<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE PERIOD ENDED SEPTEMBER 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 1-13373
THE PETERSEN COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-4099296
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6420 WILSHIRE BOULEVARD 90048
LOS ANGELES, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code: (213) 782-2000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_].
<PAGE>
THE PETERSEN COMPANIES, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements - The Petersen Companies, Inc...........................
Condensed balance sheets as of December 31, 1996
and September 30, 1997 (unaudited)........................................... 3
Unaudited condensed statements of operations from
August 15, 1996 (inception) to September 30, 1996 and
the three and nine months ended September 30, 1997 .......................... 4
Unaudited condensed statements of cash flows from
August 15, 1996 (inception) to September 30, 1996 and
the nine months ended September 30, 1997..................................... 5
Notes to unaudited condensed financial statements............................ 6
Item 2. Financial Statements - Petersen Holdings, L.L.C..............................
Condensed consolidated balance sheets as of December 31, 1996
and September 30, 1997 (unaudited)........................................... 8
Unaudited condensed consolidated statements of operations for the three
and nine months ended September 30, 1996 and 1997............................ 9
Unaudited condensed consolidated statements of cash flows for the three
and nine months ended September 30, 1996 and 1997............................ 10
Notes to unaudited condensed consolidated financial statements............... 11
Item 3. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.......................... 19
Item 6. Exhibits and Reports on Form 8-K............................................. 19
SIGNATURES.............................................................................. 20
</TABLE>
The Petersen Companies, Inc., (the "Company"), previously known as BrightView
Communications Group, Inc. ("BrightView"), is a Delaware corporation. Prior to
the consummation of the Recapitalization Agreement (as defined below), the
Company owned 1.0% of Petersen Holdings, L.L.C. ("Holdings") and .1% of Petersen
Publishing Company, L.L.C. ("Petersen"). The Company has no business operations
other than the investment in Holdings and Petersen.
All of the existing securityholders of the Company and Holdings entered
into a Contribution and Recapitalization Agreement, dated as of September 30,
1997 (the "Recapitalization Agreement") pursuant to which, among
other things, each existing securityholder of the Company and Holdings will
contribute directly or indirectly all of its existing shares of common stock of
the Company and Preferred Units and Common Units of Holdings to the Company in
exchange for newly-issued shares of Common Stock. Following the transactions
contemplated by the Recapitalization Agreement, Holdings will be merged into
Petersen and Petersen will become a wholly owned subsidiary of the Company.
On October 7, 1997, the Company issued 8,050,000 shares of Class A Common Stock
at $17.50/share pursuant to the Securities and Exchange Registration Statement.
Net proceeds to the Company in connection with the Offering was $131,376,000.
The Company has included the financial statements of Petersen Holdings, L.L.C.
for the three and nine months ended September 30, 1996 compared to the three and
nine months ended September 30, 1997 as Holdings is the operating entity which
is managed by the Company.
2
<PAGE>
THE PETERSEN COMPANIES, INC.
BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------ -------------
<S> <C> <C>
ASSETS
Investment in Petersen Publishing, L.L.C...................................... $ 154 $ 139
Investment in Petersen Holdings, L.L.C........................................ 1,506 1,513
------ ------
Total assets.................................................................. $1,660 $1,652
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities................................................................... $ -- $ --
Commitments and contingencies
Shareholders' equity:
Class A Shares, $0.01 par value, 10,000 shares authorized; 2,163.5 shares
issued and outstanding.................................................. 1,073 1,114
Class B Shares, $0.01 par value, 10,000 shares authorized; 1,200 shares
issued and outstanding.................................................. 600 600
Accumulated deficit....................................................... (11) (60)
------ ------
1,662 1,654
Notes receivable from related parties..................................... (2) (2)
------ ------
Total liabilities and shareholders' equity.................................... $1,660 $1,652
====== ======
</TABLE>
See accompanying notes.
3
<PAGE>
THE PETERSEN COMPANIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
August 15, 1996 Three months Nine months
(inception) to ended ended
September 30, September 30, September 30,
1996 1997 1997
--------------- ------------- ------------
<S> <C> <C> <C>
Net revenues........................................... $ -- $ -- $ --
General and administrative expenses.................... -- 3 5
------- ------ -----
Loss from operations................................... -- (3) (5)
Equity in loss of subsidiary........................... -- (18) (23)
------- ------ -----
Net loss before dividends.............................. $ -- $ (21) (28)
Preferred unit dividend................................ -- (21) (21)
------- ------ -----
Net Loss............................................... $ -- $ (42) $ (49)
======= ====== =====
</TABLE>
See accompanying notes.
4
<PAGE>
THE PETERSEN COMPANIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
August 15, 1996 Nine months
(inception) to ended
September 30, September 30,
1996 1997
------------ -------------
<S> <C> <C>
Operating activities
Net loss.................................................................. $ -- $ (28)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Equity in loss of subsidiary............................................ -- 23
------- ------
Net cash used in operating activities..................................... -- (5)
Investing activities
Investment in Petersen Publishing Company, L.L.C. ........................ (165) 4
Investment in Petersen Holdings, L.L.C. .................................. (1,505) (8)
------- ------
Net cash used in investing activities..................................... (1,670) (4)
Financing activities
Proceeds from issuance of stock........................................... 1,670 9
------- ------
Net cash provided by financing activities................................. 1,670 9
------- ------
Increase (decrease) in cash............................................... -- --
Cash at beginning of period............................................... -- --
------- ------
Cash at end of period..................................................... $ -- $ --
======= ======
</TABLE>
See accompanying notes.
5
<PAGE>
THE PETERSEN COMPANIES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Petersen Companies, Inc. (the "Company"), previously known as
BrightView Communications Group, Inc. ("BrightView) is a Delaware corporation.
The Company owns 1.0% of Petersen Holdings L.L.C. ("Holdings") and .1% of
Petersen Publishing Company, L.L.C. ("Petersen"). The Company has no business
operations other than the investment in Holdings and Petersen. The Company was
organized in August 1996 for the principal purpose of investing in Holdings and
Petersen. The Company is Holdings' managing member and as such controls the
policies and operations of Holdings and of Petersen through Holdings.
Basis of Presentation
The financial statements reflect the activity of the Company for the period
of August 15, 1996 (inception) through September 30, 1996 and for the three and
nine months period ended September 30, 1997, after elimination of intercompany
transactions.
2. LONG-TERM DEBT
Senior Credit Facility:
On September 30, 1996, Petersen entered into a Senior Credit Facility with
First Union National Bank of North Carolina and CIBC Inc. (the "Lenders")
pursuant to which the Lenders agreed to loan the Company up to $260,000,000.
Such amount was allocated among a revolving credit facility for up to
$60,000,000 (the "Revolver"), of which up to $10,000,000 can be in the form of
letters of credit; a tranche A term loan for up to $100,000,000 (the "Tranche A
Loan"); and a tranche B term loan for up to $100,000,000 (the "Tranche B Loan").
On October 6, 1997, the Company entered into a Senior Revolving Credit
Facility with First Union National Bank of North Carolina and CIBC, Inc. (the
"Lenders") pursuant to which the Lenders agreed to loan the Company up to
$175,000,000. Such amount is allocated to a revolving credit facility for up to
$175,000,000 the (1997 "Revolver"), of which up to $10,000,000 can be in the
form of letters of credit.
The 1997 Revolver bears interest at either LIBOR, plus 0.625% based on
borrowings or the prime rate of the agent bank based on borrowings.
The 1997 Revolver matures on September 30, 2002.
The 1997 Revolver contains certain restrictive covenants including, but not
limited to restrictions on capital expenditures, payments of dividends, liens,
investments and disposals of assets, as well as financial covenants including a
maximum leverage ratio, minimum interest coverage ratio and minimum fixed charge
coverage ratio, all as defined in the Senior Revolving Credit Facility.
The Revolver and the Tranche A Loan bear interest at either LIBOR (5.656%
at September 30, 1997), plus 1.375% to 2.750%, based on borrowings or the prime
rate of the agent bank (8.5% at September 30, 1997), plus .125% to 1.5%, based
on borrowings. As of December 31, 1996 and September 30, 1997, the Company had
no borrowings outstanding under the Revolver. However, a letter of credit for
$1,600,000 issued in January 1997 reduces the amount available under the
Revolver. The letter of credit expires in January 1998. As of September 30,
1997, the Company had $89,000,000 outstanding under the Tranche A Loan at a
weighted average interest rate of 8.264%.
The Tranche B Loan bears interest at either LIBOR (5.656% at September 30,
1997), plus 2.625% to 3.250%, based on borrowings or the prime rate of the agent
bank (8.5% at September 30, 1997), plus 1.375% to 2.0% based on borrowings. As
of September 30, 1997, the Company had $88,500,000 outstanding under the Tranche
6
<PAGE>
B Loan at a weighted average interest rate of 8.764%.
The Revolver and Tranche A Loan mature on December 31, 2002 and Tranche B
Loan matures on September 30, 2004.
The Senior Credit Facility contains certain restrictive covenants including
but not limited to restrictions on capital expenditures, payments of dividends,
liens, investments and disposals of assets, as well as financial covenants
including a maximum leverage ratio, minimum interest coverage ratio and minimum
fixed charge coverage ratio, all as defined in the Senior Credit Facility. As of
September 30, 1997, the Company was in compliance with the covenants of the
Senior Credit Facility.
The Senior Credit Facility is guaranteed by Holdings and the Company.
Petersen estimates that the book value of the Senior Credit Facility
approximates its fair value.
3. INVESTMENTS IN HOLDINGS AND PETERSEN
In August 1996, the Company issued shares of Class A and Class B Common
stock in exchange for proceeds aggregating 1,672,500. At the same time, the
Company invested $1,505,250 in 1.0% of Holdings and $167,250 on .1% of Petersen.
The Company reflects their proportionate share of the loss in both Holdings and
Petersen each period.
4. INCOME TAXES
No provision or liability for federal or state income taxes is included in
the accompanying financial statements. The difference between the tax basis and
the reported amounts of the Company's assets and liabilities is not material at
December 31, 1996 and September 30, 1997. The Company has no deferred tax assets
and liabilities at December 31, 1996 or September 30, 1997.
5. CONTINGENCIES
The company is a party to various legal actions and disputes arising in the
ordinary course of business. Management believes, based on the advice of
counsel, that any resulting liabilities from these actions will not have a
material effect on the financial position of the company.
7. EVENTS SUBSEQUENT TO SEPTEMBER 30, 1997
On October 7, 1997, the Company issued 8,050,000 shares of Class A Common
Stock at $17.50 /share pursuant to the Securities and Exchange Registration
Statement. In connection with the offering, all of the existing security holders
of the Company and Holdings entered into an agreement in which all of the
Holdings Common Units and Preferred Units and all of the Company's common stock
will be exchanged for an aggregate of 19,122,974 shares of Class A Common Stock
and 7,736,290 shares of Class B Common Stock.
Upon completion of the Offering, the Company has 34,909,264 shares of
Common Stock outstanding.
The Company's Employee Stock Discount Purchase Plan (the "Employee Stock
Purchase Plan") was approved by the Board and the existing stockholders prior to
the consummation of the Offering. The Employee Stock Purchase Plan was
established to give employees desiring to do so a convenient means of purchasing
shares of Class A Common Stock through payroll deductions. The Employee Stock
Purchase Plan will provide an incentive to participate by permitting certain
purchases at a discounted price equal to 85% of fair market value of the Class A
Common Stock on the date of purchase. An aggregate of 90,557 shares of Class A
Common Stock have been reserved for sale under the Employee Stock Purchase Plan.
7
<PAGE>
PETERSEN HOLDINGS, L.L.C.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,761 $ 15,920
Accounts receivable, less allowance for doubtful accounts
of $1,604 (1996) and $1,988 (1997) 20,141 20,554
Inventories 4,408 3,814
Current portion of deferred subscription acquisition costs 43,835 36,493
Deferred direct mail advertising costs, net of
accumulated amortization of $1,007 (1997) -- 3,535
Other prepaid expenses and current assets 730 1,222
-------- --------
Total current assets 76,875 81,538
Deferred subscription acquisition costs 41,168 44,008
Property and equipment, net of accumulated depreciation
of $560 (1996) and $1,943 (1997) 4,152 3,358
Goodwill, net of accumulated amortization of
$5,992 (1996) and $24,096 (1997) 353,556 335,351
Subscriber list and established work force, net of
accumulated amortization of $3,000 (1996) and $12,000 (1997) 117,000 108,000
Deferred financing costs, net of accumulated
amortization of $3,276 (1996) and $11,286 (1997) 10,735 2,725
Other assets 587 645
-------- --------
TOTAL ASSETS $604,073 $575,625
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 13,288 $ 11,318
Accrued payroll and related costs 1,963 4,875
Accrued interest on long-term debt 2,041 4,454
Customer incentives payable 5,785 6,965
Current portion of unearned subscription revenues 71,163 66,874
Current portion of long-term debt 1,000 8,250
Other accrued expenses and current liabilities 119 524
-------- --------
Total current liabilities 95,359 103,260
Unearned subscription revenues 47,608 51,061
Long-term debt 299,000 269,250
Other noncurrent liabilities 7,652 6,941
Due to Minority Member 154 145
Commitments and contingencies
Members' equity
Common units 1,671 1,707
Preferred units 165,171 199,078
Accumulated deficit (10,594) (54,069)
-------- --------
156,248 146,716
Less: Notes receivable from related parties (1,948) (1,748)
-------- --------
TOTAL MEMBERS' EQUITY 154,300 144,968
-------- --------
TOTAL LIABILITIES AND MEMBERS' EQUITY $604,073 $575,625
======== ========
</TABLE>
See accompanying notes.
<PAGE>
PETERSEN HOLDINGS, L.L.C.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Petersen Petersen
Holdings Holdings
Predecessor LLC Predecessor LLC
------------ ----------- ------------ ----------
Three Months Nine Months
Ended Sept 30 Ended Sept 30
-------------- --------------
1996 1997 1996 1997
------------ ----------- --------- ----------
<S> <C> <C> <C> <C>
Net revenues:
Advertising $36,212 $38,421 $103,609 $111,860
Newsstand 10,717 11,746 31,998 32,995
Subscriptions (net of agency commissions of $14,261 and
$41,201 for the three and nine months ended September 30,
1996 and $13,604 and $41,327 for the three and nine months
ended September 30, 1997 respectively.) 11,010 11,814 32,838 33,551
Other 956 1,704 5,490 5,423
-------- --------- -------- ---------
Total net revenues 58,895 63,685 173,935 183,829
Production, selling and other direct costs (including
rent paid to a related party of $1,149, and $3,347 for the
three and nine months ended Sept 30, 1996, and $1,093 and
$3,280 for the three and nine months ended Sept 30, 1997,
respectively) 45,362 43,530 137,334 125,970
-------- --------- -------- ---------
Gross profit 13,533 20,155 36,601 57,859
General and administrative expenses 9,536 3,475 22,439 12,430
Compensation expense -- 12,182 -- 12,182
Amortization of goodwill and other intangible assets 110 9,012 306 27,163
-------- --------- -------- ---------
Income (loss) from operations 3,887 (4,514) 13,856 6,084
Other income (expense):
Interest income 234 324 472 685
Interest expense -- (7,211) (153) (23,064)
Gain (loss) on sale of assets -- 14 1,554 (26)
-------- --------- -------- ---------
Income (loss) before provision for taxes 4,121 (11,387) 15,729 (16,321)
Provision for taxes 71 -- 270 --
-------- --------- -------- ---------
Net income (loss) before extraordinary items & minority
interest 4,050 (11,387) 15,459 (16,321)
Extraordinary Item
Loss on early extinguishment of debt -- (6,307) -- (6,307)
-------- --------- -------- ---------
Income (loss) before minority interest 4,050 (17,694) 15,459 (22,628)
Minority interest in loss of subsidiary -- 18 -- 23
-------- --------- -------- ---------
Net Income(loss) 4,050 (17,676) 15,459 (22,605)
Preferred unit dividends -- (5,451) -- (20,870)
Net income(loss) attriutable to common units $ 4,050 $ (23,127) $ 15,459 $ (43,475)
======== ========= ======== =========
Pro forma net loss per share -- $ (.86) -- $ (1.62)
======== ========= ======== =========
Pro forma weighted average number of common shares outstanding -- 26,859,264 -- 26,859,264
======== ========== ======== ==========
</TABLE>
See accompanying notes.
<PAGE>
PETERSEN HOLDINGS, L.L.C.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PETERSEN
PREDECESSOR HOLDINGS, L.L.C.
------------- -----------------
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPT 30, SEPT 30,
1996 1997
------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 15,459 $(22,605)
Adjustment to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,424 36,578
Allowance for doubtful accounts 426 1,110
(Gain) loss on sale of assets (1,554) 26
Deferred state income taxes (101) --
Non-cash, non-recurring compensation expense -- 12,182
Changes in operating assets and liabilities:
Accounts receivable (3,722) (1,524)
Inventories 12,146 594
Deferred direct mail advertising costs -- (3,535)
Deferred subscription acquisition costs (6,996) 4,502
Accounts payable and accrued liabilities 5,116 (4,246)
Accrued payroll and related costs 308 2,912
Accrued interest on long-term debt -- 2,413
Customer incentives payable 415 1,180
Unearned subscription revenues, net 9,678 (836)
Other current assets, net 495 (608)
Other noncurrent liabilities (163) (306)
-------- --------
Total adjustments 18,472 50,442
-------- --------
Net cash provided by operating activities 33,931 27,837
INVESTING ACTIVITIES
Decrease in minority interest -- (23)
Purchases of property and equipment (643) (669)
Purchases of magazines -- (122)
Purchases of investments (333) --
Proceeds from sale of assets 2,501 31
Acquisition of assets of publishing division of Petersen Publishing Company,
including liabilities assumed and net of costs associated with the acquisition -- 2,500
-------- --------
Net cash provided by investing activities 1,525 1,717
-------- --------
FINANCING ACTIVITIES
Repayment of bank borrowings -- (22,500)
Proceeds from issuance of members units -- 905
Reduction in notes receivable, related party -- 200
Distribution of S corporation earnings (3,969) --
Net change in advances of other divisions of the Company (5,312) --
-------- --------
Net cash used in financing activities (9,281) (21,395)
-------- --------
Increase (decrease) in cash and cash equivalents 26,175 8,159
Cash and cash equivalents at beginning of period (13,663) 7,761
-------- --------
Cash and cash equivalents at end of period $ 12,512 $ 15,920
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during period for:
Interest $ 152 $ 18,845
======== ========
Taxes $ 101 $ 43
======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the nine months ended September 30, 1997, the Company increased goodwill
and accrued liabilities by $2,276,000 representing adjustments to the allocation
of the purchase price of the Acquisition. Additionally, the Company recorded a
non-recurring non-cash compensation charge of $12,182,000 in September 1997.
See accompanying notes.
<PAGE>
PETERSEN HOLDINGS, L.L.C.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Petersen Holdings, L.L.C. ("Holdings") is a Delaware limited liability
company. Holdings owns 99.9% of Petersen Publishing Company , L.L.C. ("the
Company"). The remaining 0.1% of the Company is owned by The Petersen Companies
Inc. ("Petersen"), previously known as BrightView Communications Group, Inc.
("BrightView"). The Company was organized in 1996 for the principal purpose of
completing the acquisition (the "Acquisition") of substantially all of the
assets and assuming certain liabilities of the Publishing Division of Petersen
Publishing Company (the "Predecessor") (see Note 2). The Company is engaged in
the publishing business with revenues generated primarily from the publication
of various special interest magazines and the sale of related advertising,
principally within the United States, and is the operating subsidiary of
Petersen.
The Company and Holdings are each limited liability companies organized
under the Delaware Limited Liability Company Act (the "LLC Act"). Holdings is
the Company's managing member and as such controls the policies and operations
of the Company. Holdings is governed by a limited liability company agreement
(the "LLC Agreement") among Willis Stein & Partners, L.P. (through Petersen
Investment Corp.), the Predecessor, certain members of the Company's management
and other investors (collectively the "Members"). As a limited liability company
organized under Delaware law, members of Holdings are not liable for debts or
other obligations of Holdings. The LLC Agreement governs the relative rights and
duties of the Members. Petersen is Holdings' managing member and as such
controls the policies and operations of Holdings and of the Company through
Holdings. (see note 6)
During the nine months ended September 30, 1997, Holdings received $905,000
in exchange for the issuance of additional Preferred Units and Common Units.
Such funds were contributed by Holdings to the Company. Additionally, Holdings
recorded $20,870,000 for the preferred yield on the Preferred Units which
represents the cumulative compounded yield through September 30, 1997.
In July 1997, Holdings' limited liability company agreement was amended to
create new classes of equity securities. The new units (collectively, the "Class
D Common Units") were issued to the holders of the Class B Common Units and
Class C Common Units pro rata according to ownership of the Class B Common Units
and Class C Common Units. In connection with the issuance of the Class D Common
Units in such exchange, the Company recognized a non-recurring, non-cash
compensation charge of approximately $12.2 million.
Additionally, in July 1997, Holdings established the Petersen Holdings,
L.L.C. 1997 Long-Term Equity Incentive Plan (the "Incentive Plan") pursuant to
which Holdings granted, to certain of the Company's employees, options to
purchase Class A Common Units. Such options vest on the fifth year after the
date of issuance. Should certain events occur (including an initial public
offering of Petersen's common stock pursuant to a registration statement
filed with the Securities and Exchange Commission), the vesting period would
accelerate to an approximate three year vesting period. The exercise price for
each option is $320,685 per Class A Common Unit, which is equal to the fair
market value of each Class A Common Unit as determined by the Board of Directors
of Petersen, acting as Holdings' managing member, at the date of grant of the
options. Holdings is authorized to issue up to 10,000 Class A Common Units under
the Incentive Plan and in July 1997 granted to Company employees, options to
purchase an aggregate of 8,867 Class A Common Units. See Note 6 for a discussion
of other transactions concerning Members' Equity.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required to generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments consisting
of normal recurring accruals considered necessary for a fair presentation have
been included. Operating results for the three-month and nine-month period ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the financial statements and notes thereto included in Holdings special
financial report on Form 10-K for the three months ended December 31, 1996.
Upon completion of the Acquisition, Holdings changed its year-end to
December 31. The consolidated financial statements reflect then consolidated
activity of Holdings and the Company at September 1997 and the three and nine
months then ended, after elimination of intercompany transactions and
segregation of minority interest. The unaudited consolidated statement of
operations for the three and nine months ended September 30, 1997 relate to the
activity of Holdings and the Company. All references to the three and nine
months ended September 30, 1996 relate to activity of the Predecessor.
Certain reclassifications have been made to the consolidated balance sheet
at December 31, 1996, and consolidated statements of operations for the three
and nine months ended September 30, 1996 to conform to the presentation for the
three and nine months ended September 30, 1997.
Income Taxes
As a limited liability company, Holdings is not subject to U.S. federal
income taxes or state income taxes.
Advertising Expenses
The Company began a new mailing program in 1997. The Company accounts for
its direct response advertising costs in accordance with the American Institute
of Certified Public Accountants' Statement of Position 93-7 "Reporting on
Advertising Costs", pursuant to which qualified direct response advertising is
capitalized and amortized over its expected period of future benefit. Such
captalized costs include primarily printing and postage to current and potential
subscribers and totaled $3,535,000 at September 30, 1997 and will be amortized
over twelve months (the estimated period of future benefit), beginning two
months after mailing. No direct mail advertising costs were capitalized at
December 31, 1996. Amortization of direct response advertising costs was
$700,000 and $1,007,000 for the three and nine months ended September 30, 1997,
respectively and is included in production, selling and other direct costs.
The Company expenses all other costs of advertising as incurred. Advertising
expense was $39,000 and $985,000 for the three and nine months ended September
30, 1997, respectively.
<PAGE>
PETERSEN HOLDINGS, L.L.C.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
2. ACQUISITION OF THE PUBLISHING DIVISION OF PETERSEN PUBLISHING COMPANY
In August 1996, Petersen entered into an Asset Purchase Agreement to
purchase substantially all of the assets of the publishing division of the
Predecessor. Petersen assigned its rights under such agreement to the Company
and the Company assumed all of Petersen's obligations thereunder. The aggregate
purchase price (including expenses) was $462,800,000 (including costs associated
with the Acquisition), plus the assumption of unearned subscription revenues and
other certain liabilities totaling approximately $49,000,000. The Asset Purchase
Agreement provided for a final settlement of the purchase price related to
changes in working capital of Petersen between June 30, 1996 and September 30,
1996. During the nine months ended September 30, 1997, the Company received
$2,276,000 related to such changes and increased goodwill and accrued
liabilities accordingly. The Acquisition was completed on September 30, 1996. In
connection with the Acquisition, the Company recorded goodwill of approximately
$360,000,000 and other intangible assets of approximately $120,000,000. Goodwill
amortization expense for the three months and nine months ended September 30,
1997 was $5,995,000 and $18,104,000, respectively. Amortization of other
intangible assets was $3,000,000 and $9,000,000 for the three and nine months
ended September 30, 1997, respectively.
In order to finance the Acquisition, the Company entered into a Senior
Credit Facility for up to 260,000,000, issued 11 1/8% Senior Subordinated Notes
for $100,000,000 and Holdings issued equity securities for $165,000,000. See
Notes 4 and 5 for a more comprehensive discussion of the debt and equity
issuances.
3. INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPT 30,
1996 1997
------------ --------
<S> <C> <C>
Paper $ 611 $1,265
Magazines in process 3,797 2,549
------ ------
$4,408 $3,814
====== ======
</TABLE>
4. LONG-TERM DEBT
Senior Credit Facility:
On September 30, 1996, the Company entered into a Senior Credit Facility
with First Union National Bank of North Carolina and CIBC Inc. (the "Lenders")
pursuant to which the Lenders agreed to loan the Company up to $260,000,000.
Such amount was allocated among a revolving credit facility for up to
$60,000,000 (the "Revolver"), of which up to $10,000,000 can be in the form of
letters of credit; a tranche A term loan for up to $100,000,000 (the "Tranche A
Loan"); and a tranche B term loan for up to $100,000,000 (the "Tranche B Loan").
On October 6, 1997, the Company entered into a Senior Revolving Credit
Facility with First Union National Bank of North Carolina and CIBC, Inc. (the
"Lenders") pursuant to which the Lenders agreed to loan the Company up to
$175,000,000. Such amount is allocated to a revolving credit facility for up to
$175,000,000 ("1997 Revolver"), of which up to $10,000,000 can be in the
form of letters of credit.
The 1997 Revolver bears interest at either LIBOR, plus 0.625% based on
borrowings or the prime rate of the agent bank based on borrowings.
The 1997 Revolver matures on September 30, 2002.
The 1997 Revolver contains certain restrictive covenants including, but not
limited to, restrictions on capital expenditures, payments of dividends, liens,
investments and disposals of assets, as well as financial covenants including a
maximum leverage ratio, minimum interest coverage ratio and minimum fixed charge
coverage ratio, all as defined in the Senior Revolving Credit Facility.
The Revolver and the Tranche A Loan bear interest at either LIBOR (5.656% at
September 30, 1997), plus 1.375% to 2.750%, based on borrowings or the prime
rate of the agent bank (8.5% at September 30, 1997), plus .125% to 1.5%, based
on borrowings. As of December 31, 1996 and September 30, 1997, the Company had
no borrowings outstanding under the Revolver. However, a letter of credit for
$1,600,000 issued in January 1997 reduces the amount available under the
Revolver. The letter of credit expires in January 1998. As of September 30,
1997, the Company had $89,000,000 outstanding under the Tranche A Loan at a
weighted average interest rate of 8.264%.
The Tranche B Loan bears interest at either LIBOR (5.656% at September 30,
1997), plus 2.625% to 3.250%, based on borrowings or the prime rate of the agent
bank (8.5% at September 30, 1997), plus 1.375% to 2.0% based on borrowings. As
of September 30, 1997, the Company had $88,500,000 outstanding under the Tranche
B Loan at a weighted average interest rate of 8.764%.
The Revolver and Tranche A Loan mature on December 31, 2002 and Tranche B
Loan matures on September 30, 2004.
The Senior Credit Facility contains certain restrictive covenants including
but not limited to restrictions on capital expenditures, payments of dividends,
liens, investments and disposals of assets, as well as financial covenants
including a maximum leverage ratio, minimum interest coverage ratio and minimum
fixed charge coverage ratio, all as defined in the Senior Credit Facility. As of
September 30, 1997, the Company was in compliance with the covenants of the
Senior Credit Facility.
The Senior Credit Facility is guaranteed by Holdings and Petersen.
The Company estimates that the book value of the Senior Credit Facility
approximates its fair value.
As a result of refinancing the Senior Credit Facility, the Company recorded
additional amortization of deferred financing costs of approximately $5,399,000.
<PAGE>
11 1/8% Senior Subordinated Notes due 2006:
Holdings, the Company and its wholly-owned subsidiary, Petersen Capital
Corp. (together, the "Issuers"), issued $100,000,000 in 11 1/8% Senior
Subordinated Notes due 2006 (the "Notes") pursuant to an Offering Memorandum
dated November 20, 1996. The Notes bear interest at 11 1/8% per annum, payable
semi-annually on November 15 and May 15, commencing May 15, 1997. The Notes will
mature on November 15, 2006 and will not be subject to any sinking fund
requirement. The Notes are redeemable at the option of the Issuers, in whole or
in part, at any time on or after November 15, 2001, at the redemption prices set
forth in the Notes Purchase Agreement, plus accrued and unpaid interest to the
date of redemption. Under certain circumstances, prior to November 15, 1999, the
Issuers, at their option, may redeem in the aggregate up to 25% of the original
principal amount of the Notes at 111.125% of the aggregate principal amount so
redeemed, plus accrued and unpaid interest.
On November 6, 1997, the Company redeemed $25.0 million of the Notes. As a
result of the redemption, the Company recorded additional amortization of
deferred financing cost of approximately $908,000.
The Notes are general unsecured obligations of the Issuers and are subordinated
in right of payment to all existing and future senior indebtedness of the
Issuers. The Notes are guaranteed by Holdings.
The Indenture governing the Notes (the "Indenture") contains certain
restrictive covenants, including but not limited to, restrictions on incurrence
of debt, dividend payments, certain asset sales, transactions with affiliates,
liens and investments. As of September 30, 1997, the Company was in compliance
with the covenants contained in the Indenture.
The Company incurred costs of approximately $4,000,000 in connection with
the issuance of the Notes. These costs have been included in Deferred Financing
Costs and are being amortized over the term of the Notes. During the three
months and nine months ended September 30, 1997 the Company amortized
approximately $1,008,000 and $1,208,000, respectively, of such deferred
financing costs.
On March 11, 1997, the Company exchanged all of the outstanding Notes for
substantially identical notes that were registered pursuant to a registration
statement on Form S-4 under the Securities Act of 1933.
The Company estimates that the book value of the Senior Subordinated Notes
approximates their fair value.
<PAGE>
5. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, the Company entered into employment
agreements with three officers of the Company. Pursuant to these employment
agreements, the officers purchased Common Units and Preferred Units with
promissory notes aggregating approximately $1,950,000. Of this amount, $200,000
was paid on March 1, 1997 and the balance of each promissory note will be due
and payable on the earlier to occur of: (i) December 31, 2001; (ii) the
termination of the employment with the Company of the officers or (iii) a sale
of the Company. Such promissory notes bear interest at a rate equal to the
Company's weighted average cost of borrowings. In addition, Holdings issued to
each of the officers additional Common Units without additional consideration.
Such Common Units vest ratably over a period of five years. See Note 1 for
additional information concerning Related Party transactions.
<PAGE>
PETERSEN HOLDINGS, L.L.C.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
7. EVENTS SUBSEQUENT TO SEPTEMBER 30, 1997
On October 7, 1997, Petersen issued 8,050,000 shares of Class A Common Stock
at $17.50 /share pursuant to the Securities and Exchange Registration Statement.
Net proceeds to Petersen in connection with the Offering was $131,376,000.
Petersen used $114,240,000 to repay a portion of the indebtedness incurred under
the Senior Credit Facility and $17,136,000 towards redemption of $25.0 million
aggregate principal amount of the Notes and redemption premium and accrued and
unpaid interest.
Upon completion of the Offering, Petersen has 34,909,264 shares of Common
Stock outstanding.
All of the existing securityholders of Petersen and Holdings have entered
into a Contribution and Recapitalization Agreement (the "Recapitalization
Agreement") pursuant to which, among other things, each existing securityholder
of Petersen and Holdings will contribute directly or indirectly all of its
existing shares of common stock of Petersen and Preferred Units and Common Units
of Holdings to Petersen in exchange for newly-issued shares of Common Stock.
Pursuant to the Recapitalization Agreement: (i) all of the Preferred Units of
Holdings will be exchanged for an aggregate of 10,727,176 shares of Common Stock
and (ii) all of the Class A and Class D Common Units of Holdings and all of the
common stock of Petersen will be exchanged for an aggregate of 16,132,088 shares
of Common Stock. The number of shares of Common Stock that will be issued under
the Recapitalization Agreement to the existing securityholders of Petersen and
Holdings has been determined according to the relative preference rankings of
such securities and is based upon the initial public offering price of the Class
A Common Stock. Following the transactions contemplated by the Recapitalization
Agreement, Holdings will be merged into Publishing.
<PAGE>
ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PETERSEN HOLDINGS L.L.C. FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 HAVE BEEN INCLUDED
HEREIN, AS HOLDINGS IS THE OPERATING ENTITY WHICH IS MANAGED BY THE
COMPANY. MANAGEMENT BELIEVES THE DISCUSSION OF OPERATIONS OF HOLDINGS
REFLECTS A MORE COMPLETE DISCUSSION OF THE COMPANY. ALL REFERENCES TO
THE "COMPANY" IN THE MANAGEMENT DISCUSSION AND ANALYSIS BELOW, REFER
TO HOLDINGS.
OVERVIEW
The Company is a leading publisher of special-interest magazines with a
diverse portfolio of 78 publications, including 25 monthly, 11 bi-monthly and 42
single issue or annual publications. The Company operates primarily within the
expanding special-interest segment of the consumer magazine publishing market.
According to a survey by VSA of 111 general-interest and 115 special-interest
magazines, special-interest magazine publishing is the fastest growing sector of
the consumer magazine industry. The Company had net revenues of $183.8 million
for the nine months ended September 30, 1997.
The Company's principal sources of revenues from the publication of its
magazines are derived from advertising and circulation. Circulation revenues are
generated from subscription, newsstand and list rental sales. Advertising
revenues of the Company, as well as those of the consumer magazine industry in
general, are cyclical and dependent upon general economic conditions. As
compared to general-interest magazines publishers, however, the Company believes
that its advertising revenues are less susceptible to changes in general
economic conditions due to the diversity of its publications and the endemic
nature of its advertiser base. The Company's revenues are generated
predominantly from U.S. sources.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO PREDECESSOR THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net revenues increased $4.8 million, or 8.1%, to $63.7 million for the three
months ended September 30, 1997 from $58.9 million for the three months ended
September 30, 1996. This increase is primarily the result of a $2.2 million, or
6.1%, increase in advertising revenues. The increase in advertising revenues was
due principally to (i) an overall increase in the Company's advertising rates,
(ii) higher advertising revenues by Motor Trend, Teen and Hot Rod and (iii)
additional revenues from relatively new and start-up publications. In December
1996 and June 1997, the Company discontinued the publication of Sassy and
Petersen's Golfing, respectively. Net revenues for the three-month period ended
September 30, 1996 for those two publications were $2.5 million (comprised of
$1.5 million in advertising and $1.0 million in circulation.). Net revenues,
excluding these two discontinued publications, increased $7.3 million, or 12.9%,
to $63.7 million for the three months ended September 30, 1997 from $56.4
million for the three months ended September 30, 1996.
Production, selling and other direct costs decreased $1.8 million, or 4.0%,
to $43.5 million for the three months ended September 30, 1997 from $45.3
million for the three months ended September 30, 1996. Production, selling and
other direct costs decreased as a percentage of net revenues to 68.4% from 77.0%
for the same periods. The successful implementation of the Company's operating
improvements significantly contributed to the decrease in production, selling
and other direct costs. This decrease is primarily comprised of a $2.7 million,
or 23.0%, decrease in paper costs, a $.8 million, or 6.8%, decrease in editorial
and advertising sales expenses offset by an increase of $1.7 million, or 50.3%
in subscription promotion expenses.
General and administrative expenses decreased $6.0 million, or 63.6%, to
$3.5 million for the three months ended September 30, 1997 from $9.5 million for
the three months ended September 30, 1996. General and administrative expenses
decreased as a percentage of net revenues to 5.5% from 16.2% for the same
periods. The successful implementation of the Company's operating improvements,
including personnel and other operating expense reductions, contributed to the
decrease in general and administrative expenses. The Company recorded a non-
recurring non-cash compensation charge of $12.2 million in connection with the
exchange of Class B and Class C Common Units for Class D Common Units.
Amortization of goodwill and other intangible assets increased to $9.0 million
for the three months ended September 30, 1997 from $.1 million for the three
months ended September 30, 1996. This expense represents amortization of
goodwill and the subscribers list purchased in the Acquisition.
<PAGE>
Operating income decreased $8.4 million, or 216.1%, to a net operating loss
of $4.5 million for the three months ended September 30, 1997 from $3.9 million
for the three months ended September 30, 1996, for the reasons stated above.
Operating income decreased as a percentage of net revenues to (7.1%) from 6.6%
for the same periods. Operating income excluding the non-recurring non-cash
compensation charge increased $3.8 million. or 97.3%, to $7.7 million for the
three months ended September 30, 1997 from 3.9 million for the three months
ended September 30, 1996.
The increase in interest expense to $7.2 million for the three months ended
September 30, 1997 is the result of indebtedness incurred under the Senior
Credit Facility and the Notes in connection with the Acquisition.
The net loss was $17.7 million for the three months ended September 30, 1997
as compared to net income of $4.1 million for the three months ended September
30, 1996. This decrease is primarily the result of the increases in interest and
amortization expenses, loss on the early extinguishment of debt and recording
the non-recurring non-cash compensation charge as stated above.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO PREDECESSOR NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net revenues increased $9.9 million, or 5.7%, to $183.8 million for the nine
months ended September 30, 1997 from $173.9 million for the nine months ended
September 30, 1996. This increase is primarily the result of a $8.3 million, or
8.0%, increase in advertising revenues, and a $1.7 million or 2.6% increase in
circulation revenues. The increase in advertising revenues was due principally
to (i) an overall increase in the Company's advertising rates, (ii) higher
advertising revenues by Motor Trend, Teen and Hot Rod and (iii) additional
revenues from relatively new and start-up publications. In December 1996 and
June 1997, the Company discontinued the publication of Sassy and Petersen's
Golfing, respectively. Net revenues for the period ended September 30, 1996 for
those two publications were $7.2 million (comprised of $4.4 million in
advertising, $2.7 million in subscription, and $.1 million other). Net revenues,
excluding these two discontinued publications, increased $17.1 million, or
10.2%, to $183.8 million for the nine months ended September 30, 1997 from
$166.7 million for the nine months ended September 30, 1996.
Production, selling and other direct costs decreased $11.3 million, or 8.3%,
to $126.0 million for the nine months ended September 30, 1997 from $137.3
million for the nine months ended September 30, 1996. Production, selling and
other direct costs decreased as a percentage of net revenues to 68.5% from 78.9%
for the same periods. The successful implementation of the Company's operating
improvements significantly contributed to the decrease in production, selling
and other direct costs. This decrease is primarily comprised of a $9.4 million,
or 36.0%, decrease in paper costs, a $2.2 million, or 13.8%, decrease in
printing expenses and a $4.2 million, or 11.3%, decrease in editorial and
advertising sales expenses.
General and administrative expenses decreased $10.0 million, or 44.6%, to
$12.4 million for the nine months ended September 30, 1997 from $22.4 million
for the nine months ended September 30, 1996. General and administrative
expenses decreased as a percentage of net revenues to 6.8% from 12.9% for the
same periods. The successful implementation of the Company's operating
improvements, including personnel and other operating expense reductions,
contributed to the decrease in general and administrative expenses. The Company
recorded a non-recurring non-cash compensation charge of $12.2 million in
connection with the exchange of Class B and Class C Common Units for Class D
Common Units. Amortization of goodwill and other intangible assets increased to
$27.2 million for the nine months ended September 30, 1997 from $.3 million for
the nine months ended September 30, 1996. This expense represents amortization
of goodwill and the subscribers list purchased in the Acquisition.
Operating income decreased $7.8 million, or 56.1%, to $6.1 million for the
nine months ended September 30, 1997 from $13.9 million for the nine months
ended September 30, 1996, for the reasons stated above. Operating income
decreased as a percentage of net revenues to 3.3% from 8.0% for the same
periods. Operating income excluding the non-recurring non-cash compensation
charge increased $4.4 million, 31.8%, to $18.3 million for the nine months ended
September 30, 1997 from $13.9 for the nine months ended September 30, 1996.
Interest expense increased $22.9 million to $23.1 million for the nine
months ended September 30, 1997 from $.2 million for the nine months ended
September 30, 1996.
The net loss was $22.8 million for the nine months ended September 30, 1997
as compared to net income of $15.5 million for the nine months ended September
30, 1996. This decrease is primarily the result of the increase in interest and
amortization expenses, loss on the early extinguishment of debt and recording
the non-recurring non-cash compensation charge as stated above.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $15.9 million and working capital
(excluding the current portion of unearned subscription revenue) totaled $8.5
million at September 30, 1997. At December 31, 1996, cash and cash equivalents
totaled $7.8 million and working capital (excluding the current portion of
unearned subscription revenue) totaled $8.8 million.
The Company's net cash provided by operations was $27.8 million for the nine
months ended September 30, 1997 compared to $33.9 million for the nine months
ended September 30, 1996. Of this difference, $11.6 million relates to changes
in inventories and $38.2 million relates to decreased net income, offset by a
$34.2 million increase in depreciation and amortization and a non-cash non-
recurring compensation charge of 12.2 million.
The Company's net cash provided by investing activities was $1.7 million for
the nine months ended September 30, 1997, as compared to $1.5 million for the
nine months ended September 30, 1996, which included $2.5 million in proceeds
from the sale of its Viking Color pre-press operations. The Company's operations
are not capital intensive. The Company's capital expenditures were $.7 million
and $.6 million in the nine months ended September 30, 1997 and 1996,
respectively.
The Company's net cash used in financing activities for the nine months
ended September 30, 1997 was comprised of $22.5 million of repayments of
borrowings under the Senior Credit Facility. Of this amount, $21.8 million
represented an early repayment.
EARNINGS BEFORE INTEREST TAXES DEPRECIATION AND AMORTIZATION
Earnings before interest expense, taxes, depreciation and amortization
("EBITDA") is a widely used and commonly reported standard measure utilized by
analysts and investors in the analysis of the media industry. The following
EBITDA information can provide additional information for determining the
ability of the Company to meet its debt service requirements and for other
comparative analyses of the Company's operating performance relative to other
publishing companies.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ---------------
1996 1997 1996 1997
-------- -------- -------- --------
(unaudited)
(000's)
<S> <C> <C> <C> <C>
Total net $58,895 $ 63,685 $173,935 $183,829
Production, selling & other direct costs (excluding
depreciation of $647, $442, $2,119 and $1,406 for the
three months ended Sept. 30, 1996 and 1997, and nine
months ended Sept. 30, 1996 and 1997, respectively) 44,715 43,088 135,215 124,564
------- -------- -------- --------
Gross 14,180 20,597 38,720 59,265
General & administrative expenses (9,536) (15,657) (22,439) (24,609)
Other adjustments 234 187 2,026 502
------- -------- -------- --------
EBITDA 4,878 5,127 18,307 35,158
Extraordinary items
Non-cash Non-recurring Compensation Expense -- 12,182 -- 12,182
Sale of Digital Services PrePress Facility -- -- (1,554) --
------- -------- -------- --------
Adjusted EBITDA $ 4,878 $ 17,309 $ 16,753 $ 47,340
======= ======== ======== ========
</TABLE>
The Company's Adjusted EBITDA increased $30.6 million, or 182.6%, to $47.3
million for the nine months ended September 30, 1997 from $16.7 million for the
nine months ended September 30, 1996. Adjusted EBITDA as a percentage of net
revenues increased to 25.6% from 9.6% for the same periods.
The Company's Adjusted EBITDA increased $12.4 million to $17.3 million for
the three months ended September 30, 1997 from $4.9 million for the three months
ended September 30, 1996. Adjusted EBITDA as a percentage of net revenues
increased to 27.2% from 8.3% for the same periods. The successful implementation
of the Company's operating improvements contributed to these increases in
EBITDA.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security-Holders.
Pursuant to Section 228 of the General Corporation Law of the State of
Delaware, on August 7, 1997, the stockholders of the Company, by written consent
without a meeting, adopted a resolution approving an amendment to the
Certificate of Incorporation of the Company changing its name from Brightview
Communications Group, Inc. to The Petersen Companies, Inc. Votes cast for the
amendment: 1,300 against: 0 abstaining: 862.7
Pursuant to Section 228 of the General Corporation Law of the State of
Delaware, on September 30, 1997, the stockholders of the Company, by written
consent without a meeting, adopted resolutions approving the Amended and
Restated Certificate of Incorporation and the Amended and Restated Bylaws of the
Company. Votes (including voting and nonvoting shares of common stock) cast for
the above matters: 3,362.7 against: 0 abstaining: 0
Pursuant to Section 338 of the General Corporation Law of the State of
Delaware, on September 30, 1997, the stockholders of the Company, by written
consent without a meeting, adopted resolutions:
1. Approving a form of Indemnification Agreement for directors and
officer of the Company.
2. Approving the adoption of The Petersen Companies, Inc. 1997
Long-Term Equity Incentive Plan.
3. Approving the adoption of The Petersen Companies, Inc. Employee
Stock Discount Purchase Plan.
4. Electing as directors the following persons: (i) Richard S. Willis,
John R. Willis and Stuart Karu to serve until the annual meeting of
stockholders in 1998, (ii) D. Claeys Bahrenburg, Daniel H.
Blumenthal and Laurence H. Bloch to serve until the annual meeting
of stockholders in 1999 and (iii) Neal Vitale, Avy H. Stein and
James D. Dunning, Jr. to serve until the annual meeting of
stockholders in 2000.
Votes cast for the above matters: 1,300 against: 0 abstaining: 862.7
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
2.1 Contribution and Recapitalization Agreement, dated September 30,
1997, by and among The Petersen Companies, Inc. (the "Company"),
Petersen Holdings L.L.C. ("Holdings"), Petersen Publishing
Company, L.L.C. ("Publishing") and the securityholders of the
Company and Holdings named therein. (1)
3.1(i) Amended and Restated Certificate of Incorporation of the Company.
3.1(ii) Amended and Restated By-Laws of the Company.
4.1 Credit Agreement, dated as of October 6, 1997, by and among the
Company, Publishing, the lenders named therein, First Union
National Bank ("First Union"), as Administrative Agent, and CIBC
Inc., as Documentation Agent. (1)
4.2 Borrower Pledge and Security Agreement, dated as of October 6,
1997, made by Publishing in favor of First Union, as
Administrative Agent.
4.3 Parent Pledge and Security Agreement, dated as of October 6,
1997, made by Holdings and the Company in favor of First Union,
as Administrative Agent.
4.4 Revolving Credit and Swingline Notes of Publishing, each dated
October 6, 1997.
4.5 Parent Guaranty, dated as of October 6, 1997, by and among
Holdings, Publishing and First Union, as Administrative Agent.
10.1 The Petersen Companies, Inc. 1997 Long-Term Equity Incentive
Plan.
10.2 The Petersen Companies, Inc. Employee Stock Discount Purchase
Plan.
10.3 Amendment No. 1 to Securityholders Agreement, dated September
30, 1997, by and among the Company, Holdings and the
securityholders of the Company and Holdings named therein.
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
(1) The Company agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to such agreement upon request of the
Commission.
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Peterson Companies, Inc.
Date: November 14, 1997 By: /s/ Richard S Willis
----------------- --------------------
Richard S Willis
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
2.1 Contribution and Recapitalization Agreement, dated September 30,
1997, by and among The Petersen Companies, Inc. (the "Company"),
Petersen Holdings L.L.C. ("Holdings"), Petersen Publishing
Company, L.L.C. ("Publishing") and the securityholders of the
Company and Holdings named therein. (1)
3.1(i) Restated Certificate of Incorporation of the Company.
3.1(ii) Amended and Restated By-Laws of the Company.
4.1 Credit Agreement, dated as of October 6, 1997, by and among the
Company, Publishing, the lenders named therein, First Union
National Bank ("First Union"), as Administrative Agent, and CIBC
Inc., as Documentation Agent. (1)
4.2 Borrower Pledge and Security Agreement, dated as of October 6,
1997, made by Publishing in favor of First Union, as
Administrative Agent.
