictive covenants on AGI and
its subsidiaries including, but not limited to, mergers, change in the nature of
the business, acquisitions, additional indebtedness, sale of assets,
investments, payment of dividends, and minimum coverage ratios pertaining to
interest expense, fixed charges, levels of consolidated cash flow and cash flow
leverage ratio. Substantially all of AGIs assets are pledged as collateral under
the terms of the AGI Credit Facility. As long as AGI is not in default under the
AGI Credit Facility, AGI may make dividend distributions to the Company to
enable the Company to pay the debt service on the Notes and the Ehlert Note and
to pay the management incentive payments to certain Camping World executives.
AGI NOTES
In October 1993, AGI issued a total of $120 million of senior subordinated
notes. The AGI Notes bear interest at the rate of 11 1/2%, and mature on October
15, 2003. No sinking fund payments are required. The AGI Notes are unsecured
obligations of AGI and are subordinated in right of payment to the senior
indebtedness (as defined) of AGI, including the AGI Credit Facility, but will
rank senior or PARI PASSU with all other existing indebtedness and future
indebtedness of AGI. The AGI Notes are guaranteed by all of the subsidiaries of
AGI other than ATL and its parent corporation. The AGI Indenture governing the
AGI Notes contains certain restrictive covenants including, but not limited to,
mergers, change in the nature of the business, acquisitions, additional
indebtedness, sale of assets, investments, payment of dividends, and minimum
coverage ratios pertaining to interest expense, fixed charges, levels of
consolidated cash flow and cash flow leverage ratio. The AGI Indenture limits
indebtedness that can be outstanding under the AGI Credit Facility to 150% of
AGI's consolidated cash flow (as defined) for the immediately preceding four
fiscal quarters. The AGI Notes may be redeemed by AGI beginning October 15, 1998
at a redemption price of 104.313% which decreases annually until it reaches 100%
from and after October 15, 2001.
After giving pro forma effect to the application of the net proceeds from
the Private Offering, AGI would have had the ability to make a distribution to
the Company in the amount of $122.4 million as of December 31, 1996 under the
terms of the AGI Indenture.
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<PAGE>
DESCRIPTION OF THE NOTES
The Original Notes were issued, and the New Notes will be issued under an
indenture to be dated as of April 2, 1997 (the "Indenture") between the Company
and United States Trust Company of New York, as trustee (the "Trustee"). The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"), as in effect from time to time. The Notes are subject to all such terms,
and holders of the Notes are referred to the Indenture and the TIA for a
statement of them.
The following is a summary of the material terms and provisions of the
Notes. This summary does not purport to be a complete description of the Notes
and is subject to the detailed provisions of, and qualified in its entirety by
reference to, the Notes and the Indenture (including the definitions contained
therein.) 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
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The form of the New Notes and the Original Notes are
identical in all material respects except that the New Notes will have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer. The New Notes will not represent new indebtedness of
the Company, will be entitled to the benefits of the same Indenture which
governs the Original Notes and will rank pari passu with the Original Notes. Any
provisions of the Indenture which require actions by or approval of a specified
percentage of Original Notes shall require the approval of the holders of such
percentage of principal amount of Original Notes and New Notes, in the
aggregate.
GENERAL
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. Principal of, premium,
if any, and interest on the Notes will be payable, and the Notes will be
transferable, at the corporate trust office or agency of the Trustee in the City
of New York maintained for such purposes at 114 West 47th Street, New York, New
York 10036. In addition, interest may be paid by wire transfer or check mailed
to the person entitled thereto as shown on the register for the Notes. No
service charge will be made for any registration of transfer or exchange of the
Notes, except for any tax or other governmental charge that may be imposed in
connection therewith. Any Notes that remain outstanding after the completion of
the Exchange Offer, together with the Exchange Notes issued in connection with
the Exchange Offer, will be treated as a single class of securities under the
Indenture. See "Exchange Offer; Registration Rights."
MATURITY, INTEREST AND PRINCIPAL
The Notes are general unsecured obligations of the Company, limited to
$130,000,000 in aggregate principal amount, and will mature on April 1, 2007.
Interest on the Notes will accrue at the rate of 11% PER ANNUM and will be
payable semi-annually on each October 1 and April 1, commencing October 1, 1997,
to the holders of record of Notes at the close of business on September 15 and
March 15 immediately preceding such interest payment date. Interest on the Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the original date of issuance (the "Issue Date").
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Interest on overdue principal and (to the extent permitted by
law) on overdue installments of interest will accrue at a rate increasing to a
maximum of 13% PER ANNUM.
The Notes are not entitled to the benefit of any mandatory sinking fund.
75
<PAGE>
RANKING
The Notes are general unsecured obligations of the Company and, except as
otherwise provided herein, rank pari passu in right of payment with all existing
and future unsubordinated indebtedness of the Company. The Notes will rank
senior in right of payment to all existing and future subordinated indebtedness
of the Company. However, the Notes are effectively subordinated to the claims of
secured creditors of the Company to the extent of the value of the assets
securing such secured Indebtedness. The Notes are effectively subordinated to
all existing and future claims of creditors of the subsidiaries of the Company,
including AGI. See "Risk Factors--Structural Subordination."
REDEMPTION
OPTIONAL REDEMPTION. The Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after April 1 , 2002, 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
12-month period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 105.500%
2003.............................................................................. 103.667%
2004.............................................................................. 101.833%
2005 and thereafter............................................................... 100.000%
</TABLE>
In addition to the optional redemption of the Notes in accordance with the
provisions of the preceding paragraph, on or prior to April 1, 2000, the Company
may use the net proceeds of one or more Public Equity Offerings to redeem up to
30% of the originally issued aggregate principal amount of Notes at a redemption
price of 110% of the aggregate principal amount thereof, plus accrued and unpaid
interest to the redemption date; PROVIDED, HOWEVER, that at least $75 million
aggregate principal amount of Notes remains outstanding immediately after giving
effect to any such redemption (it being expressly agreed that for purposes of
determining whether this condition is satisfied, Notes owned by the Company or
any of its Affiliates shall be deemed not to be outstanding).
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not listed
on a national securities exchange, on a PRO RATA basis, by lot or by such method
as the Trustee shall deem fair and appropriate, provided, however, that no Note
of $1,000 or less shall be redeemed in part. Notice of redemption shall be
mailed by first-class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption.
CHANGE OF CONTROL
In the event of a Change of Control (see "--Certain Definitions"), the
Company shall notify the holders of Notes and the Trustee in writing of such
occurrence (the date of such occurrence being the "Change of Control Date") and
shall make an offer to purchase (the "Change of Control Offer"), on a business
day (the "Change of Control Payment Date") not later than 60 days following the
Change of Control Date, all Notes then outstanding at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the Change of Control Payment Date.
76
<PAGE>
Notice of a Change of Control Offer shall be mailed by the Company to the
holders of Notes not less than 30 days nor more than 45 days before the Change
of Control Payment Date. The Change of Control Offer is required to remain open
for at least 20 business days and until the close of business on the business
day next preceding the Change of Control Payment Date. No assurance can be given
that the Company will have sufficient funds to repurchase the Notes upon a
Change of Control or that the performance of the Change of Control Offer would
not constitute an event of default in respect of the Company's other
indebtedness.
The Change of Control provisions do not apply in the event of certain
transactions with certain permitted holders including Stephen Adams and his
Affiliates. In addition, these provisions are not intended to afford the Holders
of the Notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or other similar transaction involving the
Company that may adversely affect the Holders of the Notes, but does not
constitute a Change of Control. However, the Indenture contains limitations on
the ability of the Company to incur additional indebtedness and to engage in
certain mergers, consolidations and sales of assets, whether or not a Change of
Control is involved. See "--Limitation on Additional Indebtedness,"
"--Disposition of Proceeds of Assets Sales" and "--Consolidation, Merger,
Conveyance, Transfer or Lease."
A Change of Control would also constitute a default under the Senior Credit
Facility. If any such default occurred and was not remedied within any
applicable grace period, the lenders thereunder would be entitled to declare all
amounts outstanding thereunder to be immediately due and payable, and the
ability of the Holders to receive the Change of Control purchase price for the
Notes could be impaired. There can be no assurance that sufficient funds will be
available at the time of any Change of Control to satisfy the obligations of the
Company under any Change of Control Offer which it might make or to repay the
Notes or other Indebtedness which may become payable at that time.
Clause (i) of the definition of "Change of Control" includes a sale, lease,
exchange or other transfer of "all or substantially all" of the assets of the
Company to a Person or Group of Persons. There is little case law interpreting
the phrase "all or substantially all" in the context of an Indenture. Because
there is no precise established definition of this phrase, there may be
uncertainty as to whether a Change of Control has occurred as a result of any
particular sale, lease, exchange or other transfer of assets of the Company. Any
such uncertainty may adversely affect the enforceability of the Change of
Control provisions of the Indenture.
None of the provisions relating to a redemption upon a Change of Control are
waiveable by the Board of Directors of the Company or the Trustee. See
"--Amendments and Waivers."
The Company will comply with any tender offer rules under the Securities
Exchange Act of 1934, as amended, which may then be applicable, including but
not limited to Rule 14e-1, in connection with any Change of Control Offer
required to be made by the Company to repurchase the Notes as a result of a
Change of Control.
PROVISION OF FINANCIAL INFORMATION
Pursuant to the Indenture, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will distribute or cause to be
distributed to holders of the Notes copies of the financial information that
would have been contained in such annual reports and quarterly reports that the
Company would have been required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act. Such financial information shall include annual
reports containing consolidated financial statements and notes thereto, together
with an opinion thereon expressed by an independent public accounting firm,
management's discussion and analysis of financial condition and results of
operations as well as quarterly reports containing unaudited condensed
consolidated financial statements for the first three quarters of each fiscal
year.
77
<PAGE>
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture.
LIMITATION ON ADDITIONAL INDEBTEDNESS. The Indenture provides that the
Company shall not, and shall not permit any of its Subsidiaries to, incur (as
defined), any Indebtedness (including Acquired Indebtedness) other than
Permitted Indebtedness, provided, however, that the Company and its Subsidiaries
may incur Indebtedness (including Acquired Indebtedness) and interest, premium,
fees and other obligations associated therewith if, immediately after giving pro
forma effect to the incurrence thereof, the Fixed Charge Coverage Ratio of
Company would be greater than or equal to 2.0:1 if such proposed incurrence is
on or prior to April 1, 2000 and 2.25:1 thereafter.
LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. The Indenture provides that
the Company shall not make and shall not permit any of its Subsidiaries to make
any Investments, except: (i) Permitted Investments and (ii) Investments
permitted to be made under the "Limitation on Restricted Payments" covenant
described below.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
shall not make, and shall not permit any of its 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 after giving effect to such Restricted Payment;
(b) at the time of and immediately after giving pro forma effect to such
Restricted Payment, the Company could incur at least $1 of Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation on
Additional Indebtedness" covenant above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after April 2 , 1997
through and including the date of such Restricted Payment (the "Base
Period") does not exceed the sum of (1) 50% of the Company's Consolidated
Net Income (or in the event such Consolidated Net Income shall be a deficit,
minus 100% of such deficit) during the Base Period, and (2) 100% of the
aggregate Net Proceeds and the Fair Market Value of marketable securities
and property received by the Company from (x) the issue or sale, during the
Base Period of Capital Stock (other than Disqualified Stock) of the Company
or any Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company which has been so converted, exercised or exchanged,
as the case may be, and (y) dividends or other distributions received by the
Company from any Unrestricted Subsidiary. 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 will not prohibit (i) the payment of any
dividend 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,
it being understood that the obligation to pay such declared dividend shall
constitute Permitted Indebtedness; (ii) the retirement of any shares of Capital
Stock or subordinated Indebtedness of the Company in exchange for, by conversion
into, 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 Stock); (iii) the redemption or retirement of
subordinated Indebtedness of the Company in exchange for, by conversion into, or
out of the Net Proceeds of the substantially concurrent incurrence of
subordinated Indebtedness of the Company (other than any such subordinated
Indebtedness owing to a Subsidiary of the Company) that is contractually
subordinated in right of payment to the Notes and that is permitted to be
incurred in accordance with the covenant described under "Limitation on
Additional Indebtedness" above; (iv) Prior Accrued Bonus Payments; PROVIDED,
HOWEVER, that (x) the aggregate amount of all such payments made after the Issue
Date does not
78
<PAGE>
exceed $4,000,000 and (y) no Default or Event of Default shall have occurred and
be continuing at the time of or after giving effect to such payments; (v)
Permitted Tax Distributions; or (vi) the making of any Permitted Investment.
In determining the amount of Restricted Payments permissible under
subparagraph (c) above, amounts expended pursuant to clauses (i) and (ii) above
shall be included as Restricted Payments.
LIMITATION ON LIENS. The Indenture provides that the Company will not, and
will not cause or permit any of its Subsidiaries to, directly or indirectly,
create, incur, assume or permit or suffer to exist any Liens of any kind against
or upon any property or assets of the Company or any of its Subsidiaries
(whether owned on the Issue Date or acquired after the Issue Date) or any
proceeds therefrom, or assign or otherwise convey any right to receive income or
profits therefrom unless (a) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens at least to the same extent as the Notes are senior in
priority to such Indebtedness and (b) in all other cases, the Notes are equally
and ratably secured. Notwithstanding the foregoing, the following liens may be
created, incurred or assumed:
(a) Liens existing as of the Issue Date to the extent and in the manner
such Liens are in effect on the Issue Date;
(b) Permitted Liens;
(c) Liens on the assets or property of a Subsidiary of the Company
existing at the time such Subsidiary became a Subsidiary of the Company and
not incurred as a result of (or in connection with or in anticipation of)
such Subsidiary's becoming a Subsidiary of the Company; PROVIDED, HOWEVER,
that such Liens do not extend to or cover any property or assets of the
Company or any of its Subsidiaries (other than the property or assets of the
Subsidiary so acquired);
(d) Liens securing (x) Permitted Senior Indebtedness and (y) Refinancing
Indebtedness incurred to refinance the AGI Notes;
(e) any Lien securing Capitalized Lease Obligations, PROVIDED, HOWEVER,
that such Capitalized Lease Obligations are incurred in compliance with the
"Limitations on Additional Indebtedness" covenant and PROVIDED, HOWEVER,
that such Liens do not extend to or cover any property or assets of the
Company or any of its Subsidiaries (other than the property or assets
subject to such Capitalized Lease Obligations);
(f) Liens pursuant to leases and subleases of real property which do not
interfere with the ordinary conduct of the business of the Company or any of
its Subsidiaries and which are made on customary and usual terms applicable
to similar properties;
(g) Liens securing Indebtedness which is incurred to refinance or
replace Indebtedness which has been secured by a Lien permitted under the
Indenture and is permitted to be refinanced or replaced under the Indenture;
PROVIDED, HOWEVER, that (i) such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries not securing
the Indebtedness so refinanced or replaced and (ii) such Liens are no less
favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
refinanced;
(h) Liens to secure all or a part of the purchase price of assets or
property acquired in the ordinary course of business after the Issue Date;
PROVIDED, HOWEVER, that (a) any such Lien is created solely for the purpose
of securing Indebtedness representing, or incurred to finance, the cost of
the item of property subject thereto, (b) the principal amount of
Indebtedness secured by such Lien does not exceed the lesser of the cost or
Fair Market Value of the asset or property so acquired, (c) such Lien does
not extend to or cover any other property other than such acquired item of
property and
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shall attach to such property within 90 days of the acquisition thereof and
(d) the incurrence of the Indebtedness secured by such Lien is permitted by
paragraph (a) of the "Limitation on Additional Indebtedness" covenant
described above;
(i) Liens securing reimbursement obligations under letters of credit but
only in or upon the goods the purchase of which was financed by such letters
of credit; and
(j) other Liens securing obligations in a principal amount in the
aggregate at any one time of not more than $10,000,000.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Indenture provides that the Company shall not, and shall not
permit any Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective or enter into any
agreement with any Person that would cause or create any consensual encumbrance
or restriction of any kind on the ability of any Subsidiary of the Company to
(a) pay dividends, in cash or otherwise, or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits owned by the Company or a Subsidiary of the Company, (b) make any loans
or advances to, or pay any Indebtedness owed to, the Company or any Subsidiary
of the Company or (c) transfer any of its properties or assets to the Company or
to any Subsidiary of the Company, except, in each case, for such encumbrances or
restrictions existing under or contemplated by or by reason of (i) the Notes or
the Indenture, (ii) any restrictions existing under or contemplated by
agreements in effect on the Issue Date, including, without limitation,
restrictions under the AGI Indenture and the Senior Credit Facility as in effect
on the Issue Date, (iii) any restrictions contained in agreements entered into
after the Issue Date which do not restrict the ability of any Subsidiary of the
Company to pay dividends or make distributions in amounts sufficient to pay
interest under the Notes, principal and interest on the Ehlert Note and
obligations under the management incentive compensation agreements with certain
Camping World executives so long as no default is continuing by the Company or
any Subsidiary under any such agreement entered into after the Issue Date, (iv)
any restrictions, with respect to a Subsidiary of the Company that is not a
Subsidiary of the Company on the Issue Date, in existence at the time such
Person becomes a Subsidiary of the Company (but not created in contemplation of
such Person becoming a Subsidiary), (v) any restrictions existing under any
agreement that refinances or replaces an agreement containing a restriction
permitted by clause (i), (ii), (iii) or (iv) above, PROVIDED, HOWEVER, that the
terms and conditions of any such restrictions are not materially less favorable
in the aggregate to the holders of the Notes than those under or pursuant to the
agreement being replaced or the agreement evidencing the Indebtedness refinanced
or replaced and (vi) restrictions imposed by applicable law or regulation or by
regulatory authorities having jurisdiction over such Subsidiary.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Indenture provides that the
Company shall not, and shall not permit any of its Subsidiaries to, enter into
any Sale-Leaseback Transaction. Notwithstanding the foregoing, the Company and
its Subsidiaries may enter into Sale-Leaseback Transactions if (i) after giving
pro forma effect to any such Sale-Leaseback Transaction, the Company shall be in
compliance with the "Limitation on Additional Indebtedness" covenant described
above, (ii) the sale price in such Sale-Leaseback Transaction is at least equal
to the Fair Market Value of such property, and (iii) the Company or such
Subsidiary shall apply the Net Cash Proceeds of the sale as provided under
"Disposition of Proceeds of Asset Sales" below, to the extent required by such
provision.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture provides that the
Company shall not, and shall not permit any of its Subsidiaries to, make any
Asset Sale unless (a) such Asset Sale is for Fair Market Value, (b) the net
proceeds therefrom consist of at least 85% cash or Cash Equivalents (with
Indebtedness of the Company or its Subsidiaries assumed by the purchaser being
counted as cash for such purposes if the Company and its Subsidiaries are
permanently released from all liability therefor) (provided, however, that this
clause (b) shall not be applicable to any Asset Sale that (i) the consideration
with respect to which does not exceed $5,000,000 or (ii) pertains to assets
which did not contribute more than five percent of
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Consolidated Cash Flow for the four full fiscal quarters immediately preceding
the date of the Asset Sale) and (c) the Company shall commit to apply or to
cause its Subsidiaries to apply the Net Cash Proceeds of such Asset Sale within
180 days of receipt thereof, and shall apply such Net Cash Proceeds within 270
days of receipt thereof, as follows:
(i) first, to satisfy all mandatory repayment obligations, if any, under
any Permitted Indebtedness, if any, arising by reason of such Asset Sale,
including a permanent reduction in the related commitment;
(ii) second, out of any Net Cash Proceeds remaining after application of
Net Cash Proceeds pursuant to the preceding paragraph (i) (the "Available
Amount"), the Company shall make an offer to purchase (the "Asset Sale
Offer") from all Holders of Notes, up to a maximum principal amount
(expressed as a multiple of $1,000) of Notes equal to the Available Amount
at a purchase price of 100% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase; PROVIDED, HOWEVER,
that the Company will not be required to apply pursuant to this paragraph
(ii) Net Cash Proceeds received from any Asset Sale if, and only to the
extent that, such Net Cash Proceeds are committed in writing to be applied
to acquire or construct property or assets in lines of business related to
the Company's or its Subsidiaries' businesses within 180 days after the
consummation of such Asset Sale and are so applied within 270 days after the
consummation of such Asset Sale (and, after such application, the amount so
applied shall no longer constitute a part of the Available Amount), and
PROVIDED, HOWEVER, further, that the Company may defer the Asset Sale Offer
until there is an aggregate unutilized Available Amount equal to or in
excess of $5,000,000 (at which time the entire unutilized Available Amount
and not just the amount in excess of $5,000,000 shall be applied as required
pursuant to this paragraph). The Asset Sale Offer shall remain open for a
period of 20 business days or such longer period as may be required by law.
To the extent the Asset Sale Offer is not fully subscribed to by the holders
of the Notes, the Company may retain such unutilized portion of the Net Cash
Proceeds. To the extent that the aggregate amount of Notes tendered pursuant
to an Asset Sale Offer is less than the Available Amount, the Company may
use such deficiency for general corporate purposes.
The Company will comply with any tender offer rules under the Securities
Exchange Act of 1934, as amended, which may then be applicable, including but
not limited to Rule 14e-1, in connection with any offer required to be made by
the Company to repurchase the Notes as a result of an Asset Sale.
LIMITATION ON PREFERRED STOCK ISSUANCES BY SUBSIDIARIES. The Indenture
prohibits the Company from causing or permitting the issuance by any Subsidiary
of any Capital Stock other than common stock or causing or permitting any
Subsidiary to at any time have outstanding any shares of Capital Stock other
than common stock, except issuances of Capital Stock to the Company or a
Wholly-Owned Subsidiary of the Company, PROVIDED, HOWEVER, that the Company or
such Wholly-Owned Subsidiary of the Company, as the case may be, is at all times
the sole beneficial and record owner of such Capital Stock.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that the
Company shall not, and the Company shall not permit, cause, or suffer any
Subsidiary of the Company to, conduct any business or enter into any transaction
or series of transactions with or for the benefit of any Affiliate of the
Company or any of its Subsidiaries or any holder of 5% or more of any class of
Capital Stock of the Company (each an "Affiliate Transaction"), except in good
faith and on terms that are, in the aggregate, no less favorable to the Company
or such Subsidiary, as the case may be, than those that could have been obtained
in a comparable transaction on an arm's-length basis from a Person not an
Affiliate of the Company or such Subsidiary. All Affiliate Transactions (and
each series of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value in excess of
$1,000,000 shall be approved by a majority of the Board of Directors of the
Company, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has, in good faith, determined that such transaction complies
with the foregoing provisions. If the Company or any Subsidiary enters into an
Affiliate
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Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate value of more than $5,000,000, the Company or
such Subsidiary shall, prior to the consummation thereof, obtain a favorable
opinion as to the fairness of such transaction or series of related transactions
to the Company or the relevant Subsidiary, as the case may be, from a financial
point of view, from an Independent Financial Advisor and file the same with the
Trustee. Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (A) contractual obligations in existence on the date
of the Indenture and extensions and replacements thereof to the extent such
extension or replacement, as the case may be, does not materially amend or
change any substantive term or provision of such contract, (B) Restricted
Payments permitted under the LIMITATION ON RESTRICTED PAYMENTS covenant
described above, (C) customary directors' fees, consulting fees, indemnification
and similar arrangements, and employee salaries and bonuses and (D) transactions
between the Company and any of its Wholly-Owned Subsidiaries or among
Wholly-Owned Subsidiaries of the Company.
COMPANY OWNERSHIP OF AGI CAPITAL STOCK. The Company will at all times be
the beneficial and record owner of all of the outstanding Capital Stock of AGI,
subject only to the pledge thereof to secure Permitted Senior Indebtedness.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Indenture provides that, the Company shall not consolidate with or merge
with or into or sell, assign, convey, lease or transfer all or substantially all
of its properties and assets as an entirety to any Person or group of affiliated
Persons in a single transaction or through a series of transactions, unless
after giving effect thereto: (a) the Company shall be the continuing Person or
the resulting, surviving or transferee Person (the "surviving entity") shall be
a corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia; (b) the surviving entity shall
expressly assume, by a supplemental indenture executed and delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee, all of
the obligations of the Company under the Notes and the Indenture; (c)
immediately before and immediately after giving effect to such transaction or
series of transactions (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), no Default or Event of Default shall
have occurred and be continuing; (d) the Company or the surviving entity, as the
case may be, shall immediately before and immediately after giving effect to
such transaction or series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of the transaction or series of transactions) have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction or series of transactions; (e) immediately
after giving effect to such transaction or series of transactions, the Company
or the surviving entity, as the case may be, could incur $1.00 of Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation on Additional
Indebtedness" covenant above; (f) the Company or the surviving entity shall have
delivered to the Trustee an Officer's Certificate stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction or series of
transactions, such supplemental indenture complies with this covenant and that
all conditions precedent in the Indenture relating to the transaction or series
of transactions have been satisfied; and (g) the Company would not thereupon
become obligated with respect to any Indebtedness, nor any of its property
become subject to any Lien, unless the Company could incur such Indebtedness or
create such Lien under the Indenture. Notwithstanding the foregoing, either the
Company or AGI may consolidate with or merge with or into or sell, assign,
convey, loan or transfer all or substantially all of its properties and assets
as an entirety to the other in a single transaction or series of transactions,
if after giving effect thereto, either the Company or AGI shall be the surviving
entity and in the event that AGI is the surviving entity, AGI shall expressly
assume, by a supplemental indenture executed and delivered to the Trustee, in
form and substance reasonably satisfactory to the Trustee, all of the
obligations of the Company under the Notes and the Indenture.
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EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(i) default in the payment of any interest on the Notes when it
becomes due and payable and continuance of such default for a period of
30 days; or
(ii) default in the payment of the principal of or premium, if any,
on the Notes when due (including by reason of a default in payment upon
an offer to purchase pursuant to the "Change of Control" or "Disposition
of Proceeds of Asset Sales" covenants described above); or
(iii) default in the performance, or breach, of any covenant in the
Indenture (other than defaults specified in clause (i) or (ii) above) and
continuance of such default or breach for a period of 30 days after
written notice thereof has been given to the Company by the Trustee or to
the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Notes; or
(iv) failure by the Company or any of its Material Subsidiaries to
perform any term, covenant, condition or provision of one or more classes
or issues of other Indebtedness in an aggregate principal amount of
$5,000,000 or more, which failure results in an acceleration of the
maturity thereof and such Indebtedness shall not have been repaid or such
acceleration rescinded within 30 days of such acceleration of maturity;
or
(v) one or more judgments, orders or decrees for the payment of
money in excess of $5,000,000, either individually or in an aggregate
amount, shall be entered against the Company, any of its Material
Subsidiaries or any of their respective properties and shall not be
discharged, and there shall have been a period of 60 days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(vi) certain events of bankruptcy or insolvency with respect to the
Company or any Material Subsidiary shall have occurred.
If an Event of Default occurs and is continuing, then the holders of at
least 25% in principal amount of the outstanding Notes may, by written notice,
and the Trustee upon the request of the holders of not less than 25% in
principal amount of the outstanding Notes shall, declare the principal of,
premium, if any, and accrued interest on all the Notes to be due and payable
immediately. Upon any such declaration such principal, premium, if any, and
accrued interest shall become due and payable immediately. If an Event of
Default specified in (vi) occurs with respect to the Company and is continuing,
then the principal of, premium, if any, and accrued interest on all the Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder.
After a declaration of acceleration, the holders of a majority in aggregate
principal amount of outstanding Notes may, by notice to the Trustee, rescind
such declaration of acceleration if all existing Events of Default have been
cured or waived, other than nonpayment of principal of, premium, if any, and
accrued interest on the Notes that has become due solely as a result of such
acceleration, and if the rescission of acceleration would not conflict with any
judgment or decree. The holders of a majority in principal amount of the
outstanding Notes also have the right to waive past defaults under the Indenture
except a default in the payment of the principal of, premium, if any, or
interest on any Note or in respect of a covenant or a provision which cannot be
modified or amended without the consent of all holders.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder unless the holders of at least
25% in principal amount of the outstanding Notes have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee, the Trustee has failed to institute such proceeding within 15 days
after receipt of such notice and the Trustee has not within such 15-day period
received directions inconsistent with such written request from holders of a
majority in principal amount of the outstanding Notes. Such limitations do not
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apply, however, to a suit instituted by a holder of a Note for the enforcement
of the payment of the principal of or premium, if any, or accrued interest on
such Note on or after the due date expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
shall have offered the Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, the holders of a
majority in principal amount of the outstanding Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee.
DEFEASANCE
The Company may at any time terminate all of its obligations with respect to
the Notes ("defeasance"), except for certain obligations, including those
regarding any trust established for a defeasance and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain agencies in respect of the Notes. The Company may
at any time terminate its obligations under certain covenants set forth in the
Indenture, some of which are described under "Certain Covenants" above, and any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Notes issued under the Indenture ("covenant
defeasance"). In order to exercise either defeasance or covenant defeasance, the
Company must irrevocably deposit in trust with the Trustee, for the benefit of
the holders of the Notes, money or U.S. government obligations, or a combination
thereof, in such amounts as will be sufficient to pay the principal of, premium,
if any, and interest on the Notes to redemption or maturity and comply with
certain other conditions, including the delivery of an opinion as to certain tax
matters.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of Notes)
as to all outstanding Notes when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation or (b) (i) all such Notes not theretofore delivered to
the Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee as trust funds
in the trust for the purpose an amount of money sufficient to pay and discharge
the entire indebtedness on the Notes not theretofore delivered to the Trustee
for cancellation, for principal, premium, if any, and accrued interest to the
date of such deposit; (ii) the Company has paid all sums payable by it under the
Indenture; and (iii) the Company has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of the Notes at maturity
or redemption, as the case may be. In addition, the Company must deliver an
Officers' Certificate and an Opinion of Counsel stating that all conditions
precedent to satisfaction and discharge have been complied with.
AMENDMENTS AND WAIVERS
From time to time the Company, when authorized by resolution of its Board of
Directors, and the Trustee may, without the consent of the holders of the Notes,
amend, waive or supplement the Indenture or the Notes for certain specified
purposes, including, among other things, curing ambiguities, defects or
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inconsistencies, maintaining the qualification of the Indenture under the Trust
Indenture Act or making any change that does not adversely affect the rights of
any holder. Other amendments and modifications of the Indenture or the Notes may
be made by the Company and the Trustee with the consent of the holders of not
less than a majority of the aggregate principal amount of the outstanding Notes;
PROVIDED, HOWEVER, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby, (i) reduce the
principal amount outstanding, extend the fixed maturity, or alter the redemption
provisions of the Notes, (ii) change the currency in which any Notes or any
premium or accrued interest thereon is payable, (iii) reduce the percentage in
principal amount outstanding of Notes necessary for consent to an amendment,
supplement or waiver or consent to take any action under the Indenture or the
Notes, (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes, (v) waive a default in payment with
respect to the Notes, (vi) reduce the rate or extend the time for payment of
interest on the Notes, (vii) change the Company's obligation to purchase Notes
upon the occurrence of a Change of Control (or change the definition thereof) or
an Asset Sale in accordance with the Indenture or waive any default in the
performance thereof or (viii) affect the ranking of the Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used 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 existing at the time
such Person becomes a Subsidiary of the Company or assumed in connection with an
Asset Acquisition of such Person, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such Person's becoming a
Subsidiary of the Company or such acquisition.
"Affiliate" of any specified Person means any other Person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) or purchase or
acquisition of Capital Stock by the Company or any of its Subsidiaries to or in
any other Person, in either case as a result of which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with or
into the Company or any of its Subsidiaries or (ii) any acquisition by the
Company or any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(including by means of sale-leaseback) or other disposition by the Company or a
Subsidiary to any Person (including any Unrestricted Subsidiary) other than the
Company or a Subsidiary of the Company that is not an Unrestricted Subsidiary,
in one transaction or a series of related transactions, of (i) any Capital Stock
of any Subsidiary of the Company or (ii) any other property or asset of the
Company or any Subsidiary of the Company, in each case other than (x) in the
ordinary course of business, (y) isolated transactions in which the
consideration received does not exceed $100,000 individually and (z) NAFE or the
assets thereof. For the purposes of this definition, the term "Asset Sale" shall
not include sales of receivables not a part of a sale of the business from which
they arose or any disposition of all or substantially all of the properties and
assets of the Company that is governed under and complies with the
"Consolidation, Merger, Conveyance, Transfer or Lease" covenant described above.
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"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors of the Company and to be in full force and effect on the date of
such certification and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(PROVIDED, HOWEVER, that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $250,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except any
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or at least P-1 by Moody's Investors Service, Inc.; (iv) repurchase
agreements and reverse repurchase agreements relating to marketable obligations,
directly or indirectly, issued or unconditionally guaranteed by the United
States of America or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the
date of acquisition; PROVIDED, HOWEVER, that the terms of such agreements comply
with the guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency; (v) instruments backed by letters of credit of institutions
satisfying the requirements of clause (ii) above; (vi) mutual funds or similar
securities, not less than 80 percent of the assets of which are invested in
securities of the type referred to in clauses (i) through (v) above, including
without limitation the UST Master Government Fund; and (vii) in the case of any
Subsidiary which is regulated by an insurance regulating authority, instruments
permitted to be invested in by such regulatory authority at the time such
investment was made.
"Change of Control" means (i) the direct or indirect sale, lease, exchange
or other transfer of all or substantially all of the assets of the Company to
any Person or entity or group of Persons or entities acting in concert as a
partnership or other group (a "Group of Persons") other than a Permitted Holder,
(ii) the merger or consolidation of the Company with or into another corporation
with the effect that a person or group of persons, other than Permitted Holders
are or become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the surviving corporation of such merger or the
corporation resulting from such consolidation representing 50% or more of the
combined voting power of the then outstanding securities of the surviving
corporation ordinarily (and apart from rights arising under special
circumstances) having the right to vote in the election of directors, (iii) the
replacement of a majority of the Board of Directors of the Company, over a
two-year period, from the directors who constituted such Board of Directors at
the beginning of such period, and (x) such replacement shall not have been
approved by a vote of at least a majority of the Board of Directors then still
in office who either were members of the Board of Directors at the beginning of
such period or whose election as a member of the Board of Directors was
previously so approved or (y) such replacement shall not have been approved by a
Permitted Holder, PROVIDED, HOWEVER, that a Permitted Holder is the beneficial
holder (within the meaning of Rule 13(d)-3 under the Exchange Act) of more than
50 percent of the combined voting power of the then outstanding securities of
the Company or (iv) any instance when a Person or Group of Persons
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(other than Permitted Holders) shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, have become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of securities of the Company representing 49% or more of the combined voting
power of the then outstanding securities of the Company ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors.
"Consolidated Cash Flow" means, with respect to any Person for any period,
without duplication, the Consolidated Net Income of such Person for such period
increased (to the extent deducted in determining Consolidated Net Income during
such period) by the sum of: (i) all United States Federal, state and foreign
income taxes of such Person paid or accrued according to GAAP for such period
(other than income taxes attributable to extraordinary gains and losses); (ii)
all interest expense of such Person paid or accrued in accordance with GAAP (net
of any interest income and exclusive of deferred financing fees) for such period
(including amortization of original issue discount and the interest portion of
deferred payment obligations); (iii) depreciation; (iv) amortization including,
without limitation, amortization of capitalized debt issuance costs; and (v) any
other non-cash charges to the extent deducted from Consolidated Net Income
(including non-cash expenses recognized in accordance with Financial Accounting
Standards Bulletin Number 106 and excluding any non-cash charge to the extent
that it requires an accrual of or a reserve for cash disbursements for any
future period).
"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; PROVIDED,
HOWEVER, that (a) the Net Income of any Person (the "Other Person") in which the
Person in question or one of its Subsidiaries has a joint interest with a third
party (which interest does not allow 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 other than AGI of the Person in question that is
subject to any contractual restriction or limitation on the payment of dividends
or the making of other distributions shall be excluded to the extent of such
restriction or limitation, (c)(i) the Net Income (or loss) 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, (d) extraordinary gains and
losses, and the related income tax effect according to GAAP, shall be excluded,
(e) charges with respect to Indebtedness (and related warrant interests) retired
with the proceeds of the Notes shall be excluded, (f) charges for amortization
of goodwill in excess of amortization on a straight-line, 40 year basis shall be
excluded, (g) Consolidated Net Income shall be calculated without deducting
therefrom any accruals made for phantom stock arrangements between the Company
or any Subsidiary with key employees, (h) Net Income (loss) pertaining to
discontinued operations (including NAFE), shall be excluded, and (i) all gains,
losses, charges or write-offs with respect to an election to be taxed as an "S
corporation" under Subchapter S of the Internal Revenue Code shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any date of
determination, the consolidated stockholders' equity represented by the shares
of such Person's Capital Stock (other than Disqualified Stock) outstanding at
such date, as determined on a consolidated basis in accordance with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or
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otherwise, or is exchangeable for Indebtedness, or is redeemable at the option
of the holder thereof, in whole or in part, in each case on or prior to the
maturity date of the Notes.
"Fair Market Value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value or fair value shall be determined by a majority of the Board of
Directors acting in good faith and shall be evidenced by a Board Resolution
delivered to the Trustee. No such determination need be supported by an
appraisal or other expert opinion and such determination by the Board of
Directors shall be conclusive.
"Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio
of (i) Consolidated Cash Flow of such Person for the four full fiscal quarters
for which financial statements are available that immediately precede the date
of the transaction or other circumstances giving rise to the need to calculate
the Fixed Charge Coverage Ratio (the "Transaction Date") to (ii) all cash and
non-cash interest expense (including capitalized interest) of such Person and
its Subsidiaries determined in accordance with GAAP (net of any interest income
of such Person and its subsidiaries and exclusive of deferred financing fees of
such Person and its Subsidiaries and excluding interest in respect of the
management incentive payments to certain Camping World executives entered into
at the time of the Camping World acquisition) and the aggregate amount of cash
dividends or other distributions declared or paid on Capital Stock (other than
Common Stock) of such Person and its Subsidiaries, in each case for such four
full fiscal quarter period. For purposes of this definition, if the Transaction
Date occurs prior to the date on which the Company's consolidated financial
statements for the four full fiscal quarters subsequent to the Issue Date are
first available, then "Consolidated Cash Flow" and the items referred to in the
preceding clause (ii) shall be calculated, in the case of the Company, after
giving effect on a pro forma basis as if the Notes outstanding on the
Transaction Date were issued on the first day of such four full fiscal quarter
period. In addition to and without limitation of the foregoing two sentences,
for purposes of this definition, "Consolidated Cash Flow" and the items referred
to in the preceding clause (ii) shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
retirement, as the case may be, of any Indebtedness of such Person or any of its
Subsidiaries at any time during the period (the "Reference Period") (A)
commencing on the first day of the four full fiscal quarter period for which
financial statements are available that precedes the Transaction Date and (B)
ending on and including the Transaction Date, including, without limitation, the
incurrence of the Indebtedness giving rise to the need to make such calculation,
as if such incurrence occurred on the first day of the Reference Period;
PROVIDED, HOWEVER, that if such Person or any of its Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such Person
or Subsidiary had directly incurred such guaranteed Indebtedness and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or any of its Subsidiaries (including any Person who becomes a
Subsidiary as a result of the Asset Acquisition) incurring Acquired
Indebtedness) occurring during the Reference Period and any retirement of
Indebtedness in connection with such Asset Sales, as if such Asset Sale or Asset
Acquisition and/or retirement occurred on the first day of the Reference Period;
PROVIDED, HOWEVER, that pro forma Consolidated Cash Flow shall be calculated
taking into account the results of operations attributable to the assets which
are the subject of the Asset Sale or Asset Acquisition during the Reference
Period, but in the case of Asset Acquisitions, only to the extent derived from
historical financial statements with respect to such operations; PROVIDED,
HOWEVER, further, that pro forma Consolidated Cash Flow attributable to any
Asset Acquisition shall be included only to the extent that Consolidated Cash
Flow of such Person is otherwise includible in the referent Person's
Consolidated Cash Flow. Furthermore, in calculating the denominator (but not the
numerator) of this "Fixed Charge Coverage Ratio," (1) subject to clause (3)
below, interest on Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to accrue at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
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Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate
based upon a factor of a prime or similar rate shall be deemed to have been in
effect; and (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"GAAP" means generally accepted accounting principles in effect on the Issue
Date as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
"incur" means, with respect to any Indebtedness (including Acquired
Indebtedness) or other obligation of any Person, to create, issue, incur (by
conversion, exchange or otherwise), assume or guaranty or otherwise become,
directly or indirectly, liable for or with respect to the payment of such
Indebtedness or other obligation.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (A) 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), (B) evidenced by a note, debenture or
similar instrument, letter of credit or draft accepted (including a purchase
money obligation) representing extensions of credit whether or not representing
obligations for borrowed money or (C) for the payment of money relating to a
Capitalized Lease Obligation or other obligation relating to the deferred
purchase price of any property or services (other than property or services
purchased on ordinary trade terms therefor) which purchase price is payable over
a period in excess of six months or is evidenced by a note, invoice or similar
written instrument with a maturity in excess of six months; (ii) any liability
of others of the kind described in the preceding clause (i) which the Person has
guaranteed or which is otherwise its legal liability; (iii) any obligation
secured by a lien to which the property or assets of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability; and (iv) any and all
deferrals, renewals, extensions, replacements, refinancings, and refundings of,
or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) or (iii). Notwithstanding
the foregoing, Indebtedness shall not include (i) obligations of any Subsidiary
of the Company engaged in the insurance business with respect to insurance
policies or similar contracts written by such Subsidiary in the ordinary course
of its insurance business and (ii) obligations of the Company or any Subsidiary
with respect to non-competition agreements, consulting agreements with certain
executives of Camping World or the Company with respect to management incentive
agreements with certain Camping World executives in connection with the
acquisition of the stock of Camping World by AGI. Notwithstanding any other
provision of the foregoing definition, guaranties of Indebtedness otherwise
included in a determination of such amount shall not be deemed "Indebtedness" of
the Company or any Subsidiaries for purposes of this definition.
"Independent Financial Advisor" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is, in the good faith
judgment of the Board of Directors of the Company, qualified to perform the task
such firm has been engaged and disinterested and independent with respect to the
Company and its Affiliates.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
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"Investments" means any capital contribution, advance or loans to (including
any guarantees of loans to), or investments or purchases of Capital Stock in,
any Person.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, hypothecation, assignment for security or other security
agreement of any kind or nature whatsoever. For purposes of the Indenture, a
Person shall be deemed to own subject to a Lien any property which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such Person.
"Material Subsidiary" means a Subsidiary of the Company which would
constitute a "significant subsidiary" of the Company within the meaning of
Regulation S-X, under the Securities Act of 1933, as amended, of the Securities
and Exchange Commission.
"NAFE" means the National Association of Female Executives, Inc., a
subsidiary of AGI.
"Net Cash Proceeds" means, with respect to any Asset Sale the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents net of (i) brokerage commissions and other reasonable fees and
expenses (including, without limitation, fees and expenses of counsel,
accountants and investment bankers) related to such Asset Sale; (ii) provisions
for all taxes payable as a result of such Asset Sale; (iii) payments made to
retire Indebtedness secured by the assets subject to such Asset Sale; and (iv)
appropriate amounts to be provided by the Company or any of its Subsidiaries, as
the case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any of its
Subsidiaries, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"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 (other
than Disqualified Stock) by the Company, the aggregate net proceeds received by
the Company, 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 a majority of
the Board of Directors of the Company, at the time of receipt), (b) in the case
of any exchange, exercise, conversion or surrender of outstanding securities of
any kind of the Company 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) and (c) in the case of the
issuance of any Indebtedness by the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
incurred therewith.
"Permitted Holder" means Stephen Adams, his spouse and lineal descendants
and trusts for the exclusive benefit of any of the foregoing persons and any
Affiliate of Stephen Adams.
"Permitted Indebtedness" means:
(a) Indebtedness under the Notes and the Indenture;
(b) Permitted Senior Indebtedness;
(c) Indebtedness and guarantees (plus interest, premium, fees and
other obligations associated therewith) not otherwise referred to in this
covenant outstanding on the Issue Date;
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(d) Indebtedness in respect of Interest Rate Protection Obligations
incurred in the ordinary course of business to the extent that the
national principal amount of such Indebtedness does not exceed, at the
time of the making of such Interest Rate Protection Obligations, the
principal amount of Indebtedness to which such Interest Rate Protection
Obligations relate;
(e) Indebtedness of a Wholly-Owned Subsidiary issued to and held by
the Company or a Wholly-Owned Subsidiary in respect of the intercompany
advances or transactions;
(f) Indebtedness incurred in connection with or arising out of
Capitalized Lease Obligations not to exceed $7,500,000 at any one time
outstanding;
(g) Refinancing Indebtedness; and
(h) Other Indebtedness of the Company or any Subsidiary that does not
exceed $10,000,000 in the aggregate at any one time outstanding.
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of:
(i) Investments by the Company in any Wholly-Owned Subsidiary and
Investments or loans in or to the Company or a Subsidiary by any
Subsidiary;
(ii) Investments represented by accounts receivable created or
acquired in the ordinary course of business;
(iii) advances to employees in the ordinary course of business not to
exceed an aggregate of $2,000,000 outstanding at any one time;
(iv) Investments under or pursuant to Interest Rate Protection
Obligations;
(v) Investments by any Subsidiary of the Company engaged in the
insurance business that are made in the ordinary course of its insurance
business and is permitted by applicable insurance laws and regulations;
(vi) Cash Equivalents;
(vii) Investments in the Notes;
(viii) Investments existing on the Issue Date; and
(ix) Investments made after the Issue Date in Affinity Thrift and
Loan or Affinity Group Thrift Holding Corp. that do not exceed $5,000,000
in the aggregate outstanding at any one time; and
(x) Investments made after the Issue Date that do not exceed
$10,000,000 in the aggregate outstanding at any one time.
"Permitted Liens" means, with respect to any Person, any lien arising by
reason of (a) any attachment, judgment, decree or order of any court, so long as
such lien is being contested in good faith and is either adequately bonded or
execution thereon has been stayed pending appeal or review, and any appropriate
legal proceedings which may have been duly initiated for the review of such
attachment, judgment, decree or order shall not have been finally terminated or
the period within which such proceedings may be initiated shall not have
expired; (b) taxes, assessments or governmental charges not yet delinquent or
which are being contested in good faith; (c) security for payment of workers'
compensation or other insurance; (d) security for the performance of tenders,
bids, leases and contracts (other than contracts for the payment of money); (e)
deposits to secure public or statutory obligations or in lieu of surety or
appeal bonds or to secure permitted contracts for the purchase or sale of any
currency entered into in the ordinary course of business; (f) operation of law
in favor of carriers, warehousemen, landlords, mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for sums
which
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are not yet delinquent or are being contested in good faith by negotiations or
by appropriate proceedings which suspend the collection thereof; (g) any
interest or title of a lessor under any lease; (h) security for surety or appeal
bonds; and (i) easements, rights-of-way, zoning and similar covenants and
restrictions and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount and which do not in any case materially
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries.