4.3 Parent Pledge and Security Agreement, dated as of October 6,
1997, made by Holdings and the Company in favor of First Union,
as Administrative Agent.
4.4 Revolving Credit and Swingline Notes of Publishing, each dated
October 6, 1997.
4.5 Parent Guaranty, dated as of October 6, 1997, by and among
Holdings, Publishing and First Union, as Administrative Agent.
10.1 The Petersen Companies, Inc. 1997 Long-Term Equity Incentive
Plan.
10.2 The Petersen Companies, Inc. Employee Stock Discount Purchase
Plan.
10.3 Amendment No. 1 to Securityholders Agreement, dated September
30, 1997, by and among the Company, Holdings and the
securityholders of the Company and Holdings named therein.
27.1 Financial Data Schedule.
- ---------------------
(1) The Company agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to such agreement upon request of the
Commission.
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
EXHIBITS
TO
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
______________
Commission File No.: 1-13373
______________
THE PETERSEN COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
===============================================================================
<PAGE>
EXHIBIT 2.1
CONTRIBUTION AND RECAPITALIZATION AGREEMENT
-------------------------------------------
This Contribution and Recapitalization Agreement (this "Agreement") is
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made as of September 30, 1997, by and among The Petersen Companies, Inc., a
Delaware corporation (the "Company"), Willis Stein & Partners, L.P. ("Willis
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Stein"), Nassau Capital Partners II, L.P. ("Nassau") and NAS Partners I, L.L.C.
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("NAS" and, together with Willis Stein and Nassau, the "PIC Investors"), and
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each of the other Persons listed on the Schedule of Investors attached hereto
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(each, a "Holdings Investor" and all of such Persons, collectively, the
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"Holdings Investors"). The PIC Investors and the Holdings Investors are
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collectively referred to herein as the "Investors." Capitalized terms used
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herein and not otherwise defined herein have the meanings given to such terms in
Section 8 below.
The Investors hold all of the outstanding capital stock of the Company
and, with the Company, hold directly or indirectly all of the membership
interests in Petersen Holdings, L.L.C., a Delaware limited liability company
("Holdings"), Petersen Publishing Company, L.L.C., a Delaware limited liability
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company ("Publishing"), and Petersen Investment Corp., a Delaware corporation
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("PIC"). The Company and the Investors desire to consummate the transactions
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contemplated by this Agreement in order to facilitate an initial public offering
and sale by the Company of shares of its common stock pursuant to an effective
registration statement filed with the U.S. Securities and Exchange Commission
(the "SEC") under the Securities Act (the "Company IPO"). The Company has
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engaged Morgan Stanley Dean Witter, Donaldson, Lufkin & Jenrette Securities
Corporation, Alex. Brown & Sons Incorporated and Goldman Sachs & Co. to act as
representatives of the underwriters of such offering (the "Underwriters") and,
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in connection therewith, contemplates entering into an underwriting agreement
(the "Underwriting Agreement") with such persons.
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Immediately prior to the effectiveness of the registration statement
filed with the SEC in connection with the Company IPO, the Company will file an
amendment to its certificate of incorporation substantially in the form of
Exhibit A hereto (the "Certificate of Amendment") with the Secretary of State of
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the State of Delaware to increase the number of authorized shares of Class A
Common Stock, par value $.01 per share (the "Company Voting Stock"), and to
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increase the number of authorized shares of Class B Common Stock, par value $.01
per share (the "Company Non-Voting Stock" and, together with the Company Voting
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Stock, the "Company Stock"). Upon filing the Certificate of Amendment, each
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share of Company Voting Stock outstanding prior thereto (the "Old Company Voting
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Stock") will be canceled and the Company will issue to the holder thereof shares
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of Company Voting Stock on the terms set forth herein, and each share of Company
Non-Voting Stock outstanding prior thereto (the "Old Company Non-Voting Stock"
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and, together with the Old Company Voting Stock, the "Old Company Stock") will
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be canceled and the Company will issue to the holder thereof shares of Company
Non-Voting Stock on the terms set forth herein. Such amendment to the Company's
certificate of incorporation, cancellation of the outstanding
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shares of Old Company Stock and issuance of Company Stock to the holders of Old
Company Stock are referred to herein collectively as the "Recapitalization
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Transactions."
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The PIC Investors hold all of the outstanding shares of capital stock
of PIC and the Holdings Investors hold all of the outstanding membership
interests in Holdings, other than those membership interests in Holdings held by
the Company or PIC. The PIC Investors desire to contribute to the Company all
of the outstanding shares of PIC's Common Stock, par value $.01 per share (the
"PIC Common Stock"), and all of the outstanding shares of PIC's Preferred Stock,
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par value $.01 per share (the "PIC Preferred Stock" and, together with the PIC
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Common Stock, the "PIC Stock"). The Holdings Investors desire to contribute to
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the Company all of their membership interests in Holdings, including all of
their Class A Common Units, Class D Common Units and Preferred Units of Holdings
(each as defined in the LLC Agreement and all referred to herein collectively as
the "Holdings Units"). In exchange, the Company shall issue to the PIC
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Investors and the Holdings Investors shares of the Company Voting Stock or
Company Non-Voting Stock, as provided herein. The transactions described in
this paragraph and more particularly described below are referred to herein
collectively as the "Contribution Transactions". The Contribution Transactions
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will be consummated immediately prior to the consummation of the Company IPO and
are intended to be tax-free pursuant to Section 351 of the Internal Revenue Code
of 1986, as amended.
In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. Recapitalization and Contribution.
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1A. Authorization of Company Stock. Prior to the Closing, the
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Company shall authorize the issuance to the Investors of shares of Company
Voting Stock and shares of Company Non-Voting Stock in the amounts required to
be issued to the Investors hereunder.
1B. Contribution Transactions. Subject to the satisfaction or waiver
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of the conditions set forth in Section 3 below, each of the Investors and the
Company agrees to and shall consummate, at the Closing, the following
Contribution Transactions:
(i) Each of the PIC Investors shall contribute, transfer and assign
to the Company the number of shares of PIC Common Stock and the number of shares
of PIC Preferred Stock set forth opposite its name on the Schedule of Investors,
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each of the Holdings Investors shall contribute, transfer and assign to the
Company all of the Class A Common Units, and Preferred Units of Holdings held by
such Holdings Investor, as set forth opposite its name on the Schedule of
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Investors, and each of the Class D Holders shall contribute, transfer and assign
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to the Company all of the Class D1 Common Units, Class D2 Common Units, Class D3
Common Units, Class D4 Common Units, Class D5 Common Units held by such Class D
Holder.
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(ii) In exchange for the PIC Stock and the Holdings Units contributed
by the Investors, the Company shall issue a number of shares of Company Voting
Stock to each of the Voting Investors and Company Non-Voting Stock to each of
the Non-Voting Investors equal to:
(a) in the case of PIC Preferred Stock and Preferred Units of
Holdings, the quotient determined by dividing (x) the sum of the Accreted
Value of the PIC Preferred Stock and Preferred Units of Holdings held by
such Investor, by (y) the IPO Price; and
(b) in the case of PIC Common Stock and Common Units of Holdings,
the product determined by multiplying (x) the aggregate number of shares of
PIC Common Stock, Class A Common Units and "Converted Class D Units" held
by such Investor by (y) the Conversion Ratio.
For purposes of the foregoing, each Class D Holder will be deemed to
hold the number of "Converted Class D Units" set forth opposite such Class D
Holder's name on the attached Schedule of Class D Units (which is equivalent to
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the number of Class A Common Units which are equal in value to the Class D
Common Units held by such Class D Holder). Class D Holders will receive no
other consideration in respect of their Class D Units.
(iii) At the written election of any Investor, the Company shall, in
lieu of issuing Company Voting Stock to such Investor, issue an equal number of
shares of Company Non-Voting Stock to such Investor.
1C. Recapitalization Transactions. Each of the Investors and the
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Company understands and agrees that, effective upon filing of the Certificate of
Amendment, the shares of Old Company Voting Stock or Old Company Non-Voting
Stock held by such Investor shall be canceled and deemed to be no longer
outstanding, and the Company shall issue to each Investor:
(i) the right to receive at the Closing a number of shares of Company
Voting Stock or Company Non-Voting Stock, respectively, equal to the quotient
determined by dividing (a) the Accreted Value of a number Preferred Units of
Holdings equal to (x) the number of shares of Old Company Stock held by such
Investor multiplied by (y) the Imputed Preferred Holdings Multiple by (b) the
IPO Price; plus
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(ii) a number of shares of Company Voting Stock or Company Non-Voting
Stock, respectively, equal to the product of (x) the number of shares of Old
Company Stock held by such Investor, multiplied by (y) the Imputed Common
Holdings Multiple, multiplied by (z) the Conversion Ratio.
1D. Holdings Options. Each Investor hereby acknowledges and agrees
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that in accordance with the terms of the Holdings Options, contemporaneously
with the consummation of the Contribution Transactions, (i) each of the Holdings
Options shall cease to be exercisable to purchase Class A Common Units of
Holdings and, in lieu thereof, shall automatically become exercisable, subject
to the other terms and conditions set forth therein, to purchase up to a number
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of shares of Company Stock equal to the Unit Exercise Number thereof multiplied
by the Conversion Ratio (provided that such maximum number of shares of Company
Stock issuable under any Holdings Option shall be rounded up or down to the
nearest whole share of Company Stock), and (ii) the exercise price per share of
Company Stock for each of the Holdings Options shall be automatically adjusted
to be equal to the Unit Exercise Price thereof divided by the Conversion Ratio.
For purposes hereof, the "Unit Exercise Number" means, in respect of any
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Holdings Option, the maximum number of Class A Common Units obtainable upon
exercise thereof immediately prior to consummation of the Contribution
Transactions, and the "Unit Exercise Price" means, in respect of any Holdings
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Option, the price payable per Class A Common Unit upon exercise thereof
immediately prior to consummation of the Contribution Transactions.
1E. No Fractional Shares. If any fractional interest in a share of
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Company Stock would, except for the provisions of this Section 1E, be
deliverable to any Investor upon contribution of such Investor's PIC Stock or
Holdings Units or upon conversion of such Investor's Old Company Stock after
taking into account and consolidating all shares of Company Stock to be issued
to such Investor pursuant to the Recapitalization Transactions and the
Contribution Transactions, such fractional interest shall be rounded up or down
to the nearest whole share of Company Stock.
1F. Closing. The closing of the Contribution Transactions (the
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"Closing") shall take place at the offices of Kirkland & Ellis, 200 E. Randolph
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Drive, Chicago, Illinois, or at such other place as may be agreeable to Willis
Stein and the Company, immediately prior to the consummation of the Company IPO
(the "Closing Date"). Upon execution of this Agreement, each Investor shall
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deliver to the Company stock certificates evidencing all of such Investor's
outstanding shares of PIC Stock and Old Company Stock, duly endorsed in blank or
accompanied by duly executed stock powers, and each Holdings Investor shall
deliver to the Company such documentation as the Company may reasonably request
to indorse such Holdings Investor's delivery to the Company of such Investor's
Holdings Units. At the Closing, the Company shall cancel all such certificates
and shall deliver to each Investor stock certificates evidencing the shares of
Company Stock to be issued as described in Paragraphs 1B and 1C and as set forth
on the Schedule of Investors, registered in such Investor's or its nominee's
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name (it being understood that such amounts of shares of stock set forth in the
Schedule of Investors have been calculated assuming the IPO Price and a Closing
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Date as set forth therein, and that such amounts shall be adjusted in accordance
with the provisions hereof if the actual IPO Price or Closing Date are different
than as assumed).
Section 2. Securityholders Agreement Matters. Each of the Investors
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hereby (a) acknowledges that it has received prompt written notice of the
Company's intention to effect the Company IPO contemplated by the Underwriting
Agreement pursuant to Section 5.2(a) of the Securityholders Agreement, (b)
irrevocably waives any rights that it has pursuant to Section 5.2 of the
Securityholders Agreement (the "Piggyback Rights") to have the Company include
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Registrable Securities (as defined in the Securityholders Agreement) in the
Company IPO contemplated by the Underwriting Agreement and (c) acknowledges that
the shares of Company Stock that are issued as described herein shall be
"Manager Common Stock" and "Registrable Securities" within the meaning of the
Securityholders Agreement.
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Section 3. Conditions to the Obligations of the Parties at the
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Closing.
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3A. Conditions to the Obligations of the Investors. The obligations
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of each of the Investors hereunder are subject to the satisfaction or waiver of
the following conditions: (i) the representations and warranties of the Company
are true and correct in all material respects at and as of the Closing as though
then made, (ii) all conditions precedent to the consummation of the Company IPO
shall have been satisfied or waived (including the conditions to the obligations
of the parties to the Underwriting Agreement relating thereto between the
Company and the underwriters party thereto) and (iii) the Certificate of
Amendment shall have been duly filed with the Secretary of State of the State of
Delaware and shall be in full force and effect under the laws of the State of
Delaware.
3B. Conditions to the Obligations of the Company. The obligations of
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the Company hereunder are subject to the satisfaction or waiver of the following
conditions: (i) the representations and warranties of the Investors are true
and correct in all respects at and as of the Closing as though then made, (ii)
all conditions precedent to the consummation of the Company IPO shall have been
satisfied or waived (including the conditions to the obligations of the parties
to the Underwriting Agreement relating thereto between the Company and the
underwriters party thereto), (iii) the Certificate of Amendment shall have been
duly filed with the Secretary of State of the State of Delaware and shall be in
full force and effect under the laws of the State of Delaware and (iv) the
amendment to the Securityholders Agreement in the form of Exhibit B attached
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hereto shall have been executed by certain Investors and shall be in full force
and effect.
Section 4. Representations and Warranties of the Investors.
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4A. Ownership of PIC Stock and Holdings Units. Each Investor
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severally represents and warrants to the Company that such Investor (i) is the
beneficial and record owner of the amount of each class and type of PIC Stock,
Holdings Units and Old Company Stock set forth opposite its name on the Schedule
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of Investors attached hereto, (ii) holds such PIC Stock, Holdings Units or Old
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Company Stock, as applicable, free and clear of all liens, charges and other
encumbrances (subject only to liens, charges and other encumbrances pursuant to
agreements with the Company), and (iii) holds no capital stock of PIC or the
Company or membership interest in Holdings, other than the Class D Common Units
of Holdings. Each of the Class D Holders represent and warrants to the Company
that he has not transferred any interest in any of the Class D1 Common Units,
Class D2 Common Units, Class D3 Common Units, Class D4 Common Units, Class D5
Common Units issued to him by Holdings and that he holds such interests free and
clear of all liens, charges and other encumbrances (subject only to liens,
charges and other encumbrances pursuant to agreements with the Company).
4B. Transfer. Each Investor severally represents and warrants to the
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Company that such Investor has full power, authority and legal right to execute
and deliver this Agreement and to perform the terms and provisions hereof.
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4C. Registration Statement. Each Investor severally represents and
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warrants to the Company that such Investor has received and reviewed the
prospectus included in the Amendment No.1 to Registration Statement on Form S-1
prepared by the Company and filed with the Securities and Exchange Commission on
September 15, 1997 relating to the Company IPO (the "Registration Statement").
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4D. Capitalization of PIC. Each PIC Investor severally represents
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and warrants that as of the Closing, the authorized capital stock of PIC shall
consist of 200,000 shares of PIC Preferred Stock, of which 121,000 shares shall
be issued and outstanding, and 200,000 shares PIC Common Stock, of which 121,000
shares shall be issued and outstanding, and that PIC shall not have outstanding
any other stock or securities convertible or exchangeable for any shares of its
capital stock or containing any profit participation features, nor shall it have
outstanding any rights or options to subscribe for or to purchase its capital
stock or any stock or securities convertible into or exchangeable for its
capital stock or any stock appreciation rights or phantom stock plans.
4E. Investment Intent; Accredited Investor. Each Investor severally
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represents and warrants that such Investor: (i) is acquiring the Restricted
Securities acquired hereunder for its own account with the present intention of
holding such securities for investment purposes and it has no intention of
selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
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contained herein will prevent such Investor and the subsequent holders of
Restricted Securities from transferring such securities in compliance with the
provisions of Section 6 hereof and the Securityholders Agreement; (ii) possesses
knowledge and experience in financial and business matters such that it is
capable of evaluating the risks of the investment in the securities issued
pursuant to this Agreement; and (iii) is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
Section 5. Representations and Warranties of the Company.
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5A. Organization; Good Standing. The Company is a corporation duly
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organized, validly existing, and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to own and operate its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted, to execute, deliver and carry out the provisions of
this Agreement and to issue the Company Stock.
5B. Authorization. As of the Closing, all action on the part of the
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Company necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder and the
authorization, issuance and delivery of the Company Stock will have been taken,
and will constitute a valid and legally binding obligations of the Company,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained herein may be limited by applicable federal or state
securities law.
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5C. Valid Issuance of Company Stock. The shares of Company Stock
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when issued and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under the Securityholders Agreement and applicable
state and federal securities laws.
5D. Capitalization. As of the Closing, after the filing of the
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Certificate of Amendment and after giving effect to the Recapitalization
Transactions and the Contribution Transactions, the authorized capital stock of
the Company shall consist of (i) 5,000,000 shares of preferred stock, par value
$.01 per share, of which no shares shall be issued and outstanding, (ii)
75,000,000 shares of Company Voting Stock, of which only the shares issued
hereunder shall be issued and outstanding immediately prior to the issuance of
shares in the Company IPO, and (iii) 25,000,000 shares of Company Non-Voting
Stock, of which only the shares hereunder shall be issued and outstanding
immediately prior to the issuance of shares in the Company IPO. Except for
Holdings Options exercisable in the aggregate for 8,866.53 Class A Common Units,
except for the obligations of the Company to issue Company Stock to the
Underwriters pursuant to the Underwriting Agreement in connection with the
Company IPO and except as otherwise described in the Registration Statement, the
Company shall not have outstanding any other stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor shall it have outstanding any rights or options to
subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock plans.
Section 6. Transfer.
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6A. Restrictions. Restricted Securities are only transferable (i)
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pursuant to public offerings registered under the Securities Act, (ii) pursuant
to Rule 144 or Rule 144A if such rules are available and (iii) subject to the
conditions specified in Section 6B below, any other legally available means of
transfer pursuant to the Securities Act.
6B. Procedure for Transfer. In connection with the transfer of any
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Restricted Securities (other than a transfer referred to in clauses (i) or (ii)
of Section 6A above), the holder thereof will deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of Kirkland & Ellis or other counsel which (to the
Company's reasonable satisfaction) is knowledgeable in securities law matters to
the effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of such Restricted Securities delivers to the Company an
opinion of such counsel that no subsequent transfer of such Restricted
Securities will require registration under the Securities Act. The Company will
promptly upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act legend set forth in
Section 6C below. If the Company is not required to deliver new certificates
for such Restricted Securities not bearing such legend, the holder thereof will
not transfer the same until the prospective transferee has confirmed to the
Company in writing its agreement to be bound by the agreements related to
transfer of Restricted Securities contained in this Agreement.
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6C. Legend. Each certificate representing Restricted Securities
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shall be endorsed with the legend in substantially the form set forth below.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
__________, 1997 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE CONTRIBUTION
AGREEMENT, DATED AS OF SEPTEMBER 30, 1997, AS AMENDED AND MODIFIED FROM
TIME TO TIME, BY AND AMONG THE ISSUER (THE "COMPANY") AND CERTAIN
INVESTORS, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO
SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Whenever any of the Restricted Securities cease to be Restricted Securities, the
holder thereof will be entitled to receive from the Company, without expense,
upon surrender to the Company of the certificate representing such securities, a
new certificate representing such securities of like tenor but not bearing a
legend of the character set forth above.
Section 7. Termination. Upon execution by Willis Stein and the Company
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of any agreement to terminate this Agreement at any time prior to consummation
of the Company IPO, this Agreement shall immediately terminate. Upon any such
termination, no party hereunder shall have any liability hereunder to any other
party hereto, except for wilful breach hereof by such party prior to such
termination.
Section 8. Certain Definitions.
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"Accreted Value" of any PIC Stock or Holdings Unit as of any date
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means:
(i) in the case of any share of PIC Preferred Stock, the sum of
the Unreturned Preferred Capital and the Unpaid Preferred Yield of such share
(as defined in the Certificate of Incorporation of PIC); and
(ii) in the case of any Preferred Unit of Holdings, the quotient
determined by dividing (x) the sum as of such date of the Unreturned Preferred
Capital and the Unpaid Preferred Yield (as defined in the LLC Agreement),
divided by (y) the aggregate number of Preferred Units outstanding as of the
determination thereof.
"Board" means the Board of Directors of the Company.
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"Class A Common Units" has the meaning given to such term in the LLC
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Agreement.
"Class D Common Units" means the Class D1 Common Units, Class D2
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Common Units, Class D3 Common Units, Class D4 Common Units and Class D5 Common
Units, each as defined in the LLC Agreement.
"Class D Holder" means each holder of Class D Common Units listed on
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the attached Schedule of Class D Units.
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"Conversion Ratio" means 36.166847.
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"Holdings Options" means the options which were granted to employees
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of the Company and its Subsidiaries as of July 31, 1997 to purchase the number
of Class A Common Units of Holdings.
"Imputed Common Holdings Multiple" means 1.13265.
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"Imputed Preferred Holdings Multiple" means 1.11111.
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"IPO Price" means the price per share at which the Company Stock is to
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be offered and sold to the public at the closing of the Company IPO.
"LLC Agreement" means the Limited Liability Company Agreement of
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Holdings originally effective as of September 30, 1996, as amended and restated
as of July 31, 1997.
"Non-Voting Investors" means, collectively, BankAmerica Investment
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Corporation, CIVC Partners II, Chase Equity Associates, L.P., FUI, Inc. and CIBC
WG Argosy Merchant Fund 2, L.L.C.
"Restricted Securities" means the Company Stock and Company Class B
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Stock issued hereunder and any securities issued with respect to such Company
Stock or Company Class B Stock by way of any stock dividend or stock split, or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities will cease to be Restricted Securities when (a) they
have been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) they have become
eligible for sale pursuant to Rule 144 or Rule 144A or (c) an opinion of
Kirkland & Ellis or other counsel which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that the
transfer of such Restricted Securities may be effected without registration of
such Restricted Securities under the Securities Act and that no subsequent
transfer of such Restricted Securities will require registration under the
Securities Act has been delivered to the Company.
"Securities Act" means the Securities Act of 1933, as amended, or any
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similar federal law then in force.
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"Securityholders Agreement" means the Securityholders Agreement dated
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as of September 30, 1996 among PIC, Holdings, the Company and certain of the
Investors, as amended.
"Voting Investors" means all Investors other than the Non-Voting
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Investors.
Section 9. Miscellaneous.
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9A. Reasonable Best Efforts. Each Investor shall use its reasonable
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best efforts to cause the conditions to the obligations of the parties contained
in Section 3 hereof to be satisfied promptly, including without limitation by
voting such Investor's Old Voting Shares and Old Non-Voting Shares to approve
the Certificate of Amendment.
9B. Amendment and Waiver. Any modification, amendment or waiver of
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any provision of this Agreement shall be effective against any Investor if such
modification, amendment or waiver is approved in writing by Willis Stein;
provided that any amendment, modification or waiver of any provision of this
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Agreement which has a material adverse effect on any Investor in its capacity as
such, which would be borne disproportionately by such Investor relative to
Willis Stein (measured by the value of such Investor's holdings of PIC Stock,
Holdings Units and Old Company Stock), shall be effective against such Investor
only if consented to in writing by such Investor; provided further that if more
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than one Investor is materially adversely affected in such a disproportionate
manner, such amendment, modification or waiver shall be effective against all
Investors who are similarly so affected if consented to in writing by Investors
holding a majority in value of the PIC Stock, Holdings Units and Old Company
Stock held by such holders.
9C. No Transfer. Each of the Investors hereby agrees that it will
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not, directly or indirectly, transfer any interest in any of its PIC Stock,
Holdings Units or Old Company Stock except to the Company at the Closing, unless
this Agreement is terminated prior thereto in accordance with Section 7 above.
9D. Severability. Whenever possible, each provision of this
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Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
9E. Captions. The captions used in this Agreement are for the
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convenience of reference only and do not constitute a part of this Agreement and
will not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement will be enforced and
construed as if no caption had been used in this Agreement.
9F. Gender. Reference herein to any gender, including the neutral
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gender, includes each other gender.
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9G. Entire Agreement. This Agreement, together with all exhibits
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and schedules attached hereto, and the other agreements dated the date hereof,
contain the entire agreement between the parties with respect to the subject
matter hereof, and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
9H. Counterparts. This Agreement may be executed in one or more
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counterparts all of which taken together will constitute one and the same
instrument.
9I. Governing Law. The corporate law of Delaware will govern all
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issues concerning the relative rights of the Company and its stockholders. All
other issues concerning this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Delaware.
9J. No Third Party Beneficiary Rights. This Agreement is intended
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solely for the benefit of the parties hereto. Nothing herein shall be construed
or deemed to create any rights or benefits in any third parties or third party
beneficiaries.
9K. Several Obligations; Understanding Among Investors. The
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obligations hereunder of each of the Investors shall be several and not joint.
The liabilities of each PIC Investor in respect of the representations and
warranties included in Section 4D above shall be several, in proportion to each
such Investor's holdings of PIC Stock. The determination of each Investor to
execute this Agreement, to contribute PIC Stock and Holdings Units pursuant
hereto and to consent to the cancellation of its Old Common Stock and the
issuance therefor of Company Stock has been made by such Investor independent of
any other Investor and independent of any statements or opinions as to the
advisability of such transaction which may have been made or given by any other
Investor or by any agent or employee of any other Investor. In addition, it is
acknowledged by each of the other Investors that Willis Stein has not acted as
an agent of such Investor in connection with making its investment hereunder and
that Willis Stein shall not be acting as an agent of such Investor in connection
with monitoring its investment hereunder or in any other respect.
* * * * *
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Contribution and
Recapitalization Agreement as of the date first written above.
THE PETERSEN COMPANIES, INC.
By: /s/ Richard S Willis
-------------------------------------------
Title: Executive Vice President and Chief
Financial Officer
WILLIS STEIN & PARTNERS, L.P.
By: Willis Stein & Partners, L.L.C.
Its: General Partner
By: /s/ Daniel H. Blumenthal
-------------------------------------------
Name Daniel H. Blumenthal
Title: Managing Director
NASSAU CAPITAL PARTNERS II, L.P.
By: Nassau Capital, L.L.C.
Title: General Partner
By: /s/ John G. Quigley
-------------------------------------------
Name: John G. Quigley
Title: Member
NAS PARTNERS I, L.L.C.
By: /s/ John G. Quigley
-------------------------------------------
Name: John G. Quigley
Title: Member
PETERSEN PROPERTIES
By: /s/ Robert E. Petersen
-------------------------------------------
Name: Robert E. Petersen
Title: Chairman of the Board
BANKAMERICA INVESTMENT CORPORATION
By: /s/ Christopher J. Perry
-------------------------------------------
Name: Christopher J. Perry
Title: Managing Director
<PAGE>
[Signature Page to Contribution and Recapitalization Agreement]
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capitals Partners
Its: General Partner
By: /s/ Brian J. Richmond
-------------------------------------------
Name: Brian J. Richmond
Title: General Partner
ALLSTATE INSURANCE COMPANY
By: /s/ John M. Goesne
-------------------------------------------
Name: John M. Goesne
By: /s/ Corey S. Golde
-------------------------------------------
Name: Corey S. Golde
Title: Authorized Signatories
FUI, INC.
By: /s/ Scott B. Perpe
-------------------------------------------
Name: Scott B. Perper
Title: Senior Vice President
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
By: /s/ Jay Levine
-------------------------------------------
Name: Jay Levine
Title: Managing Director
NORWEST EQUITY CAPITAL, L.L.C.
By: Itasca NEC, L.L.C.
Its: Managing Member
By: /s/ J.E. Lindahl
-------------------------------------------
Name: J.E. Lindahl
Title: Managing Member
/s/ James D. Dunning, Jr.
-------------------------------------------
James D. Dunning, Jr.
<PAGE>
[Signature Page to Contribution and Recapitalization Agreement]
JAMES D. DUNNING III TRUST
By: /s/ James D. Dunning, Jr.
-------------------------------------------
Name: James D. Dunning, Jr.
Title: Trustee
DAVID F. DUNNING TRUST
By: /s/ James D. Dunning, Jr.
-------------------------------------------
Name: James D. Dunning, Jr.
Title: Trustee
CIVC PARTNERS II
By: /s/ Christopher J. Perry
-------------------------------------------
Name: Christopher J. Perry
Title: A General Partner
THE LAURENCE H. BLOCH AND CINDY BLOCH
TRUST
By: /s/ Laurence H. Bloch
-------------------------------------------
Name: Laurence H. Bloch
Title: Trustee
/s/ Stuart Karu
-------------------------------------------
Stuart Karu
/s/ Thomas J. Strauss
-------------------------------------------
Thomas J. Strauss
/s/ Irwin Bard
-------------------------------------------
Irwin Bard
/s/ Bernard Shavitz
-------------------------------------------
Bernard Shavitz
/s/ D. Claeys Bahrenburg
-------------------------------------------
D. Claeys Bahrenburg
<PAGE>
[Signature Page to Contribution and Recapitalization Agreement]
/s/ Neal Vitale
-------------------------------------------
Neal Vitale
/s/ Richard S. Willis
--------------------------------------------
Richard S Willis
/s/ John Dianna
--------------------------------------------
John Dianna
/s/ Richard P. Lague
--------------------------------------------
Richard P. Lague
/s/ Paul Tzimoulis
--------------------------------------------
Paul Tzimoulis
/s/ David Myers
--------------------------------------------
David Myers
/s/ Ken Elliot
--------------------------------------------
Ken Elliot
/s/ Lee Kelley
--------------------------------------------
Lee Kelley
/s/ Michael Borchetta
--------------------------------------------
Michael Borchetta
/s/ Justin McCormack
--------------------------------------------
Justin McCormack
<PAGE>
[Signature Page to Contribution and Recapitalization Agreement]
DEAN WITTER REYNOLDS, Custodian for Justin
McCormack IRA Rollover
By: /s/ Timothy J. Walsh
--------------------------------------------
Name: Timothy J. Walsh
Title: Branch Manager
MLPF&S, Custodian FPO James Guthrie IRA FBO
James Guthrie
By: /s/ Frank P. Trapani
--------------------------------------------
Name: Frank P. Trapani
Title: Assistant Vice President
/s/ Charlotte Perkins
--------------------------------------------
Charlotte Perkins
/s/ Amy Wilkins
--------------------------------------------
Amy Wilkins
<PAGE>
EXHIBIT 3.1 (i)
RESTATED CERTIFICATE OF INCORPORATION
OF
THE PETERSEN COMPANIES, INC.
ARTICLE I - Name
----------------
The name of the corporation is The Petersen Companies, Inc.
(hereinafter referred to as the "Corporation").
-----------
ARTICLE II - Registered Office
------------------------------
The address of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle
19805. The name of the registered agent of the Corporation at that address is
Corporation Service Company.
ARTICLE III - Purpose
---------------------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law").
--------------------------------
ARTICLE IV - Capital Stock
--------------------------
Part A. General. The maximum number of shares of capital stock that
------- -------
the Corporation is authorized to have outstanding at any one time is 105,000,000
shares, consisting of: (i) 5,000,000 shares of Preferred Stock, par value $0.01
per share (the "Preferred Stock"); (ii 75,000,000 shares of Class A Common
---------------
Stock, par value $0.01 per share (the "Class A Common") and (iii) 25,000,000
--------------
shares of Class B Common Stock, par value $0.01 per share (the "Class B Common"
--------------
and, together with the Class A Common, the "Common Stock").
------------
Part B. Preferred Stock. Authority is hereby expressly vested in
------- ---------------
the Board of Directors of the Corporation, subject to the provisions of this
ARTICLE IV and to the limitations prescribed by law, to authorize the issuance
- ----------
from time to time of one or more series of Preferred Stock. The authority of
the Board of Directors with respect to each series shall include, but not be
limited to, the determination or fixing of the following by resolution or
resolutions adopted by the affirmative vote of a majority of the total number of
the Directors then in office:
<PAGE>
(1) The designation of such series;
(2) The dividend rate of such series, the conditions and dates upon
which such dividends shall be payable, the relation which such dividends shall
bear to the dividends payable on any other class or classes or series of the
Corporation's capital stock and whether such dividends shall be cumulative or
non-cumulative;
(3) Whether the shares of such series shall be subject to redemption
for cash, property or rights, including securities of any other corporation, by
the Corporation or upon the happening of a specified event and, if made subject
to any such redemption, the times or events, prices, rates, adjustments and
other terms and conditions of such redemptions;
(4) The terms and amount of any sinking fund provided for the purchase
or redemption of the shares of such series;
(5) Whether or not the shares of such series shall be convertible
into, or exchangeable for, at the option of either the holder or the Corporation
or upon the happening of a specified event, shares of any other class or classes
or of any other series of the same class of the Corporation's capital stock and,
if provision be made for conversion or exchange, the times or events, prices,
rates, adjustments and other terms and conditions of such conversions or
exchanges;
(6) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock;
(7) The rights of the holders of the shares of such series upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; and
(8) The provisions as to voting, optional and/or other special rights
and preferences, if any, including, without limitation, the right to elect one
or more Directors.
Part C. Common Stock. Except as otherwise provided in this Part C
------- ------------
or as otherwise required by applicable law, all shares of Class A Common and
Class B Common shall be identical in all respects and shall entitle the holders
thereof to the same rights, preferences and privi leges, subject to the same
qualifications, limitations and restrictions, as set forth herein.
(1) Except as otherwise provided in this Part C or as otherwise
required by applicable law, the holders of Class A Common shall be entitled to
one vote per share on all matters to be voted on by the Corporation's
stockholders, and the holders of Class B Common shall have no right to vote on
any matters to be voted on by the Corporation's stockholders; provided that the
-------- ----
holders of the Class B Common shall have the right to vote as a separate class
on any merger or consolidation of the Corporation with or into another entity or
entities, or any recapitalization or reorganization, in which shares of Class B
Common would receive or be exchanged for consideration different on a per share
basis from the consideration received with respect to or in exchange for shares
of Class A Common or would otherwise be treated differently from shares of Class
A Common, except that shares of Class B Common may, without such a separate
class vote, receive or be exchanged for non-voting securities (except as
otherwise required by law) which are
-2-
<PAGE>
otherwise identical on a per share basis in amount and form to the voting
securities received with respect to or in exchange for the Class A Common so
long as (i) such non-voting securities are convertible into voting securities on
the same terms as the Class B Common is convertible into Class A Common and (ii)
all other consideration is equal on a per share basis.
(2) As and when dividends are declared or paid with respect to shares
of Common Stock, whether in cash, property or securities of the Corporation, the
holders of Class A Common and the holders of Class B Common shall be entitled to
receive such dividends pro rata at the same rate per share of each class of
Common Stock; provided that (i) if dividends are declared or paid in shares of
-------- ----
Class A Common or Class B Common, the dividends payable in shares of Class A
Common shall be payable to holders of Class A Common and the dividends payable
in shares of Class B Common shall be payable to holders of Class B Common and
(ii) if the dividends consist of other voting securities of the Corporation, the
Corporation shall make available to each holder of Class B Common, at such
holder's request, dividends consisting of non-voting securities (except as
otherwise required by law) of the Corporation which are otherwise identical to
the voting securities and which are convertible into such voting securities on
the same terms as the Class B Common is convertible into the Class A Common.
The rights of the holders of Common Stock to receive dividends are subject to
the provisions of the Preferred Stock.
(3) Subject to the provisions of the Preferred Stock, the holders of
the Class A Common and the holders of the Class B Common shall be entitled to
participate pro rata at the same rate per share of each class of Common Stock in
all distributions to the holders of the Common Stock in any liquidation,
dissolution or winding up of the Corporation.
(4) Conversion.
----------
(a) Conversion of Class B Common.
----------------------------
(i) In connection with the occurrence (or the expected
occurrence as described in (iii) below) of any Conversion Event, each holder of
Class B Common shall be entitled to convert into an equal number of shares of
Class A Common any or all of the shares of such holder's Class B Common being
(or expected to be) distributed, disposed of or sold in connection with such
Conversion Event.
(ii) For purposes of this paragraph (4)(a) of this Part C, a
"Conversion Event" shall mean (a) any public offering or public sale of
- -----------------
securities of the Corporation (including a public offering registered under the
Securities Act of 1933 and a public sale pursuant to Rule 144 of the Securities
and Exchange Commission or any similar rule then in force), (b) any sale of
securities of the Corporation to a person or group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
-------------
if, after such sale, such person or group of persons in the aggregate would own
or control securities which possess in the aggregate the ordinary voting power
to elect a majority of the Corporation's directors (provided that such sale has
-------- ----
been approved by the Corporation's Board of Directors or a committee thereof),
(c) any sale of securities of the Corporation to a person or group of persons
(within the meaning of the Exchange Act) if, after such sale, such person or
group of persons in the aggregate would own or control securities of the
Corporation (excluding any Class B Common being converted and disposed of in
-3-
<PAGE>
connection with such Conversion Event) which possess in the aggregate the
ordinary voting power to elect a majority of the Corporation's directors, (d)
any sale of securities of the Corporation to a person or group of persons
(within the meaning of the Exchange Act) if, after such sale, such person or
group of persons would not, in the aggregate, own, control or have the right to
acquire more than two percent (2%) of the outstanding securities of any class of
voting securities of the Corporation, and (e) a merger, consolidation or similar
transaction involving the Corporation if, after such transaction, a person or
group of persons (within the meaning of the Exchange Act) in the aggregate would
own or control securities which possess in the aggregate the ordinary voting
power to elect a majority of the surviving corporation's directors (provided
--------
that the transaction has been approved by the Corporation's Board of Directors
- ----
or a committee thereof). For purposes of this paragraph (4)(a) of this Part C,
a "person" shall include any natural person and any corporation, partnership,
------
joint venture, trust, unincorporated organization and any other entity or
organization.
(iii) Each holder of Class B Common shall be entitled to
convert shares of Class B Common in connection with any Conversion Event if such
holder reasonably believes that such Conversion Event shall be consummated, and
a written request for conversion from any holder of Class B Common to the
Corporation stating such holder's reasonable belief that a Conversion Event
shall occur shall be conclusive and shall obligate the Corporation to effect
such conversion in a timely manner so as to enable each such holder to
participate in such Conversion Event. The Corporation shall not cancel the
shares of Class B Common so converted before the tenth day following such
Conversion Event and shall reserve such shares until such tenth day for
reissuance in compliance with the next sentence. If any shares of Class B
Common are converted into shares of Class A Common in connection with a
Conversion Event and such shares of Class A Common are not actually distributed,
disposed of or sold pursuant to such Conversion Event, such shares of Class A
Common shall be promptly converted back into the same number of shares of Class
B Common.
(b) Conversion Procedure.
--------------------
(i) Unless otherwise provided in connection with a
Conversion Event, each conversion of shares of Class B Common into shares of
Class A Common shall be effected by the surrender of the certificate or
certificates representing the shares to be converted at the principal office of
the Corporation at any time during normal business hours, together with a
written notice by the holder of such Class B Common stating that such holder
desires to convert the shares, or a stated number of the shares, of Class B
Common represented by such certificate or certificates into Class A Common.
Unless otherwise provided in connection with a Conversion Event, each conversion
shall be deemed to have been effected as of the close of business on the date on
which such certificate or certificates have been surrendered and such notice has
been received, and at such time the rights of the holder of the converted Class
B Common as such holder shall cease and the person or persons in whose name or
names the certificate or certificates for shares of Class A Common are to be
issued upon such conversion shall be deemed to have become the holder or holders
of record of the shares of Class A Common represented thereby.
(ii) Promptly after the surrender of certificates and the
receipt of such written notice, the Corporation shall issue and deliver in
accordance with the surrendering holder's instructions (a) the certificate or
certificates for the Class A Common issuable upon such
-4-
<PAGE>
conversion and (b) a certificate representing any Class B Common which was
represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which was not converted.
(iii) The issuance of certificates for Class A Common upon
conversion of Class B Common shall be made without charge to the holders of such
shares for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of Class
A Common.
(iv) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Common, solely
for the purpose of issuance upon the conversion of the Class B Common, such
number of shares of Class A Common issuable upon the conversion of all
outstanding Class B Common. All shares of Class A Common which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of Class A Common may
be so issued without violation of any applicable law or governmental regulation
or any requirements of any domestic securities exchange upon which shares of
Class A Common may be listed (except for official notice of issuance which shall
be immediately transmitted by the Corporation upon issuance).
(v) The Corporation shall not close its books against the
transfer of Class B Common or of Class A Common issued or issuable upon
conversion of Class B Common in any manner which would interfere with the timely
conversion of Class B Common. The Corporation shall assist and cooperate with
any holder of Class B Common required to make any governmental filings or obtain
any governmental approval prior to or in connection with any conversion of Class
B Common hereunder (including, without limitation, making any filings required
to be made by the Corporation).
(c) Stock Splits. If the Corporation in any manner subdivides or
------------
combines the outstanding shares of one class of Common Stock, the outstanding
shares of the other class of Common Stock shall be proportionately subdivided or
combined in a similar manner.
ARTICLE V - Existence
---------------------
The Corporation is to have perpetual existence.
ARTICLE VI - By-laws
--------------------
In furtherance and not in limitation of the powers conferred by the
Delaware General Corporation Law, the Board of Directors of the Corporation is
expressly authorized to make, alter, amend, change, add to or repeal the By-laws
of the Corporation by the affirmative vote of a majority of the total number of
Directors then in office. Any alteration or repeal of the By-laws of the
Corporation by the stockholders of the Corporation shall require the affirmative
vote of at least a majority of the voting power of the then outstanding shares
of capital stock of the Corporation
-5-
<PAGE>
entitled to vote on such alteration or repeal, subject to ARTICLE IX hereof and
----------
ARTICLE VII of the Corporation's By-laws.
- -----------
ARTICLE VII - Stockholders and Directors
----------------------------------------
Part A. Stockholder Action. Election of Directors need not be by
------- ------------------
written ballot unless the By-laws of the Corporation so provide. Subject to any
rights of holders of any series of Preferred Stock, from and after the date on
which the Class A Common of the Corporation is registered pursuant to the
Exchange Act, (i) any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected in lieu thereof by
any consent in writing by such stockholders, (ii) special meetings of
stockholders of the Corporation may be called only by either the Board of
Directors pursuant to a resolution adopted by the affirmative vote of the
majority of the total number of Directors then in office or by the chief
executive officer of the Corporation and (iii) advance notice of stockholder
nominations of persons for election to the Board of Directors of the Corporation
and of business to be brought before any annual meeting of the stockholders by
the stockholders of the Corporation shall be given in the manner provided in the
By-laws of the Corporation.
Part B. Number of Directors and Term of Office. Subject to any
------- --------------------------------------
rights of holders of any series of Preferred Stock to elect additional Directors
under specified circumstances, the number of Directors which shall constitute
the Board of Directors of the Corporation shall be fixed from time to time in
the manner set forth in the By-laws of the Corporation. The Directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. Membership in such class shall be as nearly equal in number as possible.
The term of office of the initial Class I Directors shall expire at the annual
election of Directors by the stockholders of the Corporation in 1998, the term
of office of the initial Class II Directors shall expire at the annual election
of Directors by the stockholders of the Corporation in 1999 and the term of
office of the initial Class III Directors shall expire at the annual election of
Directors by the stockholders of the Corporation in 2000, or thereafter when
their respective successors in each case are elected by the stockholders and
qualified, subject however, to prior death, resignation, retirement,
disqualification or removal from office for cause. At each succeeding annual
election of Directors by the stockholders of the Corporation beginning in 1998,
the Directors chosen to succeed those whose terms then expire shall be
identified as being of the same class as the Directors they succeed and shall be
elected for a term expiring at the third succeeding annual election of Directors
by the stockholders of the Corporation, or thereafter when their respective
successors in each case are elected by the stockholders and qualified. If the
number of Directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of Directors in each class as
nearly equal as possible, and any additional Director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of Directors shorten the term of any incumbent
Director.
Part C. Removal and Resignation. No Director may be removed from
------- -----------------------
office without cause and without the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the
-6-
<PAGE>
election of Directors voting together as a single class; provided, however, that
-------- -------
if the holders of any class or series of capital stock are entitled by the
provisions of this Restated Certificate (it being understood that any references
to this Restated Certificate shall include any duly authorized certificate of
designation) to elect one or more Directors, such Director or Directors so
elected may be removed without cause only by the vote of the holders of a
majority of the outstanding shares of that class or series entitled to vote. Any
Director may resign at any time upon written notice to the Corporation.
Part D. Vacancies and Newly Created Directorships. Subject to any
------- -----------------------------------------
rights of holders of any series of Preferred Stock to fill such newly created
Directorships or vacancies, any newly created Directorships resulting from any
increase in the authorized number of Directors and any vacancies in the Board of
Directors resulting from death, resignation, disqualification or removal from
office for cause shall, unless otherwise provided by law or by resolution
approved by the affirmative vote of a majority of the total number of Directors
then in office, be filled only by resolution approved by the affirmative vote of
a majority of the total number of Directors then in office. Any Director so
chosen shall hold office until the next election of the class for which such
Director shall have been chosen, and until his successor shall have been duly
elected and qualified, unless he shall resign, die, become disqualified or be
removed for cause.
Part E. Effectiveness. The provisions of this ARTICLE VII shall
------- -------------
terminate and be of no further force and effect in the event that the initial
public offering of the Corporation's Common Stock as contemplated by the
Corporation's Prospectus included in the Registration Statement is not
consummated within 30 days of the Effective Date.
ARTICLE VII - General Provisions
--------------------------------
Part A. Dividends. The Board of Directors shall have authority from
------- ---------
time to time to set apart out of any assets of the Corporation otherwise
available for dividends a reserve or reserves as working capital or for any
other purpose or purposes, and to abolish or add to any such reserve or reserves
from time to time as said Board may deem to be in the interest of the
Corporation; and said Board shall likewise have power to determine in its
discretion, except as herein otherwise provided, what part of the assets of the
Corporation available for dividends in excess of such reserve or reserves shall
be declared in dividends and paid to the stockholders of the Corporation.
Part B. Issuance of Stock. The shares of all classes of stock of
------- -----------------
the Corporation may be issued by the Corporation from time to time for such
consideration as from time to time may be fixed by the Board of Directors of the
Corporation, provided that shares of stock having a par value shall not be
-------- ----
issued for a consideration less than such par value, as determined by the Board.
At any time, or from time to time, the Corporation may grant rights or options
to purchase from the Corporation any shares of its stock of any class or classes
to run for such period of time, for such consideration, upon such terms and
conditions, and in such form as the Board of Directors may determine. The Board
of Directors shall have authority, as provided by law, to determine that only a
part of the consideration which shall be received by the Corporation for the
shares of its stock which it shall issue from time to time, shall be capital;
provided, however, that,
- -------- -------
-7-
<PAGE>
if all the shares issued shall be shares having a par value, the amount of the
part of such consideration so determined to be capital shall be equal to the
aggregate par value of such shares. The excess, if any, at any time, of the
total net assets of the Corporation over the amount so determined to be capital,
as aforesaid, shall be surplus. All classes of stock of the Corporation shall be
and remain at all times nonassessable.
The Board of Directors is hereby expressly authorized, in its
discretion, in connection with the issuance of any obligations or stock of the
Corporation (but without intending hereby to limit its general power so to do in
other cases), to grant rights or options to purchase stock of the Corporation of
any class upon such terms and during such period as the Board of Directors shall
determine, and to cause such rights to be evidenced by such warrants or other
instruments as it may deem advisable.
Part C. Inspection of Books and Records. The Board of Directors
------- -------------------------------
shall have power from time to time to determine to what extent and at what times
and places and under what conditions and regulations the accounts and books of
the Corporation, or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or of the stockholders of the Corporation.
Part D. Location of Meetings, Books and Records. Except as
------- ---------------------------------------
otherwise provided in the By-laws, the stockholders of the Corporation and the
Board of Directors may hold their meetings and have an office or offices outside
of the State of Delaware and, subject to the provisions of the laws of said
State, may keep the books of the Corporation outside of said State at such
places as may, from time to time, be designated by the Board of Directors.
ARTICLE IX - Amendments
-----------------------
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate in the manner now or
hereinafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation. Notwithstanding anything contained in this Restated Certificate to
the contrary, Parts A, B and C of ARTICLE IV, ARTICLE VII, ARTICLE X, and this
---------- ----------- ---------
ARTICLE IX of this Restated Certificate shall not be altered, amended or
- ----------
repealed and no provision inconsistent therewith shall be adopted without the
affirmative vote of the holders of at least 66 2/3% of the voting power of the
then outstanding shares of capital stock of the Corporation entitled to vote on
such alteration, amendment or repeal, voting together as a single class (other
than any alteration or amendment to Part A of ARTICLE IV that increases the
----------
authorized number of shares of Preferred Stock, Class A Common or Class B
Common); provided further that no amendment or waiver of any provision of Part C
-------- -------
of ARTICLE IV shall be effective without the prior approval of the holders of a
----------
majority of the then outstanding Class B Common voting as a separate class.
-8-
<PAGE>
ARTICLE X - Liability
---------------------
Part A. Limitation of Liability.
------- -----------------------
(1) To the fullest extent permitted by the Delaware General
Corporation Law as it now exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), and except as otherwise provided in the Corporation's By-laws, no
Director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the Corporation or its stockholders.
(2) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
Part B. Right to Indemnification. Each person who was or is made a
------- ------------------------
party or is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
----------
fact that he or she is or was a Director or officer of the Corporation or, while
a Director or officer of the Corporation, is or was serving at the request of
the Corporation as a Director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (an "indemnitee"), whether the basis of
----------
such proceeding is alleged action in an official capacity as a Director or
officer or in any other capacity while serving as a Director or officer, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise exercise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith and such indemnification shall continue as to
an indemnitee who has ceased to be a Director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Part C of this
-------- -------
ARTICLE X with respect to proceedings to enforce rights to indemnification, the
- ---------
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The right
to indemnification conferred in this Part B of this ARTICLE X shall be a
---------
contract right and shall include the obligation of the Corporation to pay the
expenses incurred in defending any such proceeding in advance of its final
disposition (an "advance of expenses"); provided, however, that, if and to the
------------------- -------- -------
extent that the Delaware General Corporation Law requires, an advance of
expenses incurred by an indemnitee in his or her capacity as a Director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking (an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
-----------
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (a "final adjudication") that such
------------------
indemnitee is not entitled to be indemnified for such
-9-
<PAGE>
expenses under this Part B or otherwise. The Corporation may, by action of its
Board of Directors, provide indemnification to employees and agents of the
Corporation with the same or lesser scope and effect as the foregoing
indemnification of Directors and officers.
Part C. Procedure for Indemnification. Any indemnification of a
------- -----------------------------
Director or officer of the Corporation or advance of expenses under Part B of
this ARTICLE X shall be made promptly, and in any event within forty-five days
---------
(or, in the case of an advance of expenses, twenty days), upon the written
request of the Director or officer. If a determination by the Corporation that
the Director or officer is entitled to indemnification pursuant to this ARTICLE
-------
X is required, and the Corporation fails to respond within sixty days to a
- -
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advance of expenses, in whole or in part, or if payment in full pursuant to such
request is not made within forty-five days (or, in the case of an advance of
expenses, twenty days), the right to indemnification or advances as granted by
this ARTICLE X shall be enforceable by the Director or officer in any court of
---------
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of expenses where the undertaking required pursuant to
Part B of this ARTICLE X, if any, has been tendered to the Corporation) that the
---------
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct. The procedure for indemnification of other employees and agents for
whom indemnification is provided pursuant to Part B of this ARTICLE X shall be
---------
the same procedure set forth in this Part C for Directors or officers, unless
otherwise set forth in the action of the Board of Directors providing
indemnification for such employee or agent.
Part D. Insurance. The Corporation may purchase and maintain
------- ---------
insurance on its own behalf and on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss asserted against him or her and incurred by him or
her in any such capacity, whether or not the Corporation would have the power to
indemnify such person against such expenses, liability or loss under the
Delaware General Corporation Law.
Part E. Service for Subsidiaries. Any person serving as a
------- ------------------------
Director, officer, employee or agent of another corporation, partnership,
limited liability company, joint venture or other enterprise, at least 50% of
whose equity interests are owned by the Corporation (a "subsidiary"
----------
-10-
<PAGE>
for this ARTICLE X) shall be conclusively presumed to be serving in such
---------
capacity at the request of the Corporation.
Part F. Reliance. Persons who after the date of the adoption of
------- --------
this provision become or remain Directors or officers of the Corporation or who,
while a Director or officer of the Corporation, become or remain a Director,
officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, advance of expenses and other rights
contained in this ARTICLE X in entering into or continuing such service. The
---------
rights to indemnification and to the advance of expenses conferred in this
ARTICLE X shall apply to claims made against an indemnitee arising out of acts
- ---------
or omissions which occurred or occur both prior and subsequent to the adoption
hereof.
Part G. Non-Exclusivity of Rights. The rights to indemnification
------- -------------------------
and to the advance of expenses conferred in this ARTICLE X shall not be
---------
exclusive of any other right which any person may have or hereafter acquire
under this Restated Certificate or under any statute, by-law, agreement, vote of
stockholders or disinterested Directors or otherwise.
Part H. Merger or Consolidation. For purposes of this ARTICLE X,
------- ----------------------- ---------
references to the "Corporation" shall include, in addition to the resulting
-----------
Corporation, any constituent Corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
Directors, officers and employees or agents, so that any person who is or was a
Director, officer, employee or agent of such constituent Corporation, or is or
was serving at the request of such constituent Corporation as a Director,
officer, employee or agent of another Corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this ARTICLE X
---------
with respect to the resulting or surviving Corporation as he or she would have
with respect to such constituent Corporation if its separate existence had
continued.
ARTICLE XI - Business Combinations
----------------------------------
The Corporation expressly elects to be governed by Section 203 of the
Delaware General Corporation Law.
* * * * *
-11-
<PAGE>
EXHIBIT 3.1 (ii)
AMENDED AND RESTATED BY-LAWS
OF
THE PETERSEN COMPANIES, INC.
A Delaware Corporation
(Adopted as of September 30, 1997)
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of The Petersen
---------- -----------------
Companies, Inc. (the "Corporation") in the State of Delaware shall be located at
-----------
1013 Centre Road, in the City of Wilmington, Delaware, County of New Castle
19805. The name of the Corporation's registered agent at such address shall be
Corporation Service Company. The registered office and/or registered agent of
the Corporation may be changed from time to time by action of the Board of
Directors.
Section 2. Other Offices. The Corporation may also have offices at such
---------- -------------
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Annual Meeting. An annual meeting of the stockholders shall
---------- --------------
be held each year within 150 days after the close of the immediately preceding
fiscal year of the Corporation or at such other time specified by the Board of
Directors for the purpose of electing Directors and conducting such other proper
business as may come before the annual meeting. At the annual meeting,
stockholders shall elect Directors and transact such other business as properly
may be brought before the annual meeting pursuant to Section 11 of ARTICLE II
----------
hereof.
Section 2. Special Meetings. Special meetings of the stockholders may
---------- ----------------
only be called in the manner provided in the Restated Certificate of
Incorporation.
Section 3. Place of Meetings. The Board of Directors may designate any
---------- -----------------
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting. If no designation is made,
or if a special meeting be otherwise called, the place of meeting shall be the
principal executive office of the Corporation. If for any reason any annual
meeting shall not be held during any year, the business thereof may be
transacted at any special meeting of the stockholders.
<PAGE>
Section 4. Notice. Whenever stockholders are required or permitted to
---------- ------
take action at a meeting, written or printed notice stating the place, date,
time and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the Board of Directors, the chairman of the board, the president or the
secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of the
Corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
---------- -----------------
ledger of the Corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
---------- ------
capital stock entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders, except as otherwise
provided by the General Corporation Law of the State of Delaware or by the
Restated Certificate of Incorporation. If a quorum is not present, the holders
of a majority of the shares present in person or represented by proxy at the
meeting, and entitled to vote at the meeting, may adjourn the meeting to another
time and/or place. When a specified item of business requires a vote by a class
or series (if the Corporation shall then have outstanding shares of more than
one class or series) voting as a class or series, the holders of a majority of
the shares of such class or series shall constitute a quorum (as to such class
or series) for the transaction of such item of business.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
---------- ------------------
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 30 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 8. Vote Required. When a quorum is present, the affirmative vote
---------- -------------
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless (i) by express provisions of an applicable law or
-2-
<PAGE>
of the Restated Certificate of Incorporation a different vote is required, in
which case such express provision shall govern and control the decision of such
question, or (ii) the subject matter is the election of Directors, in which case
Section 2 of ARTICLE III hereof shall govern and control the approval of such
-----------
subject matter.
Section 9. Voting Rights. Except as otherwise provided by the General
---------- -------------
Corporation Law of the State of Delaware, the Restated Certificate of
Incorporation of the Corporation or any amendments thereto or these By-laws,
every stockholder shall at every meeting of the stockholders be entitled to (i)
one vote in person or by proxy for each share of common stock (other than Class
B Common Stock) held by such stockholder and (ii) no vote in person or by proxy
for each share of Class B Common Stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
----------- -------
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Business Brought Before an Annual Meeting. At an annual
----------- -----------------------------------------
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (ii)
brought before the meeting by or at the direction of the Board of Directors or
(iii) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
-------- -------
that in the event that less than 70 days' notice or prior public announcement of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the date on which such notice of the date of
the annual meeting was mailed or such public announcement was made. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting, (ii) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (iii) the class and number
-3-
<PAGE>
of shares of the Corporation which are beneficially owned by the stockholder and
(iv) any material interest of the stockholder in such business. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
section. The presiding officer of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this section; if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted. For purposes of
this section, "public announcement" shall mean disclosure in a press release
-------------------
reported by Dow Jones News Service, Associated Press or a comparable national
news service. Nothing in this section shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
------------
ARTICLE III
-----------
Directors
---------
Section 1. General Powers. The business and affairs of the Corporation
---------- --------------
shall be managed by or under the direction of the Board of Directors. In
addition to such powers as are herein and in the Restated Certificate of
Incorporation expressly conferred upon it, the Board of Directors shall have
and may exercise all the powers of the Corporation, subject to the provisions of
the laws of Delaware, the Restated Certificate of Incorporation and these By-
laws.
Section 2. Number, Election and Term of Office. Subject to any rights of
---------- -----------------------------------
the holders of any series of Preferred Stock to elect additional Directors under
specified circumstances, the number of Directors which shall constitute the
Board of Directors shall be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the total number of Directors then in office.
The Directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote in the
election of Directors; provided that, whenever the holders of any class or
series of capital stock of the Corporation are entitled to elect one or more
Directors pursuant to the provisions of the Restated Certificate of
Incorporation of the Corporation (including, but not limited to, for purposes of
these By-laws, pursuant to any duly authorized certificate of designation), such
Directors shall be elected by a plurality of the votes of such class or series
present in person or represented by proxy at the meeting and entitled to vote in
the election of such Directors. The Directors shall be elected and shall hold
office only in the manner provided in the Restated Certificate of Incorporation.
Section 3. Removal and Resignation. No Director may be removed from
---------- -----------------------
office without cause and without the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock
entitled to vote generally in the election of Directors voting together as a
single class; provided, however, that if the holders of any class or series of
capital stock are entitled by the provisions of the Restated Certificate of
Incorporation (it being understood that any references to the Restated
Certificate of Incorporation shall include any duly authorized certificate of
designation) to elect one or more Directors, such Director or Directors so
elected may
-4-
<PAGE>
be removed without cause only by the vote of the holders of a majority of the
outstanding shares of that class or series entitled to vote. Any Director may
resign at any time upon written notice to the Corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
---------- ---------
from any increase in the total number of Directors may be filled only in the
manner provided in the Restated Certificate of Incorporation.
Section 5. Nominations.
---------- -----------
(a) Only persons who are nominated in accordance with the procedures
set forth in these By-laws shall be eligible to serve as Directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this By-law, who is
entitled to vote generally in the election of Directors at the meeting and who
shall have complied with the notice procedures set forth below in Section 5(b).
(b) In order for a stockholder to nominate a person for election to
the Board of Directors of the Corporation at a meeting of stockholders, such
stockholder shall have delivered timely notice of such stockholder's intent to
make such nomination in writing to the secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation (i) in the case of an annual
meeting, not less than 60 nor more than 90 days prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the event
-------- -------
that the date of the annual meeting is changed by more than 30 days from such
anniversary date, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the earlier of the
day on which notice of the date of the meeting was mailed or public disclosure
of the meeting was made, and (ii) in the case of a special meeting at which
Directors are to be elected, not later than the close of business on the 10th
day following the earlier of the day on which notice of the date of the meeting
was mailed or public disclosure of the meeting was made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election as a Director at such meeting all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act (including such person's written consent
to being named in the proxy statement as a nominee and to serving as a Director
if elected); (ii) as to the stockholder giving the notice (A) the name and
address, as they appear on the Corporation's books, of such stockholder and (B)
the class and number of shares of the Corporation which are beneficially owned
by such stockholder and also which are owned of record by such stockholder; and
(iii) as to the beneficial owner, if any, on whose behalf the nomination is
made, (A) the name and address of such person and (B) the class and number of
shares of the Corporation which are beneficially owned by such person. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a Director shall furnish to the secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.
-5-
<PAGE>
(c) No person shall be eligible to serve as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
section. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this section, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded. A
stockholder seeking to nominate a person to serve as a Director must also comply
with all applicable requirements of the Exchange Act, and the rules and
regulations thereunder with respect to the matters set forth in this section.
Section 6. Annual Meetings. The annual meeting of the Board of Directors
---------- ---------------
shall be held without other notice than this By-law immediately after, and at
the same place as, the annual meeting of stockholders.
Section 7. Other Meetings and Notice. Regular meetings, other than the
---------- -------------------------
annual meeting, of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the Board of Directors. Special meetings of the Board of Directors may be
called by the chairman of the board, the president (if the president is a
Director) or, upon the written request of at least a majority of the Directors
then in office, the secretary of the Corporation on at least 24 hours notice to
each Director, either personally, by telephone, by mail or by telecopy.
Section 8. Chairman of the Board, Quorum, Required Vote and Adjournment.
---------- ------------------------------------------------------------
The Board of Directors shall elect, by the affirmative vote of a majority of the
total number of Directors then in office, a chairman of the board, who shall
preside at all meetings of the stockholders and Board of Directors at which he
or she is present and shall have such powers and perform such duties as the
Board of Directors may from time to time prescribe. If the chairman of the
board is not present at a meeting of the stockholders or the Board of Directors,
the president (if the president is a Director and is not also the chairman of
the board) shall preside at such meeting, and, if the president is not present
at such meeting, a majority of the Directors present at such meeting shall elect
one of their members to so preside. A majority of the total number of Directors
then in office shall constitute a quorum for the transaction of business.
Unless by express provision of an applicable law, the Restated Certificate of
Incorporation or these By-laws a different vote is required, the vote of a
majority of Directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, the Directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Committees. The Board of Directors may, by resolution passed
---------- ----------
by a majority of the total number of Directors then in office, designate one or
more committees, each committee to consist of one or more of the Directors of
the Corporation, which to the extent provided in such resolution or these By-
laws shall have, and may exercise, the powers of the Board of Directors in the
management and affairs of the Corporation, except as otherwise limited by law.
The Board of Directors may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committee or committees shall have such name or
names as may be determined from time to time by resolution
-6-
<PAGE>
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors upon request.
Section 10. Committee Rules. Each committee of the Board of Directors may
----------- ---------------
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the Board of
Directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. Unless otherwise provided in such a
resolution, in the event that a member and that member's alternate, if
alternates are designated by the Board of Directors, of such committee is or are
absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in place of any such absent or disqualified member.
Section 11. Communications Equipment. Members of the Board of Directors
----------- ------------------------
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 12. Waiver of Notice and Presumption of Assent. Any member of the
----------- ------------------------------------------
Board of Directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 13. Action by Written Consent. Unless otherwise restricted by the
----------- -------------------------
Restated Certificate of Incorporation, any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of such board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the Corporation shall be elected by
---------- ------
the Board of Directors and shall consist of a chairman of the board, a chief
executive officer, a president, one or more vice-presidents, a secretary, a
chief financial officer and such other officers and assistant
-7-
<PAGE>
officers as may be deemed necessary or desirable by the Board of Directors. Any
number of offices may be held by the same person, except that neither the chief
executive officer nor the president shall also hold the office of secretary. In
its discretion, the Board of Directors may choose not to fill any office for any
period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the Corporation
---------- ---------------------------
shall be elected annually by the Board of Directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as convenient.
Vacancies may be filled or new offices created and filled at any meeting of the
Board of Directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the Board of
---------- -------
Directors may be removed by the Board of Directors at its discretion, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
---------- ---------
death, resignation, removal, disqualification or otherwise may be filled by the
Board of Directors.
Section 5. Compensation. Compensation of all executive officers shall be
---------- ------------
approved by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his or her also being a Director of the
Corporation; provided however, that compensation of all executive officers may
-------- -------
be determined by a committee established for that purpose if so authorized by
the unanimous vote of the Board of Directors.
Section 6. Chairman of the Board. The chairman of the board shall preside
---------- ---------------------
at all meetings of the stockholders and of the Board of Directors and shall have
such other powers and perform such other duties as may be prescribed to him or
her by the Board of Directors or provided in these By-laws.
Section 7. Vice-Chairman of the Board. Whenever the chairman of the board
---------- --------------------------
in unable to serve, by reason of sickness, absence, or otherwise, the vice-
chairman shall have the powers and perform the duties of the chairman of the
board. The vice-chairman shall have such other powers and perform such other
duties as may be prescribed by the chairman of the board, the board of directors
or these By-laws.
Section 8. Chief Executive Officer. The chief executive officer shall
---------- -----------------------
have the powers and perform the duties incident to that position. Subject to
the powers of the Board of Directors and the chairman of the board, the chief
executive officer shall be in the general and active charge of the entire
business and affairs of the Corporation, and shall be its chief policy making
officer. The chief executive officer shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or provided in
these By-laws. The chief executive officer is authorized to 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
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other officer or agent of the Corporation. Whenever the president is unable to
serve, by reason of sickness, absence or otherwise, the chief executive officer
shall perform all the duties and responsibilities and exercise all the powers of
the president.
Section 9. The President. The president of the Corporation shall, subject
---------- -------------
to the powers of the Board of Directors, the chairman of the board and the chief
executive officer, have general charge of the business, affairs and property of
the Corporation, and control over its officers, agents and employees. The
president shall see that all orders and resolutions of the Board of Directors
are carried into effect. The president is authorized to execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation. The president shall have such other powers and perform such
other duties as may be prescribed by the chairman of the board, the chief
executive officer, the Board of Directors or as may be provided in these By-
laws.
Section 10. Vice-Presidents. The vice-president, or if there shall be
----------- ---------------
more than one, the vice-presidents in the order determined by the Board of
Directors or the chairman of the board, shall, in the absence or disability of
the president, act with all of the powers and be subject to all the restrictions
of the president. The vice-presidents shall also perform such other duties and
have such other powers as the Board of Directors, the chairman of the board, the
chief executive officer, the president or these By-laws may, from time to time,
prescribe. The vice-presidents may also be designated as executive vice-
presidents or senior vice-presidents, as the Board of Directors may from time to
time prescribe.
Section 11. The Secretary and Assistant Secretaries. The secretary shall
----------- ---------------------------------------
attend all meetings of the Board of Directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose or shall ensure that
his or her designee attends each such meeting to act in such capacity. Under the
chairman of the board's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these By-laws or by law; shall have
such powers and perform such duties as the Board of Directors, the chairman of
the board, the chief executive officer, the president or these By-laws may, from
time to time, prescribe; and shall have custody of the corporate seal of the
Corporation. The secretary, or an assistant secretary, shall have authority to
affix the corporate seal to any instrument requiring it and when so affixed, it
may be attested by his 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. The assistant secretary, or if there be more than one, any of
the assistant secretaries, shall in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors, the
chairman of the board, the chief executive officer, the president, or secretary
may, from time to time, prescribe.
Section 12. The Chief Financial Officer. The chief financial officer
----------- ---------------------------
shall have the custody of the corporate funds and securities; shall keep full
and accurate all books and accounts of the
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Corporation as shall be necessary or desirable in accordance with applicable law
or generally accepted accounting principles; shall deposit all monies and other
valuable effects in the name and to the credit of the Corporation as may be
ordered by the chairman of the board or the Board of Directors; shall cause the
funds of the Corporation to be disbursed when such disbursements have been duly
authorized, taking proper vouchers for such disbursements; and shall render to
the Board of Directors, at its regular meeting or when the Board of Directors so
requires, an account of the Corporation; shall have such powers and perform such
duties as the Board of Directors, the chairman of the board, the chief executive
officer, the president or these By-laws may, from time to time, prescribe. If
required by the Board of Directors, the chief financial officer shall give the
Corporation a bond (which shall be rendered every six years) in such sums and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of the office of chief financial
officer and for the restoration to the Corporation, in case of death,
resignation, retirement or removal from office of all books, papers, vouchers,
money and other property of whatever kind in the possession or under the control
of the chief financial officer belonging to the Corporation.
Section 13. Other Officers, Assistant Officers and Agents. Officers,
----------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the Board of Directors.
Section 14. Absence or Disability of Officers. In the case of the absence
----------- ---------------------------------
or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may by resolution delegate the powers and
duties of such officer to any other officer or to any Director, or to any other
person selected by it.
ARTICLE V
---------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the Corporation shall be
---------- ----
entitled to have a certificate, signed by, or in the name of the Corporation by
the chairman of the board, the chief executive officer or the president and the
secretary or an assistant secretary of the Corporation, certifying the number of
shares owned by such holder in the Corporation. If such a certificate is
countersigned (i) by a transfer agent or an assistant transfer agent other than
the Corporation or its employee or (ii) by a registrar, other than the
Corporation or its employee, the signature of any such chairman of the board,
chief executive officer, president, secretary or assistant secretary may be
facsimiles. In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the Corporation, such certificate or certificates may neverthe
less be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be
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such officer or officers of the Corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the Corporation. Shares of stock
of the Corporation shall only be transferred on the books of the Corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the Corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization and
other matters as the Corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates and record the transaction on its books. The
Board of Directors may appoint a bank or trust company organized under the laws
of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the Corporation.
Section 2. Lost Certificates. The Board of Directors may direct a new
---------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates,
or his or her legal representative, to give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against the
Corporation on account of the loss, theft or destruction of any such certificate
or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
---------- ---------------------------------------------
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 nor less than 10 days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is first given. 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.
Section 4. Fixing a Record Date for Other Purposes. In order that the
---------- ---------------------------------------
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than 60 days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
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Section 5. Registered Stockholders. Prior to the surrender to the
---------- -----------------------
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
---------- -----------------------
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
Board of Directors. Any call made by the Board of Directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
ARTICLE VI
----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
---------- ---------
Corporation, subject to the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, in accordance with applicable law. Dividends may be paid in
cash, in property or in shares of the capital stock, subject to the provisions
of the Restated Certificate of Incorporation. Before payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or any other purpose and the Directors may modify or abolish any
such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts or other orders
---------- ------------------------
for the payment of money by or to the Corporation and all notes and other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner, as shall be determined by resolution of the Board of Directors or a duly
authorized committee thereof.
Section 3. Contracts. In addition to the powers otherwise granted to
---------- ---------
officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize any
----------
officer or officers, or any agent or agents, of the Corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
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Section 4. Loans. The Corporation may lend money to, or guarantee any
---------- -----
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiaries, including any officer or employee who is a
Director of the Corporation or its subsidiaries, whenever, in the judgment of
the Directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the Board
of Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this section shall be deemed to deny,
limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed
---------- -----------
by resolution of the Board of Directors.
Section 6. Corporate Seal. The Board of Directors may provide a corporate
---------- --------------
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
---------- --------------------------------------
any other Corporation held by the Corporation shall be voted by the chief
executive officer, the president or a vice-president, unless the Board of
Directors specifically confers authority to vote with respect thereto, which
authority may be general or confined to specific instances, upon some other
person or officer. Any person authorized to vote securities shall have the
power to appoint proxies, with general power of substitution.
Section 8. Inspection of Books and Records. The Board of Directors shall
---------- -------------------------------
have power from time to time to determine to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or of the stockholders of the Corporation.
Section 9. Section Headings. Section headings in these By-laws are for
---------- ----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
----------- -----------------------
these By-laws is or becomes inconsistent with any provision of the Restated
Certificate of Incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of these By-laws shall not
be given any effect to the extent of such inconsistency but shall otherwise be
given full force and effect.
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ARTICLE VII
-----------
AMENDMENTS
----------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
alter, amend, change, add to or repeal these By-laws by the affirmative vote of
a majority of the total number of Directors then in office. Any alteration or
repeal of these By-laws by the stockholders of the Corporation shall require the
affirma tive vote of a majority of the outstanding shares of the Corporation
entitled to vote on such alteration or repeal; provided, however, that Section
-------- -------
11 of ARTICLE II and Sections 2, 3, 4 and 5 of ARTICLE III and this ARTICLE VII
---------- ----------- -----------
of these By-laws shall not be altered, amended or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote of the
holders of at least 66 2/3% of the outstanding shares of the Corporation
entitled to vote on such alteration or repeal.
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EXHIBIT 4.1
================================================================================
CREDIT AGREEMENT
among
THE PETERSEN COMPANIES, INC.,
PETERSEN PUBLISHING COMPANY, L.L.C.,
THE LENDERS NAMED HEREIN,
FIRST UNION NATIONAL BANK,
as Administrative Agent,
and
CIBC INC.,
as Documentation Agent
$175,000,000 Senior Revolving Credit Facility
Arranged by
FIRST UNION CAPITAL MARKETS CORP.
Dated as of October 6, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
RECITALS..................................... 1
ARTICLE I
DEFINITIONS
1.1. Defined Terms....................................................... 1
1.2. Accounting Terms.................................................... 21
1.3. Designated Non-Guarantor Subsidiaries............................... 22
1.4. Other Terms; Construction........................................... 22
1.5. Officers, Directors of Limited Liability Companies.................. 22
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Commitments; Loans.................................................. 22
2.2. Borrowings.......................................................... 23
2.3. Disbursements; Funding Reliance; Domicile of Loans.................. 26
2.4. Notes............................................................... 26
2.5. Termination and Reduction of Commitments and Swingline Commitment... 27
2.6. Mandatory Repayments and Prepayments................................ 28
2.7. Voluntary Prepayments............................................... 29
2.8. Interest............................................................ 30
2.9. Fees................................................................ 31
2.10. Interest Periods.................................................... 32
2.11. Conversions and Continuations....................................... 33
2.12. Method of Payments; Computations.................................... 34
2.13. Recovery of Payments................................................ 35
2.14. Use of Proceeds..................................................... 35
2.15. Pro Rata Treatment; Sharing of Payments............................. 35
2.16. Increased Costs; Change in Circumstances; Illegality; etc........... 36
2.17. Taxes............................................................... 38
2.18. Compensation........................................................ 40
2.19. Duty to Mitigate.................................................... 40
2.20. Replacement of Lenders.............................................. 40
ARTICLE III
LETTERS OF CREDIT
3.1. Issuance............................................................ 41
3.2. Outstanding Letter of Credit........................................ 42
</TABLE>
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<C> <S> <C>
3.3. Notices............................................................. 42
3.4. Participations...................................................... 43
3.5. Reimbursement....................................................... 43
3.6. Payment by Revolving Loans.......................................... 43
3.7. Payment to Lenders.................................................. 44
3.8. Obligations Absolute................................................ 44
3.9. Cash Collateral Account............................................. 46
3.10. Effectiveness....................................................... 46
ARTICLE IV
CONDITIONS OF BORROWING
4.1. Conditions of Initial Borrowing..................................... 47
4.2. Conditions of All Borrowings........................................ 50
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Organization and Power.............................................. 51
5.2. Authorization; Enforceability....................................... 51
5.3. No Violation........................................................ 52
5.4. Governmental Authorization; Permits................................. 52
5.5. Litigation.......................................................... 52
5.6. Taxes............................................................... 53
5.7. Subsidiaries........................................................ 53
5.8. Full Disclosure..................................................... 53
5.9. Margin Regulations.................................................. 54
5.10. Financial Matters................................................... 54
5.11. Ownership of Properties............................................. 55
5.12. ERISA............................................................... 56
5.13. Environmental Matters............................................... 56
5.14. Compliance With Governing Documents, Decrees and Laws............... 57
5.15. Labor Relations..................................................... 58
5.16. Regulated Industries................................................ 58
5.17. Insurance........................................................... 58
5.18. Certain Contracts................................................... 58
5.19. Capitalization...................................................... 58
5.20. Security Documents.................................................. 59
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. Financial Statements................................................ 59
6.2. Other Business and Financial Information............................ 60
6.3. Existence; Franchises; Maintenance of Properties.................... 63
</TABLE>
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<TABLE>
<C> <S> <C>
6.4. Compliance with Laws................................................ 63
6.5. Payment of Obligations.............................................. 63
6.6. Insurance........................................................... 63
6.7. Maintenance of Books and Records; Inspection........................ 63
6.8. Permitted Acquisitions.............................................. 64
6.9. Creation or Acquisition of Subsidiaries............................. 65
6.10. Additional Security; Further Assurances............................. 66
6.11. Consents............................................................ 67
6.12. Year 2000........................................................... 67
6.13. Post-Closing Transactions........................................... 67
ARTICLE VII
FINANCIAL COVENANTS
7.1. Leverage Ratio...................................................... 67
7.2. Interest Coverage Ratio............................................. 68
7.3. Fixed Charge Coverage Ratio......................................... 68
ARTICLE VIII
NEGATIVE COVENANTS
8.1. Merger; Consolidation............................................... 68
8.2. Indebtedness........................................................ 69
8.3. Liens............................................................... 70
8.4. Disposition of Assets............................................... 72
8.5. Investments......................................................... 73
8.6. Restricted Payments................................................. 74
8.7. Transactions with Affiliates........................................ 76
8.8. Lines of Business................................................... 76
8.9. Certain Amendments.................................................. 77
8.10. Limitation on Certain Restrictions.................................. 77
8.11. No Other Negative Pledges........................................... 78
8.12. Fiscal Year......................................................... 78
8.13. Accounting Changes.................................................. 78
8.14. Designated Senior Indebtedness...................................... 78
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default................................................... 78
9.2. Remedies: Termination of Commitments, Acceleration, etc............. 80
9.3. Remedies: Set-Off................................................... 81
</TABLE>
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<TABLE>
<C> <S> <C>
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Appointment......................................................... 82
10.2. Nature of Duties.................................................... 82
10.3. Exculpatory Provisions.............................................. 82
10.4. Reliance by Administrative Agent.................................... 82
10.5. Non-Reliance on Administrative Agent and Other Lenders.............. 83
10.6. Notice of Default................................................... 83
10.7. Indemnification..................................................... 84
10.8. The Administrative Agent in its Individual Capacity................. 84
10.9. Successor Administrative Agent...................................... 84
10.10. Collateral Matters.................................................. 85
10.11. Documentation Agent, etc............................................ 85
10.12. Issuing Lender and Swingline Lender................................. 85
ARTICLE XI
MISCELLANEOUS
11.1. Fees and Expenses................................................... 86
11.2. Indemnification..................................................... 86
11.3. Governing Law; Consent to Jurisdiction.............................. 87
11.4. Waiver of Jury Trial; Arbitration; Preservation and Limitation of
Remedies............................................................ 87
11.5. Notices............................................................. 88
11.6. Amendments, Waivers, etc............................................ 89
11.7. Assignments, Participations......................................... 90
11.8. No Waiver........................................................... 92
11.9. Successors and Assigns.............................................. 92
11.10. Survival............................................................ 92
11.11. Severability........................................................ 93
11.12. Construction........................................................ 93
11.13. Confidentiality..................................................... 93
11.14. Counterparts........................................................ 93
11.15. Disclosure of Information........................................... 93
11.16. Entire Agreement.................................................... 94
</TABLE>
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<PAGE>
ANNEXES
Annex I Applicable Margin Percentages
EXHIBITS
Exhibit A-1 Form of Notice of Revolving Borrowing
Exhibit A-2 Form of Notice of Swingline Borrowing
Exhibit B-1 Form of Revolving Credit Note
Exhibit B-2 Form of Swingline Note
Exhibit C Form of Notice of Prepayment
Exhibit D Form of Notice of Conversion/Continuation
Exhibit E Form of Letter of Credit Notice
Exhibit F Form of Parent Guaranty
Exhibit G Form of Borrower Pledge and Security Agreement
Exhibit H Form of Parent Pledge and Security Agreement
Exhibit I-1 Form of Opinion of Kirkland & Ellis
Exhibit I-2 Form of Opinion of Heller Ehrman White & McAuliffe
Exhibit J Form of Compliance Certificate
Exhibit K Form of Assignment and Acceptance
SCHEDULES
Schedule 5.7 Subsidiaries
Schedule 5.11 Leases
Schedule 5.17 Insurance
Schedule 5.18 Certain Contracts
Schedule 5.19 Capitalization
Schedule 8.3 Liens
Schedule 8.4 Scheduled Titles
Schedule 8.5 Investments
Schedule 8.7 Transactions with Affiliates
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 6th day of October, 1997 (this
"Agreement"), is made among THE PETERSEN COMPANIES, INC., a Delaware corporation
formerly known as BrightView Communications Group, Inc. with its principal
offices in Los Angeles, California ("Parent"), PETERSEN PUBLISHING COMPANY,
L.L.C., a Delaware limited liability company with its principal offices in Los
Angeles, California (the "Borrower"), the banks and financial institutions
listed on the signature pages hereof or that become parties hereto after the
date hereof (collectively, the "Lenders"), FIRST UNION NATIONAL BANK ("First
Union"), as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), and CIBC INC. ("CIBC"), as documentation agent (in such
capacity, the "Documentation Agent").
RECITALS
A. The Borrower is owned by Petersen Holdings, L.L.C., a Delaware limited
liability company ("Holdings"), which holds a 99.9% managing membership interest
in the Borrower), and by Parent, which holds a 0.1% passive membership interest
in the Borrower.
B. The Borrower has requested that the Lenders make available to the
Borrower a revolving credit facility in the aggregate principal amount of
$175,000,000. The Borrower will use the proceeds of this facility to repay
certain existing indebtedness, to pay or reimburse certain fees and expenses in
connection herewith and therewith, and for working capital and general corporate
purposes, including certain acquisitions, all as more fully described herein.
C. The Lenders are willing to make available to the Borrower the credit
facility described herein subject to and on the terms and conditions set forth
in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to the
-------------
terms defined elsewhere herein, the following terms shall have the meanings set
forth below (such meanings to be equally applicable to the singular and plural
forms thereof):
"ABR Loan" shall mean, at any time, any Loan that bears interest at such
time at the Alternate Base Rate.
<PAGE>
"Account Designation Letter" shall mean a letter from the Borrower to the
Administrative Agent, duly completed and signed by an Authorized Officer and in
form and substance satisfactory to the Administrative Agent, listing any one or
more accounts to which the Borrower may from time to time request the
Administrative Agent to forward the proceeds of any Loans made hereunder.
"Acquisition" shall mean any transaction or series of related transactions,
consummated on or after the date hereof, by which a Person directly, or
indirectly through one or more of its Subsidiaries, (i) acquires any going
business, any publication or brand name and the related rights and assets, or
all or substantially all of the assets, of any Person, whether through purchase
of assets, merger or otherwise, or (ii) acquires securities or other ownership
interests of any Person having at least a majority of combined voting power of
the then outstanding securities or other ownership interests of such Person.
"Acquisition Amount" shall mean, with respect to any Acquisition, the sum
(without duplication) of (i) the amount of cash paid by the Borrower and its
Subsidiaries in connection with such Acquisition, (ii) the Fair Market Value of
all Capital Stock of Parent issued or given in connection with such Acquisition,
(iii) the amount (determined by using the face amount or the amount payable at
maturity, whichever is greater) of all Indebtedness incurred, assumed or
acquired by the Borrower and its Subsidiaries in connection with such
Acquisition, (iv) all additional purchase price amounts in connection with such
Acquisition in the form of earnouts and other contingent obligations that should
be recorded as a liability on the balance sheet of the Borrower and its
Subsidiaries or expensed, in either event in accordance with Generally Accepted
Accounting Principles, Regulation S-X under the Securities Act, or any other
rule or regulation of the Securities and Exchange Commission, (v) all amounts
paid in respect of covenants not to compete, consulting agreements and other
affiliated contracts in connection with such Acquisition, (vi) the amount of all
transaction fees and expenses (including, without limitation, legal, accounting
and finders' fees and expenses) incurred by the Borrower and its Subsidiaries in
connection with such Acquisition and (vii) the aggregate fair market value of
all other consideration given by the Borrower and its Subsidiaries in connection
with such Acquisition.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Loan, a rate per annum equal to the LIBOR Rate as in effect at such time plus
the Applicable Margin Percentage for LIBOR Loans as in effect at such time.
"Administrative Agent" shall mean First Union, in its capacity as
Administrative Agent appointed under ARTICLE X, and its successors and permitted
assigns in such capacity.
"Affiliate" shall mean, as to any Person, each other Person that directly,
or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person or is a director or
officer of such Person. For purposes of this definition, with respect to any
Person "control" shall mean (i) the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise, or
(ii) the beneficial ownership of securities or other ownership interests of such
Person having 10% or more of the combined voting power of the then outstanding
securities or other ownership interests of such Person ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors or other governing body of such Person.
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<PAGE>
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time.
"Alternate Base Rate" shall mean the higher of (i) the per annum interest
rate publicly announced from time to time by First Union in Charlotte, North
Carolina, to be its prime rate (which may not necessarily be its best lending
rate), as adjusted to conform to changes as of the opening of business on the
date of any such change in such prime rate, or (ii) 0.5% per annum plus the
Federal Funds Rate, as adjusted to conform to changes as of the opening of
business on the date of any such change in the Federal Funds Rate.
"Applicable Margin Percentage" shall mean, at any time from and after the
Closing Date, the applicable percentage (a) to be added to the LIBOR Rate
pursuant to SECTION 2.8 for purposes of determining the Adjusted LIBOR Rate, and
(b) to be used in calculating the Revolving Credit Commitment Fee payable
pursuant to SECTION 2.9(b), in each case as determined in accordance with the
matrix set forth in Annex I hereto. On each Adjustment Date, the Applicable
-------
Margin Percentage for LIBOR Loans and the Revolving Credit Commitment Fee shall
be adjusted effective as of such date (based upon the calculation of the
Leverage Ratio as of the last day of the fiscal period to which such Adjustment
Date relates) in accordance with the matrix set forth in Annex I hereto;
-------
provided, however, that, notwithstanding the foregoing or anything in Annex I to
- -------- ------- -------
the contrary, if at any time Parent shall have failed to deliver the financial
statements and a Compliance Certificate as required by SECTION 6.1(a) or SECTION
6.1(b) (as the case may be) and SECTION 6.2(a), or if at any time a Default or
Event of Default shall have occurred and be continuing, then at all times from
and including the date on which such statements and Compliance Certificate are
required to have been delivered (or the date of occurrence of such Default or
Event of Default, as the case may be) to the date on which the same shall have
been delivered (or such Default or Event of Default cured or waived, as the case
may be), each Applicable Margin Percentage shall be determined in accordance
with Annex I hereto as if the Leverage Ratio were greater than or equal to 4.0 :
-------
1.0 (notwithstanding the actual Leverage Ratio). For purposes of this
definition, "Adjustment Date" shall mean, with respect to any fiscal quarter of
Parent beginning with the fiscal quarter ended September 30, 1997, the tenth
(10th) day (or, if such day is not a Business Day, on the next succeeding
Business Day) after delivery by Parent in accordance with SECTION 6.1(a) or
SECTION 6.1(b), as the case may be, of (i) financial statements for the most
recently completed applicable fiscal period and (ii) a duly completed Compliance
Certificate with respect to such fiscal period. Until the first Adjustment Date
after the Closing Date, the Applicable Margin Percentages for LIBOR Loans and
the Revolving Credit Commitment Fee shall be determined in accordance with the
matrix set forth in Annex I hereto based upon the Leverage Ratio as set forth in
-------
the pro forma Covenant Compliance Worksheet required to be delivered pursuant to
SECTION 4.1(n).
"Asset Disposition" shall mean any sale, assignment, transfer or other
disposition by Parent or any of its Subsidiaries to any other Person (other than
to the Borrower or to a Wholly Owned Subsidiary of the Borrower), whether in one
transaction or in a series of related transactions, of any of its assets,
business units or other properties (including any interests in property, whether
tangible or intangible, and including Capital Stock of Subsidiaries), excluding
(i) sales of inventory and other assets and licenses or leases of intellectual
property, in each case in the ordinary course of business, (ii) the sale or
exchange of used or obsolete equipment to the extent the proceeds of such sale
are applied towards, or such equipment is exchanged for, similar replacement
equipment, and (iii) the sale or other disposition of the Scheduled Titles or
Investments relating thereto as permitted by clause (iii) of SECTION 8.4.
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"Assignee" shall have the meaning given to such term in SECTION 11.7(a).
"Assignment and Acceptance" shall mean an Assignment and Acceptance entered
into between a Lender and an Assignee and accepted by the Administrative Agent
and the Borrower, in substantially the form of EXHIBIT K.
"Authorized Officer" shall mean (i) any individual properly authorized in
accordance with the terms of the operating agreement of the Borrower to take the
action specified herein on behalf of the Borrower or (ii) in the case of a
corporation or other Person (other than an individual) taking any action on
behalf of the Borrower in its capacity as a manager of the Borrower, any
individual properly authorized by resolution of the board of directors of such
corporation or other Person or in accordance with the terms of its operating
agreement to take the action specified herein on its behalf, and in each case
whose signature and incumbency shall have been certified to the Administrative
Agent by the secretary or an assistant secretary (or such other individual who
is properly authorized to perform the duties normally associated with the title
of secretary or assistant secretary) of the Borrower or such corporation or
other Person, as the case may be.
"Bankruptcy Code" shall mean 11 U.S.C. (S)(S) 101 et seq., as amended from
-- ---
time to time, and any successor statute.
"Borrower Pledge and Security Agreement" shall mean a pledge and security
agreement made by the Borrower in favor of the Administrative Agent, in
substantially the form of EXHIBIT G, as amended, modified or supplemented from
time to time.
"Borrowing" shall mean the incurrence by the Borrower (including as a
result of conversions and continuations of outstanding Revolving Loans pursuant
to SECTION 2.11) on a single date of a group of Revolving Loans of a single Type
(or a Swingline Loan made by the Swingline Lender) and, in the case of LIBOR
Loans, as to which a single Interest Period is in effect.
"Borrowing Date" shall mean, with respect to any Borrowing, the date upon
which such Borrowing is made.
"Business Day" shall mean (i) any day other than a Saturday or Sunday, a
legal holiday or a day on which commercial banks in Charlotte, North Carolina
are required by law to be closed and (ii) in respect of any determination
relevant to a LIBOR Loan, any such day that is also a day on which tradings are
conducted in the London interbank Eurodollar market.
"CIBC" shall have the meaning given to such term in the preamble hereto.
"Capital Expenditures" shall mean, for any period, the aggregate amount
(whether paid in cash or accrued as a liability) that would, in accordance with
Generally Accepted Accounting Principles, be included on the consolidated
statement of cash flows of Parent and its Subsidiaries for such period as
additions to equipment, fixed assets, real property or improvements or other
capital assets (including, without limitation, capital lease obligations);
provided, however, that Capital Expenditures shall not include any such
- -------- -------
expenditures (i) for replacements and substitutions for capital assets, to the
extent made with the proceeds of insurance, or (ii) made in connection with
Permitted Acquisitions.
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<PAGE>
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in corporate stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants or options to
purchase any of the foregoing.
"Cash Collateral Account" shall have the meaning given to such term in
SECTION 3.9.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within one year from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing within 270 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc., (iii) time deposits and certificates of deposit
maturing within one year from the date of issuance and issued by a bank or trust
company organized under the laws of the United States of America or any state
thereof that has combined capital and surplus of at least $500,000,000 and that
has (or is a subsidiary of a bank holding company that has) a long-term
unsecured debt rating of at least A or the equivalent thereof by Standard &
Poor's Ratings Services or at least A2 or the equivalent thereof by Moody's
Investors Service, Inc., (iv) repurchase obligations with a term not exceeding
seven (7) days with respect to underlying securities of the types described in
clause (i) above entered into with any bank or trust company meeting the
qualifications specified in clause (iii) above, and (v) money market funds at
least 95% of the assets of which are continuously invested in securities of the
type described in clause (i) above.
"Casualty Event" shall mean, with respect to any property (including any
interest in property) of the Borrower or any of its Subsidiaries, any loss of,
damage to, or condemnation or other taking of, such property for which the
Borrower or such Subsidiary receives insurance proceeds, proceeds of a
condemnation award or other compensation (other than business interruption
insurance proceeds).
"Closing Date" shall mean the date upon which the initial extensions of
credit are made pursuant to this Agreement.
"Collateral" shall mean all the assets, property and interests in property
that shall from time to time be pledged or be purported to be pledged as direct
or indirect security for the Obligations pursuant to any one or more of the
Security Documents.
"Commission" shall mean the Securities and Exchange Commission and any
successor thereto.
"Commitment" shall mean, with respect to any Lender at any time, the amount
set forth opposite such Lender's name on its signature page hereto under the
caption "Commitment" or, if such Lender has entered into one or more Assignment
and Acceptances, the amount set forth for such Lender at such time in the
Register maintained by the Administrative Agent pursuant to SECTION 11.7(b) as
such Lender's "Commitment," as such amount may be reduced at or prior to such
time pursuant to the terms hereof.
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<PAGE>
"Commodity Hedge Agreement" shall mean any option, hedge or other similar
agreement or arrangement designed to protect against fluctuations in commodity
or materials prices.
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of EXHIBIT J, together with a Covenant Compliance
Worksheet.
"Consolidated Fixed Charges" shall mean, for any period, the aggregate
(without duplication) of the following, all determined on a consolidated basis
for Parent and its Subsidiaries in accordance with Generally Accepted Accounting
Principles for such period: (a) Consolidated Interest Expense for such period,
(b) federal, state, local and other income taxes (but only to the extent
actually paid in cash during such period), (c) Capital Expenditures for such
period, (d) the aggregate (without duplication) of all scheduled payments of
principal on Funded Debt required to have been made by Parent and its
Subsidiaries during such period (whether or not actually made), and (e) the
aggregate of all amounts actually paid in cash by Parent during such period as
dividends or distributions in respect of its Capital Stock or to purchase,
redeem, retire or otherwise acquire its Capital Stock.
"Consolidated Funded Debt" shall mean, as of any date of determination, the
difference between (i) the aggregate (without duplication) of all Funded Debt of
Parent and its Subsidiaries as of such date, determined on a consolidated basis
in accordance with Generally Accepted Accounting Principles, minus (ii) the
-----
amount by which the aggregate cash balances and Cash Equivalents of Parent and
its Subsidiaries as of such date, determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles, exceed $5,000,000.
For purposes of determining Consolidated Funded Debt as of any date, each
Contingent Obligation of Parent and its Subsidiaries required to be included in
such determination shall be valued at the maximum aggregate principal amount
(whether or not drawn or outstanding) of the Indebtedness that is the
corresponding "primary obligation" (as such term is defined in the definition of
Contingent Obligation) as of such date.
"Consolidated Interest Expense" shall mean, for any period, the sum
(without duplication) of (i) total interest expense of Parent and its
Subsidiaries for such period in respect of Funded Debt of Parent and its
Subsidiaries (including, without limitation, all such interest expense accrued
or capitalized during such period, whether or not actually paid during such
period), determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles (but excluding pay-in-kind interest, if any, on
Indebtedness permitted under clause (ii) of SECTION 8.2), (ii) all net amounts
payable under or in respect of Interest Rate Protection Agreements, to the
extent paid or accrued by Parent and its Subsidiaries during such period, and
(iii) all ongoing commitment fees and other ongoing fees in respect of Funded
Debt (including the Revolving Credit Commitment Fee and the annual
administrative fee payable to the Administrative Agent under paragraph (ii) of
the Fee Letter) paid, accrued or capitalized by Parent and its Subsidiaries
during such period.
"Consolidated Net Income" shall mean, for any period, net income (or loss)
for Parent and its Subsidiaries for such period, determined on a consolidated
basis in accordance with Generally Accepted Accounting Principles.
"Consolidated Operating Cash Flow" shall mean, for any period, the
aggregate of (i) Consolidated Net Income for such period, plus (ii) the sum of
----
Consolidated Interest Expense, federal, state, local and other income taxes,
depreciation, amortization of intangible assets, and extraordinary losses and
other noncash expenses or charges reducing income for such period, all to the
extent taken into account in the calculation of Consolidated Net Income for such
period, minus
-----
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<PAGE>
(iii) the sum of extraordinary gains and other noncash credits increasing income
for such period, all to the extent taken into account in the calculation of
Consolidated Net Income for such period.
"Contingent Obligation" shall mean, with respect to any Person, any direct
or indirect liability of such Person with respect to any Indebtedness, liability
or other obligation (the "primary obligation") of another Person (the "primary
obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise
acquire such primary obligation or any property constituting direct or indirect
security therefor, (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in
respect thereof; provided, however, that, with respect to Parent and its
-------- -------
Subsidiaries, the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business.