"Permitted Senior Indebtedness" means any Indebtedness (plus interest,
premium, fees and other obligations associated therewith) and refinancing,
refunding, replacement, renewal or extension thereof, under (a) the Senior
Credit Facility and (b) any other Indebtedness outstanding (plus interest,
premium, fees and other obligations associated therewith) and any refinancing,
refunding, replacement, renewal or extension thereof; PROVIDED, HOWEVER, that at
the time of incurrence of Indebtedness under this clause (b) the sum of the
aggregate principal amount of outstanding Indebtedness incurred under clauses
(a) and (b) of this definition does not exceed 150% of the Consolidated Cash
Flow of the Company for the immediately preceding four fiscal quarters;
PROVIDED, FURTHER, that at the time of any refinancing, refunding, replacement,
renewal, extension or amendment of the Senior Credit Facility that increases the
aggregate revolving credit and/or term loan commitments thereunder to an amount
in excess of $75,000,000, the sum of such commitments under such refinanced,
refunded, renewed, extended or amended Senior Credit Facility (regardless of the
amount actually borrowed thereunder) plus the aggregate principal amount of
outstanding Indebtedness incurred under clause (b) of this definition does not
exceed 150% of the Consolidated Cash Flow of the Company for the immediately
preceding four fiscal quarters; PROVIDED, HOWEVER, that if the Indebtedness
which is the subject of a determination under this provision is Acquired
Indebtedness, or Indebtedness incurred with a simultaneous Asset Acquisition,
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 the assumption of such Acquired Indebtedness or such
other Indebtedness by the Company and the inclusion in the Company's
Consolidated Cash Flow or the Consolidated Cash Flow of the acquired Person,
business, property or assets; PROVIDED, HOWEVER, that in the case of any
Indebtedness (regardless of whether or not such Indebtedness is incurred
pursuant to clause (a) or (b) of this definition), the provider of such
Indebtedness may rely on a representation from the senior financial officer of
the Company to the effect that the incurrence of such Indebtedness does not
violate the provisions of this Indenture and the incurrence of Indebtedness
subject to such representation shall thereupon be deemed to be Permitted Senior
Indebtedness owed to such provider, but nothing in this proviso shall preclude
the existence of any Default or Event of Default in the event such Indebtedness
is incurred in violation of this Indenture.
"Permitted Tax Distributions" means, for so long as the Company is an "S
corporation" or a substantially similar pass-through entity for federal income
tax purposes, distributions to AGI Holding Corp. (or any successor entity or
other entity that owns, directly or indirectly, all of the outstanding common
stock of the Company) based on reasonable estimates of the amount of federal,
state and local income taxes that the Company would be required to pay with
respect to a fiscal year calculated as if, for the applicable fiscal year, the
Company were treated as a "C corporation" domiciled in the State of California
rather than as an "S corporation".
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Prior Accrued Bonus Payments" means payments of amounts accrued prior to
the Issue Date pursuant to Article II of the phantom stock agreements (the
"Phantom Compensation") entered into, in writing, between the Company or any of
its Subsidiaries and its officers prior to December 31, 1996 or substitutions to
or replacements of such Article of such agreements.
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"Public Equity Offering" means an underwritten registered public offering of
Capital Stock (other than Disqualified Stock) of the Company or AGI Holding
Corp. (or any successor) pursuant to a registration statement that has been
declared effective by the Commission.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
renews, replaces or extends any Indebtedness of the Company or any Subsidiary
outstanding at the Issue Date or other Indebtedness permitted to be incurred by
the Company or the Subsidiaries pursuant to the terms of the Indenture, whether
involving the same or any other lender or creditor or group of lenders or
creditors, 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) if the Refinancing Indebtedness matures, in whole or part, before the
maturity date of the Notes, the Refinancing Indebtedness 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 to maturity of the Indebtedness
being refunded, refinanced or extended, and (iv) the Refinancing Indebtedness is
in an aggregate principal amount that is less than or equal to the aggregate
principal or accreted amount (in the case of any Indebtedness issued with
original issue discount) then outstanding (plus any applicable prepayment
premiums or penalties and accrued interest thereon) under the Indebtedness being
refunded, refinanced or extended.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any 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 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 Subsidiaries of the Company, dividends or
distributions payable to the Company or to a 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 Subsidiaries, (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 Indebtedness
acquired in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition), (iv) payments of Phantom Compensation other than Prior Accrued
Bonus Payments, (v) the making of any Investment in any Person other than a
Permitted Investment. If a Restricted Payment is made in other than cash, the
value of any such payment shall be determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution to be
filed with the Trustee.
"Sale-Leaseback Transaction" means any arrangement with any Person providing
for the leasing by the Company or any Subsidiary of the Company of any real or
tangible personal property, which property (i) has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing and (ii) would constitute an Asset Sale if such property had been
sold in an outright sale thereof.
"Senior Credit Facility" means the credit facility evidenced by the Credit
Agreement dated April 2, 1997 among AGI, the guarantor parties thereto, the
several lenders from time to time party thereto, and Fleet National Bank, as
agent together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements from time to time may be amended, amended and restated,
supplemented or otherwise modified, from time to time, including any agreement
extending the maturity of, refinancing, replacing, consolidating, or otherwise
restructuring (including adding Subsidiaries of the Company as additional
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and
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whether by the same or any other agent, lender or group of lenders and whether
or not increasing the amount of Indebtedness that may be incurred thereunder.
"Subsidiary" means, with respect to any Person, (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors shall at the time be owned, directly or
indirectly, by such Person, by a Subsidiary of such Person or by such Person and
a Subsidiary of such Person, or (ii) any other Person (other than a corporation)
of which at least a majority of voting interest is at the time, directly or
indirectly, owned by such Person, by a Subsidiary of such Person or by such
Person and a Subsidiary of such Person. Unless specifically provided to the
contrary herein, Unrestricted Subsidiaries shall not be included in the
definition of Subsidiaries for any purpose of the Indenture (other than for the
purposes of the definition of "Unrestricted Subsidiary" herein).
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be or continue to be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and, (ii) any
Subsidiary of an Unrestricted Subsidiary; PROVIDED, HOWEVER, that Affinity
Thrift and Loan and Affinity Group Thrift Holding Corp. shall initially
constitute Unrestricted Subsidiaries. The Board of Directors may (i) designate
any entity which is not a Subsidiary to be an Unrestricted Subsidiary and (ii)
may designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary that is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED, HOWEVER, that (x) either (A) the Subsidiary to be so
designated has total assets of $10,000 or less or (B) if such Subsidiary has
assets greater than $10,000, such designation would be permitted under the
"Limitation on Investments, Loans and Advances" covenant described above and (y)
immediately before and after giving effect to the designation of such Subsidiary
as an Unrestricted Subsidiary the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the "Limitation on
Additional Indebtedness" covenant described above. The Board of Directors may
designate any Unrestricted Subsidiary to be a Subsidiary; PROVIDED, HOWEVER,
that immediately after giving effect to such designation (x) the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under
the "Limitation on Indebtedness" covenant described above and (y) no Event of
Default or Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Wholly-Owned Subsidiary" means any Subsidiary all of the outstanding
Capital Stock of which (other than directors' qualifying shares) is owned,
directly or indirectly, by the Company.
94
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
The Old Notes were initially issued in the form of a Global Note (the
"Original Global Note"). Except for New Notes issued to Non-global Purchases (as
defined below), the New Notes will initially be issued in the form of one or
more Global Notes (collectively, the "New Global Notes"). The Original Global
Note was deposited on the date of closing of the sale of the Original Notes, and
the New Global Notes will be deposited on the date of closing of the Exchange
Offer, with or on behalf of the Depositary and registered in the name of CEDE &
Co., as nominee of the Depositary (such nominee being referred to herein as the
"DTC Nominee").
Notes that are (i) originally issued to or transferred to "institutional
accredited investors" that are not "qualified institutional buyers," as defined
in Rule 144A under the Securities Act (the "Non-Global Purchasers") or (ii)
issued as described below under "--Certificated Securities" will be issued in
registered form, without interest coupons (the "Certificated Securities"). Upon
the transfer to a qualified institutional buyer of Certificated Securities
initially issued to a Non-Global Purchaser, such Certificated Securities will,
unless the Global Notes have previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Notes representing the
principal amount of Notes being transferred. "Global Notes" means the Original
Global Notes or the New Global Notes as the case may be.
DTC is (i) a limited purpose trust company organized under the banking laws
of the State of New York (and is a "banking organization" within the meaning of
such laws), (ii) a member of the Federal Reserve System, (iii) a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, as
amended, and (iv) a "Clearing Agency" registered pursuant to Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations (the "participants") and to facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes to the accounts of its participants. DTC's participants
include securities brokers and dealers, commercial banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its direct participants and by each of the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to DTC's systems 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.
Persons who are not participants may beneficially own securities held by or on
behalf of the DTC only through the DTC's director indirect participants.
Pursuant to procedures established by the Depositary (i) upon deposit of the
Global Notes, the Depositary will credit the accounts of participants in
connection with the Notes with portions of the principal amount of the Global
Notes and (ii) ownership of the Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's participants), the
Depositary's participants and the Depository's indirect participants.
So long as DTC's Nominee is the registered owner of the Global Notes, DTC or
DTC's Nominee, as the case may be, is considered the sole owner and holder under
the Indenture of the underlying Notes. Unless DTC notifies the Company that it
is unwilling or unable to continue serving as depositary for such Notes, DTC
ceases to be a clearing agency registered under the Exchange Act, the Company
determines to permit the Global Notes to be exchanged for certificated Notes or
an Event of Default has occurred and is continuing with respect to the Note,
owners of beneficial interests in the Global Notes will not be entitled to have
the Notes evidenced by the Global Note registered in their names, will not
receive or be entitled to receive physical delivery of certificated Notes in
definitive and fully registered form, and will not be considered to be the
owners or holders of any Notes under the Indenture or such Notes for any
purposes. Neither the Company nor the Trustee have any responsibility or
liability for any aspect of the records of DTC or for maintaining, supervising
or reviewing any records of DTC relating to the Notes.
95
<PAGE>
Payments in respect of the principal of, premium, if any, and interest on
the Global Notes are payable by the Trustee to DTC or DTC's nominee, as the case
may be, as the registered holder under the Indenture. Under the terms of the
Indenture, the Company and the Trustee may treat the persons in whose names
Notes are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has any
responsibility or liability of the payment of such amounts to beneficial owners
of Notes (including principal, premium, if any, Liquidated Damages, if any, and
interest). The Company believes, however, that it is currently the policy of DTC
to immediately credit the accounts of the relevant participants with such
payments, in amounts proportionate to their respective holdings of beneficial
interests in the relevant security as shown on the records of DTC. Payments by
DTC's direct and indirect participants to the beneficial owners of Notes are
governed by standing instructions and customary practice and are the
responsibility of DTC's direct and indirect participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in
the Global Notes may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such Person or Persons (or
the nominee of any thereof). All such certificated Original Notes would be
subject to the legend requirements described herein under "Notice to Investors."
In addition, if (i) the Company notifies the Trustee in writing that DTC is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Securities under the Indenture, then, upon surrender by
DTC's Nominee of its Global Notes, Notes in such form will be issued to each
Person that DTC's Nominee and DTC identify as being the beneficial owner of the
related Notes.
Neither the Company nor the Trustee are liable for any delay by DTC or DTC's
Nominee, as the case may be, in identifying the beneficial owners of Notes and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from DTC or DTC's Nominee for all purposes.
Neither DTC nor DTC's Nominee will consent or vote in any manner with
respect to the Notes. Pursuant to its customary procedures, in the case of any
matter as to which the consent or vote of holders of the Notes is sought, DTC
will mail an Omnibus Proxy to the Company as soon as practicable after the
record date for the determination of holders eligible to consent or vote on the
matter to be acted upon. The Omnibus Party serves to assign DTC's Nominee's
right to consent or vote to the direct participants whose accounts it maintains
as of the record date.
Notices of redemption and repurchase with respect to Notes held by direct
participants in the DTC system will be forwarded to DTC's Nominee. In the case
of a partial redemption, DTC's practice is to determine, by lot, the amount of
the beneficial interest in the Notes to be redeemed of each of its direct
participants.
Beneficial owners who elect to participate in a tender offer or purchase of
their securities, must provide notice of such election, through its direct or
indirect participant in DTC's system, to the appropriate depositary, tender or
purchase agent, and effect delivery of their Notes by causing the direct
participant in DTC's system to transfer the indirect participants interest in
the Notes, as reflected in DTC's records, to such depositary, tender or purchase
agent. The requirement for physical delivery of certificates evidencing the
Notes in connection with aforementioned transactions will be deemed satisfied
when the beneficial ownership rights in the Global Notes are transferred by
direct participants on DTC's records.
The conveyance of all notices and other communications by DTC to its direct
participants, among DTC's direct and indirect participants and by DTC's direct
and indirect participants to owners of beneficial interests in the Notes is
governed by customary arrangements among them, subject to statutory or
regulatory requirements in effect with respect thereto from time to time.
96
<PAGE>
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Notes among participants of DTC, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
have any responsibility for the performance by DTC or its participants of their
respective obligations under the rules and procedures governing their
operations.
97
<PAGE>
PLAN OF DISTRIBUTION
Each 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 broker-dealer in
connection with resales of New Notes received in exchange for Original Notes
where such Original Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of 165
days after the effective date of this Prospectus, it will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
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 at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells 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 broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 165 days after the effective date of this Prospectus, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that request
such documents in the Letter of Transmittal. The Company has agreed, in
connection with the Exchange Offer, to indemnify the Initial Purchaser against
certain liabilities, including liabilities under the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives New
Notes pursuant to the Exchange Offer hereby agrees to notify the Company prior
to using the Prospectus in connection with the sale or transfer of New Notes,
and acknowledges and agrees that, upon receipt of notice from the issuers of the
happening of any event which makes any statement in the Prospectus untrue in any
material respect or which requires the making of any changes in the Prospectus
in order to make the statements therein not misleading (which notice the Company
agrees to deliver promptly to such broker-dealer), such broker-dealer will
suspend use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented prospectus to such broker-dealer.
LEGAL MATTERS
The legality of the New Notes being offered hereby have been passed upon for
the Company by Kaplan, Strangis and Kaplan, P.A., Minneapolis, Minnesota.
98
<PAGE>
EXPERTS
The consolidated financial statements of Affinity Group Holding, Inc. and
its subsidiaries as of December 31, 1996 and 1995 and for each of the three
years in the period ended December 31, 1996 and of Camping World, Inc. and its
subsidiaries as of September 30, 1996 and 1995 and for each of the three years
in the period ended September 30, 1996, included in this Prospectus, and the
related financial statement schedules, included elsewhere in the Registration
Statement, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the Registration
Statement, and are included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
99
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AFFINITY GROUP HOLDING, INC.
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995.............. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994..................................................... F-4
Consolidated Statements of Stockholder's Deficit for the years ended
December 31, 1996, 1995 and 1994........................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994..................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
CAMPING WORLD, INC.
Consolidated Balance Sheet as of December 31, 1996 (unaudited)............ F-22
Consolidated Statements of Operations for the three months ended December
31, 1996 and 1995 (unaudited)........................................... F-23
Consolidated Statements of Cash Flows for the three months ended December
31, 1996 and 1995 (unaudited)........................................... F-24
Notes to Consolidated Financial Statements (unaudited).................... F-25
Independent Auditors' Report.............................................. F-26
Consolidated Balance Sheets as of September 30, 1996 and 1995............. F-27
Consolidated Statements of Earnings for the years ended September 30,
1996, 1995 and 1994..................................................... F-28
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 1996, 1995 and 1994....................................... F-29
Consolidated Statements of Cash Flows for the years ended September 30,
1996, 1995 and 1994..................................................... F-30
Notes to Consolidated Financial Statements................................ F-31
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Affinity Group Holding, Inc. and subsidiaries
We have audited the accompanying consolidated balance sheets of Affinity
Group Holding, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholder's deficit, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Affinity Group Holding, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
March 7, 1997 (April 2, 1997 with respect to Note 19)
Denver, Colorado
F-2
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 4,278 $ 3,833
Investments............................................................................. 499 1,514
Accounts receivable, less allowance for doubtful accounts of $1,081 in 1996 and $926 in
1995.................................................................................. 14,812 15,054
Note receivable from affiliate.......................................................... -- 3,113
Inventories............................................................................. 2,473 3,873
Prepaid expenses and other assets....................................................... 6,052 5,376
Deferred tax asset-current.............................................................. 2,228 1,907
Net current assets of discontinued operations........................................... -- 457
---------- ----------
Total current assets.................................................................. 30,342 35,127
PROPERTY AND EQUIPMENT.................................................................... 10,550 10,769
LOANS RECEIVABLE.......................................................................... 13,134 8,474
INTANGIBLE ASSETS......................................................................... 109,065 115,009
DEFERRED TAX ASSET........................................................................ 13,516 16,503
RESTRICTED INVESTMENTS.................................................................... 2,137 2,015
OTHER ASSETS.............................................................................. 4,411 4,530
NET LONG-TERM ASSETS OF DISCONTINUED OPERATIONS........................................... 973 5,272
---------- ----------
$ 184,128 $ 197,699
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable........................................................................ $ 4,517 $ 4,426
Accrued interest........................................................................ 2,966 3,058
Accrued liabilities..................................................................... 14,516 16,269
Customer deposits....................................................................... 14,979 10,974
Current portion of long-term debt....................................................... 5,344 4,665
Net current liabilities of discontinued operations...................................... 1,464 --
---------- ----------
Total current liabilities............................................................. 43,786 39,392
DEFERRED REVENUES......................................................................... 70,113 68,702
LONG-TERM DEBT............................................................................ 142,031 159,831
OTHER LONG-TERM LIABILITIES............................................................... 7,632 7,737
COMMITMENTS AND CONTINGENCIES............................................................. -- --
---------- ----------
263,562 275,662
---------- ----------
STOCKHOLDER'S DEFICIT:
Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and
outstanding........................................................................... 1 1
Additional paid-in capital.............................................................. 12,021 12,021
Accumulated deficit..................................................................... (91,456) (89,985)
---------- ----------
Total stockholder's deficit........................................................... (79,434) (77,963)
---------- ----------
$ 184,128 $ 197,699
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Membership services........................................................ $ 98,901 $ 99,194 $ 91,185
Publications............................................................... 41,078 40,043 37,601
---------- ---------- ----------
139,979 139,237 128,786
COSTS APPLICABLE TO REVENUES:
Membership services........................................................ 57,003 54,203 51,795
Publications............................................................... 29,571 29,700 27,148
---------- ---------- ----------
86,574 83,903 78,943
GROSS PROFIT................................................................. 53,405 55,334 49,843
OPERATING EXPENSES:
General and administrative................................................. 16,326 18,376 13,615
Depreciation and amortization.............................................. 8,340 9,013 11,020
---------- ---------- ----------
24,666 27,389 24,635
---------- ---------- ----------
INCOME FROM OPERATIONS....................................................... 28,739 27,945 25,208
NON-OPERATING EXPENSE:
Interest expense, net...................................................... (16,518) (16,433) (16,716)
Other non-operating charges, net........................................... (996) (1,579) (811)
---------- ---------- ----------
(17,514) (18,012) (17,527)
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EXTRAORDINARY ITEM................................. 11,225 9,933 7,681
INCOME TAX (EXPENSE) BENEFIT................................................. (6,144) (5,047) 13,255
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS............................................ 5,081 4,886 20,936
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net of applicable deferred
income tax benefit of $384 in 1996 and deferred income tax expense of
$264 in 1995 and $162 in 1994............................................ (686) 430 265
Estimated loss on disposal including provision for $862 in operating losses
during holding period, net of applicable deferred income tax benefit of
$1,060................................................................... (5,866) -- --
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM...................................... (1,471) 5,316 21,201
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, less applicable current income tax
benefit of $800.......................................................... -- -- (1,277)
---------- ---------- ----------
NET INCOME (LOSS)............................................................ $ (1,471) $ 5,316 $ 19,924
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------- ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1994.............................. 100 $ 1 $ 16,499 $ (105,572) $ (89,072)
Investment in related subsidiary....................... (794) (794)
Dividends.............................................. (4,337) (4,337)
Net income............................................. 19,924 19,924
--
--- ----------- ------------ ----------
BALANCES AT DECEMBER 31, 1994............................ 100 1 15,705 (89,985) (74,279)
Dividends.............................................. (3,684) (5,316) (9,000)
Net income............................................. 5,316 5,316
--
--- ----------- ------------ ----------
BALANCES AT DECEMBER 31, 1995............................ 100 1 12,021 (89,985) (77,963)
Net loss............................................... (1,471) (1,471)
--
--- ----------- ------------ ----------
BALANCES AT DECEMBER 31, 1996............................ 100 $ 1 $ 12,021 $ (91,456) $ (79,434)
--
--
--- ----------- ------------ ----------
--- ----------- ------------ ----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................... $ (1,471) $ 5,316 $ 19,924
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Deferred tax provision (benefit).................................................. 2,023 4,990 (13,124)
Depreciation and amortization..................................................... 8,340 9,013 11,020
Provision for losses on accounts receivable....................................... 278 548 373
Provision for estimated loss on disposal of NAFE.................................. 6,926 -- --
Deferred compensation............................................................. -- 1,000 1,300
(Gain) loss on disposal of property and equipment................................. 1 (48) 18
Loss on sale of business.......................................................... -- -- 793
Loss on lease abandonment......................................................... -- 1,228 --
Write-off of leasehold improvements............................................... -- 400 --
Extraordinary item--loss on early extinguishment of debt.......................... -- -- 1,277
Changes in operating assets and liabilities (net of purchased businesses):
Accounts receivable............................................................. (36) (4,810) 903
Inventories..................................................................... 1,400 (512) (762)
Prepaids and other assets....................................................... (557) (419) 1,501
Long term lease prepayment...................................................... -- (1,679) --
Accounts payable................................................................ 91 634 821
Accrued and other liabilities................................................... (1,307) (2,375) (612)
Deferred revenues............................................................... 1,411 1,254 (308)
Net assets and liabilities of discontinued operations........................... (706) (817) 677
--------- --------- ---------
Net cash provided by operating activities..................................... 16,393 13,723 23,801
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................................ (1,743) (4,713) (3,167)
Proceeds from sale of property and equipment........................................ 2 263 12
Payments received on notes receivable............................................... -- -- 44
Net changes in intangible assets.................................................... (437) 30 (1,236)
Net changes in investments.......................................................... 893 -- --
Net changes in loans receivable..................................................... (4,660) 893 --
Purchase of investments............................................................. -- (3,529) --
Purchase of Affinity Thrift and Loan, net of cash acquired.......................... -- 1,854 --
Purchase of Affinity Insurance Group, Inc........................................... -- (356) --
Note receivable from affiliate...................................................... 3,113 (3,113) --
Purchase of partnership, net of cash acquired....................................... -- -- (1,599)
Purchased assets of Woodall, net of cash acquired................................... -- -- (10,297)
Purchased assets of NAFE, net of cash acquired...................................... -- -- (6,050)
--------- --------- ---------
Net cash used in investing activities......................................... (2,832) (8,671) (22,293)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in customer deposits..................................................... 4,005 -- --
Dividends paid...................................................................... -- (9,000) (4,337)
Borrowings on long-term debt........................................................ 34,200 125,046 89,996
Principal payments on long-term debt................................................ (51,321) (117,820) (95,718)
Deferred financing costs............................................................ -- -- (824)
--------- --------- ---------
Net cash used in financing activities......................................... (13,116) (1,774) (10,883)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................. 445 3,278 (9,375)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................................ 3,833 555 9,930
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.............................................. $ 4,278 $ 3,833 $ 555
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Affinity Group Holding, Inc. (AGHI), its wholly-owned
subsidiary, Affinity Group, Inc. (AGI), and AGI's subsidiaries (collectively the
Company). AGHI was formed in November 1996 and all of the stock of AGI was
contributed to AGHI from its parent, AGI Holding Corp. (formerly Affinity Group
Holding, Inc.) upon formation. Since all companies are under common control, and
since AGHI has no operations other than those related to AGI and AGI's
subsidiaries, the contribution was accounted for as if it was a pooling of
interests. Therefore, the accounts of AGI and AGI's subsidiaries are presented
in AGHI's financial statements. All significant intercompany transactions and
balances have been eliminated.
DESCRIPTION OF THE BUSINESS--The Company is a membership based direct
marketing company which sells club memberships, products, services, and
publications to selected affinity groups primarily in North America. The Company
markets club memberships and selected products and services to RV owners,
camping and golf enthusiasts. The Company also publishes magazines, directories
and books. In connection with the acquisitions of Affinity Thrift and Loan and
Affinity Insurance Group, Inc. (see Note 2), the Company has commenced offering
certain banking services and underwriting property and casualty insurance for
its members and others in the states in which it is licensed to do business.
USE OF ESTIMATES--The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
the Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS--The Company considers all short-term, highly
liquid investments purchased with a maturity date of three months or less to be
cash equivalents.
INVENTORIES--Inventories are valued at the lower of cost (first-in,
first-out) or market. Inventories consist of books, paper, and travel and
leisure merchandise.
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost.
Depreciation of property and equipment is provided using the straight-line
method over the following estimated useful lives of the assets:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements............................................................. 3-31
Furniture and equipment................................................................ 3-12
Software............................................................................... 3
</TABLE>
Leasehold improvements, included in buildings and improvements, are
amortized over the lives of the respective leases.
LOANS RECEIVABLE--Loans Receivable were acquired as part of Affinity Thrift
and Loan (see Note 2). In accordance with purchase accounting rules, the loans
were recorded at their fair value, $9,367,000. The adjustment for fair value is
being amortized using the interest method over the weighted average term to
maturity of the affected loans, 16 years.
F-7
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS--Intangible assets are amortized over the following lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Goodwill......................................................................................... 40
Membership and customer lists.................................................................... 3-10
Resort and golf course agreements................................................................ 4
Noncompete and deferred consulting agreements.................................................... 3-6
Organizational costs............................................................................. 5
</TABLE>
Deferred financing costs are amortized over the lives of the related debt
agreements.
IMPAIRMENT OF LONG-LIVED ASSETS--In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets,
including intangible assets, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable and establishes guidelines for determining fair value based on
future net cash flows for the use of the asset and for the measurement of the
impairment loss. Any impairment loss is recorded in the period in which the
recognition criteria are first applied and met. The adoption by the Company of
SFAS No. 121 had no material effect on its results of operations or on its
financial position at December 31, 1996.
MEMBERSHIP SERVICES REVENUE AND EXPENSE--Membership and Emergency Road
Service (ERS) revenues are deferred and recognized over the life of the
membership. Good Sam Club lifetime membership revenues and expenses are deferred
and recognized over 18 years which is the actuarially determined fulfillment
period. Promotional expenses, consisting primarily of direct mail advertising,
are deferred and expensed over the period of expected future benefit. Renewal
expenses are expensed at the time related materials are mailed. ERS claims
expenses are recognized when incurred.
PUBLICATIONS REVENUE AND EXPENSE--Newsstand sales of publications and
related expenses are recorded at the time of delivery net of estimated provision
for returns. Subscription sales of publications are reflected in income over the
lives of the subscriptions. The related selling expenses are expensed as
incurred. Advertising revenues and related expenses are recorded at the time of
delivery. Subscription and newsstand revenues and expenses related to annual
publications are deferred until the publications are distributed.
DEFERRED REVENUE--For balance sheet purposes, deferred revenues are
classified as long-term, although a portion of the amounts deferred expire over
the next year.
2. ACQUISITIONS
In October 1995, a wholly owned subsidiary of the Company acquired the
common stock of Affinity Thrift and Loan (ATL), formerly San Francisco Thrift
and Loan. Under the terms of the purchase agreement, ATL stock was acquired for
$125,000 and ATL entered into a non-compete agreement with the previous owner
for $75,000. In addition, in accordance with FDIC regulatory requirements, the
Company, through its wholly owned subsidiary, contributed an additional $1.0
million of capital to ATL in each of 1995 and 1996. For purposes of the Senior
Subordinated Notes Indenture (Indenture) and the senior
F-8
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. ACQUISITIONS (CONTINUED)
credit facility discussed in Note 7, the Company's investment and the continuing
operations of the wholly owned subsidiary, ATL, has been designated as an
"unrestricted subsidiary".
In June 1995, the Company acquired the common stock of Affinity Insurance
Group, Inc. (AINS) formerly Aspen Indemnity Corporation, for $87,500. In
December 1995, AINS was licensed in the state of Colorado, its domicile state.
The Company contributed $3.5 million in capital to AINS in 1995 to meet
regulatory requirements of which $2.0 million is recorded as restricted.
In October 1994, the Company acquired substantially all the assets and
assumed certain liabilities of the National Association for Female Executives,
Inc. (NAFE). The total consideration for the acquisition, including assumed
liabilities and costs of acquisition, totaled $10.8 million. In the fourth
quarter of 1996, the Company adopted a plan to dispose of NAFE. See Note 18.
In May 1994, the Company acquired all the assets and assumed certain
liabilities of Woodall Publishing Company, L.P. and Woodall World of Travel,
L.P. (collectively Woodall). The total consideration for the acquisitions,
including assumed liabilities and costs of acquisition, totaled $11.5 million.
In April 1994 AGI Properties of Colorado, Inc. (AGIPC), a wholly-owned
subsidiary of AGI, acquired a 99.9% partnership interest from the principal
shareholder of AGHI for a total purchase price of $3,449,000 which included
$1,600,000 in cash and assumed liabilities of $1,849,000. In accordance with
generally accepted accounting principles for transfers among entities under
common control, the purchase has been reflected in the accounts of AGIPC at the
historical cost basis of the principal shareholder of AGHI of $2,174,000. The
difference between the consideration paid for the partnership interest and its
carrying value in the accounts of AGIPC of $1,275,000 has been reflected as a
reduction in additional paid-in capital in the accompanying consolidated
financial statements, net of a related deferred tax asset of $481,000. As of
December 31, 1995, AGIPC is designated a "restricted subsidiary" for the
purposes of the Indenture discussed in Note 7 and by virtue of a Supplemental
Indenture is a guarantor under the Indenture.
The operating results of ATL, AINS, AGIPC, and Woodall have been included in
the Company's consolidated results of operations from the dates of their
respective acquisitions. These acquisitions have been accounted for using the
purchase method of accounting and, accordingly, the assets and liabilities of
these companies have been recorded at their estimated fair value at the date of
their respective acquisitions. In connection with these acquisitions, the
Company has recognized goodwill of approximately $400,000 and $17,900,000 in
1995 and 1994, respectively.
The following unaudited pro forma results of operations for the year ended
December 31, 1994 assumes the acquisition of Woodall occurred as of January 1,
1994. ATL, AINS and AGIPC are excluded from the following pro forma results of
operations as their effects are immaterial. The summary pro forma results are
based on assumptions and are not necessarily indicative of the actual results
which would have
F-9
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. ACQUISITIONS (CONTINUED)
occurred had this acquisition occurred on January 1, 1994, or of the future
results of operations of the Company.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
---------------
($ IN
THOUSANDS)
<S> <C>
Revenues.......................................................................... $ 130,485
Income before extraordinary item.................................................. 19,595
Net income........................................................................ 18,318
</TABLE>
3. DISPOSITIONS
BENBOW VALLEY RV RESORT AND GOLF COURSE RESORT:
The Company disposed of a portion of the Benbow Valley RV Resort and Golf
Course Resort in Northern California during 1994 and simultaneously entered into
a contract to sell the remaining assets. The assets of the resort were written
down to the expected combined sales price of $1.9 million and accruals were made
for the projected cost of sale resulting in a loss on disposal of $793,000. The
property was sold in 1996 for approximately the anticipated amount.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Land......................................................................... $ 536 $ 536
Building and improvements.................................................... 4,936 3,929
Furniture and equipment...................................................... 7,621 6,813
Software..................................................................... 2,276 1,935
Systems development in progress.............................................. 1,873 2,293
--------- ---------
17,242 15,506
Less accumulated depreciation................................................ (6,692) (4,737)
--------- ---------
Net Property and Equipment................................................... $ 10,550 $ 10,769
--------- ---------
--------- ---------
</TABLE>
F-10
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
5. INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Goodwill................................................................... $ 116,785 $ 117,709
Membership and customer lists.............................................. 14,691 15,099
Resort and golf course participation agreements............................ 14,013 13,960
Noncompete and deferred consulting agreements.............................. 1,193 1,193
Deferred financing and organization costs.................................. 6,757 7,492
---------- ----------
153,439 155,453
Less accumulated amortization.............................................. (44,374) (40,444)
---------- ----------
$ 109,065 $ 115,009
---------- ----------
---------- ----------
</TABLE>
6. ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Legal expense and litigation settlement................................. $ 9 $ 301
Compensation and benefits............................................... 4,994 6,083
Other accruals.......................................................... 9,513 9,885
--------- ---------
$ 14,516 $ 16,269
--------- ---------
--------- ---------
</TABLE>
F-11
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. LONG-TERM DEBT
The following reflects outstanding long-term debt as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Senior secured term note bearing interest that varies from prime to
prime plus 1.25%, or LIBOR plus 2.00% to 3.25%. Interest rate as of
December 31, 1996 was 8.25%. Quarterly principal installments of $1
million are due through September 30, 1999.......................... $ 11,000 $ 15,000
Revolving line of credit of $30 million, with the same interest
arrangement as the senior secured term note discussed above,
maturing September 1999............................................. 14,050 26,500
Senior subordinated notes, bearing interest at 11.50% per annum,
interest payable semi-annually each April 15 and October 15,
maturing October 2003............................................... 120,000 120,000
Other, primarily capital leases, settlement agreements, and building
mortgage............................................................ 2,325 2,996
---------- ----------
147,375 164,496
Less: current portion................................................. (5,344) (4,665)
---------- ----------
$ 142,031 $ 159,831
---------- ----------
---------- ----------
</TABLE>
In 1993, a total of $120 million of senior subordinated notes were issued in
a public offering. The notes bear interest at the rate of 11 1/2%, and mature on
October 15, 2003. These notes are unsecured obligations of AGI and are
subordinated in right of payment to the existing senior indebtedness, but rank
senior or pari passu with all other existing indebtedness and future
indebtedness of AGI.
On October 11, 1994, AGI entered into a new five year credit agreement with
certain lenders and First Bank National Association, as agent, consisting of a
term loan of $20.0 million and revolving credit facility of $30.0 million. The
funds were used primarily to retire senior secured term notes and revolving
credit lines established on October 29, 1993. The revolving loan must be repaid
so that the aggregate unpaid principal amount outstanding under the facility
does not exceed $15.0 million for at least 30 consecutive days in each fiscal
year of AGI. The loan agreement provides that if the cash flow leverage, as
defined, for any period of four consecutive fiscal quarters of AGI exceeds
4.25:1, then AGI is required to prepay the loans in amounts equal to 50% of the
excess cash flow as defined, for such four fiscal quarters.
The credit agreement and senior subordinated notes indenture contain certain
restrictive covenants related to, but not limited to, mergers, changes in the
nature of the business, acquisitions, additional indebtedness, sale of assets,
investments, payment of dividends, and minimum coverage ratios pertaining to
interest expense, fixed charges, levels of consolidated cash flow and cash flow
leverage ratio. Substantially all of the AGI's assets are pledged as collateral
under the terms of the credit agreement.
F-12
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. LONG-TERM DEBT (CONTINUED)
The aggregate future maturities of long-term debt at December 31, 1996, are
as follows (in thousands):
<TABLE>
<S> <C>
1997.............................. $ 5,344
1998.............................. 4,137
1999.............................. 17,534
2000.............................. 48
2001.............................. 53
Thereafter........................ 120,259
---------
Total............................. $ 147,375
---------
---------
</TABLE>
8. INCOME TAXES
The components of the Company's income tax benefit (expense) from continuing
operations for the year ended December 31, consisted of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal...................................................... $ (2,381) $ (317) $ --
State........................................................ (296) (4) (31)
Deferred..................................................... (3,467) (4,726) 13,286
--------- --------- ---------
Income tax benefit (expense)................................... $ (6,144) $ (5,047) $ 13,255
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of income tax benefit (expense) from continuing operations
to the federal statutory rate for the year ended December 31, is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income taxes computed at federal statutory rate................ $ (3,928) $ (3,477) $ (2,688)
State income taxes--net of federal benefit..................... (603) (398) (8)
Permanent differences:
Interest expense-warrants.................................... -- -- 4,668
Amortization of goodwill..................................... (1,520) (1,499) (1,499)
Change in valuation allowance.................................. (495) -- 12,842
Other.......................................................... 402 327 (60)
--------- --------- ---------
Income tax benefit (expense)................................... $ (6,144) $ (5,047) $ 13,255
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax
F-13
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
8. INCOME TAXES (CONTINUED)
purposes and operating loss and tax credit carryforwards. Significant items
comprising the net deferred tax asset at December 31, are (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Prepaid expenses................................................................ $ (2,115) $ (1,745)
Directory revenue............................................................... (274) (204)
Intangible assets............................................................... (140) (284)
Loans receivable................................................................ (59) (130)
Other........................................................................... (15) (56)
--------- ---------
Deferred income tax liabilities................................................. (2,603) (2,419)
DEFERRED TAX ASSETS:
Accrual for litigation and settlements.......................................... 207 483
Intangible assets............................................................... 135 --
Accelerated depreciation........................................................ 539 310
Deferred revenues............................................................... 8,064 6,838
Accrual for employee benefits and severance..................................... 1,123 1,081
Accrual for deferred phantom stock compensation................................. 1,483 2,283
Organizational and start up costs............................................... 171 192
Net operating loss carryforward................................................. 5,347 9,820
Tax credits..................................................................... 1,698 1,443
Emergency road service claim reserve............................................ 393 479
Accounts receivable reserve..................................................... 513 437
Building lease abandonment reserve.............................................. 411 619
Relocation reserve.............................................................. 17 180
Other real estate owned......................................................... -- 77
Provision for loss on discontinued operations................................... 1,476 --
Reserve for resort cards........................................................ 1,139 --
Other reserves.................................................................. 794 1,255
--------- ---------
Deferred tax assets............................................................. 23,510 25,497
Valuation allowance............................................................. (5,163) (4,668)
--------- ---------
Net deferred tax asset.......................................................... $ 15,744 $ 18,410
--------- ---------
--------- ---------
</TABLE>
At December 31, 1996, the Company has unused net operating loss
carryforwards for federal income tax purposes of approximately $14.6 million
which expire through 2009. The Company also has alternative minimum tax credit
(AMT) carryforwards remaining of approximately $1.4 million and general business
credit carryforwards attributable to a subsidiary of approximately $256,000. The
Company and its subsidiaries are parties to a tax-sharing agreement with the
Company's parent; however, taxes are determined on a separate company basis.
F-14
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. COMMITMENTS AND CONTINGENCIES
LEASES--The Company holds certain property and equipment under rental
agreements and operating leases which have varying expiration dates. Future
minimum annual fixed rentals under operating leases having an original term of
more than one year as of December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997................................ $ 1,435
1998................................ 988
1999................................ 811
2000................................ 669
2001................................ 613
Thereafter.......................... 1,912
---------
Total............................... $ 6,428
---------
---------
</TABLE>
During 1996, 1995, and 1994, respectively, approximately $1,571,000,
$1,297,000, and $1,223,000 of rent expense was charged to costs and expenses.
In the fourth quarter of 1995, the Company abandoned its leased facility in
Camarillo, California. As a result of this abandonment the Company recognized a
loss on this operating leased asset representing the future minimum annual fixed
rental charges and other incidental costs to be incurred over the term of the
related lease through May 1998 of $1,228,000, and wrote off net leasehold
improvements of $400,000.
LITIGATION--From time to time, the Company is involved in litigation arising
in the normal course of business operations. In the opinion of management, the
Company's consolidated financial statements adequately provide for liabilities
associated with all lawsuits to which it is a party.
EMPLOYMENT AGREEMENTS--The Company has employment agreements with certain
officers. The agreements include, among other things, one year's severance pay
beyond the termination date.
10. RELATED-PARTY TRANSACTIONS
Effective June 1995, the Company entered into a lease agreement for its
corporate facilities in Ventura, California (the Lease Agreement) with AGI Real
Estate Holdings, Inc. The owners of AGI Real Estate Holdings, Inc. are minority
shareholders of the Company's parent and are also related to the Company's
Chairman. The lease extends for an initial term of 20 years. Upon execution of
the Lease Agreement, the Company paid $1,650,000 as initial rent and pays
monthly base rent, commencing at $369,000 annually and increasing to $492,000,
through year 10 of the lease. On the tenth anniversary of the lease, and
extending through the term of the initial lease, either party may compel the
other party to enter into a 20 year extension of the lease term. The rental rate
will be set based on the fair value of the leased premises at the time of the
extension.
In 1995, the Company purchased $3 million of subordinated notes of Adams
Outdoor Advertising Limited Partnership (AOALP) from its parent. The Company's
Chairman is the principal owner of its parent and AOALP. The investment and
related accrued interest are included in note receivable from affiliate in the
accompanying balance sheet. On March 12, 1996 the notes were paid in full.
Included in income in the accompanying statement of operations for 1996 and 1995
is $54,000 and $113,000, respectively, of interest income related to these
notes.
F-15
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
10. RELATED-PARTY TRANSACTIONS (CONTINUED)
Certain facilities used by the Company were leased until April 1994 from
partnerships in which certain former and current officers of the Company were
partners. Aggregate rental payments under the terms of the leases were
approximately $101,000 during 1994.
11. STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information for December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash paid during the year for:
Interest............................................... $ 16,795 $ 16,724 $ 16,085
Income taxes........................................... 568 152 36
</TABLE>
The Company entered into the following non-cash investing transactions:
1996:
- The Company received a note receivable of $1,000,000 in the sale of
the Benbow Golf Course.
1995:
- The Company assumed $11,122,000 of liabilities in the acquisition of
ATL.
1994:
- The Company assumed $983,000 of liabilities in the acquisition of
Woodall.
- The Company assumed $4,797,000 of liabilities in the acquisition of
NAFE.
- The Company assumed $1,849,000 of liabilities in the acquisition of
AGIPC.
- The Company received notes receivable of $491,000 for the sale of
Benbow Resort.
- The Company transferred property valued at $1,350,000 to other assets
held for sale.
12. BENEFIT PLAN
The Company has a 401(k) deferred savings and profit sharing plan. Employees
must have attained age 21 and completed 1,950 hours of service to participate in
the plan. Vesting occurs ratably over 7 years at which time the participants are
100% vested.
Employees may contribute up to 15% of their salaries, and the Company
matches these employee contributions at the rate of 75%, up to 6% of the
employee's salary. Contributions are limited to the maximum amount deductible
for federal income tax purposes during the year. The Company's contributions to
the plan totaled approximately $416,000, $396,000, and $348,000 for 1996, 1995,
and 1994, respectively.
13. DEFERRED PHANTOM STOCK COMPENSATION
The Company has deferred compensation agreements with certain officers. The
agreements provide for payment to the officers upon their termination, death,
disability, or sale of the Company. Deferred
F-16
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
13. DEFERRED PHANTOM STOCK COMPENSATION (CONTINUED)
compensation is included in other long-term liabilities as if fully vested.
Deferred compensation to be paid in 1997 has been classified in current
liabilities. This deferred compensation is subject to vesting under the terms of
the individual agreements. Vesting periods range from 20% per year over a five
year period to immediate vesting upon entering an agreement.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments.
CASH AND CASH EQUIVALENTS--The carrying amount approximates fair value
because of the short maturity of these instruments.
INVESTMENTS--The fair value of investments is based on quoted rates for
similar instruments.
LOANS RECEIVABLE--The carrying amount approximates fair value because the
loans are predominately variable rate loans.
CUSTOMER DEPOSITS--The carrying amount approximates fair value because the
deposits are predominately instruments with a short maturity.
LONG-TERM DEBT--The fair value of the Company's long-term debt is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered for debt of the same or similar remaining maturities.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
---------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial Instruments Recorded as Assets:
Cash and cash equivalents......................................... $ 4,278 $ 4,278 $ 3,833 $ 3,833
Investments....................................................... 2,636 2,614 3,529 3,529
Loans Receivable.................................................. 13,134 13,134 8,474 8,474
Financial Instruments Recorded as Liabilities:
Customer deposits................................................. 14,979 14,979 10,974 10,974
Long-term debt.................................................... 147,375 152,175 164,496 166,296
</TABLE>
CONCENTRATION OF CREDIT RISK--The Company is potentially subject to
concentrations of credit risk in accounts receivable and loans receivable.
Concentrations of credit risk with respect to accounts receivable is limited due
to the large number of customers and their geographical dispersion. The
Company's loans receivable are secured by real estate. At December 31, 1996,
approximately $6.0 million of these loans are secured by residential real estate
located in southern California and the remaining loans are secured by real
estate located primarily in the San Francisco Bay area.
F-17
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
15. SEGMENT INFORMATION
The Company operates principally in two segments--membership services and
publications. Financial information by industry segment is summarized as follows
(in thousands):
<TABLE>
<CAPTION>
MEMBERSHIP
SERVICES PUBLICATIONS CORPORATE CONSOLIDATED
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Income (loss) from continuing operations
before income taxes and extraordinary
item.................................... $ 35,569 $ 10,515 $ (34,859) $ 11,225
Identifiable assets....................... 103,171 47,050 32,934 183,155
Capital expenditures...................... 764 54 925 1,743
Depreciation and amortization............. 5,941 450 1,949 8,340
YEAR ENDED DECEMBER 31, 1995
Income (loss) from continuing operations
before income taxes and extraordinary
item.................................... $ 37,117 $ 9,245 $ (36,429) $ 9,933
Identifiable assets....................... 106,859 51,319 33,792 191,970
Capital expenditures...................... 3,274 496 943 4,713
Depreciation and amortization............. 6,865 653 1,495 9,013
YEAR ENDED DECEMBER 31, 1994
Income (loss) from continuing operations
before income taxes and extraordinary
item.................................... $ 30,352 $ 8,248 $ (30,919) $ 7,681
Identifiable assets....................... 92,621 53,657 29,600 175,878
Capital expenditures...................... 2,287 274 606 3,167
Depreciation and amortization............. 7,232 2,163 1,625 11,020
</TABLE>
MAJOR CUSTOMERS--Included in revenues in 1996, 1995 and 1994 are $17.2
million, $17.3 million, and $12.6 million, respectively, received under
contracts from one customer of the Company. These revenues have been reported in
the Membership Services segment.
16. SELECTED UNAUDITED QUARTERLY INFORMATION
The following is a summary of selected quarterly information for the years
ended December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996
----------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Total revenue............................ $ 31,593 $ 33,206 $ 32,159 $ 43,021
Gross profit............................. 10,456 13,522 12,303 17,124
Income from continuing operations........ 225 1,491 916 2,449
Net income (loss)........................ 91 1,099 685 (3,346)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
----------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Total revenue............................ $ 31,646 $ 32,478 $ 31,797 $ 43,316
Gross profit............................. 11,782 13,763 12,878 16,911
Income from continuing operations........ 408 1,048 718 2,712
Net income............................... 458 1,223 1,290 2,345
</TABLE>
F-18
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
16. SELECTED UNAUDITED QUARTERLY INFORMATION (CONTINUED)
The loss in the fourth quarter of 1996 is primarily a result of recording a
$5.9 million estimated loss on the disposal of NAFE. The information for the
quarters in 1995 and the quarters ended March 31, June 30 and September 30, 1996
have been restated to reflect the operations of NAFE as discontinued. See Note
18.
17. GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION
Under terms of the AGI's various debt agreements, all wholly-owned
subsidiaries of AGI which are not designated as unrestricted subsidiaries are
guarantors of AGI's obligations under the debt agreements. There are no
contractual restrictions on the ability of any guarantor subsidiaries to make
distributions to AGI. Separate financial statements and related disclosures for
the subsidiaries are omitted as, in the opinion of management, they are not
material; however, summarized combined financial information of the guaranteeing
subsidiaries at December 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Combined current assets............................................... $15,384 $17,922
Combined non-current assets........................................... 30,340 48,110
Combined current liabilities.......................................... 16,362 14,210
Combined non-current liabilities...................................... 70,609 72,415
</TABLE>
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Combined revenues..................................................... $ 116,472 $ 125,698
Combined costs and expenses........................................... 87,283 99,014
Combined income from continuing operations............................ 19,649 29,758
Combined net income................................................... 11,968 30,452
</TABLE>
18. DISCONTINUED OPERATIONS
In October 1994, the Company acquired substantially all the assets and
assumed certain liabilities of the National Association for Female Executives,
Inc. (NAFE). The total consideration for the acquisition, including assumed
liabilities and costs of acquisition, totaled $10.8 million.