"Covenant Compliance Worksheet" shall mean a fully completed worksheet in
the form of Attachment A to EXHIBIT J.
"Credit Documents" shall mean this Agreement, the Notes, the Letters of
Credit, the Fee Letter, the Parent Guaranty, the Parent Pledge and Security
Agreement, the Borrower Pledge and Security Agreement, any other Security
Documents, any Subsidiaries Guaranty, any Interest Rate Protection Agreement to
which the Borrower and any Lender are parties and that is permitted hereunder to
be entered into by the Borrower, and all other agreements, instruments,
documents and certificates (other than legal opinions) now or hereafter executed
and delivered to the Administrative Agent or any Lender by or on behalf of any
Credit Party with respect to this Agreement and the transactions contemplated
hereby, in each case as amended, modified, supplemented or restated from time to
time.
"Credit Party" shall mean any of the Borrower, any of its Subsidiaries,
Holdings and Parent.
"Debt Issuance" shall mean the issuance or sale by Parent, the Borrower or
any of their Subsidiaries of any debt securities, whether in a public offering
of such securities or otherwise (excluding Permitted Refinancing Indebtedness).
"Default" shall mean any event or condition that, with the passage of time
or giving of notice, or both, would constitute an Event of Default.
"Designated Acquisition Funds" shall have the meaning given to such term in
SECTION 6.8(a).
"Designated Non-Guarantor Subsidiary" shall mean (i) any Foreign
Subsidiary, (ii) Petersen Capital Corp., so long as such corporation exists
solely as a co-issuer of the Subordinated Notes or any Permitted Refinancing
Indebtedness and has no assets (other than nominal capitalization) and conducts
no business other than the performance of its obligations with regard thereto,
or any other Person formed for such purpose and satisfying such conditions, or
(iii) any other Subsidiary of the Borrower that is not a Wholly Owned Subsidiary
and that has elected, by written notice to the
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<PAGE>
Administrative Agent given not less than ten (10) Business Days after the
creation or acquisition thereof by the Borrower or any other Subsidiary, not to
become a guarantor under a Subsidiaries Guaranty and not to grant to the
Administrative Agent a Lien upon and security interest in its personal property
assets pursuant to a Subsidiaries Pledge and Security Agreement.
"Disqualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person that, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event or otherwise, (i) matures or is mandatorily redeemable or subject
to any mandatory repurchase requirement, pursuant to a sinking fund obligation
or otherwise, (ii) is redeemable or subject to any mandatory repurchase
requirement at the sole option of the holder thereof, or (iii) is convertible
into or exchangeable for (whether at the option of the issuer or the holder
thereof) (a) debt securities or (b) any Capital Stock referred to in (i) or (ii)
above, in each case under (i), (ii) or (iii) above at any time on or prior to
the Maturity Date; provided, however, that only the portion of Capital Stock
-------- -------
that so matures or is mandatorily redeemable, is so redeemable at the option of
the holder thereof, or is so convertible or exchangeable on or prior to such
date shall be deemed to be Disqualified Capital Stock.
"Dollars" or "$" shall mean dollars of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or business,
whether or not incorporated) that would be deemed to be under "common control"
with, or a member of the same "controlled group" as, the Borrower or any of its
Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a complete or partial withdrawal by the Borrower
or any ERISA Affiliate from a Multiemployer Plan that results in liability under
Section 4201 or 4204 of ERISA, or the receipt by the Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA, (iii) the distribution
by the Borrower or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a
notice of intent to terminate any Plan or the taking of any action to terminate
any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Borrower or any ERISA Affiliate of a notice from any
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the
imposition upon the Borrower or any ERISA Affiliate of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, or the imposition or threatened imposition of any Lien upon any
assets of the Borrower or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by the Borrower or any ERISA Affiliate, (viii) a violation of the
applicable requirements of Section 404 or 405 of ERISA
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or the exclusive benefit rule under Section 401(a) of the Internal Revenue Code
by any fiduciary of any Plan for which the Borrower or any of its ERISA
Affiliates may be directly or indirectly liable or (ix) the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Internal
Revenue Code or Section 307 of ERISA, would result in the loss of tax-exempt
status of the trust of which such Plan is a part if the Borrower or an ERISA
Affiliate fails to timely provide security to such Plan in accordance with the
provisions of such sections.
"Eligible Assignee" shall mean (i) a commercial bank organized under the
laws of the United States or any state thereof and having total assets in excess
of $1,000,000,000, (ii) a commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $1,000,000,000, provided
--------
that such bank or other financial institution is acting through a branch or
agency located in the United States, in the country under the laws of which it
is organized or in another country that is also a member of the OECD, (iii) the
central bank of any country that is a member of the OECD, (iv) a finance
company, insurance company or other financial institution or fund that is
engaged in making, purchasing or otherwise investing in loans in the ordinary
course of its business and having total assets in excess of $500,000,000, (v)
any Affiliate of an existing Lender or (vi) any other Person approved by the
Administrative Agent and the Documentation Agent, which approval shall not be
unreasonably withheld.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, accusations,
allegations, notices of noncompliance or violation, investigations (other than
internal reports prepared by any Person in the ordinary course of its business
and not in response to any third party action or request of any kind) or
proceedings relating in any way to any actual or alleged violation of or
liability under any Environmental Law or relating to any permit issued, or any
approval given, under any such Environmental Law (collectively, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals, rules of
common law and orders of courts or Governmental Authorities, relating to the
protection of human health or occupational safety or the environment, now or
hereafter in effect and in each case as amended from time to time, including,
without limitation, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
"Equity Issuance" shall mean the issuance, sale or other disposition by
Parent, the Borrower or any of their Subsidiaries of its Capital Stock, any
rights, warrants or options to purchase or acquire any shares of its Capital
Stock or any other security or instrument representing, convertible into or
exchangeable for an equity interest in Parent, the Borrower or any of their
Subsidiaries; provided, however, that the term Equity Issuance shall not include
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(i) the issuance or sale of Capital Stock of the Borrower or a Subsidiary of the
Borrower in connection with any capital contributions made
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directly or indirectly (y) by Parent to the Borrower or (z) by the Borrower to a
Subsidiary of the Borrower, (ii) the issuance or sale of Capital Stock by the
Borrower or any of its Subsidiaries to Parent, the Borrower or any of their
Subsidiaries, provided that such Capital Stock is pledged to the Administrative
--------
Agent pursuant to the Borrower Pledge and Security Agreement, the Parent Pledge
and Security Agreement or a Subsidiaries Pledge and Security Agreement, as
applicable, (iii) any issuance or sale of Capital Stock of Parent to any of the
Permitted Holders, but only to the extent that the Net Cash Proceeds therefrom
constitute Designated Acquisition Funds and are contributed to the Borrower and
applied in payment of the relevant Acquisition Amount as provided in SECTION
6.8(a), (iv) any Capital Stock or other equity securities of Parent issued or
sold in connection with any Permitted Acquisition and constituting all or a
portion of the applicable purchase price, or (v) any rights, options, shares or
other Capital Stock issued pursuant to employee stock option plans, stock
purchase plans or other benefit plans duly approved by Parent's board of
directors or a committee thereof.
"Event of Default" shall have the meaning given to such term in SECTION
9.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute, and all rules and regulations from
time to time promulgated thereunder.
"Existing Senior Credit Agreement" shall mean the Credit Agreement, dated
as of September 30, 1996, among the Borrower, the banks and other financial
institutions party thereto, CIBC, as Documentation Agent, and First Union, as
Administrative Agent, as amended.
"Existing Senior Indebtedness" shall mean all indebtedness, accrued and
unpaid interest, fees and other monetary obligations under the Existing Senior
Credit Agreement and the other Credit Documents (as such term is defined in the
Existing Senior Credit Agreement).
"Fair Market Value" shall mean, with respect to any Capital Stock of Parent
given in connection with an Acquisition, the value given to such Capital Stock
for purposes of such Acquisition by the parties thereto, as determined in good
faith pursuant to the relevant acquisition agreement or otherwise in connection
with such Acquisition.
"Federal Funds Rate" shall mean, for any period, a fluctuating per annum
interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by the Administrative Agent.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fee Letter" shall mean the letter from First Union to the Borrower, dated
August 18, 1997, relating to certain fees payable by the Borrower in respect of
the transactions contemplated by this Agreement, as amended, modified or
supplemented from time to time.
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"Financial Officer" shall mean, with respect to Parent or the Borrower, as
the context may require, the chief financial officer, vice president - finance,
principal accounting officer or treasurer of Parent or the Borrower, as the case
may be.
"First Union" shall have the meaning given to such term in the preamble
hereto.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) Consolidated Operating Cash Flow for the period of
four consecutive fiscal quarters then ending to (ii) Consolidated Fixed Charges
for such period.
"Foreign Subsidiary" shall mean any Subsidiary of the Borrower that is
organized under the laws of any nation, state or jurisdiction other than the
United States of America or any state thereof.
"Funded Debt" shall mean any Indebtedness other than (i) Indebtedness
arising under Interest Rate Protection Agreements or Commodity Hedge Agreements
and (ii) accrued expenses, current trade or other accounts payable (it being
understood that such expenses and accounts payable that are 90 days or more past
due (except to the extent such items are being disputed by the obligor on
reasonable grounds and in good faith) shall be considered to be "Funded Debt")
and other current liabilities arising in the ordinary course of business and not
incurred through the borrowing of money.
"Generally Accepted Accounting Principles" shall mean generally accepted
accounting principles, as set forth in the statements, opinions and
pronouncements of the Accounting Principles Board, the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board (or,
to the extent not so set forth in such statements, opinions and pronouncements,
as generally followed by entities similar in size to Parent and engaged in
generally similar lines of business), consistently applied and maintained and in
conformity with those used in the preparation of the most recent financial
statements of Holdings referred to in SECTION 5.10(a).
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Substances" shall mean any substances or materials (i) that are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) that constitute
a nuisance, trespass or health or safety hazard to Persons or neighboring
properties, or (iv) that contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or wastes, crude oil, nuclear fuel, natural gas or synthetic
gas.
"Holdings" shall have the meaning given to such term in the recitals
hereof.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness, obligations and liabilities of such Person
for borrowed money or in respect of loans or advances (including, in the case of
the Borrower, pay-in-kind interest, if any, on Indebtedness
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permitted under clause (ii) of SECTION 8.2), (ii) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (iii) all
reimbursement obligations of such Person with respect to surety bonds, letters
of credit and bankers' acceptances (in each case, whether or not drawn or
matured and in the stated amount thereof), (iv) all obligations of such Person
to pay the deferred purchase price of property or services, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person, (vi) all obligations of such
Person as lessee under leases that are or are required to be, in accordance with
Generally Accepted Accounting Principles, recorded as capital leases, to the
extent such obligations are required to be so recorded, (vii) all Disqualified
Capital Stock issued by such Person with the amount of Indebtedness represented
by such Disqualified Capital Stock being equal to the greater of its voluntary
or involuntary liquidation preference and its maximum fixed repurchase price,
but excluding accrued dividends, if any (for purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Agreement, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value to be
determined reasonably and in good faith by the board of directors or other
governing body of the issuer of such Disqualified Capital Stock), (viii) the net
termination obligations of such Person under any Interest Rate Protection
Agreements or Commodity Hedge Agreements, calculated as of any date as if such
agreement or arrangement were terminated as of such date, (ix) all Contingent
Obligations of such Person and (x) all indebtedness referred to in clauses (i)
through (ix) above secured by any Lien on any property or asset owned or held by
such Person regardless of whether the indebtedness secured thereby shall have
been assumed by such Person or is nonrecourse to the credit of such Person. For
all purposes of this Agreement, Indebtedness of Parent or any of its
Subsidiaries shall not include any unearned subscription revenues.
"Initial Public Offering" shall mean the initial public offering and sale
by Parent of its Class A Common Stock pursuant to the Registration Statement.
"Interest Coverage Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) Consolidated Operating Cash Flow for the period of
four consecutive fiscal quarters then ending to (ii) Consolidated Interest
Expense for such period.
"Interest Period" shall have the meaning given to such term in SECTION
2.10.
"Interest Rate Protection Agreement" shall mean any interest or foreign
currency rate swap, cap, collar, option, hedge, forward rate or other similar
agreement or arrangement designed to protect against fluctuations in interest
rates or currency exchange rates.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Issuing Lender" shall mean First Union in its capacity as issuer of the
Letters of Credit, and its successors in such capacity.
"LIBOR Loan" shall mean, at any time, any Revolving Loan that bears
interest at such time at the Adjusted LIBOR Rate.
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"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising part of
the same Borrowing for any Interest Period, an interest rate per annum obtained
by dividing (i) (y) the rate of interest appearing on Telerate Page 3750 (or any
successor page) or (z) if no such rate is available, or at the option of the
Administrative Agent in any event, the rate of interest determined by the
Administrative Agent to be the rate or the arithmetic mean of rates (rounded
upward, if necessary, to the nearest 1/16 of one percentage point) at which
Dollar deposits in immediately available funds are offered by First Union to
first-tier banks in the London interbank Eurodollar market, in each case under
(y) and (z) above at approximately 11:00 a.m., London time, two (2) Business
Days prior to the first day of such Interest Period for a period substantially
equal to such Interest Period and in an amount substantially equal to the amount
of First Union's LIBOR Loan comprising part of such Borrowing, by (ii) the
amount equal to 1.00 minus the Reserve Requirement (expressed as a decimal) for
such Interest Period.
"Lender" shall mean each financial institution signatory hereto and each
other financial institution that becomes a "Lender" hereunder pursuant to
SECTION 11.7, and their respective successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of such
Lender designated as its "Lending Office" on its signature page hereto or in an
Assignment and Acceptance, or such other office as may be otherwise designated
in writing from time to time by such Lender to the Borrower and the
Administrative Agent. A Lender may designate separate Lending Offices as
provided in the foregoing sentence for the purposes of making or maintaining
different Types of Loans, and, with respect to LIBOR Loans, such office may be a
domestic or foreign branch or Affiliate of such Lender.
"Letter of Credit Exposure" shall mean, with respect to any Lender at any
time, such Lender's ratable share (based on the proportion that its Commitment
bears to the aggregate Commitments at such time) of the sum of (i) the aggregate
Stated Amount of all Letters of Credit outstanding at such time and (ii) the
aggregate amount of all Reimbursement Obligations outstanding at such time.
"Letter of Credit Notice" shall have the meaning given to such term in
SECTION 3.3.
"Letters of Credit" shall have the meaning given to such term in SECTION
3.1.
"Leverage Ratio" shall mean, as of the last day of any fiscal quarter, the
ratio of (i) Consolidated Funded Debt as of such date to (ii) Consolidated
Operating Cash Flow for the period of four consecutive fiscal quarters then
ending.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, security
interest, lien (statutory or otherwise), preference, priority, charge or other
encumbrance of any nature, whether voluntary or involuntary, including, without
limitation, the interest of any vendor or lessor under any conditional sale
agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
"Loans" shall mean any or all of the Revolving Loans and the Swingline
Loans.
"Margin Stock" shall have the meaning given to such term in Regulation U.
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"Material Adverse Change" shall mean a material adverse change in the
condition (financial or otherwise), operations, business, properties or assets
of Parent and its Subsidiaries taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect upon (A) the
condition (financial or otherwise), operations, business, properties or assets
of Parent and its Subsidiaries taken as a whole, (B) to the extent not covered
under clause (A) above, the ability of any Credit Party to consummate the
transactions contemplated hereby or perform its obligations under this Agreement
or any of the other Credit Documents to which it is a party or (C) the legality,
validity or enforceability of this Agreement or any of the other Credit
Documents or the rights and remedies of the Administrative Agent and the Lenders
hereunder and thereunder.
"Maturity Date" shall mean September 30, 2002.
"Multiemployer Plan" shall mean any "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
makes, is making or is obligated to make contributions or has made or been
obligated to make contributions.
"Net Cash Proceeds" shall mean (i) in the case of any Equity Issuance or
Debt Issuance, the aggregate cash payments received by Parent, the Borrower and
their Subsidiaries less reasonable and customary fees and expenses (including
underwriting discounts and commissions) incurred by Parent, the Borrower and
their Subsidiaries in connection therewith, (ii) in the case of any Casualty
Event, the aggregate cash proceeds of insurance, condemnation awards and other
compensation received by the Borrower and its Subsidiaries in respect of such
Casualty Event less (y) reasonable fees and expenses incurred by the Borrower
and its Subsidiaries in connection therewith and (z) contractually required
repayments of Indebtedness to the extent secured by Liens on the property
subject to such Casualty Event and any income or transfer taxes paid or
reasonably estimated by the Borrower to be payable by Parent and its
Subsidiaries as a result of such Casualty Event, and (iii) in the case of any
Asset Disposition, the aggregate amount of all cash payments received by Parent
and its Subsidiaries in connection with such Asset Disposition less (x)
reasonable fees and expenses incurred by Parent, the Borrower and their
Subsidiaries in connection therewith, (y) Indebtedness to the extent the amount
thereof is secured by a Lien on the property that is the subject of such Asset
Disposition and the transferee of (or holder of the Lien on) such Property
requires that such Indebtedness be repaid as a condition to such Asset
Disposition, and (z) any income or transfer taxes paid or reasonably estimated
by the Borrower to be payable by Parent, the Borrower and their Subsidiaries as
a result of such Asset Disposition.
"Notes" shall mean any or all of the Revolving Credit Notes and the
Swingline Note.
"Notice of Conversion/Continuation" shall have the meaning given to such
term in SECTION 2.11(b).
"Notice of Prepayment" shall have the meaning given to such term in SECTION
2.7(a).
"Notice of Revolving Borrowing" shall have the meaning given to such term
in SECTION 2.2(b).
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"Notice of Swingline Borrowing" shall have the meaning given to such term
in SECTION 2.2(d).
"Obligations" shall mean all principal of and interest (including, to the
greatest extent permitted by law, post-petition interest) on the Loans, all
Reimbursement Obligations and all fees, expenses, indemnities and other
obligations owing, due or payable at any time by the Borrower to the
Administrative Agent, any Lender, the Issuing Lender or any other Person
entitled thereto, under this Agreement or any of the other Credit Documents.
"Outstanding Letter of Credit" shall mean that certain irrevocable letter
of credit no. S111300, dated January 21, 1997, issued for the account of the
Borrower in favor of Goldmick, LLC and 251 West 92nd Corp. under the Existing
Senior Credit Agreement as a "Letter of Credit" within the meaning of such term
thereunder and treated pursuant to SECTION 3.2 as having originally been issued
under this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"PIC" shall mean Petersen Investment Corp., a Delaware corporation.
"Parent" shall have the meaning given to such term in the preamble hereof.
"Parent Guaranty" shall mean a guaranty agreement made by Parent and
Holdings in substantially the form of EXHIBIT F, as amended, modified or
supplemented from time to time.
"Parent Pledge and Security Agreement" shall mean a pledge agreement made
by Parent and Holdings in favor of the Administrative Agent, in substantially
the form of EXHIBIT H, as amended, modified or supplemented from time to time.
"Participant" shall have the meaning given to such term in SECTION 11.7(d).
"Permitted Acquisition" shall mean (a) any Acquisition made by the Borrower
or any of its Subsidiaries with respect to which all of the following conditions
are satisfied: (i) each business acquired shall be within the Permitted Lines of
Business, (ii) any Capital Stock given as consideration in connection therewith
shall be Capital Stock of Parent, (iii) in the case of an Acquisition involving
the acquisition of control of Capital Stock of any Person, immediately after
giving effect to such Acquisition such Person (or the surviving Person, if the
Acquisition is effected through a merger or consolidation) shall be the Borrower
or a Subsidiary Guarantor (provided that such Person (or the surviving Person)
--------
may be a Designated Non-Guarantor Subsidiary, but only so long as after giving
effect to such Acquisition the Borrower is in compliance with the applicable
provisions of SECTION 8.5), and (iv) all of the conditions and requirements of
SECTIONS 6.8 and 6.9 applicable to such Acquisition are satisfied; or (b) any
other Acquisition to which the Required Lenders (or the Administrative Agent on
their behalf) have given their prior written consent (which consent may be in
their sole discretion and may be given subject to such additional terms and
conditions as the Required Lenders shall establish) and with respect to which
all of the conditions and requirements set forth in this definition and in
SECTION 6.8, and in or pursuant to any such consent, have been satisfied or
waived in writing by the Required Lenders (or the Administrative Agent on their
behalf).
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"Permitted Holders" shall mean, collectively, Neal Vitale and each Person
who purchased Capital Stock of Holdings, Parent or PIC pursuant to the
Securities Purchase Agreement as of the date thereof.
"Permitted Liens" shall have the meaning given to such term in SECTION 8.3.
"Permitted Lines of Business" shall have the meaning given to such term in
SECTION 8.8(a).
"Permitted Refinancing Indebtedness" shall mean Indebtedness of the
Borrower (and, at the election of the Borrower, any Designated Non-Guarantor
Subsidiary described in clause (ii) of the definition thereof) the proceeds of
which are used to extend, repay, redeem, repurchase, defease or refinance the
Subordinated Notes (or to extend, repay, redeem, repurchase, defease or
refinance any Indebtedness previously issued to extend, repay, redeem,
repurchase, defease or refinance the Subordinated Notes and satisfying the
requirements of "Permitted Refinancing Indebtedness" set forth in this
definition); provided that, as a condition to such Indebtedness being permitted
--------
to be issued pursuant to clause (ii) of SECTION 8.2, (i) immediately after
giving effect to the issuance of such Indebtedness, no Default or Event of
Default shall exist, (ii) such Indebtedness (a) shall mature by its terms no
earlier than November 15, 2006, (b) shall not provide for any scheduled payment
of principal prior to November 15, 2006, (c) shall be unsecured, (d) shall be
subordinated in right and time of payment to the Obligations on terms and
conditions no less favorable to the Lenders than those set forth in Articles 10
and 11 of the Subordinated Note Indenture as in effect on the date hereof, and
(e) shall bear interest at a fixed, non-increasing rate not exceeding the rate
payable in respect of the Subordinated Notes as in effect on the date hereof,
and such interest shall be payable not more frequently than semiannually, (iii)
the principal amount of such Indebtedness shall not exceed the principal amount
of the Indebtedness so extended, repaid, redeemed, repurchased, defeased or
refinanced (plus the amount of any accrued interest, premiums, make-whole
amounts and expenses paid or incurred in connection therewith), (iv) the
agreements and instruments evidencing or governing such Indebtedness shall not
have any covenants more restrictive in any material respect than the covenants
set forth in the Subordinated Note Indenture as in effect on the date hereof or
any material covenants not contained in the Subordinated Note Indenture as in
effect on the date hereof, and (v) prior to or concurrently with the issuance of
such Indebtedness, the Borrower shall have delivered to each Lender a
certificate, signed by a Financial Officer of the Borrower, satisfactory in form
and substance to the Required Lenders and to the effect that, after giving
effect to the incurrence of such Indebtedness, the Borrower is in compliance
with the financial covenants set forth in SECTIONS 7.1 through 7.3, such
compliance being determined with regard to calculations made on a pro forma
basis in accordance with Generally Accepted Accounting Principles as of the last
day of the fiscal quarter then most recently ended and as if such Indebtedness
had been incurred on the first day of the period applicable to such covenants
(such calculations to be attached to such certificate).
"Permitted Subordinated Note Repurchases" shall mean one or more
repurchases by the Borrower, in any one or more transactions, of any of the
Subordinated Notes (other than pursuant to the Subordinated Note Redemption), so
long as (i) immediately prior to and immediately after giving effect to each
such repurchase, no Default or Event of Default shall exist, (ii) prior to or
concurrently with each such repurchase, the Borrower shall have delivered to the
Administrative Agent a certificate, signed by a Financial Officer of the
Borrower, satisfactory in form and substance to the Administrative Agent and to
the effect that, after giving effect to such repurchase, the Borrower is in
compliance with the financial covenants set forth in SECTIONS 7.1 through 7.3,
such compliance being determined with regard to calculations made on a pro forma
basis in accordance with Generally
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Accepted Accounting Principles as of the last day of the fiscal quarter then
most recently ended and as if such repurchase had been effected on the first day
of the period applicable to such covenants (such calculations to be attached to
such certificate), and (iii) pursuant to all such repurchases, the Borrower
shall not directly or indirectly acquire more than $25,000,000 in aggregate
stated principal amount of the Subordinated Notes (provided that the Borrower
---------
may pay up to $28,500,000 in the aggregate, inclusive of premium and other
associated costs and expenses, if any, in respect of such repurchases (but
excluding accrued and unpaid interest), so long as the aggregate stated
principal amount of all Subordinated Notes so repurchased does not exceed
$25,000,000).
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Petersen License Agreement" shall mean the License Agreement, dated as of
August 15, 1996, between Robert E. Petersen and Petersen Publishing Company, as
licensor, and Parent, as licensee, as amended, modified or supplemented from
time to time in accordance with the terms of this Agreement.
"Plan" shall mean any "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA that is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which the Borrower or any ERISA
Affiliate may have any liability.
"Post-Closing Transactions" shall mean (i) the merger of PIC with and into
Parent, (ii) the merger of Holdings with and into the Borrower, and (iii) the
Subordinated Note Redemption.
"Predecessor" shall mean the historical operations of the publishing
division of Petersen Publishing Company prior to the acquisition thereof by the
Borrower.
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Projections" shall have the meaning given to such term in SECTION 5.10(c).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Redemption Account" shall mean an account established and maintained by
the Borrower with the Administrative Agent to hold funds for the purpose of
effecting the Subordinated Note Redemption on the date specified therefor in the
notice of redemption, with investments of amounts on deposit therein being at
the direction of the Borrower but to be made only in Cash Equivalents unless
otherwise agreed to by the Administrative Agent.
"Refunded Swingline Loans" shall have the meaning given to such term in
SECTION 2.2(e).
"Register" shall have the meaning given to such term in SECTION 11.7(b).
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"Registration Statement" shall mean the Registration Statement of Parent on
Form S-1 under the Securities Act, as initially filed with the Commission on
August 7, 1997, and as amended by Amendment No. 1 thereto filed with the
Commission on September 15, 1997, and by Amendment No. 2 thereto filed with the
Commission on September 24, 1997, and as may be further amended prior to the
date hereof.
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"Reimbursement Obligation" shall have the meaning given to such term in
SECTION 3.5.
"Reportable Event" shall mean (i) any "reportable event" within the meaning
of Section 4043(c) of ERISA for which the 30-day notice under Section 4043(a) of
ERISA has not been waived by the PBGC (including any failure to meet the minimum
funding standard of, or timely make any required installment under, Section 412
of the Internal Revenue Code or Section 302 of ERISA, regardless of the issuance
of any waivers in accordance with Section 412(d) of the Internal Revenue Code),
(ii) any such "reportable event" subject to advance notice to the PBGC under
Section 4043(b)(3) of ERISA, (iii) any application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Internal
Revenue Code, and (iv) a cessation of operations described in Section 4062(e) of
ERISA.
"Required Lenders" shall mean the Lenders holding outstanding Loans and
Commitments (or, after the termination of the Commitments, outstanding Loans and
Letter of Credit Exposure) representing at least a majority of the aggregate at
such time of all outstanding Loans and Commitments (or, after the termination of
the Commitments, the aggregate at such time of all outstanding Loans and Letter
of Credit Exposure); provided, however, that so long as First Union and CIBC are
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the only Lenders under this Agreement, the term "Required Lenders" shall mean
First Union and CIBC.
"Requirement of Law" shall mean, with respect to any Person, the charter,
articles or certificate of organization or incorporation and bylaws or other
organizational or governing documents of such Person, and any statute, law,
treaty, rule, regulation, order, decree, writ, injunction or determination of
any arbitrator or court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject or otherwise pertaining to any or all of the
transactions contemplated by this Agreement and the other Credit Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period, the
reserve percentage (expressed as a decimal) in effect from time to time during
such Interest Period, as provided by the Federal Reserve Board, applied for
determining the maximum reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"Responsible Officer" shall mean, with respect to Parent or the Borrower,
as the context may require, the president, the chief executive officer, the
chief financial officer, any executive officer, or any other Financial Officer
of Parent or the Borrower, as the case may be, and any other officer or
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similar official thereof responsible for the administration of the obligations
of Parent or the Borrower, as applicable, in respect of this Agreement.
"Revolving Credit Commitment Fee" shall have the meaning given to such term
in SECTION 2.9(b).
"Revolving Credit Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT B-1, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Revolving Loans" shall have the meaning given to such term in SECTION
2.1(a).
"Scheduled Titles" shall have the meaning given to such term in SECTION
8.4.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time, and any successor statute, and all rules and regulations from time
to time promulgated thereunder.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of September 30, 1996, among Holdings, PIC, Parent and the
Persons listed on Schedule A thereto, providing for the purchase and sale of
Capital Stock of Holdings, Parent and PIC, as amended, modified or supplemented
from time to time.
"Security Documents" shall mean the Borrower Pledge and Security Agreement,
the Parent Pledge and Security Agreement, any Subsidiaries Pledge and Security
Agreement and all other pledge or security agreements, mortgages, assignments or
other similar agreements or instruments executed and delivered by any Credit
Party pursuant to SECTION 6.9 or SECTION 6.10 or otherwise in connection with
the transactions contemplated hereby, in each case as amended, modified or
supplemented from time to time.
"Securityholders Agreement" shall mean the Securityholders Agreement, dated
as of September 30, 1996, among PIC, Holdings, Parent and the securityholders
named therein, as amended, modified or supplemented from time to time.
"Stated Amount" shall mean, with respect to any Letter of Credit at any
time, the aggregate amount available to be drawn thereunder at such time
(regardless of whether any conditions for drawing could then be met).
"Subordinated Note Indenture" shall mean the Indenture, dated as of
November 15, 1996, among the Borrower and Petersen Capital Corp., as issuers,
the guarantors named therein, and United States Trust Company of New York, as
trustee, providing for the issuance of the Subordinated Notes, as amended,
modified or supplemented from time to time in accordance with the terms of this
Agreement.
"Subordinated Note Redemption" shall mean the redemption, which shall be at
the option of the Borrower (but which, if consummated, shall be consummated on
or before December 1, 1997), by the Borrower of up to $25,000,000 in aggregate
principal amount of the Subordinated Notes together with the payment of the
redemption premium and all accrued and unpaid interest thereon.
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"Subordinated Notes" shall mean the 11-1/8% Senior Subordinated Notes of
the Borrower issued pursuant to the Subordinated Note Indenture, as amended,
modified or supplemented from time to time in accordance with the terms of this
Agreement.
"Subsidiaries Guaranty" shall mean any agreement or instrument, in form and
substance satisfactory to the Administrative Agent and the Required Lenders (and
in any event in substantially the form of the Parent Guaranty, with appropriate
modifications), entered into pursuant to SECTION 6.9 and pursuant to which any
one or more of the Subsidiaries of the Borrower shall guarantee to the
Administrative Agent and the Lenders the payment in full of the Obligations, as
the same may be amended, modified or supplemented from time to time.
"Subsidiaries Pledge and Security Agreement" shall mean any agreement or
instrument, in form and substance satisfactory to the Administrative Agent and
the Required Lenders (and in any event in substantially the form of the Borrower
Pledge and Security Agreement, with appropriate modifications), entered into
pursuant to SECTION 6.9 and pursuant to which any one or more of the
Subsidiaries of the Borrower shall grant to the Administrative Agent a Lien upon
and security interest in its personal property assets as security for its
obligations under a Subsidiaries Guaranty, as the same may be amended, modified
or supplemented from time to time.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and one or more
of its other Subsidiaries or a combination thereof (irrespective of whether, at
the time, securities of any other class or classes of any such corporation or
other Person shall or might have voting power by reason of the happening of any
contingency). When used without reference to a parent entity, the term
"Subsidiary" shall be deemed to refer to a Subsidiary of Parent.
"Subsidiary Guarantor" shall mean any Subsidiary of the Borrower that is a
guarantor under a Subsidiaries Guaranty and has granted to the Administrative
Agent a Lien upon and security interest in its personal property assets pursuant
to a Subsidiaries Pledge and Security Agreement.
"Swingline Commitment" shall mean $10,000,000 or, if less, the aggregate
Commitments at the time of determination, as such amount may be reduced at or
prior to such time pursuant to the terms hereof.
"Swingline Lender" shall mean First Union in its capacity as maker of
Swingline Loans, and its successors in such capacity.
"Swingline Loans" shall have the meaning given to such term in SECTION
2.1(b).
"Swingline Maturity Date" shall mean the date that is five (5) Business
Days prior to the Maturity Date.
"Swingline Note" shall mean the promissory note of the Borrower in
substantially the form of EXHIBIT B-2, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
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"Syndication Completion Date" shall have the meaning given to such term in
SECTION 2.2(a).
"Termination Date" shall mean the Maturity Date or such earlier date of
termination of the Commitments pursuant to SECTION 2.5 or SECTION 9.2.
"Transactions" shall mean, collectively, (i) the consummation of the
Initial Public Offering, (ii) the transactions described in the first paragraph
under the caption "Use of Proceeds" in the Registration Statement and the
transactions described under the caption "The Reorganization" in the
Registration Statement (other than the Post-Closing Transactions), and (iii) the
transactions contemplated by this Agreement and the other Credit Documents,
including the initial extensions of credit hereunder on the Closing Date and the
repayment in full of the Existing Senior Indebtedness.
"Type" shall have the meaning given to such term in SECTION 2.2(a).
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Unutilized Commitment" shall mean, with respect to any Lender at any time,
such Lender's Commitment at such time less the sum of (i) the aggregate
----
principal amount of all Revolving Loans made by such Lender that are outstanding
at such time and (ii) such Lender's Letter of Credit Exposure at such time.
"Unutilized Swingline Commitment" shall mean, with respect to the Swingline
Lender at any time, the Swingline Commitment at such time less the aggregate
----
principal amount of all Swingline Loans that are outstanding at such time.
"Wholly Owned" shall mean, with respect to any Subsidiary of any Person,
that 100% of the outstanding Capital Stock of such Subsidiary (excluding
directors' qualifying shares and shares required to be held by foreign
nationals, in the case of a Foreign Subsidiary) is owned, directly or
indirectly, by such Person.
"Willis Stein" shall mean Willis Stein & Partners, L.P., a Delaware limited
partnership.
1.2 Accounting Terms. Except as specifically provided otherwise in this
----------------
Agreement, all accounting terms used herein that are not specifically defined
shall have the meanings customarily given them, and all financial computations
hereunder shall be made, in accordance with Generally Accepted Accounting
Principles. Notwithstanding the foregoing, in the event that any changes in
Generally Accepted Accounting Principles after the date hereof are required to
be applied to Parent and would affect the computation of the financial covenants
contained in SECTIONS 7.1 through 7.3, as applicable, such changes shall be
followed only from and after the date this Agreement shall have been amended to
take into account any such changes. Notwithstanding anything to the contrary
contained herein, all computations of the financial covenants contained in
SECTIONS 7.1 through 7.3 with respect to any period ending on or before
September 30, 1997 shall be made with reference to, and all associated financial
terms defined herein shall, with respect to any such period, be deemed to refer
to, the consolidated financial statements of Holdings and its Subsidiaries for
such period.
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1.3 Designated Non-Guarantor Subsidiaries. Notwithstanding anything to
-------------------------------------
the contrary contained in this Agreement, the assets, liabilities, revenues,
income, losses and other financial statement items of Designated Non-Guarantor
Subsidiaries shall not be taken into account in the calculation of the financial
covenants set forth in SECTIONS 7.1 through 7.3.
1.4 Other Terms; Construction. Unless otherwise specified or unless the
-------------------------
context otherwise requires, all references herein to sections, annexes,
schedules and exhibits are references to sections, annexes, schedules and
exhibits in and to this Agreement, and all terms defined in this Agreement shall
have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto. All references
herein to the Lenders or any of them shall be deemed to include the Issuing
Lender unless specifically provided otherwise or unless the context otherwise
requires. As used in this Agreement or in any other Credit Document, the term
"including" means "including, without limitation."
1.5 Officers, Directors of Limited Liability Companies. References herein
--------------------------------------------------
to officers or directors of any limited liability company shall refer to persons
who are authorized under the articles of organization and operating agreement of
such company to perform the duties and exercise the powers normally associated
with officers and directors, as the case may be, of corporations.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments; Loans. (a) Each Lender severally agrees, subject to and
------------------
on the terms and conditions of this Agreement, to make revolving credit loans
(each, a "Revolving Loan," and collectively, the "Revolving Loans") to the
Borrower, from time to time on any Business Day during the period from and
including the Closing Date to but not including the Termination Date, in an
aggregate principal amount at any time outstanding not greater than the excess,
if any, of its Commitment at such time over its Letter of Credit Exposure at
such time, provided that no Borrowing of Revolving Loans shall be made if,
--------
immediately after giving effect thereto, the sum of (x) the aggregate principal
amount of Revolving Loans outstanding at such time, (y) the aggregate Letter of
Credit Exposure of all Lenders at such time and (z) the aggregate principal
amount of Swingline Loans outstanding at such time (excluding the aggregate
amount of any Swingline Loans to be repaid with proceeds of Revolving Loans made
pursuant to such Borrowing) would exceed the aggregate Commitments at such time,
and provided further that, in the event the Borrower shall deliver a notice of
-------- -------
redemption pursuant to the Subordinated Note Indenture in connection with the
Subordinated Note Redemption, no Borrowing of Revolving Loans shall be made at
any time prior to the consummation of the Subordinated Note Redemption (other
than for the purpose of effecting the Subordinated Note Redemption) if,
immediately after giving effect thereto, the aggregate Unutilized Commitments
would be less than the difference between (i) the aggregate amount required to
effect the Subordinated Note Redemption (including the payment of any related
redemption premium and all accrued and unpaid interest) minus (ii) the amount
then on deposit with the Administrative Agent in a Redemption Account. Subject
to and on the terms and conditions of this Agreement, the Borrower may borrow,
repay and reborrow Revolving Loans.
(b) The Swingline Lender agrees, subject to and on the terms and conditions
of this Agreement, to make loans (each, a "Swingline Loan," and collectively,
the "Swingline Loans") to the
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Borrower, from time to time on any Business Day during the period from the
Closing Date to but not including the Swingline Maturity Date (or, if earlier,
the Termination Date), in an aggregate principal amount not exceeding the
Swingline Commitment, notwithstanding that the aggregate principal amount of
Swingline Loans outstanding at any time, when added to the aggregate principal
amount of the Revolving Loans made by the Swingline Lender in its capacity as a
Lender outstanding at such time and its Letter of Credit Exposure at such time,
may exceed its Commitment at such time, but provided that no Borrowing of
--------
Swingline Loans shall be made if, immediately after giving effect thereto, the
sum of (x) the aggregate principal amount of Revolving Loans outstanding at such
time, (y) the aggregate Letter of Credit Exposure of all Lenders at such time
and (z) the aggregate principal amount of Swingline Loans outstanding at such
time would exceed the aggregate Commitments at such time. Subject to and on the
terms and conditions of this Agreement, the Borrower may borrow, repay
(including by means of a Borrowing of Revolving Loans pursuant to SECTION
2.2(e)) and reborrow Swingline Loans.
2.2 Borrowings. (a) The Revolving Loans shall, at the option of the
----------
Borrower and subject to the terms and conditions of this Agreement, be either
ABR Loans or LIBOR Loans (each, a "Type" of Loan), provided that (i) all Loans
--------
comprising the same Borrowing shall, unless otherwise specifically provided
herein, be of the same Type, (ii) notwithstanding any other provision of this
Agreement, any Revolving Loans made on the Closing Date shall be made initially
as ABR Loans, and (iii) notwithstanding any other provision of this Agreement,
no LIBOR Loans having an interest period of longer than one month may be
borrowed at any time prior to the earlier of the 60th day after the Closing Date
and the date upon which the Administrative Agent determines in its sole
discretion, and notifies the Borrower, that the primary syndication of the
credit facilities provided for hereunder has been completed (the earlier of such
dates, the "Syndication Completion Date"). The Swingline Loans shall be made
and maintained as ABR Loans at all times.
(b) In order to make a Borrowing of Revolving Loans (other than Borrowings
for the purpose of repaying Refunded Swingline Loans, which shall be made
pursuant to SECTION 2.2(e), and other than Borrowings involving continuations or
conversions of outstanding Revolving Loans, which shall be made pursuant to
SECTION 2.11), the Borrower will give the Administrative Agent written notice
(or oral notice promptly confirmed in writing) not later than 1:00 p.m.,
Charlotte time, three (3) Business Days prior to each such Borrowing to be
comprised of LIBOR Loans and one (1) Business Day prior to each such Borrowing
to be comprised of ABR Loans; provided, however, that a request for a Borrowing
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of any Revolving Loans to be made on the Closing Date may, at the discretion of
the Administrative Agent, be given later than the times specified hereinabove.
Each such notice (each, a "Notice of Revolving Borrowing") shall be irrevocable,
shall be given in the form of EXHIBIT A-1 (or, if oral notice is given, shall be
promptly followed with a writing in the form of EXHIBIT A-1) and shall specify
(x) the aggregate principal amount and initial Type of the Revolving Loans to be
made pursuant to such Borrowing, (y) in the case of a Borrowing of LIBOR Loans,
the initial Interest Period to be applicable thereto, and (z) the requested
Borrowing Date, which shall be a Business Day. Upon its receipt of a Notice of
Revolving Borrowing, the Administrative Agent will promptly notify each Lender
of the proposed Borrowing. Notwithstanding anything to the contrary contained
herein:
(i) the aggregate principal amount of each Borrowing of Revolving
Loans that is comprised of ABR Loans shall not be less than $3,000,000 or,
if greater, an integral multiple of $1,000,000 in excess thereof (or, if
less, in the amount of the aggregate Unutilized Commitments), and the
aggregate principal amount of each Borrowing of Revolving Loans
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that is comprised of LIBOR Loans shall not be less than $5,000,000 or, if
greater, an integral multiple of $1,000,000 in excess thereof;
(ii) if the Borrower shall have failed to designate the Type of
Revolving Loans comprising a Borrowing, the Borrower shall be deemed to
have requested a Borrowing comprised of ABR Loans; and
(iii) if the Borrower shall have failed to select the duration of the
Interest Period to be applicable to any Borrowing of LIBOR Loans, then the
Borrower shall be deemed to have selected an Interest Period with a
duration of one month.
(c) Not later than 1:00 p.m., Charlotte time, on the requested Borrowing
Date, each Lender will make available to the Administrative Agent at its office
referred to in SECTION 11.5 (or at such other location as the Administrative
Agent may designate) an amount, in Dollars and in immediately available funds,
equal to the amount of the Revolving Loan to be made by such Lender. To the
extent the Lenders have made such amounts available to the Administrative Agent
as provided hereinabove, the Administrative Agent will make the aggregate of
such amounts available to the Borrower in accordance with SECTION 2.3(a) and in
like funds as received by the Administrative Agent.
(d) In order to make a Borrowing of a Swingline Loan, the Borrower will
give the Administrative Agent and the Swingline Lender written notice (or oral
notice promptly confirmed in writing) not later than 1:00 p.m., Charlotte time,
on the Business Day of such Borrowing. Each such notice (each, a "Notice of
Swingline Borrowing") shall be irrevocable, shall be given in the form of
EXHIBIT A-2 (or, if oral notice is given, shall be promptly followed with a
writing in the form of EXHIBIT A-2) and shall specify (i) the principal amount
of the Swingline Loan to be made pursuant to such Borrowing (which shall not be
less than $500,000 and, if greater, shall be in an integral multiple of $250,000
in excess thereof (or, if less, in the amount of the Unutilized Swingline
Commitment)) and (ii) the requested Borrowing Date, which shall be a Business
Day. Not later than 3:00 p.m., Charlotte time, on the requested Borrowing Date,
the Swingline Lender will make available to the Administrative Agent at its
office referred to in SECTION 11.5 (or at such other location as the
Administrative Agent may designate) an amount, in Dollars and in immediately
available funds, equal to the amount of the requested Swingline Loan. To the
extent the Swingline Lender has made such amount available to the Administrative
Agent as provided hereinabove, the Administrative Agent will make such amount
available to the Borrower in accordance with SECTION 2.3(a) and in like funds as
received by the Administrative Agent.
(e) With respect to any outstanding Swingline Loans, the Swingline Lender
may at any time (whether or not an Event of Default has occurred and is
continuing) in its sole and absolute discretion, and is hereby authorized and
empowered by the Borrower to, cause a Borrowing of Revolving Loans to be made
for the purpose of repaying such Swingline Loans by delivering to the
Administrative Agent (if the Administrative Agent is different from the
Swingline Lender) and each other Lender (on behalf of, and with a copy to, the
Borrower), not later than 1:00 p.m., Charlotte time, one (1) Business Day prior
to the proposed Borrowing Date therefor, a notice (which shall be deemed to be a
Notice of Revolving Borrowing given by the Borrower) requesting the Lenders to
make Revolving Loans (which shall be made initially as ABR Loans) on such
Borrowing Date in an aggregate amount equal to the amount of such Swingline
Loans (the "Refunded Swingline Loans") outstanding on the date such notice is
given that the Swingline Lender requests to be repaid. Not
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later than 1:00 p.m., Charlotte time, on the requested Borrowing Date, each
Lender (other than the Swingline Lender) will make available to the
Administrative Agent at its office referred to in SECTION 11.5 (or at such other
location as the Administrative Agent may designate) an amount, in Dollars and in
immediately available funds, equal to the amount of the Revolving Loan to be
made by such Lender. To the extent the Lenders have made such amounts available
to the Administrative Agent as provided hereinabove, the Administrative Agent
will make the aggregate of such amounts available to the Swingline Lender in
like funds as received by the Administrative Agent, which shall apply such
amounts in repayment of the Refunded Swingline Loans. Notwithstanding any
provision of this Agreement to the contrary, on the relevant Borrowing Date, the
Refunded Swingline Loans (including the Swingline Lender's ratable share
thereof, in its capacity as a Lender) shall be deemed to be repaid with the
proceeds of the Revolving Loans made as provided above (including a Revolving
Loan deemed to have been made by the Swingline Lender), and such Refunded
Swingline Loans deemed to be so repaid shall no longer be outstanding as
Swingline Loans but shall be outstanding as Revolving Loans. If any portion of
any such amount repaid (or deemed to be repaid) to the Swingline Lender shall be
recovered by or on behalf of the Borrower from the Swingline Lender in any
bankruptcy, insolvency or similar proceeding or otherwise, the loss of the
amount so recovered shall be shared ratably among all the Lenders in the manner
contemplated by SECTION 2.15(b).
(f) If, as a result of any bankruptcy, insolvency or similar proceeding
with respect to the Borrower, Revolving Loans are not made pursuant to
subsection (e) above in an amount sufficient to repay any amounts owed to the
Swingline Lender in respect of any outstanding Swingline Loans, or if the
Swingline Lender is otherwise precluded for any reason from giving a notice on
behalf of the Borrower as provided for hereinabove, the Swingline Lender shall
be deemed to have sold without recourse, representation or warranty, and each
Lender shall be deemed to have purchased and hereby agrees to purchase, a
participation in such outstanding Swingline Loans in an amount equal to its
ratable share (based on the proportion that its Commitment bears to the
aggregate Commitments at such time) of the unpaid amount thereof together with
accrued interest thereon. Upon one (1) Business Day's prior notice from the
Swingline Lender, each Lender (other than the Swingline Lender) will make
available to the Administrative Agent at its office referred to in SECTION 11.5
(or at such other location as the Administrative Agent may designate) an amount,
in Dollars and in immediately available funds, equal to its respective
participation. To the extent the Lenders have made such amounts available to
the Administrative Agent as provided hereinabove, the Administrative Agent will
make the aggregate of such amounts available to the Swingline Lender in like
funds as received by the Administrative Agent. In the event any such Lender
fails to make available to the Administrative Agent the amount of such Lender's
participation as provided in this subsection (f), the Swingline Lender shall be
entitled to recover such amount on demand from such Lender, together with
interest thereon for each day from the date such amount is required to be made
available for the account of the Swingline Lender until the date such amount is
made available to the Swingline Lender at the Federal Funds Rate for the first
three (3) Business Days and thereafter at the Alternate Base Rate. Promptly
following its receipt of any payment by or on behalf of the Borrower in respect
of a Swingline Loan, the Swingline Lender will pay to each Lender that has
acquired a participation therein such Lender's ratable share of such payment.
(g) Notwithstanding any provision of this Agreement to the contrary, the
obligation of each Lender (other than the Swingline Lender) to make Revolving
Loans for the purpose of repaying any Refunded Swingline Loans pursuant to
subsection (e) above and each such Lender's obligation to purchase a
participation in any unpaid Swingline Loans pursuant to subsection (f) above
shall be
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absolute and unconditional and shall not be affected by any circumstance or
event whatsoever, including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right that such Lender may have against the
Swingline Lender, the Administrative Agent, the Borrower or any other Person for
any reason whatsoever, (ii) the occurrence or continuance of any Default or
Event of Default, (iii) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of the
Borrower or any of its Subsidiaries, or (iv) any breach of this Agreement by any
party hereto.