During the fourth quarter of 1996, the Company adopted a plan to dispose of
the assets related to NAFE. The Company intends to sell NAFE to an unidentified,
unrelated third party during 1997. In connection with the plan, the Company
recorded a loss of $5.9 million net of related income taxes of $1,060,000 in the
fourth quarter 1996 based on the anticipated proceeds upon sale. The results of
operations of NAFE have been classified as discontinued operations in the
accompanying financial statements.
F-19
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
18. DISCONTINUED OPERATIONS (CONTINUED)
Information relating to the operations of NAFE for the years ended December
31, 1996, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues.................................... $ 5,062 $ 7,887 $ 1,491
Costs applicable to revenues................ 5,090 6,001 806
--------- --------- ---------
Gross profit (loss)......................... (28) 1,886 685
Operating expenses.......................... 1,042 1,192 258
--------- --------- ---------
Income (loss) from operations............... (1,070) 694 427
Income tax (expense) benefit................ 384 (264) (162)
Estimated loss on disposal, net of taxes.... (5,866) -- --
--------- --------- ---------
Income (loss) from discontinued
operations................................ $ (6,552) $ 430 $ 265
--------- --------- ---------
--------- --------- ---------
</TABLE>
The assets and liabilities of NAFE included in the accompanying consolidated
balance sheet as of December 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash.................................................................... $ 261 $ --
Accounts receivable..................................................... 539 570
Inventories............................................................. 183 173
Prepaid expenses........................................................ 884 418
--------- ---------
Total current assets.................................................. 1,867 1,161
Current liabilities:
Accounts payable........................................................ 1,048 391
Accrued liabilities..................................................... 2,283 313
--------- ---------
Total current liabilities............................................. 3,331 704
--------- ---------
Net current assets (liabilities)........................................ $ (1,464) $ 457
--------- ---------
--------- ---------
Long-term assets:
Property and equipment.................................................. $ 67 $ 107
Intangible assets....................................................... 3,000 7,570
Other assets............................................................ 25 26
--------- ---------
Total long-term assets................................................ 3,092 7,703
Long-term liabilities:
Deferred revenues....................................................... 2,119 2,431
--------- ---------
Net long-term assets.................................................... $ 973 $ 5,272
--------- ---------
--------- ---------
</TABLE>
F-20
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
19. SUBSEQUENT EVENTS
On March 6, 1997, AGI acquired the common stock of the Ehlert Publishing
companies for $22.3 million. The purchase price was funded primarily through
borrowings under AGI's revolving credit facility, loans to the Company from its
parent and a $1.5 millon loan from the sellers to the Company, of which $1.0
million was recently repaid. In addition, the principal shareholder and the
Company entered into a non-competition agreement for $200,000.
On April 2, 1997, AGI acquired the common stock of Camping World, Inc. for
approximately $89 million, including debt repayment upon acquisition. Certain
Camping World executives also entered into non-competition and consulting
agreements pursuant to which AGI paid $19 million at closing. In addition, at
closing the Company and certain members of Camping World management entered into
incentive compensation agreements pursuant to which an additional $15 million
will be paid subsequent to the closing of which $1.0 million is payable annually
on the first four anniversaries after the closing date with the balance, $11.0
million, due on the fifth anniversary of the closing date.
The Camping World acquisition was financed through a $130.0 million bond
offering by the Company, the proceeds of which were contributed, as capital, to
AGI net of closing fees and expenses and repayment of approximately $7.5 million
of the Company's indebtedness. These net proceeds and new borrowings under a new
$75.0 million credit facility discussed below of AGI were adequate to close the
acquisition.
Unaudited pro forma net revenue, income from operations and net income for
the year ended December 31, 1996 assuming the transactions had closed January 1,
1996, are estimated to have been $324.0 million, $43.0 million, and $5.4
million, respectively.
The new AGI credit facility is a senior secured credit facility consisting
of a revolving line of credit of $45.0 million and a term loan of $30.0 million.
The interest on borrowings under the new AGI credit facility is at variable
rates based on the ratio of total cash flow to outstanding indebtedness (as
defined) and AGI pays a commitment fee of 0.5% per annum on the unused amount of
its revolving credit line. Borrowings under the new AGI credit facility were
also used to pay-off outstanding balances under the previous senior secured note
and the previous revolving line of credit (see Note 7).
*****
F-21
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................................ $ 3,107,408
Trade accounts receivable, no allowance for doubtful accounts considered necessary............... 239,719
Inventories...................................................................................... 31,284,247
Vendor and other receivables..................................................................... 2,620,851
Prepaid expenses, deferred catalog costs and other............................................... 1,851,614
-------------
Total current assets....................................................................... 39,103,839
PROPERTY AND EQUIPMENT, net........................................................................ 31,687,332
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, net of
accumulated amortization of $1,595,650......................................................... 6,136,141
OTHER ASSETS....................................................................................... 2,307,818
-------------
TOTAL.............................................................................................. $ 79,235,130
-------------
-------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................................. $ 14,575,064
Accrued expenses and other....................................................................... 3,974,629
Deferred income.................................................................................. 2,149,600
Short-term borrowings............................................................................ 9,202,317
Current maturities of long-term debt............................................................. 3,319,871
-------------
Total current liabilities.................................................................. 33,221,481
DEFERRED INCOME TAXES.............................................................................. 5,124,180
DEFERRED INCOME.................................................................................... 545,605
LONG-TERM DEBT..................................................................................... 21,261,483
SUBORDINATED NOTES................................................................................. 3,384,410
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock--Class A voting, $0.0l par value; authorized, 13,000,000 shares; issued and
outstanding, 1,236,880 shares.................................................................. 12,369
Common stock--Class B nonvoting, $0.0l par value; authorized, 2,000,000 shares; issued and
outstanding, 1,276,828 shares.................................................................. 12,768
Additional paid-in capital....................................................................... 1,202,641
Retained earnings................................................................................ 14,470,193
-------------
Total shareholders' equity................................................................. 15,697,971
-------------
TOTAL.............................................................................................. $ 79,235,130
-------------
-------------
</TABLE>
See notes to consolidated financial statements.
F-22
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER
31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
REVENUES:
Merchandise sales................................................................ $ 28,425,483 $ 25,110,010
Other revenues................................................................... 5,152,192 4,397,508
------------- -------------
Total revenues................................................................. 33,577,675 29,507,518
COST RELATED TO MERCHANDISE SOLD AND OTHER REVENUES................................ 21,570,360 18,635,579
------------- -------------
Gross profit............................................................... 12,007,315 10,871,939
OPERATING EXPENSES:
Selling, general and administrative expenses..................................... 12,826,676 11,169,235
------------- -------------
Operating loss............................................................. (819,361) (297,296)
OTHER INCOME (EXPENSE):
Interest income.................................................................. 171,462 95,508
Interest expense................................................................. (930,393) (948,157)
------------- -------------
Total other income (expense)................................................... (758,931) (852,649)
------------- -------------
LOSS BEFORE INCOME TAX BENEFIT..................................................... (1,578,292) (1,149,945)
INCOME TAX BENEFIT................................................................. 607,000 471,000
------------- -------------
NET LOSS........................................................................... $ (971,292) $ (678,945)
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-23
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................................................... $ (971,292) $ (678,945)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.................................................. 646,035 499,490
Amortization of debt related costs............................................. 88,932 87,869
Amortization of intangibles.................................................... 48,324 30,951
Amortization of deferred income on sale/leaseback.............................. (3,984) (2,109)
Loss on sale of property and equipment and other assets........................ -- 374
Deferred income taxes.......................................................... -- 53,241
(Increase) decrease in operating assets:
Trade accounts receivable.................................................... 415,650 769,085
Inventories.................................................................. (3,956,311) (2,562,418)
Vendor and other receivables................................................. 631,596 355,768
Prepaid expenses, deferred catalog costs and other........................... 846,115 411,226
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses...................................... (806,693) (2,185,266)
Deferred income............................................................ (226,288) (580,125)
------------- -------------
Net cash used in operating activities.................................... (3,287,916) (3,800,859)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.............................................. (921,858) (1,767,299)
Increase in other assets......................................................... (3,103) (140,123)
------------- -------------
Net cash used in investing activities.................................... (924,961) (1,907,422)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to property held for sale/leaseback.................................... -- (343,924)
Net increase in short-term borrowings............................................ 3,107,546 5,635,769
Proceeds from issuance of long-term debt......................................... 1,129,000 1,400,000
Payments of long-term debt....................................................... (701,420) (599,929)
------------- -------------
Net cash provided by financing activities................................ 3,535,126 6,091,916
------------- -------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............................... (677,751) 383,635
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 3,785,159 2,572,876
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 3,107,408 $ 2,956,511
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amounts capitalized).......................................... $ 818,865 $ 789,949
------------- -------------
------------- -------------
Income taxes................................................................... $ 850,700 $ 908,660
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-24
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein include the results of
Camping World, Inc. and subsidiaries (the "Company") in accordance with
generally accepted accounting principles. These consolidated financial
statements have not been audited, reviewed or compiled by the Company's
independent auditors and they assume no responsibility for such consolidated
financial statements. These interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes for the
year ended September 30, 1996. In the opinion of management of the Company,
these consolidated financial statements contain all adjustments of a normal
recurring nature necessary to present fairly the financial position, results of
operations and cash flows of the Company for the interim periods presented.
2. SUBSEQUENT EVENTS
On February 25, 1997 the shareholders entered into an agreement to sell the
outstanding stock of the Company to Affinity Group, Inc. ("AGI"). The stock sale
closed on April 2, 1997 simultaneously with the closing of a note offering by
the parent company of AGI. Additionally, certain executives and members of
management of the Company will enter into non-competition, consulting, and
incentive compensation agreements with AGI or the parent of AGI.
On February 7, 1997 Affinity Group Plans, Inc. (an entity not affiliated
with AGI) and National Alliance Insurance Company filed a complaint in the
United States District Court for the Eastern District of Missouri against the
Company, a subsidiary of the Company, and two of the directors of the Company
seeking damages in excess of $125 million (and punitive damages of a like
amount) alleging breaches of contract, misrepresentations, misappropriation of
information and breaches of fiduciary duty in connection with the Company's
preliminary discussions with AGI to sell certain assets of the Company
(excluding insurance marketing arrangements and related assets in which the
plaintiffs have an interest). The shareholders of the Company and AGI have
structured the sale as a stock sale. Under the stock sale agreement, the
insurance marketing arrangements and related assets in dispute remain as assets
of the Company. AGI has advised the plaintiffs in this litigation that it
recognizes the contractual obligations of the Company relating to such marketing
arrangements and that it intends to comply (and cause the Company to comply)
with the terms of such insurance marketing arrangements. The Company and
defendant directors believe the complaint to be without merit and that such
litigation will not have a material adverse effect on the Company.
F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Camping World, Inc.
Bowling Green, Kentucky
We have audited the consolidated balance sheets of Camping World, Inc. and
subsidiaries as of September 30, 1996 and 1995, and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
three years in the period ended September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Camping World, Inc. and
subsidiaries as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
November 22, 1996 (April 2, 1997 with respect to Note 14)
Nashville, Tennessee
F-26
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1)............................................... $ 3,785,159 $ 2,572,876
Trade accounts receivable, no allowance for doubtful accounts considered
necessary (Note 2)............................................................. 655,369 1,286,623
Inventories (Notes 1 and 3)...................................................... 27,327,936 24,741,370
Vendor and other receivables..................................................... 3,252,447 2,041,837
Prepaid expenses, deferred catalog costs and other (Note 1)...................... 2,126,657 2,098,375
------------- -------------
Total current assets....................................................... 37,147,568 32,741,081
PROPERTY AND EQUIPMENT, net (Notes 1, 4 and 6)..................................... 32,005,469 29,117,567
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, net of accumulated
amortization of $1,547,323 and $1,354,027 (Note 1)............................... 6,184,465 6,377,761
OTHER ASSETS (Notes 1 and 5)....................................................... 2,360,702 2,935,762
------------- -------------
TOTAL.............................................................................. $ 77,698,204 $ 71,172,171
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................. $ 13,354,907 $ 12,862,633
Accrued expenses and other (Note 10)............................................. 5,078,742 4,984,291
Deferred income (Note 1)......................................................... 2,383,056 3,235,453
Income taxes payable (Notes 1 and 11)............................................ 922,671 987,000
Short-term borrowings (Note 6)................................................... 6,094,771 3,696,593
Current maturities of long-term debt (Note 6).................................... 3,203,158 2,733,224
------------- -------------
Total current liabilities.................................................. 31,037,305 28,499,194
DEFERRED INCOME TAXES (Notes 1 and 11)............................................. 5,124,245 4,825,245
DEFERRED INCOME (Note 1)........................................................... 542,421 705,222
LONG-TERM DEBT (Note 6)............................................................ 20,950,616 21,153,985
SUBORDINATED NOTES (Note 7)........................................................ 3,374,354 3,334,853
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY: (Notes 1, 9 and 12)
Common stock--Class A voting, $0.0l par value; authorized, 13,000,000 shares;
issued and outstanding, 1,236,880 shares and 1,233,880 shares, respectively.... 12,369 12,339
Common stock--Class B nonvoting, $0.0l par value; authorized, 2,000,000 shares;
issued and outstanding, 1,276,828 shares....................................... 12,768 12,768
Additional paid-in capital....................................................... 1,202,641 1,161,551
Retained earnings................................................................ 15,441,485 11,467,014
------------- -------------
Total shareholders' equity................................................. 16,669,263 12,653,672
------------- -------------
TOTAL.............................................................................. $ 77,698,204 $ 71,172,171
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Merchandise sales............................................... $ 147,254,869 $ 143,344,126 $ 137,711,646
Other revenues (Note 1)......................................... 22,514,926 19,079,029 16,321,237
-------------- -------------- --------------
Total revenues................................................ 169,769,795 162,423,155 154,032,883
COST RELATED TO MERCHANDISE SOLD AND OTHER REVENUES (Notes 1, 4
and 8)........................................................ 108,768,825 104,951,237 100,097,229
-------------- -------------- --------------
Gross profit.................................................. 61,000,970 57,471,918 53,935,654
OPERATING EXPENSES:
Selling, general and administrative expenses (Notes 1, 4, 8
and 10)..................................................... 51,175,164 49,667,616 44,754,811
-------------- -------------- --------------
Operating income.............................................. 9,825,806 7,804,302 9,180,843
-------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest income................................................. 523,377 438,063 380,221
Interest expense (Notes 1, 5, 6 and 7).......................... (3,601,712) (3,861,768) (4,342,138)
Other........................................................... -- -- (143,500)
-------------- -------------- --------------
Total other income (expense).................................. (3,078,335) (3,423,705) (4,105,417)
-------------- -------------- --------------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM............... 6,747,471 4,380,597 5,075,426
PROVISION FOR INCOME TAX EXPENSE (Notes 1 and 11)............... 2,773,000 1,796,000 2,081,000
-------------- -------------- --------------
INCOME BEFORE EXTRAORDINARY ITEM................................ 3,974,471 2,584,597 2,994,426
EXTRAORDINARY ITEM--Loss on early extinguishment of debt, less
applicable income taxes of $240,000 (Note 6).................. -- -- 346,476
-------------- -------------- --------------
NET INCOME...................................................... $ 3,974,471 $ 2,584,597 $ 2,647,950
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
CLASS A VOTING COMMON CLASS B NONVOTING
STOCK COMMON STOCK ADDITIONAL TOTAL
---------------------- ---------------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- ----------- --------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1993............ 1,200,000 $ 12,000 1,200,000 $ 12,000 $1,667,455 $6,234,467 $ 7,925,922
Exercise of stock options.............. 21,000 210 -- -- 52,290 -- 52,500
Repurchase and retirement of common
stock................................ (9,000) (90) -- -- (61,380) -- (61,470)
Net income............................. -- -- -- -- -- 2,647,950 2,647,950
--------- ----------- --------- ----------- ----------- ---------- -------------
BALANCE, SEPTEMBER 30, 1994............ 1,212,000 12,120 1,200,000 12,000 1,658,365 8,882,417 10,564,902
Exercise of stock options and
warrants............................. 58,630 587 76,828 768 37,898 -- 39,253
Repurchase and retirement of common
stock................................ (36,750) (368) -- -- (534,712) -- (535,080)
Net income............................. -- -- -- -- -- 2,584,597 2,584,597
--------- ----------- --------- ----------- ----------- ---------- -------------
BALANCE, SEPTEMBER 30, 1995............ 1,233,880 12,339 1,276,828 12,768 1,161,551 11,467,014 12,653,672
Exercise of stock options.............. 3,000 30 -- -- 41,090 -- 41,120
Net income............................. -- -- -- -- -- 3,974,471 3,974,471
--------- ----------- --------- ----------- ----------- ---------- -------------
BALANCE, SEPTEMBER 30, 1996............ 1,236,880 $ 12,369 1,276,828 $ 12,768 $1,202,641 $15,441,485 $16,669,263
--------- ----------- --------- ----------- ----------- ---------- -------------
--------- ----------- --------- ----------- ----------- ---------- -------------
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE>
CAMPING WORLD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................ $ 3,974,471 $ 2,584,597 $ 2,647,950
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................... 2,186,434 1,943,395 1,813,444
Amortization of debt related costs...................................... 368,615 443,374 414,067
Amortization of intangibles............................................. 193,296 193,296 193,296
Amortization of deferred income on sale/leaseback....................... (14,231) (2,811) --
(Gain) loss on sale of property and equipment and other assets.......... (609) 5,062 (152,430)
Extraordinary loss on debt extinguishment............................... -- -- 586,476
Deferred income taxes................................................... 299,000 (44,000) 60,000
(Increase) decrease in operating assets:
Trade accounts receivable............................................. 631,254 (1,148,706) 1,566,286
Inventories........................................................... (2,586,566) 517,049 (3,832,037)
Vendor and other receivables.......................................... (1,210,610) (1,035,393) 90,866
Prepaid expenses, deferred catalog costs and other.................... (28,282) 216,384 (952,706)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses................................. 586,725 2,061,280 2,596,024
Deferred income....................................................... (1,000,967) 1,691,939 271,482
Income taxes payable.................................................. (64,329) 112,014 670,359
----------- ----------- -----------
Net cash provided by operating activities........................... 3,334,201 7,537,480 5,973,077
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................................... (5,109,141) (3,265,825) (1,655,088)
Proceeds from sale of property and equipment.............................. 1,400 71,889 376,812
Decrease (increase) in other assets....................................... 245,946 (670,834) (233,091)
----------- ----------- -----------
Net cash used in investing activities............................... (4,861,795) (3,864,770) (1,511,367)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to property held for sale/leaseback............................. (2,715,986) (3,818,575) --
Proceeds from sale/leaseback of property.................................. 2,750,000 4,167,800 --
Deferred financing costs.................................................. -- -- (1,752,868)
Net increase (reduction) in short-term borrowings......................... 3,814,178 (866,606) 1,420,175
Proceeds from issuance of long-term debt.................................. 3,981,006 -- 24,000,000
Payments of long-term debt................................................ (5,130,441) (1,935,945) (28,366,415)
Exercise of stock options and warrants.................................... 41,120 39,253 52,500
Repurchase and retirement of common stock................................. -- (535,080) (61,470)
----------- ----------- -----------
Net cash provided by (used in) financing activities................. 2,739,877 (2,949,153) (4,708,078)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ 1,212,283 723,557 (246,368)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............................. 2,572,876 1,849,319 2,095,687
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................................... $ 3,785,159 $ 2,572,876 $ 1,849,319
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amounts capitalized)................................... $ 3,501,893 $ 3,427,384 $ 4,080,708
----------- ----------- -----------
----------- ----------- -----------
Income taxes............................................................ $ 2,537,218 $ 1,573,397 $ 1,110,922
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-30
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE CONSOLIDATED FINANCIAL STATEMENTS of Camping World, Inc. (the "Company")
include the accounts of the Company and its wholly-owned subsidiaries. All
material intercompany transactions have been eliminated. The Company operates 27
retail Supercenters and a mail order/telephone order catalog service offering a
variety of merchandise and services to the owners of recreational vehicles.
CASH AND CASH EQUIVALENTS principally consist of demand deposits and
repurchase agreements at banks with maturities less than three months.
INVENTORIES are generally valued at the lower of cost or net realizable
market value. Inventory costs are charged to cost of goods sold primarily by the
last-in, first-out (LIFO) method.
CATALOG COSTS associated with the production and mailing of the Company's
direct mail catalogs and national media offerings are deferred and amortized
over the periods in which the related revenues are generated, generally three
months or less.
PROPERTY AND EQUIPMENT are stated at cost, less accumulated depreciation and
amortization. Depreciation of property and equipment is calculated using the
straight-line method over the estimated useful lives of the assets (ranging from
three to twenty-five years). Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or the estimated useful
life of the asset (ranging from seven to fifteen years).
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED is amortized on the
straight-line basis over forty years.
LONG-LIVED ASSETS--The Company assesses the impairment of the value of
property and equipment, excess of cost over fair value of net assets acquired
and other long-lived assets from time to time utilizing valuation methodologies
that reflect the current fair market value of the assets. Effective October 1,
1996, the Company will adopt the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
FOR LONG-LIVED ASSETS TO BE DISPOSED OF. The Company does not expect the
adoption of SFAS No. 121 to result in an adjustment to the financial statements
at the date of adoption.
OTHER ASSETS include deferred financing costs which are carried at cost less
accumulated amortization. Deferred financing costs are amortized over the lives
of the related borrowings using the effective interest rate method.
THE PRESIDENT'S CLUB program consists of a program whereby customers pay a
membership fee and are entitled to special mailings, promotions and discounts.
Membership fees from the President's Club program are included in other
revenues. The membership fees are deferred and recognized as revenues in
proportion to the buying patterns of members.
INCOME TAXES are accounted for in accordance with SFAS No. 109, ACCOUNTING
FOR INCOME TAXES.
INTEREST is capitalized on borrowed funds used to construct qualifying
assets as part of the cost of the asset. Interest is capitalized using the
Company's incremental borrowing rate or, where appropriate, the rate on
borrowings specifically associated with a qualifying asset.
STOCK OPTIONS--SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, is
effective October 1, 1996 for the Company. The new standard encourages companies
to adopt a fair value method of accounting for
F-31
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
employee stock options but allows companies to continue to account for those
plans using the accounting prescribed by Accounting Principles Board (APB)
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The Company will adopt
the disclosure requirements of the new standard in fiscal 1997 and plans to
continue accounting for stock compensation using APB Opinion 25, making pro
forma disclosures of net income as if the fair value method had been applied.
MANAGEMENT ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CERTAIN RECLASSIFICATIONS of prior year amounts have been made to conform to
the current year presentation.
2. TRADE ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
The Company offers to its catalog customers various deferred installment
payment plans ranging from three to twelve months. At September 30, 1996 and
1995, the Company had installment plan receivables of approximately $655,000 and
$1,287,000, respectively. The Company also issues it own private label credit
card through an independent financial institution. All receivables and related
financing, credit approval, collection efforts, and supporting services on the
private label credit card are provided without recourse to the Company by the
independent financial institution.
Except for the above mentioned financing arrangements offered to its
customers, the Company accepts cash, checks, and major credit cards in full
payment for goods and services at the point of sale. The Company's credit risk
is minimal since no single customer accounts for a significant amount of
business. The Company's retail stores are located in 17 states with eight
locations in California and three in Florida. The retail market penetration
covers the continental United States, except for the northeastern portion. The
catalog operation ships to all fifty states and to a much lesser extent Canada,
Japan and Europe.
3. INVENTORIES
Inventories consist of finished goods purchased principally from
manufacturers and are primarily valued at the lower of last-in, first-out (LIFO)
cost or net realizable market value. If inventories had been stated at current
cost, inventories would have increased by approximately $189,000 and $403,000 at
September 30, 1996 and 1995, respectively.
F-32
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Land.......................................................... $ 9,840,907 $ 10,710,584
Buildings..................................................... 17,307,343 16,751,974
Furniture, fixtures and equipment............................. 14,659,390 10,464,128
Leasehold improvements........................................ 952,158 682,253
Capital projects-in-progress.................................. 2,427,551 1,529,903
-------------- --------------
45,187,349 40,138,842
Less accumulated depreciation and amortization................ (13,181,880) (11,021,275)
-------------- --------------
$ 32,005,469 $ 29,117,567
-------------- --------------
-------------- --------------
</TABLE>
Interest costs capitalized were $303,035, $212,068 and $0, respectively, for
the years ended September 30, 1996, 1995 and 1994. These costs related primarily
to Supercenters constructed and subsequently sold/leased back during the years
ended September 30, 1996 and 1995.
5. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Deferred financing costs (net of accumulated amortization of
$835,205 and $506,091).......................................... $ 1,969,565 $ 2,298,679
Long-term deposits and other...................................... 391,137 637,083
------------ ------------
$ 2,360,702 $ 2,935,762
------------ ------------
------------ ------------
</TABLE>
6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
On May 31, 1994, the Company refinanced a major portion of its debt
structure through an agreement (the "Credit Agreement") with a financial
institution. The new facility aggregated $44 million and is comprised of three
major loan arrangements. First, a new $24 million term loan was obtained to pay
off the existing term loan and revolving credit note with the Company's former
senior lending institution. Additionally, the remaining proceeds from the term
loan and a portion of the available line of credit from a $10 million revolving
loan with the new senior lending financial institution were used to pay off a
$7.5 million senior subordinated note and $1 million each of the acquisition and
junior subordinated notes (See Note 7). The third portion of the new facility is
a $10 million commitment from the new senior lender for expansion of the number
of the Company's retail Supercenters.
This refinancing resulted in an approximate $586,000 write-off of deferred
financing costs during 1994 related to the early retirement of existing debt
described above.
F-33
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT (CONTINUED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Term loan, interest on the first $19.5 million outstanding at the
London Interbank Offered Rate (LIBOR) one month rate plus 3% (8.5%
at September 30, 1996), interest on the remaining outstanding
balance at the prime rate of interest plus 1.5% (9.75% at
September 30, 1996) payable monthly, principal due in quarterly
installments of $500,000 beginning January 1, 1995; the quarterly
installments increase by $125,000 each year until the term loan
expires on September 30, 2001..................................... $ 20,125,000 $ 22,500,000
Revolving loan, interest at the prime rate of interest plus 1.5%
(9.75% at September 30, 1996) payable monthly..................... 6,094,771 2,280,593
Expansion loans, interest at the LIBOR one month rate plus 3.5% (9%
at September 30, 1996) payable monthly............................ 3,000,000 1,416,000
Mortgage payable, interest at the rate of 7.25% at September 30,
1996, monthly principal and interest payments of $20,470 through
1998, collateralized by property with a net book value of
approximately $1,064,000 at September 30, 1996.................... 847,779 1,024,722
Installment notes payable, interest rates ranging from 9.25% to
9.75% at September 30, 1996, monthly principal and interest
payments ranging from $4,121 to $6,155 through 1997,
collateralized by furniture, fixtures and equipment with a net
book value of approximately $393,000 at September 30, 1996........ 180,995 362,487
------------ ------------
30,248,545 27,583,802
Less short-term borrowings.......................................... (6,094,771) (3,696,593)
Less current maturities of long-term debt........................... (3,203,158) (2,733,224)
------------ ------------
$ 20,950,616 $ 21,153,985
------------ ------------
------------ ------------
</TABLE>
Borrowings under the revolving loan are limited to the lesser of $10,000,000
or 55% of eligible inventory as defined in the Credit Agreement. The revolving
loan expires September 30, 2001. As of September 30, 1996, $3,905,229 was
available under the revolving loan. Borrowings under the revolving loan are
expected to be repaid prior to September 30, 1997 and are classified as current
at September 30, 1996. Borrowings under the expansion loan facility are limited
to $10,000,000. The expansion loan facility expires October 1, 1999 at which
point any outstanding balance becomes payable quarterly beginning January 1,
2000. As of September 30, 1996, $7,000,000 was available under the expansion
loan facility. The weighted average interest rate on outstanding short-term
borrowings was 9.47% and 9.60% for the years ended September 30, 1996 and 1995,
respectively.
The Credit Agreement contains restrictive covenants, the more significant of
which require the Company to maintain certain interest coverage, fixed charge
coverage, and adjusted total debt coverage ratios; certain minimum levels of
earnings before interest, depreciation, amortization, and taxes; certain minimum
levels of net worth; and prohibits cash dividends. In addition, certain limits
are placed upon capital expenditures. At September 30, 1996, the Company was in
compliance with these covenants.
F-34
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT (CONTINUED)
Substantially all of the assets of the Company serve as collateral for loans
outstanding under the Credit Agreement.
The aggregate maturities of long-term debt subsequent to September 30, 1997
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
1998........................................................................... $ 3,625,934
1999........................................................................... 4,095,263
2000........................................................................... 7,604,419
2001........................................................................... 5,625,000
-------------
$ 20,950,616
-------------
-------------
</TABLE>
7. SUBORDINATED NOTES
Subordinated notes consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Acquisition subordinated notes.................................... $ 2,000,000 $ 2,000,000
Junior subordinated notes (net of discount of $125,646 and
$165,147)....................................................... 1,374,354 1,334,853
------------ ------------
$ 3,374,354 $ 3,334,853
------------ ------------
------------ ------------
</TABLE>
The acquisition subordinated notes as amended May 31, 1994 bear interest at
16.5%, payable quarterly until maturity. The notes are due in various quarterly
installments beginning September 2001 until maturity in June 2004.
The junior subordinated notes as amended May 31, 1994 bear interest at
16.5%, payable quarterly until maturity. Assuming the amortization of the
related discount to be additional interest, the stated rate of interest would be
increased by 2.92%. The notes are due in various quarterly installments
beginning September 2001 until maturity in August 2006.
The acquisition and junior subordinated notes incorporate covenants
applicable to the covenants in the Credit Agreement (See Note 6) and consist of
notes payable to certain shareholders of the Company. Interest expense
applicable to these subordinated notes was approximately $587,000 for each of
the years ended September 30, 1996 and 1995 and $808,000 for the year ended
September 30, 1994.
8. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its buildings under operating leases. Rental
expense under such lease agreements was approximately $5,670,000, $4,676,000 and
$4,470,000 for the years ended September 30, 1996, 1995 and 1994, respectively.
F-35
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease commitments at September 30, 1996 for all noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
1997........................................................................... $ 6,183,000
1998........................................................................... 5,915,000
1999........................................................................... 5,976,000
2000........................................................................... 6,062,000
2001........................................................................... 5,949,000
Thereafter..................................................................... 33,957,000
-------------
$ 64,042,000
-------------
-------------
</TABLE>
Certain operating leases provide for five year renewal periods at the option
of the Company.
Certain operating leases result from sale/leaseback transactions. The terms
of these leases are not substantially different from terms that an independent
third-party lessor or lessee would accept. The Company has no continuing
involvement in the leases as contemplated by SFAS No. 98, ACCOUNTING FOR LEASES.
The Company leased seven, five and five facilities during the years ended
September 30, 1996, 1995 and 1994, respectively, from partnerships in which the
partners include shareholders of the Company in addition to unrelated parties.
These leases are classified as operating leases. Payments made under these
leases were approximately $2,103,000, $1,618,000 and $1,561,000 for the years
ended September 30, 1996, 1995 and 1994, respectively. During the year ended
September 30, 1996 the Company sold to and leased back one property from a
partnership considered to be a related party for a price of $2,750,000. During
the year ended September 30, 1995 the Company sold to and leased back one
property from a partnership considered to be a related party for a price of
$2,900,000. There were no sale/leaseback transactions during the year ended
September 30, 1994.
During the year ended September 30, 1996, the Company received notice of a
condemnation action from the State of California--Department of Transportation
indicating that the state was condemning one of the Company's Supercenters as a
result of interstate highway expansion. Although the state has remitted a
compensation award to the Company based upon an appraisal, the compensation
portion of the case is pending and awaiting a trial date which is expected to
occur during the fall of 1997. The carrying amount of the related property and
equipment, reflected in the accompanying consolidated balance sheet as of
September 30, 1996, exceeds the amount of the compensation award by
approximately $550,000 and there is the potential for a loss in that amount. The
Company has not recorded a provision for loss as of the date of the accompanying
consolidated financial statements. The Company plans to vigorously pursue
collection of the balance of the carrying value of the property. In the opinion
of management the likelihood of an unfavorable outcome is not probable as of the
date of the accompanying consolidated financial statements.
The Company is a party to other legal proceedings incidental to its
business. In the opinion of management, any ultimate liability with respect to
these actions will not materially affect the consolidated financial position or
results of operations of the Company.
F-36
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
9. SHAREHOLDERS' EQUITY AND REDEMPTION PROVISIONS
The Class B common stock contains provisions whereby the stock will be
converted into Class A common stock in the event of any one of the following
occurrences: 1) the consummation of a public offering of the Class A common
stock, 2) a sale of all of the Class A common stock, or 3) a merger or sale of
all or substantially all of the assets of the Company. Voting powers are
extended to Class B shareholders with regard to amending the corporate charter
and authorizing material changes in the nature or form of the Company's
business.
Included in additional paid-in capital is the allocated amount for the fair
value of detachable stock warrants issued in connection with the acquisition
subordinated notes. Also included in additional paid-in capital is the allocated
amount for the fair value of detachable stock warrants issued in connection with
the junior subordinated notes.
Outstanding warrants, issued in connection with the subordinated notes,
represented 210,735 and 207,183 shares of Class A common stock at September 30,
1996 and 1995, respectively. All warrants outstanding at September 30, 1996 and
1995 were exercisable at a nominal exercise price.
Under the terms of a Stockholder's Agreement, certain shareholders may
require the Company to repurchase their outstanding shares of common stock and
shares represented by the warrants issued with subordinated notes (representing
in the aggregate 677,136 shares of Class A common stock and 1,276,828 shares of
Class B common stock at September 30, 1996) for fair market value beginning on
or after the later of payment of obligations under the Credit Agreement (see
Note 6) or September 30, 2001. At the Company's option, the same shares of
common stock and shares represented by warrants may be repurchased at fair
market value beginning September 30, 1996. The repurchase provisions terminate
upon a firm commitment underwritten public offering, provided the underwriters
value the equity of the Company at no less than $25 million. Classification of
the related common stock and warrants associated with these repurchase rights is
reflected as equity in the consolidated balance sheets of the Company as the
repurchase rights have subsequently been eliminated through the acquisition of
the Company's outstanding shares by Affinity Group, Inc. (see Note 14).
10. PROFIT-SHARING PLAN
The Company has a profit sharing plan for substantially all employees. This
plan provides for annual contributions based on employee deferrals. The Company
may also make additional contributions as determined by the Board of Directors
in excess of the required matching amounts. The Company accrued contributions of
approximately $115,000, $99,000 and $75,000 to the plan for the years ended
September 30, 1996, 1995 and 1994, respectively.
F-37
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
11. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Currently payable:
Federal........................................... $ 2,059,000 $ 1,513,000 $ 1,677,000
State............................................. 415,000 327,000 344,000
------------ ------------ ------------
2,474,000 1,840,000 2,021,000
Deferred............................................ 299,000 (44,000) 60,000
------------ ------------ ------------
$ 2,773,000 $ 1,796,000 $ 2,081,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
A current income tax benefit of $240,000 was recognized during the year
ended September 30, 1994 as a result of a loss on the early extinguishment of
debt (see Note 6).
The difference between the provision for income taxes and the amount that
would be computed using statutory federal income tax rates is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income taxes computed using federal statutory
rates............................................. $ 2,294,000 $ 1,489,000 $ 1,726,000
State income taxes, net of federal income tax
benefit........................................... 314,000 217,000 221,000
Amortization of excess of cost over fair value of
net assets acquired............................... 79,000 79,000 79,000
Other............................................... 86,000 11,000 55,000
------------ ------------ ------------
$ 2,773,000 $ 1,796,000 $ 2,081,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-38
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
11. INCOME TAXES (CONTINUED)
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax basis of property............ $ (5,759,045) $ (5,648,245)
Deferred catalog costs........................................ (209,083) (232,680)
Pre-opening expenses.......................................... (115,431) (47,812)
Other......................................................... (80,143) (50,919)
------------- -------------
(6,163,702) (5,979,656)
Deferred tax assets:
Stock option compensation..................................... 434,231 451,149
Deferred income............................................... 109,515 200,612
Capitalized inventory costs................................... 197,731 170,645
Accruals without economic substance........................... 225,610 231,200
Other......................................................... 72,370 100,805
------------- -------------
1,039,457 1,154,411
------------- -------------
Net deferred tax liability...................................... $ (5,124,245) $ (4,825,245)
------------- -------------
------------- -------------
</TABLE>
The Company provided no valuation allowance against deferred tax assets
recorded as of September 30, 1996 and 1995 as the Company believes that all
deferred assets will more likely than not be fully realizable in future taxable
periods.
12. STOCK OPTIONS
Under the 1991 Stock Option Plan (the "Plan"), options may be granted to key
employees to purchase shares of Class A common stock at a price not less than
85% of the fair market value at date of grant, nor greater than 110%. The Plan
permits the grant of options for a term of up to ten years, except in the case
of an individual who, at the time of the grant, owns more than 10% of the
Company, in which case the term of options is limited to five years.
F-39
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
12. STOCK OPTIONS (CONTINUED)
A summary of the Plan activity follows:
<TABLE>
<CAPTION>
OUTSTANDING PRICE RANGE
----------- ---------------
<S> <C> <C>
September 30, 1993............................................. 142,040 $ 2.50-$9.70
Granted...................................................... 30,000 $ 6.83
Exercised.................................................... (21,000) $ 2.50
Cancelled.................................................... -- --
-----------
September 30, 1994............................................. 151,040 $ 2.50-$9.70
Granted...................................................... 50,200 $ 14.56
Exercised.................................................... (3,750) $ 9.70
Cancelled.................................................... (750) $ 9.70
-----------
September 30, 1995............................................. 196,740 $ 2.50-$14.56
Granted...................................................... 27,675 $ 13.28
Exercised.................................................... (3,000) $ 13.28
Cancelled.................................................... (1,750) $ 14.56
-----------
September 30, 1996............................................. 219,665 $ 2.50-$14.56
-----------
-----------
</TABLE>
All outstanding options at September 30, 1996 and 1995 were exercisable.
Exercisable options outstanding at September 30, 1994 were 150,290.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. Fair values of cash and
cash equivalents and short-term borrowings approximate cost due to the short
period of time to maturity. Fair values of long-term debt approximate face value
since the interest rate is floating with the market on a monthly basis. The
Company believes that since the subordinated debt is held by major shareholders,
the terms of this debt are unique, and the fact that there is no public market
for these debt instruments, fair value cannot be determined on a reasonable
basis.
14. SUBSEQUENT EVENTS
On February 25, 1997 the shareholders entered into an agreement to sell the
outstanding stock of the Company to Affinity Group, Inc. ("AGI"). The stock sale
transaction is expected to closed on April 2, 1997 simultaneously with the
closing of a note offering by the parent company of AGI. Additionally, certain
executives and members of management of the Company will enter into
non-competition, consulting, and incentive compensation agreements with AGI or
the parent of AGI.
On February 7, 1997 Affinity Group Plans, Inc. (an entity not affiliated
with AGI) and National Alliance Insurance Company filed a complaint in the
United States District Court for the Eastern District of Missouri against the
Company, a subsidiary of the Company, and two of the directors of the Company
seeking damages in excess of $125 million (and punitive damages of a like
amount) alleging breaches of contract, misrepresentations, misappropriation of
information and breaches of fiduciary duty in connection with the Company's
preliminary discussions with AGI to sell certain assets of the Company
(excluding
F-40
<PAGE>
CAMPING WORLD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
14. SUBSEQUENT EVENTS (CONTINUED)
insurance marketing arrangements and related assets in which the plaintiffs have
an interest). The shareholders of the Company and AGI have structured the sale
as a stock sale. Under the stock sale agreement, the insurance marketing
arrangements and related assets in dispute remain as assets of the Company. AGI
has advised the plaintiffs in this litigation that it recognizes the contractual
obligations of the Company relating to such marketing arrangements and that it
intends to comply (and cause the Company to comply) with the terms of such
insurance marketing arrangements. The Company and defendant directors believe
the complaint to be without merit and that such litigation will not have a
material adverse effect on the Company.
F-41
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Prospectus Summary............................. 4
Risk Factors................................... 20
The Acquisitions............................... 31
Use of Proceeds................................ 32
Capitalization................................. 34
Selected Financial Data........................ 35
Selected Pro Forma Combined Financial
Statements................................... 39
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 45
Business....................................... 51
Management..................................... 67
Certain Transactions........................... 72
Principal Shareholders and Security Ownership
of Management................................ 73
Description of Other Indebtedness.............. 74
Description of the Notes....................... 75
Plan of Distribution........................... 98
Legal Matters.................................. 98
Experts........................................ 99
Index to Consolidated Financial Statements..... F-1
</TABLE>
--------------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING NEW NOTES
RECEIVED IN EXCHANGE FOR ORIGINAL NOTES HELD FOR THEIR OWN ACCOUNT. SEE "PLAN OF
DISTRIBUTION."
AFFINITY GROUP HOLDING, INC.
OFFER TO EXCHANGE ITS
11% SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT
FOR ANY AND ALL OF ITS
OUTSTANDING
11% SENIOR NOTES DUE 2007
PROSPECTUS
DATED , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. The Company's Certificate of
Incorporation or By-laws contains provisions limiting the personal liability of
its directors for monetary damages resulting from breaches of their duty of care
to the extent permitted by Section 102(b)(7) of the Delaware General Corporation
Law. The Company's Certificate of Incorporation or By-laws also contains
provisions making indemnification of such company's directors and officers
mandatory to the fullest extent permitted by the Delaware General Corporation
Law.
The Delaware General Corporation Law permits the indemnification by a
Delaware corporation of its directors, officers, employees and other agents
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement in connection with specified actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than derivative
actions which are by or in the right of the corporation) if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was illegal. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with defense or settlement of such an action and court
approval is required before there can be any indemnification where the person
seeking indemnification has been found liable to the corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<C> <S>
3.1 Articles of Incorporation of the Company
3.2 By-laws of the Company
4.1 Indenture dated as of April 2, 1997 among the Company and United States Trust Company, as Trustee (the
"Indenture")
4.2* Form of Original Note
4.3* Form of New Note
4.4 Registration Rights Agreement dated as of April 2, 1997 among the Company and the Initial Purchasers
referred to therein
5.1 Legal Opinion of Kaplan, Strangis and Kaplan, P.A.
10.1 Securities Purchase Agreement dated as of March 26, 1997 by and among the Company and the initial
purchasers referred to therein
12.1 Statement re: Computation of Ratios
23.1** Consent of Kaplan, Strangis and Kaplan, P.A.
23.2 Consent of Deloitte & Touche LLP, independent auditors for the Company
23.3 Consent of Deloitte & Touche LLP, independent auditors for Camping World, Inc.
24.1 Powers of Attorney
25.1 Statement of Eligibility of Trustee, United States Trust Company, on Form T-1
27 Financial Data Schedule
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------------
* To be filed by Amendment.
** Filed as part of the opinion of Kaplan, Strangis and Kaplan, P.A. (see
Exhibit 5.1 hereto).
II-1
<PAGE>
(b) Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, 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 Act and
will be governed by the final adjudication of such issue.
(b) (1) 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.
(2) 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.
(c) The undersigned Registrant hereby undertakes:
(1) 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 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.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not subject of and included in the Registration Statement when it
became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
AFFINITY GROUP HOLDING, INC., a Delaware corporation, has duly caused this
amendment to the Registration Statement to be signed on behalf by the
undersigned, thereunto duly authorized in the City of Denver, Colorado on May 2,
1997;
AFFINITY GROUP HOLDING, INC.
By /s/ MARK J. BOGGESS
-----------------------------------------
Mark J. Boggess,
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
* Officer and Director
---------------------------- (Principal Executive May 2, 1997
Joe McAdams Officer)
/s/ MARK J. BOGGESS Chief Financial Officer
---------------------------- (Principal Financial and May 2, 1997
Mark J. Boggess Accounting Officer)
*
---------------------------- Chairman of the Board and May 2, 1997
Stephen Adams Director
*
---------------------------- Director May 2, 1997
Wayne Boysen
*
---------------------------- Director May 2, 1997
Thomas A. Donnelly
*
---------------------------- Director May 2, 1997
John Ehlert
---------------------------- Director
David B. Garvin
*
---------------------------- Director May 2, 1997
David Frith-Smith
*By: /s/ MARK J. BOGGESS
----------------------- May 1, 1997
(AS ATTORNEY-IN-FACT)
* Mark J. Boggess, pursuant to Powers of Attorney executed by each of the
directors listed above whose name is marked by an "*" and filed as an
exhibit hereto, by signing his name hereto does hereby sign and execute this
Prospectus on behalf of each of such directors.
S-1
<PAGE>
AFFINITY GROUP HOLDING, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Description:
Year ended December 31, 1996:
Allowance for doubtful accounts receivable.................... $ 926 $ 802 $ 647(a) $ 1,081
Allowance for obsolete and overstock inventory................ -- 2 -- (b) 2
----- ----- ----- -----------
$ 926 $ 804 $ 647 $ 1,083
----- ----- ----- -----------
----- ----- ----- -----------
Year ended December 31, 1995:
Allowance for doubtful accounts receivable.................... $ 709 $ 531 $ 314(a) $ 926
Allowance for obsolete and overstock inventory................ 134 -- 134(b) --
----- ----- ----- -----------
$ 843 $ 531 $ 448 $ 926
----- ----- ----- -----------
----- ----- ----- -----------
Year ended December 31, 1994:
Allowance for doubtful accounts receivable.................... $ 422 $ 336 $ 49(a) $ 709
Allowance for obsolete and overstock inventory................ 134 -- -- 134
----- ----- ----- -----------
$ 556 $ 336 $ 49 $ 843
----- ----- ----- -----------
----- ----- ----- -----------
</TABLE>
- ------------------------
(a) Accounts determined to be uncollectable and charged against allowance
account, net of collection on accounts previously charged against allowance
account.
(b) Amounts represent inventories written off.
S-2
<PAGE>
CERTIFICATE OF INCORPORATION
OF
AFFINITY GROUP HOLDING, INC.
1. The name of the corporation is:
AFFINITY GROUP HOLDING, INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Thousand (1,000) and the par value of each of such
shares is $0.01 amounting in the aggregate to Ten Dollars ($10.00).
5. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not apply
to any liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. This Article shall not eliminate or limit the
liability of a director for any act or omission occurring prior to the time this
Article became effective.
6. No holder of stock of this Corporation shall be entitled to any
cumulative voting rights.
7. No holder of stock of this Corporation shall have any preferential,
pre-emptive, or other rights of subscription to any shares of any class or
series of stock of this Corporation allotted or sold, or to be allotted or sold,
and now or hereafter authorized, or to any obligations or securities convertible
into any class or series of stock of this Corporation, nor any right of
subscription to any part thereof.
<PAGE>
8. The business and affairs of the Corporation shall be managed under the
direction of a Board of Directors consisting of such number as is provided from
time to time in the Bylaws of the Corporation. The Board of Directors is
authorized to make, alter,or repeal the Bylaws of the Corporation. Election of
directors need not be by ballot.
9. The name and mailing address of the incorporator is:
Robert T. York
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
I, the undersigned, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true and accordingly have
hereunto set my hand this 25th day of November, 1996.
/s/
------------------------
Robert T. York
<PAGE>
AFFINITY GROUP HOLDING, INC.
* * * * *
B Y L A W S
* * * * *
ARTICLE I - OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II - MEETING OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Minneapolis, State of Minnesota, at such place as
may be fixed from time to time by the board of directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on the first day
of December if not a legal holiday, and if a legal holiday, then on the next
secular day following, at 10:00 A.M., or at such other date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting, at which they shall elect by a plurality vote a board of
directors, and transact such other business as may properly be brought before
the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during
<PAGE>
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than sixty days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
-2-
<PAGE>
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III - DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be such number as is determined from time to time by the stockholders of
the corporation, and the Board of Directors may consist of only one member. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his or her successor is elected and qualified. Directors need not
be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the
-3-
<PAGE>
certificate of incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president on
three days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors unless the
board consists of only one director; in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the board of directors the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
-4-
<PAGE>
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each
-5-
<PAGE>
meeting of the board of directors of a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by-law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV - NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V - OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a chairman, a president, a vice president, a secretary
and a treasurer. The board of directors may also choose additional vice
presidents, and one or more assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall
-6-
<PAGE>
exercise such powers and perform such duties as shall be determined from time to
time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE CHAIRMAN AND THE PRESIDENT
Section 6. The chairman and the president shall be the chief executive
officers of the corporation, shall preside at all meetings of the stockholders
and the board of directors, shall have general and active management of the
business of the corporation and shall see that all order and resolutions of the
board of directors are carried into effect.
Section 7. He or she shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. In the absence of the president or in the event of his or her
inability or refusal to act, the vice president (or in the event there be more
than one vice president, the vice presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He or she shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors, and
shall perform such other duties as may be
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<PAGE>
prescribed by the board of directors or president, under whose supervision he or
she shall be. He or she shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
his or her signature or by the signature of such assistant secretary. The board
of directors may give general authority to any other officer to affix the seal
of the corporation and to attest the affixing by his or her signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He of she shall disburse the funds of the corporation as may
be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his or her transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he or she shall give
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his or her office and for the
restoration to the corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election, shall,
in the absence of the treasurer or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
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<PAGE>
ARTICLE VI - CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him or her in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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<PAGE>
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII - GENERAL PROVISIONS; DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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<PAGE>
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
INDEMNIFICATION
Section 7. The corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law of
Delaware.
ARTICLE VIII - AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the board of directors, when such power
is conferred upon the board of directors by the certificate of incorporation at
any regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal bylaws
is conferred upon the board of directors by the certificate of incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
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<PAGE>
AFFINITY GROUP HOLDING, INC.,
as Issuer,
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
-----------------------
INDENTURE
Dated as of April 2, 1997
-----------------------
$130,000,000
11% Senior Notes Due 2007
<PAGE>
CROSS-REFERENCE TABLE
---------------------
TIA Section INDENTURE SECTION
- ----------- -----------------
Section 310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.8; 7.10; 10.2
(c) N.A.
Section 311(a) 7.11
(b) 7.11
(c) N.A.
Section 312(a) 2.5
(b) 10.3
(c) 10.3
Section 313(a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6; 10.2
(d) 7.6
Section 314(a) 4.6; 4.7; 10.2
(b) N.A.
(c)(1) 10.4
(c)(2) 10.4
(c)(3) 10.4
(d) N.A.
(e) 10.5
(f) N.A.
Section 315(a) 7.1(b)
(b) 7.5; 10.2
(c) 7.1(a)
(d) 7.1(c)
(e) 6.11
Section 316(a) (last sentence) 2.9
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
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<PAGE>
(c) 9.4
Section 317(a)(1) 6.8
(a)(2) 6.9
(b) 2.4
Section 318(a) 10.1
(c) 10.1
- --------------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table
shall not, for any purpose, be
deemed to be a part of this
Indenture.
ii
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE...................... 1
1.1 Definitions........................................................ 1
1.2 Incorporation by Reference to Trust Indenture Act.................. 20
1.3 Rules of Construction.............................................. 20
ARTICLE II
THE NOTES............................................... 21
2.1 Form and Dating.................................................... 21
2.2 Execution and Authentication....................................... 22
2.3 Registrar and Paying Agent......................................... 23
2.4 Paying Agent To Hold Money in Trust................................ 24
2.5 Noteholder Lists................................................... 24
2.6 Transfer and Exchange.............................................. 24
2.7 Replacement Notes.................................................. 25
2.8 Outstanding Notes.................................................. 26
2.9 Treasury Notes..................................................... 26
2.10 Temporary Notes.................................................... 26
2.11 Cancellation....................................................... 27
2.12 Defaulted Interest................................................. 27
2.13 CUSIP Number....................................................... 27
2.14 Deposit of Moneys.................................................. 28
2.15 Wire Payments to Holders........................................... 28
2.16 Book-Entry Provisions for Global Notes............................. 29
2.17 Special Transfer Provisions........................................ 31
ARTICLE III
OPTIONAL REDEMPTION........................................ 33
3.1 Notices to Trustee................................................. 33
3.2 Selection of Notes To Be Redeemed.................................. 33
3.3 Notice of Redemption............................................... 34
3.4 Effect of Notice of Redemption..................................... 35
3.5 Deposit of Redemption Price........................................ 35
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<PAGE>
3.6 Notes Redeemed in Part............................................. 35
ARTICLE IV
COVENANTS............................................... 35
4.1 Payment of Notes................................................... 35
4.2 Maintenance of Office or Agency.................................... 36
4.3 Corporate Existence................................................ 36
4.4 Payment of Taxes and Other Claims.................................. 37
4.5 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law................................................ 37
4.6 Compliance Certificates............................................ 38
4.7 Reports............................................................ 39
4.8 Further Assurance to the Trustee................................... 39
4.9 Limitation on Additional Indebtedness.............................. 39
4.10 Limitations on Investments, Loans and Advances..................... 39
4.11 Limitation on Restricted Payments.................................. 40
4.12 Limitation on Liens................................................ 41
4.13 Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries....................................................... 43
4.14 Limitations on Sale-Leaseback Transactions......................... 44
4.15 Disposition of Proceeds of Asset Sale.............................. 44
4.16 Limitation on Preferred Stock Issuances by Subsidiaries............ 45
4.17 Limitation on Transactions with Affiliates......................... 45
4.18 Company Ownership of AGI Stock..................................... 46
4.19 Change of Control.................................................. 46
4.20 Payments for Consent............................................... 48
4.21 Waiver of Stay, Extension or Usury Laws............................ 49
ARTICLE V
SUCCESSOR CORPORATION...................................... 49
5.1 Consolidation, Merger, Conveyance, Transfer or Lease............... 49
5.2 Successor Entity Substituted....................................... 51
ARTICLE VI
DEFAULT AND REMEDIES....................................... 51
6.1 Events of Default.................................................. 51
6.2 Acceleration....................................................... 53
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<PAGE>
6.3 Other Remedies..................................................... 53
6.4 Waiver of Past Default............................................. 54
6.5 Control by Majority................................................ 54
6.6 Limitation on Suits................................................ 54
6.7 Rights of Holders To Receive Payment............................... 55
6.8 Collection Suit by Trustee......................................... 55
6.9 Trustee May File Proofs of Claim................................... 56
6.10 Priorities......................................................... 56
6.11 Undertaking for Costs.............................................. 57
6.12 Restoration of Rights and Remedies................................. 57
ARTICLE VII
TRUSTEE................................................. 57
7.1 Duties of Trustee.................................................. 57
7.2 Rights of Trustee.................................................. 59
7.3 Individual Rights of Trustee....................................... 60
7.4 Trustee's Disclaimer............................................... 60
7.5 Notice of Defaults................................................. 60
7.6 Reports by Trustee to Holders...................................... 60
7.7 Compensation and Indemnity......................................... 61
7.8 Replacement of Trustee............................................. 62
7.9 Successor Trustee by Merger, Etc................................... 63
7.10 Eligibility; Disqualification...................................... 63
7.11 Preferential Collection of Claims Against Company.................. 63
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE............................. 64
8.1 Termination of Company's Obligations............................... 64
8.2 Legal Defeasance and Covenant Defeasance........................... 65
8.3 Application of Trust Money......................................... 68
8.4 Repayment to Company............................................... 69
8.5 Reinstatement...................................................... 69
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS............................ 70
9.1 Without Consent of Holders......................................... 70
9.2 With Consent of Holders............................................ 70
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<PAGE>
9.3 Compliance with Trust Indenture Act................................ 72
9.4 Revocation and Effect of Consents.................................. 72
9.5 Notation on or Exchange of Notes................................... 72
9.6 Trustee To Sign Amendments, Etc.................................... 73
ARTICLE X
MISCELLANEOUS............................................ 73
10.1 Trust Indenture Act Controls....................................... 73
10.2 Notices............................................................ 73
10.3 Communications by Holders with Other Holders....................... 75
10.4 Certificate and Opinion of Counsel as to Conditions Precedent...... 75
10.5 Statements Required in Certificate and Opinion of Counsel.......... 75
10.6 Rules by Trustee, Paying Agent, Registrar.......................... 76
10.7 Legal Holidays..................................................... 76
10.8 Governing Law...................................................... 76
10.9 Release from Liability............................................. 76
10.10 Successors......................................................... 77
10.11 Duplicate Originals................................................ 77
10.12 Separability....................................................... 77
10.13 Table of Contents, Headings, Etc................................... 77
SIGNATURES
EXHIBIT A - Form of Physical Note
EXHIBIT B - Form of Rule 144A Global Note
EXHIBIT C - Form of Regulation S Global Note
EXHIBIT D - Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Rule 144A
EXHIBIT E - Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S
EXHIBIT F - Form of Certificate to Be Delivered in Connection with Transfers
to Non-QIB Accredited Investors
vi
<PAGE>
INDENTURE dated as of April 2, 1997, between AFFINITY GROUP HOLDING,
INC., a Delaware corporation (the "Company"), and UNITED STATES TRUST COMPANY OF
NEW YORK, a New York corporation, as trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Notes (as hereinafter defined) to
be issued as provided for in this Indenture.
The parties hereto agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders (as hereinafter defined) of the
Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Subsidiary of the Company or assumed in connection
with an Asset Acquisition of such Person, including, without limitation,
Indebtedness incurred in connection with, or in anticipation of, such Person's
becoming a Subsidiary of the Company or such acquisition.
"Additional Interest" means the interest rate provided for in Section
4 of the Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.17
hereof.
"Agent" means any Registrar or Paying Agent.
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"AGI" means Affinity Group, Inc. a Delaware corporation.
"AGI Indenture" means the Indenture dated as of October 29, 1993,
among AGI, as issuer, Trailer Life Enterprises, Inc., Camp Coast to Coast, Inc.,
Golf Card International Corp., Golf Card Resort Services, Inc., VBI, Inc.,
Venture Enterprises, Inc., GSS Enterprises, Inc., Golf Card Holding Corporation
and National Boat Owners Association, Inc., as guarantors, and the Trustee, as
trustee, as supplemented from time to time.
"AGI Notes" means the $120,000,000 11/2% Senior Subordinated Notes
due 2003 of AGI issued under the AGI Indenture.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) or purchase or
acquisition of Capital Stock by the Company or any of its Subsidiaries to or in
any other Person, in either case as a result of which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with or
into the Company or any of its Subsidiaries or (ii) any acquisition by the
Company or any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease (including by means of sale-leaseback) or other disposition by the Company
or a Subsidiary to any Person (including any Unrestricted Subsidiary) other than
the Company or a Subsidiary of the Company that is not an Unrestricted
Subsidiary, in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of the Company or (ii) any other property or
asset of the Company or any Subsidiary of the Company, in each case other than
(x) in the ordinary course of business, (y) isolated transactions in which the
consideration received does not exceed $100,000 individually and (z) NAFE or the
assets thereof. For the purposes of this definition, the term "Asset Sale" shall
not include sales of receivables not a part of a sale of the business from which
they arose or any disposition of all or substantially all of the properties and
assets of the Company that is governed under and complies with Section 5.1
hereof.
"Asset Sale Offer" has the meaning provided in Section 4.15(a) hereof.
"Available Amount" has the meaning provided in Section 4.15(a) hereof.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
federal or state law for the relief of debtors as the same may be amended from
time to time.
2
<PAGE>
"Base Period" has the meaning provided in Section 4.11 hereof.
"Board of Directors" means, as to any Person, the board of directors
or any duly authorized committee thereof of such Person or, if such Person is a
partnership, of the managing general partner of such Person.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors of the Company and to be in full force and effect on the
date of such certification and delivered to the Trustee.
"Business Day" means any day except a Saturday, a Sunday or any day on
which banking institutions in New York, New York are required or authorized by
law or other governmental action to be closed.
"Camping World" means Camping World, Inc., a Kentucky corporation.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under GAAP, and, for the purpose
of the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 180 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (PROVIDED, HOWEVER, that the full faith and credit of
the United States of America is pledged in support thereof); (ii) certificates
of deposit or acceptances with a maturity of 180 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $250,000,000;
(iii) commercial paper with a maturity of 180 days or less issued by a
corporation (except any Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and rated at least
A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investors
3
<PAGE>
Service, Inc.; (iv) repurchase agreements and reverse repurchase agreements
relating to marketable obligations, directly or indirectly, issued or
unconditionally guaranteed by the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; PROVIDED,
HOWEVER, that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions with Securities
Dealers and Others, as adopted by the Comptroller of the Currency;
(v) instruments backed by letters of credit of institutions satisfying the
requirements of clause (ii) above; (vi) mutual funds or similar securities, not
less than 80 percent of the assets of which are invested in securities of the
type referred to in clauses (i) through (v) above, including without limitation
the UST Master Government Fund; and (vii) in the case of any Subsidiary which is
regulated by an insurance regulating authority, instruments permitted to be
invested in by such regulatory authority at the time such investment was made.
"CEDEL" means Cedel Bank, Societe Anonyme (or any successor securities
clearing agency).
"Change of Control" means (i) the direct or indirect sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company to any Person or entity or group of Persons or entities acting in
concert as a partnership or other group (a "Group of Persons") other than a
Permitted Holder, (ii) the merger or consolidation of the Company with or into
another corporation with the effect that a person or group of persons, other
than Permitted Holders are or become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of securities of the surviving corporation of
such merger or the corporation resulting from such consolidation representing
50% or more of the combined voting power of the then outstanding securities of
the surviving corporation ordinarily (and apart from rights arising under
special circumstances) having the right to vote in the election of directors,
(iii) the replacement of a majority of the Board of Directors of the Company,
over a two-year period, from the directors who constituted such Board of
Directors at the beginning of such period, and (x) such replacement shall not
have been approved by a vote of at least a majority of such Board of Directors
then still in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved or (y) such replacement shall not have been
approved by a Permitted Holder; PROVIDED, HOWEVER, that a Permitted Holder is
the beneficial holder (within the meaning of Rule 13(d)-3 under the Exchange
Act) of more than 50% of the combined voting power of the then outstanding
securities of the Company or (iv) any instance when a Person or Group of Persons
(other than Permitted Holders) shall, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, have become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of securities of the Company representing 49% or more of the combined
4
<PAGE>
voting power of the then outstanding securities of the Company ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors.
"Change of Control Date" has the meaning provided in Section 4.19(a)
hereof.
"Change of Control Offer" has the meaning provided in Section 4.19(a)
hereof.
"Change of Control Payment Date" has the meaning provided in Section
4.19(a) hereof.
"Company" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and,
thereafter, means the successor.
"Consolidated Cash Flow" means, with respect to any Person for any
period, without duplication, the Consolidated Net Income of such Person for such
period increased (to the extent deducted in determining Consolidated Net Income
during such period) by the sum of: (i) all United States Federal, state and
foreign income taxes of such Person paid or accrued according to GAAP for such
period (other than income taxes attributable to extraordinary gains and losses);
(ii) all interest expense of such Person paid or accrued in accordance with GAAP
(net of any interest income and exclusive of deferred financing fees) for such
period (including amortization of original issue discount and the interest
portion of deferred payment obligations); (iii) depreciation; (iv) amortization
including, without limitation, amortization of capitalized debt issuance costs;
and (v) any other non-cash charges to the extent deducted from Consolidated Net
Income (including non-cash expenses recognized in accordance with Financial
Accounting Standards Bulletin Number 106 and excluding any non-cash charge to
the extent that it requires an accrual of or a reserve for cash disbursements
for any future period).
"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;
PROVIDED, HOWEVER, that (a) the Net Income of any Person (the "Other Person") in
which the Person in question or one of its Subsidiaries has a joint interest
with a third party (which interest does not allow 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 (other than AGI) of the Person in question
that is subject to any contractual restriction or limitation on the payment of
dividends or the making of other distributions shall
5
<PAGE>
be excluded to the extent of such restriction or limitation, (c)(i) the Net
Income (or loss) 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,
(d) extraordinary gains and losses, and the related income tax effect according
to GAAP, shall be excluded, (e) charges with respect to Indebtedness (and
related warrant interests) retired with the proceeds of the Notes shall be
excluded, (f) charges for amortization of goodwill in excess of amortization on
a straight-line, 40 year basis shall be excluded, (g) Consolidated Net Income
shall be calculated without deducting therefrom any accruals made for phantom
stock arrangements between the Company or any Subsidiary with key employees,
(h) Net Income (loss) pertaining to discontinued operations (including NAFE),
shall be excluded, and (i) all gains, losses, charges or write-offs with respect
to an election to be taxed as an "S corporation" under Subchapter S of the
Internal Revenue Code shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any date
of determination, the consolidated stockholders' equity represented by the
shares of such Person's Capital Stock (other than Disqualified Stock)
outstanding at such date, as determined on a consolidated basis in accordance
with GAAP.
"Custodian" has the meaning provided in Section 6.1(b) hereof.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, in each case on or
prior to the maturity date of the Notes.
"Event of Default" has the meaning provided in Section 6.1 hereof.
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"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Notes" means the 11% Senior Notes due 2007 of the Company,
to be issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement.
"Fair Market Value" or "fair value" means, with respect to any asset
or property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value or fair value shall be determined by a majority of the Board of
Directors acting in good faith and shall be evidenced by a Board Resolution
delivered to the Trustee. No such determination need be supported by an
appraisal or other expert opinion and such determination by the Board of
Directors shall be conclusive.
"Fixed Charge Coverage Ratio" means, with respect to any Person, the
ratio of (i) Consolidated Cash Flow of such Person for the four full fiscal
quarters for which financial statements are available that immediately precede
the date of the transaction or other circumstances giving rise to the need to
calculate the Fixed Charge Coverage Ratio (the "Transaction Date") to (ii) all
cash and non-cash interest expense (including capitalized interest) of such
Person and its Subsidiaries determined in accordance with GAAP (net of any
interest income of such Person and its Subsidiaries and exclusive of deferred
financing fees of such Person and its Subsidiaries and excluding interest in
respect of the management incentive payments to certain Camping World executives
entered into at the time of the Camping World acquisition) and the aggregate
amount of cash dividends or other distributions declared or paid on Capital
Stock (other than Common Stock) of such Person and its Subsidiaries, in each
case for such four full fiscal quarter period. For purposes of this definition,
if the Transaction Date occurs prior to the date on which the Company's
consolidated financial statements for the four full fiscal quarters subsequent
to the Issue Date are first available, then "Consolidated Cash Flow" and the
items referred to in the preceding clause (ii) shall be calculated, in the case
of the Company, after giving effect on a pro forma basis as if the Notes
outstanding on the Transaction Date were issued on the first day of such four
full fiscal quarter period. In addition to and without limitation of the
foregoing two sentences, for purposes of this definition, "Consolidated Cash
Flow" and the items referred to in the preceding clause (ii) shall be calculated
after giving effect on a pro forma basis for the period of such calculation to
(i) the incurrence or retirement, as the case may be, of any Indebtedness of
such Person or any of its Subsidiaries at any time during the period (the
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"Reference Period") (A) commencing on the first day of the four full fiscal
quarter period for which financial statements are available that precedes the
Transaction Date and (B) ending on and including the Transaction Date,
including, without limitation, the incurrence of the Indebtedness giving rise to
the need to make such calculation, as if such incurrence occurred on the first
day of the Reference Period; PROVIDED, HOWEVER, that if such Person or any of
its Subsidiaries directly or indirectly guarantees Indebtedness of a third
Person, the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or Subsidiary had directly incurred such
guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company or any of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring Acquired Indebtedness) occurring during the Reference
Period and any retirement of Indebtedness in connection with such Asset Sales,
as if such Asset Sale or Asset Acquisition and/or retirement occurred on the
first day of the Reference Period; PROVIDED, HOWEVER, that pro forma
Consolidated Cash Flow shall be calculated taking into account the results of
operations attributable to the assets which are the subject of the Asset Sale or
Asset Acquisition during the Reference Period, but in the case of Asset
Acquisitions, only to the extent derived from historical financial statements
with respect to such operations; PROVIDED, HOWEVER, further, that pro forma
Consolidated Cash Flow attributable to any Asset Acquisition shall be included
only to the extent that Consolidated Cash Flow of such Person is otherwise
includible in the referent Person's Consolidated Cash Flow. Furthermore, in
calculating the denominator (but not the numerator) of this "Fixed Charge
Coverage Ratio," (1) subject to clause (3) below, interest on Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to accrue at a fixed
rate PER ANNUM equal to the rate of interest on such Indebtedness in effect on
the Transaction Date; (2) if interest on any Indebtedness actually incurred on
the Transaction Date may optionally be determined at an interest rate based upon
a factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate based upon a factor of a prime or similar
rate shall be deemed to have been in effect; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"GAAP" means generally accepted accounting principles in effect on the
Issue Date as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
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"Global Note" means any and all Notes issued in global form.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"incur" means, with respect to any Indebtedness (including Acquired
Indebtedness) or other obligation of any Person, to create, issue, incur (by
conversion, exchange or otherwise), assume or guaranty or otherwise become,
directly or indirectly, liable for or with respect to the payment of such
Indebtedness or other obligation.
"Indebtedness" means, with respect to any Person, without duplication,
(i) any liability, contingent or otherwise, of such Person (A) 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), (B) evidenced by a note, debenture
or similar instrument, letter of credit or draft accepted (including a purchase
money obligation) representing extensions of credit whether or not representing
obligations for borrowed money or (C) for the payment of money relating to a
Capitalized Lease Obligation or other obligation relating to the deferred
purchase price of any property or services (other than property or services
purchased on ordinary trade terms therefor) which purchase price is payable over
a period in excess of six months or is evidenced by a note, invoice or similar
written instrument with a maturity in excess of six months; (ii) any liability
of others of the kind described in the preceding clause (i) which the Person has
guaranteed or which is otherwise its legal liability; (iii) any obligation
secured by a lien to which the property or assets of such Person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such Person's legal liability; and (iv) any and all
deferrals, renewals, extensions, replacements, refinancings, and refundings of,
or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) or (iii). Notwithstanding
the foregoing, Indebtedness shall not include (i) obligations of any Subsidiary
of the Company engaged in the insurance business with respect to insurance
policies or similar contracts written by such Subsidiary in the ordinary course
of its insurance business and (ii) obligations of the Company or any Subsidiary
with respect to non-competition agreements, consulting agreements with certain
executives of Camping World or the Company with respect to management incentive
agreements with certain Camping World executives in connection with the
acquisition of the stock of Camping World by AGI. Notwithstanding any other
provision of the foregoing definition, guaranties of Indebtedness otherwise
included in a determination of such amount shall not be deemed "Indebtedness" of
the Company or any Subsidiaries for purposes of this definition.
"Indenture" means this Indenture as amended or supplemented from time
to time pursuant to the terms hereof.
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"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the good
faith judgment of the Board of Directors of the Company, qualified to perform
the task such firm has been engaged and disinterested and independent with
respect to the Company and its Affiliates.
"Initial Notes" means the 11% Senior Notes due 2007 of the Company
issued initially issued pursuant to this Indenture.
"Initial Purchasers" means Citicorp Securities, Inc., Citibank Canada
Securities Limited, Citibank International plc and CIBC Wood Gundy Securities
Corp.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
promulgated under the Securities Act.
"interest" when used with respect to any Note, means the amount of all
interest accruing on such Note, including all interest accruing subsequent to
the occurrence of any events specified in Sections 6.1(a)(vi) and (vii) or which
would have accrued but for any such event and any Additional Interest.
"Interest Payment Date" when used with respect to any Note means the
stated maturity of an installment of interest specified in such Note.
"Interest Rate" when used with respect to any Note means the rate per
annum specified in such Note as the rate of interest accruing on the principal
amount of such Note.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investments" means any capital contribution, advance or loans to
(including any guarantees of loans to), or investments or purchases of Capital
Stock in, any Person.
"Issue Date" means the date of original issuance of the Notes.
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"Legal Holiday" means any day other than a Business Day, a Saturday or
a Sunday.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, hypothecation, assignment for security or other security
agreement of any kind or nature whatsoever. For purposes of the Indenture, a
Person shall be deemed to own subject to a Lien any property which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such Person.
"Material Subsidiary" means a Subsidiary of the Company which would
constitute a "significant subsidiary" of the Company within the meaning of
Regulation S-X, under the Securities Act of 1933, as amended, of the Securities
and Exchange Commission.
"Maturity Date," when used with respect to any Note, means the date
specified in such Note as the fixed date on which the principal of such Note is
due and payable.
"NAFE" means the National Association for Female Executives, Inc., a
subsidiary of AGI.
"Net Cash Proceeds" means, with respect to any Asset Sale the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents net of (i) brokerage commissions and other reasonable fees and
expenses (including, without limitation, fees and expenses of counsel,
accountants and investment bankers) related to such Asset Sale; (ii) provisions
for all taxes payable as a result of such Asset Sale; (iii) payments made to
retire Indebtedness secured by the assets subject to such Asset Sale; and
(iv) appropriate amounts to be provided by the Company or any of its
Subsidiaries, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any of its Subsidiaries, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"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
(other than Disqualified Stock) by the Company, the aggregate net proceeds
received by the Company, after payment of expenses, commissions and the like
incurred in connection therewith,
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whether such proceeds are in cash or in property (valued at the Fair Market
Value thereof, as determined in good faith by a majority of the Board of
Directors of the Company, at the time of receipt), (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind of the Company 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) and (c) in the case of the issuance of
any Indebtedness by the Company, the aggregate net cash proceeds received by the
Company, after payment of expenses, commissions and the like incurred therewith.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Notes" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities under this Indenture.
"Officer" means, with respect to any Person, the Chairman, the
President, the Chief Executive Officer, any Vice President, the Chief Financial
Officer, the Treasurer, the Secretary or any Assistant Secretary of such Person
(or, in the case of a Person that is a partnership, the general partner of such
Person in such capacity).
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Secretary or an Assistant Treasurer of such Person that shall comply with
applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal counsel which
is acceptable to the Trustee, which may include counsel to the Company.
"Participants" has the meaning provided in Section 2.16 hereof.
"Paying Agent" has the meaning provided in Section 2.3 hereof.
"Permitted Holder" means Stephen Adams, his spouse and lineal
descendants and trusts for the exclusive benefit of any of the foregoing persons
and any Affiliate of Stephen Adams.
"Permitted Indebtedness" means:
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(a) Indebtedness under the Notes and the Indenture;
(b) Permitted Senior Indebtedness;
(c) Indebtedness and guarantees (plus interest, premium, fees and
other obligations associated therewith) not otherwise referred to in this
covenant outstanding on the Issue Date;
(d) Indebtedness in respect of Interest Rate Protection Obligations
incurred in the ordinary course of business to the extent that the notional
principal amount of such Indebtedness does not exceed, at the time of the
making of such Interest Rate Protection Obligations, the principal amount
of Indebtedness to which such Interest Rate Protection Obligations relate;
(e) Indebtedness of a Wholly-Owned Subsidiary issued to and held by
the Company or a Wholly-Owned Subsidiary in respect of the intercompany
advances or transactions;
(f) Indebtedness incurred in connection with or arising out of
Capitalized Lease Obligations not to exceed $7,500,000 at any one time
outstanding;
(g) Refinancing Indebtedness; and
(h) Other Indebtedness of the Company or any Subsidiary that does not
exceed $10,000,000 in the aggregate at any one time outstanding.
"Permitted Investments" means, for any Person, Investments made on or
after the date of the Indenture consisting of:
(i) Investments by the Company in any Wholly-Owned Subsidiary
and Investments or loans in or to the Company or a Subsidiary by any
Subsidiary;
(ii) Investments represented by accounts receivable created or
acquired in the ordinary course of business;
(iii) advances to employees in the ordinary course of business not
to exceed an aggregate of $2,000,000 outstanding at any one time;
(iv) Investments under or pursuant to Interest Rate Protection
Obligations;
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(v) Investments by any Subsidiary of the Company engaged in the
insurance business that are made in the ordinary course of its insurance
business and is permitted by applicable insurance laws and regulations;
(vi) Cash Equivalents;
(vii) Investments in the Notes;
(viii) Investments existing on the Issue Date;
(ix) Investments made after the Issue Date in Affinity Thrift and
Loan or Affinity Group Thrift Holding Corp. that do not exceed $5,000,000
in the aggregate outstanding at any one time; and
(x) Investments made after the Issue Date that do not exceed
$10,000,000 in the aggregate outstanding at any one time.
"Permitted Liens" means, with respect to any Person, any lien arising
by reason of (a) any attachment, judgment, decree or order of any court, so long
as such lien is being contested in good faith and is either adequately bonded or
execution thereon has been stayed pending appeal or review, and any appropriate
legal proceedings which may have been duly initiated for the review of such
attachment, judgment, decree or order shall not have been finally terminated or
the period within which such proceedings may be initiated shall not have
expired; (b) taxes, assessments or governmental charges not yet delinquent or
which are being contested in good faith; (c) security for payment of workers'
compensation or other insurance; (d) security for the performance of tenders,
bids, leases and contracts (other than contracts for the payment of money);
(e) deposits to secure public or statutory obligations or in lieu of surety or
appeal bonds or to secure permitted contracts for the purchase or sale of any
currency entered into in the ordinary course of business; (f) operation of law
in favor of carriers, warehousemen, landlords, mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for sums
which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof;
(g) any interest or title of a lessor under any lease; (h) security for surety
or appeal bonds; and (i) easements, rights-of-way, zoning and similar covenants
and restrictions and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount and which do not in any case materially
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries.
"Permitted Senior Indebtedness" means any Indebtedness (plus interest,
premium, fees and other obligations associated therewith) and refinancing,
refunding,
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replacement, renewal or extension thereof, under (a) the Senior Credit Facility
and (b) any other Indebtedness of the Company or any Subsidiary of the Company
outstanding (plus interest, premium, fees and other obligations associated
therewith) and any refinancing, refunding, replacement, renewal or extension
thereof; PROVIDED, HOWEVER, that at the time of incurrence of Indebtedness under
this clause (b), the sum of the aggregate principal amount of outstanding
Indebtedness incurred under clauses (a) and (b) of this definition does not
exceed 150% of the Consolidated Cash Flow of the Company for the immediately
preceding four fiscal quarters; PROVIDED, FURTHER, that at the time of any
refinancing, refunding, replacement, renewal, extension or amendment of the
Senior Credit Facility that increases the aggregate revolving credit and/or term
loan commitments thereunder to an amount in excess of $75,000,000, the sum of
such commitments under such refinanced, refunded, renewed, extended or amended
Senior Credit Facility (regardless of the amount actually borrowed thereunder)
plus the aggregate principal amount of outstanding Indebtedness incurred under
clause (b) of this definition does not exceed 150% of the Consolidated Cash Flow
of the Company for the immediately preceding four fiscal quarters; provided,
however, that if the Indebtedness which is the subject of a determination under
this provision is Acquired Indebtedness, or Indebtedness incurred with a
simultaneous Asset Acquisition, 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 the assumption of
such Acquired Indebtedness or such other Indebtedness by the Company and the
inclusion in the Company's Consolidated Cash Flow or the Consolidated Cash Flow
of the acquired Person, business, property or assets; PROVIDED, HOWEVER, that in
the case of any Indebtedness (regardless of whether or not such Indebtedness is
incurred pursuant to clause (a) or (b) of this definition), the provider of such
Indebtedness may rely on a representation from the senior financial officer of
the Company to the effect that the incurrence of such Indebtedness does not
violate the provisions of this Indenture and the incurrence of Indebtedness
subject to such representation shall thereupon be deemed to be Permitted Senior
Indebtedness owed to such provider, but nothing in this proviso shall preclude
the existence of any Default or Event of Default in the event such Indebtedness
is incurred in violation of this Indenture.
"Permitted Tax Distributions" means, for so long as the Company is an
"S corporation" or a substantially similar pass-through entity for federal
income tax purposes, distributions to AGI Holding Corp. (or any successor entity
or other entity that owns, directly or indirectly, all of the outstanding common
stock of the Company) based on reasonable estimates of the amount of federal,
state and local income taxes that the Company would be required to pay with
respect to a fiscal year calculated as if, for the applicable fiscal year, the
Company were treated as a "C corporation" domiciled in the State of California
rather than as an "S corporation."
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"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.1 hereof.
"principal" of a debt security means the principal amount of the
security plus, when appropriate, the premium, if any, on the security.
"Prior Accrued Bonus Payments" means payments of amounts accrued prior
to the Issue Date pursuant to Article II of the phantom stock agreements (the
"Phantom Compensation") entered into, in writing, between the Company or any of
its Subsidiaries and its officers prior to December 31, 1996 or substitutions to
or replacements of such Article of such agreements.
"Private Exchange Notes" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth on EXHIBIT A.
"Public Equity Offering" means an underwritten registered public
offering of Capital Stock (other than Disqualified Stock) of the Company or AGI
Holding Corp. (or any successor) pursuant to a registration statement that has
been declared effective by the SEC.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A.
"Redemption Date" means, with respect to any Note, the date on which
such Note is to be redeemed by the Company pursuant to the terms of the Notes.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, renews, replaces or extends any Indebtedness of the Company or any
Subsidiary outstanding at the Issue Date or other Indebtedness permitted to be
incurred by the Company or the Subsidiaries pursuant to the terms of the
Indenture, whether involving the same or any other lender or creditor or group
of lenders or creditors, 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) if the Refinancing Indebtedness matures, in whole or
part, before the maturity date of the Notes,
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the Refinancing Indebtedness 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 Indebtedness being refunded, refinanced
or extended, and (iv) the Refinancing Indebtedness is in an aggregate principal
amount that is less than or equal to the aggregate principal or accreted amount
(in the case of any Indebtedness issued with original issue discount) then
outstanding (plus any applicable prepayment premiums or penalties and accrued
interest thereon) under the Indebtedness being refunded, refinanced or extended.
"Registrar" has the meaning provided in Section 2.3 hereof.
"Registration Rights Agreement" means the registration rights
agreement dated the Issue Date between the Company and the Initial Purchasers.
"Regulation S" means Regulation S promulgated under the Securities
Act, as such may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
"Regulation S Global Note" has the meaning provided in Section 2.1
hereof.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution on Capital Stock of the
Company or any 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 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 Subsidiaries of the Company, dividends or
distributions payable to the Company or to a 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 Subsidiaries, (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 Indebtedness
acquired in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition), (iv) payments of Phantom Compensation other than Prior Accrued
Bonus Payments, (v) the making of any Investment in any Person other than a
Permitted Investment. If a Restricted Payment is made in other than cash, the
value of any such payment shall be determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution to be
filed with the Trustee.
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"Restricted Period" has the meaning provided in Section 2.1 hereof.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; PROVIDED, HOWEVER, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Rule 144A" means Rule 144A promulgated under the Securities Act, as
such may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
"Rule 144A Global Note" has the meaning provided in Section 2.1
hereof.
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property (i) has been or is to be sold
or transferred by the Company or such Subsidiary to such Person in contemplation
of such leasing and (ii) would constitute an Asset Sale if such property had
been sold in an outright sale thereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Credit Facility" means the credit facility evidenced by the
Credit Agreement dated April 2, 1997, among AGI, the guarantors party thereto,
the several lenders from time to time party thereto, and Fleet National Bank, as
agent, together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements from time to time may be amended, amended and restated,
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing, consolidating, or otherwise
restructuring (including adding Subsidiaries of the Company as additional
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 and whether or not increasing the
amount of Indebtedness that may be incurred thereunder.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, by a
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Subsidiary of such Person or by such Person and a Subsidiary of such Person, or
(ii) any other Person (other than a corporation) of which at least a majority of
voting interest is at the time, directly or indirectly, owned by such Person, by
a Subsidiary of such Person or by such Person and a Subsidiary of such Person.
Unless specifically provided to the contrary herein, Unrestricted Subsidiaries
shall not be included in the definition of Subsidiaries for any purpose of the
Indenture (other than for the purposes of the definition of "Unrestricted
Subsidiary" herein).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as it may be amended from time to time.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means an officer or assistant officer of the Trustee
assigned to the Corporate Trustee Administration Department or similar
department performing corporate trust work, or any successor to such department
or, in the case of a successor trustee, an officer assigned to the department,
division or group performing the corporate trust work of such successor and also
means with respect to any particular corporate trust matter any other officer of
the Trustee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Unrestricted Notes" means one or more Notes that do not and are not
required to bear the Private Placement Legend, including, without limitation,
the Exchange Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be or continue to be designated an
Unrestricted Subsidiary by the Board of Directors in the manner provided below
and, (ii) any Subsidiary of an Unrestricted Subsidiary; PROVIDED, HOWEVER, that
Affinity Thrift and Loan and Affinity Group Thrift Holding Corp. shall initially
constitute Unrestricted Subsidiaries. The Board of Directors may (i) designate
any entity which is not a Subsidiary to be an Unrestricted Subsidiary and
(ii) may designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any other Subsidiary that is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED, HOWEVER, that (x) either (A) the Subsidiary to be so
designated has total assets of $10,000 or less or (B) if such Subsidiary has
assets greater than $10,000, such designation would be permitted under Section
4.10 hereof and (y) immediately before and after giving effect to the
designation of such
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Subsidiary as an Unrestricted Subsidiary the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.9 hereof. The Board of Directors may designate any Unrestricted Subsidiary to
be a Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 4.9 hereof and (y) no Event of
Default or Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" has the meaning provided in Section
8.1(b) hereof.
"Wholly-Owned Subsidiary" means any Subsidiary all of the outstanding
Capital Stock of which (other than directors' qualifying shares) is owned,
directly or indirectly, by the Company.
SECTION 1.2 INCORPORATION BY REFERENCE TO TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
(a) "Commission" means the SEC;
(b) "indenture securities" means the Notes;
(c) "indenture security holder" means a Holder or Noteholder;
(d) "indenture to be qualified" means this Indenture;
(e) "indenture trustee" or "institutional trustee" means the Trustee;
and
(f) "obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings so assigned to them therein.
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SECTION 1.3 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the plural
include the singular;
(d) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subdivision; and
(e) unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP as in effect from time to time,
applied on a basis consistent with the most recent audited financial
statements of the Company.
ARTICLE II
THE NOTES
SECTION 2.1 FORM AND DATING.
Notes sold to Institutional Accredited Investors that are neither QIBs
nor Non-U.S. Persons will be issued in definitive form in substantially the form
of EXHIBIT A hereto ("Physical Notes"), duly executed by the Company and
authenticated by the Trustee as hereinafter provided and shall bear the legend
set forth on EXHIBIT A.
Notes offered and sold to QIBs in reliance on Rule 144A shall be
issued initially in the form of one or more Global Notes substantially in the
form set forth in EXHIBIT B ("Rule 144A Global Notes"), deposited with the
Trustee, as Custodian for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided and shall bear the legend
set forth on EXHIBIT B. The aggregate principal amount of the Rule 144A Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as Custodian for the Depository, as hereinafter
provided.
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Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of one or more Global Notes, substantially in the form set
forth in EXHIBIT C ("Regulation S Global Notes"), deposited with the trustee, as
Custodian for the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided, for credit to the accounts of Euroclear and
CEDEL (or such other accounts as they may direct), and shall bear the legend set
forth on EXHIBIT C. Prior to and including the 40th day after the later of the
commencement of the offering of the Notes and the Issue Date (the "Restricted
Period"), beneficial interests in the Regulation S Global Note may only be held
through Euroclear or CEDEL. The aggregate principal amount of the Regulation S
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as Custodian of the Depository, as hereinafter
provided.
The Notes may have notations, legends or endorsements required by law,
rule, regulation, usage or agreement to which the Company is subject. Any such
legends, notations or endorsements shall be submitted to the Trustee in writing.
Each Note shall be dated the date of its issuance and shall show the date of its
authentication.
The terms and provisions contained in the forms of Notes attached
hereto as EXHIBITS A, B and C shall constitute, and are expressly made, a part
of this Indenture, and, to the extent applicable, the Company and the Trustee,
by their execution and delivery of the Indenture, expressly agree to such terms
and provisions and to be bound thereby. In case of any conflict between the
terms and provisions of this Indenture and those of the Notes, the terms and
provisions of this Indenture shall control. The Company shall approve the form
of the Notes. The Company may use "CUSIP" numbers in issuing the Notes.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
One Officer shall execute the Notes on behalf of the Company by either
manual or facsimile signature. The Company's seal shall be impressed, affixed
and imprinted or reproduced on the Notes.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note or at any time thereafter, the
Note shall be valid nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. Such signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
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The Trustee or an authenticating agent shall authenticate Notes for
original issue in the aggregate principal amount of $130,000,000 upon receipt of
a written request from the Company. The aggregate principal amount of Notes
outstanding at any time may not exceed $130,000,000, except as provided in
Section 2.7 hereof. Upon receipt of an Officers' Certificate from the Company
certifying that a Registration Statement (as defined in the Registration Rights
Agreement) is effective and directing the Trustee to authenticate an additional
series of Exchange Notes, the Trustee shall authenticate an additional series of
Notes in an aggregate principal amount not to exceed $130,000,000 for issuance
in exchange for any Notes previously issued and tender by the Holder thereof for
exchange pursuant to an exchange offer registered under the Securities Act or
pursuant to a Private Exchange (as defined in the Registration Rights
Agreement). The Exchange Notes may have such distinctive series designation as,
and such changes in the form thereof as, are specified in the Officers'
Certificate from the Company referred to in the preceding sentence. The
Officers' Certificate from the Company shall confirm that all conditions
precedent to the issuance of the Notes contained herein shall have been complied
with.
All Notes issued under this Indenture shall vote and consent together
on all matters as one class and no series of Notes will have the right to vote
or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes at the expense of the Company. Unless limited by
the terms of such appointment, an authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. Such
authenticating agent shall have the same rights as the Trustee in any dealings
hereunder with the Company or with any Affiliate of the Company.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and integral multiples thereof.
SECTION 2.3 REGISTRAR AND PAYING AGENT.
The Company shall appoint a registrar (which shall be located in the
Borough of Manhattan in the City of New York, State of New York) where Notes may
be presented for registration of transfer or for exchange (the "Registrar") and
a paying agent (which shall be located in the Borough of Manhattan, City of New
York, State of New York) where Notes may be presented for payment (the "Paying
Agent"), and shall maintain an office or agency where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more additional paying agents.
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The term "Paying Agent" includes any additional paying agent. Neither the
Company nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee in writing of the
name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.7 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or interest on the Notes (whether such money has been paid to it by
the Company or any other obligor on the Notes), and the Company and the Paying
Agent shall notify the Trustee of any default by the Company (or any other
obligor on the Notes) in making any such payment. Money held in trust by the
Paying Agent need not be segregated except as required by law and in no event
shall the Paying Agent be liable for any interest on any money received by it
hereunder. The Company at any time may require the Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default specified
in Section 6.1(a)(i) or (ii) hereof, upon written request by the Trustee to the
Paying Agent, require such Paying Agent to pay forthwith all money so held by it
to the Trustee and to account for any funds disbursed. Upon making such
payment, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.5 NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date,
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Noteholders, including the aggregate principal amount of Notes
held by each such Noteholder, and the Company shall otherwise comply with TIA
Section 312(a).
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SECTION 2.6 TRANSFER AND EXCHANGE.
Subject to Sections 2.16 and 2.17 hereof, when Notes are presented to
the Registrar with a request from the Holder of such Notes to register the
transfer or to exchange them for an equal principal amount of Notes of other
authorized denominations, the Registrar shall register the transfer or make the
exchange as requested; PROVIDED, HOWEVER, that every Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar, duly executed by the Holder thereof or his attorneys
duly authorized in writing. To permit registrations of transfers and exchanges,
the Company shall issue and execute and, at the request and the expense of the
Company, the Trustee shall authenticate new Notes evidencing such transfer or
exchange at the Registrar's request. No service charge shall be made to the
Noteholder for any registration of transfer or exchange. The Company may
require from the Noteholder payment of a sum sufficient to cover any transfer
taxes or other governmental charge that may be imposed in relation to a transfer
or exchange, but this provision shall not apply to any exchange pursuant to
Sections 2.10, 3.6, 4.15, 4.19 or 9.5 hereof (in which events the Company will
be responsible for the payment of such taxes). The Trustee shall not be
required to exchange or register a transfer of any Note for a period of 15 days
immediately preceding the first mailing of notice of redemption of Notes to be
redeemed or of any Note selected, called or being called for redemption except,
in the case of any Note where public notice has been given that such Note is to
be redeemed in part, the portion thereof not to be redeemed.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Company's compliance with or have
any responsibility with respect to the Company's compliance with any federal or
state securities laws.
SECTION 2.7 REPLACEMENT NOTES.
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If a mutilated Note is surrendered to the Registrar or the Trustee or
if the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and, at the written request set forth
in an Officers' Certificate and the expense of the Company, the Trustee shall
authenticate a replacement Note if the Holder of such Note furnishes to the
Company and the Trustee evidence reasonably acceptable to them of the ownership
and the destruction, loss or theft of such Note. If required by the Trustee or
the Company, an indemnity bond shall be posted, sufficient in their judgment to
protect the Company, the Trustee or any Paying Agent from any loss that any of
them may suffer if such Note is replaced. The Company may charge such Holder
for the Company's expenses in replacing such Note and the Trustee may charge the
Company for the Trustee's expenses (including reasonable attorneys' fees and
expenses) in replacing such Note. Every replacement Note shall constitute an
additional obligation of the Company.
SECTION 2.8 OUTSTANDING NOTES.
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those cancelled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 8.1
and 8.2 hereof, on or after the date on which the conditions set forth in
Section 8.1 or 8.2 hereof have been satisfied, those Notes theretofore
authenticated and delivered by the Trustee hereunder and (d) those described in
this Section 2.8 as not outstanding. Subject to Section 2.9 hereof, a Note does
not cease to be outstanding because the Company or one of its Affiliates holds
the Note.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives written notice that the replaced Note is
held by a bona fide purchaser in whose hands such Note is a legal, valid and
binding obligation of the Company.
If the Paying Agent holds, in its capacity as such, on any Maturity
Date or on any optional Redemption Date, money sufficient to pay all accrued
interest and principal with respect to such Notes payable on that date and is
not prohibited from paying such money to the Holders thereof pursuant to the
terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on such Notes ceases to accrue.
SECTION 2.9 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any declaration of acceleration or notice of default or
direction, waiver or consent or any amendment, modification or other change to
this Indenture, Notes owned by the Company or any Affiliate of the Company shall
be disregarded as though they were not outstanding, except that for the purposes
of determining whether the Trustee shall be
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protected in relying on any such direction, waiver or consent or any amendment,
modification or other change to this Indenture, only Notes as to which a Trust
Officer of the Trustee receives an Officers' Certificate stating that such Notes
are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES.
Until definitive Notes are prepared and ready for delivery, the
Company may prepare, and the Trustee shall authenticate, temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company and the Trustee consider appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare, and the
Trustee shall authenticate, definitive Notes in exchange for temporary Notes.
Until such exchange, temporary Notes shall be entitled to the same rights,
benefits and privileges as definitive Notes.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment,
as the case may be. The Trustee shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall (subject to the record-retention requirements of the Exchange Act) destroy
cancelled Notes and shall deliver a certificate of destruction thereof to the
Company. The Company may not reissue or resell, or issue new Notes to replace,
Notes that the Company has redeemed or paid, or that have been delivered to the
Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults on a payment of interest on the Notes, they
shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms hereof,
to the Persons who are Noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to such payment date. The
Company shall fix such special record date and payment date in a manner
satisfactory to the Trustee. At least 15 days before such special record date,
the Company shall mail to each Noteholder a notice that states the special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid on such special record
date. Notwithstanding any of the foregoing, the Company may make payment of any
defaulted interest in any other lawful
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manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange if, upon notice given by the Company to the Trustee of such proposed
method of payment, such payment shall be deemed satisfactory by the Trustee.