2.3 Disbursements; Funding Reliance; Domicile of Loans. (a) The Borrower
--------------------------------------------------
hereby authorizes the Administrative Agent to disburse the proceeds of each
Borrowing in accordance with the terms of any written instructions from any of
the Authorized Officers, provided that the Administrative Agent shall not be
--------
obligated under any circumstances to forward amounts to any account not listed
in an Account Designation Letter. The Borrower may at any time deliver to the
Administrative Agent an Account Designation Letter listing any additional
accounts or deleting any accounts listed in a previous Account Designation
Letter.
(b) Unless the Administrative Agent has received, prior to 1:00 p.m.,
Charlotte time, on the relevant Borrowing Date, written notice from a Lender
that such Lender will not make available to the Administrative Agent such
Lender's ratable portion of the relevant Borrowing, the Administrative Agent may
assume that such Lender has made such portion available to the Administrative
Agent in immediately available funds on such Borrowing Date in accordance with
the applicable provisions of SECTION 2.2, and the Administrative Agent may, in
reliance upon such assumption, but shall not be obligated to, make a
corresponding amount available to the Borrower on such Borrowing Date. If and
to the extent that such Lender shall not have made such portion available to the
Administrative Agent, and the Administrative Agent shall have made such
corresponding amount available to the Borrower, such Lender, on the one hand,
and the Borrower, on the other, severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount, together with interest
thereon for each day from the date such amount is made available to the Borrower
until the date such amount is repaid to the Administrative Agent, (i) in the
case of such Lender, at the Federal Funds Rate, and (ii) in the case of the
Borrower, at the rate of interest applicable at such time to the Type of
Revolving Loans comprising such Borrowing, as determined under the provisions of
SECTION 2.8. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such Lender's Revolving Loan
as part of such Borrowing for purposes of this Agreement. The failure of any
Lender to make any Loan required to be made by it as part of any Borrowing shall
not relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Loan as part of such Borrowing, but no Lender shall be responsible for
the failure of any other Lender to make the Revolving Loan to be made by such
other Lender as part of any Borrowing.
(c) Each Lender may, at its option, make and maintain any Loan at, to or
for the account of any of its Lending Offices, provided that any exercise of
--------
such option shall not affect the obligation of the Borrower to repay such Loan
to or for the account of such Lender in accordance with the terms of this
Agreement.
2.4 Notes. (a) The Revolving Loans made by each Lender shall be
-----
evidenced by a Revolving Credit Note appropriately completed in substantially
the form of EXHIBIT B-1. Each Revolving Credit Note issued to a Lender shall
(i) be executed by the Borrower, (ii) be payable to the order of such Lender,
(iii) be dated as of the Closing Date, (iv) be in a stated principal amount
equal
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to such Lender's Commitment, (v) bear interest in accordance with the provisions
of SECTION 2.8, as the same may be applicable to the Revolving Loans made by
such Lender from time to time, and (vi) be entitled to all of the benefits of
this Agreement and the other Credit Documents and subject to the provisions
hereof and thereof.
(b) The Swingline Loans made by the Swingline Lender shall be evidenced by
a Swingline Note appropriately completed in substantially the form of EXHIBIT B-
2. The Swingline Note shall (i) be executed by the Borrower, (ii) be payable to
the order of the Swingline Lender, (iii) be dated as of the Closing Date, (iv)
be in a stated principal amount equal to the Swingline Commitment, (v) bear
interest in accordance with the provisions of SECTION 2.8, as the same may be
applicable to the Swingline Loans made from time to time, and (vi) be entitled
to all of the benefits of this Agreement and the other Credit Documents and
subject to the provisions hereof and thereof.
(c) Each Lender will record on its internal records the amount and Type of
each Loan made by it and each payment received by it in respect thereof and
will, in the event of any transfer of any of its Notes, either endorse on the
reverse side thereof or on a schedule attached thereto (or any continuation
thereof) the outstanding principal amount and Type of the Loans evidenced
thereby as of the date of transfer or provide such information on a schedule to
the Assignment and Acceptance relating to such transfer; provided, however, that
-------- -------
the failure of any Lender to make any such recordation or provide any such
information, or any error therein, shall not affect the Borrower's obligations
under this Agreement or the Notes.
2.5 Termination and Reduction of Commitments and Swingline Commitment.
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(a) The Commitments shall be automatically and permanently terminated on the
earlier of (i) October 15, 1997 (if the Closing Date shall not have occurred on
or prior to such date) and (ii) the Maturity Date (unless sooner terminated
pursuant to subsections (b) or (c) below or SECTION 9.2). The Swingline
Commitment shall be automatically and permanently terminated on the Swingline
Maturity Date (unless sooner terminated pursuant to subsections (c) or (d) below
or SECTION 9.2).
(b) The Commitments shall, on each date upon which a prepayment of the
Loans is required under SECTIONS 2.6(c) through 2.6(e), be automatically and
permanently reduced by the amount of such required prepayment, as more
particularly set forth in SECTION 2.6(f).
(c) At any time and from time to time after the date hereof, upon not less
than five (5) Business Days' prior written notice to the Administrative Agent
(and, in the case of a termination or reduction of the Unutilized Swingline
Commitment, the Swingline Lender), the Borrower may terminate in whole or reduce
in part the aggregate Unutilized Commitments or the Unutilized Swingline
Commitment, provided that any such partial reduction shall be in an aggregate
--------
amount of not less than $5,000,000 ($500,000 in the case of the Unutilized
Swingline Commitment) or, if greater, an integral multiple thereof, and provided
--------
further that, in the event the Borrower shall deliver a notice of redemption
- -------
pursuant to the Subordinated Note Indenture in connection with the Subordinated
Note Redemption, at no time prior to the consummation of the Subordinated Note
Redemption shall the Borrower reduce the aggregate Unutilized Commitments to an
amount less than the difference between (i) the aggregate amount required to
effect the Subordinated Note Redemption (including the payment of any related
redemption premium and all accrued and unpaid interest) minus (ii) the amount
then on deposit with the Administrative Agent in a Redemption Account. The
amount of any termination or reduction made under this subsection (c) may not
thereafter be reinstated.
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(d) Each reduction of the Commitments pursuant to this SECTION 2.5 shall be
applied ratably among the Lenders according to their respective Commitments.
Notwithstanding any provision of this Agreement to the contrary, any reduction
of the Commitments pursuant to this SECTION 2.5 that has the effect of reducing
the aggregate Commitments to an amount less than the amount of the Swingline
Commitment at such time shall result in an automatic corresponding reduction of
the Swingline Commitment to the amount of the aggregate Commitments (as so
reduced), without any further action on the part of the Borrower or the
Swingline Lender.
2.6 Mandatory Repayments and Prepayments. (a) To the extent not
------------------------------------
previously paid, and except to the extent due or made sooner pursuant to the
provisions of this Agreement, (i) the aggregate outstanding principal of the
Revolving Loans shall be due and payable on the Maturity Date, and (ii) the
aggregate outstanding principal of the Swingline Loans shall be due and payable
on the Swingline Maturity Date.
(b) In the event that at any time the sum of (x) the aggregate principal
amount of Revolving Loans outstanding at such time, (y) the aggregate Letter of
Credit Exposure of all Lenders at such time and (z) the aggregate principal
amount of Swingline Loans outstanding at such time (excluding the aggregate
amount of any Swingline Loans to be repaid with proceeds of Revolving Loans made
on the date of determination) shall exceed the aggregate Commitments at such
time (after giving effect to any concurrent termination or reduction thereof),
the Borrower will immediately prepay the outstanding principal amount of the
Swingline Loans and, to the extent of any excess remaining after prepayment in
full of outstanding Swingline Loans, the Borrower will immediately prepay the
outstanding principal amount of the Revolving Loans in the amount of such
excess; provided that, to the extent such excess amount is greater than the
--------
aggregate principal amount of Swingline Loans and Revolving Loans outstanding
immediately prior to the application of such prepayment, the amount so prepaid
shall be retained by the Administrative Agent and held in the Cash Collateral
Account as cover for the Letter of Credit Exposure of the Lenders, as more
particularly described in SECTION 3.9, and thereupon such cash shall be deemed
to reduce the aggregate Letter of Credit Exposure by an equivalent amount.
(c) Promptly upon (and in any event not later than two (2) Business Days
after) its receipt thereof, the Borrower will prepay the outstanding principal
amount of the Loans in an amount equal to 25% of the Net Cash Proceeds from any
Equity Issuance (other than the Initial Public Offering or any offering and sale
of common stock of Parent pursuant to exercise of the over-allotment option in
connection therewith) or 100% of the Net Cash Proceeds from any Debt Issuance,
and will deliver to the Administrative Agent, concurrently with such prepayment,
a certificate signed by a Financial Officer of the Borrower in form and
substance satisfactory to the Administrative Agent and setting forth the
calculation of such Net Cash Proceeds.
(d) Not later than 180 days after its receipt of any proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event (and
in any event upon its determination not to repair or replace any property
subject to such Casualty Event), the Borrower will prepay the outstanding
principal amount of the Loans in an amount equal to 100% of the Net Cash
Proceeds from such Casualty Event (less any amounts theretofore applied or
committed to be applied within a reasonable period to the repair or replacement
of property subject to such Casualty Event) and will deliver to the
Administrative Agent, concurrently with such prepayment, a certificate signed by
a Financial Officer of the Borrower in form and substance satisfactory to the
Administrative Agent and setting forth the calculation of such Net Cash
Proceeds; provided, however, that, notwithstanding
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the foregoing, (i) nothing in this subsection shall be deemed to limit or
otherwise affect any right of the Administrative Agent herein or in any of the
other Credit Documents to receive and hold such proceeds as loss payee and to
disburse the same to the Borrower upon the terms hereof or thereof, or any
obligation of the Borrower and each of its Subsidiaries herein or in any of the
other Credit Documents to remit any such proceeds to the Administrative Agent
upon its receipt thereof, and (ii) any and all such proceeds received or held by
the Administrative Agent or the Borrower or any of its Subsidiaries during the
continuance of an Event of Default (regardless of any proposed or actual use
thereof for repair or replacement) shall be applied to prepay the outstanding
principal amount of the Loans.
(e) Not later than 180 days after its receipt thereof (and in any event
upon its determination not to acquire additional assets or properties or
otherwise to reinvest in its businesses), the Borrower will prepay the
outstanding principal amount of the Loans in an amount equal to 100% of the Net
Cash Proceeds from any Asset Disposition (less any amounts theretofore expended
or committed to be expended within a reasonable period to acquire assets or
properties or otherwise reinvested in its businesses) and will deliver to the
Administrative Agent, concurrently with such prepayment, a certificate signed by
a Financial Officer of the Borrower in form and substance satisfactory to the
Administrative Agent and setting forth the calculation of such Net Cash
Proceeds. Notwithstanding the foregoing, nothing in this subsection shall be
deemed to permit any Asset Disposition not expressly permitted under SECTION
8.4.
(f) Each prepayment of the Loans made pursuant to subsections (c) through
(e) above shall be applied (i) first, to reduce the outstanding principal amount
of the Swingline Loans, with a corresponding reduction to the Commitments as
provided in SECTION 2.5(b), (ii) second, to the extent of any excess remaining
after application as provided in clause (i) above, to reduce the outstanding
principal amount of the Revolving Loans, with a corresponding reduction to the
Commitments as provided in SECTION 2.5(b), and (iii) third, to the extent of any
excess remaining after application as provided in clauses (i) and (ii) above, to
pay any outstanding Reimbursement Obligations, and thereafter to cash
collateralize Letter of Credit Exposure pursuant to SECTION 3.9. Each
prepayment pursuant to the provisions of this Section shall be applied ratably
among the Lenders holding the Loans being prepaid, in proportion to the
principal amount held by each, and as among Revolving Loans shall be applied
first to prepay all ABR Loans before any LIBOR Loans are prepaid.
(g) Each payment or prepayment of a LIBOR Loan made pursuant to the
provisions of this SECTION 2.6 on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
SECTION 2.18 to be paid as a consequence thereof.
2.7 Voluntary Prepayments. At any time and from time to time, the
---------------------
Borrower shall have the right to prepay the Revolving Loans, in whole or in
part, without premium or penalty (except as provided in clause (iii) below),
upon written notice (or oral notice promptly confirmed in writing) given to the
Administrative Agent not later than 1:00 p.m., Charlotte time, three (3)
Business Days prior to each intended prepayment, provided that (i) each partial
--------
prepayment shall be in an aggregate principal amount of not less than $3,000,000
or, if greater, an integral multiple of $1,000,000 in excess thereof, (ii) no
partial prepayment of LIBOR Loans made pursuant to any single Borrowing shall
reduce the aggregate outstanding principal amount of the remaining LIBOR Loans
under such Borrowing to less than $5,000,000 or to any greater amount not an
integral multiple of $1,000,000 in excess thereof, and (iii) unless made
together with all amounts required under SECTION 2.18 to be paid as a
consequence of such prepayment, a prepayment of a LIBOR Loan may be made only on
the last
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day of the Interest Period applicable thereto. Each such notice (each, a "Notice
of Prepayment") shall be given in the form of EXHIBIT C (or, if oral notice is
given, shall be promptly followed with a writing in the form of EXHIBIT C),
shall specify the proposed date of such prepayment and the aggregate principal
amount and Type of Revolving Loans to be prepaid (and, in the case of LIBOR
Loans, the Interest Period of the Borrowing pursuant to which made), and shall
be irrevocable and shall bind the Borrower to make such prepayment on the terms
specified therein. Notwithstanding the foregoing provisions of this Section, the
Borrower may prepay the Swingline Loans at any time and from time to time after
the date hereof, in whole or in part, without premium or penalty, upon written
notice (or oral notice promptly confirmed in writing) delivered to the
Administrative Agent no later than 1:00 p.m., Charlotte time, on the date of
such prepayment, provided that each partial prepayment of Swingline Loans shall
--------
be in an aggregate principal amount of not less than $500,000 or, if greater, an
integral multiple of $250,000 in excess thereof. Revolving Loans and Swingline
Loans prepaid pursuant to this Section may be reborrowed, subject to the terms
and conditions of this Agreement. Each prepayment of the Loans pursuant to the
provisions of this Section shall be applied ratably among the Lenders holding
the Loans being prepaid, in proportion to the principal amount held by each.
2.8 Interest. (a) The Borrower will pay interest in respect of the
--------
unpaid principal amount of each Loan, from the date of Borrowing thereof until
such principal amount shall be paid in full, (i) at the Alternate Base Rate, as
in effect from time to time during such periods as such Loan is an ABR Loan, and
(ii) at the Adjusted LIBOR Rate, as in effect from time to time during such
periods as such Loan is a LIBOR Loan.
(b) Upon the occurrence and during the continuance of an Event of Default
as the result of failure by the Borrower to pay any principal of or interest on
any Loan, any fees or other amount hereunder when due (whether at maturity,
pursuant to acceleration or otherwise), and (at the election of the Required
Lenders) upon the occurrence and during the continuance of any other Event of
Default, all outstanding principal amounts of the Loans and, to the greatest
extent permitted by law, all interest accrued on the Loans and all other accrued
and outstanding fees and other amounts hereunder, shall bear interest at a rate
per annum equal to the interest rate applicable from time to time thereafter to
such Loans (whether the Alternate Base Rate or the Adjusted LIBOR Rate) plus 2%
(or, in the case of fees and other amounts, at the Alternate Base Rate plus 2%),
and, in each case, such default interest shall be payable on demand. To the
greatest extent permitted by law, interest shall continue to accrue after the
filing by or against the Borrower of any petition seeking any relief in
bankruptcy or under any law pertaining to insolvency or debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as follows:
(i) in respect of each ABR Loan (including any ABR Loan or portion
thereof paid or prepaid pursuant to the provisions of SECTION 2.6, except
as provided hereinbelow), in arrears on the last Business Day of each
calendar quarter, beginning with the first such day to occur after the
Closing Date; provided, that in the event the Loans are repaid or prepaid
--------
in full and the Commitments have been terminated, then accrued interest in
respect of all ABR Loans shall be payable together with such repayment or
prepayment on the date thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR Loan or
portion thereof paid or prepaid pursuant to the provisions of SECTION 2.6,
except as provided hereinbelow), in arrears (y) on the last Business Day of
the Interest Period applicable thereto (subject to the
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provisions of clause (iv) in SECTION 2.10) and (z) in addition, in the case
of a LIBOR Loan with an Interest Period having a duration of six months, on
the date three months after the first day of such Interest Period;
provided, that in the event all LIBOR Loans made pursuant to a single
--------
Borrowing are repaid or prepaid in full, then accrued interest in respect
of such LIBOR Loans shall be payable together with such repayment or
prepayment on the date thereof; and
(iii) in respect of any Loan, at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit Document
shall be deemed to establish or require the payment of interest to any Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of any Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
In the event of any such reduction affecting any Lender, if from time to time
thereafter the amount of interest payable for the account of such Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be automatically
increased to such maximum permissible amount, provided that at no time shall the
--------
aggregate amount by which interest paid for the account of any Lender has been
increased pursuant to this sentence exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to the
previous sentence.
(e) The Administrative Agent shall promptly notify the Borrower and the
Lenders upon determining the interest rate for each Borrowing of LIBOR Loans
after its receipt of the relevant Notice of Revolving Borrowing or Notice of
Conversion/Continuation, and upon each change in the Alternate Base Rate;
provided, however, that the failure of the Administrative Agent to provide the
- -------- -------
Borrower or the Lenders with any such notice shall neither affect any
obligations of the Borrower or the Lenders hereunder nor result in any liability
on the part of the Administrative Agent to the Borrower or any Lender. Each
such determination (including each determination of the Reserve Requirement)
shall, absent manifest error, be conclusive and binding on all parties hereto.
2.9 Fees. The Borrower agrees to pay:
----
(a) To First Union, for its own account, on the Closing Date, the fee
described in paragraph (i) of the Fee Letter, in the amount set forth therein as
due and payable on such date;
(b) To the Administrative Agent, for the account of each Lender, a
commitment fee (the "Revolving Credit Commitment Fee") for the period from the
date of this Agreement to the Termination Date, at a per annum rate equal to the
Applicable Margin Percentage for the Revolving Credit Commitment Fee, on such
Lender's ratable share (based on the proportion that its Commitment bears to the
aggregate Commitments) of the average daily aggregate Unutilized Commitments,
payable in arrears (i) on the last Business Day of each calendar quarter,
beginning with the first such day to occur after the Closing Date, and (ii) on
the Termination Date;
(c) To the Administrative Agent, for the account of each Lender, a letter
of credit fee for each calendar quarter in respect of all Letters of Credit
outstanding during such quarter, at a per
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annum rate equal to the Applicable Margin Percentage from time to time during
such quarter for LIBOR Loans, on such Lender's ratable share (based on the
proportion that its Commitment bears to the aggregate Commitments) of the daily
average aggregate Stated Amount of such Letters of Credit, payable in arrears
(i) on the last Business Day of each calendar quarter, beginning with the first
such day to occur after the Closing Date, and (ii) on the later of the
Termination Date and the date of termination of the last outstanding Letter of
Credit;
(d) To the Issuing Lender, for its own account, a facing fee for each
calendar quarter in respect of all Letters of Credit outstanding during such
quarter, at a per annum rate of 0.25% on the daily average aggregate Stated
Amount of such Letters of Credit (provided, however, that, notwithstanding the
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foregoing, the amount of such fee with regard to any single Letter of Credit
shall not be less than $500), payable in arrears (i) on the last Business Day of
each calendar quarter, beginning with the first such day to occur after the
Closing Date, and (ii) on the later of the Termination Date and the date of
termination of the last outstanding Letter of Credit; and
(e) To the Administrative Agent, for its own account, the annual
administrative fee described in paragraph (ii) of the Fee Letter, on the terms,
in the amount and at the times set forth therein.
2.10. Interest Periods. Concurrently with the giving of (y) a Notice of
----------------
Revolving Borrowing or (z) a Notice of Conversion/Continuation in respect of any
Borrowing comprised of ABR Loans to be converted into, or LIBOR Loans to be
continued as, LIBOR Loans, the Borrower shall have the right to elect, pursuant
to such notice, the interest period (each, an "Interest Period") to be
applicable to such LIBOR Loans, which Interest Period shall, at the option of
the Borrower, be a one, three or six-month period; provided, however, that:
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(i) all LIBOR Loans comprising a single Borrowing shall at all
times have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall commence
on the date of the Borrowing of such LIBOR Loan (including the date of any
continuation of, or conversion into, such LIBOR Loan), and each successive
Interest Period applicable to such LIBOR Loan shall commence on the day on
which the next preceding Interest Period applicable thereto expires;
(iii) LIBOR Loans may not be outstanding under more than seven (7)
separate Interest Periods at any one time (for which purpose Interest
Periods shall be deemed to be separate even if they are coterminous);
(iv) if any Interest Period otherwise would expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall expire on
the next preceding Business Day;
(v) the Borrower may not select any Interest Period that begins
prior to the Closing Date or that expires after the Maturity Date;
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(vi) at any time prior to the Syndication Completion Date, the
Borrower may select an Interest Period having a duration of two weeks but
may not select any Interest Period having a duration longer than one month;
(vii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period would otherwise expire, such Interest Period shall expire
on the last Business Day of such calendar month; and
(viii) if, upon the expiration of any Interest Period applicable to a
Borrowing of LIBOR Loans, the Borrower shall have failed to elect a new
Interest Period to be applicable to such LIBOR Loans, then the Borrower
shall be deemed to have elected to convert such LIBOR Loans into ABR Loans
as of the expiration of the then current Interest Period applicable
thereto.
2.11. Conversions and Continuations. (a) The Borrower shall have the
-----------------------------
right, on any Business Day occurring on or after the Closing Date, to elect (i)
to convert all or a portion of the outstanding principal amount of any ABR Loans
into LIBOR Loans, or to convert any LIBOR Loans the Interest Periods for which
end on the same day into ABR Loans, or (ii) to continue all or a portion of the
outstanding principal amount of any LIBOR Loans the Interest Periods for which
end on the same day for an additional Interest Period, provided that (w) any
--------
such conversion of LIBOR Loans into ABR Loans shall involve an aggregate
principal amount of not less than $3,000,000 or, if greater, an integral
multiple of $1,000,000 in excess thereof; any such conversion of ABR Loans into,
or continuation of, LIBOR Loans shall involve an aggregate principal amount of
not less than $5,000,000 or, if greater, an integral multiple of $1,000,000 in
excess thereof; and no partial conversion of LIBOR Loans made pursuant to a
single Borrowing shall reduce the outstanding principal amount of such LIBOR
Loans to less than $5,000,000 or to any greater amount not an integral multiple
of $1,000,000 in excess thereof, (x) except as otherwise provided in SECTION
2.16(d), LIBOR Loans may be converted into ABR Loans only on the last day of the
Interest Period applicable thereto (and, in any event, if a LIBOR Loan is
converted into an ABR Loan on any day other than the last day of the Interest
Period applicable thereto, the Borrower will pay, upon such conversion, all
amounts required under SECTION 2.18 to be paid as a consequence thereof), (y) no
such conversion or continuation shall be permitted with regard to any ABR Loans
that are Swingline Loans, and (z) no conversion of ABR Loans into LIBOR Loans or
continuation of LIBOR Loans shall be permitted during the continuance of a
Default or Event of Default.
(b) The Borrower shall make each such election by giving the Administrative
Agent written notice (or oral notice promptly confirmed in writing) not later
than 1:00 p.m., Charlotte time, three (3) Business Days prior to the intended
effective date of any conversion of ABR Loans into, or continuation of, LIBOR
Loans and one (1) Business Day prior to the intended effective date of any
conversion of LIBOR Loans into ABR Loans. Each such notice (each, a "Notice of
Conversion/Continuation") shall be irrevocable, shall be given in the form of
EXHIBIT D (or, if oral notice is given, shall be promptly followed with a
writing in the form of EXHIBIT D) and shall specify (x) the date of such
conversion or continuation (which shall be a Business Day), (y) in the case of a
conversion into, or a continuation of, LIBOR Loans, the Interest Period to be
applicable thereto, and (z) the aggregate amount and Type of the Loans being
converted or continued. Upon the receipt of a Notice of
Conversion/Continuation, the Administrative Agent will promptly notify each
Lender of the proposed conversion or continuation. In the event that the
Borrower shall fail to deliver a Notice of Conversion/Continuation as provided
herein with respect to any outstanding LIBOR Loans, such
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<PAGE>
LIBOR Loans shall automatically be converted to ABR Loans upon the expiration of
the then current Interest Period applicable thereto (unless repaid pursuant to
the terms hereof). In the event the Borrower shall have failed to select in a
Notice of Conversion/Continuation the duration of the interest period to be
applicable to any conversion into, or continuation of, LIBOR Loans, then the
Borrower shall be deemed to have selected an Interest Period with a duration of
one month.
2.12. Method of Payments; Computations. (a) All payments by the Borrower
--------------------------------
hereunder shall be made without setoff, counterclaim or other defense, in
Dollars and in immediately available funds to the Administrative Agent, for the
account of the Lenders or the Swingline Lender, as the case may be (except as
otherwise expressly provided herein as to payments required to be made directly
to the Issuing Lender and the Lenders), at the Administrative Agent's office
referred to in SECTION 11.5, prior to 1:00 p.m., Charlotte time, on the date
payment is due. Any payment made as required hereinabove, but after 1:00 p.m.,
Charlotte time, shall be deemed to have been made on the next succeeding
Business Day. If any payment falls due on a day that is not a Business Day,
then such due date shall be extended to the next succeeding Business Day (except
that in the case of LIBOR Loans to which the proviso of clause (iv) in SECTION
2.10 is applicable, such due date shall be the next preceding Business Day), and
such extension of time shall then be included in the computation of payment of
interest, fees or other applicable amounts.
(b) The Administrative Agent will distribute to the Lenders like amounts
relating to payments made to the Administrative Agent for the account of the
Lenders as follows: (i) if the payment is received by 1:00 p.m., Charlotte time,
in immediately available funds, the Administrative Agent will make available to
each relevant Lender on the same date, by wire transfer of immediately available
funds, such Lender's ratable share of such payment (based on the percentage that
the amount of the relevant payment owing to such Lender bears to the total
amount of such payment owing to all of the relevant Lenders), and (ii) if such
payment is received after 1:00 p.m., Charlotte time, or in other than
immediately available funds, the Administrative Agent will make available to
each such Lender its ratable share of such payment by wire transfer of
immediately available funds on the next succeeding Business Day (or in the case
of uncollected funds, as soon as practicable after collected). If the
Administrative Agent shall not have made a required distribution to the
appropriate Lenders as required hereinabove after receiving a payment for the
account of such Lenders, the Administrative Agent will pay to each such Lender,
on demand, its ratable share of such payment with interest thereon at the
Federal Funds Rate for each day from the date such amount was required to be
disbursed by the Administrative Agent until the date repaid to such Lender. The
Administrative Agent will distribute to the Issuing Lender like amounts relating
to payments made to the Administrative Agent for the account of the Issuing
Lender in the same manner, and subject to the same terms and conditions, as set
forth hereinabove with respect to distributions of amounts to the Lenders.
(c) Unless the Administrative Agent shall have received written notice from
the Borrower prior to the date on which any payment is due to any Lender
hereunder that such payment will not be made in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date, and the Administrative Agent may, in reliance on such
assumption, but shall not be obligated to, cause to be distributed to such
Lender on such due date an amount equal to the amount then due to such Lender.
If and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, and without limiting the obligation of the Borrower to
make such payment in accordance with the terms hereof, such Lender shall repay
to the Administrative Agent forthwith on demand such amount so distributed
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to such Lender, together with interest thereon for each day from the date such
amount is so distributed to such Lender until the date repaid to the
Administrative Agent, at the Federal Funds Rate.
(d) All computations of interest and fees hereunder (including computations
of the Reserve Requirement) shall be made on the basis of a year consisting of
(i) in the case of interest on ABR Loans, 365 or 366 days, as the case may be,
or (ii) in all other instances, 360 days; and in each instance under (i) and
(ii) above, with regard to the actual number of days (including the first day,
but excluding the last day) elapsed.
2.13. Recovery of Payments. (a) The Borrower agrees that to the extent
--------------------
the Borrower makes a payment or payments to or for the account of the
Administrative Agent, the Issuing Lender or any Lender, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or similar state or
federal law, common law or equitable cause, then, to the extent of such payment
or repayment, the Obligation intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been received.
(b) If any amounts distributed by the Administrative Agent to any Lender
are subsequently returned or repaid by the Administrative Agent to the Borrower
or its representative or successor in interest, whether by court order or by
settlement approved by the Lender in question, such Lender will, promptly upon
receipt of notice thereof from the Administrative Agent, pay the Administrative
Agent such amount. If any such amounts are recovered by the Administrative
Agent from the Borrower or its representative or successor in interest, the
Administrative Agent will redistribute such amounts to the Lenders on the same
basis as such amounts were originally distributed.
2.14. Use of Proceeds. The proceeds of the Loans shall be used solely (i)
---------------
to repay a portion of the Existing Senior Indebtedness, (ii) to pay or reimburse
reasonable transaction fees and expenses in connection therewith and in
connection with the consummation of the transactions contemplated hereby, (iii)
to effect the Subordinated Note Redemption and Permitted Subordinated Note
Repurchases, and (iv) for working capital and general corporate purposes and to
finance Permitted Acquisitions in accordance with the terms and provisions of
this Agreement, including, without limitation, the provisions set forth in
SECTION 6.8.
2.15. Pro Rata Treatment; Sharing of Payments. (a) All fundings,
---------------------------------------
continuations and conversions of Revolving Loans shall be made by the Lenders
pro rata on the basis of their respective Commitments (in the case of the
initial funding of Revolving Loans pursuant to SECTION 2.2) or on the basis of
their respective outstanding Revolving Loans (in the case of continuations and
conversions of Revolving Loans pursuant to SECTION 2.11, and additionally in all
cases in the event the Commitments have expired or have been terminated), as the
case may be from time to time. All payments on account of principal of or
interest on any Loans, fees or any other Obligations owing to or for the account
of any one or more Lenders shall be apportioned ratably among such Lenders in
proportion to the amounts of such principal, interest, fees or other Obligations
owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount hereunder
(whether by voluntary payment, realization upon security, exercise of the right
of setoff or banker's lien, counterclaim or cross action, or otherwise, other
than pursuant to SECTION 11.7 or SECTION 2.20)
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applicable to the payment of any of the Obligations that exceeds its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable to such Lender at such time to (ii) the aggregate amount of such
Obligations due and payable to all Lenders at such time) of payments on account
of such Obligations then or therewith obtained by all the Lenders to which such
payments are required to have been made, such Lender shall forthwith purchase
from the other Lenders such participations in such Obligations as shall be
necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided, however, that if all or any
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portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each such other Lender shall be rescinded and each
such other Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery, together with an amount equal to such other Lender's
ratable share (according to the proportion of (i) the amount of such other
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to the provisions of this subsection may, to the fullest extent
permitted by law, exercise any and all rights of payment (including, without
limitation, setoff, banker's lien or counterclaim) with respect to such
participation as fully as if such participant were a direct creditor of the
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or similar law, any Lender receives a secured claim in
lieu of a setoff to which this subsection applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this subsection
to share in the benefits of any recovery on such secured claim.
2.16. Increased Costs; Change in Circumstances; Illegality; etc. (a) If,
---------------------------------------------------------
at any time after the date hereof and from time to time, the introduction of or
any change after the date hereof in any applicable law, rule or regulation or in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by any
Lender with any guideline or request from any such Governmental Authority
(whether or not having the force of law), shall (i) subject such Lender to any
tax or other charge, or change the basis of taxation of payments to such Lender,
in respect of any of its LIBOR Loans or any other amounts payable hereunder or
its obligation to make, fund or maintain any LIBOR Loans (other than taxes on
the overall net income of such Lender or its applicable Lending Office or any
change in the rate or basis thereof), (ii) impose, modify or deem applicable any
reserve, special deposit or similar requirement (other than as a result of any
change in the Reserve Requirement) against assets of, deposits with or for the
account of, or credit extended by, such Lender or its applicable Lending Office,
or (iii) impose on such Lender or its applicable Lending Office any other
condition, and the result of any of the foregoing shall be to increase the cost
to such Lender of making or maintaining any LIBOR Loans or issuing or
participating in Letters of Credit or to reduce the amount of any sum received
or receivable by such Lender hereunder (including in respect of Letters of
Credit), the Borrower will, promptly upon demand therefor by such Lender, pay to
such Lender such additional amounts as shall compensate such Lender for such
increase in costs or reduction in return.
(b) If, at any time after the date hereof and from time to time, any Lender
shall have reasonably determined that the introduction of or any change after
the date hereof in any applicable law, rule or regulation regarding capital
adequacy or in the interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration thereof, or
compliance by such Lender with any guideline or request from any such
Governmental Authority (whether or not having the force of law), has or would
have the effect, as a consequence of such Lender's
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Commitment, Loans or issuance of or participations in Letters of Credit
hereunder, of reducing the rate of return on the capital of such Lender or any
Person controlling such Lender to a level below that which such Lender or
controlling Person could have achieved but for such introduction, change or
compliance (taking into account such Lender's or controlling Person's policies
with respect to capital adequacy), the Borrower will, promptly upon demand
therefor by such Lender therefor, pay to such Lender such additional amounts as
will compensate such Lender or controlling Person for such reduction in return.
(c) If, on or prior to the first day of any Interest Period, (y) the
Administrative Agent shall have determined that adequate and reasonable means do
not exist for ascertaining the applicable LIBOR Rate for such Interest Period or
(z) the Administrative Agent shall have received written notice from the
Required Lenders of their determination that the rate of interest referred to in
the definition of "LIBOR Rate" upon the basis of which the Adjusted LIBOR Rate
for LIBOR Loans for such Interest Period is to be determined will not adequately
and fairly reflect the cost to such Lenders of making or maintaining LIBOR Loans
during such Interest Period, the Administrative Agent will forthwith so notify
the Borrower and the Lenders. Upon such notice, (i) all then outstanding LIBOR
Loans shall automatically, on the expiration date of the respective Interest
Periods applicable thereto (unless then repaid in full), be converted into ABR
Loans, (ii) the obligation of the Lenders to make, to convert ABR Loans into, or
to continue, LIBOR Loans shall be suspended (including pursuant to the Borrowing
to which such Interest Period applies), and (iii) any Notice of Revolving
Borrowing or Notice of Conversion/Continuation given at any time thereafter with
respect to LIBOR Loans shall be deemed to be a request for ABR Loans, in each
case until the Administrative Agent or the Required Lenders, as the case may be,
shall have determined that the circumstances giving rise to such suspension no
longer exist (and the Required Lenders, if making such determination, shall have
so notified the Administrative Agent), and the Administrative Agent shall have
so notified the Borrower and the Lenders.
(d) Notwithstanding any other provision in this Agreement, if, at any time
after the date hereof and from time to time, any Lender shall have determined in
good faith that the introduction of or any change in any applicable law, rule or
regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance with any guideline or request from any such Governmental
Authority (whether or not having the force of law), has or would have the effect
of making it unlawful for such Lender to make or to continue to make or maintain
LIBOR Loans, such Lender will forthwith so notify the Administrative Agent and
the Borrower. Upon such notice, (i) each of such Lender's then outstanding
LIBOR Loans shall automatically, on the expiration date of the respective
Interest Period applicable thereto (or, to the extent any such LIBOR Loan may
not lawfully be maintained as a LIBOR Loan until such expiration date, upon such
notice), be converted into an ABR Loan, (ii) the obligation of such Lender to
make, to convert ABR Loans into, or to continue, LIBOR Loans shall be suspended
(including pursuant to any Borrowing of Revolving Loans for which the
Administrative Agent has received a Notice of Revolving Borrowing but for which
the Borrowing Date has not arrived), and (iii) any Notice of Revolving Borrowing
or Notice of Conversion/Continuation given at any time thereafter with respect
to LIBOR Loans shall, as to such Lender, be deemed to be a request for an ABR
Loan, in each case until such Lender shall have determined that the
circumstances giving rise to such suspension no longer exist and shall have so
notified the Administrative Agent, and the Administrative Agent shall have so
notified the Borrower.
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(e) Determinations by the Administrative Agent or any Lender for purposes
of this SECTION 2.16 of any increased costs, reduction in return, market
contingencies, illegality or any other matter shall, absent manifest error, be
conclusive, provided that such determinations are made in good faith. No
--------
failure by the Administrative Agent or any Lender at any time to demand payment
of any amounts payable under this SECTION 2.16 shall constitute a waiver of its
right to demand payment of any additional amounts arising at any subsequent
time. Nothing in this SECTION 2.16 shall require or be construed to require the
Borrower to pay any interest, fees, costs or other amounts in excess of that
permitted by applicable law.
2.17. Taxes. (a) Any and all payments by the Borrower hereunder or under
-----
any Note shall be made, in accordance with the terms hereof and thereof, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, other than net income and franchise taxes imposed on the
Administrative Agent or any Lender by the United States or by the jurisdiction
under the laws of which the Administrative Agent or such Lender, as the case may
be, is organized or in which its principal office or (in the case of a Lender)
its applicable Lending Office is located, or any political subdivision or taxing
authority thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to the Administrative Agent or
any Lender, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 2.17), the Administrative Agent or
such Lender, as the case may be, receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower will make such
deductions, (iii) the Borrower will pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and (iv)
the Borrower will deliver to the Administrative Agent or such Lender, as the
case may be, evidence of such payment.
(b) The Borrower will indemnify the Administrative Agent and each Lender
for the full amount of Taxes (including, without limitation, any Taxes imposed
by any jurisdiction on amounts payable under this SECTION 2.17) paid by the
Administrative Agent or such Lender, as the case may be, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted; provided
--------
that if the Borrower reasonably believes that such Taxes were not correctly or
legally asserted, the Administrative Agent or such Lender, as the case may be,
will use reasonable efforts to cooperate with the Borrower to obtain a refund of
such Taxes so long as such efforts would not, in the sole determination of the
Administrative Agent or such Lender, as the case may be, result in any
additional costs, expenses or risks or be otherwise disadvantageous to it. This
indemnification shall be made within 30 days from the date the Administrative
Agent or such Lender, as the case may be, makes written demand therefor.
(c) Each of the Administrative Agent and the Lenders agrees that if it
subsequently recovers, or receives a permanent net tax benefit with respect to,
any amount of Taxes (i) previously paid by it and as to which it has been
indemnified by or on behalf of the Borrower or (ii) previously deducted by the
Borrower (including, without limitation, any Taxes deducted from any additional
sums payable under clause (i) of subsection (a) above), the Administrative Agent
or such Lender, as the case may be, shall reimburse the Borrower to the extent
of the amount of any such recovery or permanent net tax benefit (but only to the
extent of indemnity payments made, or additional amounts
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paid, by or on behalf of the Borrower under this SECTION 2.17 with respect to
the Taxes giving rise to such recovery or tax benefit); provided, however, that
-------- -------
the Borrower, upon the request of the Administrative Agent or such Lender,
agrees to repay to the Administrative Agent or such Lender, as the case may be,
the amount paid over to the Borrower (together with any penalties, interest or
other charges), in the event the Administrative Agent or such Lender is required
to repay such amount to the relevant taxing authority or other Governmental
Authority. The determination by the Administrative Agent or any Lender of the
amount of any such recovery or permanent net tax benefit shall, in the absence
of manifest error, be conclusive and binding.
(d) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender") and claims exemption from United States withholding tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Administrative Agent and the Borrower, on or prior to the Closing Date
(or, in the case of a Non-U.S. Lender that becomes a party to this Agreement as
a result of an assignment after the Closing Date, on the effective date of such
assignment), (i) in the case of a Non-U.S. Lender that is a "bank" for purposes
of Section 881(c)(3)(A) of the Internal Revenue Code, a properly completed
Internal Revenue Service Form 4224 or 1001, as applicable (or successor forms),
certifying that such Non-U.S. Lender is entitled to an exemption from or a
reduction of withholding or deduction for or on account of United States federal
income taxes in connection with payments under this Agreement or any of the
Notes, together with a properly completed Internal Revenue Service Form W-8 or
W-9, as applicable (or successor forms), and (ii) in the case of a Non-U.S.
Lender that is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal
Revenue Code, a certificate in form and substance reasonably satisfactory to the
Administrative Agent and the Borrower and to the effect that (x) such Non-U.S.
Lender is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal
Revenue Code, is not subject to regulatory or other legal requirements as a bank
in any jurisdiction, and has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any governmental authority,
any application made to a rating agency or qualification for any exemption from
any tax, securities law or other legal requirements, (y) is not a 10-percent
shareholder for purposes of Section 881(c)(3)(B) of the Internal Revenue Code
and (z) is not a controlled foreign corporation receiving interest from a
related person for purposes of Section 881(c)(3)(C) of the Internal Revenue
Code, together with a properly completed Internal Revenue Service Form W-8 or W-
9, as applicable (or successor forms). Each such Non-U.S. Lender further agrees
to deliver to each of the Administrative Agent and the Borrower an additional
copy of each such relevant form on or before the date that such form expires or
becomes obsolete or after the occurrence of any event (including a change in its
applicable Lending Office) requiring a change in the most recent forms so
delivered by it, in each case certifying that such Non-U.S. Lender is entitled
to an exemption from or a reduction of withholding or deduction for or on
account of United States federal income taxes in connection with payments under
this Agreement or any of the Notes, unless an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required, which event renders
all such forms inapplicable or the exemption to which such forms relate
unavailable and such Non-U.S. Lender notifies the Administrative Agent and the
Borrower that it is not entitled to receive payments without deduction or
withholding of United States federal income taxes. Each such Non-U.S. Lender
will promptly notify the Administrative Agent and the Borrower of any changes in
circumstances that would modify or render invalid any claimed exemption or
reduction.
(e) If any Lender is entitled to a reduction in (and not a complete
exemption from) the applicable withholding tax, the Borrower and the
Administrative Agent may withhold from any
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interest payment to such Lender an amount equivalent to the applicable
withholding tax after taking into account such reduction. If any of the forms or
other documentation required under subsection (d) above are not delivered to the
Administrative Agent as therein required, then the Borrower and the
Administrative Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
2.18. Compensation. The Borrower will compensate each Lender upon demand
------------
for all losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund or maintain LIBOR
Loans) that such Lender may incur or sustain (i) if for any reason (other than a
default by such Lender) a borrowing or continuation of, or conversion into, a
LIBOR Loan does not occur on a date specified therefor in a Notice of Revolving
Borrowing or Notice of Conversion/Continuation, (ii) if any repayment,
prepayment or conversion of any LIBOR Loan occurs on a date other than the last
day of an Interest Period applicable thereto (including as a consequence of
acceleration of the maturity of the Loans pursuant to SECTION 9.2), (iii) if any
prepayment of any LIBOR Loan is not made on any date specified in a notice of
prepayment given by the Borrower or (iv) as a consequence of any other failure
by the Borrower to make any payments with respect to any LIBOR Loan when due
hereunder. Calculation of all amounts payable to a Lender under this SECTION
2.18 shall be made as though such Lender had actually funded its relevant LIBOR
Loan through the purchase of a Eurodollar deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of such LIBOR Loan, having a maturity
comparable to the relevant Interest Period; provided, however, that each Lender
-------- -------
may fund its LIBOR Loans in any manner it sees fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this SECTION
2.18. Determinations by any Lender for purposes of this SECTION 2.18 of any
such losses, expenses or liabilities shall, absent manifest error, be
conclusive, provided that such determinations are made in good faith.
--------
2.19. Duty to Mitigate. Any of the Administrative Agent or any Lender
----------------
claiming any additional amounts payable pursuant to SECTION 2.16(a), SECTION
2.16(b) or SECTION 2.17 or exercising its rights under SECTION 2.16(d) shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document reasonably requested by the Borrower or to change
the jurisdiction of its applicable Lending Office if the making of such filing
or change would avoid the need for or reduce the amount of any such additional
amounts that may thereafter accrue or avoid the circumstances giving rise to
such exercise and would not, in the sole determination of the Administrative
Agent or such Lender, as the case may be, result in any additional costs,
expenses or risks or be otherwise disadvantageous to it. Each of the
Administrative Agent and each Lender agrees to use reasonable efforts to notify
the Borrower as promptly as practicable upon its becoming aware that
circumstances exist that would cause the Borrower to become obligated to pay
additional amounts to the Administrative Agent or such Lender pursuant to
SECTION 2.16(a), SECTION 2.16(b) or SECTION 2.17 or that would entitle such
Lender to exercise its rights under SECTION 2.16(d).
2.20. Replacement of Lenders. The Borrower may, at any time and so long
----------------------
as no Default or Event of Default has then occurred and is continuing, replace
any Lender that has requested additional amounts from the Borrower under SECTION
2.16(a), SECTION 2.16(b) or SECTION 2.17 or the obligation of which to make or
maintain LIBOR Loans has been suspended under SECTION 2.16(d), in either case by
written notice to such Lender and the Administrative Agent given not more than
thirty (30) days after any such event and identifying one or more Persons each
of which shall be reasonably
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acceptable to the Administrative Agent (each, a "Replacement Lender," and
collectively, the "Replacement Lenders") to replace such Lender (the "Replaced
Lender"), provided that (i) the notice from the Borrower to the Replaced Lender
--------
and the Administrative Agent provided for hereinabove shall specify an effective
date for such replacement (the "Replacement Effective Date"), which shall be at
least five (5) Business Days after such notice is given, (ii) as of the relevant
Replacement Effective Date, each Replacement Lender shall enter into an
Assignment and Acceptance with the Replaced Lender pursuant to SECTION 11.7(a)
(but shall not be required to pay the processing fee otherwise payable to the
Administrative Agent pursuant to SECTION 11.7(a)), pursuant to which such
Replacement Lenders collectively shall acquire, in such proportion among them as
they may agree with the Borrower and the Administrative Agent, all (but not less
than all) of the Commitment and outstanding Loans of the Replaced Lender, and,
in connection therewith, shall pay to the Replaced Lender, as the purchase price
in respect thereof, an amount equal to the sum as of the Replacement Effective
Date (without duplication) of (y) the unpaid principal amount of, and all
accrued but unpaid interest on, all outstanding Loans of the Replaced Lender and
(z) the Replaced Lender's ratable share of all accrued but unpaid fees owing to
the Replaced Lender hereunder, and (iii) all other obligations of the Borrower
owing to the Replaced Lender under this Agreement (other than those specifically
described in clause (ii) above in respect of which the assignment purchase price
has been, or is concurrently being, paid), including, without limitation,
amounts payable under SECTION 2.18 as a result of the actions required to be
taken under this SECTION 2.20, shall be paid in full by the Borrower to the
Replaced Lender on or prior to the Replacement Effective Date.
ARTICLE III
LETTERS OF CREDIT
3.1 Issuance. Subject to and upon the terms and conditions herein set
--------
forth, so long as no Default or Event of Default has occurred and is continuing,
the Issuing Lender will, at any time and from time to time on and after the
Closing Date and prior to the earlier of (i) the seventh day prior to the
Maturity Date and (ii) the Termination Date, and upon request by the Borrower in
accordance with the provisions of SECTION 3.3, issue for the account of the
Borrower one or more irrevocable standby letters of credit denominated in
Dollars and in a form customarily used or otherwise approved by the Issuing
Lender, and on the Closing Date the Issuing Lender shall be deemed to have
issued the Outstanding Letter of Credit (together with all amendments,
modifications and supplements thereto, substitutions therefor and renewals and
restatements thereof, collectively, the "Letters of Credit"). The Stated Amount
of each Letter of Credit shall not be less than such amount as may be acceptable
to the Issuing Lender. Notwithstanding the foregoing:
(a) No Letter of Credit shall be issued the Stated Amount upon issuance of
which (i) when added to the aggregate Letter of Credit Exposure of the Lenders
at such time, would exceed $10,000,000 or (ii) when added to the sum of (x) the
aggregate Letter of Credit Exposure of all Lenders at such time, (y) the
aggregate principal amount of all Revolving Loans then outstanding and (z) the
aggregate principal amount of all Swingline Loans then outstanding, would exceed
the aggregate Commitments at such time;
(b) Unless the Issuing Lender otherwise agrees, there shall not be more
than five (5) Letters of Credit issued and outstanding at any time;
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(c) No Letter of Credit shall be issued that by its terms expires later
than the seventh day prior to the Maturity Date or, in any event, more than one
(1) year after its date of issuance; provided, however, that a Letter of Credit
-------- -------
may, if requested by the Borrower, provide by its terms, and on terms acceptable
to the Issuing Lender, for renewal for successive periods of one year or less
(but not beyond the seventh day prior to the Maturity Date), unless and until
the Issuing Lender shall have delivered a notice of nonrenewal to the
beneficiary of such Letter of Credit; and
(d) The Issuing Lender shall be under no obligation to issue any Letter of
Credit if, at the time of such proposed issuance, (i) any order, judgment or
decree of any Governmental Authority or arbitrator shall purport by its terms to
enjoin or restrain the Issuing Lender from issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Lender or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing
Lender refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon the Issuing Lender with respect to
such Letter of Credit any restriction or reserve or capital requirement (for
which the Issuing Lender is not otherwise compensated) not in effect on the
Closing Date, or any unreimbursed loss, cost or expense that was not applicable,
in effect or known to the Issuing Lender as of the Closing Date and that the
Issuing Lender in good faith deems material to it, or (ii) the Issuing Lender
shall have actual knowledge, or shall have received notice from any Lender,
prior to the issuance of such Letter of Credit that one or more of the
conditions specified in SECTIONS 4.1 (if applicable) or 4.2 are not then
satisfied (or have not been waived in writing as required herein) or that the
issuance of such Letter of Credit would violate the provisions of subsection (a)
above.