SECTION 2.13 CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number(s), and if
so, such CUSIP number(s) shall be included in notices of redemption or exchange
as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number(s) printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company will
promptly notify the Trustee of any such CUSIP number(s) used by the Company in
connection with the Notes and any change in such CUSIP number(s).
SECTION 2.14 DEPOSIT OF MONEYS.
Prior to 11:30 a.m., New York City time, on each Interest Payment Date
and Maturity Date, the Company shall deposit with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall
be payable at the office of the Paying Agent.
SECTION 2.15 WIRE PAYMENTS TO HOLDERS.
Notwithstanding any provisions of this Indenture and the Notes to the
contrary, if the Company so agrees with any Holder (such decision to be in the
sole discretion of the Company), payments of interest on, and any portion of the
principal of any Notes (other than the final payment of principal on a Note),
may be made by the Paying Agent upon receipt from the Company of immediately
available funds prior to 11:30 a.m., New York City time, directly to the Holder
of such Note (whether by Federal funds, wire transfer or otherwise); PROVIDED,
HOWEVER, that no such federal funds, wire transfer or other such direct payment
shall be made to any Holder under this Section 2.15 unless (i) such Holder shall
hold in aggregate principal amount $500,000 or more in value of Notes, and
(ii) such Holder (with the prior consent of the Company) has delivered written
instructions to the Trustee 15 days
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prior to such payment date requesting that such payment will be so made and
designating the bank account to which such payments shall be so made and in the
case of payments of principal, surrenders the Note to the Trustee in exchange
for a Note or Notes aggregating the same principal amount as the unredeemed
principal amount of the Notes surrendered. The Trustee shall be entitled to
rely on the last instruction delivered by the Holder pursuant to this
Section 2.15 unless a new instruction is delivered 15 days prior to a payment
date. The Company will indemnify and hold the Trustee harmless against any
loss, liability or expense (including attorneys' fees and expenses) resulting
from any act or omission to act on the part of the Company or any such Holder in
connection with any such agreement or which the Paying Agent may incur as a
result of making any payment in accordance with any such agreement.
SECTION 2.16 GLOBAL NOTES.
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of the Depository and (ii) be delivered to the
Trustee as Custodian for the Depository.
Members of, or participants in, the Depository ("Participants") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its Custodian, or under the
Global Note, and the Depository may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Participants, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfer in whole,
but not in part, by the Depository, its successors or their respective nominees.
In addition, Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Notes if (i) the Depository
notifies the Company that it is unwilling or unable to continue as Depository
for any Global Note and a successor depositary is not appointed by the Company
within 90 days of such notice, (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) an Event of Default has occurred and is continuing
and the Registrar has received a written request from the Depository to issue
Physical Notes. In connection with the transfer of Global Notes as an entirety
to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed
to be surrendered to the Trustee for cancellation, and the Company
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shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(c) Interests of beneficial owners in the Global Notes may be
transferred or exchanged through the Depository in accordance with the rules and
procedures of the Depository, Euroclear and CEDEL, in each case to the extent
applicable, and the provisions of this Section 2.16 and Section 2.17 hereof. In
connection with any transfer or exchange of a portion of the beneficial interest
in any Global Note, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the Global Note in an amount
equal to the principal amount of the beneficial interest in the Global Note to
be transferred, and if one or more Physical Notes are to be issued, the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c) shall
bear the Private Placement Legend.
(e) Prior to the expiration of the Restricted Period, if the holder
of a beneficial interest in the Regulation S Global Note wishes at any time to
transfer such interest to a Person who wishes to take delivery thereof in the
form of a beneficial interest in the Rule 144A Global Note, such transfer may be
effected in accordance with the rules and procedures of the Depository,
Euroclear and CEDEL, in each case to the extent applicable, upon receipt by the
Registrar of (x) written instructions given in accordance with the Registrar's
procedures and (y) a certificate substantially in the form of EXHIBIT D hereto,
whereupon the Registrar shall reflect on its books and records the date and a
decrease in the principal amount of the Regulation S Global Note in an amount
equal to the principal amount of the beneficial interest in the Regulation S
Global Note to be transferred and an increase in the principal amount of the
Rule 144A Global Note in a like amount. Following the expiration of the
Restricted Period, the certification requirement will no longer apply to such
transfers.
(f) If the holder of a beneficial interest in the Rule 144A Global
Note wishes at any time to transfer such interest to a Person who wishes to take
delivery thereof in the form of a beneficial interest in the Regulation S Global
Note, such transfer may be effected in accordance with the rules and procedures
of the Depository, Euroclear and CEDEL, in each case to the extent applicable,
upon receipt by the Registrar of (x) written instructions given in accordance
with the Registrar's procedures and (y) a certificate substantially in the form
of EXHIBIT E hereto, whereupon the Registrar shall reflect on its
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books and records the date and a decrease in the principal amount of the Rule
144A Global Note in an amount equal to the principal amount of the beneficial
interest in the Rule 144A Global Note to be transferred and an increase in the
principal amount of the Regulation S Global Note in a like amount.
(g) Until the later of the expiration of the Restricted Period,
beneficial interests in the Regulation S Global Note may be held only in or
through accounts maintained at the Depository by Euroclear or CEDEL.
(h) The Holder of any Global Note may grant proxies and otherwise
authorize any person, including Participants and persons that may hold interests
through Participants, to take any action which a Holder is entitled to take
under this Indenture or the Notes.
SECTION 2.17 SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND
NON-U.S. PERSONS. The following additional provisions shall apply with respect
to the registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is subsequent
to a date which is two years after the later of the Issue Date and the
last date on which the Company or any of its Affiliates was the owner
of such Note or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons),
the proposed transferor has checked the box provided for on the form
of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made to a transferee that
has delivered to the Registrar a certificate substantially in the form
of EXHIBIT F hereto or (2) in the case of a transfer to a Non-U.S.
Person (including a QIB), the proposed transferor has checked the box
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
accordance with Regulation S under the Securities Act and has
delivered to the Registrar a certificate substantially in the form of
EXHIBIT E hereto; and
(ii) if the proposed transferor is a Participant holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the rules and procedures
of the Depository, Euroclear and CEDEL,
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in each case to the extent applicable, and the Registrar's procedures and
(y) the certificate, if any, required by clause of paragraph (i) above,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Company shall execute and the Trustee shall authenticate and make
available for delivery one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided for
on the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is a Participant, and the Notes
to be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of written instructions given in accordance with the rules and procedures
of the Depository, Euroclear and CEDEL, in each case to the extent
applicable, and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
such Global Note in an amount equal to the principal amount of the Physical
Notes to be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
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(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless, and the Trustee is hereby authorized to deliver Notes without the
Private Placement Legend, if (i) it has received an Officers' Certificate from
the Company and the circumstances contemplated by paragraph (a)(i)(x) of this
Section 2.17 exist, (ii) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or
(iii) it has received an Officers' Certificate from the Company and such Note
has been sold pursuant to an effective registration statement under the
Securities Act.
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 hereof or this
Section 2.17. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications during the normal
business hours of the Trustee upon the giving of reasonable notice to the
Registrar.
ARTICLE III
OPTIONAL REDEMPTION
SECTION 3.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph 5 of the
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.1 at
least 60 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein
and in the Notes. The notice shall include the Redemption
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Date, the principal amount of Notes to be redeemed and the redemption price and,
if such redemption is prior to April 1, 2000, that the redemption is being
financed with the Net Proceeds from a Public Equity Offering of the Company
pursuant to Paragraph 5 of the Notes and all other information required to be
furnished to the Holders pursuant to Section 3.3 hereof.
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed, on a PRO RATA basis, by lot or by such other
method as the Trustee may deem fair and equitable. The Trustee shall make the
selection from the Notes outstanding and not previously called for redemption.
The Trustee shall promptly notify the Company in writing of such Notes selected
for redemption. The Trustee may select for redemption portions of the principal
amount of Notes that have denominations larger than $1,000. Notes and portions
of them the Trustee selects shall be in amounts of $1,000 or integral multiples
thereof. Provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
SECTION 3.3 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail or cause the mailing of, in the name of, at the request
of, and at the expense of the Company, a notice of redemption by first-class
mail to each Holder of Notes to be redeemed with a copy to each of the Trustee
and any Paying Agent.
The notice shall identify the Notes to be redeemed and shall state:
(a) the Redemption Date;
(b) the redemption price and the amount of accrued interest, if any,
to be paid;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price and accrued interest, if any;
(e) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption
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Date and the only remaining right of the Holders of such Notes is to
receive payment of the redemption price upon surrender to the Paying Agent
of the Notes redeemed;
(f) if any Note is to be redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Note to be redeemed and that, on or after the Redemption Date, upon
surrender of such Note, a new Note or Notes in aggregate principal amount
equal to the unredeemed portion thereof will be issued without charge to
the Noteholder; and
(g) the CUSIP number, if any, pursuant to Section 2.13 hereof.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for redemption
become due and payable on the Redemption Date and at the redemption price. Upon
surrender for redemption to the Paying Agent, such Notes shall be paid at the
redemption price plus accrued interest to the Redemption Date, but interest
installments whose maturity is on or prior to such Redemption Date will be
payable on the relevant Interest Payment Dates to the Holders of record at the
close of business on the relevant record dates referred to in the Notes.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
At least one Business Day prior to the Redemption Date, the Company
shall deposit with the Paying Agent in immediately available funds money
sufficient to pay the redemption price of and accrued interest on all Notes or
portions thereof to be redeemed on the Redemption Date.
If any Note surrendered for redemption in the manner provided in the
Notes shall not be so paid on the Redemption Date due to the failure of the
Company to deposit sufficient funds with the Paying Agent, interest will
continue to accrue from the Redemption Date until such payment is made on the
unpaid principal and, to the extent lawful, on any interest not paid on such
unpaid principal, in each case at the date and in the manner provided in the
Notes.
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SECTION 3.6 NOTES REDEEMED IN PART.
Upon surrender to the Paying Agent of a Note that is redeemed in part,
the Company shall execute and the Trustee shall authenticate for the Holder a
new Note equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1 PAYMENT OF NOTES.
The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes and this Indenture.
An installment of principal or interest shall be considered paid on
the date due if the Trustee or the Paying Agent holds on such date immediately
available funds designated for and sufficient to pay such installment.
The Company shall pay interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest at a rate equal to .5% PER
ANNUM; and the PER ANNUM interest rate of such additional interest will increase
by an additional .25% PER ANNUM for each subsequent 90-day period during which
such overdue principal and installments of interest remain unpaid, up to a
maximum additional interest rate of 2.0% PER ANNUM.
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.2 hereof.
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The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust
Administration Office of the Trustee set forth in Section 10.2 hereof as an
agency of the Company in accordance with Section 2.3 hereof.
SECTION 4.3 CORPORATE EXISTENCE.
Subject to Article V, the Company shall do or cause to be done, at its
own cost and expense, all things necessary to, and will cause each of its
Subsidiaries to, preserve and keep in full force and effect the corporate or
partnership existence and rights (charter and statutory), licenses and/or
franchises of the Company and each of its Subsidiaries; PROVIDED, HOWEVER, that
the Company or any of its Subsidiaries shall not be required to preserve any
such rights, licenses or franchises if the Board of Directors of the Company
shall reasonably and in good faith determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company or such
Subsidiary and the loss thereof is not adverse in any material respect to the
Holders.
SECTION 4.4 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon it or its Subsidiaries' or
Unrestricted Subsidiaries' income, profits or property and (b) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a Lien
upon their property; PROVIDED, HOWEVER, that the Company shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate negotiations or proceedings and for which disputed
amounts adequate reserves (in the good faith judgment of the Officers of the
Company) have been made.
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SECTION 4.5 MAINTENANCE OF PROPERTIES; INSURANCE; BOOKS AND RECORDS;
COMPLIANCE WITH LAW.
(a) The Company shall, and shall cause each of its Subsidiaries to,
at all times cause all material properties used or useful in the conduct of its
business to be maintained and kept in good condition, repair and working order
(reasonable wear and tear excepted) and supplied with all equipment deemed
necessary in the good faith judgment of the Officers of the Company, and shall
cause to be made all repairs, renewals, replacements, betterments and
improvements thereto; PROVIDED, HOWEVER, that the Company or any of its
Subsidiaries shall not be required to maintain, repair, renew, replace, better
or improve any such equipment if the Board of Directors of the Company shall
reasonably and in good faith determine that the maintenance thereof is no longer
desirable in the conduct of the business of the Company or such Subsidiaries and
the loss thereof is not adverse in any material respect to the Holders.
(b) The Company and each of its Subsidiaries shall maintain insurance
in such amounts and covering such risks as are usually and customarily carried
with respect to similar facilities according to their respective locations.
(c) The Company shall and shall cause each of its Subsidiaries to
keep proper books of record and account, in which full and correct entries shall
be made of all financial transactions and the assets and business of the Company
and each Subsidiary of the Company, in accordance with GAAP consistently applied
to the Company and its Subsidiaries taken as a whole.
(d) The Company shall and shall cause each of its Subsidiaries to
comply with all statutes, laws, ordinances, or government rules and regulations
to which they are subject, non-compliance with which would materially adversely
affect the business, prospects, earnings, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
SECTION 4.6 COMPLIANCE CERTIFICATES.
(a) The Company shall deliver to the Trustee, within 50 days after
the end of each of the first three quarters of the Company's fiscal year, and
within 120 days after the end of such fiscal year, Officers' Certificates of the
Company signed by the Officers specified under TIA Section 314(a)(4) stating
(i) that a review of the activities of the Company during the preceding fiscal
quarter or year, as the case may be, has been made under the supervision of the
signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
(ii) that, to
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the best knowledge of each Officer signing such certificate, the Company has
kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions hereof (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which such Officers may have knowledge, their status and what action the
Company is taking or propose to take with respect thereto).
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
annual financial statements delivered pursuant to Section 4.7 hereof shall be
accompanied by a written statement of the Company's independent public
accountants that in making the examination necessary for certification of such
annual financial statements nothing has come to their attention that would lead
them to believe that the Company has violated any provisions of Article IV or of
Article V of this Indenture or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
(d) The Company's fiscal year shall end on December 31.
SECTION 4.7 REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any of the Notes are outstanding, the Company shall distribute or cause
to be distributed to the Holders and file with the Trustee copies of the
financial information that would have been contained in such annual reports and
quarterly reports that the Company would have been required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act of the Company were the
Company so subject. Such financial information shall include annual reports
containing consolidated financial statements and notes thereto, together with an
opinion thereon expressed by an independent public accounting firm, management's
discussion and analysis of financial condition and results of operations as well
as quarterly reports containing unaudited condensed consolidated financial
statements for the first three quarters of each fiscal year.
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SECTION 4.8 FURTHER ASSURANCE TO THE TRUSTEE.
The Company shall, upon request of the Trustee, execute and deliver
such further instruments and do such further acts as may reasonably be necessary
or proper to carry out more effectively the provisions of this Indenture.
SECTION 4.9 LIMITATION ON ADDITIONAL INDEBTEDNESS.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, incur (as defined herein) any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness; PROVIDED,
HOWEVER, that the Company and its Subsidiaries may incur Indebtedness (including
Acquired Indebtedness) and interest, premium, fees and other obligations
associated therewith if immediately after giving pro forma effect to the
incurrence thereof, the Fixed Charge Coverage Ratio of the Company would be
greater than or equal to 2.0:1 if such proposed incurrence is on or prior to
April 1, 2000 and 2.25:1 thereafter.
SECTION 4.10 LIMITATIONS ON INVESTMENTS, LOANS AND ADVANCES.
The Company shall not make and shall not permit any of its
Subsidiaries to make any Investments except: (i) Permitted Investments and (ii)
Investments permitted to be made pursuant to Section 4.11 hereof.
SECTION 4.11 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not make, and shall not permit any of its
Subsidiaries to, directly or indirectly, make, any Restricted Payment unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(ii) at the time of and immediately after giving pro forma effect
to such Restricted Payment, the Company could incur at least $1.00 of
Indebtedness (other than Permitted Indebtedness) under Section 4.9 hereof;
and
(iii) immediately after giving effect to such Restricted Payment,
the aggregate of all Restricted Payments declared or made after the Issue
Date through and including the date of such Restricted Payment (the "Base
Period") does not exceed the sum of (1) 50% of the Company's Consolidated
Net Income (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) during the
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Base Period and (2) 100% of the aggregate Net Proceeds and the Fair Market
Value of marketable securities and property received by the Company from
(A) the issue or sale, during the Base Period, of Capital Stock (other than
Disqualified Stock) 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, exercised or exchanged, as the case may be and (y) dividends
or other distributions received by the Company from any Unrestricted
Subsidiary. For purposes of determining under this clause (iii) 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.
(b) The provisions of this covenant shall not prohibit:
(i) the payment of any dividend 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, it being understood that the
obligation to pay such declared dividend shall constitute Permitted
Indebtedness;
(ii) the retirement of any shares of Capital Stock or
subordinated Indebtedness of the Company in exchange for, by conversion
into, 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 Stock);
(iii) the redemption or retirement of subordinated Indebtedness of
the Company in exchange for, by conversion into, or out of the Net Proceeds
of the substantially concurrent incurrence of subordinated Indebtedness
(other than any such subordinated Indebtedness owing to a Subsidiary of the
Company) that is contractually subordinated in right of payment to the
Notes and that is permitted to be incurred in accordance with Section 4.9
hereof;
(iv) Prior Accrued Bonus Payments; PROVIDED, HOWEVER, that (A)
the aggregate amount of all such payments made after the Issue Date does
not exceed $4,000,000 and (B) no Default or Event of Default shall have
occurred and be continuing at the time of or after giving effect to such
payments;
(v) Permitted Tax Distributions; or
(vi) the making of any Permitted Investment.
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(c) In determining the amount of Restricted Payments permissible
under clause (a)(iii) above, amounts expended pursuant to clauses (b)(i) and
(b)(ii) shall be included as Restricted Payments.
SECTION 4.12 LIMITATION ON LIENS.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or asset of
the Company or any of its Subsidiaries (whether owned on the Issue Date or
acquired after the Issue Date) or any proceeds therefrom, or assign or otherwise
convey any right to receive income or profits therefrom UNLESS (a) in the case
of Liens securing Indebtedness that is expressly subordinate or junior in right
of payment to the Notes, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Liens at least to the same
extent as the Notes are senior in priority to such Indebtedness and (b) in all
other cases, the Notes are equally and ratably secured. Notwithstanding the
foregoing, the following Liens may be created, incurred or assumed:
(a) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date;
(b) Permitted Liens;
(c) Liens on the assets or property of a Subsidiary of the Company
existing at the time such Subsidiary became a Subsidiary of the Company and
not incurred as a result of (or in connection with or in anticipation of)
such Subsidiary's becoming a Subsidiary of the Company; PROVIDED, HOWEVER,
that such Liens do not extend to or cover any property or assets of the
Company or any of its Subsidiaries (other than the property or assets of
the Subsidiary so acquired);
(d) Liens securing (x) Permitted Senior Indebtedness and
(y) Refinancing Indebtedness incurred to refinance the AGI Notes;
(e) any Lien securing Capitalized Lease Obligations; PROVIDED,
HOWEVER, that such Capitalized Lease Obligations are incurred in compliance
with Section 4.9 hereof and that such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries (other than
the property or assets subject to such Capitalized Lease Obligations);
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(f) Liens pursuant to leases and subleases of real property which do
not interfere with the ordinary conduct of the business of the Company or
any of its Subsidiaries and which are made on customary and usual terms
applicable to similar properties;
(g) Liens securing Indebtedness which is incurred to refinance or
replace Indebtedness which has been secured by a Lien permitted under the
Indenture and is permitted to be refinanced or replaced under the
Indenture; PROVIDED, HOWEVER, that (i) such Liens do not extend to or cover
any property or assets of the Company or any of its Subsidiaries not
securing the Indebtedness so refinanced or replaced and (ii) such Liens are
no less favorable to the Holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced;
(h) Liens to secure all or a part of the purchase price of assets or
property acquired in the ordinary course of business after the Issue Date;
PROVIDED, HOWEVER, that (i) any such Lien is created solely for the purpose
of securing Indebtedness representing, or incurred to finance, the cost of
the item of property subject thereto, (ii) the principal amount of
Indebtedness secured by such Lien does not exceed the lesser of the cost or
Fair Market Value of the asset or property so acquired, (iii) such Lien
does not extend to or cover any other property other than such acquired
item of property and shall attach to such property within 90 days of the
acquisition thereof and (iv) the incurrence of the Indebtedness secured by
such Lien is permitted by paragraph (a) of Section 4.9 hereof;
(i) Liens securing reimbursement obligations under letters of credit
but only in or upon the goods the purchase of which was financed by such
letters of credit; and
(j) other Liens securing obligations in a principal amount in the
aggregate at any one time of not more than $10,000,000.
SECTION 4.13 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any Subsidiary of the
Company to, directly or indirectly, create or otherwise cause or suffer to exist
or become effective or enter into any agreement with any Person that would cause
or create any consensual encumbrance or restriction of any kind on the ability
of any Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or
make any other distributions on its Capital Stock
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or any other interest or participation in, or measured by, its profits owned by
the Company or a Subsidiary of the Company, (b) make any loans or advances to,
or pay any Indebtedness owed to, the Company or any Subsidiary of the Company or
(c) transfer any of its properties or assets to the Company or to any Subsidiary
of the Company, except, in each case, for such encumbrances or restrictions
existing under or contemplated by or by reason of (i) the Notes or the
Indenture, (ii) any restrictions existing under or contemplated by agreements in
effect on the Issue Date, including, without limitation, restrictions under the
AGI Indenture and the Senior Credit Facility as in effect on the Issue Date,
(iii) any restrictions contained in agreements entered into after the Issue Date
which do not restrict the ability of any Subsidiary of the Company to pay
dividends or make distributions in amounts sufficient to pay interest under the
Notes, principal and interest on the Ehlert Note and obligations under the
management incentive compensation agreements with certain Camping World
executives so long as no default is continuing by the Company or any Subsidiary
under any such agreement entered into after the Issue Date, (iv) any
restrictions, with respect to a Subsidiary of the Company that is not a
Subsidiary of the Company on the Issue Date, in existence at the time such
Person becomes a Subsidiary of the Company (but not created in contemplation of
such Person becoming a Subsidiary), (v) any restrictions existing under any
agreement that refinances or replaces an agreement containing a restriction
permitted by clause (i), (ii), (iii) or (iv) above; PROVIDED, HOWEVER, that the
terms and conditions of any such restrictions are not materially less favorable
in the aggregate to the holders of the Notes than those under or pursuant to the
agreement being replaced or the agreement evidencing the Indebtedness refinanced
or replaced and (vi) restrictions imposed by applicable law or regulation or by
regulatory authorities having jurisdiction over such Subsidiary.
SECTION 4.14 LIMITATIONS ON SALE-LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Subsidiaries
to, enter into any Sale-Leaseback Transaction. Notwithstanding the foregoing,
the Company and its Subsidiaries may enter into Sale-Leaseback Transactions if
(i) after giving pro forma effect to any such Sale-Leaseback Transaction, the
Company shall be in compliance with Section 4.9 hereof, (ii) the sale price in
such Sale-Leaseback Transaction is at least equal to the Fair Market Value of
such property, and (iii) the Company or such Subsidiary shall apply the Net Cash
Proceeds of the sale as provided under Section 4.15 hereof, to the extent
required by such provision.
SECTION 4.15 DISPOSITION OF PROCEEDS OF ASSET SALE.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, make any Asset Sale unless:
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(i) such Asset Sale is for Fair Market Value;
(ii) the net proceeds therefrom consist of at least 85% cash or
Cash Equivalents (with Indebtedness of the Company or its Subsidiaries
assumed by the purchaser being counted as cash for such purposes if the
Company and its Subsidiaries are permanently released from all liability
therefor) (provided, however, that this clause (ii) shall not be applicable
to any Asset Sale that (A) the consideration with respect to which does not
exceed $5,000,000 or (B) pertains to assets which did not contribute more
than five percent of Consolidated Cash Flow for the four full fiscal
quarters immediately preceding the date of the Asset Sale); and
(iii) the Company shall commit to apply or to cause its
Subsidiaries to apply the Net Cash Proceeds of such Asset Sale within 180
days of receipt thereof, and shall apply such Net Cash Proceeds within 270
days of receipt thereof, as follows: (A) first, to satisfy all mandatory
repayment obligations, if any, under any Permitted Indebtedness, if any,
arising by reason of such Asset Sale, including a permanent reduction in
the related commitment; (B) second, out of any Net Cash Proceeds remaining
after application of Net Cash Proceeds pursuant to the preceding clause (A)
(the "Available Amount"), the Company shall make an offer to purchase (the
"Asset Sale Offer") from all Holders of Notes, up to a maximum principal
amount (expressed as a multiple of $1,000) of Notes equal to the Available
Amount at a purchase price of 100% of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of purchase;
PROVIDED, HOWEVER, that the Company will not be required to apply pursuant
to this clause (B) Net Cash Proceeds received from any Asset Sale if, and
only to the extent that, such Net Cash Proceeds are committed in writing to
be applied to acquire or construct property or assets in lines of business
related to the Company's or its Subsidiaries' businesses within 180 days
after the consummation of such Asset Sale and are so applied within 270
days after the consummation of such Asset Sale (and, after such
application, the amount so applied shall no longer constitute a part of the
Available Amount), and PROVIDED, HOWEVER, further, that the Company may
defer the Asset Sale Offer until there is an aggregate unutilized Available
Amount equal to or in excess of $5,000,000 (at which time the entire
unutilized Available Amount and not just the amount in excess of $5,000,000
shall be applied as required pursuant to this paragraph). The Asset Sale
Offer shall remain open for a period of 20 business days or such longer
period as may be required by law. To the extent the Asset Sale Offer is not
fully subscribed to by the holders of the Notes, the Company may retain
such unutilized portion of the Net Cash Proceeds. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Available Amount, the Company may use such deficiency for general
corporate purposes.
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(b) The Company will comply with any tender offer rules under the
Exchange Act which may then be applicable, including but not limited to Rule
14e-1, in connection with any offer required to be made by the Company to
repurchase the Notes as a result of an Asset Sale.
SECTION 4.16 LIMITATION ON PREFERRED STOCK ISSUANCES BY SUBSIDIARIES.
The Company shall not cause or permit any of its Subsidiaries to,
issue any Capital Stock other than common stock or cause or permit any
Subsidiary to at any time have outstanding any shares of Capital Stock other
than common stock, except issuances of Capital Stock to the Company or a
Wholly-Owned Subsidiary of the Company; PROVIDED, HOWEVER, that the Company or
such Wholly-Owned Subsidiary of the Company, as the case may be, is at all times
the sole beneficial and record owner of such Capital Stock.
SECTION 4.17 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not and shall not permit, cause, or suffer any
Subsidiary of the Company to, conduct any business or enter into any transaction
or series of transactions with or for the benefit of any Affiliate of the
Company or any of its Subsidiaries or any holder of 5% or more of any class of
Capital Stock of the Company (each an "Affiliate Transaction"), except in good
faith and on terms that are, in the aggregate, no less favorable to the Company
or such Subsidiary, as the case may be, than those that could have been obtained
in a comparable transaction on an arm's-length basis from a Person not an
Affiliate of the Company or such Subsidiary. All Affiliate Transactions (and
each series of related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value in excess of
$1,000,000 shall be approved by a majority of the Board of Directors of the
Company, such approval to be evidenced by a Board Resolution stating that such
Board of Directors has, in good faith, determined that such transaction complies
with the foregoing provisions. If the Company or any Subsidiary enters into an
Affiliate Transaction (or a series of related Affiliate Transactions related to
a common plan) that involves an aggregate value of more than $5,000,000, the
Company or such Subsidiary shall, prior to the consummation thereof, obtain a
favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Subsidiary, as the case may be, from
a financial point of view, from an Independent Financial Advisor and file the
same with the Trustee. Notwithstanding the foregoing, the restrictions set forth
in this covenant shall not apply to (a) contractual obligations in existence on
the date of the Indenture and extensions and replacements thereof to the extent
such extension or replacement, as the case may be, does not materially amend or
change any substantive term or provision of such contract, (b) Restricted
Payments permitted under Section 4.11 hereof, (c) customary directors' fees,
consulting fees, indemnification and
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similar arrangements, and employee salaries and bonuses and (d) transactions
between the Company and any of its Wholly-Owned Subsidiaries or among
Wholly-Owned Subsidiaries of the Company.
SECTION 4.18 COMPANY OWNERSHIP OF AGI STOCK.
The Company will at all times be the beneficial and record owner of
all of the outstanding Capital Stock of AGI, subject to the pledge thereof to
secure Permitted Senior Indebtedness.
SECTION 4.19 CHANGE OF CONTROL.
(a) In the event of a Change of Control, the Company shall notify
each Holder of the Notes and the Trustee in writing of such occurrence (the date
of such occurrence being the "Change of Control Date") and shall make an offer
to purchase (the "Change of Control Offer"), on a business day (the "Change of
Control Payment Date") not later than 60 days following the Change of Control
Date, all Notes then outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the Change of Control Payment Date.
(b) Notice of a Change of Control Offer shall be mailed by the
Company to the holders of the Notes at their last registered addresses with a
copy to the Trustee and the Paying Agent not less than 30 nor more than 45 days
before the Change of Control Payment Date. The Change of Control Offer shall
remain open from the time of mailing for at least 20 Business Days and until the
close of business on the Business Day next preceding the Change of Control
Payment Date. The notice shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.19 and that all Notes tendered will be accepted for payment;
(ii) the purchase price (including the amount of accrued and
unpaid interest, if any) and the Change of Control Payment Date;
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in making the payment, 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 (A) Holders of Physical Notes 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 and (B) Holders of beneficial interests under a
Global Note accepting the offer to have such interests purchased pursuant
to a Change of Control Offer will be required to notify the Depository by
telegram, telex or facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the interests to be purchased and a
statement that such Holder is electing to have such interests purchased; in
each case 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.
(c) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Notes or portions thereof or
beneficial interests under a Global Note 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 or beneficial interests, so
tendered, (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 Company and (iv) deliver to the Registrar an Officers'
Certificate stating the amount of beneficial interests so tendered and cause the
Registrar to reflect on its books and records the decrease in principal amount
of a Global Note in an amount equal to the principal amount of the beneficial
interest in a Global Note so tendered. The Paying Agent shall promptly (1) mail
to each Holder of Notes so accepted and (2) cause to be credited to the
respective
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accounts of the Holders under a Global Note of beneficial interests so accepted
payment in an amount equal to the Change of Control Purchase Price for such
Notes (which such payment shall, in the case of Holders of beneficial interests
in a Global Note, be through the facilities of the Depository), and the Company
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 and shall issue a new Global Note equal in principal
amount to any unpurchased portion of beneficial interests so surrendered;
PROVIDED, HOWEVER, that each such new Note shall be issued in an original
principal amount in denominations of $1,000 and integral multiples thereof.
(d) The Company will comply with any tender offer rules under the
Exchange Act which may then be applicable, including but not limited to
Rule 14e-1, in connection with any Change of Control Offer required to be made
by the Company to repurchase the Notes as a result of a Change of Control.
SECTION 4.20 PAYMENTS FOR CONSENT.
Neither the Company nor any of its Affiliates, nor any of the
Company's Subsidiaries or any of their Affiliates, 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 hereof 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 the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.21 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent permitted by law) 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 Company from paying all or any portion of
the principal of or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may affect the covenants
or the performance of this Indenture; and (to the extent permitted by law) each
of the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE V
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SUCCESSOR CORPORATION
SECTION 5.1 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.
(a) The Company shall not consolidate with or merge with or into or
sell, assign, convey, lease or transfer all or substantially all of its
properties and assets as an entirety to any Person or group of affiliated
Persons in a single transaction or through a series of transactions, unless
after giving effect thereto:
(i) the Company shall be the continuing Person or the resulting,
surviving or transferee Person (the "surviving entity") shall be a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia;
(ii) the surviving entity shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee, all of the obligations of
the Company under the Notes and the Indenture and all of the obligations
under this Indenture shall remain in full force and effect;
(iii) immediately before and immediately after giving effect to
such transaction or series of transactions (including, without limitation,
any Indebtedness incurred or anticipated to be incurred in connection with
or in respect of such transaction or series of transactions), no Default or
Event of Default shall have occurred and be continuing;
(iv) the Company or the surviving entity, as the case may be,
shall immediately before and immediately after giving effect to such
transaction or series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of the transaction or series of transactions) have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth
of the Company immediately prior to such transaction or series of
transactions;
(v) immediately after giving effect to such transaction or
series of transactions, the Company or the surviving entity, as the case
may be, could incur $1.00 of Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.9 hereof;
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(vi) the Company or the surviving entity shall have delivered to
the Trustee an Officer's Certificate stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction or series of transactions,
such supplemental indenture complies with this covenant and that all
conditions precedent in the Indenture relating to the transaction or series
of transactions have been satisfied; and
(vii) the Company would not thereupon become obligated with
respect to any Indebtedness, nor any of its property become subject to any
Lien, unless the Company could incur such Indebtedness or create such Lien
under the Indenture.
(b) Notwithstanding the foregoing in Section 5.1(a) hereof, either
the Company or AGI may consolidate with or merge with or into or sell, assign,
convey, loan or transfer all or substantially all of its properties and assets
as an entirety to the other in a single transaction or series of transactions,
if after giving effect thereto, either the Company or AGI shall be the surviving
entity and in the event that AGI is the surviving entity, AGI shall expressly
assume, by a supplemental indenture executed and delivered to the Trustee, in
form and substance reasonably satisfactory to the Trustee, all of the
obligations of the Company under the Notes and the Indenture.
SECTION 5.2 SUCCESSOR ENTITY SUBSTITUTED.
Upon any consolidation, merger or any transfer of all or substantially
all of the assets of the Company in accordance with Section 5.1 hereof, the
surviving entity formed by such consolidation or into which the Company is
merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such surviving entity had been named as the Company
herein.
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
(a) An "Event of Default" occurs if:
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(i) the Company defaults in the payment of any interest on the
Notes when the same becomes due and payable and such default continues for
a period of 30 days; or
(ii) the Company defaults in the payment of the principal of, or
premium, if any, on, the Notes when due (including by reason of a default
in payment upon an offer to purchase pursuant to Section 4.15 or Section
4.19 hereof); or
(iii) the Company defaults in the performance of, or breaches, any
covenant contained in this Indenture (other than defaults specified in
clause (i) or (ii) above), and such default or breach continues for a
period of 30 days after written notice thereof has been given to the
Company by the Trustee or to the Company and the Trustee by the Holders of
at least 25% in aggregate principal amount of the outstanding Notes; or
(iv) the Company or any of its Material Subsidiaries fails to
perform any term, covenant, condition or provision of one or more classes
or issues of other Indebtedness in an aggregate principal amount of
$5,000,000 or more, which failure results in an acceleration of the
maturity thereof and such Indebtedness shall not have been repaid or such
acceleration rescinded within 30 days of such acceleration of maturity; or
(v) one or more judgments, orders or decrees for the payment of
money in excess of $5,000,000, either individually or in an aggregate
amount, shall be entered against the Company, any of its Material
Subsidiaries or any of their respective properties and shall not be
discharged, and there shall have been a period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason of
pending appeal or otherwise, shall not be in effect; or
(vi) the Company or any Material Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
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(D) makes a general assignment for the benefit of its
creditors or
(E) shall generally not pay its debts when such debts
become due or shall admit in writing its inability to pay its debts
generally; or
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Material
Subsidiary in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Material
Subsidiary for all or substantially all of its properties, or
(C) orders the liquidation of the Company or any Material
Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60
consecutive days; PROVIDED, HOWEVER, that if the entry of such order or
decree is appealed and dismissed on appeal then the Event of Default
hereunder by reason of the entry of such order or decree shall be deemed to
have been cured.
(b) For purposes of this Section 6.1, the term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official
charged with maintaining possession or control over property for one or more
creditors.
(c) Subject to the provisions of Sections 7.1 and 7.2 hereof, the
Trustee shall not be charged with knowledge of any Event of Default unless
written notice thereof shall have been given to a Trust Officer at the corporate
trust office of the Trustee by the Company or any other Person.
SECTION 6.2 ACCELERATION.
If an Event of Default (other than an Event of Default specified in
Section 6.1(a)(vi) or (vii) hereof with respect to the Company or any Material
Subsidiary thereof) occurs and is continuing, then the Holders of at least 25%
in aggregate principal amount of the outstanding Notes may, by written notice to
the Company and the Trustee, and the Trustee upon the written request of the
Holders of not less than 25% in aggregate principal amount of the outstanding
Notes shall, declare the principal of and accrued interest on all the Notes to
be due and payable immediately. Upon any such declaration such principal,
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premium, if any, and accrued interest shall become due and payable immediately.
If an Event of Default specified in Section 6.1(a)(vi) or (vii) hereof with
respect to the Company or any Material Subsidiary occurs and is continuing, then
the principal of, premium, if any, and accrued interest on all the Notes shall
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder. After a declaration of
acceleration, the Holders of a majority in aggregate principal amount of
outstanding Notes may, by written notice to the Trustee, rescind such
declaration of acceleration if all existing Events of Default have been cured or
waived, other than the non-payment of principal of, premium, if any, and accrued
interest on the Notes that have become due solely as a result of such
acceleration and if the rescission of acceleration would not conflict with any
judgment or decree. No such rescission shall affect any subsequent default or
impair any right consequent thereto.
SECTION 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
All rights of action and claims under this Indenture or the Notes may
be enforced by the Trustee even if the Trustee does not possess any of the Notes
or does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Noteholder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULT.
Subject to Sections 6.7 and 9.2 hereof, the Holders of at least a
majority in aggregate principal amount of the outstanding Notes by notice to the
Trustee may waive an existing Default or Event of Default and its consequences,
except a Default specified in Section 6.1(a)(i) or (ii) hereof or in respect of
any provision hereof which cannot be modified or amended without the consent of
the Holder so affected pursuant to Section 9.2 hereof. When a Default or Event
of Default is so waived, it shall be deemed cured and ceases.
SECTION 6.5 CONTROL BY MAJORITY.
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The Holders of at least a majority in aggregate principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it; PROVIDED, HOWEVER, that the Trustee may refuse to follow
any direction that (i) conflicts with law or this Indenture, (ii) the Trustee
determines may be unduly prejudicial to the rights of another Noteholder, or
(iii) may involve the Trustee in personal liability unless the Trustee has asked
for and received indemnification reasonably satisfactory to it in its sole
discretion against any loss, liability or expense caused by its following such
direction; and PROVIDED, FURTHER, that the Trustee may take any other action
deemed proper by the Trustee that is not inconsistent with such direction.
SECTION 6.6 LIMITATION ON SUITS.
A Noteholder may not pursue any remedy with respect to this Indenture
or the Notes unless:
(a) the Holder or Holders give to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
outstanding Notes make a written request to the Trustee to pursue a remedy;
(c) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity reasonably satisfactory to the Trustee in its sole
discretion against any loss, liability or expense;
(d) the Trustee does not comply with the request within 15 days after
receipt of the request and the offer and, if requested, provision of
indemnity by the Holders; and
(e) during such 15-day period the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a written
direction inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of, premium, if any, or
accrued interest on such Note on or after the respective due dates set forth in
such Note.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over such other
Noteholder.
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SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, is absolute
and unconditional and shall not be impaired or affected without the consent of
such Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a)(i) or (ii) hereof
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other obligor on the
Notes for the whole amount of principal and accrued interest remaining unpaid,
together with interest overdue on principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the Interest Rate and such further amount as shall be sufficient to
cover the costs and expenses of collection (including counsel fees and
expenses), including all sums due and owing to the Trustee pursuant to Section
7.7 hereof.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee shall be entitled and empowered to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Noteholders allowed in any judicial proceedings relative to
the Company or the Subsidiaries of the Company (or any other obligor upon the
Notes), their respective creditors or property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Noteholder to make
such payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Noteholders, to pay to the Trustee
any amounts due the Trustee under Section 7.7 hereof. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Noteholder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
SECTION 6.10 PRIORITIES.
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If the Trustee collects any money pursuant to this Article VI, it
shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.7 hereof;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Notes for interest;
Third: to Holders for principal amounts owing under the Notes,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal; and
Fourth: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Noteholders pursuant to this
Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit instituted by the Trustee, a suit
instituted by a Holder pursuant to Section 6.7 hereof, or a suit instituted by
Holders of more than 10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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ARTICLE VII
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
(a) If a Trust Officer of the Trustee has received written notice
that an Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine whether
or not they conform to the requirements of this Indenture but need not
verify the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(ii) In the absence of bad faith on its part, the Trustee shall
not be liable for any error of judgment made in good faith by a Trust
Officer, unless it is proved that the Trustee was negligent in ascertaining
the pertinent facts.
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(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or reasonable indemnity against such risk or liability
is not reasonably assured to it. The Trustee may refuse to perform any duty or
exercise any right or power unless it receives indemnity satisfactory to it in
its sole discretion against any loss, liability or expense.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d), (f) and (g) of this Section
7.1 and the requirements of the TIA.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) The Trustee may refuse to perform any duty or exercise any right
or power unless it is provided adequate funds to enable it to do so and it
receives indemnity reasonably satisfactory to it in its sole discretion against
any loss, liability, fee or expense.
SECTION 7.2 RIGHTS OF TRUSTEE.
Subject to Section 7.1 hereof:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee shall
not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney.
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(b) Before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate or an Opinion of Counsel, which shall conform to the provisions
of Section 10.5 hereof. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than the negligence or willful misconduct of an agent who is an employee of
the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers, provided that the Trustee's conduct does not
constitute negligence or bad faith.
(e) Before taking or refraining from taking any action, the Trustee
may consult with counsel and the advice or opinion of such counsel as to
matters of law shall be full and complete authorization and protection from
liability in respect of any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Notes and may otherwise deal with the Company or
its Subsidiaries and Affiliates with the same rights it would have if it were
not Trustee. Any Agent may do the same with like rights. However, the Trustee
is subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes and it shall not
be accountable for the Company's use of the proceeds from the issuance of the
Notes, and it shall not be responsible for any statement of the Company in this
Indenture or any document issued in connection with the sale of Notes or any
statement in the Notes other than the Trustee's certificate of authentication.
SECTION 7.5 NOTICE OF DEFAULTS.
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If a Default or an Event of Default with respect to the Notes occurs
and is continuing and is known to the Trustee, the Trustee shall mail to each
Noteholder notice of the Default or Event of Default within 90 days after the
occurrence thereof. Except in the case of a Default or an Event of Default
under Section 6.1(a)(i) or (ii) hereof, the Trustee may withhold such notice to
the Noteholders if a committee of its Trust Officers in good faith determines
that withholding such notice is in the interest of Noteholders.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
To the extent required by TIA Section 313(a), within 60 days after
May 15 of each year commencing with May 15, 1997 and for as long as there are
Notes outstanding hereunder, the Trustee shall mail to each Noteholder the
Company's brief report dated as of such date that complies with TIA Section
313(a); PROVIDED, HOWEVER, that no report need be transmitted if no such event
listed in TIA Section 313(a) has occurred within such period. The Trustee also
shall comply with TIA Section 313(b) and TIA Section 313(c) and (d). A copy
of such report at the time of its mailing to Noteholders shall be filed with the
SEC, if required, and each stock exchange, if any, on which the Notes are
listed.
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange, and the Trustee shall comply with TIA Section
313(d).
SECTION 7.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee, the Paying Agent and the
Registrar from time to time such reasonable compensation for their respective
services rendered hereunder as may be agreed in writing from time to time. The
Trustee's, the Paying Agent's and the Registrar's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee, the Paying Agent and the Registrar upon
request for all reasonable out-of-pocket disbursements, expenses and advances
(including fees and expenses of counsel) incurred or made by each of them in
addition to the compensation for their respective services. Such expenses shall
include the reasonable compensation, out-of-pocket disbursements and expenses of
the Trustee's, the Paying Agent's and the Registrar's agents and counsel.
The Company shall indemnify the Trustee, the Paying Agent and the
Registrar for, and hold each of them harmless against, any claim, demand,
expense (including but not limited to attorneys' fees and expenses), loss or
liability incurred by each of them arising out of or in connection with the
administration of this Indenture and their respective duties hereunder without
negligence or bad faith on its part. Each of the Trustee, the Paying Agent and
the Registrar shall notify the Company promptly of any
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claim asserted against it for which it may seek indemnity. However, failure by
the Trustee, the Paying Agent or the Registrar to so notify the Company shall
not relieve the Company of its obligations hereunder. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee, the Paying Agent or the Registrar through the Trustee's, the Paying
Agent's or the Registrar's, as the case may be, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7, each
of the Trustee, the Paying Agent and the Registrar shall have a lien prior to
the Notes on all money or property held or collected by it, in its capacity as
Trustee, Paying Agent or Registrar, as the case may be, except money or property
held in trust to pay principal of or interest on particular Notes. Such lien
and indemnity shall survive the satisfaction, discharge and termination of this
Indenture, including the termination or rejection hereof in any bankruptcy
proceeding.
When any of the Trustee, the Paying Agent and the Registrar incurs
expenses or renders services after an Event of Default specified in Section
6.1(a)(vi) or (vii) hereof occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Company in
writing, such resignation to be effective upon the appointment of a successor
Trustee. The Holders of a majority in principal amount of the outstanding Notes
may remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee with the Company' consent, which consent shall not be
unreasonably withheld. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason (the Trustee in such event being referred
to herein as the
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retiring Trustee), the Company shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the Notes may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee (subject to the lien provided in Section 7.7 hereof), the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 25% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee, provided such corporation shall be otherwise
qualified and eligible under this Article VII.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); PROVIDED, HOWEVER, that there shall be excluded
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from the operation of TIA Section 310(b)(1) any indenture or indentures under
which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA
Section 310 shall apply to the Company, as obligor of the Notes, and to any
person directly or indirectly controlling, controlled by, or under common
control with the Company.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein. The provisions of TIA Section 311 shall apply to the Company, as
obligor on the Notes.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 TERMINATION OF COMPANY'S OBLIGATIONS.
The Company may terminate all of its obligations under the Notes and
this Indenture, except those obligations referred to in the penultimate
paragraph of this Section 8.1, if all Notes previously authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid) have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it hereunder, or if:
(a) pursuant to Article III, the Company shall have given notice to
the Trustee and mailed a notice of redemption to each Holder of the
redemption of all of the Notes under arrangements satisfactory to the
Trustee for the giving of such notice;
(b) the Company shall have irrevocably deposited or caused to be
deposited with the Trustee or a trustee satisfactory to the Trustee, under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust solely for the benefit
of the Holders for that purpose, money or direct non-callable obligations
of, or non-callable obligations guaranteed by, the United States of America
for the payment of which guarantee or obligation the full faith and credit
of the United States is pledged ("U.S. Government Obligations") maturing as
to principal and interest in such amounts and at such times as are
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sufficient without consideration of any reinvestment of such interest, to
pay the principal of, premium, if any, and interest on the outstanding
Notes to redemption, provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of said principal and interest with respect to
the Notes; and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Company's obligations under
the Notes and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.5, 2.6, 2.7, 2.8, 4.1, 4.2, 7.7, 7.8, 8.4, 8.5 and 10.1 hereof shall
survive until the Notes are no longer outstanding. After the Notes are no
longer outstanding, the Company's obligations in Sections 7.7 and 8.5 hereof
shall survive.
After such delivery or irrevocable deposit the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
SECTION 8.2 LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolutions, at any time,
with respect to the Notes, elect to have either paragraph (b) or paragraph (c)
below be applied to the outstanding Notes upon compliance with the conditions
set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of paragraph (e) below and the other
Sections of and matters under this Indenture referred to in (i) and (ii) below,
and to have satisfied all of its other obligations under such Notes and this
Indenture insofar as such Notes are concerned (and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in paragraph (d) below
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and as more fully set forth in such paragraph, payments in respect of the
principal of and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to such Notes under Sections 2.5, 2.6, 2.7,
2.8, 4.2, 7.7, 7.8, 8.4 and 8.5 hereof, (iii) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (iv) this Section 8.2. Subject to
compliance with this Section 8.2, the Company may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Notes.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article V and in
Sections 4.6 through 4.21 hereof with respect to the outstanding Notes on and
after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Notes shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.1
hereof nor will any judgment default or default in respect of other Indebtedness
constitute a Default or an Event of Default under Section 6.1(a)(iv) or (v)
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Notes:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (A) money in
an amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal of and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge and which shall be applied by the Trustee (or)
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other qualifying trustee) to pay and discharge principal of and interest on
the outstanding Notes on the Maturity Date of such principal or installment
of principal or interest in accordance with the terms of this Indenture and
of such Notes; PROVIDED, HOWEVER, that the Trustee (or other qualifying
trustee) shall have received an irrevocable written order from the Company
instructing the Trustee (or other qualifying trustee) to apply such money
or the proceeds of such U.S. Government Obligations to said payments with
respect to the Notes;
(ii) no Default or Event of Default or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Notes shall have occurred and be continuing on the date of
such deposit or, insofar as Sections 6.1(a)(vii) and (viii) hereof are
concerned, at any time during the period ending on the 91st day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(iii) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a Default or Event of
Default under, this Indenture or any other agreement or instrument to which
the Company is a party or by which it is bound;
(iv) in the case of an election under paragraph (b) above, the
Company shall have delivered to the Trustee an Opinion of Counsel stating
that (x) the Company have received from, or there has been published by,
the Internal Revenue Service a ruling or (y) since the date of this
Indenture, there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
legal defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such legal defeasance had not occurred;
(v) in the case of an election under paragraph (c) above, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such covenant
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred;
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(vi) in the case of an election under either paragraph (b) or (c)
above, an Opinion of Counsel to the effect that, (x) the trust funds will
not be subject to any rights of any other holders of Indebtedness of the
Company, and (y) after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable Bankruptcy Law;
PROVIDED, HOWEVER, that if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the Company,
no opinion need be given as to the effect of such laws on the trust funds
except the following: (A) assuming such trust funds remained in the
Trustee's possession prior to such court ruling to the extent not paid to
Holders of Notes, the Trustee will hold, for the benefit of the Holders of
Notes, a valid and enforceable security interest in such trust funds that
is not avoidable in bankruptcy or otherwise, subject only to principles of
equitable subordination, (B) the Holders of Notes will be entitled to
receive adequate protection of their interests in such trust funds if such
trust funds are used, and (C) no property, rights in property or other
interests granted to the Trustee or the Holders of Notes in exchange for or
with respect to any of such funds will be subject to any prior rights of
any other Person, subject only to prior Liens granted under Section 364 of
Title 11 of the U.S. Bankruptcy Code (or any section of any other
Bankruptcy Law having the same effect), but still subject to the foregoing
clause (B); and
(vii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (A) all conditions
precedent provided for relating to either the legal defeasance under
paragraph (b) above or the covenant defeasance under paragraph (c) above,
as the case may be, have been complied with and (B) if any other
Indebtedness of the Company shall then be outstanding, such legal
defeasance or covenant defeasance will not violate the provisions of the
agreements or instruments evidencing such Indebtedness.
(e) All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d)
above in respect of the outstanding Notes shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Notes and this Indenture,
to the payment, either directly or through any Paying Agent (other than the
Company or any of their respective Affiliates) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited
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pursuant to paragraph (d) above or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
Anything in this Section 8.2 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
legal defeasance or covenant defeasance.
SECTION 8.3 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.1 and 8.2 hereof, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of and interest on the Notes.
The Trustee shall be under no obligation to invest such trust money or U.S.
Government Obligations except as it may agree with the Company in writing. The
Trustee shall not be liable for any losses incurred in connection with such
investments.
SECTION 8.4 REPAYMENT TO COMPANY.
Subject to Sections 7.7, 8.1 and 8.2 hereof, the Trustee shall
promptly pay to the Company, upon receipt by the Trustee of an Officers'
Certificate, any excess money, determined in accordance with Sections 8.2(d)(i)
and (e) hereof, held by it at any time. The Trustee and the Paying Agent shall
pay to the Company, upon receipt by the Trustee or the Paying Agent, as the case
may be, of an Officers' Certificate, any money held by it for the payment of
principal or interest that remains unclaimed for two years; PROVIDED, HOWEVER,
that the Trustee and the Paying Agent before being required to make any such
payment may, but need not, at the expense of the Company cause to be published
once in a newspaper of general circulation in The City of New York or mail to
each Holder entitled to such money notice that such money remains unclaimed and
that after a date specified therein, which shall be at least 30 days from the
date of such publication or mailing, any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company,
Noteholders entitled to money must look solely to the Company for payment as
general creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
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SECTION 8.5 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
and only then shall the Company's obligations under this Indenture and the Notes
be revived and reinstated as though no deposit had been made pursuant to this
Indenture until such time as the Trustee is permitted to apply all such money or
U.S. Government Obligations in accordance with this Article VIII; PROVIDED,
HOWEVER, that if the Company has made any payment of interest on or principal of
any Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by Board Resolution, and the Trustee may,
without notice to or the consent of any Noteholder, modify, amend, waive or
supplement this Indenture:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with any requirements of the SEC under the TIA;
(c) to evidence the succession in accordance with Article V hereof of
another Person to the Company and the assumption by any such successor of
the covenants of the Company herein and in the Notes;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(e) to make any change that does not adversely affect the rights of
any Holder.
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SECTION 9.2 WITH CONSENT OF HOLDERS.
Subject to Section 6.7 hereof and the provisions of this Section 9.2,
the Company, when authorized by Board Resolution, and the Trustee may modify,
amend, waive or supplement this Indenture or the Notes with the written consent
of the Holders of not less than a majority in aggregate principal amount of the
Notes then outstanding. Subject to Section 6.7 hereof and the provisions of
this Section 9.2, the Holders of not less than a majority in aggregate principal
amount of the outstanding Notes affected may waive compliance by the Company
with any provision of this Indenture or the Notes without notice to any other
Noteholder. However, without the consent of each Noteholder affected, an
amendment, modification, supplement or waiver, including a waiver pursuant to
Section 6.4 hereof, may not:
(a) reduce the principal amount outstanding, extend the fixed
maturity, or alter the redemption provisions of the Notes;
(b) change the currency in which any Notes or any premium or accrued
interest thereon is payable;
(c) reduce the percentage in principal amount outstanding of Notes
necessary for consent to an amendment, modification, supplement or waiver
of any provision of this Indenture or the Notes or who must consent to take
any action under the Notes or this Indenture;
(d) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes;
(e) waive a default in the payment of the principal of, interest on,
or redemption payment or an offer to purchase required hereunder with
respect to, any Note;
(f) reduce the rate of, change the method of calculation of, or
extend the time for, payment of interest on any Note;
(g) amend, change or modify the obligation of the Company to purchase
the Notes upon the occurrence of a Change of Control (or amend, change or
modify any of the provisions or definitions with respect thereto) or an
Asset Sale in accordance with this Indenture or waive any default in the
performance thereof;
(h) affect the ranking of the Notes; or
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(i) modify this Section 9.2 or Section 6.4 hereof.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment,
modification, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, modification, supplement or waiver under this
Section 9.2 becomes effective, the Company shall mail to the Holders a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amendment, modification,
supplement or waiver.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a written consent to
it by a Holder is a continuing consent by the Holder and every subsequent Holder
of that Note or portion of that Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as
to his Note or portion of his Note. Such revocation shall be effective only if
the Trustee receives the written notice of revocation before the date the
amendment, supplement or waiver becomes effective. Notwithstanding the above,
nothing in this paragraph shall impair the right of any Noteholder under Section
316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
second and third sentences of the immediately preceding paragraph, those Persons
who were Holders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to consent to such amendment, supplement
or waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. Such consent shall be effective
only for actions taken within 90 days after such record date.
After an amendment, supplement or waiver becomes effective in
accordance with the terms of this Article IX, it shall bind every Noteholder.
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SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee shall (in accordance with the specific written direction of the Company
and at the expense of the Company) request the Holder of the Note to deliver
such Note to the Trustee. The Trustee shall (in accordance with the specific
direction of the Company set forth in an Officers' Certificate) place an
appropriate notation on the Note about the changed terms and return such Note to
the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall upon receipt
of a written order authenticate a new Note that reflects the changed terms.
Failure to make the appropriate notation or issue a new Note shall not affect
the validity and effect of such amendment, supplement or waiver.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article IX if the amendment, supplement or waiver does not
adversely affect the rights, duties or immunities of the Trustee. If it does,
the Trustee may, but need not, sign it. In signing any amendment, supplement or
waiver, the Trustee shall be entitled to receive, if requested, an indemnity
reasonably satisfactory to it and to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article IX is authorized or
permitted by this Indenture and that any supplemental indenture constitutes the
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms (subject to customary exceptions). The Company may
not sign an amendment until its Board of Directors approves it.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control. If any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by TIA Section 318(c),
the imposed duties shall control.
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SECTION 10.2 NOTICES.
Any notice or communication shall be sufficiently given only if in
writing and delivered in Person or mailed by first-class mail (or as between the
Company and the Trustee, by facsimile transmission) addressed as follows:
(a) if to the Company:
Affinity Group Holding, Inc.
64 Inverness Drive East
Englewood, Colorado 80112
Attention: Chief Financial Officer
with a copy (which copy shall not constitute notice) to:
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Andris A. Baltins, Esq.
(b) if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Administration
with a copy (which copy shall not constitute notice) to:
Siller Wilk LLP
747 Third Avenue
New York, New York 10017-2803
Attention: Hugh P. Finnegan, Esq.
The Company or the Trustee by written notice to the other may
designate additional or different addresses for subsequent notices or
communications.
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Any notice or communication mailed to a Noteholder, including any
notice delivered in connection with TIA Section 310(b), TIA Section 313(c),
TIA Section 314(a) and TIA Section 315(b), shall be mailed to him, first-class
postage prepaid, at his address as it appears on the registration books of the
Registrar and shall be deemed to have been sufficiently given to him on the date
so deposited in the mail, whether or not the addressee receives it.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
Except for a notice to the Trustee, which is deemed given only when received, if
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
In case, by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 10.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
SECTION 10.4 CERTIFICATE AND OPINION OF COUNSEL AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee (a) an Officers' Certificate in form and substance
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (b) an Opinion of Counsel in form and
substance satisfactory to the Trustee stating that, in the opinion of counsel,
all such conditions have been complied with and (c) where applicable, a
certificate or opinion by an independent certified public accountant
satisfactory to the Trustee that complies with TIA Section 314(c).
SECTION 10.5 STATEMENTS REQUIRED IN CERTIFICATE AND OPINION OF COUNSEL.
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
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(a) a statement that the Person making such certificate or Opinion of
Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 10.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Noteholders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 10.7 LEGAL HOLIDAYS.
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 10.8 GOVERNING LAW.
The internal laws of the State of New York shall govern this Indenture
and the Notes without regard to principles of conflict of laws.
SECTION 10.9 RELEASE FROM LIABILITY.
No trustee, director, officer, employee, stockholder, partner,
affiliate or beneficiary, as such, of the Company shall have any liability for
any obligations of the Company under the Notes or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Noteholder by accepting a Note waives and releases all such
liability as part of the consideration for the Notes. It is understood that
this limitation on recourse is made expressly for the benefit of any such
trustee,
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director, officer, employee, stockholder, partner, affiliate or beneficiary and
may be enforced by any one or all of them.
SECTION 10.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind their respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 10.11 DUPLICATE ORIGINALS.
The parties may sign any multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent the same agreement.
SECTION 10.12 SEPARABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SECTION 10.13 TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
AFFINITY GROUP HOLDING, INC.
By:
------------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
------------------------------------
Name:
Title:
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EXHIBIT A
(FACE OF NOTE)
[FORM OF PHYSICAL NOTE]
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO (X) THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR SECURITY) OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"),
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OR BENEFIT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THE NOTES),
(D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (a)(2), (a)(3),
OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS PURCHASING NOTES WITH AN
AGGREGATE PRINCIPAL AMOUNT, PLUS ACCRUED AND UNPAID INTEREST,
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IF ANY, OF AT LEAST $250,000 AND THAT IS PURCHASING NOTES FOR ITS OWN ACCOUNT,
OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY BE COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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<PAGE>
AFFINITY GROUP HOLDING, INC.
NO. $
11% SENIOR NOTE DUE 2007
AFFINITY GROUP HOLDING, INC. promises to pay to or registered
assigns the principal sum of Dollars on , 2007.
-------------
Interest Payment Dates: October 1 and April 1
Record Dates: September 15 and March 15
AFFINITY GROUP HOLDING, INC.
By:
-----------------------------------------
Name:
Title:
Dated:
---------------
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<PAGE>
Certificate of Authentication
This is one of the 11% Senior Notes Due 2007 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 OF NOTE)
AFFINITY GROUP HOLDING, INC.
11% SENIOR NOTE DUE 2007
1. INTEREST. AFFINITY GROUP HOLDING, INC., a Delaware corporation
(the "Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the reverse
side hereof at a rate of 11% PER ANNUM plus Additional Interest upon the
occurrence of certain specified events described in the Registration Rights
Agreement. Interest on this 11% Senior Note Due 2007 (the "Note") will accrue
from and including the most recent date to which interest has been paid or, if
no interest has been paid, from and including April 2, 1997 through but
excluding the date on which interest is paid. Interest shall be payable in
arrears on October 1 and April 1 and at the stated maturity commencing October
1, 1997. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal and on
overdue interest (to the full extent permitted by law) at a rate equal to .5%
PER ANNUM; and the PER ANNUM interest rate of such additional interest will
increase by an additional .25% PER ANNUM for each subsequent 90-day period
during which such overdue principal and installments of interest remain unpaid,
up to a maximum additional interest rate of 2.0% per annum.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on September 15 and March 15 (whether or not a Business
Day) next preceding the interest payment date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, UNITED STATES TRUST
COMPANY OF NEW YORK, a New York corporation (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice. Either of the Company or any of their Affiliates may act as
Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of April 2, 1997 (the "Indenture"), between the Company and the Trustee.
This Note is one of an issue of Notes of the Company issued, or to be issued,
under the Indenture. The terms of the Notes include those stated in the
Indenture and those made part of the
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<PAGE>
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended from time to time. The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
them. Capitalized and certain other terms used herein and not otherwise defined
have the meanings set forth in the Indenture. The Notes are general unsecured
senior obligations of the Company limited in aggregate principal amount to
$130,000,000. The Indenture limits, among other things, the incurrence of
Indebtedness by the Company and its Subsidiaries; investments, loans and
advances by its Subsidiaries; the declaration or payment of any dividend or any
other distribution on Capital Stock of the Company or its Subsidiaries; the
creation of Liens by the Company and its Subsidiaries; purchases, redemptions,
and other acquisitions or retirements of Capital Stock of the Company and its
Subsidiaries; Sale-Leaseback Transactions by the Company; transactions by the
Company and its Subsidiaries with its respective Affiliates; and the issuance of
Capital Stock by the Company's Subsidiaries. The limitations are subject to a
number of important qualifications and exceptions. The Company must report to
the Trustee quarterly on compliance with the limitations contained in the
Indenture.
5. OPTIONAL REDEMPTION. The Notes will be redeemable at the option
of the Company, in whole or in part, at any time on or after April 1, 2002 at
the following redemption prices (expressed as a percentage of principal amount),
together, in each case, with accrued and unpaid interest to the redemption date,
if redeemed during the twelve-month period beginning on April 1 of each year
listed below:
Year Percentage
---- ----------
2002 105.500%
2003 103.667%
2004 101.833%
2005 and thereafter 100.000%
Notwithstanding the foregoing, the Company may redeem in the aggregate
up to 30% of the original principal amount of Notes at any time and from time to
time prior to April 1, 2000 at a redemption price equal to 110% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest to the redemption
date out of the net proceeds of one or more Public Equity Offerings; PROVIDED,
HOWEVER, that at least $75 million of the principal amount of Notes originally
issued remains outstanding immediately after the
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occurrence of any such redemption and that any such redemption occurs within
60 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 PRO RATA, by lot or in such other manner as it shall deem fair and
equitable, the Notes to be redeemed. 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. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note,
in a principal amount equal to the unredeemed portion thereof, will be issued in
the name of the Holder thereof upon cancellation of the original Note. After
any redemption date, unless the Company shall default in the payment of the
redemption price, interest will cease to accrue on the Notes or portions thereof
called for redemption.
6. OFFERS TO PURCHASE. Sections 4.15 and 4.19 of the Indenture
provide that after an Asset Sale or upon the occurrence of a Change of Control,
and subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of Notes in accordance with the procedures set
forth in the Indenture.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange 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 to it any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Notes or portion of a Note selected for redemption, or
transfer or exchange any Notes for a period of 15 days before a selection of
Notes to be redeemed.
8. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as the owner of it for all purposes.
9. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its written request. After that, Holders
entitled to the money must look to the Company for payment as general creditors
unless an "abandoned property" law designates another Person.
10. AMENDMENT, SUPPLEMENT, WAIVER. The Company and the Trustee may,
without the consent of the Holders of any outstanding Notes, amend, waive or
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<PAGE>
supplement the Indenture or the Notes for certain specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies, maintaining
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, making any change that does not adversely affect the rights of any
Holder. Other amendments and modifications of the Indenture or the Notes may be
made by the Company and the Trustee with the consent of the Holders of not less
than a majority of the aggregate principal amount of the outstanding Notes,
subject to certain exceptions requiring the consent of each Holder.
11. SUCCESSOR CORPORATION. When a successor corporation assumes all
the obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article V of the Indenture, the
predecessor corporation will be released from those obligations.
12. DEFAULTS AND REMEDIES. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(vi) or (vii)
of the Indenture) occurs and is continuing, then the Holders of not less than
25% in aggregate principal amount of the outstanding Notes may, and the Trustee
upon the request of the Holders of not less than 25% in aggregate principal
amount of the outstanding Notes shall, declare the principal of and interest on
all of the Notes to be due and payable immediately. If an Event of Default
specified in Section 6.1(a)(vi) or (vii) of the Indenture occurs and is
continuing, the principal of, and premium, if any, and interest on all of the
Notes shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity reasonably satisfactory to it, in its sole
discretion, before it enforces the Indenture or the Notes. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company must furnish an annual compliance
certificate to the Trustee.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No trustee, director, officer,
employee, stockholder, partner, affiliate or beneficiary as such, of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any
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<PAGE>
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Notes.
15. GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in the Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in the
Indenture.
16. DISCHARGE. The Company's obligations pursuant to the Indenture
will be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or upon
the irrevocable deposit with the Trustee of money or U.S. Government Obligations
sufficient to pay when due principal of, and premium, if any, and interest on
the Notes to maturity or redemption, as the case may be.
17. AUTHENTICATION. This Note shall not be valid until the Trustee
manually signs the certificate of authentication on the other side of this Note.
18. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Affinity Group Holding, Inc.
64 Inverness Drive East
Englewood, Colorado 80112
Attention: Chief Financial Officer
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act on his or her behalf.
- --------------------------------------------------------------------------------
Date: Your signature:
-------------- ---------------------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
------------------------------------------------------------
In connection with any such transfer, the Transferor does hereby certify that
Transferor is familiar with the Indenture relating to the above-captioned Notes
and as provided in the Indenture, the transfer of this Note does not require
registration under the Securities Act because:
[ ] (a) such Note is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over
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which it exercises sole investment discretion that is aware that the transfer is
being made in reliance on Rule 144A.
[ ] (b) such Note is being transferred in accordance with Regulation S under
the Securities Act. An Opinion of Counsel, if so requested by the Company or
the Trustee, to the effect that such transfer is in compliance with the
Securities Act accompanies this Certificate.
[ ] (c) such Note is being transferred to an institutional investor that is an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act which delivers in accordance with Regulation S under
the Securities Act. An Opinion of Counsel, if so requested by the Company or
the Trustee, to the effect that such transfer is in compliance with the
Securities Act accompanies this Certificate.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.15 or 4.19 of the Indenture, check this Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.15 or 4.19 of the Indenture, state the amount:
$
-------------
(multiple of $1,000)
Date: Your Signature:
-------------- -------------------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
-----------------------
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<PAGE>
EXHIBIT B
(FACE OF NOTE)
[FORM OF RULE 144A GLOBAL 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
COMPANY OR ITS 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.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH
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<PAGE>
SECURITY, PRIOR TO (X) THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
SECURITY) OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OR BENEFIT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THE NOTES), (D) PURSUANT TO OFFERS AND SALES
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (a)(2), (a)(3), OR (a)(7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS PURCHASING NOTES WITH AN
AGGREGATE PRINCIPAL AMOUNT, PLUS ACCRUED AND UNPAID INTEREST, IF ANY, OF AT
LEAST $250,000 AND THAT IS PURCHASING NOTES FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS SECURITY BE COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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<PAGE>
AFFINITY GROUP HOLDING, INC.
NO. $
11% SENIOR NOTE DUE 2007
AFFINITY GROUP HOLDING, INC. promises to pay to or registered
assigns the principal sum of Dollars on , 2007.
-------------
Interest Payment Dates: October 1 and April 1
Record Dates: September 15 and March 15
AFFINITY GROUP HOLDING, INC.
By:
-----------------------------------------
Name:
Title:
Dated:
---------------
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<PAGE>
Certificate of Authentication
This is one of the 11% Senior Notes Due 2007 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 OF NOTE)
AFFINITY GROUP HOLDING, INC.
11% SENIOR NOTE DUE 2007
1. INTEREST. AFFINITY GROUP HOLDING, INC., a Delaware corporation
(the "Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the reverse
side hereof at a rate of 11% PER ANNUM plus Additional Interest upon the
occurrence of certain specified events described in the Registration Rights
Agreement. Interest on this 11% Senior Note Due 2007 (the "Note") will accrue
from and including the most recent date to which interest has been paid or, if
no interest has been paid, from and including April 2, 1997 through but
excluding the date on which interest is paid. Interest shall be payable in
arrears on October 1 and April 1 and at the stated maturity commencing October
1, 1997. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal and on
overdue interest (to the full extent permitted by law) at a rate equal to .5%
PER ANNUM; and the PER ANNUM interest rate of such additional interest will
increase by an additional .25% PER ANNUM for each subsequent 90-day period
during which such overdue principal and installments of interest remain unpaid,
up to a maximum additional interest rate of 2.0% per annum.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on September 15 and March 15 (whether or not a Business
Day) next preceding the interest payment date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, UNITED STATES TRUST
COMPANY OF NEW YORK, a New York corporation (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice. Either of the Company or any of their Affiliates may act as
Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of April 2, 1997 (the "Indenture"), between the Company and the Trustee.
This Note is one of an issue of Notes of the Company issued, or to be issued,
under the Indenture. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as amended from time
to time. The Notes are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of them. Capitalized and certain
other terms used herein and not otherwise defined have the meanings set forth in
the Indenture. The Notes are general unsecured senior obligations of the
Company limited in aggregate principal amount to $130,000,000. The Indenture
limits, among other things, the
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<PAGE>
incurrence of Indebtedness by the Company and its Subsidiaries; investments,
loans and advances by its Subsidiaries; the declaration or payment of any
dividend or any other distribution on Capital Stock of the Company or its
Subsidiaries; the creation of Liens by the Company and its Subsidiaries;
purchases, redemptions, and other acquisitions or retirements of Capital Stock
of the Company and its Subsidiaries; Sale-Leaseback Transactions by the Company;
transactions by the Company and its Subsidiaries with its respective Affiliates;
and the issuance of Capital Stock by the Company's Subsidiaries. The
limitations are subject to a number of important qualifications and exceptions.
The Company must report to the Trustee quarterly on compliance with the
limitations contained in the Indenture.
5. OPTIONAL REDEMPTION. The Notes will be redeemable at the option
of the Company, in whole or in part, at any time on or after April 1, 2002 at
the following redemption prices (expressed as a percentage of principal amount),
together, in each case, with accrued and unpaid interest to the redemption date,
if redeemed during the twelve-month period beginning on April 1 of each year
listed below:
Year Percentage
---- ----------
2002 105.500%
2003 103.667%
2004 101.833%
2005 and thereafter 100.000%
Notwithstanding the foregoing, the Company may redeem in the aggregate
up to 30% of the original principal amount of Notes at any time and from time to
time prior to April 1, 2000 at a redemption price equal to 110% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest to the redemption
date out of the net proceeds of one or more Public Equity Offerings; PROVIDED,
HOWEVER, that at least $75 million of the principal amount of Notes originally
issued remains outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 60 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 PRO RATA, by lot or in such other manner as it shall deem fair and
equitable, the Notes to be redeemed. 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. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note,
in a principal amount equal to the unredeemed portion thereof, will be issued in
the name of the Holder thereof upon cancellation of the original Note. After
any redemption date, unless the Company shall
B-6
<PAGE>
default in the payment of the redemption price, interest will cease to accrue on
the Notes or portions thereof called for redemption.
6. OFFERS TO PURCHASE. Sections 4.15 and 4.19 of the Indenture
provide that after an Asset Sale or upon the occurrence of a Change of Control,
and subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of Notes in accordance with the procedures set
forth in the Indenture.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange 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 to it any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Notes or portion of a Note selected for redemption, or
transfer or exchange any Notes for a period of 15 days before a selection of
Notes to be redeemed.
8. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as the owner of it for all purposes.
9. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its written request. After that, Holders
entitled to the money must look to the Company for payment as general creditors
unless an "abandoned property" law designates another Person.
10. AMENDMENT, SUPPLEMENT, WAIVER. The Company and the Trustee may,
without the consent of the Holders of any outstanding Notes, amend, waive or
supplement the Indenture or the Notes for certain specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies, maintaining
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, making any change that does not adversely affect the rights of any
Holder. Other amendments and modifications of the Indenture or the Notes may be
made by the Company and the Trustee with the consent of the Holders of not less
than a majority of the aggregate principal amount of the outstanding Notes,
subject to certain exceptions requiring the consent of each Holder.
11. SUCCESSOR CORPORATION. When a successor corporation assumes all
the obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article V of the Indenture, the
predecessor corporation will be released from those obligations.
12. DEFAULTS AND REMEDIES. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(vi) or (vii)
of the Indenture) occurs and is continuing, then the Holders of not less than
25% in aggregate principal amount of the
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<PAGE>
outstanding Notes may, and the Trustee upon the request of the Holders of not
less than 25% in aggregate principal amount of the outstanding Notes shall,
declare the principal of and interest on all of the Notes to be due and payable
immediately. If an Event of Default specified in Section 6.1(a)(vi) or (vii) of
the Indenture occurs and is continuing, the principal of, and premium, if any,
and interest on all of the Notes shall IPSO FACTO become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity reasonably
satisfactory to it, in its sole discretion, before it enforces the Indenture or
the Notes. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment of principal or interest) if
it determines that withholding notice is in their interests. The Company must
furnish an annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No trustee, director, officer,
employee, stockholder, partner, affiliate or beneficiary as such, of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
15. GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in the Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in the
Indenture.
16. DISCHARGE. The Company's obligations pursuant to the Indenture
will be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or upon
the irrevocable deposit with the Trustee of money or U.S. Government Obligations
sufficient to pay when due principal of, and premium, if any, and interest on
the Notes to maturity or redemption, as the case may be.
17. AUTHENTICATION. This Note shall not be valid until the Trustee
manually signs the certificate of authentication on the other side of this Note.
18. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
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<PAGE>
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).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Affinity Group Holding, Inc.
64 Inverness Drive East
Englewood, Colorado 80112
Attention: Chief Financial Officer
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act on his or her behalf.
Date: Your signature:
-------------- ---------------------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
------------------------------------------------------------
In connection with any such transfer, the Transferor does hereby certify that
Transferor is familiar with the Indenture relating to the above-captioned Notes
and as provided in the Indenture, the transfer of this Note does not require
registration under the Securities Act because:
[ ] (a) such Note is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over which it exercises sole investment
discretion that is aware that the transfer is being made in reliance on Rule
144A.
[ ] (b) such Note is being transferred in accordance with Regulation S under
the Securities Act. An Opinion of Counsel, if so requested by the Company or
the Trustee, to
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<PAGE>
the effect that such transfer is in compliance with the Securities Act
accompanies this Certificate.
[ ] (c) such Note is being transferred to an institutional investor that is an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act which delivers in accordance with Regulation S under
the Securities Act. An Opinion of Counsel, if so requested by the Company or
the Trustee, to the effect that such transfer is in compliance with the
Securities Act accompanies this Certificate.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.15 or 4.19 of the Indenture, check this Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.15 or 4.19 of the Indenture, state the amount:
$
-------------
(multiple of $1,000)
Date: Your Signature:
-------------- ----------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
Signature Guarantee:
-----------------------
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<PAGE>
EXHIBIT C
(FACE OF NOTE)
[FORM OF REGULATION S GLOBAL 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
COMPANY OR ITS 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.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH
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<PAGE>
SECURITY, PRIOR TO (X) THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
SECURITY) OR (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY
SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG
AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OR BENEFIT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THE NOTES), (D) PURSUANT TO OFFERS AND SALES
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (a)(2), (a)(3), OR (a)(7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS PURCHASING NOTES WITH AN
AGGREGATE PRINCIPAL AMOUNT, PLUS ACCRUED AND UNPAID INTEREST, IF ANY, OF AT
LEAST $250,000 AND THAT IS PURCHASING NOTES FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THE OTHER SIDE OF THIS SECURITY BE COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
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<PAGE>
AFFINITY GROUP HOLDING, INC.
NO. $
11% SENIOR NOTE DUE 2007
AFFINITY GROUP HOLDING, INC. promises to pay to or registered
assigns the principal sum of Dollars on , 2007.
-------------
Interest Payment Dates: October 1 and April 1
Record Dates: September 15 and March 15
AFFINITY GROUP HOLDING, INC.
By:
--------------------------------
Name:
Title:
Dated:
-------------
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<PAGE>
Certificate of Authentication
This is one of the 11% Senior Notes Due 2007 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 OF NOTE)
AFFINITY GROUP HOLDING, INC.
11% SENIOR NOTE DUE 2007
1. INTEREST. AFFINITY GROUP HOLDING, INC., a Delaware corporation
(the "Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the reverse
side hereof at a rate of 11% PER ANNUM plus Additional Interest upon the
occurrence of certain specified events described in the Registration Rights
Agreement. Interest on this 11% Senior Note Due 2007 (the "Note") will accrue
from and including the most recent date to which interest has been paid or, if
no interest has been paid, from and including April 2, 1997 through but
excluding the date on which interest is paid. Interest shall be payable in
arrears on October 1 and April 1 and at the stated maturity commencing October
1, 1997. Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal and on
overdue interest (to the full extent permitted by law) at a rate equal to .5%
PER ANNUM; and the PER ANNUM interest rate of such additional interest will
increase by an additional .25% PER ANNUM for each subsequent 90-day period
during which such overdue principal and installments of interest remain unpaid,
up to a maximum additional interest rate of 2.0% per annum.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on September 15 and March 15 (whether or not a Business
Day) next preceding the interest payment date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, UNITED STATES TRUST
COMPANY OF NEW YORK, a New York corporation (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice. Either of the Company or any of their Affiliates may act as
Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of April 2, 1997 (the "Indenture"), between the Company and the Trustee.
This Note is one of an issue of Notes of the Company issued, or to be issued,
under the Indenture. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as amended from time
to time. The Notes are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of them. Capitalized and certain
other terms used herein and not otherwise defined have the meanings set forth in
the Indenture. The Notes are general unsecured senior obligations of the
Company limited in aggregate principal amount to $130,000,000. The Indenture
limits, among other things, the
C-5
<PAGE>
incurrence of Indebtedness by the Company and its Subsidiaries; investments,
loans and advances by its Subsidiaries; the declaration or payment of any
dividend or any other distribution on Capital Stock of the Company or its
Subsidiaries; the creation of Liens by the Company and its Subsidiaries;
purchases, redemptions, and other acquisitions or retirements of Capital Stock
of the Company and its Subsidiaries; Sale-Leaseback Transactions by the Company;
transactions by the Company and its Subsidiaries with its respective Affiliates;
and the issuance of Capital Stock by the Company's Subsidiaries. The
limitations are subject to a number of important qualifications and exceptions.
The Company must report to the Trustee quarterly on compliance with the
limitations contained in the Indenture.
5. OPTIONAL REDEMPTION. The Notes will be redeemable at the option
of the Company, in whole or in part, at any time on or after April 1, 2002 at
the following redemption prices (expressed as a percentage of principal amount),
together, in each case, with accrued and unpaid interest to the redemption date,
if redeemed during the twelve-month period beginning on April 1 of each year
listed below:
YEAR PERCENTAGE
---- ----------
2002 105.500%
2003 103.667%
2004 101.833%
2005 and thereafter 100.000%
Notwithstanding the foregoing, the Company may redeem in the aggregate
up to 30% of the original principal amount of Notes at any time and from time to
time prior to April 1, 2000 at a redemption price equal to 110% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest to the redemption
date out of the net proceeds of one or more Public Equity Offerings; PROVIDED,
HOWEVER, that at least $75 million of the principal amount of Notes originally
issued remains outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 60 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 PRO RATA, by lot or in such other manner as it shall deem fair and
equitable, the Notes to be redeemed. 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. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note,
in a principal amount equal to the unredeemed portion thereof, will be issued in
the name of the Holder thereof upon cancellation of the original Note. After
any redemption date, unless the Company shall
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<PAGE>
default in the payment of the redemption price, interest will cease to accrue on
the Notes or portions thereof called for redemption.
6. OFFERS TO PURCHASE. Sections 4.15 and 4.19 of the Indenture
provide that after an Asset Sale or upon the occurrence of a Change of Control,
and subject to further limitations contained therein, the Company shall make an
offer to purchase certain amounts of Notes in accordance with the procedures set
forth in the Indenture.
7. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange 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 to it any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
transfer or exchange any Notes or portion of a Note selected for redemption, or
transfer or exchange any Notes for a period of 15 days before a selection of
Notes to be redeemed.
8. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as the owner of it for all purposes.
9. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its written request. After that, Holders
entitled to the money must look to the Company for payment as general creditors
unless an "abandoned property" law designates another Person.
10. AMENDMENT, SUPPLEMENT, WAIVER. The Company and the Trustee may,
without the consent of the Holders of any outstanding Notes, amend, waive or
supplement the Indenture or the Notes for certain specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies, maintaining
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, making any change that does not adversely affect the rights of any
Holder. Other amendments and modifications of the Indenture or the Notes may be
made by the Company and the Trustee with the consent of the Holders of not less
than a majority of the aggregate principal amount of the outstanding Notes,
subject to certain exceptions requiring the consent of each Holder.
11. SUCCESSOR CORPORATION. When a successor corporation assumes all
the obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article V of the Indenture, the
predecessor corporation will be released from those obligations.
12. DEFAULTS AND REMEDIES. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(vi) or (vii)
of the Indenture) occurs and is continuing, then the Holders of not less than
25% in aggregate principal amount of the
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<PAGE>
outstanding Notes may, and the Trustee upon the request of the Holders of not
less than 25% in aggregate principal amount of the outstanding Notes shall,
declare the principal of and interest on all of the Notes to be due and payable
immediately. If an Event of Default specified in Section 6.1(a)(vi) or (vii) of
the Indenture occurs and is continuing, the principal of, and premium, if any,
and interest on all of the Notes shall IPSO FACTO become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may require indemnity reasonably
satisfactory to it, in its sole discretion, before it enforces the Indenture or
the Notes. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment of principal or interest) if
it determines that withholding notice is in their interests. The Company must
furnish an annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. No trustee, director, officer,
employee, stockholder, partner, affiliate or beneficiary as such, of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
15. GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in the Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in the
Indenture.
16. DISCHARGE. The Company's obligations pursuant to the Indenture
will be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or upon
the irrevocable deposit with the Trustee of money or U.S. Government Obligations
sufficient to pay when due principal of, and premium, if any, and interest on
the Notes to maturity or redemption, as the case may be.
17. AUTHENTICATION. This Note shall not be valid until the Trustee
manually signs the certificate of authentication on the other side of this Note.
18. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
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<PAGE>
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).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Affinity Group Holding, Inc.
64 Inverness Drive East
Englewood, Colorado 80112
Attention: Chief Financial Officer
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act on his or her behalf.
- --------------------------------------------------------------------------------
Date: Your signature:
-------------- ---------------------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
------------------------------------------------------------
In connection with any such transfer, the Transferor does hereby certify
that Transferor is familiar with the Indenture relating to the above-captioned
Notes and as
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<PAGE>
provided in the Indenture, the transfer of this Note does not require
registration under the Securities Act because:
[ ] (a) such Note is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over which it exercises sole investment
discretion that is aware that the transfer is being made in reliance on Rule
144A.
[ ] (b) such Note is being transferred in accordance with Regulation S under
the Securities Act. An Opinion of Counsel, if so requested by the Company or
the Trustee, to the effect that such transfer is in compliance with the
Securities Act accompanies this Certificate.
[ ] (c) such Note is being transferred to an institutional investor that is an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act which delivers in accordance with Regulation S under
the Securities Act. An Opinion of Counsel, if so requested by the Company or
the Trustee, to the effect that such transfer is in compliance with the
Securities Act accompanies this Certificate.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.15 or 4.19 of the Indenture, check this Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.15 or 4.19 of the Indenture, state the amount:
$
------------------------
(multiple of $1,000)
Date: Your Signature:
------------- ---------------------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
------------------------
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<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO RULE 144A
___________, ____
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: Affinity Group Holding, Inc.
11% Senior Notes due 2007
(The "Notes")
Dear Sirs:
In connection with our proposed sale of $_______ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with the transfer restrictions set forth in the Notes and to and
in accordance with Rule 144A under the U.S. Securities Act of 1933, as amended
(the "Securities Act'), and, accordingly we further certify that the Notes are
being transferred to a person that we reasonably believe is purchasing the Notes
for its own account, or for one or accounts with respect to which such person
exercises sole investment discretion, and such person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in each case in
a transaction meeting the requirements of Rule 144A and in accordance with any
applicable securities laws of any state of the United States.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
E-1
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
___________, ____
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: Affinity Group Holding, Inc.
11% Senior Notes due 2007
(The "Notes")
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act'), and, accordingly, we represent that:
1. the offer of the Notes was not made to a person in the United
States;
2. either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities or a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
E-1
<PAGE>
3. no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
5. we understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect; and
6. we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:
------------------------------------
Authorized Signature
E-2
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
___________, ____
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Re: Affinity Group Holding, Inc.
11% Senior Notes due 2007
(The "Notes")
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of April 2, 1997 relating to the Notes and the undersigned agrees
to be bound by, and not to resell, pledge or otherwise transfer the
Securities except in compliance with, such restrictions and conditions and
the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Notes within two years after the original issuance of
the Notes, we will do so only
F-1
<PAGE>
(A) to the Company, (B) pursuant to a registration statement which has been
declared effective under the Securities Act (C) for so long as the Notes
are eligible for resale pursuant to Rule 144A under the Securities Act, to
a person we reasonably believe is a "qualified institutional buyer" as
defined in Rule 144A that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given that the
transfer is being made in reliance on Rule 144A (as indicated by the box
checked by the transferor on the certificate of transfer on the reverse of
the Notes), (D) outside the United States to a foreign person in compliance
with Rule 904 of Regulation S under the Securities Act, (E) inside the
United States, to an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (a)(2), (a)(3), or (a)(7) of Rule 501 under the
Securities Act that is purchasing Notes with an aggregate principal amount,
plus accrued and unpaid interest, if any, of at least $250,000 and that is
purchasing Notes for its own account, or for the account of such an
institutional "accredited investor," for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, and that prior to such transfer, furnishes
to you a signed letter substantially in the form of this letter, or (F)
pursuant to an another available exemption from the registration
requirements of the Securities Act.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act), are purchasing Notes
with an aggregate principal amount, plus accrued and unpaid interest, if
any, of at least $250,000 and have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of our investment in the Notes, and we and any accounts for which
we are acting are each able to bear the economic risk of our or its
investment.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in
F-2
<PAGE>
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
------------------------------------
Authorized Signature
F-3
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of April 2, 1997
by and among
AFFINITY GROUP HOLDING, INC.
and
AFFINITY GROUP, INC.
and
CITICORP SECURITIES, INC.,
CITIBANK CANADA SECURITIES LIMITED,
CITIBANK INTERNATIONAL PLC
and
CIBC WOOD GUNDY SECURITIES CORP.
as Initial Purchasers
------------------------------
$130,000,000
11% SENIOR NOTES DUE 2007
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS............................................................. 1
2. EXCHANGE OFFER.......................................................... 5
3. SHELF REGISTRATION...................................................... 8
4. LIQUIDATED DAMAGES...................................................... 10
5. REGISTRATION PROCEDURES................................................. 12
6. REGISTRATION EXPENSES................................................... 20
7. INDEMNIFICATION......................................................... 21
8. PROVISION OF FINANCIAL STATEMENTS....................................... 25
9. UNDERWRITTEN REGISTRATIONS.............................................. 25
10. MISCELLANEOUS........................................................... 25
(a) REMEDIES........................................................... 25
(b) NO INCONSISTENT AGREEMENTS......................................... 26
(c) ADJUSTMENTS AFFECTING REGISTRABLE NOTES............................ 26
(d) AMENDMENTS AND WAIVERS............................................. 26
(e) NOTICES............................................................ 27
(f) SUCCESSORS AND ASSIGNS............................................. 28
(g) COUNTERPARTS....................................................... 28
(h) HEADINGS........................................................... 28
(i) GOVERNING LAW...................................................... 28
(j) SEVERABILITY....................................................... 29
(k) NOTES HELD BY THE COMPANY OR ITS AFFILIATES........................ 29
(l) THIRD PARTY BENEFICIARIES.......................................... 29
(m) ENTIRE AGREEMENT................................................... 29
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of April 2, 1997, by and among Affinity Group Holding, Inc., a
Delaware corporation (the "COMPANY"), and Affinity Group, Inc., a Delaware
corporation ("AGI"), and Citicorp Securities, Inc., Citibank Canada Securities
Limited, Citibank International plc and CIBC Wood Gundy Securities Corp.
(collectively, the "INITIAL PURCHASERS").
This Agreement is entered into in connection with the Purchase
Agreement, dated March 27, 1997, by and among the Company, AGI and the Initial
Purchasers (the "PURCHASE AGREEMENT") relating to the sale by the Company to the
Initial Purchasers of $130,000,000 aggregate principal amount of the Company's
11% Senior Notes due 2007 (the "NOTES"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement for the benefit of
the holders of Registrable Notes (as defined), including, without limitation,
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 the last paragraph of Section 5.
AGREEMENT: See the first introductory paragraph to this Agreement.
APPLICABLE PERIOD: See Section 2(b).
BUSINESS DAY: A day that is not a Saturday, a Sunday, or a day on
which banking institutions in New York, New York are required to be closed.
CLOSING DATE: The Closing Date as defined in the Purchase Agreement.
COMPANY: See the first introductory paragraph to this Agreement.
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<PAGE>
EFFECTIVENESS DATE: The 150th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(b).
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 30th day after the Issue Date.
HOLDER: Any registered holder of Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of April 2, 1997, by and between
the Company 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 first introductory paragraph to this
Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(n).
ISSUE DATE: The date on which the original Notes were sold to the
Initial Purchasers pursuant to the Purchase Agreement.
NASD: National Association of Securities Dealers, Inc.
2
<PAGE>
NOTES: See the second introductory paragraph to this Agreement.
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
PERSON: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
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 second introductory paragraph to this
Agreement.
RECORDS: See Section 5(n).
REGISTRABLE NOTES: Each Note upon original issuance thereof and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance thereof and at all times subsequent
thereto and each Private Exchange Note upon original issuance thereof and at all
times subsequent thereto, until, in the case of any such Note, Exchange Note or
Private Exchange Note, as the case may be, the earliest to occur of (i) a
Registration Statement covering such Note, Exchange Note or Private Exchange
Note, as the case may be, has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed of
in accordance with such effective Registration Statement, (ii) such Note,
Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144, (iii) in the
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<PAGE>
case of any Note, the Company has offered to and was capable of successfully
exchanging such Note pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes which may be resold without further registration under federal
securities laws, or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceases to be outstanding for purposes of the Indenture.
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, that 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 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 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.
RULE 415: Rule 415 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.
4
<PAGE>
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 the Company are sold to an underwriter for reoffering to the
public.
2. EXCHANGE OFFER
(a) The Company agrees to file with the SEC no later than the Filing
Date, a Registration Statement relating to an offer to exchange (the "EXCHANGE
OFFER") any and all of the Registrable Notes (other than Private Exchange Notes,
if any) for a like aggregate principal amount of debt securities of the Company
which are identical in all material respects to the Notes (the "EXCHANGE NOTES")
(and which are entitled to the benefits of the Indenture or a trust indenture
which is identical in all material respects 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 shall contain no restrictive legend thereon. The Exchange Offer shall
be registered on a Registration Statement under the Securities Act on the
appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and shall comply with
all applicable rules and regulations under the Exchange Act. The Company agrees
to use its best efforts to (y) cause the Exchange Registration Statement to be
declared effective under the Securities Act on or before the Effectiveness Date;
and (z) keep the Exchange Offer open for at least 30 calendar days (or longer if
required by applicable law) after the date that notice of the Exchange Offer is
mailed to the Holders. If after such Exchange Registration Statement is
initially declared effective by the SEC, the Exchange Offer or the issuance of
the Exchange Notes thereunder is interfered with by any stop order, injunction
or other order or requirement of the SEC or any other governmental agency or
court, such Exchange Registration Statement shall be deemed not to have become
effective for purposes of this Agreement. Each Holder who participates in the
Exchange Offer will be required to represent (i) that any Exchange Notes
received by it will be acquired in the ordinary course of its business, (ii)
that at the time of the consummation of the Exchange Offer such Holder will have
no intent, or arrangement or understanding with any Person, to participate in
the distribution of the Exchange Notes, (iii) that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, (iv) that if
such Holder is a broker-dealer that will receive Exchange Notes for its own
account that were acquired as a result of market-making or trading activities,
that it will deliver the Prospectus in connection with any resale of the
Exchange Notes, (v) that it is not engaged in, and does not intend to engage in,
the
5
<PAGE>
distribution of the Exchange Notes, and (vi) as to any additional matters
that are requested by the SEC pursuant to any review thereof, or that in the
written opinion of counsel to the Company are necessary under then-existing
interpretations of the SEC in order for the Exchange Registration Statement
to be declared effective. 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, and the Company shall have no further obligation to register
Registrable Notes (other than Private Exchange Notes and other than in
respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies)
pursuant to Section 3 of this Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange 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 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
judgment of the Initial Purchasers, represent the prevailing views of the Staff
of the SEC. Such "Plan of Distribution" section shall also allow, to the extent
permitted by applicable policies and regulations of the SEC, the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of the
Securities Act, including, to the extent so permitted, all Participating
Broker-Dealers, and include a statement describing the manner in which
Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
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 connection with offers and sales of the Exchange Notes; PROVIDED, that such
period shall not exceed 165 calendar days (or such longer period if extended
pursuant to Section 5 hereof) (the "APPLICABLE PERIOD").
If, upon consummation of the Exchange Offer, any Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
the initial distribution, the Company upon the request of any such 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
6
<PAGE>
Purchaser, a like principal amount of debt securities of the Company that are
identical in all material respects to the Exchange Notes except for the
existence of restrictions on transfer thereof under the Securities Act and
securities laws of the several states of the U.S. (the "PRIVATE EXCHANGE NOTES")
(and which are issued pursuant to the same trust 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 Issue Date.