3.2 Outstanding Letter of Credit. The parties hereto agree that the
----------------------------
Outstanding Letter of Credit will be treated as if it had been originally issued
under this Agreement, and as of the Closing Date the Outstanding Letter of
Credit shall be deemed to be a Letter of Credit for all purposes hereunder and
under the other Credit Documents. Specifically, and without limitation of the
foregoing or the other provisions of this Article, (i) the Stated Amount of the
Outstanding Letter of Credit, for so long as the same shall be outstanding,
shall be included in calculating (y) the limit set forth in clause (i) of
SECTION 3.1(a) and (z) the aggregate Letter of Credit Exposure, (ii) each Lender
hereby absolutely and unconditionally agrees to pay to the Issuing Lender, in
accordance with SECTION 3.6, such Lender's pro rata share of each payment made
by the Issuing Lender under the Outstanding Letter of Credit, together with
interest in accordance with SECTION 3.6, and (iii) with respect to the
Outstanding Letter of Credit, the Issuing Lender shall have the benefit of all
agreements, covenants and indemnities of the Issuing Lender set forth in this
Agreement and shall comply with all agreements and obligations set forth herein
that bind the Issuing Lender, insofar as the same apply to Letters of Credit
generally.
3.3 Notices. Whenever the Borrower desires the issuance of a Letter of
-------
Credit (other than the Outstanding Letter of Credit), the Borrower will give the
Issuing Lender written notice (or oral notice promptly confirmed in writing)
with a copy to the Administrative Agent not later than 1:00 p.m., Charlotte
time, three (3) Business Days (or such shorter period as is acceptable to the
Issuing Lender in any given case) prior to the requested date of issuance
thereof. Each such notice (each, a "Letter of Credit Notice") shall be
irrevocable, shall be given in the form of EXHIBIT E (or, if oral notice is
given, shall be promptly followed with a writing in the form of EXHIBIT E) and
shall specify (i) the requested date of issuance, which shall be a Business Day,
(ii) the requested Stated Amount and expiry date of the Letter of Credit, and
(iii) the name and address of the requested beneficiary or beneficiaries of the
Letter of Credit. The Borrower will also complete any application
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procedures and documents required by the Issuing Lender in connection with the
issuance of any Letter of Credit. Upon its issuance of any Letter of Credit, the
Issuing Lender will promptly notify the Administrative Agent of such issuance,
and the Administrative Agent will give prompt notice thereof to each Lender.
3.4 Participations. Immediately upon the issuance of any Letter of
--------------
Credit, the Issuing Lender shall be deemed to have sold and transferred to each
Lender, and each Lender shall be deemed irrevocably and unconditionally to have
purchased and received from the Issuing Lender, without recourse or warranty, an
undivided interest and participation, pro rata (based on the percentage of the
aggregate Commitments represented by such Lender's Commitment), in such Letter
of Credit, each drawing made thereunder and the obligations of the Borrower
under this Agreement with respect thereto and any Collateral or other security
therefor or guaranty pertaining thereto; provided, however, that the fee
-------- -------
relating to Letters of Credit described in SECTION 2.9(d) shall be payable
directly to the Issuing Lender as provided therein, and the Lenders shall have
no right to receive any portion thereof. Upon any change in the Commitments of
any of the Lenders pursuant to SECTION 11.7(a), with respect to all outstanding
Letters of Credit and Reimbursement Obligations there shall be an automatic
adjustment to the participations pursuant to this Section to reflect the new pro
rata shares of the assigning Lender and the Assignee.
3.5 Reimbursement. The Borrower hereby agrees to reimburse the Issuing
-------------
Lender by making payment to the Administrative Agent, for the account of the
Issuing Lender, in immediately available funds, for any payment made by the
Issuing Lender under any Letter of Credit (each such amount so paid until
reimbursed, together with interest thereon payable as provided hereinbelow, a
"Reimbursement Obligation") immediately after, and in any event within one (1)
Business Day after its receipt of notice of, such payment (provided that any
--------
such Reimbursement Obligation shall be deemed timely satisfied (but nevertheless
subject to the payment of interest thereon as provided hereinbelow) if satisfied
pursuant to a Borrowing of Revolving Loans made on or prior to the next Business
Day following the date of the Borrower's receipt of notice of such payment),
together with interest on the amount so paid by the Issuing Lender, to the
extent not reimbursed prior to 1:00 p.m., Charlotte time, on the date of such
payment or disbursement, for the period from the date of the respective payment
to the date the Reimbursement Obligation created thereby is satisfied, at the
Alternate Base Rate as in effect from time to time during such period, such
interest also to be payable on demand. The Issuing Lender will provide the
Administrative Agent and the Borrower with prompt notice of any payment or
disbursement made under any Letter of Credit, although the failure to give, or
any delay in giving, any such notice shall not release, diminish or otherwise
affect the Borrower's obligations under this Section or any other provision of
this Agreement. The Administrative Agent will promptly pay to the Issuing
Lender any such amounts received by it under this Section.
3.6 Payment by Revolving Loans. In the event that the Issuing Lender
--------------------------
makes any payment under any Letter of Credit and the Borrower shall not have
timely satisfied in full its Reimbursement Obligation to the Issuing Lender
pursuant to SECTION 3.5, and to the extent that any amounts then held in the
Cash Collateral Account established pursuant to SECTION 3.9 shall be
insufficient to satisfy such Reimbursement Obligation in full, the Issuing
Lender will promptly notify the Administrative Agent, and the Administrative
Agent will promptly notify each Lender, of such failure. If the Administrative
Agent gives such notice prior to 11:00 a.m., Charlotte time, on any Business
Day, each Lender will make available to the Administrative Agent, for the
account of the Issuing Lender, its pro rata share (based on the percentage of
the aggregate Commitments represented by such Lender's Commitment) of the amount
of such payment on such Business Day in immediately
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available funds. If the Administrative Agent gives such notice after 11:00 a.m.,
Charlotte time, on any Business Day, each such Lender shall make its pro rata
share of such amount available to the Administrative Agent on the next
succeeding Business Day. If and to the extent any Lender shall not have so made
its pro rata share of the amount of such payment available to the Administrative
Agent, such Lender agrees to pay to the Administrative Agent, for the account of
the Issuing Lender, forthwith on demand such amount, together with interest
thereon at the Federal Funds Rate for each day from such date until the date
such amount is paid to the Administrative Agent. The failure of any Lender to
make available to the Administrative Agent its pro rata share of any payment
under any Letter of Credit shall not relieve any other Lender of its obligation
hereunder to make available to the Administrative Agent its pro rata share of
any payment under any Letter of Credit on the date required, as specified above,
but no Lender shall be responsible for the failure of any other Lender to make
available to the Administrative Agent such other Lender's pro rata share of any
such payment. Each such payment by a Lender under this SECTION 3.6 of its pro
rata share of an amount paid by the Issuing Lender shall constitute a Revolving
Loan by such Lender (the Borrower being deemed to have given a timely Notice of
Revolving Borrowing therefor) and shall be treated as such for all purposes of
this Agreement; provided that for purposes of determining the aggregate
--------
Unutilized Commitments immediately prior to giving effect to the application of
the proceeds of such Revolving Loans, the Reimbursement Obligation being
satisfied thereby shall be deemed not to be outstanding at such time.
3.7 Payment to Lenders. Whenever the Issuing Lender receives a payment in
------------------
respect of a Reimbursement Obligation as to which the Administrative Agent has
received, for the account of the Issuing Lender, any payments from the Lenders
pursuant to SECTION 3.6, the Issuing Lender will promptly pay to the
Administrative Agent, and the Administrative Agent will promptly pay to each
Lender that has paid its pro rata share thereof, in immediately available funds,
an amount equal to such Lender's ratable share (based on the proportionate
amount funded by such Lender to the aggregate amount funded by all Lenders) of
such Reimbursement Obligation.
3.8 Obligations Absolute. The Reimbursement Obligations of the Borrower,
--------------------
and the obligations of the Lenders under SECTION 3.6 to make payments to the
Administrative Agent, for the account of the Issuing Lender, with respect to
Letters of Credit, shall be irrevocable, shall remain in effect until the
Issuing Lender shall have no further obligations to make any payments or
disbursements under any circumstances with respect to any Letter of Credit, and,
except to the extent resulting from any gross negligence or willful misconduct
on the part of the Issuing Lender, shall be absolute and unconditional, shall
not be subject to counterclaim, setoff or other defense or any other
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(a) Any lack of validity or enforceability of this Agreement, any of the
other Credit Documents or any documents or instruments relating to any Letter of
Credit;
(b) Any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations in respect of any Letter of Credit or any
other amendment, modification or waiver of or any consent to departure from any
Letter of Credit or any documents or instruments relating thereto, in each case
whether or not the Borrower has notice or knowledge thereof;
(c) The existence of any claim, setoff, defense or other right that the
Borrower may have at any time against a beneficiary named in a Letter of Credit,
any transferee of any Letter of Credit
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(or any Person for whom any such transferee may be acting), the Administrative
Agent, the Issuing Lender, any Lender or other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions contemplated hereby
or any unrelated transactions (including any underlying transaction between the
Borrower and the beneficiary named in any such Letter of Credit);
(d) Any draft, certificate or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
(provided that such draft, certificate or other document appears on its face to
--------
comply with the terms of such Letter of Credit), any errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
telecopier or otherwise, or any errors in translation or in interpretation of
technical terms;
(e) Any defense based upon the failure of any drawing under a Letter of
Credit to conform to the terms of the Letter of Credit (provided that any draft,
--------
certificate or other document presented pursuant to such Letter of Credit
appears on its face to comply with the terms thereof), any nonapplication or
misapplication by the beneficiary or any transferee of the proceeds of such
drawing or any other act or omission of such beneficiary or transferee in
connection with such Letter of Credit;
(f) The exchange, release, surrender or impairment of any Collateral or
other security for the Obligations;
(g) The occurrence of any Default or Event of Default; or
(h) Any other circumstance or event whatsoever, including, without
limitation, any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor.
Any action taken or omitted to be taken by the Issuing Lender under or in
connection with any Letter of Credit, if taken or omitted in the absence of
gross negligence or willful misconduct, shall be binding upon the Borrower and
each Lender and shall not create or result in any liability of the Issuing
Lender to the Borrower or any Lender. It is expressly understood and agreed
that, for purposes of determining whether a wrongful payment under a Letter of
Credit resulted from the Issuing Lender's gross negligence or willful
misconduct, (i) the Issuing Lender's acceptance of documents that appear on
their face to comply with the terms of such Letter of Credit, without
responsibility for further investigation, regardless of any notice or
information to the contrary (so long as such documents appear on their face to
comply with the terms of such Letter of Credit), (ii) the Issuing Lender's
exclusive reliance on the documents presented to it under such Letter of Credit
as to any and all matters set forth therein, including the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect (so long as such document appears on its face to comply with the
terms of such Letter of Credit), and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever, and (iii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute gross negligence or willful misconduct of
the Issuing Lender.
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3.9 Cash Collateral Account. At any time and from time to time (i) after
-----------------------
the occurrence and during the continuance of an Event of Default, the
Administrative Agent, at the direction or with the consent of the Required
Lenders, may require the Borrower to deliver to the Administrative Agent such
additional amount of cash as is equal to the aggregate Stated Amount of all
Letters of Credit at any time outstanding (whether or not any beneficiary under
any Letter of Credit shall have drawn or be entitled at such time to draw
thereunder) and (ii) in the event of a prepayment under SECTION 2.6(b), or to
the extent any amount of a required prepayment under any of SECTIONS 2.6(c)
through 2.6(e) remains after prepayment of all outstanding Loans and
Reimbursement Obligations and termination of the Commitments, as contemplated by
SECTION 2.6(f), the Administrative Agent will retain such amount as may then be
required to be retained, such amounts in each case under clauses (i) and (ii)
above to be held by the Administrative Agent in a cash collateral account (the
"Cash Collateral Account"). The Borrower hereby grants to the Administrative
Agent, for the benefit of the Issuing Lender and the Lenders, a Lien upon and
security interest in the Cash Collateral Account and all amounts held therein
from time to time as security for Letter of Credit Exposure, and for application
to the Borrower's Reimbursement Obligations as and when the same shall arise.
The Administrative Agent shall have exclusive dominion and control, including
the exclusive right of withdrawal, over such account. Other than any interest
on the investment of such amounts in Cash Equivalents, which investments shall
be made at the direction of the Borrower (unless a Default or Event of Default
shall have occurred and be continuing, in which case the determination as to
investments shall be made at the option and in the discretion of the
Administrative Agent), amounts in the Cash Collateral Account shall not bear
interest. Interest and profits, if any, on such investments shall accumulate in
such account. In the event of a drawing, and subsequent payment by the Issuing
Lender, under any Letter of Credit at any time during which any amounts are held
in the Cash Collateral Account, the Administrative Agent will deliver to the
Issuing Lender an amount equal to the Reimbursement Obligation created as a
result of such payment (or, if the amounts so held are less than such
Reimbursement Obligation, all of such amounts) to reimburse the Issuing Lender
therefor. Any amounts remaining in the Cash Collateral Account after the
expiration of all Letters of Credit and reimbursement in full of the Issuing
Lender for all of its obligations thereunder shall be held by the Administrative
Agent, for the benefit of the Borrower, to be applied against the Obligations in
such order and manner as the Administrative Agent may direct. If the Borrower
is required to provide cash collateral pursuant to SECTION 2.6(b), such amount
(to the extent not applied as aforesaid) shall be returned to the Borrower on
demand, provided that after giving effect to such return (i) the sum of (x) the
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aggregate principal amount of all Revolving Loans outstanding at such time, (y)
the aggregate principal amount of all Swingline Loans outstanding at such time
and (z) the aggregate Letter of Credit Exposure of all Lenders at such time
would not exceed the aggregate Commitments at such time and (ii) no Default or
Event of Default shall have occurred and be continuing at such time. If the
Borrower is required to provide cash collateral as a result of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within three (3) Business Days after all Events of Default have
been cured or waived.
3.10 Effectiveness. Notwithstanding any termination of the Commitments or
-------------
repayment of the Loans, or both, the obligations of the Borrower under this
ARTICLE III shall remain in full force and effect until the Issuing Lender and
the Lenders shall have no further obligations to make any payments or
disbursements under any circumstances with respect to any Letter of Credit.
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ARTICLE IV
CONDITIONS OF BORROWING
4.1 Conditions of Initial Borrowing. The obligation of each Lender to
-------------------------------
make Loans in connection with the initial Borrowing hereunder, and the
obligation of the Issuing Lender to issue Letters of Credit hereunder on the
Closing Date, is subject to the satisfaction of the following conditions
precedent:
(a) The Administrative Agent shall have received the following, each dated
as of the Closing Date (unless otherwise specified) and, except for the Notes
and any certificates or instruments required to be delivered under the Borrower
Pledge and Security Agreement and the Parent Pledge and Security Agreement, in
sufficient copies for each Lender:
(i) a Revolving Credit Note for each Lender that is a party hereto
as of the Closing Date, in the amount of such Lender's Commitment, and a
Swingline Note for the Swingline Lender, in the amount of the Swingline
Commitment, in each case duly completed in accordance with the relevant
provisions of SECTION 2.4 and executed by the Borrower;
(ii) the Parent Guaranty, duly completed and executed by each of
Parent and Holdings;
(iii) the Borrower Pledge and Security Agreement, duly completed and
executed by the Borrower, and the Parent Pledge and Security Agreement,
duly completed and executed by each of Parent and Holdings, in each case
together with any certificates evidencing the interests being pledged
thereunder as of the Closing Date and undated assignments separate from
certificate for any such certificate, duly executed in blank, and any
promissory notes being pledged thereunder, duly endorsed in blank (or, in
the case of uncertificated interests, appropriately completed and duly
executed instructions for registration and notification thereof); and
(iv) the favorable opinions of (A) Kirkland & Ellis, special
counsel to the Credit Parties, in substantially the form of EXHIBIT I-1,
and (B) Heller Ehrman White & McAuliffe, special California counsel to the
Credit Parties, in substantially the form of EXHIBIT I-2, in each case
addressed to the Administrative Agent and the Lenders and addressing such
other matters as the Administrative Agent or any Lender may reasonably
request.
(b) The Administrative Agent shall have received a certificate, signed by
the president, the chief executive officer or the chief financial officer of
Parent, in form and substance satisfactory to the Administrative Agent,
certifying that (i) all representations and warranties of Parent and the
Borrower contained in this Agreement and the other Credit Documents are true and
correct as of the Closing Date, both immediately before and after giving effect
to the consummation of the Transactions, the initial Loans hereunder and the
application of the proceeds thereof, (ii) no Default or Event of Default has
occurred and is continuing, both immediately before and after giving effect to
the consummation of the Transactions, the initial Loans hereunder and the
application of the proceeds thereof, and (iii) both immediately before and after
giving effect to the consummation of the Transactions, the initial Loans
hereunder and the application of the proceeds thereof, no Material
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Adverse Change has occurred since June 30, 1997, and there exists no event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change.
(c) The Administrative Agent shall have received a certificate of the
secretary or an assistant secretary of the Borrower, in form and substance
satisfactory to the Administrative Agent, certifying (i) that attached thereto
is a true and complete copy of the articles of organization and all amendments
thereto of the Borrower, certified as of a recent date by the Secretary of State
of the State of Delaware, and that the same has not been amended since the date
of such certification, and (ii) that attached thereto is a true and complete
copy of the limited liability company operating agreement of the Borrower and
all amendments thereto, as then in effect, and as to the incumbency and
genuineness of the signature of each officer of the Borrower executing this
Agreement or any of the other Credit Documents on behalf of the Borrower, and
attaching all such copies of the documents described above.
(d) The Administrative Agent shall have received a certificate of the
secretary or an assistant secretary of Holdings, in form and substance
satisfactory to the Administrative Agent, certifying (i) that attached thereto
is a true and complete copy of the articles of organization and all amendments
thereto of Holdings, certified as of a recent date by the Secretary of State of
the State of Delaware, and that the same has not been amended since the date of
such certification, and (ii) that attached thereto is a true and complete copy
of the limited liability company operating agreement of Holdings and all
amendments thereto, as then in effect, and as to the incumbency and genuineness
of the signature of each officer of Holdings executing any of the Credit
Documents to which Holdings is a party on behalf of Holdings, and attaching all
such copies of the documents described above.
(e) The Administrative Agent shall have received a certificate of the
secretary or an assistant secretary of Parent, in form and substance
satisfactory to the Administrative Agent, certifying (i) that attached thereto
is a true and complete copy of the certificate of incorporation and all
amendments thereto of Parent, certified as of a recent date by the Secretary of
State of the State of Delaware, and that the same has not been amended since the
date of such certification, (ii) that attached thereto is a true and complete
copy of the bylaws of Parent, as then in effect and as in effect at all times
from the date on which the resolutions referred to in clause (iii) below were
adopted to and including the date of such certificate and (iii) that attached
thereto is a true and complete copy of the resolutions adopted by the board of
directors of Parent (x) authorizing the execution, delivery and performance by
Parent of this Agreement and the other Credit Documents to which it is a party,
(y) authorizing, in its capacity as the managing member of Holdings, the
execution, delivery and performance by Holdings of the Credit Documents to which
Holdings is a party, and (z) authorizing, in its capacity as the managing member
of Holdings (in Holdings' capacity as the managing member of the Borrower), the
execution, delivery and performance by the Borrower of the Credit Documents to
which the Borrower is a party, and as to the incumbency and genuineness of the
signature of each officer of Parent executing any of such Credit Documents, and
attaching all such copies of the documents described above.
(f) The Administrative Agent shall have received (i) a certificate as of a
recent date of the good standing of each of the Borrower, Holdings and Parent
under the laws of the State of Delaware, from the Secretary of State of
Delaware, (ii) a certificate as of a recent date of the qualification of Parent
to conduct business as a foreign corporation in the State of California, from
the Secretary of State of California, and (iii) certificates as of a recent date
of the qualification of the Borrower to
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conduct business as a foreign corporation in the States of Illinois and
California, from the Secretaries of State of Illinois and California.
(g) All legal matters, documentation, and corporate or other proceedings
incident to the Transactions shall be satisfactory in form and substance to the
Administrative Agent and the Documentation Agent; all approvals, permits and
consents of any Governmental Authorities or other Persons required in connection
with the execution and delivery of this Agreement and the other Credit Documents
and the consummation of the Transactions (including, if required or solicited,
from the holders of the Subordinated Notes) shall have been obtained (without
the imposition of conditions that are not acceptable to the Administrative
Agent), and all related filings, if any, shall have been made, and all such
approvals, permits, consents and filings shall be in full force and effect and
the Administrative Agent shall have received such copies thereof as it shall
have requested; all applicable waiting periods shall have expired without any
adverse action being taken by any Governmental Authority having jurisdiction;
and no action, proceeding, investigation, regulation or legislation shall have
been instituted, threatened or proposed before, and no order, injunction or
decree shall have been entered by, any court or other Governmental Authority, in
each case to enjoin, restrain or prohibit, to obtain substantial damages in
respect of, or that is otherwise related to or arises out of, this Agreement,
any of the other Credit Documents or the consummation of the Transactions, or
that, in the opinion of the Administrative Agent, could reasonably be expected
to have a Material Adverse Effect.
(h) The Administrative Agent shall have received evidence in form and
substance satisfactory to it that (i) the Initial Public Offering shall have
been consummated in all material respects in compliance with all applicable
Requirements of Law, and (ii) Parent shall have applied all of the Net Cash
Proceeds of the Initial Public Offering (other than the portion thereof
attributable to exercise of the over-allotment option in connection therewith)
to prepay an equivalent amount of the Existing Senior Indebtedness, all on terms
and conditions satisfactory to the Administrative Agent.
(i) All transaction fees and expenses payable by or on behalf of the
Borrower in connection with the Transactions shall be in an aggregate amount
reasonably acceptable to the Administrative Agent, and the Administrative Agent
shall have received such evidence thereof in form and substance satisfactory to
it (including itemizations thereof) as it shall have reasonably requested.
(j) The Administrative Agent shall have received certified reports from an
independent search service satisfactory to it listing (i) any judgment or tax
lien filing that names the Borrower as debtor in any of the jurisdictions listed
on Annex A to the Borrower Pledge and Security Agreement or that names Holdings
or Parent as debtor in any of the jurisdictions listed beneath its respective
name on Annex A to the Parent Pledge and Security Agreement and (ii) any Uniform
Commercial Code financing statement that names the Borrower, Holdings or Parent
as debtor in any of such jurisdictions, as applicable, and the results thereof
shall be satisfactory to the Administrative Agent.
(k) The Administrative Agent shall have received evidence in form and
substance satisfactory to it that all filings, recordings, registrations and
other actions (including, without limitation, the filing of duly completed UCC-1
financing statements in each jurisdiction listed on Annex A to the Borrower
Pledge and Security Agreement or Annex A to the Parent Pledge and Security
Agreement) necessary or, in the reasonable opinion of the Administrative Agent,
desirable to perfect the Liens created by the Security Documents shall have been
completed, or arrangements satisfactory to the Administrative Agent for the
completion thereof shall have been made.
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(l) Since June 30, 1997, both immediately before and after giving effect to
the consummation of the Transactions, there shall not have occurred any Material
Adverse Change or any event, condition or state of facts that could reasonably
be expected to result in a Material Adverse Change.
(m) The Borrower shall have paid (i) to First Union, the unpaid balance of
the fee described in paragraph (i) of the Fee Letter, (ii) to the Administrative
Agent, the initial payment of the annual administrative fee described in
paragraph (ii) of the Fee Letter, and (iii) all other fees and expenses of the
Administrative Agent and the Lenders required hereunder or under any other
Credit Document to be paid on or prior to the Closing Date (including fees and
expenses of counsel) in connection with this Agreement and the transactions
contemplated hereby.
(n) The Administrative Agent shall have received a Covenant Compliance
Worksheet, duly completed and certified by the chief financial officer of Parent
and in form and substance satisfactory to the Administrative Agent,
demonstrating Parent's compliance with the financial covenants set forth in
SECTIONS 7.1 through 7.3 (at the levels applicable thereto as of September 30,
1997), determined on a pro forma basis as of June 30, 1997 after giving effect
to the making of the initial Loans hereunder and the consummation of the other
Transactions. For purposes of the calculations under the foregoing Covenant
Compliance Worksheet, Consolidated Operating Cash Flow for the fiscal quarter
ended September 30, 1996 shall be deemed to be $14,600,000.
(o) The Administrative Agent shall have received evidence satisfactory to
it that concurrently with the making of the initial Loans hereunder, (x) all
principal, interest and other amounts outstanding with respect to the Existing
Senior Indebtedness shall be repaid and satisfied in full, (y) all commitments
to extend credit under the Existing Senior Credit Agreement shall be terminated,
and (z) any Liens securing any Existing Senior Indebtedness shall be released.
(p) The Administrative Agent shall have received evidence in form and
substance reasonably satisfactory to it that all of the requirements of SECTION
6.6 and those provisions of the Borrower Pledge and Security Agreement relating
to the maintenance of insurance have been satisfied, including receipt of
certificates of insurance evidencing the insurance coverages described on
SCHEDULE 5.17 and all other or additional coverages required under the Borrower
Pledge and Security Agreement and naming the Administrative Agent as loss payee
or additional insured, as its interests may appear.
(q) The Administrative Agent shall have received an Account Designation
Letter, together with written instructions from an Authorized Officer, including
wire transfer information, directing the payment of the proceeds of the initial
Loans to be made hereunder.
(r) The Administrative Agent and each Lender shall have received such other
documents, certificates, opinions and instruments in connection with the
transactions contemplated hereby as it shall have reasonably requested.
4.2 Conditions of All Borrowings. The obligation of each Lender to make
----------------------------
any Loans hereunder, including the initial Loans (but excluding Revolving Loans
made for the purpose of repaying Refunded Swingline Loans pursuant to SECTION
2.2(e)), and the obligation of the Issuing Lender to issue any Letters of Credit
hereunder, is subject to the satisfaction of the following conditions precedent
on the relevant Borrowing Date or date of issuance:
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(a) The Administrative Agent shall have received a Notice of Revolving
Borrowing in accordance with SECTION 2.2(b), or (together with the Swingline
Lender) a Notice of Swingline Borrowing in accordance with SECTION 2.2(d), or
(together with the Issuing Lender) a Letter of Credit Notice in accordance with
SECTION 3.3, as applicable;
(b) Each of the representations and warranties contained in ARTICLE V and
in the other Credit Documents shall be true and correct in all material respects
on and as of such Borrowing Date (including the Closing Date, in the case of the
initial Loans made hereunder) or date of issuance with the same effect as if
made on and as of such date, both immediately before and after giving effect to
the Loans to be made or Letter of Credit to be issued on such date (except to
the extent any such representation or warranty is expressly stated to have been
made as of a specific date, in which case such representation or warranty shall
be true and correct in all material respects as of such date); and
(c) No Default or Event of Default shall have occurred and be continuing on
such date, both immediately before and after giving effect to the Loans to be
made or Letter of Credit to be issued on such date.
Each giving of a Notice of Revolving Borrowing, a Notice of Swingline
Borrowing or a Letter of Credit Notice, and the consummation of each Borrowing
or issuance of a Letter of Credit, shall be deemed to constitute a
representation by the Borrower that the statements contained in subsections (b)
and (c) above are true, both as of the date of such notice or request and as of
the relevant Borrowing Date or date of issuance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to induce the Lenders to extend the credit contemplated hereby,
each of Parent and the Borrower represents and warrants to the Administrative
Agent and the Lenders as follows:
5.1 Organization and Power. Each Credit Party (i) is a limited liability
----------------------
company, corporation, partnership or other business organization duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has the full limited liability company, corporate,
partnership or other applicable power and authority to execute, deliver and
perform the Credit Documents to which it is or will be a party, to own and hold
its property and to engage in its business as presently conducted, and (iii) is
duly qualified to do business as a foreign limited liability company,
corporation, partnership or other business organization and is in good standing
in each jurisdiction where the nature of its business or the ownership of its
properties requires it to be so qualified, except where the failure to be so
qualified could not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect.
5.2 Authorization; Enforceability. Each Credit Party has taken, or on the
-----------------------------
Closing Date will have taken, all necessary limited liability company or
corporate action to execute, deliver and perform each of the Credit Documents to
which it is or will be a party, and has, or on the Closing Date (or any later
date of execution and delivery) will have, validly executed and delivered each
of the Credit Documents to which it is or will be a party. This Agreement
constitutes, and each of the
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other Credit Documents upon execution and delivery will constitute, the legal,
valid and binding obligation of each of the Credit Parties that is a party
hereto or thereto, enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally or by
general equitable principles or principles of good faith and fair dealing.
5.3 No Violation. The execution, delivery and performance by each Credit
------------
Party of this Agreement and each of the other Credit Documents to which it is or
will be a party, compliance by it with the terms hereof and thereof, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (i) violate any provision of its articles of organization, certificate
of incorporation, certificate of partnership, operating agreement, bylaws,
partnership agreement or other constituent documents, as applicable, or
contravene any other Requirement of Law applicable to it, (ii) conflict with,
result in a breach of or constitute (with notice, lapse of time or both) a
default under any indenture, agreement or other instrument to which it is a
party, by which it or any of its properties is bound or to which it is subject,
(iii) require any approval of stockholders, members or partners of any Credit
Party or any approval or consent of any Person under any agreement to which any
Credit Party is a party, except for such approvals or consents which will be
obtained on or before the Closing Date and disclosed in writing to the Lenders
or such approvals or consents the failure of which to obtain could not
reasonably be expected, singly or in the aggregate, to have a Material Adverse
Effect, or (iv) except for the Liens granted pursuant to the Security Documents,
result in or require the creation or imposition of any Lien upon any of its
properties or assets. No Subsidiary of the Borrower is subject to any
restriction or encumbrance on its ability to make dividend payments or other
distributions in respect of its Capital Stock, to repay Indebtedness owed to the
Borrower or any other Subsidiary of the Borrower, to make loans or advances to
the Borrower or any other Subsidiary of the Borrower, or to transfer any of its
assets or properties to the Borrower or any other Subsidiary of the Borrower, in
each case other than such restrictions or encumbrances existing under or by
reason of (i) the Credit Documents, (ii) applicable Requirements of Law, (iii)
customary non-assignment provisions in any lease governing a leasehold interest,
(iv) the terms of licenses of trademarks and copyrights entered into in the
ordinary course of business, and (v) other contractual restrictions in respect
of assets not material to the business of the Credit Parties, taken as a whole.
5.4 Governmental Authorization; Permits. (a) No consent, approval,
-----------------------------------
authorization or other action by, notice to, or registration or filing with, any
Governmental Authority or other Person is or will be required as a condition to
or otherwise in connection with the due execution, delivery and performance by
any Credit Party of this Agreement or any of the other Credit Documents to which
it is or will be a party or the legality, validity or enforceability hereof or
thereof, other than (i) filings of Uniform Commercial Code financing statements
and other instruments and actions necessary to perfect the Liens created by the
Security Documents, (ii) consents that would be required in respect of the
leases referred to in clause (iii) of SECTION 5.3, and (iii) consents the
failure to obtain which would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) Each Credit Party has, and is in good standing with respect to, all
governmental approvals, licenses, permits and authorizations necessary to
conduct its business as presently conducted and to own or lease and operate its
properties, except for those the failure to obtain which could not be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.
5.5 Litigation. There are no actions, investigations, suits or
----------
proceedings pending or, to the knowledge of Parent or the Borrower (after due
investigation) threatened, at law, in equity or in
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arbitration, before any court, other Governmental Authority or other Person
("Litigation"), (i) against or affecting any Credit Party or any of such
Person's properties that could, if adversely determined, be reasonably expected
to have a Material Adverse Effect, or (ii) with respect to this Agreement, any
of the other Credit Documents or any of the Transactions. Neither Parent nor the
Borrower has been advised that there is a reasonable likelihood of an adverse
determination of any Litigation, which adverse determination, should it occur,
would have a Material Adverse Effect.
5.6 Taxes. Each Credit Party has timely filed all federal and all
-----
material state and local tax returns and reports required to be filed by it and
has paid all taxes, assessments, fees and other charges levied upon it or upon
its properties that are shown thereon as due and payable, other than those that
are being contested in good faith and by proper proceedings and for which
adequate reserves have been established in accordance with Generally Accepted
Accounting Principles. Such returns accurately reflect in all material respects
all liability for taxes of the Borrower and its Subsidiaries for the periods
covered thereby. There is no ongoing audit or examination or, to the knowledge
of Parent or the Borrower, other investigation by any Governmental Authority of
the tax liability of any Credit Party and there is no unresolved claim by any
Governmental Authority concerning the tax liability of any Credit Party for any
period for which tax returns have been or were required to have been filed,
other than claims for which adequate reserves have been established in
accordance with Generally Accepted Accounting Principles. No Credit Party has
waived or extended or has been requested to waive or extend the statute of
limitations relating to the payment of any taxes.
5.7 Subsidiaries. As of the Closing Date, no Credit Party has any
------------
Subsidiaries or otherwise has any equity or other ownership interest in any
corporation, partnership, joint venture or other Person, except as set forth on
SCHEDULE 5.7. SCHEDULE 5.7 indicates, as to each such Subsidiary of any Credit
Party as of the Closing Date and after giving effect to the Transactions, each
direct owner of its Capital Stock and such owner's percentage ownership thereof.
On the Closing Date and immediately after giving effect to the Transactions, (i)
Holdings will directly own 99.9% of the outstanding membership interests in the
Borrower, (ii) Parent will directly own 0.1% of the outstanding membership
interests in the Borrower, and (iii) Parent will directly or indirectly own all
of the outstanding membership interests in Holdings.
5.8 Full Disclosure. All factual information (including, without
---------------
limitation, factual information set forth in the Registration Statement)
furnished to the Administrative Agent or any Lender on or prior to the Closing
Date in writing by or on behalf of any Credit Party for purposes of or in
connection with this Agreement, the transactions contemplated hereby and the
other Transactions is, and all other such factual information hereafter
furnished to the Administrative Agent or any Lender in writing by or on behalf
of any Credit Party will be, true and accurate in all material respects on the
date as of which such information is dated or certified (or, if such information
has been amended or supplemented, on the date as of which any such amendment or
supplement is dated or certified) and not made incomplete by omitting to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which such information was provided, not misleading. No
fact is known, no condition exists nor has any event occurred which has not been
disclosed herein or in any other document, certificate or statement furnished to
the Administrative Agent or the Lenders for use in the transactions contemplated
hereby which, singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
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5.9 Margin Regulations. Neither the Borrower nor any of its Subsidiaries
------------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying Margin Stock. No
proceeds of the Loans will be used, directly or indirectly, to purchase or carry
any Margin Stock, to extend credit for such purpose or for any other purpose
that would violate or be inconsistent with Regulations G, T, U or X or any
provision of the Exchange Act.
5.10 Financial Matters. (a) The Borrower has heretofore furnished to the
-----------------
Administrative Agent copies of (i) the audited balance sheets of Parent as of
December 31, 1996 and June 30, 1997, and the related statements of operations
and shareholders' equity and cash flows for the period from August 15, 1996 to
December 31, 1996 and the six months ended June 30, 1997, together with the
opinion of Ernst & Young LLP thereon, (ii) the audited consolidated balance
sheets of Holdings and its Subsidiaries as of December 31, 1996 and June 30,
1997, and the related consolidated statements of operations, members' equity and
cash flows for the three months ended December 31, 1996 and the six months ended
June 30, 1997, together with the opinion of Ernst & Young LLP thereon, and (iii)
the audited balance sheets of the Predecessor as of November 30, 1995 and
September 30, 1996, and the related statements of operations and divisional
equity and cash flows for each of the two years in the period ended November 30,
1995 and the ten months ended September 30, 1996, together with the opinion of
Ernst & Young LLP thereon. Such financial statements have been prepared in
accordance with Generally Accepted Accounting Principles and present fairly the
financial condition of Parent, Holdings or the Predecessor, as the case may be
(and with respect to Holdings, on a consolidated basis), as of the respective
dates thereof and the results of operations and cash flows of Parent, Holdings
or the Predecessor, as the case may be (and with respect to Holdings, on a
consolidated basis), for the respective periods then ended. Except as fully
reflected in the most recent financial statements referred to above and the
notes thereto, there are no material liabilities or obligations with respect to
any Credit Party of any nature whatsoever (whether absolute, contingent or
otherwise and whether or not due). There has been no Material Adverse Change
since June 30, 1997, and there exists no event, condition or state of facts that
could reasonably be expected to result in a Material Adverse Change.
(b) The Borrower has heretofore furnished to the Administrative Agent a
correct and complete copy of the Registration Statement as filed with the
Commission. The unaudited pro forma balance sheet and statement of operations
of Parent set forth in the Registration Statement comply in all material
respects with the applicable accounting requirements of the Securities Act and
the rules and regulations thereunder, and in the opinion of Parent, the
assumptions on which the pro forma adjustments to such financial statements are
based provide a reasonable basis for presenting the significant effects of the
transactions contemplated thereby and such adjustments give appropriate effect
to such assumptions and are properly applied in such financial statements.
(c) The Borrower has prepared, and has heretofore furnished to the
Administrative Agent a copy of, annual projected balance sheets and statements
of income and cash flows of the Borrower for the four-year period ending
December 31, 2000, giving effect to the consummation of the Transactions (the
"Projections"). In the opinion of management of the Borrower, the assumptions
used in the preparation of the Projections were fair, complete and reasonable
when made and continue to be fair, complete and reasonable as of the date
hereof. The Projections have been prepared in good faith by the executive and
financial personnel of the Borrower, are complete and represent a reasonable
estimate of the future performance and financial condition of the Borrower,
subject to the
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uncertainties and approximations inherent in any projections and without any
representation or warranty that the projected results will be achieved.
(d) Upon consummation of the Transactions and as of the Closing Date:
(i) The fair saleable value of the assets of the Borrower and each
of its Subsidiaries, on a stand-alone basis, exceeds the amount that will
reasonably be required to be paid on or in respect of the existing debts
and other liabilities (including Contingent Obligations) of such Person as
they mature.
(ii) The assets of each of the Borrower and each of its
Subsidiaries, on a stand-alone basis, do not constitute unreasonably small
capital for any such Person to carry out its business as conducted as of
the Closing Date and as proposed to be conducted, including the capital
needs of any such Person, taking into account the particular capital
requirements of the business conducted and to be conducted by such Person,
and the availability of capital in respect thereof (with reference, without
limitation, to the Projections).
(iii) The Borrower does not intend to, and does not intend to permit
any of its Subsidiaries to, incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of debt of each of such Person). As of the
Closing Date, the anticipated cash flow of the Borrower and each of its
Subsidiaries, after taking into account all presently anticipated uses of
the cash of each such Person, will at all times be sufficient to pay all
amounts on or in respect of Indebtedness of each such Person when such
amounts are, as anticipated as of the Closing Date, required to be paid.
(iv) The Borrower does not intend, and does not believe, that final
judgments against any of the Borrower or its Subsidiaries in actions for
money damages will be rendered at a time when, or in an amount such that,
any such Person will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account the maximum reasonable
amount of such judgments in any such actions and the earliest reasonable
time at which such judgments might be rendered). The anticipated cash flow
of the Borrower and each of its Subsidiaries, on a stand-alone basis, after
taking into account all other anticipated uses of the cash of each such
Person (including the payments on or in respect of debt referred to in
clause (iii) of this SECTION 5.10(D)), will at all times be sufficient to
pay all such judgments promptly in accordance with their terms.
5.11 Ownership of Properties. Each Credit Party (i) has good and
-----------------------
marketable title to all real property owned by it, (ii) holds interests as
lessee under valid leases in full force and effect with respect to all material
leased real and personal property used in connection with its business, (iii)
possesses or has rights to use licenses, patents, copyrights, trademarks,
service marks, trade names and other assets sufficient to enable it to continue
to conduct its business substantially as heretofore conducted and without any
material conflict with the rights of others, and (iv) has good title to all of
its other properties and assets reflected in the most recent financial
statements referred to in SECTION 5.10(a) (except as sold or otherwise disposed
of since the date thereof in the ordinary course of business), in each case
under (i), (ii), (iii) and (iv) above free and clear of all Liens other than
Permitted Liens, and other than encumbrances or restrictions that could not
reasonably be expected to have a Material Adverse Effect. SCHEDULE 5.11 lists,
as of the Closing Date, all real
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property leasehold interests of each Credit Party, indicating in each case the
identity of the owner, the nature of the leased premises and the address of the
property. As of the Closing Date, no Credit Party owns any fee interest in any
real property.
5.12 ERISA. Each Plan is and has been administered in compliance in all
-----
material respects with all applicable Requirements of Law, including, without
limitation, the applicable provisions of ERISA and the Internal Revenue Code.
No ERISA Event has occurred and is continuing or, to the knowledge of Parent or
the Borrower, is reasonably expected to occur with respect to any Plan, in
either case that could be reasonably expected, individually or in the aggregate,
to have a Material Adverse Effect. No Plan has any Unfunded Pension Liability,
and neither the Borrower nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA, in either instance
where the same could be reasonably expected, individually or in the aggregate,
to have a Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate
is required to contribute to or has, or has at any time had, any liability to a
Multiemployer Plan.
5.13 Environmental Matters. (a) No Hazardous Substances are or have been
---------------------
generated, used, located, released, treated, disposed of or stored by any Credit
Party or, to the knowledge of Parent or the Borrower, by any other Person
(including any predecessor in interest) or otherwise, in, on or under any
portion of any real property, leased or owned, of any Credit Party, except as
could not reasonably be expected to have a Material Adverse Effect, and no
portion of any such real property or, to the knowledge of Parent or the
Borrower, any other real property at any time leased, owned or operated by any
Credit Party, has been contaminated by any Hazardous Substance; and no portion
of any real property, leased or owned, of any Credit Party has been or is
presently the subject of an environmental audit, assessment or remedial action,
except for any such contamination, audit, assessment or remedial action that
could not reasonably be expected to have a Material Adverse Effect.
(b) No portion of any real property leased or owned by any Credit Party as
of the Closing Date has been used by a Credit Party or, to the knowledge of
Parent or the Borrower, by any other Person, as or for a mine, a landfill, a
dump or other disposal facility, a gasoline service station, or (other than for
petroleum substances stored in the ordinary course of business) a petroleum
products storage facility; no portion of such real property or any other real
property at any time leased, owned or operated by any Credit Party has, pursuant
to any Environmental Law, been placed on the "National Priorities List" or
"CERCLIS List" (or any similar federal or state list) of sites subject to
possible environmental problems; and there are not, and to Parent or the
Borrower's knowledge have never been, any underground or above-ground storage
tanks situated on any real property currently leased or owned by any Credit
Party.
(c) Each Credit Party has obtained all licenses and permits under
Environmental Laws necessary to their respective operations, and all such
licenses and permits are being maintained in good standing, and each Credit
Party is in compliance with all material terms and conditions of such licenses
and permits, except for any such failure to obtain, maintain or comply which
could not reasonably be expected to have a Material Adverse Effect.
(d) No Credit Party has received (i) any notice or claim to the effect that
it is or may be liable to any Person under any Environmental Law, including
without limitation, any claim relating to any Hazardous Materials except as
could not reasonably be expected to have a Material Adverse Effect or (ii) any
letter or request for information under Section 104 of the Comprehensive
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Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9604) or
comparable foreign or state laws regarding any matter which could reasonably be
expected to result in a Material Adverse Effect, and, to the best of Parent or
the Borrower's knowledge, no Credit Party is involved in any investigation,
response or corrective action relating to or in connection with any Hazardous
Materials at any real property occupied by such Person or at any other location
except for such of the foregoing which could not reasonably be expected to have
a Material Adverse Effect.
(e) No Credit Party is subject to any judicial or administrative proceeding
alleging the violation of or liability under any Environmental Laws which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect.
(f) No Credit Party nor any of its respective properties or operations is
subject to any outstanding written order or agreement with any governmental
authority or private party relating to (i) any actual or potential violation of
or liability under any Environmental Laws or (ii) any Environmental Claims,
except for such of the foregoing which could not reasonably be expected to have
a Material Adverse Effect.
(g) No Credit Party or, to the best of Parent or the Borrower's knowledge,
any predecessor of any Credit Party, has filed any notice under any
Environmental Law indicating past or present ownership or operation of a
hazardous waste treatment, storage or disposal facility, as defined under 40
C.F.R. Parts 260-270 or any state equivalent.
(h) No Lien in favor of any Person relating to or in connection with any
Environmental Claim has attached to any property currently owned by any Credit
Party, except for any such Lien which could not reasonably be expected to have a
Material Adverse Effect.
(i) All activities and operations of each Credit Party are in compliance
with the requirements of all applicable Environmental Laws, except to the extent
the failure so to comply, individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect. No Credit Party is
involved in any suit, action or proceeding, or has received any notice,
complaint or other request for information from any Governmental Authority or
other Person, in either case with respect to any actual, alleged or threatened
Environmental Claims that, if adversely determined, could be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.
(j) To Parent or the Borrower's knowledge, no event or condition has
occurred which may interfere with present compliance by any Credit Party with
any Environmental Law, or which may give rise to any liability of any Credit
Party under any Environmental Law, which individually or in the aggregate has
had or could reasonably be expected to have a Material Adverse Effect.
5.14 Compliance With Governing Documents, Decrees and Laws. (a) No
-----------------------------------------------------
Credit Party is in violation of (i) its articles of incorporation, articles of
organization, bylaws, operating agreement or any other organizational documents
or (ii) any order, decree or judgment of any Governmental Authority having
jurisdiction over any such Person.
(b) Each Credit Party has timely filed all material reports, documents and
other materials required to be filed by it under all applicable Requirements of
Law with any Governmental Authority, has retained all material records and
documents required to be retained by it under all applicable Requirements of
Law, and is otherwise in compliance with all applicable Requirements of
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Law in respect of the conduct of its business and the ownership and operation of
its properties, except for such Requirements of Law the failure to comply with
which, individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect.
5.15 Labor Relations. Except as could not reasonably be expected to have
---------------
a Material Adverse Effect: (a) no Credit Party is engaged in any unfair labor
practice within the meaning of the National Labor Relations Act of 1947, as
amended; (b) there is (i) no unfair labor practice complaint before the National
Labor Relations Board, or grievance or arbitration proceeding arising out of or
under any collective bargaining agreement, pending or, to the knowledge of
Parent or the Borrower, threatened against any Credit Party, (ii) no strike,
lock-out, slowdown, stoppage, walkout or other labor dispute pending or, to the
knowledge of Parent or the Borrower, threatened against any Credit Party and
(iii) to the knowledge of Parent or the Borrower, no petition for certification
or union election or union organizing activities with respect to any Credit
Party; and (c) neither Parent nor the Borrower is aware of any existing or
imminent labor disturbance by the employees of any Credit Party's principal
suppliers, manufacturers or customers.
5.16 Regulated Industries. No Credit Party is (i) an "investment
--------------------
company," a company "controlled" by an "investment company," or an "investment
advisor," within the meaning of the Investment Company Act of 1940, as amended,
(ii) a "holding company," a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to regulation under the Federal Power Act.
5.17 Insurance. SCHEDULE 5.17 sets forth a summary (that is true and
---------
correct in all material respects) of all insurance policies or arrangements
carried or maintained by any Credit Party as of the Closing Date. The assets,
properties and business of the Credit Parties are insured against such hazards
and liabilities, under such coverages and in such amounts, as are customarily
maintained by prudent companies of established repute engaged in the same or
similar businesses and under policies issued by insurers of recognized
responsibility.
5.18 Certain Contracts. SCHEDULE 5.18 lists, as of the Closing Date and
-----------------
after giving effect to the Transactions, each contract, agreement or commitment,
written or oral, to which any Credit Party is a party, by which any of them or
their respective properties is bound or to which any of them is subject and that
(i) relates to employment of senior executives of a Credit Party or labor
matters, (ii) evidences Funded Debt of a Credit Party, or (iii) the termination
of which by any party or the breach of which by a Credit Party could reasonably
be expected to have a Material Adverse Effect, in each case other than purchase
orders in the ordinary course of business and the Credit Documents, and also
indicates the parties, subject matter and term thereof. As of the Closing Date,
each such contract is in full force and effect, and no Credit Party or, to the
knowledge of Parent or the Borrower, any other party thereto, is in default
under any such contract.