In connection with the Exchange Offer, the Company shall:
(1) promptly upon the effectiveness of the Exchange Registration
Statement, commence the Exchange Offer and 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;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Registrable 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; and
(4) otherwise comply in all material respects with all laws
applicable to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder tendering such Registrable 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.
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The Company shall make available, for a period of 90 days after
consummation of the Exchange Offer, a copy of the Prospectus forming part of the
Exchange Registration Statement to any broker-dealer in connection with any
resale of any Private Exchange Notes or Exchange Notes, as the case may be.
The Exchange Notes and the Private Exchange Notes may be issued under
the Indenture or a trust indenture identical in all material respects 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), 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, if any, will vote and consent together on all matters as
one class and that none of the Exchange Notes, the Private Exchange Notes or the
Notes, if any, will have the right to vote or consent as a separate class on any
matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Company is not permitted to effect
the Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days
of the Issue Date,(iii) any holder of Private Exchange Notes so requests in
writing to the Company or (iv) in the case of any Holder that participates in
the Exchange Offer (and tenders its Registrable Notes prior to the expiration
thereof), such Holder does not receive Exchange Notes on the date of the
exchange that may be sold without further registration or subject to transfer
restrictions involving unregistered securities under federal securities laws
(other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act) and so notifies the Company
within 30 days following the consummation of the Exchange Offer (and providing a
reasonable basis for its conclusions), in the case of each of clauses (i)-(iv),
then the Company shall promptly deliver to the Holders and the Trustee written
notice thereof (the "SHELF NOTICE") and shall as promptly as possible file a
Shelf Registration pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) SHELF REGISTRATION. The Company shall as promptly as practicable
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 Company shall not have yet filed the
Exchange Registration Statement, the Company shall use its best efforts to file
with the SEC the Initial Shelf Registration on or prior to the
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Filing Date and shall use its best efforts to cause such Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date. Otherwise, the Company shall use its best efforts to
file with the SEC the Initial Shelf Registration within 30 days of the delivery
of the Shelf Notice and shall use its best efforts to cause such Shelf
Registration to be declared effective under the Securities Act as promptly as
practicable thereafter. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company shall not
permit any securities other than the Registrable Notes to be included in any
Shelf Registration. The Company shall use its best efforts to keep the Initial
Shelf Registration continuously effective under the Securities Act until the
date which is 24 months from the Issue Date (or, if Rule 144(k) under the
Securities Act is amended to permit unlimited resales by non-affiliates within a
lesser period, such lesser period) (subject to extension pursuant to the last
paragraph of Section 5 hereof) (the "EFFECTIVENESS PERIOD") 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.
(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 (other than because of the
sale of all of the securities registered thereunder), the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation
of effectiveness amend the Shelf Registration in a manner 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, the Company 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 Subsequent Shelf Registration 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 Registrations 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 Company shall promptly
supplement and amend any 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 reasonably
requested by the Holders of a majority in aggregate
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principal amount of the Registrable Notes covered by such Shelf Registration or
by any underwriter of such Registrable Notes, in each case, with the Company's
consent, which consent shall not be unreasonably withheld or delayed.
4. LIQUIDATED DAMAGES
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
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 Company agrees to pay, as liquidated damages, additional interest in respect
of the Registrable Notes ("ADDITIONAL INTEREST") under the circumstances and to
the extent set forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Registration Statement nor the Initial
Shelf Registration has been filed on or prior to the Filing Date or (B)
notwithstanding that the Company has consummated or will consummate the
Exchange Offer, the Company is required to file a Shelf Registration and
such Shelf Registration is not filed on or prior to the date that is 30
days after delivery of the Shelf Notice, then commencing on the day after
the Filing Date (in the case of clause (A)) or the date that is 31 days
after delivery of the Shelf Notice (in the case of clause (B)), Additional
Interest shall be payable in respect of the Registrable Notes at a rate of
0.50% of the outstanding principal amount of the Notes per annum for the
first 90 days immediately following the Filing Date, such Additional
Interest payable shall increase by an additional 0.50% of the outstanding
principal amount of the Notes per annum at the beginning of each subsequent
90-day period;
(ii) if (A) neither the Exchange Registration Statement nor the Initial
Shelf Registration is declared effective on or prior to the Effectiveness
Date or (B) notwithstanding that the Company has consummated or will
consummate the Exchange Offer, the Company is required to file a Shelf
Registration and such Shelf Registration is not declared effective on or
prior to the 150th day following the date such Shelf Registration was
filed, Additional Interest shall be payable in respect of the Registrable
Notes at a rate of 0.50% of the outstanding principal amount of the Notes
per annum for the first 90 days immediately following the day after the
Effectiveness Date (in the case of clause (A)) or the 151st day following
the date such Shelf Registration was filed (in the case of clause (B)),
such Additional Interest payable increasing by an additional 0.50% of the
outstanding principal amount of the Notes per annum at the beginning of
each subsequent 90-day period; and
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(iii) if (A) the Company has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to 180 days after the Issue Date or (B) if applicable, a Shelf
Registration has been declared effective and such Shelf Registration ceases
to be effective at any time during the Effectiveness Period, Additional
Interest shall be payable in respect of the Registrable Notes at a rate of
0.50% of the outstanding principal amount of the Notes per annum for the
first 90 days commencing on the (x) 181st day after the Issue Date (in the
case of clause (A) above), or (y) the day such Shelf Registration ceases to
be effective (in the case of clause (B) above), such Additional Interest
payable increasing by an additional 0.50% of the outstanding principal
amount of the Notes per annum at the beginning of each such subsequent
90-day period;
PROVIDED, HOWEVER, that Additional Interest may not exceed in the aggregate
1.50% of the outstanding principal amount of the Notes per annum; PROVIDED
FURTHER that (1) upon the filing of the Exchange Registration Statement or the
Initial Shelf Registration (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Registration Statement or the Initial Shelf
Registration, as the case may be (in the case of clause (ii) above), or (3) upon
the exchange of Exchange Notes for all Registrable Notes tendered (in the case
of clause (iii)(A) above), upon the effectiveness of a Shelf Registration which
had ceased to remain effective (in the case of clause (iii)(B) above),
Additional Interest on any Registrable Notes then accruing Additional Interest
as a result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
(b) The Company shall notify the Trustee within three business days
after each and every date on which an event occurs in respect of which
Additional Interest are required to be paid (an "EVENT DATE"). Any 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 regular interest payment date specified in
the Indenture (to the Holders of Registrable Notes of record on the regular
record date therefor (specified in the Indenture) immediately preceding such
dates), commencing with the first such regular interest payment date occurring
after any such Additional Interest commence to accrue. The amount of any
Additional Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Notes subject thereto, 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.
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5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, the Company shall effect such registrations to permit
the sale of such securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in connection
with any Registration Statement filed by the Company hereunder, the Company
shall:
(a) Prepare and file with the SEC prior to the Filing Date, the
Exchange Registration Statement or if the Exchange Registration Statement is not
filed or is unavailable, a Shelf Registration as prescribed by Section 2 or 3,
and use its best efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; PROVIDED that, 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 and has advised the Company
that it is a Participating Broker-Dealer, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Company
shall, if requested, furnish to and afford the Holders of the Registrable Notes
to be registered pursuant to such Shelf Registration or each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, 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
(in each case at least five business days prior to such filing). The Company
shall not file any such Registration Statement or Prospectus or any amendments
or supplements thereto if the Holders of a majority in aggregate principal
amount of the Registrable Notes covered by such Registration Statement, or any
such Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange 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 and the
Exchange Act applicable to it 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
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covered by any such Prospectus. The Company shall be deemed not to have used
its best efforts to keep a Registration Statement effective during the
Applicable Period if it 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, rule or regulation or unless the Company complies
with this Agreement, including, without limitation, the provisions of paragraph
5(j) hereof and the last paragraph of Section 5.
(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 from whom the Company has received written notice that it will
be a Participating Broker-Dealer, notify the selling Holders of Registrable
Notes, and each such Participating Broker-Dealer, their counsel and the managing
underwriters, 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 has been filed, and, with respect to a
Registration Statement or any post-effective amendment, 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 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 Company contained in
any agreement (including any underwriting agreement) contemplated by Section
5(m) hereof cease to be true and correct in any material respect,(iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or 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, the existence of any condition 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
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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 the Company'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 its 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 its best efforts to
obtain the withdrawal of any such order at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Registrable Notes being sold in connection
with an underwritten offering, at such Holders' expense,(i) as promptly as
practicable incorporate in a prospectus supplement or post-effective amendment
such information or revisions to information therein relating to such
Underwriters or selling Holders as the managing underwriters, if any, or such
Holders or their counsel reasonably request to be included or made therein,
(ii) make all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment, 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 and to
each such Participating Broker-Dealer who so requests and to counsel and each
managing underwriter, 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.
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(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 respective counsel,
and the 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, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Notes and each Participating Broker-Dealer, and the
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) 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 its best efforts to register or qualify, and cooperate
with the selling Holders of Registrable Notes and each such Participating
Broker-Dealer, the 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 or Exchange Notes, as
the case may be, 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 pursuant to an underwritten
offering, counsel to the underwriters shall, at the cost and expense of the
Company, perform the 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 by Participating
Broker-Dealers or the Registrable Notes covered by the applicable Registration
Statement; PROVIDED that the Company shall not 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
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taxation in excess of a nominal dollar amount in any such jurisdiction where it
is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3, cooperate
with the selling Holders of Registrable Notes, any Participating Broker-Dealer
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) 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) hereof, as promptly as practicable prepare and (subject to
Section 5(a) hereof) file with the SEC, at the Company's sole expense, 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.
(k) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement 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 managing
underwriter or underwriters, if any.
(l) Prior to the consummation of an Exchange Offer, (i) provide the
Trustee with printed certificates for the Exchange Notes and Private Exchange
Notes, if any, in a form eligible for deposit with The Depository Trust Company
and (ii) provide a CUSIP number for the Exchange Notes and Private Exchange
Notes, if any.
(m) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in
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underwritten offerings of debt securities similar to the Notes and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters 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 underwriters, with respect to the business
of the Company and its 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 similar to the Notes, and confirm the
same in writing if and when requested; (ii) obtain the opinion of counsel to the
Company and updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters, addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings of
debt securities similar to the Notes 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 Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to each of the
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 similar to the Notes 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 above shall be done at each closing under such underwriting agreement, or as
and to the extent required thereunder.
(n) 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, and each Participating Broker-Dealer, any
underwriter participating in any such disposition of Registrable Notes, if any,
and any attorney, accountant or other agent retained by any such selling Holder,
or Participating Broker-Dealer, as the case may be, or underwriter
(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 Company
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and its 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 Company
and its subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential and any Records which it
notifies 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 misstatement or 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, (iii) the information in such Records has been
made generally available to the public other than as a result of a disclosure or
failure to safeguard by such Inspector or (iv) disclosure of such information
is, in the opinion of counsel for any Inspector, necessary or advisable in
connection with any action, claim, suit or proceeding, directly or indirectly,
involving or potentially involving such Inspector and arising out of, based
upon, related to, or involving this Agreement, or any transactions contemplated
hereby or arising hereunder. Each selling Holder of such Registrable Notes and
each Participating Broker-Dealer will be required to agree in writing that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be disclosed or used by it as the basis for any
market transactions in the securities of the Company unless and until such is
made generally available to the public. Each Inspector, each selling Holder of
such Registrable Notes and each 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 pursuant to clauses (ii) or (iv) of
the previous sentence or otherwise, give notice to the Company and allow the
Company to undertake appropriate action to obtain a protective order or
otherwise prevent disclosure of the Records deemed confidential at its expense.
(o) 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 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 request 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.
(p) 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
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<PAGE>
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period,
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
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(q) Upon consummation of a Private Exchange, obtain an opinion of
counsel to the Company, in a form customary for underwritten transactions,
addressed to the Trustee for the benefit of all Holders of Registrable Notes
participating in the Private Exchange, that the Private Exchange Notes and the
related indenture constitute legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms.
(r) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or
caused 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; in no event shall such Registrable Notes be marked as
paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, 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 NASD.
(t) Use its reasonable best efforts to take all other steps
reasonably necessary to effect the registration of the Registrable Notes covered
by a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Notes as the
Company may, from time to time, reasonably request. The Company may exclude
from such registration the Registrable Notes
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<PAGE>
of any seller who fails to
furnish such information within a reasonable time after receiving such request.
Each seller as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such seller not materially misleading.
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 Company of the happening of any event of the kind described in
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, and, in each case,
dissemination of such Prospectus until such Holder's or Participating
Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(j), or until it is advised in writing (the "ADVICE")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Company 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 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
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company 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 (x) where the holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h) hereof, 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
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<PAGE>
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 requested by the managing underwriter or underwriters, if any,
or by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or by any Participating
Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery
expenses incurred in connection with the Exchange Registration Statement and any
Shelf Registration,(iv) fees and disbursements of counsel for the Company and,
in the case of a Shelf Registration, fees and disbursements of one special
counsel for the sellers of Registrable Notes reasonably acceptable to the
Company,(v) fees and disbursements of all independent certified public
accountants referred to in Section 5(m)(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) fees and expenses of all
other Persons retained by the Company,(viii) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties),(ix) the expense
of any annual or special audit,(x) the fees and expenses incurred in connection
with the listing of the securities to be registered on any securities
exchange,(xi) the fees and disbursements of underwriters, if any, customarily
paid by issuers or sellers of securities (but not including any underwriting
discounts or commissions or transfer taxes, if any, attributable to the sale of
the Registrable Notes which discounts, commissions or taxes shall be paid by
Holders of such Registrable Notes) and (xii) 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.
7. INDEMNIFICATION
(a) The Company and AGI, jointly and severally, agree to indemnify
and hold harmless the Initial Purchasers, each Holder of Registrable Notes and
each Participating Broker-Dealer, the officers, directors, agents and employees
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 limitation, the reasonable
legal fees and other reasonable 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 Shelf Registration or any Exchange Registration Statement
and delivered under the Securities Act by any Participating Broker-Dealer who
sells Exchange Notes during the Applicable Period or any Prospectus forming part
of any such Shelf Registration or Exchange Registration Statement (as amended or
supplemented if the Company shall have furnished any
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<PAGE>
amendments or supplements thereto) 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 Company
in writing by or on behalf of such Participant expressly for use therein;
PROVIDED, HOWEVER, that the Company and AGI shall not be liable if such untrue
statement or omission or alleged untrue statement or omission was contained or
made in any preliminary prospectus and corrected in the Prospectus or any
amendment or supplement thereto and the Prospectus does not contain any other
untrue statement or omission or alleged untrue statement or omission of a
material fact that was the subject matter of the related proceeding and any such
loss, liability, claim, damage or expense suffered or incurred by the
Participants resulted from any action, claim or suit by any Person who purchased
Registrable Notes or Exchange Notes which are the subject thereof from such
Participant and such Participant failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Notes or Exchange Notes sold to
such Person if required by applicable law, unless such failure to deliver or
provide a copy of the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5 of this Agreement.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, AGI, their respective
directors, officers, agents and employees and each Person who controls the
Company 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 Company
and AGI to each Participant, but only with reference to information furnished to
the Company in writing by such Participant expressly for use in any Shelf
Registration or Prospectus contained in an Exchange Registration Statement and
delivered under the Securities Act by any Participating Broker-Dealer who sells
Exchange Notes during the Applicable Period, any amendment or supplement
thereto, or any preliminary prospectus (and if no such information is furnished,
then no agreement to indemnify and hold harmless shall be required). The
liability of any Participant under this paragraph shall in no event exceed the
proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes giving rise to such obligations.
(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 of the
two preceding paragraphs, such Person (the "INDEMNIFIED PERSON") shall promptly
notify the Person against
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<PAGE>
whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing, and
the Indemnifying Person, upon request of the Indemnified Person, shall retain
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
actually incurred by such counsel related to such proceeding; PROVIDED, HOWEVER,
that the failure to so notify the Indemnifying Person shall not (i) relieve the
Indemnifying Person from any liability under paragraph (a) or (b) above unless
and to the extent such failure results in the forfeiture by the Indemnifying
Person of substantial rights or defenses and (ii) in any event, relieve the
Indemnifying Person from any obligation or liability which it may have other
than under paragraph (a) or (b) above. 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 representation 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 firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and reasonable
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 Company, its
directors, officers, agents, employees and such control Persons of the Company
shall be designated in writing by the Company. 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 is a final non-appealable
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 actually 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 consent 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
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<PAGE>
sentence if the Indemnifying Person is contesting, in good faith, the request
for reimbursement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person (which shall not be unreasonably withheld or
delayed), 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 (A) includes an unconditional release of such Indemnified
Person, in form and substance satisfactory to such Indemnified Person, from all
liability on claims that are the subject matter of such proceeding and (B) does
not include any statement as to an admission of fault, culpability or failure to
act by or on behalf of an Indemnified Person.
(d) If the indemnification provided for in the first or contemplated
by paragraphs (a) and (b) of this Section 7 is unavailable to, or insufficient
to hold harmless, 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 and
in order to provide for just and equitable contribution, 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 Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions (or alleged statements or omissions) that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or by the Participants or such other Indemnified Person, as the case
may be, on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission and
any other equitable considerations appropriate under the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to Section 7(d) 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, 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
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<PAGE>
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, as the case may be, 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.
(f) 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. PROVISION OF FINANCIAL STATEMENTS
The Company covenants that it will, so long as any of the Notes are
outstanding, comply with Section 4.7 of the Indenture for the benefit of the
Holders of the Notes and the Initial Purchasers.
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 will be reasonably acceptable to the
Company.
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 required under the terms of such
underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder of Registrable Notes and each
Participating Broker-Dealer holding Exchange Notes, in addition to being
entitled to exercise all rights provided herein, in the Indenture or, in the
case of an Initial Purchaser, in the Purchase
25
<PAGE>
Agreement, or granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company 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 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) NO INCONSISTENT AGREEMENTS. The Company has not entered, as of
the date hereof, and shall not enter, after the date of this Agreement, into any
agreement with respect to any of its securities that conflicts with the rights
granted to the Holders of Registrable Notes in this Agreement or otherwise
conflicts with the provisions hereof. The Company has not entered and will not
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.
(c) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not,
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.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate principal
amount of the then outstanding Registrable Notes and (B) in circumstances that
would adversely affect Participating Broker-Dealers, the Participating
Broker-Dealers holding not less than a majority in aggregate principal amount of
the Exchange Notes held by all Participating Broker-Dealers; PROVIDED, HOWEVER,
that Section 7 and this Section 10(d) may not be amended, modified or
supplemented without the prior written consent of each Holder and each
Participating Broker-Dealer (including any person who was a Holder or
Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case
may be, disposed of pursuant to any Registration Statement). 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 tendered pursuant to the Exchange
Offer or 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 tendered or being sold by such
Holders pursuant to such Registration Statement.
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<PAGE>
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery against written
receipt, registered first-class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
Citicorp Securities, Inc.
Citibank Canada Securities Limited
Citibank International plc
c/o Citicorp Securities, Inc.
399 Park Avenue
New York, New York 10043
Attention: High-Yield Finance Group
and
CIBC Wood Gundy Securities Corp.
425 Lexington Avenue, 3rd Floor
New York, New York 10017
Attention: High-Yield Finance Group
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ronald F. Daitz
2. if to the Initial Purchasers, at the address specified in Section
10(e)(1);
3. if to the Company, as follows:
Affinity Group Holding, Inc.
64 Inverness Drive East
Englewood, California 80112
Attention: Chief Financial Officer
27
<PAGE>
with a copy to:
Kaplan, Strangis and Kaplan, P.A.
550 Northwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Andris A. Baltins, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier guaranteeing
overnight delivery; and when receipt is acknowledged by the recipient's telecopy
machine.
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.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto and the Holders; PROVIDED, HOWEVER, that this Agreement shall not inure
to the benefit of or be binding upon a successor or assign of a Holder unless
and to the extent such successor or assign holds Registrable Notes.
(g) 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.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) 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.
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<PAGE>
(j) 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, unless the intent of the parties shall be
materially frustrated, 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. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(k) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its 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.
(l) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(m) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein and any and all prior oral or
written agreements, representations, or warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchasers on
the one hand and the Company on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AFFINITY GROUP HOLDING, INC.
By:
-------------------------------------
Name:
Title:
The undersigned is executed and delivered as of the date first written
above for the purpose of being bound by Sections 1, 7 and 10 hereof.
AFFINITY GROUP, INC.
By:
-------------------------------------
Name:
Title:
CITICORP SECURITIES, INC.
CITIBANK CANADA SECURITIES
LIMITED
CITIBANK INTERNATIONAL PLC
CIBC WOOD GUNDY SECURITIES CORP.
By: Citicorp Securities, Inc.
By:
---------------------------
Name:
Title:
30
<PAGE>
[LETTERHEAD]
May 1, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street NW
Washington, D.C. 20549
Re: Affinity Group Holding, Inc.
Form S-4 Registration Statement (the "Registration Statement")
in connection with the Exchange Offer for its 11% Senior Notes due
2007 in the original principal of $130 Million
Ladies and Gentlemen:
This opinion is furnished in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed with the Securities and Exchange
Commission by TCF Financial Corporation (the "Company") covering up to
$130,000,000 principal amount of 11% Senior Notes due 2007 (the "Notes") to be
issued by Affinity Group Holdings, Inc.
We have acted as counsel to the Company and, as such, have examined the
Company's Certificate of Incorporation (including amendments thereto), Bylaws
and such other corporate records and documents as we have considered relevant
and necessary for the purpose of this opinion. We have participated in the
preparation and filing of the Registration Statement. We are familiar with the
proceedings taken by the Company with respect to the authorization and proposed
issuance of Notes pursuant to the Registration Statement.
Based on the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware.
2. The Company has corporate authority to issue the Notes.
3. The Notes proposed to be issued pursuant to the Registration Statement
will, when issued, be duly and validly issued.
We hereby consent to the reference to our firm in the Registration
Statement.
<PAGE>
May 1, 1997
Page 18
Sincerely,
KAPLAN, STRANGIS AND KAPLAN, P.A.
By /s/Bruce J. Parker
-----------------------------
Bruce J. Parker
<PAGE>
Affinity Group Holding, Inc.
$130,000,000
11% Senior Notes due 2007
PURCHASE AGREEMENT
------------------
March 27, 1997
Citicorp Securities, Inc.
Citibank Canada Securities Limited
Citibank International plc
CIBC Wood Gundy Securities Corp.
c/o Citicorp Securities, Inc.
399 Park Avenue
New York, NY 10022
Ladies and Gentlemen:
Affinity Group Holding, Inc., a Delaware corporation (the "COMPANY"),
proposes, subject to the terms and conditions set forth herein, to issue and
sell to Citicorp Securities, Inc., Citibank Canada Securities Limited, Citibank
International plc and CIBC Wood Gundy Securities Corp. (together, the "INITIAL
PURCHASERS") $130,000,000 aggregate principal amount of 11% Senior Notes due
2007 (the "NOTES") of the Company. The Notes are to be issued pursuant to an
indenture dated as of April 2, 1997 (the "INDENTURE") between the Company, as
issuer, and United States Trust Company of New York, as trustee (in such
capacity, the "TRUSTEE").
The Notes will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "ACT"), in
reliance upon an exemption from the registration requirements of the Act. In
connection with the sale of the Notes, the Company has prepared a preliminary
offering memorandum dated March 12, 1997 (the "PRELIMINARY OFFERING MEMORANDUM")
and a final offering memorandum dated March 27, 1997 (the "OFFERING
MEMORANDUM"), each setting forth certain information concerning the Company and
the Notes. The Company hereby confirms that it has authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offer and sale of the Notes by the Initial Purchasers in the manner and to
the persons contemplated herein and therein.
The Company understands that the Initial Purchasers propose to make an
offering of the Notes on the terms and in the manner set forth in the Offering
Memorandum
<PAGE>
and Section 4 hereof, as soon as the Initial Purchasers deem advisable after
this Agreement has been executed and delivered, (i) to persons in the United
States whom the Initial Purchasers reasonably believe to be qualified
institutional buyers ("QUALIFIED INSTITUTIONAL BUYERS") as defined in Rule 144A
under the Act, as such rule may be amended from time to time ("RULE 144A"), in
transactions meeting the requirements of Rule 144A, (ii) to a limited number of
other institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) and (7) under Regulation D of the Act ("ACCREDITED INVESTORS")) in private
sales exempt from registration under the Act and/or (iii) to non-U.S. persons to
whom the Initial Purchasers reasonably believe offers and sales of the Notes may
be made in reliance upon Regulation S under the Act ("REGULATION S"), in
transactions meeting the requirements of Regulation S.
The Initial Purchasers and other holders of the Notes, the Exchange
Notes (as defined herein) and the Private Exchange Notes (as defined herein)
will have, with respect to the Notes, the Exchange Notes and the Private
Exchange Notes, the registration rights set forth in the Registration Rights
Agreement dated as of April 2, 1997 by and among the Company and the Initial
Purchasers (the "NOTES REGISTRATION RIGHTS AGREEMENT"). Pursuant to the Notes
Registration Rights Agreement, the Company has agreed, among other things, to
file with the Securities and Exchange Commission (the "COMMISSION") under the
circumstances set forth therein (i) a registration statement under the Act
relating to the Company's 11% Senior Notes due 2007 to be offered in exchange
(the "EXCHANGE NOTES") for the Notes and to use its best efforts to cause such
registration statement to be declared effective, and (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the Act
relating to the resale of the Notes by holders thereof or, if applicable,
relating to the resale of the Notes or debt securities of the Company
substantially identical to the Notes (the "PRIVATE EXCHANGE NOTES"), issued
pursuant to an exchange for the Notes, and to use its best efforts to cause such
shelf registration statement to be declared effective.
The Notes are being offered and sold in connection with (i) the proposed
acquisition (the "CAMPING WORLD ACQUISITION") by Affinity Group, Inc., a
Delaware corporation and wholly-owned subsidiary of the Company ("AGI"), of all
of the outstanding capital stock of Camping World, Inc., a Kentucky corporation
("CAMPING WORLD"), pursuant to a Stock Purchase Agreement, dated February 25,
1997, among AGI and the selling securityholders of Camping World named therein
(as amended and supplemented to the Closing Date (as defined in Section 3) and
together with all ancillary documents entered into in connection therewith, the
"CWI STOCK PURCHASE AGREEMENT") and (ii) the acquisition by AGI of all of the
outstanding capital stock of Ehlert Publishing Group, Inc., a Minnesota
corporation ("EPG"), and Expositions Group, Inc., a Minnesota corporation
("EGI", and collectively with EPG, "EHLERT"), pursuant to a Stock Purchase
Agreement, dated August 28, 1996, and amended January 7, 1997, among AGI, Ehlert
and the selling securityholders of Ehlert named therein. To effect the
transactions contemplated by the Offering Memorandum, the Company and AGI will
enter into a Credit Agreement, to be dated as of the Closing Date,
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among AGI, Fleet National Bank, as agent and a lender thereunder, and the other
lender institutions party thereto, which will provide for a senior secured
financing facility of up to $75,000,000 (together with all ancillary documents
entered into in connection therewith, the "CREDIT AGREEMENT"). The CWI Stock
Purchase Agreement and the Credit Agreement are herein collectively referred to
as the "ACQUISITION DOCUMENTS").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, each Initial Purchaser that:
(a) The Offering Memorandum and any amendment or supplement thereto as
of the date thereof and at all times subsequent thereto up to the Closing
Date (as defined in Section 3) did not, does not and will not include an
untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED that
this representation and warranty shall not apply to statements or omissions
made in reliance upon and in conformity with written information furnished
to the Company by the Initial Purchasers about to the Initial Purchasers
expressly for use in the Preliminary Offering Memorandum or the Offering
Memorandum or any amendment or supplement thereto.
(b) Each of the Company, the Subsidiaries (as defined herein) and the
Camping World Subsidiaries (as defined herein) has been duly incorporated
and each of the Company, the Subsidiaries and the Camping World
Subsidiaries is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation with authority and power,
corporate or otherwise, to own, lease and operate its properties and to
conduct its business as described or contemplated in the Offering
Memorandum; each of the Company, the Subsidiaries and the Camping World
Subsidiaries is duly qualified as a foreign corporation to transact
business in good standing in each jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property and
assets or the conduct of business or otherwise, except (i) where the
failure to so qualify would not have a material adverse effect on the
general affairs, condition, financial or otherwise, results of operations,
business, properties or assets of the Company, the Subsidiaries and the
Camping World Subsidiaries, taken as a whole or (ii) a material adverse
effect on the ability of the Company or any of the Subsidiaries or the
Camping World Subsidiaries to consummate the transactions contemplated by,
or perform their respective obligations under, this Agreement or the
Acquisition Documents (any such event described in (i) or (ii), a "MATERIAL
ADVERSE EFFECT").
(c) As of the date indicated in the Offering Memorandum, the Company
had the authorized, issued and outstanding capitalization as set forth
under the caption
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"Actual" under the heading "Capitalization" in the Offering Memorandum; all of
the issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable; and the
issuance of the Notes and the consummation of the transactions contemplated by
the Transaction Documents do not give any person the right to require
registration of any securities of the Company or any of the Subsidiaries or the
Camping World Subsidiaries except for the rights granted pursuant to the Notes
Registration Rights Agreement.
(d) The Company owns, either directly or indirectly, 100% of the
capital stock of the entities set forth on SCHEDULE I attached hereto
(collectively, the "SUBSIDIARIES"). All of the issued and outstanding
shares of each of the Subsidiaries have been validly issued and are fully
paid and non-assessable and were not issued in violation of preemptive or
similar rights; and are owned free and clear of any liens, claims or
encumbrances of any kind except for liens, claims and encumbrances arising
(i) as of the date hereof, under AGI's existing senior secured financing
facility and (ii) as of the Closing Date, under the Credit Agreement. As
of the date hereof, the Company has no direct or indirect subsidiaries
other than the Subsidiaries and, as of the date hereof, the Company does
not own, directly or indirectly, any equity interest or ownership interest
in any entity other than the Subsidiaries.
(e) Upon consummation of the Camping World Acquisition, the Company
will own, either directly or indirectly, 100% of the capital stock of
Camping World (which will be merged into CWI, Inc.), CWI, Inc., Camping
World Realty, Inc., CW Texas, LP and CW Michigan LP (collectively, the
"CAMPING WORLD SUBSIDIARIES"). All of the issued and outstanding shares of
each of the Camping World Subsidiaries have been validly issued and are
fully paid and non-assessable and were not issued in violation of
preemptive or similar rights; and upon consummation of the Camping World
Acquisition, will be owned free and clear of any liens, claims or
encumbrances of any kind except for liens, claims and encumbrances arising
under the Credit Agreement. As of the Closing Date, the Company will have
no direct or indirect subsidiaries other than the Subsidiaries and the
Camping World Subsidiaries, and the Company will not own, directly or
indirectly, any equity interest or ownership interest in any entity other
than the Subsidiaries and the Camping World Subsidiaries.
(f) Neither the Company nor any of the Subsidiaries or the Camping
World Subsidiaries is (i) in violation of its certificate or articles of
incorporation, or its by-laws or other charter documents (collectively,
"ORGANIZATION DOCUMENTS"), (ii) in breach of or default (or, with notice or
lapse of time or both, would be in default) in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, license, concession agreement, authorization, permit,
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<PAGE>
certificate or other agreement or instrument to which any of them is a
party, or to which any of their assets or properties are subject
("CONTRACTS"), or (iii) in violation of any law, statute, judgment, decree,
order, rule or regulation applicable to, or of any court or other
governmental or regulatory authority, agency or other body with
jurisdiction over, the Company or any of the Subsidiaries or the Camping
World Subsidiaries or any of their respective assets or properties ("LAWS")
other than, in the case of clauses (ii) and (iii), such defaults or
violations which, individually or in the aggregate, would not have or
result in a Material Adverse Effect.
(g) The issuance, sale and delivery of the Notes, the Exchange Notes
and, if issued, the Private Exchange Notes, the execution, delivery and
performance of this Agreement, the Notes Registration Rights Agreement and
the Indenture (collectively, the "TRANSACTION DOCUMENTS"), the consummation
by each of the Company and AGI of the transactions contemplated hereby and
thereby and the compliance by each of the Company and AGI with the terms of
the foregoing do not and will not conflict with or constitute or result in
a breach or violation by the Company or any of the Subsidiaries or the
Camping World Subsidiaries of (i) any of the terms or provision of, or
constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) by the Company or any of the Subsidiaries
or the Camping World Subsidiaries or give rise to any right to accelerate
the maturity or require the prepayment of any indebtedness under, or result
in the creation or imposition of any lien, charge, security interest or
other encumbrance upon any property or assets of the Company or any of the
Subsidiaries or the Camping World Subsidiaries under, any Contract, (ii)
the applicable Organization Documents of the Company or any of the
Subsidiaries or the Camping World Subsidiaries, or (iii) any Law other
than, in the case of clauses (i), (ii) or (iii), such conflicts, breaches
or violations which, individually or in the aggregate, would not have a
Material Adverse Effect.
(h) No event with respect to the Company or any of the Subsidiaries
or the Camping World Subsidiaries has occurred and is continuing which,
upon issuance of the Notes, would (whether or not with the giving of notice
and/or the passage of time and/or the fulfillment of any other requirement)
constitute a default or an event of default as described in the Indenture.
(i) Each of the Company and AGI has all requisite corporate power and
authority to execute, deliver and perform its respective obligations under
this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly authorized, executed and delivered
by each of the Company and AGI and constitutes the legal, valid and binding
obligation of each of the Company and AGI, enforceable against each of them
in accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency,
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<PAGE>
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) (the "ENFORCEABILITY
EXCEPTIONS") and as to rights of indemnification or contribution thereunder
may be limited by principles of public policy or federal or state
securities laws relating thereto.
(j) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture. The
Indenture has been duly and validly authorized by the Company and, when
duly executed and delivered by the Company (assuming the due execution and
delivery thereof by the Trustee), will constitute the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except for the Enforceability Exceptions; the
Indenture conforms in all material respects to the description thereof
included in the Offering Memorandum and is in a form which qualifies under
the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT").
(k) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes, the
Exchange Notes and the Private Exchange Notes. The Notes, when issued,
will be in the form contemplated by the Indenture. The Notes, the Exchange
Notes and the Private Exchange Notes have each been duly and validly
authorized by the Company and, when duly executed by the Company and
authenticated by the Trustee in accordance with the provisions of the
Indenture, and, in the case of the Notes, when delivered and paid for in
the manner provided for herein, will constitute legal, valid and binding
obligations of the Company entitled to the benefits of the Indenture and
will be enforceable against the Company in accordance with their terms,
except for the Enforceability Exceptions. The Notes conform in all
material respects to the description thereof included in the Offering
Memorandum.
(l) Each of the Company and AGI has all requisite corporate power and
authority to execute, deliver and perform its respective obligations under
the Notes Registration Rights Agreement. The Notes Registration Rights
Agreement has been duly and validly authorized by each of the Company and
AGI and, when duly executed and delivered by the Company and AGI (assuming
the due execution and delivery thereof by the Initial Purchasers), will
constitute the legal, valid and binding obligation of each of the Company
and AGI, enforceable against each of them in accordance with its terms
except for the Enforceability Exceptions and as to rights of
indemnification or contribution thereunder may be limited by principles of
public policy or federal or state securities laws relating thereto; and the
Notes Registration
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<PAGE>
Rights Agreement conforms in all material respects to the description
thereof included in the Offering Memorandum.
(m) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Acquisition Documents (to the
extent a party thereto). The CWI Stock Purchase Agreement has been duly
and validly authorized, executed and delivered by AGI and (assuming the due
execution and delivery thereof by the other parties thereto), constitutes
the legal, valid and binding obligation of AGI, enforceable against it in
accordance with its terms except for the Enforceability Exceptions and as
to rights of indemnification or contribution thereunder may be limited by
principles of public policy or federal or state securities laws relating
thereto. The Credit Agreement has been duly and validly authorized by the
Company and the Subsidiaries and will be duly and validly authorized by the
Camping World Subsidiaries when acquired and, when duly executed and
delivered by the Company, the Subsidiaries and the Camping World
Subsidiaries (assuming the due execution and delivery thereof by Fleet
National Bank and the other lender institutions party thereto), will
constitute the legal, valid and binding obligation of the Company, the
Subsidiaries and the Camping World Subsidiaries, enforceable against each
of them in accordance with its terms except for the Enforceability
Exceptions.
(n) Except for such consents, approvals, authorizations, exemptions,
orders or decrees which have been obtained and are in full force and effect
or as may be required under (i) applicable state securities or "Blue Sky"
laws in connection with the purchase and resale of the Notes by the Initial
Purchasers, (ii) the Trust Indenture Act in connection with the issuance of
Exchange Notes or (iii) the Act and state securities or "Blue Sky" laws in
connection the actions contemplated by the Notes Registration Rights
Agreement, no consent, approval, authorization, exemption, order or decree
of any court or governmental or regulatory agency or body (including
without limitation, the Federal Trade Commission (the "FTC") and the United
States Department of Justice (the "DOJ")) is required (x) for the
execution, delivery and performance by the Company or AGI of this Agreement
or any other Transaction Document (to the extent a party thereto) or by the
Company or any of the Subsidiaries or the Camping World Subsidiaries of the
Acquisition Documents (to the extent a party thereto), (y) the valid
authorization, authentication, issuance, sale and delivery of the Notes,
the Exchange Notes or the Private Exchange Notes, or (z) to permit the
Company to effect payments of principal of, premium and interest on the
Notes, the Exchange Notes and, if issued, the Private Exchange Notes.
(o) Since the date of the most recent financial statements appearing
in the Offering Memorandum, except as described therein, (i) none of the
Company, the
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Subsidiaries or the Camping World Subsidiaries has incurred any liabilities or
obligations, direct or contingent, or entered into or agreed to enter into any
transactions or contracts (written or oral) not in the ordinary course of
business which liabilities, obligations, transactions or contracts would,
individually or in the aggregate, be material to the general affairs, condition,
financial or otherwise, results of operations, business, properties, assets or
business prospects of the Company, the Subsidiaries and the Camping World
Subsidiaries, taken as a whole, (ii) none of the Company, the Subsidiaries or
the Camping World Subsidiaries has purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock (other than with respect to any of such Subsidiaries,
the purchase of, or dividend or distribution on, capital stock owned by the
Company) and (iii) there shall not have been any change in the capital stock or
long-term indebtedness of the Company, the Subsidiaries or the Camping World
Subsidiaries.
(p) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries has good and valid title to all property (real and personal,
movable or immovable) described in the Offering Memorandum as being owned
by it, free and clear of all liens, claims, security interests or other
encumbrances, except for such imperfections of title, liens, claims,
security interests or other encumbrances as are described in the Offering
Memorandum or which, individually and in the aggregate, would not have or
result in a Material Adverse Effect, and all of the property described in
the Offering Memorandum as being held under lease by any of them is held
under valid, subsisting and enforceable leases. All material leases,
contracts and agreements to which the Company or any of the Subsidiaries or
the Camping World Subsidiaries is a party or by which any of them is bound
are valid and enforceable against the Company or such Subsidiary or Camping
World Subsidiary, and, to the best knowledge of the Company, are valid and
enforceable against the other party or parties thereto and are in full
force and effect with only such exceptions as would not, individually or in
the aggregate, have a Material Adverse Effect. The Company, the
Subsidiaries and the Camping World Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how necessary to conduct the businesses
now or proposed to be operated by them as described in the Offering
Memorandum, and none of the Company, the Subsidiaries or the Camping World
Subsidiaries has received any notice of infringement of or conflict with
(or knows of any such infringement of or conflict with) asserted rights of
others with respect to any patents, trademarks, service marks, trade names,
copyrights or know-how which, if such assertion of infringement or conflict
were sustained, would have a Material Adverse Effect.
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(q) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries owns, possesses or has obtained all permits, licenses,
consents, orders, approvals, franchises and authorizations of governmental
or regulatory authorities ("PERMITS"), as are necessary to own its
properties and to conduct its businesses in the manner described or
contemplated in the Offering Memorandum, except for such instances of
failure to own, possess or obtain such Permits which, individually or in
the aggregate, would not have a Material Adverse Effect; and each of the
Company, the Subsidiaries and the Camping World Subsidiaries has fulfilled
and performed in all material respects all of its obligations with respect
to such Permits and no event has occurred, or as a result of the
consummation of the transactions contemplated hereby or in the Offering
Memorandum would occur, which allows, or after notice or lapse of time or
both would allow, revocation or termination thereof or results or would
result in any other material impairment of the rights of the holder of any
such Permit; except as described in the Offering Memorandum, none of such
Permits contains any material limitation on the ability of the Company or
any of the Subsidiaries or the Camping World Subsidiaries to own its
respective properties or to conduct its business in the manner described in
the Offering Memorandum; and, none of the Company or any of the
Subsidiaries or the Camping World Subsidiaries has any knowledge of a
threatened revocation or modification relating to any such Permit.
(r) There is no legal action, suit, proceeding, inquiry or
investigation before or by any court or governmental or regulatory body or
agency or arbitrator (including without limitation the FTC and the DOJ)
(domestic or foreign) now pending or, to the best knowledge of the Company,
threatened, against or affecting the Company or any of the Subsidiaries or
the Camping World Subsidiaries or any of their respective properties which,
individually or in the aggregate, would have a Material Adverse Effect.
There are no legal or governmental proceedings involving or affecting the
Company or any Subsidiary or Camping World Subsidiary or any of their
respective properties or assets which would be required to be described in
a prospectus pursuant to the Act that are not described in the Offering
Memorandum, nor are there any material contracts or other documents which
would be required to be described in a prospectus pursuant to the Act that
are not described in the Offering Memorandum.
(s) Except as would not, individually or in the aggregate, have a
Material Adverse Effect (i) each of the Company, the Subsidiaries and the
Camping World Subsidiaries is in compliance with and not subject to
liability under applicable Environmental Laws (as defined below), (ii) each
of the Company, the Subsidiaries and the Camping World Subsidiaries has
made all filings and provided all notices required under any applicable
Environmental Law, and has been and is in compliance with all Permits
required under any applicable Environmental Laws and each of them
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is in full force and effect, (iii) there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter or request for
information pending or, to the knowledge of the Company or any of the
Subsidiaries or Camping World Subsidiaries, threatened against the Company
or any of the Subsidiaries or Camping World Subsidiaries under any
Environmental Law, and (iv) no lien, charge, encumbrance or restriction has
been recorded under any Environmental Law with respect to any assets,
facility or property owned, operated, leased or controlled by the Company
or any of the Subsidiaries or Camping World Subsidiaries.
For purposes of this Agreement, "Environmental Laws" means the common
law and all applicable federal, state and local laws or regulations, codes,
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of public or
employee health and safety or the environment, including, without
limitation, laws relating to (i) emissions, discharges, releases or
threatened releases of hazardous materials into the environment (including,
without limitation, ambient air, surface water, ground water, land surface
or subsurface strata), (ii) the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transport or handling of
hazardous materials, and (iii) underground and above ground storage tanks
and related piping, and emissions, discharges, releases or threatened
releases therefrom.
(t) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries has such policies of insurance in full force and effect in
such amounts and covering such risks as are adequate for the conduct of its
business and the value of its properties.
(u) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries has filed or caused to be filed all necessary tax returns
(income, franchise, VAT or otherwise) under all applicable jurisdictions,
except where the failure to so file such returns would not have a Material
Adverse Effect, and has discharged all taxes shown as due and payable
thereon; and, other than tax deficiencies which are being contested in good
faith and for which the Company reasonably believes that adequate reserves
have been provided, there is no tax deficiency that has been asserted
against the Company or any of the Subsidiaries or Camping World
Subsidiaries that would have a Material Adverse Effect. There are no
disputes pending or, to the best knowledge of the Company, threatened,
between the Company or any of the Subsidiaries or Camping World
Subsidiaries, on the one hand, and any governmental taxing authority, on
the other hand.
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(v) No labor problem, dispute or disturbance with employees of the
Company or any of the Subsidiaries or the Camping World Subsidiaries exists
or, to the knowledge of the Company, is threatened which, individually or
in the aggregate, would have a Material Adverse Effect.
(w) The audited consolidated financial statements of the Company
included in the Offering Memorandum, together with the related notes
thereto, present fairly the financial position, results of operations and
cash flows of the Company, at the dates and for the periods to which they
relate, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as otherwise
stated therein. The summary and selected financial and statistical data in
the Offering Memorandum present fairly in all material respects the
information shown therein and have been prepared and compiled on a basis
consistent with the audited financial statements included therein, except
as otherwise stated therein. Deloitte & Touche LLP, which has examined
certain of such financial statements as set forth in its report included in
the Offering Memorandum, is an independent public accounting firm with
respect to the Company and its consolidated subsidiaries within the meaning
of the Act and the rules and regulations thereunder.
(x) The audited consolidated financial statements of Camping World
included in the Offering Memorandum, together with the related notes
thereto, present fairly the financial position, results of operations and
cash flows of Camping World, at the dates and for the periods to which they
relate, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as otherwise
stated therein. The unaudited consolidated financial statements of Camping
World and the related notes included in the Offering Memorandum present
fairly, in all material respects (on the basis presented), the consolidated
financial position, results of operations and cash flows of Camping World
at the dates and for the periods to which they relate, subject to year-end
audit adjustments, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein. The summary and selected financial and
statistical data in the Offering Memorandum present fairly in all material
respects the information shown therein and have been prepared and compiled
on a basis consistent with the audited and unaudited financial statements
included therein, except as otherwise stated therein. Deloitte & Touche
LLP, which has examined certain of such financial statements as set forth
in its report included in the Offering Memorandum, is an independent public
accounting firm with respect to Camping World and its consolidated
subsidiaries within the meaning of the Act and the rules and regulations
thereunder.
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(y) The financial statement information of Ehlert contained in the
pro forma condensed consolidated financial statements and other pro forma
financial information (including the notes thereto) included in Offering
Memorandum are derived from the audited financial statements of EPG, which
present fairly the financial position and results of operations of Ehlert,
at the dates and for the periods to which they relate, and have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis. Larson Allen Weishair & Co., which has
examined the financial statements from which such audited consolidated
financial statement information was derived, is an independent public
accounting firm with respect to Ehlert and its consolidated subsidiaries
within the meaning of the Act and the rules and regulations thereunder.
(z) The pro forma condensed consolidated financial statements and
other pro forma financial information (including the notes thereto)
included in the Offering Memorandum (i) comply as to form in all material
respects with applicable requirements of Regulation S-X promulgated under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and
(ii) have been computed on the bases described therein. The assumptions
used in the preparation of the pro forma financial statements and other pro
forma condensed consolidated financial information included in the Offering
Memorandum are reasonable and the adjustments used therein are reasonably
appropriate to give effect to the transactions or circumstances referred to
therein.
(aa) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries maintains a system of internal accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(ab) The statements in the Offering Memorandum under the headings
"Risk Factors--Holding Company Structure" and "Description of Other
Indebtedness" insofar as such statements purport to summarize particular
matters of law or particular provisions of the Credit Agreement and the AGI
Indenture (as defined in the Offering Memorandum) constitute accurate
summaries thereof in all material respects.
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(ac) The statements in the Offering Memorandum under the headings
"Description of the Notes" and "Exchange Offer and Registration Rights"
insofar as such statements purport to summarize matters of law or the
material provisions of the Indenture, the Notes and the Notes Registration
Rights Agreement constitute accurate summaries thereof in all material
respects.
(ad) The Company is, and immediately after the Closing Date will be,
Solvent. As used herein, the term "SOLVENT" means, with respect to the
Company on a particular date, that on such date (i) the fair market value
of the assets of the Company is greater than the total amount of
liabilities (including contingent liabilities) of the Company, (ii) the
present fair salable value of the assets of the Company is greater than the
amount that will be required to pay the probable liabilities of the Company
on its debts as they become absolute and matured, (iii) the Company is able
to realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature and (iv) the Company does
not have unreasonably small capitalization to carry out its business as now
conducted and as proposed to be conducted including the capital needs of
the Company.