5.19 Capitalization. As of the Closing Date and after giving effect to
--------------
the Transactions, the capitalization of each Credit Party (other than Parent) is
set forth on SCHEDULE 5.19. All issued and outstanding Capital Stock of the
Borrower and each Subsidiary has been duly authorized and validly issued and, to
the extent applicable, is fully paid and nonassessable. As of the Closing Date
after giving effect to the Transactions and other than with respect to the
Capital Stock of Parent, there will be no outstanding securities convertible
into or exchangeable for Capital Stock of any Credit Party or options, warrants
or other rights to purchase or subscribe for Capital Stock of any Credit
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Party or contracts, commitments, agreements, understandings or arrangements of
any kind to which any Credit Party is a party relating to the issuance of any
Capital Stock of such Credit Party, any such convertible or exchangeable
securities or any such options, warrants or rights. As of the Closing Date, no
stockholder or member of the Borrower or any of its Subsidiaries has any
preemptive rights to subscribe for any additional equity securities of such
Credit Party. Any issuance and sale of Capital Stock of the Borrower or any
Subsidiary, upon such issuance and sale, will either (a) have been registered or
qualified under applicable federal and state securities laws or (b) be exempt
therefrom. The Initial Public Offering, when consummated, will constitute a
"Qualified IPO" within the meaning of such term under the Securityholders
Agreement.
5.20 Security Documents. The provisions of each of the Security Documents
------------------
(whether executed and delivered prior to or on the Closing Date or thereafter)
are and will be effective to create in favor of the Administrative Agent, for
its benefit and the benefit of the Lenders, a valid and enforceable security
interest in and Lien upon all right, title and interest of each Credit Party
that is a party thereto in and to the Collateral purported to be pledged by such
Credit Party thereunder and described therein, and upon (i) the initial
extension of credit hereunder, (ii) the filing of appropriately completed
Uniform Commercial Code financing statements and continuations thereof in the
jurisdictions specified therein, (iii) the filing of appropriately completed
short-form assignments in the U.S. Patent and Trademark Office and the U.S.
Copyright Office, (iv) in the case of uncertificated securities, compliance with
Section 8-313 (or its successor provision) of the applicable Uniform Commercial
Code, and (v) the possession by the Administrative Agent of any certificates
evidencing the securities pledged thereby, such security interest and Lien shall
constitute a fully perfected and first priority security interest in and Lien
upon such right, title and interest of each such Credit Party in and to such
Collateral, to the extent that such security interest and Lien can be perfected
by such filings, actions and possession, subject only to Permitted Liens.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each of Parent and the Borrower covenants and agrees that, until the
termination of the Commitments, the termination or expiration of all Letters of
Credit and the payment in full of all principal and interest with respect to the
Loans and all Reimbursement Obligations together with all other amounts then due
and owing hereunder:
6.1 Financial Statements. Parent will deliver to each Lender:
--------------------
(a) As soon as available and in any event within forty-five (45) days after
the end of each of the first three fiscal quarters of each fiscal year,
beginning with the fiscal quarter ended September 30, 1997, (i) unaudited
consolidated balance sheets of Parent and its Subsidiaries as of the end of such
fiscal quarter and unaudited consolidated statements of income and cash flows
for Parent and its Subsidiaries for the fiscal quarter then ended and for that
portion of the fiscal year then ended, in each case setting forth comparative
consolidated figures as of the end of and for the corresponding period in the
preceding fiscal year, all in reasonable detail and prepared in accordance with
Generally Accepted Accounting Principles (subject to the absence of notes
required by Generally Accepted Accounting Principles and subject to normal year-
end adjustments) applied on a basis consistent with that of the preceding
quarter or containing disclosure of the effect on the financial condition or
results
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of operations of any change in the application of accounting principles and
practices during such quarter and (ii) if applicable, Parent's quarterly report
on Form 10-Q for such quarterly period;
(b) As soon as available and in any event within 100 days after the end of
each fiscal year, beginning with the fiscal year ending December 31, 1997, (i)
an audited consolidated balance sheet of Parent and its Subsidiaries as of the
end of such fiscal year and audited consolidated statements of income and cash
flows for Parent and its Subsidiaries for the fiscal year then ended, in each
case setting forth comparative figures as of the end of and for the preceding
fiscal year, all in reasonable detail, together with (y) a report thereon by
Ernst & Young, LLP or another certified public accounting firm of recognized
national standing reasonably acceptable to the Required Lenders that is not
qualified as to going concern or scope of audit and to the effect that (A) such
financial statements present fairly the consolidated financial condition and
results of operations of Parent and its Subsidiaries as of the dates and for the
periods indicated in accordance with Generally Accepted Accounting Principles
applied on a basis consistent with that of the preceding year or containing
disclosure of the effect on the financial position or results of operations of
any change in the application of accounting principles and practices during such
year and (B) the examination by such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and (z) a report by such accountants to the effect that,
based on and in connection with their examination of the financial statements of
Parent and its Subsidiaries, such accountants obtained no knowledge of the
occurrence or existence of any Default or Event of Default relating to
accounting or financial reporting matters, or a statement specifying the nature
and period of existence of any such Default or Event of Default disclosed by
their audit; provided, however, that such accountants shall not be liable by
-------- -------
reason of the failure to obtain knowledge of any Default or Event of Default
that would not be disclosed or revealed in the course of their audit
examination, and (ii) if applicable, Parent's annual report on Form 10-K for
such year; and
(c) As soon as available and in any event within sixty (60) days after the
end of each fiscal quarter of each fiscal year, beginning with the fiscal
quarter ended September 30, 1997, unaudited statements of profit and loss
(listing revenues, contribution profit and circulation figures) for each of the
top twenty publications (ranked by revenues) of the Borrower and its
Subsidiaries (and to the extent not already included in such group, the
Scheduled Titles) for such fiscal quarter.
6.2 Other Business and Financial Information. Parent will deliver to each
----------------------------------------
Lender:
(a) Concurrently with each delivery of the financial statements described
in SECTION 6.1(a) or SECTION 6.1(b), a Compliance Certificate in the form of
EXHIBIT J with respect to the period covered by the financial statements then
being delivered, executed by a Financial Officer of Parent, together with a
Covenant Compliance Worksheet reflecting the computation of the financial
covenants set forth in SECTIONS 7.1 through 7.3 as of the last day of the period
covered by such financial statements;
(b) As soon as available and in any event within thirty (30) days after the
end of each fiscal year, beginning with the fiscal year ending December 31,
1997, a consolidated operating budget for Parent and its Subsidiaries for the
succeeding fiscal year (prepared on a quarterly basis), together with a
certificate of a Financial Officer of Parent to the effect that such budget has
been prepared in good faith and is a reasonable estimate of the financial
position and results of operations of Parent and its Subsidiaries for the period
covered thereby and that such Financial Officer has no reason to believe such
budget is misleading in any material respect in light of the circumstances
existing at the time of
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preparation or delivery thereof (but without representation or warranty that the
results reflected therein will actually be achieved); and as soon as available
from time to time thereafter, any modifications or revisions to or restatements
of such budget;
(c) Promptly upon receipt thereof, copies of all reports in final form
(other than reports of a routine or ministerial nature which are not material)
submitted to Parent by its independent certified public accountants in
connection with each annual, interim or special audit, including, without
limitation, any comment letter submitted by such accountants to management in
connection with their annual audit, and promptly upon completion thereof, any
response reports from Parent in respect thereof;
(d) Promptly upon the sending, filing or receipt thereof, copies of (i) all
financial statements, reports, notices and proxy statements that Parent shall
send or make available generally to its stockholders, (ii) all regular, periodic
and special reports, registration statements and prospectuses (other than on
Form S-8) that Parent or the Borrower shall render to or file with the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. or any national securities exchange and (iii) all press releases
and other statements made available generally by Parent or any of its
Subsidiaries to the public concerning material developments in the business of
Parent or any of its Subsidiaries;
(e) Promptly upon (and in any event within five (5) Business Days after) a
Responsible Officer obtains knowledge thereof, written notice of any of the
following:
(i) the occurrence of any Default or Event of Default or of any
condition or event that would be required to be disclosed in a current
report filed with the Commission on Form 8-K (whether or not Parent is
required to file such reports under the Exchange Act), together with a
written statement of a Responsible Officer of Parent specifying the nature
and period of existence of such event or condition and the action that
Parent has taken, is taking and proposes to take with respect thereto;
(ii) the institution or threatened institution of any action, suit,
investigation or proceeding against or affecting Parent or any of its
Subsidiaries, including any such investigation or proceeding by any
Governmental Authority (other than routine periodic inquiries,
investigations or reviews), that seeks to enjoin or otherwise prevent the
consummation of, or to recover damages or obtain relief as a result of, any
of the Transactions, or that could, if adversely determined, be reasonably
expected, individually or in the aggregate, to have a Material Adverse
Effect, and any material development in any litigation or other proceeding
previously reported pursuant to SECTION 5.5 or this SECTION 6.3(e)(ii);
(iii) the receipt by Parent or any of its Subsidiaries from any
Governmental Authority of any notice asserting any failure by Parent or any
of its Subsidiaries to be in compliance with applicable Requirements of Law
or that threatens the taking of any action against Parent or such
Subsidiary or sets forth circumstances that, if taken or adversely
determined, could be reasonably expected to have a Material Adverse Effect;
(iv) the occurrence of any ERISA Event that could be reasonably
expected to have a Material Adverse Effect, together with (x) a written
statement of a Responsible Officer of
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the Borrower specifying the details of such ERISA Event and the action that
the Borrower has taken, is taking and proposes to take with respect
thereto, (y) a copy of any notice with respect to such ERISA Event that may
be required to be filed with the PBGC and (z) a copy of any notice
delivered by the PBGC to the Borrower or such ERISA Affiliate with respect
to such ERISA Event;
(v) the occurrence of any material default under, or any proposed
or threatened termination or cancellation of, any material contract or
agreement to which Parent or any of its Subsidiaries is a party, the
termination or cancellation of which could be reasonably expected to have a
Material Adverse Effect;
(vi) the occurrence of any of the following: (x) the assertion of
any Environmental Claim against or affecting Parent, any of its
Subsidiaries or any of their respective real property, leased or owned; (y)
the receipt by Parent or any of its Subsidiaries of notice of any alleged
violation of or noncompliance with any Environmental Laws; or (z) the
taking of any remedial action by Parent, any of its Subsidiaries or any
other Person in response to the actual or alleged generation, storage,
release, disposal or discharge of any Hazardous Substances on, to, upon or
from any real property leased or owned by Parent or any of its
Subsidiaries; but in each case under clauses (x), (y) and (z) above, only
to the extent the same could be reasonably expected to have a Material
Adverse Effect; and
(vii) any other matter or event that has, or could be reasonably
expected to have, a Material Adverse Effect, together with a written
statement of a Responsible Officer of Parent setting forth the nature and
period of existence thereof and the action that Parent has taken, is taking
and proposes to take with respect thereto;
(f) At the same time provided to the holders of the Subordinated Notes (or
of any debt securities in respect of any Permitted Refinancing Indebtedness),
any information provided to such holders pursuant to Section 4.02 of the
Subordinated Note Indenture (or pursuant to any similar provisions of any
agreement or instrument in respect of such Permitted Refinancing Indebtedness);
(g) Not later than the last day of each fiscal year of Parent, a report in
form and substance satisfactory to the Administrative Agent outlining all
material insurance coverage maintained as of the date of such report by Parent
and its Subsidiaries and all material insurance coverage planned to be
maintained by such Persons in the subsequent fiscal year;
(h) Promptly after the availability thereof, copies of all material
amendments to the articles of incorporation or organization, bylaws, operating
agreement or other organizational documents of Parent or any of its
Subsidiaries; and
(i) As promptly as reasonably possible, such other information about the
business, condition (financial or otherwise), operations or properties of Parent
or any of its Subsidiaries (including any Plan and any information required to
be filed under ERISA, and including any statements, audits or other reports
submitted by or on behalf of Parent or any of its Subsidiaries to any state
Governmental Authority) as the Administrative Agent or any Lender may from time
to time reasonably request.
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6.3 Existence; Franchises; Maintenance of Properties. Parent will, and
------------------------------------------------
will cause each of its Subsidiaries to, (i) maintain and preserve in full force
and effect its limited liability company or corporate existence, as applicable,
except as expressly permitted otherwise by SECTION 8.1, (ii) obtain, maintain
and preserve in full force and effect all other rights, franchises, licenses,
permits, certifications, approvals and authorizations required by Governmental
Authorities and necessary to the ownership, occupation or use of its properties
or the conduct of its business, except to the extent the failure to do so could
not be reasonably expected to have a Material Adverse Effect, and (iii) keep all
material properties in good working order and condition (normal wear and tear
excepted) and from time to time make all necessary repairs to and renewals and
replacements of such properties, except to the extent that any of such
properties are obsolete or are being replaced.
6.4 Compliance with Laws. Parent will, and will cause each of its
--------------------
Subsidiaries to, comply in all respects with all Requirements of Law applicable
in respect of the conduct of its business and the ownership and operation of its
properties, except to the extent the failure so to comply could not be
reasonably expected to have a Material Adverse Effect.
6.5 Payment of Obligations. Parent will, and will cause each of its
----------------------
Subsidiaries to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so could not be reasonably expected to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
Parent or any of its Subsidiaries; provided, however, that neither Parent nor
-------- -------
any of its Subsidiaries shall be required to pay any such tax, assessment,
charge, levy or claim that is being contested in good faith and by proper
proceedings and as to which Parent or such Subsidiary is maintaining adequate
reserves with respect thereto in accordance with Generally Accepted Accounting
Principles, unless and until any tax lien notice has become effective with
respect thereto or until any lien resulting therefrom attaches to its properties
and becomes enforceable against its other creditors.
6.6 Insurance. Parent will, and will cause each of its Subsidiaries to,
---------
maintain with financially sound and reputable insurance companies insurance with
respect to its assets, properties and business, against such hazards and
liabilities, of such types and in such amounts, as is customarily maintained by
companies of established reputation engaged in the same or similar businesses
similarly situated, and maintain such other or additional insurance on such
terms and subject to such conditions as may be required under any Security
Document.
6.7 Maintenance of Books and Records; Inspection. Parent will, and will
--------------------------------------------
cause each of its Subsidiaries to, (i) maintain adequate books, accounts and
records, in which full, true and correct entries in all material respects shall
be made of all financial transactions in relation to its business and
properties, and prepare all financial statements required under this Agreement,
in each case in accordance with Generally Accepted Accounting Principles and in
compliance with the requirements of any Governmental Authority having
jurisdiction over it, and (ii) permit employees or agents of the Administrative
Agent or any Lender to inspect its properties and examine or audit its books,
records, working papers and accounts and make copies and memoranda of them, and
to discuss its affairs, finances and accounts with its officers and employees
and, upon notice to Parent or the Borrower, the independent public accountants
of Parent and its Subsidiaries (and by this provision Parent authorizes such
accountants, in the presence of a Responsible Officer, to discuss the finances
and affairs of
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Parent and its Subsidiaries), all at such times and from time to time, upon
reasonable notice and during business hours, as may be reasonably requested.
6.8 Permitted Acquisitions. (a) Subject to the provisions of subsection
----------------------
(b) below and the requirements contained in the definition of Permitted
Acquisition, and subject to the other terms and conditions of this Agreement,
the Borrower may from time to time on or after the Closing Date effect Permitted
Acquisitions, provided that, with respect to each Permitted Acquisition:
--------
(i) no Default or Event of Default shall have occurred and be
continuing at the time of the consummation of such Permitted Acquisition or
would exist immediately after giving effect thereto; and
(ii) the Acquisition Amount with respect thereto (to the extent
paid or payable in cash (other than cash contributed to Parent (or paid to
Parent in respect of the issuance or sale of Capital Stock of Parent) by
any of the Permitted Holders and thereafter contributed by Parent to the
Borrower specifically for the purpose of paying all or a portion of the
Acquisition Amount, and which is in fact used solely for such purpose
("Designated Acquisition Funds")) and/or by the assumption of Indebtedness)
shall not exceed $100,000,000.
(b) The Borrower shall have delivered to the Administrative Agent and each
Lender the items listed in clauses (i) and (ii) below not less than ten (10)
Business Days prior to the consummation of any Permitted Acquisition with
respect to which the Acquisition Amount exceeds $10,000,000, and the items
listed in clauses (iii) and (iv) below not less than three (3) Business Days
prior thereto:
(i) a reasonably detailed description of the material terms of such
Permitted Acquisition (including, without limitation, the purchase price
and method and structure of payment) and of each Person or business that is
the subject of such Permitted Acquisition (each, a "Target");
(ii) historical financial statements of the Target (or, if there
are two or more Targets that are the subject of such Permitted Acquisition
and that are part of the same consolidated group, consolidated historical
financial statements for all such Targets) for the two (2) most recent
fiscal years available and, if available, for any interim periods since the
most recent fiscal year-end;
(iii) consolidated projected income statements of Parent and its
Subsidiaries (giving effect to such Permitted Acquisition and the
consolidation with the Borrower of each relevant Target) for the three-year
period following the consummation of such Permitted Acquisition, in
reasonable detail, together with any appropriate statement of assumptions
and pro forma adjustments; and
(iv) a certificate, in form and substance reasonably satisfactory to
the Administrative Agent, executed by a Financial Officer of Parent,
setting forth the Acquisition Amount and further to the effect that, to the
best of such individual's knowledge, (x) the consummation of such Permitted
Acquisition will not result in a violation of any provision of this SECTION
6.8, and after giving effect to such Permitted Acquisition and any
Borrowings
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made in connection therewith, Parent will be in compliance with the
financial covenants contained in SECTIONS 7.1 through 7.3, such compliance
to be determined as of the last day of the fiscal quarter then most
recently ended with regard to calculations made on a pro forma basis in
--- -----
accordance with Generally Accepted Accounting Principles as if each Target
had been consolidated with Parent for those periods applicable to SECTION
6.8 and such covenants (such calculations to be attached to the
certificate), (y) Parent believes in good faith that it will continue to
comply with such financial covenants for a period of one year following the
date of the consummation of such Permitted Acquisition, and (z) after
giving effect to such Permitted Acquisition and any Borrowings in
connection therewith, Parent believes in good faith that it will have
sufficient availability under the Commitments to meet its ongoing working
capital requirements.
(c) As soon as reasonably practicable after the consummation of any
Permitted Acquisition, the Borrower will deliver to the Administrative Agent and
each Lender a copy of the fully executed acquisition agreement (including
schedules and exhibits thereto) and other material documents and closing papers
delivered in connection therewith.
The consummation of each Permitted Acquisition shall be deemed to be a
representation and warranty by the Borrower that (except as shall have been
approved by the Required Lenders) all conditions thereto set forth in this
SECTION 6.8 and in the description furnished under clause (i) of subsection (b)
above have been satisfied in all material respects, that the same is permitted
in accordance with the terms of this Agreement and that the matters certified to
by the Financial Officer of Parent in the certificate referred to in clause (iv)
of subsection (b) above are, to the best of such individual's knowledge, true
and correct in all material respects as of the date such certificate is given,
which representation and warranty shall be deemed to be a representation and
warranty as of the date thereof for all purposes hereunder, including, without
limitation, for purposes of SECTIONS 4.2 and 9.1.
6.9 Creation or Acquisition of Subsidiaries. Subject to the provisions of
---------------------------------------
SECTION 8.5, the Borrower may from time to time create or acquire new
Subsidiaries in connection with Permitted Acquisitions or otherwise, and the
Subsidiaries of the Borrower may create or acquire new Subsidiaries, provided
--------
that:
(a) Concurrently with (and in any event within ten (10) Business Days
thereafter) the creation or direct or indirect acquisition by the Borrower
thereof, each such new Subsidiary (unless such Subsidiary is a Designated Non-
Guarantor Subsidiary) will execute and deliver to the Administrative Agent (i) a
Subsidiaries Guaranty (or an appropriate joinder to an existing Subsidiaries
Guaranty), pursuant to which such new Subsidiary shall guarantee the payment in
full of the Obligations of the Borrower under this Agreement and the other
Credit Documents, and (ii) a Subsidiaries Pledge and Security Agreement (or an
appropriate joinder to an existing Subsidiaries Pledge and Security Agreement),
pursuant to which such new Subsidiary shall grant to the Administrative Agent a
first priority Lien upon and security interest in its accounts receivable,
inventory, equipment, general intangibles and other personal property as
Collateral for its obligations under the Subsidiaries Guaranty, subject only to
Permitted Liens;
(b) Concurrently with (and in any event within ten (10) Business Days
thereafter) the creation or acquisition of any new Subsidiary all or a portion
of the Capital Stock of which is directly owned by the Borrower, the Borrower
will execute and deliver to the Administrative Agent an appropriate amendment or
supplement to the Borrower Pledge and Security Agreement pursuant to
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which all of the Capital Stock of such new Subsidiary owned by the Borrower
shall be pledged to the Administrative Agent, together with the certificates
evidencing such Capital Stock and undated stock powers duly executed in blank;
and concurrently with (and in any event within ten (10) Business Days
thereafter) the creation or acquisition of any new Subsidiary all or a portion
of the Capital Stock of which is directly owned by another Subsidiary (the
"Parent Subsidiary"), the Parent Subsidiary will execute and deliver to the
Administrative Agent an appropriate joinder, amendment or supplement to the
Subsidiaries Pledge and Security Agreement, pursuant to which all of the Capital
Stock of such new Subsidiary owned by such Parent Subsidiary shall be pledged to
the Administrative Agent, together with the certificates evidencing such Capital
Stock and undated stock powers duly executed in blank (provided that no more
--------
than 65% of the Capital Stock of any Foreign Subsidiary shall be required to be
pledged pursuant to this subsection (b)); and
(c) As promptly as reasonably possible, the Borrower and its Subsidiaries
will deliver any such other documents, certificates and opinions (including
opinions of local counsel in the jurisdiction of organization of each such new
Subsidiary), in form and substance reasonably satisfactory to the Administrative
Agent, as the Administrative Agent may reasonably request in connection
therewith and will take such other action as the Administrative Agent may
reasonably request to create in favor of the Administrative Agent a perfected
security interest in the Collateral being pledged pursuant to the documents
described above. In the event of a sale or other disposition of the Capital
Stock of any Subsidiary Guarantor in a transaction expressly permitted by or
pursuant to this Agreement or any other applicable Credit Document, such
Subsidiary Guarantor shall be released from its obligations under the applicable
Subsidiaries Guaranty, Subsidiaries Pledge and Security Agreement and any other
Security Documents to which it is a party, the security interest of the
Administrative Agent in the Collateral of such Subsidiary Guarantor pledged
thereunder shall be released, and in connection therewith the Administrative
Agent, at the request and expense of the Borrower, will execute and deliver to
such Subsidiary Guarantor such documents and instruments evidencing such release
or termination as the Borrower may reasonably request.
6.10 Additional Security; Further Assurances. (a) The Borrower will, and
---------------------------------------
will cause each of its Subsidiaries (other than any Designated Non-Guarantor
Subsidiaries) to, grant to the Administrative Agent from time to time security
interests, Liens and mortgages in and upon such assets and properties of the
Borrower or such Subsidiary as are not covered by the Security Documents
executed and delivered on the Closing Date or pursuant to SECTION 6.9 and as may
be reasonably requested from time to time by the Required Lenders (including,
without limitation, Liens on assets acquired by the Borrower or a Subsidiary in
connection with any Permitted Acquisition). Such security interests, Liens and
mortgages shall be granted pursuant to documentation in form and substance
reasonably satisfactory to the Required Lenders and shall constitute valid and
perfected security interests and Liens, subject to no Liens other than Permitted
Liens. Without limitation of the foregoing, in connection with the grant of any
mortgage or deed of trust with respect to any interest in real property, the
Borrower will, and will cause each applicable Subsidiary to, at the Borrower's
expense, prepare, obtain and deliver to the Administrative Agent any
environmental assessments, appraisals, surveys, title insurance and other
matters or documents as the Administrative Agent may reasonably request or as
may be required under applicable banking laws and regulations.
(b) Parent will, and will cause each of its Subsidiaries to, make, execute,
endorse, acknowledge and deliver any amendments, modifications or supplements
hereto and restatements hereof and any other agreements, instruments or
documents, and take any and all such other actions, as may from time to time be
reasonably requested by the Administrative Agent or the Required
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Lenders to perfect and maintain the validity and priority of the Liens granted
pursuant to the Security Documents and to effect, confirm or further assure or
protect and preserve the interests, rights and remedies of the Administrative
Agent and the Lenders under this Agreement and the other Credit Documents.
6.11 Consents. The Borrower shall use its best efforts to obtain duly
--------
executed consents, in form and substance satisfactory to the Administrative
Agent, to the grant of a security interest by the Borrower pursuant to the
Borrower Pledge and Security Agreement in each contract listed on Annex D
thereto for which a consent has not previously been furnished as required by the
terms of such contract.
6.12 Year 2000. Parent will, and will cause each of its Subsidiaries to,
---------
take all necessary action to ensure that its computer-based systems are able to
operate and effectively process data including dates on and after January 1,
2000. At the request of the Administrative Agent, Parent will provide to the
Administrative Agent evidence acceptable to the Administrative Agent of Parent's
Year 2000 compatibility.
6.13 Post-Closing Transactions. Parent will, on or prior to December 31,
-------------------------
1997 and in accordance with the provisions of SECTION 8.1, (i) cause PIC to be
merged with and into Parent or Holdings and (ii) cause Holdings to be merged
with and into the Borrower, and in connection therewith will take all such
actions as may be reasonably requested by the Administrative Agent, including
the execution of an amendment to the Parent Pledge and Security Agreement
reflecting the Parent's ownership and pledge to the Administrative Agent of all
of the outstanding membership interests in the Borrower; provided, however, that
-------- -------
Parent will not cause Holdings to be merged with and into the Borrower prior to
the merger of PIC with and into Parent or Holdings or otherwise cause or permit
PIC to become the direct owner of any of the outstanding membership interests in
the Borrower.
ARTICLE VII
FINANCIAL COVENANTS
Each of Parent and the Borrower covenants and agrees that, until the
termination of the Commitments, the termination or expiration of all Letters of
Credit and the payment in full of all principal and interest with respect to the
Loans and all Reimbursement Obligations together with all other amounts then due
and owing hereunder:
7.1 Leverage Ratio. Parent will not permit the Leverage Ratio as of the
--------------
last day of any fiscal quarter during the periods set forth below to be greater
than the ratio set forth below opposite such period:
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<TABLE>
<CAPTION>
Date Leverage Ratio
---- --------------
<S> <C>
September 30, 1997 through
December 31, 1998 4.50 : 1.0
January 1, 1999 through
December 31, 2000 4.00 : 1.0
January 1, 2001 through
December 31, 2001 3.75 : 1.0
Thereafter 3.50 : 1.0
</TABLE>
7.2 Interest Coverage Ratio. Parent will not permit the Interest Coverage
-----------------------
Ratio as of the last day of any fiscal quarter during the periods set forth
below to be less than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Date Interest Coverage Ratio
---- -----------------------
<S> <C>
September 30, 1997 through
September 30, 1998 2.00 : 1.0
October 1, 1998 through
September 30, 1999 2.25 : 1.0
Thereafter 2.50 : 1.0
</TABLE>
7.3 Fixed Charge Coverage Ratio. Parent will not permit the Fixed Charge
---------------------------
Coverage Ratio as of the last day of any fiscal quarter, beginning with the
fiscal quarter ended September 30, 1997, to be less than 1.10 : 1.0.
ARTICLE VIII
NEGATIVE COVENANTS
Each of Parent and the Borrower covenants and agrees that, until the
termination of the Commitments, the termination or expiration of all Letters of
Credit and the payment in full of all principal and interest with respect to the
Loans and all Reimbursement Obligations together with all other amounts then due
and owing hereunder:
8.1 Merger; Consolidation. Parent will not, and will not permit or cause
---------------------
any of its Subsidiaries to, liquidate, wind up or dissolve, or enter into any
consolidation, merger or other combination, or agree to do any of the foregoing;
provided, however, that:
- -------- -------
(i) the Borrower may merge or consolidate with another Person so
long as (w) the Borrower is the surviving entity, (x) if such other Person
is a Subsidiary of the Borrower immediately prior to giving effect thereto,
the aggregate of any cash or other assets
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of the Borrower or any of its Subsidiaries received as consideration
pursuant to such transaction by Persons other than the Borrower or a Wholly
Owned Subsidiary of the Borrower shall be deemed to constitute an
Investment made by the Borrower pursuant to clause (xiii) of SECTION 8.5,
(y) if such other Person is not a Subsidiary of the Borrower immediately
prior to giving effect thereto, such merger or consolidation shall
constitute a Permitted Acquisition and the applicable conditions and
requirements of SECTIONS 6.8 and 6.9 shall be satisfied, and (z)
immediately after giving effect thereto, no Default or Event of Default
would exist;
(ii) any Subsidiary of the Borrower may merge or consolidate with
another Person so long as (w) the surviving entity is the Borrower or a
Subsidiary Guarantor (which may be the acquired entity), (x) if such other
Person is a Subsidiary of the Borrower immediately prior to giving effect
thereto, the aggregate of any cash or other assets of the Borrower or any
of its Subsidiaries received as consideration pursuant to such transaction
by Persons other than the Borrower or a Wholly Owned Subsidiary of the
Borrower shall be deemed to constitute an Investment made by the Borrower
pursuant to clause (xiii) of SECTION 8.5, (y) if such other Person is not a
Subsidiary of the Borrower immediately prior to giving effect thereto, such
merger or consolidation shall constitute a Permitted Acquisition and the
applicable conditions and requirements of SECTIONS 6.8 and 6.9 shall be
satisfied, and (z) immediately after giving effect thereto, no Default or
Event of Default would exist;
(iii) Holdings may merge with and into the Borrower so long as (y)
the Borrower is the surviving entity, and (z) no Person other than Parent
or a Wholly Owned Subsidiary receives any consideration; and
(iv) PIC may merge with and into Parent or Holdings so long as
(y) Parent or Holdings, as the case may be, is the surviving entity, and
(z) no Person other than Parent or a Wholly Owned Subsidiary receives any
consideration.
8.2 Indebtedness. Parent will not, and will not permit or cause any of
------------
its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness
other than:
(i) Indebtedness incurred under this Agreement, the Notes, the
Parent Guaranty and any Subsidiaries Guaranty;
(ii) Indebtedness of the Borrower under the Subordinated Notes,
in an aggregate principal amount at any time outstanding not to exceed
$100,000,000 from and after the Closing Date (less the principal amount of
any permitted payment, prepayment or redemption, including the principal
amount of the Subordinated Note Redemption, if effected), and any Permitted
Refinancing Indebtedness;
(iii) the subordinated guarantees of the Subordinated Notes by the
Guarantors (as defined in the Subordinated Note Indenture) as set forth in
the Subordinated Note Indenture, which guarantees are subordinated to the
guarantees of the Obligations to at least the same extent and in the same
manner as the Subordinated Notes are subordinated to the Obligations, and
subordinated guarantees of the Permitted Refinancing Indebtedness, which
guarantees are subordinated to the guarantees of the Obligations to at
least the same extent and in the same manner as the Permitted Refinancing
Indebtedness is subordinated to the Obligations;
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(iv) accrued expenses (including salaries, accrued vacation and
other compensation), current trade or other accounts payable and other
current liabilities arising in the ordinary course of business and not
incurred through the borrowing of money, provided that the same shall be
paid within thirty (30) days of when due except to the extent being
contested in good faith and by appropriate proceedings;
(v) loans and advances by Parent, the Borrower or any Subsidiary
Guarantors to the Borrower or any other Subsidiary Guarantor, or by any
Subsidiary Guarantor to Parent or the Borrower, provided that any such loan
--------
or advance is subordinated in right and time of payment to the Obligations
and is evidenced by a promissory note, in form and substance satisfactory
to the Administrative Agent, pledged to the Administrative Agent pursuant
to the Security Documents;
(vi) Indebtedness of the Borrower under Interest Rate Protection
Agreements entered into for the purpose of hedging interest rate risk and
not for speculation;
(vii) Indebtedness under Commodity Hedge Agreements entered into
in the ordinary course of business consistent with reasonable business
requirements and not for speculation;
(viii) Indebtedness of the type described in, and secured by Liens
of the type described in, clauses (iv) and (v) of SECTION 8.3;
(ix) Indebtedness consisting of guarantees made in the ordinary
course of business by the Borrower or any of its Subsidiaries of
obligations of the Borrower or any of its Subsidiaries, which obligations
are otherwise permitted under this Agreement;
(x) Indebtedness of Parent in an aggregate principal amount not
exceeding $5,000,000 outstanding at any time issued to repurchase its
Capital Stock from former management employees in connection with their
termination or departure, which repurchases are permitted under SECTION 8.6
(provided that such Indebtedness is subordinated in right and time of
--------
payment to the Obligations on terms and conditions satisfactory to the
Administrative Agent in its sole discretion); and
(xi) Indebtedness of the Borrower and its Subsidiaries incurred
solely to finance the payment of all or part of the purchase price of any
equipment, real property or other fixed assets acquired in the ordinary
course of business, including Indebtedness in respect of capital lease
obligations ("Purchase Money Indebtedness") and any refinancings, renewals
or replacements of any such Purchase Money Indebtedness (subject to the
limitations on the principal amount thereof set forth in this clause (xi)),
and other Indebtedness of Parent and its Subsidiaries that is unsecured
(other than Indebtedness specified in clauses (i) through (x) above), which
Purchase Money Indebtedness and other unsecured Indebtedness shall not
exceed $10,000,000 in the aggregate at any time.
8.3 Liens. Parent will not, and will not permit or cause any of its
-----
Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer
to exist, any Lien upon or with respect to any part of its property or assets,
whether now owned or hereafter acquired, or file or permit the filing of, or
permit to remain in effect, any financing statement or other similar notice of
any Lien
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with respect to any such property, asset, income or profits under the Uniform
Commercial Code of any state or under any similar recording or notice statute,
or agree to do any of the foregoing, other than the following (collectively,
"Permitted Liens"):
(i) Liens created under the Security Documents;
(ii) Liens in existence on the Closing Date and set forth on
SCHEDULE 8.3;
(iii) Liens imposed by law with respect to property or assets of
the Borrower and its Subsidiaries, such as Liens of carriers, warehousemen,
mechanics, materialmen and landlords, and other similar Liens incurred in
the ordinary course of business for sums not constituting borrowed money
that are not overdue for a period of more than thirty (30) days or that are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with Generally
Accepted Accounting Principles (if so required);
(iv) Liens (other than any Lien imposed by ERISA, the creation or
incurrence of which would result in an Event of Default under SECTION
9.1(j)) with respect to property or assets of the Borrower and its
Subsidiaries incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of letters
of credit, bids, tenders, statutory obligations, surety and appeal bonds,
leases, government contracts and other similar obligations (other than
obligations for borrowed money) entered into in the ordinary course of
business;
(v) Liens for taxes, assessments or other governmental charges or
statutory obligations that are not delinquent or remain payable without any
penalty or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with Generally Accepted Accounting Principles (if so required);
(vi) Liens securing the Purchase Money Indebtedness permitted
under clause (xi) of SECTION 8.2, provided that the aggregate principal
--------
amount at any time outstanding of all Indebtedness secured by such Liens,
when combined with the aggregate amount of all other unsecured Indebtedness
outstanding at such time incurred pursuant to clause (xi) of SECTION 8.2,
does not exceed $10,000,000, and provided further that any such Lien (i)
-------- -------
shall attach to such property concurrently with or within twenty (20) days
after the acquisition thereof by the Borrower or such Subsidiary, (ii)
shall not exceed the lesser of (y) the fair market value of such property
or (z) the cost thereof to the Borrower or such Subsidiary and (iii) shall
not encumber any other property of the Borrower or any of its Subsidiaries;
and the replacement, extension or renewal of any such Lien, provided that
--------
such replacement, extension or renewal Lien shall not extend to or cover
any property other than the property subject to such Lien immediately prior
to such replacement, extension or renewal, and provided further that the
-------- -------
Indebtedness secured by such replacement, extension or renewal Lien is
permitted under this Agreement;
(vii) any attachment or judgment Lien not constituting an Event of
Default under SECTION 9.1(i) that is being contested in good faith by
appropriate proceedings and for which
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adequate reserves have been established in accordance with Generally
Accepted Accounting Principles (if so required);
(viii) Liens arising from the filing, for notice purposes only, of
financing statements in respect of operating leases;
(ix) Liens arising by operation of law in favor of depositary banks
and collecting banks, incurred in the ordinary course of business;
(x) Liens consisting of restrictions on the transfer of securities
pursuant to applicable federal and state securities laws;
(xi) interests of lessors and licensors under leases and licenses
to which the Borrower or any of its Subsidiaries is a party;
(xii) with respect to any real property occupied by the Borrower or
any of its Subsidiaries, all easements, rights of way, licenses and similar
encumbrances on title that do not materially impair the use of such
property for its intended purposes; and
(xiii) Liens in favor of the trustee or agent under the Subordinated
Note Indenture or any other agreement or indenture relating to Indebtedness
of the Borrower permitted under clause (ii) of SECTION 8.2, covering sums
required to be deposited with such trustee or agent thereunder.
8.4 Disposition of Assets. Parent will not, and will not permit or cause
---------------------
any of its Subsidiaries to, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one or a series of transactions) all or any portion of
its assets, business or properties (including, without limitation, any Capital
Stock of any Subsidiary), or enter into any arrangement with any Person
providing for the lease by Parent or any Subsidiary as lessee of any asset that
has been sold or transferred by Parent or such Subsidiary to such Person, or
agree to do any of the foregoing, except for:
(i) sales of inventory and licenses or leases of intellectual
property and other assets by the Borrower and its Subsidiaries, in each
case in the ordinary course of business;
(ii) the sale or exchange by the Borrower or any of its
Subsidiaries of used or obsolete equipment to the extent (y) the proceeds
of such sale are applied towards, or such equipment is exchanged for,
replacement equipment or (z) such equipment is no longer necessary for the
operations of the Borrower or its applicable Subsidiary in the ordinary
course of business;
(iii) the sale or other disposition of any or all right, title and
interest of the Borrower and its Subsidiaries in and to the assets and
properties (other than cash) directly associated with the publications
listed in SCHEDULE 8.4 (such assets and properties, collectively, the
"Scheduled Titles"), and the sale or other disposition of any Investments
made by the contribution of any of the Scheduled Titles to a joint venture,
partnership or other Person (which may be a Subsidiary) as permitted by
clause (xiii) of SECTION 8.5, in each
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case provided that, in the good faith judgment of the Borrower, fair value
--------
is received in exchange for such sale or other disposition;
(iv) the sale, lease or other disposition of assets by a Subsidiary
of the Borrower to the Borrower or to another Wholly Owned Subsidiary of
the Borrower if, immediately after giving effect thereto, no Default or
Event of Default would exist; and
(v) the sale or disposition of assets by Parent or any of its
Subsidiaries outside the ordinary course of business for cash, provided
--------
that (w) the Net Cash Proceeds from such sales or dispositions, when
aggregated with the Net Cash Proceeds from all other sales and dispositions
not otherwise specifically permitted under this SECTION 8.4 that are
consummated during the same fiscal quarter or the period of three
consecutive fiscal quarters immediately prior thereto, do not exceed
$10,000,000 in the aggregate for Parent and its Subsidiaries, (x) to the
extent not theretofore expended or committed to be expended within a
reasonable period to acquire assets or properties or otherwise reinvested
in the businesses of the Borrower, such Net Cash Proceeds are delivered to
the Administrative Agent within 180 days after receipt thereof for
application in prepayment of the Loans in accordance with the provisions of
SECTION 2.6(e), (y) in no event shall Parent or any of its Subsidiaries
sell or otherwise dispose of any of the Capital Stock of any Subsidiary
(other than a Subsidiary to which the Borrower has contributed no assets or
properties other than assets consisting of Scheduled Titles), and (z)
immediately after giving effect thereto, no Default or Event of Default
would exist.
8.5 Investments. Parent will not, and will not permit or cause any of its
-----------
Subsidiaries to, directly or indirectly, purchase, own, invest in or otherwise
acquire any Capital Stock, evidence of indebtedness or other obligation or
security or any interest whatsoever in any other Person, or make or permit to
exist any loans, advances or extensions of credit to, or any investment in cash
or by delivery of property in, any other Person, or purchase or otherwise
acquire (whether in one or a series of related transactions) any portion of the
assets, business or properties of another Person (including pursuant to an
Acquisition), or create or acquire any Subsidiary, or become a partner or joint
venturer in any partnership or joint venture (collectively, "Investments"), or
make a commitment or otherwise agree to do any of the foregoing, other than:
(i) Investments in Cash Equivalents;
(ii) Investments consisting of (a) purchases and acquisitions of
inventory, supplies, materials and equipment, or (b) licenses or leases of
intellectual property and other assets, in each case in the ordinary course
of business,
(iii) Investments consisting of loans and advances to employees for
reasonable travel, relocation and business expenses in the ordinary course
of business, extensions of trade credit in the ordinary course of business,
and prepaid expenses incurred in the ordinary course of business;
(iv) without duplication, Investments consisting of Indebtedness
permitted under clause (v) of SECTION 8.2;
(v) Investments existing on the Closing Date and described in
SCHEDULE 8.5;
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(vi) Investments of the Borrower under Interest Rate Protection
Agreements entered into for the purpose of hedging interest rate risk and
not for speculation;
(vii) Investments under Commodity Hedge Agreements entered into in
the ordinary course of business consistent with reasonable business
requirements and not for speculation;
(viii) Investments consisting of endorsements for collection or
deposit in the ordinary course of business;
(ix) Investments consisting of the making of capital contributions
or the purchase of Capital Stock (a) by Parent and Holdings in the
Borrower, (b) by the Borrower or any Subsidiary in any other Subsidiary
that is (or after giving effect to such Investment will be) a Subsidiary
Guarantor, and (c) by any Subsidiary in the Borrower;
(x) Permitted Acquisitions;
(xi) Investments of Parent contemplated by the activities described
in SECTION 8.8(b);
(xii) Investments of the Borrower and its Subsidiaries consisting of
the licensing of publication titles and other assets pursuant to joint
marketing arrangements with other Persons;
(xiii) Investments (other than Investments specified in clauses (i)
through (xii) above) of the Borrower and its Subsidiaries in an aggregate
amount, as valued at the time each such Investment is made, not exceeding
$5,000,000 for all such Investments from and after the Closing Date (which
Investments may include, without limitation, (a) Investments in Foreign
Subsidiaries and other Designated Non-Guarantor Subsidiaries, (b)
Investments consisting of the contribution by the Borrower to partnerships,
joint ventures or other Persons (including Subsidiaries) of the Scheduled
Titles and any additional Investments in such Persons, and (c) cash or
other assets of the Borrower or any of its Subsidiaries received as
consideration by any Person other than the Borrower or a Wholly Owned
Subsidiary of the Borrower in a transaction permitted by SECTION 8.1);
(xiv) Investments in Capital Stock of Parent permitted under clause
(v) of SECTION 8.6;
(xv) Permitted Subordinated Note Repurchases;
(xvi) Investments in the Borrower or any Subsidiary consisting of
Designated Acquisition Funds; and
(xvii) Investments existing as of the Closing Date by Parent in PIC
and by the Borrower in Petersen Capital Corp.
8.6 Restricted Payments. (a) Parent will not, and will not permit or
-------------------
cause any of its Subsidiaries to, directly or indirectly, declare or make any
dividend payment, or make any other distribution of cash, property or assets, in
respect of any of its Capital Stock or any warrants, rights
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or options to acquire its Capital Stock, or purchase, redeem, retire or
otherwise acquire for value any shares of its Capital Stock or any warrants,
rights or options to acquire its Capital Stock, or set aside funds for any of
the foregoing, except that:
(i) any Credit Party may declare and make dividend payments or
other distributions payable solely in its Qualified Capital Stock (provided
--------
that, in the case of any such dividends or distributions by the Borrower or
any of its Subsidiaries, such Capital Stock is pledged to the
Administrative Agent pursuant to the Borrower Pledge and Security
Agreement, the Parent Pledge and Security Agreement or a Subsidiaries
Pledge and Security Agreement, as applicable);
(ii) each Wholly Owned Subsidiary of the Borrower may declare and
make dividend payments or other distributions to the Borrower or another
Wholly Owned Subsidiary of the Borrower, to the extent not prohibited under
applicable Requirements of Law;
(iii) the Borrower may declare and make cash dividend payments to
Holdings and Parent from time to time in amounts necessary to enable Parent
to pay required federal, state and local income taxes in respect of that
portion of its consolidated earnings attributable to the operations of the
Borrower and its Subsidiaries; provided, however, that the Borrower shall
-------- -------
not make any dividends or distributions under this clause (iii) unless, at
the time made, the payment of such dividend or distribution is permitted
under the Subordinated Note Indenture (or under any applicable agreement or
instrument relating to any Permitted Refinancing Indebtedness) and the
Borrower complies with all applicable conditions and requirements
thereunder;
(iv) so long as no Default or Event of Default shall have occurred
and is continuing or would result therefrom, the Borrower may make dividend
payments or other distributions of cash to Parent in an amount not in
excess of (y) $1,000,000 per fiscal year solely for the purpose of paying
fees and expenses of the Credit Parties, including directors' fees, less
(z) the amount of any management, advisory, consulting and similar fees
paid by the Borrower to Willis Stein and its Affiliates during such fiscal
year; provided that the Borrower may make further dividends and
--------
distributions for such purpose under this clause (iv) from time to time, in
an aggregate amount (including the $1,000,000 amount set forth in clause
(y) above) not to exceed $2,500,000 during any fiscal year (less the
aggregate amount of payments during such fiscal year described under clause
(z) above) if, at the time made, the payment of such dividend or
distribution is permitted under the Subordinated Note Indenture (or under
any applicable agreement or instrument relating to any Permitted
Refinancing Indebtedness) and the Borrower complies with all applicable
conditions and requirements thereunder; and
(v) so long as no Default or Event of Default shall have occurred
and is continuing or would result therefrom, (y) Parent may repurchase its
Capital Stock from former management employees in connection with their
termination or departure, in an aggregate amount not to exceed $12,500,000
for all such repurchases from and after the Closing Date, and (z) the
Borrower may make dividend payments or other distributions of cash to
Parent for the purpose of effecting such repurchases; provided, however,
-------- -------
that the Borrower shall not make any dividends or distributions under
clause (z) above unless, at the
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time made, the payment of such dividend or distribution is permitted under
the Subordinated Note Indenture (or under any applicable agreement or
instrument relating to any Permitted Refinancing Indebtedness) and the
Borrower complies with all applicable conditions and requirements
thereunder.
(b) Parent will not, and will not permit or cause any of its Subsidiaries
to, make (or give any notice in respect of) any voluntary or optional payment or
prepayment of principal on, or directly or indirectly make any redemption
(including pursuant to any change of control provision), retirement, defeasance
or other acquisition for value of, the Subordinated Notes or any Permitted
Refinancing Indebtedness, or make any deposit or otherwise set aside funds for
any of the foregoing purposes, other than (i) the Subordinated Note Redemption,
(ii) Permitted Subordinated Note Repurchases and (iii) the repayment and
redemption of the Subordinated Notes (or any Permitted Refinancing Indebtedness)
with the proceeds from the subsequent issuance of Permitted Refinancing
Indebtedness.
8.7 Transactions with Affiliates. Parent will not, and will not permit
----------------------------
or cause any of its Subsidiaries to, enter into any material transaction
(including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service) with any officer, director,
stockholder or other Affiliate of Parent or any Subsidiary, except in the
ordinary course of its business and upon fair and reasonable terms that are no
less favorable to it than would obtain in a comparable arm's length transaction
with a Person other than an Affiliate of Parent or such Subsidiary; provided,
--------
however, that nothing contained in this Section shall prohibit:
- -------
(i) transactions described on SCHEDULE 8.7 or otherwise expressly
permitted under this Agreement;
(ii) transactions among any of Parent and its Wholly Owned
Subsidiaries;
(iii) the consummation on the Closing Date of the Transactions; and
(iv) transactions after the Closing Date that are expressly
contemplated by the Securities Purchase Agreement and the Securityholders
Agreement (including any registration rights described therein) and that
are not prohibited by any other provision of this Agreement or any other
Credit Document, provided that the aggregate management, advisory,
--------
consulting and similar fees paid by the Borrower to Willis Stein and its
Affiliates pursuant to the Securities Purchase Agreement or otherwise shall
not exceed (y) $1,000,000 during any fiscal year less (z) the amount of any
distributions made by the Borrower during such fiscal year pursuant to
SECTION 8.6(a)(iv), and provided further that any such fees may accrue but
-------- -------
shall not be paid by the Borrower at any time after the occurrence and
during the continuance of a Default or Event of Default.