(ae) The Company has not taken nor will it take any action that might
cause this Agreement or the sale of the Notes to or by the Initial
Purchasers to violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System, in each case as in effect, or as the same may
hereafter be in effect, on the Closing Date.
(af) Neither the Company nor any of the Subsidiaries or the Camping
World Subsidiaries is now, nor will any of them be, after sale of the Notes
to be sold by the Company hereunder and application of the net proceeds
from such sale as described in the Offering Memorandum under the heading
"Use of Proceeds" and consummation of each of the transactions contemplated
by the Offering Memorandum, an "investment company" or a company
"controlled by" an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT").
(ag) Neither the Company nor any of its affiliates (as defined in
Rule 501(b) under the Act) has, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act) which could be integrated
with the sale of the Notes in a manner that would require the registration
of any of the Notes under the Act.
(ah) When the Notes are issued and delivered pursuant to this
Agreement and the Indenture, none of the Notes will be of the same class
(within the meaning of
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Rule 144A) as securities of the Company which are listed on a national
securities exchange registered under Section 6 of the Exchange Act or
quoted in a U.S. automated inter-dealer quotation system.
(ai) Neither the Company nor any person (other than the Initial
Purchasers, as to which the Company makes no representation) acting on its
behalf has engaged, in connection with the offering of the Notes, (i) in
any form of general solicitation or general advertising within the meaning
of Rule 502(c) under the Act, (ii) in any directed selling efforts within
the meaning of Rule 903 under the Act and the Commission's written releases
related thereto, (iii) in a public offering of the Notes within the meaning
of Section 4(2) under the Act or (iv) in any action which would require the
registration of the offering or sale of the Notes pursuant to this
Agreement.
(aj) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 4, it is not necessary in
connection with the offer, sale and delivery of the Notes to the Initial
Purchasers or the reoffer and resale by the Initial Purchasers in the
manner contemplated by Section 4 of this Agreement to register the Notes
under the Act or to qualify any indenture in respect of the Notes under the
Trust Indenture Act.
(ak) The Company has been advised by the National Association of
Securities Dealers, Inc. Private Offerings, Resales and Trading through
Automated Linkages market ("PORTAL") that the Notes have been designated
PORTAL eligible securities in accordance with the rules and regulations of
the National Association of Securities Dealers, Inc.
(al) None of the Company or the Subsidiaries or the Camping World
Subsidiaries has taken, nor will any of them take, directly or indirectly,
any action designed to, or that might be reasonably expected to, cause or
result in stabilization or manipulation of the price of the Notes.
(am) The statistical and market-related data included in the Offering
Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate or represent the Company's good faith estimates
that are made on the basis of data derived from such sources.
(an) None of the Company, the Subsidiaries or any employee of the
Company or any of the Subsidiaries has made any payment of funds prohibited
by law, and no funds of the Company or any of the Subsidiaries have been
set aside to be used for any payment prohibited by law.
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(ao) None of the Company, the Subsidiaries or the Camping World
Subsidiaries does business with the government of Cuba or with any person
or affiliate located in Cuba within the meaning of Section 517.075 of
Florida Statutes, as amended.
Any certificate signed by any director or officer of the Company or
any Subsidiary or Camping World Subsidiary and delivered to any Initial
Purchaser or to counsel for the Initial Purchasers shall be deemed a joint and
several representation and warranty by the Company and each of the Subsidiaries
to each Initial Purchaser as to the matters covered thereby.
2. PURCHASE AND SALE OF THE NOTES. Subject to the terms and conditions
and in reliance upon the representations and warranties set forth herein, the
Company agrees to issue and sell to the Initial Purchasers, severally and not
jointly, and the Initial Purchasers agree, severally and not jointly, to
purchase from the Company that principal amount of the Notes opposite such
Initial Purchaser's name on SCHEDULE II attached hereto, at a purchase price
equal to 97% of such principal amount.
3. DELIVERY AND PAYMENT. Delivery of and payment for the Notes shall be
made at 9:00 A.M., New York City time, on April 2, 1997 at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, or such later
date and time, if any, as the Initial Purchasers and the Company shall agree
(such date and time of delivery and payment for the Notes being herein called
the "CLOSING DATE"). Delivery of the Notes shall be made to the Initial
Purchasers against payment by the Initial Purchasers of the purchase price
thereof to or upon the order of the Company by wire or book-entry transfer of
same-day funds to such account or accounts as the Company shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date. Certificates for the Notes or interests therein shall be
registered in such names and in such denominations as the Initial Purchasers may
request not less than two full business days in advance of the Closing Date.
The Company agrees to make the Notes available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 9:00 A.M. on the business day prior to the Closing Date.
4. RESALE OF THE NOTES. The Initial Purchasers have advised the Company
that they propose to offer the Notes for resale upon the terms and conditions
set forth in this Agreement and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, hereby represents and warrants to, and
agrees with, the Company that such Initial Purchaser (i) is a Qualified
Institutional Buyer or an institutional Accredited Investor, (ii) has not
solicited and, except pursuant to a registration statement which is effective
under the Act,
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<PAGE>
will not solicit offers for, or offer or sell, the Notes by means of any form of
general solicitation or general advertising within the meaning of Regulation D
under the Act or in any manner involving a public offering within the meaning of
Section 4(2) of the Act or by means of any directed selling efforts within the
meaning of Rule 903 under the Act and the Commission's written releases related
thereto and (iii) has solicited and will solicit offers for the Notes only from,
and has offered and will offer, sell or deliver the Notes only to, (A) persons
in the United States whom such Initial Purchaser reasonably believes in
accordance with Rule 144A(d)(1) to be Qualified Institutional Buyers or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a Qualified Institutional
Buyer, to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A, and, in each case, in transactions meeting the
requirements of Rule 144A, (B) a limited number of other institutional investors
whom the Initial Purchasers reasonably believe to be Accredited Investors and
who provide to the Company and the Initial Purchasers a letter in the form of
Appendix A to the Offering Memorandum and (C) non-U.S. persons in reliance upon
Regulation S, in transactions meeting the requirements of Regulation S (which
shall include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for non-U.S. persons (other than an estate or
trust)) who provide to the Company and the Initial Purchasers such
certifications and legal opinions as they may reasonably request. Each Initial
Purchaser also represents and warrants and agrees that it has offered and will
offer to sell the Notes only to, and has solicited and will solicit offers to
buy the Notes only from, persons that in purchasing such Notes will be deemed to
have represented and agreed as provided under "Notice to Investors" in the
Offering Memorandum.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Initial Purchasers that:
(a) The Company will furnish to the Initial Purchasers, without
charge, such number of copies of the Preliminary Offering Memorandum and
the Offering Memorandum and any amendments or supplements thereto as the
Initial Purchasers may reasonably request.
(b) The Company will not amend or supplement the Preliminary Offering
Memorandum or Offering Memorandum or any amendment or supplement thereto of
which the Initial Purchasers shall not previously have been advised and
furnished a copy for a reasonable period of time prior to the proposed
amendment or supplement and as to which the Initial Purchasers shall not
have given their consent. The Company will promptly, upon the reasonable
request of the Initial Purchasers or counsel for the Initial Purchasers,
make any amendments or supplements to the Preliminary Offering Memorandum
or the Offering Memorandum that may be
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<PAGE>
necessary or advisable in connection with the resale of the Notes by the
Initial Purchasers.
(c) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchasers, any event shall occur or condition shall
exist as a result of which it is necessary, in the view of the Initial
Purchasers, to amend or supplement the Offering Memorandum in order that
the Offering Memorandum, as then amended or supplemented, will (i) not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) comply
with applicable law, then, in each such case, the Company will, subject to
paragraph (b) of this Section 5, promptly prepare such amendment or
supplement at its own expense as may be necessary to correct such untrue
statement or omission or to effect such compliance and furnish to the
Initial Purchasers such number of copies thereof as the Initial Purchasers
may reasonably request.
(d) For so long as any of the Notes, Exchange Notes or Private
Exchange Notes, if any, are outstanding, the Company shall furnish to the
Initial Purchasers copies of the reports and other documents and
information which the Company is required to deliver to the holders of the
Notes, Exchange Notes or Private Exchange Notes, if any, or the Trustee
pursuant to the Indenture.
(e) Neither the Company nor any of its affiliates (as defined in Rule
501(b) under the Act) will solicit any offer to buy or offer or sell Notes
(i) by means of any form of general solicitation or general advertising (as
such terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act
or (ii) by means of any directed selling efforts (as defined under
Regulation S and the Commission's written releases related thereto) prior
to the effectiveness of a registration statement with respect to the Notes
and, in any such case, only as contemplated by such effective registration
statement.
(f) Neither the Company nor any of its affiliates (as defined in
Rule 501(b) under the Act) will offer, sell or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
which could be integrated with the sale of any of the Notes in a manner
that would require the registration of any of the Notes under the Act.
(g) From and after the Closing Date, the Company will, so long as any
of the Notes are outstanding, either (i) file reports and other information
with the Commission under Section 13 or 15(d) of the Exchange Act, or
(ii) in the event they are not permitted to file reports and other
information under Section 13 or 15(d) of
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<PAGE>
the Exchange Act, furnish to holders of Notes and prospective purchasers
thereof designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Act to permit compliance with Rule 144A in
connection with resales of any of the Notes.
(h) The Company will use its best efforts in cooperation with the
Initial Purchasers to (i) permit the Notes to be eligible for clearance and
settlement through The Depository Trust Company, and (ii) include quotation
of the Notes on PORTAL.
(i) The Company will cooperate with the Initial Purchasers and their
counsel in connection with the registration or qualification of the Notes
for offering and sale by the Initial Purchasers under the securities or
Blue Sky laws of such jurisdictions as the Initial Purchasers may designate
and the continuance of such qualifications in effect for as long as may be
necessary to complete the distribution of the Notes; PROVIDED that in
connection therewith the Company shall not be required to (i) qualify to do
business as a foreign corporation or (ii) execute a general consent to
service of process in any jurisdiction where it is not then so subject.
The Company shall promptly advise the Initial Purchasers of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of the Notes for offering or
sale in any jurisdiction or the institution, threatening or contemplation
of any proceeding for such purpose.
(j) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared by or are available
to the Company, a copy of any unaudited interim consolidated financial
statements of the Company and the Subsidiaries and the Camping World
Subsidiaries for any period subsequent to the period covered by the most
recent financial statements of the Company and the Subsidiaries appearing
in the Offering Memorandum.
(k) The Company shall apply the net proceeds from the sale of the
Notes as set forth under the caption "Use of Proceeds" in the Offering
Memorandum.
(l) Neither the Company nor any of the Subsidiaries or the Camping
World Subsidiaries shall voluntarily claim, and shall actively resist any
attempt to claim, the benefit of any usury laws against the holders of the
Notes.
6. EXPENSES.
(a) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement whether or not the
transactions
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<PAGE>
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 10 hereof, including, but not limited to, all costs and expenses
incident to (i) the printing, word processing or other production of all
documents with respect to such transactions, including, but not limited to, any
costs of printing or producing (including word processing and duplication) the
Preliminary Offering Memorandum and the Offering Memorandum and any amendment or
supplement thereto and any Blue Sky or legal investment memoranda (which shall
include disbursements of counsel for the Initial Purchasers in respect thereof),
(ii) all arrangements relating to the delivery to the Initial Purchasers of the
foregoing documents, (iii) the fees and disbursements of counsel, accountants
and any other experts or advisors retained by the Company, (iv) preparation,
issuance and delivery to the Initial Purchasers of any certificates evidencing
the Notes, (v) the fees and expenses of the Trustee, including fees and expenses
of its counsel, (vi) the qualification of the Notes and determination of their
eligibility for investment under state securities and Blue Sky laws, including
filing fees and fees and disbursements of counsel for the Initial Purchasers
(including any local counsel retained to render any opinion required by any
state securities or Blue Sky authorities) relating thereto, (vii) all expenses
and listing fees in connection with the application for quotation of the Notes
on PORTAL, (viii) any meetings with prospective investors in the Notes and
(ix) any fees charged by investment rating agencies for the rating of the Notes.
(b) If the sale of the Notes provided for herein is not consummated
because any condition to the obligations of the Initial Purchasers set forth in
Section 7 hereof is not satisfied, because this Agreement is terminated pursuant
to Section 10 hereof or because of any failure, refusal or inability on the part
of the Company to perform all obligations and satisfy all conditions on its part
to be performed or satisfied hereunder other than by reason of a default by the
Initial Purchasers in payment for the Notes on the Closing Date, the Company
shall reimburse each Initial Purchaser promptly upon demand for all
out-of-pocket expenses (but excluding the fees and disbursements of counsel)
that shall have been incurred by each Initial Purchaser in connection with the
proposed purchase and sale of the Notes. If this Agreement is terminated
pursuant to Section 11 by reason of the default of one or more of the Initial
Purchasers, the Company shall not be obligated to reimburse such defaulting
Initial Purchaser on account of such expenses.
7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The obligation of
each Initial Purchaser to purchase and pay for the Notes shall be subject, in
each such Initial Purchaser's discretion, to the accuracy of the representations
and warranties of the Company contained herein as of the Closing Date as if made
on and as of the Closing Date, to the accuracy of the statements of the
Company's officers and representatives made pursuant to the provisions hereof,
to the performance by the Company of its covenants and agreements hereunder and
to the following additional conditions:
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<PAGE>
(a) The Initial Purchasers shall have received an opinion, in form
and substance satisfactory to the Initial Purchasers, dated the Closing
Date and addressed to the Initial Purchasers, of Kaplan, Strangis and
Kaplan, P.A., counsel for the Company, substantially in the form of ANNEX A
hereto.
(b) The Initial Purchasers shall have received an opinion, dated the
Closing Date and addressed to the Initial Purchasers, of Weil, Gotshal &
Manges LLP, counsel for the Initial Purchasers, with respect to such
matters as the Initial Purchasers may reasonably require, and the Company
shall furnish to such counsel such documents as they may reasonably request
for the purpose of enabling them to pass upon such matters.
(c) The Initial Purchasers shall have received from Deloitte & Touche
LLP comfort letters dated the date hereof and the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers and counsel for
the Initial Purchasers.
(d) Subsequent to the date hereof or, if earlier, the dates as of
which information is given in the Offering Memorandum (exclusive of any
amendment or supplement thereto), except as set forth in the Offering
Memorandum (i) the Company, the Subsidiaries or the Camping World
Subsidiaries shall not have incurred any liabilities or obligations, direct
or contingent, that are material to the Company, the Subsidiaries and the
Camping World Subsidiaries, taken as a whole, or entered into any
transactions that are material to the business, condition (financial or
other) or results of operations of the Company, the Subsidiaries and the
Camping World Subsidiaries, taken as a whole, and there shall not have been
any change in the capital stock or long-term indebtedness of the Company
that is material to the business, condition (financial or other) or results
of operations of the Company, the Subsidiaries and the Camping World
Subsidiaries, taken as a whole, and (ii) there shall not have been any
change or any development involving a prospective change, in or affecting
the general affairs, condition (financial or other), results of operations,
business, properties or assets of the Company, the Subsidiaries and the
Camping World Subsidiaries, taken as a whole, the effect of which, in any
case referred to in this clause (ii), is, in the sole judgment of the
Initial Purchasers, so material and adverse as to make it impractical or
inadvisable to proceed with the purchase and the delivery of the Notes as
contemplated by the Offering Memorandum.
(e) No order suspending the qualification or exemption from
qualification of any of the Notes in any jurisdiction shall have been
issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
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(f) The Company shall have furnished to the Initial Purchasers a
certificate of the Chairman of the Board or the Chief Executive Officer and
the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have
carefully examined the Offering Memorandum, any amendment or supplement to
the Offering Memorandum, this Agreement and the other Transaction Documents
and that:
(i) The representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with the
same effect as if made on the Closing Date and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied on or prior to the Closing Date;
(ii) Since the date of the most recent financial statements in
the Offering Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), no event or development has occurred,
and no information has become known, that, individually or in the
aggregate, has or would be reasonably likely to have a Material
Adverse Effect; and
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(g) After the execution and delivery of this Agreement, there shall
not have been (i) any downgrading by Standard & Poor's Corporation ("S&P")
in the rating of the Notes; (ii) any downgrading by Moody's Investors
Service Inc. ("MOODY'S") in the rating of the Notes; or (iii) any notice
given by S&P or Moody's of any intended or potential downgrading in any
such rating or of a possible change in any such rating that does not
indicate the direction of the possible change.
(h) On the Closing Date, the Initial Purchasers shall have received
the Notes Registration Rights Agreement substantially in the form of ANNEX
B hereto executed by the Company and AGI and such agreement shall be in
full force and effect at all times from and after the Closing Date.
(i) The Indenture shall have been duly executed and delivered by the
Company and the Trustee, and the Notes shall have been duly executed and
delivered by the Company and duly authenticated by the Trustee.
(j) The Initial Purchasers shall have received evidence, reasonably
satisfactory to them, that (i) the Camping World Acquisition shall have
been consummated in accordance with the terms of the CWI Stock Purchase
Agreement
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<PAGE>
and (ii) the initial funding shall have occurred under the Credit Agreement
and AGI shall have received gross cash proceeds therefrom sufficient to
effect the Camping World Acquisition and the replacement of the existing
AGI senior secured financing facility with the senior secured financing
facility provided under the Credit Agreement as set forth in the Offering
Memorandum.
(k) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(l) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on and as
of the date hereof and on and as of the Closing Date as if made on and as
of the Closing Date; the statements of the Company's officers made pursuant
to any certificate delivered in accordance with the provisions hereof shall
be true and correct in all material respects on and as of the date made and
on and as of the Closing Date; the Company shall have performed in all
material respects all covenants and agreements and satisfied all conditions
on their part to be performed or satisfied hereunder at or prior to the
Closing Date; and, except as described in the Offering Memorandum
(exclusive of any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements in such
Offering Memorandum, there shall have been no event or development, and no
information shall have become known, that, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(m) The Initial Purchasers shall have received copies of the executed
CWI Stock Purchase Agreement and the executed Credit Agreement, certified
by the Secretary or an Assistant Secretary of the Company as being true,
correct and complete. The Credit Agreement shall be in form and substance
reasonably satisfactory to the Initial Purchasers.
(n) On or before the Closing Date, the Initial Purchasers shall have
received such further certificates, documents or other information as it
may have reasonably requested from the Company.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
satisfactory in form and substance to the Initial Purchasers, this Agreement and
all obligations of the Initial Purchasers hereunder may be cancelled on, or any
time prior to, the Closing Date by the Initial Purchasers. Notice of such
cancellation shall be given to the Company in accordance with Section 13. The
Company shall furnish to the Initial Purchasers such conformed copies of such
opinions,
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<PAGE>
certificates, letters and documents in such quantities as the Initial Purchasers
shall reasonably request.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and AGI, jointly and severally, agree to indemnify
and hold harmless each Initial Purchaser, each person, if any, who controls each
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and the directors, officers, employees and agents of each
Initial Purchaser and each such controlling person against any losses, claims,
damages or liabilities, joint or several, to which each Initial Purchaser, such
controlling person or such director, officer, employee or agent may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions, suits or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Preliminary Offering Memorandum
or the Offering Memorandum or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or otherwise based upon the matters contemplated herein,
and will reimburse, as incurred, each Initial Purchaser, each such controlling
person and each such director, officer, employee or agent for any legal or other
expenses incurred by such indemnified party in connection with investigating or
defending or preparing to defend against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action in respect
thereof; PROVIDED, that the Company and AGI shall not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission (i) made in the Preliminary Offering Memorandum or the Offering
Memorandum or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company or AGI by such
Initial Purchaser about such Initial Purchaser specifically for use therein or
(ii) made in the Preliminary Offering Memorandum that is corrected in the
Offering Memorandum (or any amendment or supplement thereto) if it is proven
that the person asserting any such loss, claim, damage or liability purchased
Notes from such Initial Purchaser and was not sent or given a copy of the
Offering Memorandum (as amended or supplemented), at or prior to the written
confirmation of the sale of such Notes to such person and the untrue statement
or alleged untrue statement of a material fact, or the omission or alleged
omission to state a material fact, that is found to be or is alleged to be the
basis of liability in such Preliminary Offering Memorandum was corrected in the
Offering Memorandum (as amended or supplemented) and if such Initial Purchaser
would not have been liable had a copy of such Offering Memorandum been so sent
or given unless such failure to deliver the Offering Memorandum (as amended or
supplemented) was a result of non-compliance by the Company with Section 5(a) of
this
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Agreement. This indemnity agreement will be in addition to any liability which
the Company or AGI may otherwise have.
(b) The Initial Purchasers will, severally, indemnify and hold
harmless the Company, AGI, each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and its
directors, officers, employees and agents against any losses, claims, damages or
liabilities to which the Company, AGI or any such director, officer, employee,
agent or controlling person may become subject under the Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions, suits or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Preliminary Offering Memorandum or the Offering Memorandum or any
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Initial Purchaser about such Initial Purchaser specifically for use therein;
and, subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company, AGI or any such director, officer, employee, agent or controlling
person in connection with investigating or defending or preparing to defend
against or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or any action in respect thereof. This indemnity
agreement will be in addition to any liability which the Initial Purchasers may
otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action or proceeding, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above unless and to the
extent such failure results in the forfeiture by the indemnifying party of
substantial rights or defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. In case any
such claim or action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it elects by delivery
of notice to the indemnified party promptly after receiving notice of the action
from the indemnified party, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; PROVIDED, HOWEVER, that if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the
24
<PAGE>
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have been advised by counsel
that there may be one or more legal defenses available to it and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, or (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after receipt by the indemnifying
party of notice of the institution of such action, then, in each such case, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the immediately
preceding sentence (it being understood, however, that in connection with such
action the indemnifying party shall not be liable for the expenses of more than
one separate counsel (in addition to local counsel) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, designated by the Initial
Purchasers in the case of paragraph (a) of this Section 8 or the Company and AGI
in the case of paragraph (b) of this Section 8, representing the indemnified
parties under such paragraph (a) or paragraph (b), as the case may be, who are
parties to such action or actions) or (ii) the indemnifying party has authorized
in writing the employment of counsel for the indemnified party at the expense of
the indemnifying party.
After such notice from the indemnifying party to such indemnified
party, the indemnifying party will not be liable for the costs and expenses of
any settlement of such action effected by such indemnified party without the
consent of the indemnifying party (which consent shall not be unreasonably
withheld), unless such indemnified party waived its rights under this Section 8,
in which case the indemnified party may effect such a settlement without such
consent.
Notwithstanding the foregoing, neither the Company nor AGI will settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought from the Company or AGI hereunder (whether or not an Initial
Purchaser or any person who controls an Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding) without the prior written consent of the
Initial Purchasers (which consent shall not be unreasonably withheld). The
Company and AGI shall not, without the prior written consent of the Initial
Purchasers,
25
<PAGE>
effect any settlement or compromise of any pending or threatened proceeding in
respect of which any Initial Purchaser is or could have been a party, or
indemnity could have been sought hereunder by any Initial Purchaser, unless such
settlement (A) includes an unconditional written release of the Initial
Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Initial Purchaser.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages,
expenses or liabilities (or actions, suits or proceedings in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (or actions,
suits or proceedings in respect thereof) in such proportion as is appropriate to
reflect (i) the relative benefits received by the indemnifying party or parties
on the one hand and the indemnified party on the other from the offering of the
Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions, suits or proceedings in respect thereof), as well as
any other relevant equitable considerations. The relative benefits received by
the Company and AGI on the one hand and the Initial Purchasers on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (before deducting expenses) received by the Company or AGI bears to the
total purchase discounts and commissions received by the Initial Purchasers.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Initial Purchasers, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances. Each of the Company and AGI and the Initial
Purchasers agrees that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Initial Purchaser
shall be obligated to make contributions hereunder that in the aggregate exceed
the amount of the purchase discount or commission applicable to the Notes
received by such Initial Purchaser under this Agreement, less the aggregate
amount of any damages that such Initial Purchaser has otherwise been required to
pay in respect of the same or any substantially similar claim, and no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
26
<PAGE>
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this paragraph (d), each
director, officer, employee and agent of an Initial Purchaser and each person,
if any, who controls an Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Initial Purchaser, and each director and officer of the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.
9. SURVIVAL. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company and its officers and
the Initial Purchasers set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the Company,
any of its officers or directors, the Initial Purchasers, any director, officer,
employee or agent of an Initial Purchaser or any controlling person referred to
in Section 8 hereof, or (ii) delivery of and payment for the Notes.
Notwithstanding any other provision of this Agreement, the respective
agreements, covenants, indemnities and other statements set forth in Sections 6,
8, 13 and 15 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
10. TERMINATION.
(a) This Agreement may be terminated in the sole discretion of the
Initial Purchasers by notice to the Company given prior to delivery and payment
for the Notes in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to
delivery and payment for the Notes:
(i) there has been, since the respective dates of which
information is given in the Offering Memorandum, any event or circumstance
which has had or could have a Material Adverse Effect, whether or not
arising in the ordinary course of business;
(ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ National Market System
shall have been suspended or minimum or maximum prices shall have been
established on any of such exchanges;
(iii) a general banking moratorium shall have been declared by
State of New York or United States authorities;
27
<PAGE>
(iv) there shall have been an outbreak or escalation of
hostilities or any other calamity or crisis having an effect on the
financial markets or the market for the Notes and other similar securities
that, in the judgment of the Initial Purchasers, makes it impracticable or
inadvisable to proceed with the offering or the delivery of the Notes as
contemplated by this Agreement and the Offering Memorandum;
(v) there has been, any change, or any development involving a
prospective change, in the United States or international financial,
political or economic conditions as would, in the Initial Purchasers'
judgment, be likely to prejudice the success of the proposed sale or
distribution of the Notes, whether in the primary market or in respect of
dealings in the secondary market; or
(vi) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating agency.
(b) Termination of this Agreement pursuant to this Section 10 shall
be without liability of any party to any other party except as provided in
Section 9 hereof.
11. DEFAULTING INITIAL PURCHASERS.
(a) If, on the Closing Date, any Initial Purchaser defaults in the
performance of its obligations under this Agreement, the non-defaulting Initial
Purchasers may make arrangements for the purchase of the Notes which such
defaulting Purchaser agreed but failed to purchase by other persons satisfactory
to the Company and the non-defaulting Initial Purchasers, but if no such
arrangements are made within 36 hours after such default, this Agreement shall
terminate without liability on the part of the non-defaulting Initial Purchasers
or the Company, except that the Company will continue to be liable for the
payment of expenses to the extent set forth in Section 6 and except that the
provisions of Sections 8, 13 and 15 shall not terminate and remain in effect.
As used in this Agreement, the term "Initial Purchasers" includes, for all
purposes of this Agreement unless the context otherwise requires, any party not
listed in Schedule I hereto that, pursuant to this Section 11, purchases Notes
which a defaulting Initial Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Company or any non-defaulting
Initial Purchaser for damages caused by its default. If other persons agree to
purchase the Notes of a defaulting Initial Purchaser, either the non-defaulting
Initial Purchasers or the Company may postpone the Closing Date for up to seven
full business days in order to effect any changes that in the reasonable opinion
of counsel for the Company or counsel for the Initial Purchasers may be
28
<PAGE>
necessary in the Offering Memorandum or in any other document or arrangement,
and the Company agrees to reasonably promptly prepare any amendment or
supplement to the Final Offering Memorandum that effects any such changes.
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS. The statements set
forth in the last paragraph on the front cover page and under the heading "Plan
of Distribution" in the Preliminary Offering Memorandum and the Offering
Memorandum (to the extent such statements relate to an Initial Purchaser)
constitute the only information furnished by such Initial Purchaser to the
Company for the purposes of Sections 1(a) and 8 hereof. The Initial Purchasers
confirm that such statements (to such extent) are correct.
13. NOTICES. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be mailed or delivered (a) to the
Company or AGI at:
Affinity Group Holding, Inc.
64 Inverness Drive East
Englewood, Colorado 80112
Attention: Chief Financial Officer
with a copy to:
Kaplan, Strangis and Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Andris A. Baltins, Esq.
or (b) to the Initial Purchasers:
Citicorp Securities, Inc.
Citibank Canada Securities Limited
Citibank International plc
c/o Citicorp Securities, Inc.
399 Park Avenue
New York, New York 10022
Attention: High-Yield Finance Group
and
29
<PAGE>
CIBC Wood Gundy Securities Corp.
425 Lexington Avenue, 3rd Floor
New York, New York 10017
Attention: High-Yield Finance Group
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ronald F. Daitz, Esq.
Any notice given hereunder may be made by telecopier or telephone, but if so
made shall be subsequently confirmed in writing.
14. SUCCESSORS. This Agreement shall inure to the benefit of and shall be
binding upon the Initial Purchasers, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company and AGI contained in Section 8 of this Agreement shall also be
for the benefit of the directors, officers, employees and agents of the Initial
Purchasers and any person or persons who control the Initial Purchasers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and
(ii) the indemnities of the Initial Purchasers contained in Section 8 of this
Agreement shall also be for the benefit of the directors and officers of the
Company and any person or persons who control the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Notes
from an Initial Purchaser shall be deemed a successor to such Initial Purchaser
solely because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
30
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Initial Purchasers, AGI and the Company in accordance with its terms.
Very truly yours,
AFFINITY GROUP HOLDING, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
The undersigned is executed and delivered as of the date first written
above for the purpose of being bound by Sections 8, 9, 10, 13, 14, 15 and 16
hereof.
AFFINITY GROUP, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Confirmed and accepted as of
the date first above written:
CITICORP SECURITIES, INC.
CITIBANK CANADA SECURITIES LIMITED
CITIBANK INTERNATIONAL PLC
CIBC WOOD GUNDY SECURITIES CORP.
By: Citicorp Securities, Inc.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
31
<PAGE>
SCHEDULE I
SUBSIDIARIES
Affinity Group, Inc.
Ehlert Publishing Group, Inc.
Expositions Group, Inc.
Affinity Insurance Group, Inc.
Affinity Brokerage, Inc.
Affinity Road and Travel Club, Inc.
Affinity Group Thrift Holding Corp.
Affinity Thrift and Loan
AGI Properties of Colorado, Inc.
A-B Development Co.
Camp Coast to Coast, Inc.
Golf Card Holding Corporation
Golf Card International Corp.
Golf Card Resort Services, Inc.
GSS Enterprises, Inc.
National Association for Female Executives, Inc.
TL Enterprises, Inc.
VBI, Inc.
Venture Enterprises, Inc. (being dissolved)
Woodall Publications Corporation
32
<PAGE>
SCHEDULE II
Principal
Amount of
Initial Purchaser Notes
------------------------------------------------------------ -----
Citicorp Securities, Inc...................................... $ 34,666,667
Citibank Canada Securities Limited............................ 34,666,667
Citibank International plc.................................... 34,666,667
CIBC Wood Gundy Securities Corp............................... 26,000,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
33
<PAGE>
Annex A
OPINION OF COUNSEL FOR THE COMPANY
All capitalized terms not defined herein have the meanings set forth
in the Purchase Agreement to which this Annex A is attached.
(1) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries has been duly incorporated and each of the Company, the
Subsidiaries and the Camping World Subsidiaries is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation with authority and power, corporate or otherwise, to
own, lease and operate its properties and to conduct its business as
described or contemplated in the Offering Memorandum.
(2) As of the date indicated in the Offering Memorandum, the Company had
the authorized, issued and outstanding capital stock as set forth
under the caption "Actual" under the heading "Capitalization" in the
Offering Memorandum; all of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable; and, to such counsel's
knowledge, the issuance of the Notes and the consummation of the
transactions contemplated by the Transaction Documents do not give any
person the right to require registration of any securities of the
Company or any of the Subsidiaries or the Camping World Subsidiaries
except for the rights granted pursuant to the Notes Registration
Rights Agreement.
(3) Based solely on such counsel's review of stock records, the Company
owns of record and, to such counsel's knowledge, beneficially, either
directly or indirectly, 100% of the capital stock of the Subsidiaries
and the Camping World Subsidiaries. All of the issued and outstanding
shares of each of the Subsidiaries and the Camping World Subsidiaries
have been validly issued and are fully paid and non-assessable and
were not issued in violation of preemptive or similar rights; and, to
such counsel's knowledge, such shares are owned free and clear of any
liens, claims or encumbrances of any kind except for liens, claims or
encumbrances arising in respect of the Credit Agreement and
limitations on transfer arising in respect of federal or state
securities laws.
(4) The issuance, sale and delivery of the Notes, the Exchange Notes and,
if issued, the Private Exchange Notes, the execution, delivery and
performance of the Transaction Documents, the consummation by each of
the Company and AGI of the transactions contemplated hereby and
thereby and the compliance by each of the Company and
A-1
<PAGE>
AGI with the terms of the foregoing do not and will not conflict with
or constitute or result in a breach or violation by the Company or any
of the Subsidiaries or the Camping World Subsidiaries of (A) any of
the terms or provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) by
the Company or any of the Subsidiaries or the Camping World
Subsidiaries or give rise to any right to accelerate the maturity or
require the prepayment of any indebtedness under, or result in the
creation or imposition of any lien, charge, security interest or other
encumbrance upon any property or assets of the Company or any of the
Subsidiaries or the Camping World Subsidiaries under, any Contract
known to such counsel, (B) the applicable Organization Documents of
the Company or any of the Subsidiaries or the Camping World
Subsidiaries, or (C) any Law applicable to the Company or any of the
Subsidiaries or the Camping World Subsidiaries.
(5) Each of the Company and AGI has all requisite corporate power and
authority to execute, deliver and perform its respective obligations
under the Agreement and to consummate the transactions contemplated
hereby. The Agreement has been duly and validly authorized, executed
and delivered by each of the Company and AGI and constitutes the
legal, valid and binding obligation of each of the Company and AGI,
enforceable against each of them in accordance with its terms, except
for the Enforceability Exceptions and as to rights of indemnification
or contribution thereunder may be limited by principles of public
policy or federal or state securities laws relating thereto.
(6) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture. The
Indenture has been duly and validly authorized, executed and delivered
by the Company and (assuming the due execution and delivery thereof by
the Trustee) constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, except for the Enforceability Exceptions; the Indenture is in
sufficient form for due qualification under the Trust Indenture Act.
(7) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes,
the Exchange Notes and the Private Exchange Notes. The Notes, the
Exchange Notes and the Private Exchange Notes have each been duly and
validly authorized by the Company and, when duly executed by the
Company and authenticated by the Trustee in accordance with the
provisions of the Indenture, and, in the case of
A-2
<PAGE>
the Notes, when delivered and paid for in the manner provided for
herein, will constitute legal, valid and binding obligations of the
Company entitled to the benefits of the Indenture and will be
enforceable against the Company in accordance with their terms, except
for the Enforceability Exceptions.
(8) Each of the Company and AGI has all requisite corporate power and
authority to execute, deliver and perform its respective obligations
under the Notes Registration Rights Agreement. The Notes Registration
Rights Agreement has been duly and validly authorized, executed and
delivered by each of the Company and AGI and (assuming the due
authorization, execution and delivery thereof by the Initial
Purchasers) constitutes the legal, valid and binding obligation of
each of the Company and AGI, enforceable against each of them in
accordance with its terms except for the Enforceability Exceptions and
as to rights of indemnification or contribution thereunder may be
limited by principles of public policy or federal or state securities
laws relating thereto.
(9) Each of the Company, the Subsidiaries and the Camping World
Subsidiaries has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Credit
Agreement (to the extent a party thereto). The CWI Stock Purchase
Agreement has been duly and validly authorized, executed and delivered
by AGI and (assuming the due execution and delivery thereof by the
other parties thereto), constitutes the legal, valid and binding
obligation of AGI, enforceable against it in accordance with its terms
except for the Enforceability Exceptions and as to rights and
indemnification or contribution thereunder may be limited by
principles of public policy or federal or state securities laws
relating thereto. The Credit Agreement has been duly and validly
authorized, executed and delivered by the Company, the Subsidiaries
and the Camping World Subsidiaries and (assuming the due execution and
delivery thereof by Fleet National Bank and the other lender
institutions party thereto) constitutes the legal, valid and binding
obligation of the Company, the Subsidiaries and the Camping World
Subsidiaries, enforceable against each of them in accordance with its
terms except for the Enforceability Exceptions.
(10) Except for such consents, approvals, authorizations, exemptions,
orders or decrees as may be required under (i) applicable state
securities or "Blue Sky" laws in connection with the purchase and
resale of the Notes by the Initial Purchasers, (ii) the Trust
Indenture Act in connection with the issuance of Exchange Notes or
(iii) the Act and state securities or "Blue Sky" laws in connection
the actions contemplated by the Notes Registration Rights
A-3
<PAGE>
Agreement, as to which no opinion is expressed and except for such
consents, approvals, authorizations, exemptions, orders or decrees
which have been obtained and are in full force and effect, no consent,
approval, authorization, exemption, order or decree of any court or
governmental or regulatory agency or body (including without
limitation, the FTC and the DOJ) is required (x) for the execution,
delivery and performance by the Company or AGI of this Agreement or
any other Transaction Document (to the extent a party thereto) or by
the Company or any of the Subsidiaries or the Camping World
Subsidiaries of the Acquisition Documents (to the extent a party
thereto), (y) the valid authorization, authentication, issuance, sale
and delivery of the Notes, the Exchange Notes or the Private Exchange
Notes or (z) to permit the Company to effect payments of principal of,
premium and interest on the Notes, the Exchange Notes and, if issued,
the Private Exchange Notes.
(11) To such counsel's knowledge, (i) there is no legal action, suit,
proceeding, inquiry or investigation before or by any court or
governmental or regulatory body or agency or arbitrator (including
without limitation the FTC and the DOJ) (domestic or foreign) now
pending or threatened against or affecting the Company or any of the
Subsidiaries or the Camping World Subsidiaries or any of their
respective properties which, individually or in the aggregate, would
have a Material Adverse Effect except as may be disclosed in the
Offering Memorandum and (ii) there are no legal or governmental
proceedings involving or affecting the Company or any Subsidiary or
Camping World Subsidiary or any of their respective properties or
assets which would be required to be described in a prospectus
pursuant to the Act that are not described in the Offering Memorandum,
nor are there any material contracts or other documents which would be
required to be described in a prospectus pursuant to the Act that are
not described in the Offering Memorandum.
(12) The Company has not taken nor will it take any action that might cause
this Agreement or the sale of the Notes to or by the Initial
Purchasers to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or
as the same may hereafter be in effect, on the Closing Date.
(13) The statements in the Offering Memorandum under the headings
"Description of the Notes" and "Exchange Offer and Registration
Rights" insofar as such statements purport to summarize matters of law
or the material provisions of the Indenture, the Notes, and the Notes
Registration Rights Agreement constitute accurate summaries thereof in
all material respects.
A-4
<PAGE>
(14) Neither the Company nor any of the Subsidiaries or the Camping World
Subsidiaries is now, nor will any of them be, after sale of the Notes
to be sold by the Company hereunder and application of the net
proceeds from such sale as described in the Offering Memorandum under
the heading "Use of Proceeds" and consummation of each of the
transactions contemplated by the Offering Memorandum, an "investment
company" or a company "controlled by" an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(15) Assuming the accuracy of the representations and warranties of the
Initial Purchasers contained in Section 4 and the due performance by
the Initial Purchasers of their obligations under Section 4, it is not
necessary in connection with the offer, sale and delivery of the Notes
to the Initial Purchasers or the reoffer and resale by the Initial
Purchasers in the manner contemplated by Section 4 of this Agreement
to register the Notes under the Act or to qualify any indenture in
respect of the Notes under the Trust Indenture Act.
In addition such counsel shall also include within their opinion a
statement to the effect that such counsel has participated in conferences with
representatives of the Initial Purchasers, counsel to the Initial Purchasers,
officers and other representatives of the Company, and representatives of the
independent public accountants of the Company, at which conferences the contents
of the Offering Memorandum and related matters were discussed, and although such
counsel has not verified and does not pass upon or assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum (except and only to the extent as set forth in paragraph 13
above), on the basis of the foregoing (relying as to materiality to a large
extent upon representations and opinions of officers and other representatives
of the Company), no facts have come to the attention of such counsel which lead
such counsel to believe that the Offering Memorandum at the date thereof or as
of the Closing Date, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED that such counsel need not express any comment
with respect to the financial statements including the notes thereto and
supporting schedules, any pro forma financial statements or any other financial
and statistical data set forth or referred to in the Offering Memorandum.
References to the Offering Memorandum in this Annex A include any
amendments or supplements made thereto in accordance with the terms of the
Purchase Agreement on or prior to the Closing Date.
A-5
<PAGE>
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other than
the Federal law of the United States and the laws of the State of Minnesota and
the General Corporation Law of the State of Delaware, (B) as to the laws of the
states of New York and Kentucky, such counsel may assume that such laws are
substantially the same as the laws of the State of Minnesota, and (C) may rely,
as to matters of fact, to the extent they deem proper on representations or
certificates of responsible officers of the Company and certificates of public
officials.
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
1992 1993 1994 1995 1996
---------------------------------------------
Earnings:
Income (loss) from continuing
operations before income taxes $(19,150) $ (970) $ 7,681 $ 9,933 $11,225
Add:
Fixed charges 33,448 20,101 17,740 17,003 17,088
---------------------------------------------
Adjusted Earnings $ 14,298 $19,131 $25,421 $26,936 $28,313
---------------------------------------------
---------------------------------------------
Fixed Charges:
Interest expense - debt 15,191 13,111 16,716 16,433 16,518
Interest expense - warrants 18,257 6,990 - - -
Amortization of financing cost - 1,024 570 570
---------------------------------------------
Total Fixed Charges $ 33,448 $20,101 $17,740 $17,003 $17,088
---------------------------------------------
---------------------------------------------
Ratio of Earnings to Fixed Charges - - 1.43 1.58 1.66
(Deficit) Excess of Earnings to
Fixed Charges $(19,150) $ (970) $ 7,681 $ 9,933 $11,225
---------------------------------------------
---------------------------------------------
<PAGE>
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS FOR THE COMPANY
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES
We consent to the use in this Registration Statement of Affinity Group Holding,
Inc. on Form S-4 of our report dated March 7, 1997 (April 2, 1997 with respect
to Note 19), appearing in the Prospectus, which is part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
Our audits of the consolidated financial statements referred to in our
aforementioned report also included the financial statement schedule of Affinity
Group Holding, Inc., listed in Item 21. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Denver, Colorado
May 1, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
FOR CAMPING WORLD, INC.
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Affinity Group
Holdings, Inc. on Form S-4 of our report (relating to the financial statements
of Camping World, Inc.) dated November 22, 1996 (April 2, 1997 with respect to
Note 14), appearing in the Prospectus, which is a part of this Registration
Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
May 1, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that AFFINITY GROUP HOLDING, INC., a
Delaware corporation (the "Company"), and each of the undersigned
directors/officers of the Company, hereby constitutes and appoints Stephen
Adams, Michael Schneider and Mark J. Boggess and each of them (with full power
to each of them to act alone) his true and lawful attorney-in-fact and agent,
for him and on his behalf and his name, place and stead, in any and all
capacities to sign, execute, affix its seal thereto and file one or more
Registration Statements on Form S-4 or any other applicable form under the
Securities Act of 1933, as amended, and amendments thereto, including
pre-effective and post-effective amendments, with all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, relating the offering of up to $130,000,000 of 11% Senior Notes due
2007 (the "Notes") offered by the Company.
There is hereby granted to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in respect of the foregoing as fully as he or himself might or could
do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
This Power of Attorney may be executed in any number of counterparts, each
of which shall be an original, but all of which taken together shall constitute
one and the same instrument and any of the undersigned directors may execute
this Power of Attorney by signing any such counterpart.
IN WITNESS WHEREOF, AFFINITY GROUP HOLDING, INC. has caused this Power of
Attorney to be executed in its name by its Chief Executive Officer and President
on the 28th day of April, 1997.
AFFINITY GROUP HOLDING, INC.
By /s/
---------------------------
Joe McAdams, Chief Executive
Officer and President
<PAGE>
The undersigned, directors and officers of AFFINITY GROUP HOLDING, INC.,
have hereunto set their hands as of the 28th day of April, 1997.
/s/
- ---------------------------------------- -----------------------------------
Stephen Adams, Director and Chairman of Thomas A. Donnelly, Director
the Board
/s/
-----------------------------------
/s/ John Ehlert, Director
- ----------------------------------------
Joe McAdams, President, Chief Executive
Officer and Director
-----------------------------------
David B. Garvin, Director
/s/
- ----------------------------------------
Wayne Boysen, Director
/s/
- ----------------------------------------
David Frith-Smith, Director
<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
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, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
AFFINITY GROUP HOLDING, INC.
(Exact name of obligor as specified in its charter)
Delaware 59-2922099
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
64 Inverness Drive East
Englewood, CO 80112
(Address of principal executive offices)
--------------------------
11% Senior Notes due 2007
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- 2 -
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. VOTING SECURITIES OF THE TRUSTEE
2,999,020 shares of Common Stock - par value $5 per share
4. TRUSTEESHIPS UNDER OTHER INDENTURES
Not applicable.
5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS
Not applicable.
<PAGE>
- 3 -
6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS
Not applicable.
7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS
Not applicable.
8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE
Not applicable.
9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE
Not applicable.
10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITIES HOLDERS OF THE OBLIGOR
Not applicable.
11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING
50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR
Not applicable.
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE
Not applicable.
13. DEFAULTS BY THE OBLIGOR
Not applicable.
14. AFFILIATIONS WITH THE UNDERWRITERS
Not applicable.
<PAGE>
- 4 -
15. FOREIGN TRUSTEE
Not applicable.
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 October 6, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 in an amended filing
to an original Registration Statement filed on August 28,
1995 (Registration No. 33-96262).
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 Exhibit T-1.4 to
Form T-1 filed on October 6, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 in an amended filing
to an original Registration Statement filed on August 28,
1995 (Registration No. 33-96262).
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.
NOTE
As of April 28,1997 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.
<PAGE>
- 5 -
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 28th day of April, 1997.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
/s/ John Guiliano
By: John Guiliano
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
September 1, 1995
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
---------------------------
By: /S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 75,754
Short-Term Investments 276,399
Securities, Available for Sale 925,886
Loans
1,638,516
Less: Allowance for Credit Losses 13,168
----------
Net Loans 1,625,348
Premises and Equipment 61,278
Other Assets 120,903
----------
TOTAL ASSETS $3,085,568
----------
LIABILITIES
Deposits:
Non-Interest Bearing
$ 645,424
Interest Bearing 1,694,581
----------
Total Deposits 2,340,005
Short-Term Credit Facilities 449,183
Accounts Payable and Accrued Liabilities 139,261
----------
TOTAL LIABILITIES $2,928,449
----------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,926
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 804
----------
TOTAL STOCKHOLDER'S EQUITY 157,119
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,085,568
----------
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. Brinkmann, SVP & Controller
April 9, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS ON PAGES F-3 TO F-10 OF
THE COMPANY'S 1996 AUDITORS REPORT TO THE BOARD OF DIRECTORS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,278
<SECURITIES> 499
<RECEIVABLES> 14,812
<ALLOWANCES> 1,081
<INVENTORY> 2,473
<CURRENT-ASSETS> 30,342
<PP&E> 10,550
<DEPRECIATION> 6,692
<TOTAL-ASSETS> 184,128
<CURRENT-LIABILITIES> 43,786
<BONDS> 142,031
0
0
<COMMON> 1
<OTHER-SE> (79,435)
<TOTAL-LIABILITY-AND-EQUITY> 184,128
<SALES> 139,979
<TOTAL-REVENUES> 139,979
<CGS> (86,574)
<TOTAL-COSTS> (86,574)
<OTHER-EXPENSES> (24,666)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (16,518)
<INCOME-PRETAX> 11,225
<INCOME-TAX> (6,144)
<INCOME-CONTINUING> 5,081
<DISCONTINUED> (6,552)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,471)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