8.8 Lines of Business. (a) The Borrower will not, and will not permit or
-----------------
cause any of its Subsidiaries to, engage in any businesses other than the
publication, sale, distribution and licensing of publications and brand names,
copyrights, patents, servicemarks and trademarks for the conduct of a
publishing, programming, events and media business (including, without
limitation, electronic media), and including new or additional publications,
media, programming or events and the business and activities ancillary thereto
(the "Permitted Lines of Business").
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(b) Parent will not engage in any business or activity other than (i) the
ownership of equity interests in the Borrower and Holdings and the exercise of
rights and performance of obligations in connection therewith, (ii) the entry
into, and exercise of rights and performance of obligations in respect of, (A)
this Agreement, the Parent Guaranty and any other Credit Documents to which it
is or may become a party, (B) contracts and agreements with or for the benefit
of officers, directors and employees of it or any Subsidiary thereof relating to
their employment or directorships, (C) insurance policies and related contracts
and agreements and (D) equity subscription agreements, registration rights
agreements, warrant agreements, voting and other stockholder agreements,
engagement letters, underwriting agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, (iii) the
offering, issuance and sale of its equity securities to the extent such
offering, issuance or sale does not constitute a Default or Event of Default,
(iv) the filing of registration statements, and compliance with applicable
reporting and other obligations, under federal, state or other securities laws,
(v) the performance of obligations under and compliance with its certificate of
incorporation and by-laws, or any applicable law, ordinance, regulation, rule,
order, judgment, decree or permit, including, without limitation, as a result of
or in connection with the activities of its Subsidiaries, (vi) the performance
of contractual obligations not otherwise prohibited hereunder, (vii) the
incurrence and payment of its business and operating expenses and any taxes for
which it may be liable, and (viii) other activities reasonably incidental or
related to the foregoing. Parent will not, directly or indirectly, create or own
any Subsidiary other than (y) the Borrower and its Subsidiaries permitted
hereunder and (z) subject to the provisions of SECTION 6.13, PIC and Holdings.
8.9 Certain Amendments. Parent will not, and will not permit or cause any
------------------
of its Subsidiaries to, (i) amend, modify or waive, or permit the amendment,
modification or waiver of, any provision of the Subordinated Notes, the
Subordinated Note Indenture or any other agreement or instrument evidencing or
governing any Indebtedness permitted under clause (ii) of SECTION 8.2, the
effect of which would be to (a) increase the principal amount due thereunder,
(b) shorten or accelerate the time of payment of any amount due thereunder, (c)
increase the applicable interest rate or amount of any fees or costs due
thereunder, (d) amend any of the subordination provisions thereunder (including
any of the definitions relating thereto), (e) make any covenant therein more
restrictive or add any new covenant, or (f) otherwise materially and adversely
affect the Lenders, or breach or otherwise violate any of the subordination
provisions applicable thereto, including, without limitation, restrictions
against payment of principal and interest thereon, or (ii) amend, modify or
change any provision of its articles of organization, certificate of
incorporation, limited liability company operating agreement or bylaws, as
applicable, or the terms of any class or series of its Capital Stock, other than
in a manner that could not reasonably be expected to materially and adversely
affect the Lenders.
8.10 Limitation on Certain Restrictions. Parent will not, and will not
----------------------------------
permit or cause any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any restriction or
encumbrance on (i) the right of any Credit Party to perform and comply with its
obligations under the Credit Documents or (ii) the right of any Subsidiary of
the Borrower to make any dividend payments or other distributions in respect of
its Capital Stock, to repay Indebtedness owed to the Borrower or any other
Subsidiary of the Borrower, to make loans or advances to the Borrower or any
other Subsidiary of the Borrower, or to transfer any of its assets or properties
to the Borrower or any other Subsidiary of the Borrower, in each case other than
such restrictions or encumbrances existing under or by reason of (i) the Credit
Documents, (ii) applicable Requirements of Law, (iii) customary non-assignment
provisions in any lease governing a leasehold
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interest, (iv) the terms of licenses or trademarks and copyrights entered into
in the ordinary course of business, and (v) other contractual restrictions in
respect of assets not material to the business of the Credit Parties, taken as a
whole.
8.11 No Other Negative Pledges. Parent will not, and will not permit or
-------------------------
cause any of its Subsidiaries to, directly or indirectly, enter into or suffer
to exist any agreement or restriction that prohibits or conditions the creation,
incurrence or assumption of any Lien upon or with respect to any part of its
property or assets, whether now owned or hereafter acquired, or agree to do any
of the foregoing, other than as set forth in (i) this Agreement and the Security
Documents, (ii) the Subordinated Note Indenture, (iii) any agreement or
instrument creating a Permitted Lien (but only to the extent such agreement or
restriction applies to the assets subject to such Permitted Lien), (iv)
operating leases of real or personal property entered into by the Borrower or
any of its Subsidiaries as lessee in the ordinary course of business, (v)
interests of licensors in licenses entered into by the Borrower or any of its
Subsidiaries as licensee in the ordinary course of business, and (vi)
restrictions on assignability in other contracts not material to the business of
the Credit Parties, taken as a whole.
8.12 Fiscal Year. Parent will not, and will not permit or cause any of
-----------
its Subsidiaries to, change the ending date of its fiscal year to a date other
than December 31.
8.13 Accounting Changes. Parent will not, and will not permit or cause
------------------
any of its Subsidiaries to, make or permit any material change in its accounting
policies or reporting practices, except as may be required by Generally Accepted
Accounting Principles.
8.14 Designated Senior Indebtedness. The Borrower will not designate any
------------------------------
Indebtedness other than the Indebtedness under this Agreement as "Designated
Senior Indebtedness" for purposes of the Subordinated Note Indenture or any
Permitted Refinancing Indebtedness.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when due;
(b) The Borrower shall fail to pay any interest on any Loan, any fee or any
other Obligation (other than as set forth in subsection (a) above) when due, and
such failure shall continue unremedied for three (3) days;
(c) Parent or the Borrower shall fail to observe, perform or comply with
any condition, covenant or agreement contained in any of SECTIONS 2.14,
6.2(e)(i), 6.3(i), 6.8, 6.9, 6.13, ARTICLE VII or ARTICLE VIII;
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(d) The Borrower or any other Credit Party shall fail to observe, perform
or comply with any condition, covenant or agreement contained in this Agreement
or any of the other Credit Documents other than those enumerated in subsections
(a), (b) and (c) above, and such failure shall continue unremedied for any grace
period specifically applicable thereto or, if no such grace period is
applicable, for a period of thirty (30) days after the earlier of (i) the date
on which a Responsible Officer of the Borrower acquires knowledge thereof and
(ii) the date on which written notice thereof is delivered by the Administrative
Agent or any Lender to the Borrower;
(e) Any representation or warranty made or deemed made by or on behalf of
the Borrower or any other Credit Party in this Agreement, any of the other
Credit Documents or in any certificate, instrument, report or other document
furnished in connection herewith or therewith or in connection with the
transactions contemplated hereby or thereby shall prove to have been false or
misleading in any material respect as of the time made, deemed made or
furnished;
(f) The Borrower or any other Credit Party shall (i) fail to pay when due
(whether by scheduled maturity, acceleration or otherwise and after giving
effect to any applicable grace period) any principal of or interest on any
Indebtedness (other than the Indebtedness incurred pursuant to this Agreement)
having an aggregate principal amount of at least $1,000,000; or (ii) fail to
observe, perform or comply with any condition, covenant or agreement contained
in any agreement or instrument evidencing or relating to any such Indebtedness,
or any other event shall occur or condition exist in respect thereof, and the
effect of such failure, event or condition is to cause, or permit the holder or
holders of such Indebtedness (or a trustee or agent on its or their behalf) to
cause (with the giving of notice, lapse of time, or both), such Indebtedness to
become due, or to be prepaid, redeemed, purchased or defeased, prior to its
stated maturity;
(g) The Borrower or any other Credit Party (other than a Designated Non-
Guarantor Subsidiary) shall (i) file a voluntary petition or commence a
voluntary case seeking liquidation, winding-up, reorganization, dissolution,
arrangement, readjustment of debts or any other relief under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to controvert
in a timely and appropriate manner, any petition or case of the type described
in subsection (h) below, (iii) apply for or consent to the appointment of or
taking possession by a custodian, trustee, receiver or similar official for or
of itself or all or a substantial part of its properties or assets, (iv) fail
generally, or admit in writing its inability, to pay its debts generally as they
become due, (v) make a general assignment for the benefit of creditors or (vi)
take any corporate action to authorize or approve any of the foregoing;
(h) Any involuntary petition or case shall be filed or commenced against
the Borrower or any other Credit Party (other than a Designated Non-Guarantor
Subsidiary) seeking liquidation, winding-up, reorganization, dissolution,
arrangement, readjustment of debts, the appointment of a custodian, trustee,
receiver or similar official for it or all or a substantial part of its
properties or any other relief under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, and
such petition or case shall continue undismissed and unstayed for a period of
sixty (60) days; or an order, judgment or decree approving or ordering any of
the foregoing shall be entered in any such proceeding;
(i) Any one or more money judgments, writs or warrants of attachment,
executions or similar processes involving an aggregate amount (exclusive of
amounts fully bonded or covered by insurance as to which the surety or insurer,
as the case may be, has acknowledged its liability in
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writing) in excess of $1,000,000 shall be entered or filed against the Borrower
or any other Credit Party or any of their respective properties and the same
shall not be dismissed, stayed or discharged for a period of thirty (30) days or
in any event later than five days prior to the date of any proposed sale
thereunder;
(j) Any ERISA Event shall occur or exist with respect to any Plan or
Multiemployer Plan, and such ERISA Event, together with all other ERISA Events
then existing, if any, could be reasonably expected to have a Material Adverse
Effect;
(k) The Petersen License Agreement shall be terminated or shall, for any
other reason, fail to be in full force and effect and enforceable in accordance
with its terms in all material respects;
(l) Any Security Document to which any Credit Party is now or hereafter a
party shall for any reason cease to be in full force and effect or cease to be
effective to give the Administrative Agent a valid and perfected security
interest in and Lien upon any material portion of the Collateral purported to be
covered thereby, subject to no Liens other than Permitted Liens, in each case
unless any such cessation occurs in accordance with the terms thereof or
pursuant to a transaction permitted under clause (iii) or (iv) of SECTION 8.1 or
is due to any act or failure to act on the part of the Administrative Agent, or
any Lender, or any Credit Party shall assert any of the foregoing;
(m) The Parent Guaranty or any Subsidiaries Guaranty shall cease to be in
full force and effect (unless any such cessation occurs in accordance with the
terms thereof or pursuant to a transaction permitted under clause (iii) or (iv)
of SECTION 8.1), or either Parent or Holdings or any Person acting on its behalf
shall deny or disaffirm such Credit Party's obligations under the Parent
Guaranty, or any Subsidiary or any Person acting on its behalf shall deny or
disaffirm such Subsidiary's obligations under any Subsidiaries Guaranty; or
(n) Any of the following shall occur: (i) Parent shall cease to own,
directly or indirectly, 100% of the outstanding Capital Stock of the Borrower;
(ii) Parent shall cease to have, directly or indirectly, the sole right and
authority to exercise control over the management of the Borrower; (iii) any
Person or group of Persons acting in concert as a partnership or other group
(other than the Permitted Holders) shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, have
become, after the date hereof, the beneficial owner of securities of Parent
representing 30% or more of the combined voting power of the then outstanding
securities of Parent ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors; (iv) the
Board of Directors of Parent shall cease to consist of a majority of the
individuals who constituted the Board of Directors as of the date hereof or who
shall have become a member thereof subsequent to the date hereof after having
been nominated, or otherwise approved in writing, by at least a majority of
individuals who constituted the Board of Directors of Parent as of the date
hereof (or their replacements approved as herein required); or (v) a Change of
Control (as defined in the Subordinated Note Indenture) shall occur under the
Subordinated Note Indenture or a "change of control" or similar event within the
meaning of any agreement or instrument governing or evidencing Permitted
Refinancing Indebtedness shall occur thereunder.
9.2 Remedies: Termination of Commitments, Acceleration, etc. Upon and at
-------------------------------------------------------
any time after the occurrence and during the continuance of any Event of
Default, the Administrative Agent
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shall at the direction, or may with the consent, of the Required Lenders, take
any or all of the following actions at the same or different times:
(a) Declare the Commitments, the Swingline Commitment, and the Issuing
Lender's obligation to issue Letters of Credit, to be terminated, whereupon the
same shall terminate (provided that, upon the occurrence of an Event of Default
--------
pursuant to SECTION 9.1(g) or SECTION 9.1(h), the Commitments, the Swingline
Commitment, and the Issuing Lender's obligation to issue Letters of Credit shall
automatically be terminated);
(b) Declare all or any part of the outstanding principal amount of the
Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Notes and the
other Credit Documents, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrower (provided that, upon the occurrence of an Event of
--------
Default pursuant to SECTION 9.1(g) or SECTION 9.1(h), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind, all of which are hereby knowingly and expressly waived by the
Borrower);
(c) Direct the Borrower to deposit (and the Borrower hereby agrees,
forthwith upon receipt of notice of such direction from the Administrative
Agent, to deposit) with the Administrative Agent from time to time such
additional amount of cash as is equal to the aggregate Stated Amount of all
Letters of Credit then outstanding (whether or not any beneficiary under any
Letter of Credit shall have drawn or be entitled at such time to draw
thereunder), such amount to be held by the Administrative Agent in the Cash
Collateral Account as security for the Letter of Credit Exposure as described in
SECTION 3.9; and
(d) Exercise all rights and remedies available to it under this Agreement,
the other Credit Documents and applicable law.
9.3 Remedies: Set-Off. In addition to all other rights and remedies
-----------------
available under the Credit Documents or applicable law or otherwise, upon and at
any time after the occurrence and during the continuance of any Event of
Default, each Lender may, and each is hereby authorized by the Borrower, at any
such time and from time to time, to the fullest extent permitted by applicable
law, without presentment, demand, protest or other notice of any kind, all of
which are hereby knowingly and expressly waived by the Borrower, to set off and
to apply any and all deposits (general or special, time or demand, provisional
or final) and any other property at any time held (including at any branches or
agencies, wherever located), and any other indebtedness at any time owing, by
such Lender to or for the credit or the account of the Borrower against any or
all of the Obligations to such Lender now or hereafter existing, whether or not
such Obligations may be contingent or unmatured, the Borrower hereby granting to
each Lender a continuing security interest in and Lien upon all such deposits
and other property as security for such Obligations. Each Lender agrees to
notify the Borrower promptly after any such set-off and application; provided,
--------
however, that the failure to give such notice shall not affect the validity of
- -------
such set-off and application.
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ARTICLE X
THE ADMINISTRATIVE AGENT
10.1 Appointment. Each Lender hereby irrevocably appoints and authorizes
-----------
First Union to act as Administrative Agent hereunder and under the other Credit
Documents and to take such actions as agent on its behalf hereunder and under
the other Credit Documents, and to exercise such powers and to perform such
duties, as are specifically delegated to the Administrative Agent by the terms
hereof or thereof, together with such other powers and duties as are reasonably
incidental thereto.
10.2 Nature of Duties. The Administrative Agent shall have no duties or
----------------
responsibilities other than those expressly set forth in this Agreement and the
other Credit Documents. The Administrative Agent shall not have, by reason of
this Agreement or any other Credit Document, a fiduciary relationship in respect
of any Lender; and nothing in this Agreement or any other Credit Document,
express or implied, is intended to or shall be so construed as to impose upon
the Administrative Agent any obligations or liabilities in respect of this
Agreement or any other Credit Document except as expressly set forth herein or
therein. The Administrative Agent may execute any of its duties under this
Agreement or any other Credit Document by or through agents or attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact that it selects with reasonable care. The Administrative
Agent shall be entitled to consult with legal counsel, independent public
accountants and other experts selected by it with respect to all matters
pertaining to this Agreement and the other Credit Documents and its duties
hereunder and thereunder and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts. The Lenders hereby acknowledge that the Administrative
Agent shall not be under any duty to take any discretionary action permitted to
be taken by it pursuant to the provisions of this Agreement or any other Credit
Document unless it shall be requested in writing to do so by the Required
Lenders (or, where a higher percentage of the Lenders is expressly required
hereunder, such Lenders).
10.3 Exculpatory Provisions. Neither the Administrative Agent nor any of
----------------------
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action taken or omitted to be taken by it or such
Person under or in connection with the Credit Documents, except for its or such
Person's own gross negligence or willful misconduct, (ii) responsible in any
manner to any Lender for any recitals, statements, information, representations
or warranties herein or in any other Credit Document or in any document,
instrument, certificate, report or other writing delivered in connection
herewith or therewith, for the execution, effectiveness, genuineness, validity,
enforceability or sufficiency of this Agreement or any other Credit Document, or
for the financial condition of the Borrower, its Subsidiaries or any other
Person, or (iii) required to ascertain or make any inquiry concerning the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document or the existence or possible existence of
any Default or Event of Default, or to inspect the properties, books or records
of the Borrower or any of its Subsidiaries.
10.4 Reliance by Administrative Agent. The Administrative Agent shall be
--------------------------------
entitled to rely, and shall be fully protected in relying, upon any notice,
statement, consent or other communication (including, without limitation, any
thereof by telephone, telecopy, telex, telegram or cable) believed by it in good
faith to be genuine and correct and to have been signed, sent or made by
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the proper Person or Persons. The Administrative Agent may deem and treat each
Lender as the owner of its interest hereunder for all purposes hereof unless and
until a written notice of the assignment, negotiation or transfer thereof shall
have been given to the Administrative Agent in accordance with the provisions of
this Agreement. The Administrative Agent shall be entitled to refrain from
taking or omitting to take any action in connection with this Agreement or any
other Credit Document (i) if such action or omission would, in the reasonable
opinion of the Administrative Agent, violate any applicable law or any provision
of this Agreement or any other Credit Document or (ii) unless and until it shall
have received such advice or concurrence of the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders)
as it deems appropriate or it shall first have been indemnified to its
satisfaction by the Lenders against any and all liability and expense (other
than liability and expense arising from its own gross negligence or willful
misconduct) that may be incurred by it by reason of taking, continuing to take
or omitting to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Administrative Agent as a
result of the Administrative Agent's acting or refraining from acting hereunder
or under any other Credit Document in accordance with the instructions of the
Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders), and such instructions and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders
(including all subsequent Lenders).
10.5 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
------------------------------------------------------
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representation or warranty to it and that no act by the Administrative Agent
or any such Person hereafter taken, including any review of the affairs of the
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender represents
to the Administrative Agent that (i) it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, properties, financial
and other condition and creditworthiness of the Borrower and its Subsidiaries
and made its own decision to enter into this Agreement and extend credit to the
Borrower hereunder, and (ii) it will, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action
hereunder and under the other Credit Documents and to make such investigation as
it deems necessary to inform itself as to the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries. Except as expressly provided in this Agreement and the
other Credit Documents, the Administrative Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other information concerning the business, prospects,
operations, properties, financial or other condition or creditworthiness of the
Borrower, its Subsidiaries or any other Person that may at any time come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
10.6 Notice of Default. The Administrative Agent shall not be deemed to
-----------------
have knowledge or notice of the occurrence of any Default or Event of Default
unless the Administrative Agent shall have received written notice from the
Borrower or a Lender referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." In the
event that the Administrative Agent receives such a notice, the Administrative
Agent will give notice thereof to the Lenders as soon as reasonably practicable;
provided, however, that if any such
- -------- -------
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notice has also been furnished to the Lenders, the Administrative Agent shall
have no obligation to notify the Lenders with respect thereto. The
Administrative Agent shall (subject to SECTIONS 10.4 and 11.6) take such action
with respect to such Default or Event of Default as shall reasonably be directed
by the Required Lenders; provided that, unless and until the Administrative
--------
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of the Lenders.
10.7 Indemnification. To the extent the Administrative Agent is not
---------------
reimbursed by or on behalf of the Borrower, and without limiting the obligation
of the Borrower to do so, the Lenders agree (i) to indemnify the Administrative
Agent and its officers, directors, employees, agents, attorneys-in-fact and
Affiliates, ratably in proportion to their respective percentages as used in
determining the Required Lenders as of the date of determination, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
attorneys' fees and expenses) or disbursements of any kind or nature whatsoever
that may at any time (including, without limitation, at any time following the
repayment in full of the Loans and the termination of the Commitments) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any other Credit Document or any
documents contemplated by or referred to herein or the transactions contemplated
hereby or thereby or any action taken or omitted by the Administrative Agent
under or in connection with any of the foregoing, and (ii) to reimburse the
Administrative Agent upon demand, ratably in proportion to their respective
percentages as used in determining the Required Lenders as of the date of
determination, for any expenses incurred by the Administrative Agent in
connection with the preparation, negotiation, execution, delivery,
administration, amendment, modification, waiver or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement or any of the other Credit
Documents (including, without limitation, reasonable attorneys' fees and
expenses and compensation of agents and employees paid for services rendered on
behalf of the Lenders); provided, however, that no Lender shall be liable for
-------- -------
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
resulting from the gross negligence or willful misconduct of the party to be
indemnified.
10.8 The Administrative Agent in its Individual Capacity. With respect to
---------------------------------------------------
its Commitment, the Loans made by it, the Letters of Credit issued or
participated in by it and the Note or Notes issued to it, the Administrative
Agent in its individual capacity and not as Administrative Agent shall have the
same rights and powers under the Credit Documents as any other Lender and may
exercise the same as though it were not performing the agency duties specified
herein; and the terms "Lenders," "Required Lenders," "holders of Notes" and any
similar terms shall, unless the context clearly otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent and
its Affiliates may accept deposits from, lend money to, make investments in, and
generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower, any of its Subsidiaries or any of their respective
Affiliates as if the Administrative Agent were not performing the agency duties
specified herein, and may accept fees and other consideration from any of them
for services in connection with this Agreement and otherwise without having to
account for the same to the Lenders.
10.9 Successor Administrative Agent. The Administrative Agent may resign
------------------------------
at any time by giving ten (10) days' prior written notice to the Borrower and
the Lenders. Upon any such notice
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of resignation, the Required Lenders will, with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld), appoint from among
the Lenders a successor to the Administrative Agent (provided that the
--------
Borrower's consent shall not be required in the event a Default or Event of
Default shall have occurred and be continuing). If no successor to the
Administrative Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within such ten-day period, then the
retiring Administrative Agent may, on behalf of the Lenders and after consulting
with the Lenders and the Borrower, appoint a successor Administrative Agent from
among the Lenders. Upon the acceptance of any appointment as Administrative
Agent by a successor Administrative Agent, such successor Administrative Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Credit Documents. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent. If no successor to the
Administrative Agent has accepted appointment as Administrative Agent by the
thirtieth (30th) day following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective, and the Lenders shall thereafter perform all of the
duties of the Administrative Agent hereunder and under the other Credit
Documents until such time, if any, as the Required Lenders appoint a successor
Administrative Agent as provided for hereinabove.
10.10 Collateral Matters. (a) The Administrative Agent is hereby
------------------
authorized on behalf of the Lenders, without the necessity of any notice to or
further consent from the Lenders, from time to time (but without any obligation)
to take any action with respect to the Collateral and the Security Documents
that may be necessary to perfect and maintain perfected the Liens upon the
Collateral granted pursuant to the Security Documents.
(b) The Lenders hereby irrevocably authorize the Administrative Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of the
Commitments, termination or expiration of all outstanding Letters of Credit and
payment in full of all of the Obligations, (ii) constituting property sold or to
be sold or disposed of as part of or in connection with any disposition
expressly permitted hereunder or under any other Credit Document or to which the
Required Lenders have consented or (iii) otherwise pursuant to and in accordance
with the provisions of any applicable Credit Document. Upon request by the
Administrative Agent at any time, the Lenders will confirm in writing the
Administrative Agent's authority to release Collateral pursuant to this
subsection (b).
10.11 Documentation Agent, etc. Notwithstanding any other provision of
------------------------
this Agreement or any of the other Credit Documents, the Documentation Agent and
any Managing Agent, Co-Agent or similarly designated Lender are named as such
for recognition purposes only, and in their capacities as such shall have no
powers, rights, duties, responsibilities or liabilities with respect to this
Agreement and the other Credit Documents and the transactions contemplated
hereby and thereby.
10.12 Issuing Lender and Swingline Lender. The provisions of this ARTICLE
-----------------------------------
X (other than SECTION 10.9) shall apply to the Issuing Lender and the Swingline
Lender mutatis mutandis to the same extent as such provisions apply to the
------- --------
Administrative Agent.
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ARTICLE XI
MISCELLANEOUS
11.1 Fees and Expenses. The Borrower agrees (i) whether or not the
-----------------
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Administrative
Agent and the Documentation Agent (including, without limitation, the reasonable
fees and expenses of counsel to the Administrative Agent and counsel to the
Documentation Agent, and the allocated costs of internal counsel) in connection
with the preparation, negotiation, execution, delivery and syndication of this
Agreement and the other Credit Documents, and all reasonable out-of-pocket costs
and expenses of the Administrative Agent (including, without limitation, the
reasonable fees and expenses of counsel to the Administrative Agent, and the
allocated costs of internal counsel) in connection with any amendment,
modification or waiver hereof or thereof or consent with respect hereto or
thereto, (ii) to pay upon demand all reasonable out-of-pocket costs and expenses
of the Administrative Agent and each Lender (including, without limitation, the
reasonable fees and expenses of counsel to the Administrative Agent or any
Lender, including the allocated costs of internal counsel) in connection with
(y) after the occurrence and during the continuance of an Event of Default, any
refinancing or restructuring of the credit arrangement provided under this
Agreement, whether in the nature of a "work-out," in any insolvency or
bankruptcy proceeding or otherwise and whether or not consummated, and (z) the
enforcement, attempted enforcement or preservation of any rights or remedies
under this Agreement or any of the other Credit Documents, whether in any
action, suit or proceeding (including any bankruptcy or insolvency proceeding)
or otherwise, and (iii) to pay and hold harmless the Administrative Agent and
each Lender from and against all liability for any intangibles, documentary,
stamp or other similar taxes, fees and excises, if any, including any interest
and penalties, and any finder's or brokerage fees, commissions and expenses
(other than any fees, commissions or expenses of finders or brokers engaged by
the Administrative Agent or any Lender), that may be payable in connection with
the transactions contemplated by this Agreement and the other Credit Documents.
11.2 Indemnification. The Borrower agrees, whether or not the
---------------
transactions contemplated by this Agreement shall be consummated, to indemnify
and hold harmless the Administrative Agent and each Lender and each of their
respective directors, officers, employees, agents and Affiliates (each, an
"Indemnified Person") from and against any and all claims, losses, damages,
obligations, liabilities, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) of any kind or nature
whatsoever, whether direct, indirect or consequential (collectively,
"Indemnified Costs"), that may at any time be imposed on, incurred by or
asserted against any such Indemnified Person as a result of, arising from or in
any way relating to the preparation, execution, performance or enforcement of
this Agreement or any of the other Credit Documents, any of the transactions
contemplated herein or therein or any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of any Loans or
Letters of Credit, or any action, suit or proceeding (including any inquiry or
investigation) by any Person, whether threatened or initiated, related to any of
the foregoing, and in any case whether or not such Indemnified Person is a party
to any such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
-------- -------
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. All of the foregoing Indemnified Costs of any Indemnified Person shall
be paid or reimbursed by the Borrower, as and when incurred and upon demand.
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11.3 Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE OTHER
--------------------------------------
CREDIT DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL BE
DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF); PROVIDED
--------
THAT EACH LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT OR, IF NO
SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR
DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER OF COMMERCE, AS IN EFFECT FROM TIME
TO TIME (THE "UNIFORM CUSTOMS"), AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM
CUSTOMS, THE LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT REGARD TO THE
CONFLICTS OF LAW PROVISIONS THEREOF). EACH OF PARENT AND THE BORROWER HEREBY
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG
COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT
OF THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER
ANY OF THE OTHER CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH THE
ADMINISTRATIVE AGENT, ANY LENDER, PARENT OR THE BORROWER IS A PARTY, INCLUDING
ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH, ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE ADMINISTRATIVE AGENT, ANY LENDER, PARENT OR THE BORROWER. EACH OF PARENT
AND THE BORROWER IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT
OF APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES
ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE
OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. EACH OF PARENT
--------------------
AND THE BORROWER CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR
CERTIFIED MAIL DIRECTED TO IT AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE
SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER
POSTAGE PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT
THE RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF ANY PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY
IN THE COURTS OF ANY OTHER JURISDICTION.
11.4 Waiver of Jury Trial; Arbitration; Preservation and Limitation of
-----------------------------------------------------------------
Remedies. (a) TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, EACH OF
- --------
PARENT, THE BORROWER, THE LENDERS AND THE ADMINISTRATIVE AGENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT AND THE
OTHER CREDIT DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
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(b) Upon demand of the Borrower, on the one hand, or the Administrative
Agent (with the approval of the Required Lenders) on the other, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement or any
other Credit Document ("Disputes") between or among the Borrower, the
Administrative Agent and the Lenders, or any of them, shall be resolved by
binding arbitration as provided herein. Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration hereunder.
Disputes may include, without limitation, tort claims, counterclaims, claims
brought as class actions, claims arising from documents executed in the future,
or claims arising out of or connected with the transactions contemplated by this
Agreement and the other Credit Documents. Arbitration shall be conducted under
and governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA"), as in
effect from time to time, and Title 9 of the U.S. Code, as amended. All
arbitration hearings shall be conducted in the city in which the principal
office of the Administrative Agent is located. The expedited procedures set
forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
-- ---
of less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted. Notwithstanding the foregoing, this arbitration provision does not
apply to Disputes under or related to Interest Rate Protection Agreements.
(c) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any Collateral by
exercising a power of sale granted pursuant to any of the Credit Documents or
under applicable law or by judicial foreclosure and sale, including a proceeding
to confirm the sale; (ii) all rights of self-help, including peaceful occupation
of real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies, including
injunctive relief, sequestration, garnishment, attachment, appointment of a
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Preservation of these
remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute. The parties hereto agree that no
party shall have a remedy of punitive or exemplary damages against any other
party in any Dispute, and each party hereby waives any right or claim to
punitive or exemplary damages that it has now or that may arise in the future in
connection with any Dispute, whether such Dispute is resolved by arbitration or
judicially.
11.5 Notices. All notices and other communications provided for hereunder
-------
shall be in writing (including telegraphic, telex, facsimile transmission or
cable communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered to the party to be notified at the following addresses:
(a) if to Parent or the Borrower, to it at 6420 Wilshire Blvd., Los
Angeles, California 90048, Attention: Neal Vitale and Richard Willis,
Telecopy No. (213) 782-2041;
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(b) if to the Administrative Agent, to First Union National Bank, One
First Union Center, TW-10, 301 South College Street, Charlotte, North
Carolina 28288-0608, Attention: Syndication Agency Services, Telecopy No.
(704) 383-0288; and
(c) if to any Lender, to it at the address for notices set forth on
its signature page hereto (or if to any Lender not a party hereto as of the
date hereof, at the address for notices set forth in its Assignment and
Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given (i) if mailed as provided above by any method
other than overnight delivery service, on the third Business Day after deposit
in the mails, (ii) if mailed by overnight delivery service, telegraphed,
telexed, telecopied or cabled, when delivered for overnight delivery, delivered
to the telegraph company, confirmed by telex answerback, transmitted by
telecopier or delivered to the cable company, respectively, or (iii) if
delivered by hand, upon delivery; provided that notices and communications to
--------
the Administrative Agent shall not be effective until received by the
Administrative Agent.
11.6 Amendments, Waivers, etc. No amendment, modification, waiver or
------------------------
discharge or termination of, or consent to any departure by the Borrower from,
any provision of this Agreement or any other Credit Document, shall be effective
unless in a writing signed by the Required Lenders (or by the Administrative
Agent at the direction or with the consent of the Required Lenders), and then
the same shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment,
-------- -------
modification, waiver, discharge, termination or consent shall:
(a) unless agreed to by each Lender directly affected thereby, (i) reduce
or forgive the principal amount of any Loan, reduce the rate of or forgive any
interest thereon, or reduce or forgive any fees or other Obligations (other than
fees payable to the Administrative Agent for its own account), or (ii) extend
the Maturity Date or any other date fixed for the payment of any principal of or
interest on any Loan (other than additional interest payable under SECTION
2.8(b) at the election of the Required Lenders, as provided therein), any fees
(other than fees payable to the Administrative Agent for its own account) or any
other Obligations, or (unless such Letter of Credit has been fully cash
collateralized or is backed by one or more letters of credit issued in favor of
the Issuing Lender for the account of the Borrower on terms and by an issuer
satisfactory to the Issuing Bank and the Administrative Agent) extend the expiry
date of any Letter of Credit beyond the seventh day prior to the Maturity Date;
(b) unless agreed to by all of the Lenders, (i) increase or extend any
Commitment of any Lender (it being understood that a waiver of any Event of
Default, if agreed to by the requisite Lenders hereunder, shall not constitute
such an increase or extension), (ii) change the percentage of the aggregate
Commitments or of the aggregate unpaid principal amount of the Loans, or the
number or percentage of Lenders, that shall be required for the Lenders or any
of them to take or approve, or direct the Administrative Agent to take or
approve, any action hereunder (including as set forth in the definition of
"Required Lenders"), (iii) except as may be otherwise specifically provided in
this Agreement or in any other Credit Document, release all or substantially all
of the Collateral, release Parent or Holdings from the Parent Guaranty, or
release any material Guarantor from a Subsidiaries Guaranty, or (iv) change any
provision of SECTION 2.15 or this SECTION 11.6; and
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(c) unless agreed to by the Issuing Lender, the Swingline Lender or the
Administrative Agent in addition to the Lenders required as provided hereinabove
to take such action, affect the respective rights or obligations of the Issuing
Lender, the Swingline Lender or the Administrative Agent, as applicable,
hereunder or under any of the other Credit Documents;
and provided further that the Fee Letter and any Interest Rate Protection
-------- -------
Agreement to which any Lender is a party may be amended or modified, and any
rights thereunder waived, in a writing signed by the parties thereto.
11.7 Assignments, Participations. (a) Each Lender may assign to one or
---------------------------
more other Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the outstanding Loans made by it, the Note or
Notes held by it and its participations in Letters of Credit); provided,
--------
however, that (i) any such assignment (other than an assignment to a Lender or
- -------
an Affiliate of a Lender) shall not be made without the prior written consent of
the Administrative Agent, the Issuing Lender and the Borrower (to be evidenced
by their counterexecution of the relevant Assignment and Acceptance), which
consents shall not be unreasonably withheld, provided that the Borrower's
--------
consent shall not be required in the event a Default or Event of Default shall
have occurred and be continuing, (ii) each such assignment by a Lender shall be
made in such manner so that the same portion of its Commitment, Loans, Note or
Notes and other interests is assigned to the relevant Assignee, (iii) except in
the case of an assignment to a Lender or an Affiliate of a Lender, no such
assignment shall be in an aggregate principal amount (determined as of the date
of the Assignment and Acceptance with respect to such assignment) less than (y)
in the case of Revolving Loans, $5,000,000, determined by combining the amount
of the assigning Lender's outstanding Revolving Loans, L/C Exposure and
Unutilized Commitment being assigned pursuant to such assignment (or, if less,
the entire Commitment of the assigning Lender), or (z) in the case of Swingline
Loans, the entire Swingline Commitment and the full amount of the outstanding
Swingline Loans, (iv) unless the assigning Lender ceases to be a Lender, the
aggregate amount of the Loans owing to and unused Commitments of such Lender
after giving effect to such assignment shall not be less than $5,000,000, and
(v) the parties to each such assignment will execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment, and will pay a nonrefundable processing fee of $3,000 to the
Administrative Agent for its own account. Upon such execution, delivery,
acceptance and recording of the Assignment and Acceptance, from and after the
effective date specified therein, which effective date shall be at least five
Business Days after the execution thereof (unless the Administrative Agent shall
otherwise agree), (A) the Assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of the assigning Lender hereunder with respect thereto and (B) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (other than rights under the provisions of this Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, to the extent such rights relate to the time prior to the effective
date of such Assignment and Acceptance) and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of such assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto). The terms
and provisions of each Assignment and Acceptance shall, upon the effectiveness
thereof, be incorporated into and made a part of this Agreement, and the
covenants, agreements and obligations of each Lender set forth therein shall be
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deemed made to and for the benefit of the Administrative Agent and the other
parties hereto as if set forth at length herein.
(b) The Administrative Agent will maintain at its address for notices
referred to herein a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and
each Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an Assignee and counterexecuted by the Borrower (if
required) and the Issuing Lender, together with the Note or Notes subject to
such assignment and the processing fee referred to in subsection (a) above, the
Administrative Agent will (i) accept such Assignment and Acceptance, (ii) on the
effective date thereof, record the information contained therein in the Register
and (iii) give notice thereof to the Borrower and the Lenders. Within five (5)
Business Days after its receipt of such notice, the Borrower, at its own
expense, will execute and deliver to the Administrative Agent, in exchange for
the surrendered Note or Notes, a new Note or Notes to the order of the Assignee
(and, if the assigning Lender has retained any portion of its rights and
obligations hereunder, to the order of the assigning Lender), prepared in
accordance with the applicable provisions of SECTION 2.4 as necessary to
reflect, after giving effect to the assignment, the Commitment of the Assignee
and (to the extent of any retained interests) the assigning Lender, dated the
date of the replaced Note or Notes and otherwise in substantially the form of
EXHIBITS B-1 and B-2, as applicable. The Administrative Agent will return
cancelled Notes to the Borrower.
(d) Each Lender may, without the consent of the Borrower, the
Administrative Agent or any other Lender, sell to one or more other Persons
(each, a "Participant") participations in any portion comprising less than all
of its rights and obligations under this Agreement (including, without
limitation, a portion of its Commitment, the outstanding Loans made by it, the
Note or Notes held by it and its participations in Letters of Credit); provided,
--------
however, that (i) such Lender's obligations under this Agreement shall remain
- -------
unchanged and such Lender shall remain solely responsible for the performance of
such obligations, (ii) no Lender shall sell any participation that, when taken
together with all other participations, if any, sold by such Lender, covers all
of such Lender's rights and obligations under this Agreement, (iii) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and no Lender shall permit any Participant to
have any voting rights or any right to control the vote of such Lender with
respect to any amendment, modification, waiver, consent or other action
hereunder or under any other Credit Document (except as to actions that would
(x) reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other
Obligations, (y) extend the Maturity Date or any other date fixed for the
payment of any principal of or interest on any Loan, any fees or any other
Obligations, or (z) increase or extend any Commitment of any Lender), and (iv)
no Participant shall have any rights under this Agreement or any of the other
Credit Documents, each Participant's rights against the granting Lender in
respect of any participation to be those set forth in the participation
agreement, and all amounts payable by the Borrower hereunder shall be determined
as if
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<PAGE>
such Lender had not granted such participation. Notwithstanding the foregoing,
each Participant shall have the rights of a Lender for purposes of SECTIONS
2.16(a), 2.16(b), 2.17, 2.18 and 9.3, and shall be entitled to the benefits
thereto, to the extent that the Lender granting such participation would be
entitled to such benefits if the participation had not been made, provided that
--------
no Participant shall be entitled to receive any greater amount pursuant to any
of such Sections than the Lender granting such participation would have been
entitled to receive in respect of the amount of the participation made by such
Lender to such Participant had such participation not been made.
(e) Nothing in this Agreement shall be construed to prohibit any Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
-------- -------
release a Lender from any of its obligations hereunder.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
Assignee or Participant or proposed Assignee or Participant any information
relating to Parent and its Subsidiaries furnished to it by or on behalf of any
other party hereto, provided that such Assignee or Participant or proposed
--------
Assignee or Participant agrees in writing to keep such information confidential
to the same extent required of the Lenders under SECTION 11.13.
11.8 No Waiver. The rights and remedies of the Administrative Agent and
---------
the Lenders expressly set forth in this Agreement and the other Credit Documents
are cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege or be
construed to be a waiver of any Default or Event of Default. No course of
dealing between any of Parent, the Borrower and the Administrative Agent or the
Lenders or their agents or employees shall be effective to amend, modify or
discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon Parent or the Borrower in any case shall entitle Parent or the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Administrative Agent or any Lender to
exercise any right or remedy or take any other or further action in any
circumstances without notice or demand.
11.9 Successors and Assigns. This Agreement shall be binding upon, inure
----------------------
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, and all references herein to any party shall be deemed to
include its successors and assigns; provided, however, that (i) neither Parent
-------- -------
nor the Borrower shall sell, assign or transfer any of its rights, interests,
duties or obligations under this Agreement or any other Credit Document without
the prior written consent of all of the Lenders and (ii) any Assignees shall
have such rights and obligations with respect to this Agreement and the other
Credit Documents as are provided for under and pursuant to the provisions of
SECTION 11.7.
11.10 Survival. All representations, warranties and agreements made by or
--------
on behalf of Parent, the Borrower or any of their Subsidiaries in this Agreement
and in the other Credit Documents shall survive the execution and delivery
hereof or thereof, the making and repayment of the Loans and the issuance and
repayment of the Letters of Credit. In addition, notwithstanding
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<PAGE>
anything herein or under applicable law to the contrary, the provisions of this
Agreement and the other Credit Documents relating to indemnification or payment
of fees, costs and expenses, including, without limitation, the provisions of
SECTIONS 2.16(a), 2.16(b), 2.17, 2.18, 10.7, 11.1 and 11.2, shall survive the
payment in full of all Loans and Letters of Credit, the termination of the
Commitments and all Letters of Credit, and any termination of this Agreement or
any of the other Credit Documents.
11.11 Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
11.12 Construction. The headings of the various articles, sections and
------------
subsections of this Agreement have been inserted for convenience only and shall
not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Credit
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
11.13 Confidentiality. Each Lender agrees to keep confidential, pursuant
---------------
to its customary procedures for handling confidential information of a similar
nature and in accordance with safe and sound banking practices, all nonpublic
information provided to it by or on behalf of Parent or any of its Subsidiaries
in connection with this Agreement or any other Credit Document; provided,
--------
however, that any Lender may disclose such information (i) to its directors,
- -------
employees and agents and to its auditors, counsel and other professional
advisors, (ii) at the demand or request of any bank regulatory authority, court
or other Governmental Authority having or asserting jurisdiction over such
Lender, as may be required pursuant to subpoena or other legal process, or
otherwise in order to comply with any applicable Requirement of Law, (iii) in
connection with any proceeding to enforce its rights hereunder or under any
other Credit Document or any other litigation or proceeding related hereto or to
which it is a party, (iv) to the Administrative Agent or any other Lender, (v)
to the extent the same has become publicly available other than as a result of a
breach of this Agreement and (vi) pursuant to and in accordance with the
provisions of SECTION 11.7(f).
11.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto and receipt by the Administrative Agent and the Borrower of
written or telephonic notification of such execution and authorization of
delivery thereof.
11.15 Disclosure of Information. Each of Parent and the Borrower agrees
-------------------------
and consents to the Administrative Agent's disclosure of information relating to
this transaction to Gold Sheets and other similar bank trade publications. Such
-----------
information will consist of deal terms and other information customarily found
in such publications, but will not include any information subject to the
provisions of SECTION 11.13.
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<PAGE>
11.16 Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
----------------
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING THE COMMITMENT LETTER FROM FIRST
UNION TO THE BORROWER DATED AUGUST 18, 1997, BUT SPECIFICALLY EXCLUDING THE FEE
LETTER, AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED OR OTHERWISE
MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THE PETERSEN COMPANIES, INC.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
PETERSEN PUBLISHING COMPANY, L.L.C.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
(signatures continued)
S-1
<PAGE>
FIRST UNION NATIONAL BANK, as Administrative
Agent and as a Lender
By: /s/ Bruce W. Loftin
--------------------------------------------
Commitment:
$96,250,000 Title: Senior Vice President
--------------------------------------------
Instructions for wire transfers to the
Administrative Agent:
First Union National Bank
ABA Routing No. 053000219
Charlotte, North Carolina
General Ledger No. 465906, RC No. 5007
Attention: Syndication Agency Services
Re: Petersen Publishing Company, L.L.C.
Address for notices (as a Lender):
First Union National Bank
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: James W. Wood
Telephone: (704) 374-3242
Telecopy: (704) 374-4092
Lending Office:
First Union National Bank
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: James W. Wood
Telephone: (704) 374-3242
Telecopy: (704) 374-4092
(signatures continued)
S-2
<PAGE>
CIBC INC., as Documentation Agent and as
a Lender
By: /s/ Susan Hanna
--------------------------------------------
Commitment:
$78,750,000 Title: Director, CIBC Wood Gundy Securities Corp.,
--------------------------------------------
as Agent
--------
Address for Notices of Borrowing, Notices of
Conversion/Continuation and Letter of Credit Notices:
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attention: Aleks Dymanus
Telephone: (770) 319-4826
Telecopy: (770) 319-4950
Address for all other notices:
425 Lexington Avenue
New York New York 10017
Attention: Susan Hanna
Telephone: (212) 856-3839
Telecopy: (212) 856-3558
Lending Office:
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attention: Aleks Dymanus
Telephone: (770) 319-4826
Telecopy: (770) 319-4950
S-3
<PAGE>
ANNEX I
-------
APPLICABLE MARGIN PERCENTAGES
<TABLE>
<CAPTION>
Applicable Margin
Applicable Margin Percentage for
Percentage for Revolving Credit
Leverage Ratio LIBOR Loans Commitment Fee
-------------- ----------- --------------
<S> <C> <C>
Greater than or equal to 4.0 to 1.0 1.0% 0.25%
Greater than or equal to 3.5 to 1.0
but less than 4.0 to 1.0 0.75% 0.25%
Greater than or equal to 3.0 to 1.0
but less than 3.5 to 1.0 0.625% 0.2%
Greater than or equal to 2.0 to 1.0
but less than 3.0 to 1.0 0.5% 0.175%
Less than 2.0 to 1.0 0.375% 0.15%
</TABLE>
<PAGE>
EXHIBIT 4.2
BORROWER PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the 6th day of October,
1997 (this "Agreement"), is made by PETERSEN PUBLISHING COMPANY, L.L.C., a
Delaware limited liability company (the "Pledgor"), in favor of FIRST UNION
NATIONAL BANK, as administrative agent for the banks and other financial
institutions (collectively, the "Lenders") party to the Credit Agreement
referred to below (in such capacity, the "Administrative Agent"), for the
benefit of the Secured Parties (as hereinafter defined). Capitalized terms used
herein without definition shall have the meanings given to them in the Credit
Agreement referred to below.
RECITALS
A. The Petersen Companies, Inc., the Pledgor, the Lenders, First Union
National Bank, as Administrative Agent, and CIBC Inc., as Documentation Agent,
are parties to a Credit Agreement, dated as of October 6, 1997 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), providing
for the availability of certain credit facilities to the Pledgor upon the terms
and subject to the conditions set forth therein.
B. It is a condition to the extension of credit to the Pledgor under the
Credit Agreement that the Pledgor shall have agreed, by executing and delivering
this Agreement, to secure the payment in full of its Obligations under the
Credit Agreement and the other Credit Documents. The Secured Parties are
relying on this Agreement in their decision to extend credit to the Pledgor
under the Credit Agreement, and would not enter into the Credit Agreement
without this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Secured Parties to enter into the Credit Agreement
and to induce the Lenders to extend credit to the Pledgor thereunder, the
Pledgor hereby agrees as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to the
-------------
terms defined elsewhere herein, the following terms shall have the meanings set
forth below:
"Accounts" shall mean, collectively, all of the Pledgor's accounts, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all of the
Pledgor's accounts receivable, all rights to payment for goods sold or leased or
to be sold or to be leased (including all rights to returned or repossessed
goods) or for services rendered at any time or for services to be rendered
(including any rights to stoppage in transit, repossession and reclamation and
other rights of an unpaid vendor or secured party), all rights
<PAGE>
under or evidenced by book debts, notes, bills, drafts or acceptances, all
Instruments evidencing or relating to any of the foregoing, and all rights under
security agreements, guarantees, indemnities and other instruments and contracts
securing or otherwise relating to any of the foregoing, in each case whether now
owned or existing or hereafter acquired or arising.
"Collateral" shall have the meaning given to such term in SECTION 2.1.
"Collateral Accounts" shall have the meaning given to such term in SECTION
6.3.
"Contracts" shall mean, collectively, all rights of the Pledgor under all
leases, contracts and agreements to which the Pledgor is now or hereafter a
party, including, without limitation, all rights, privileges and powers, whether
for payment or performance, under distribution agreements, printing service
agreements and promotional and marketing agreements, and all rights, privileges
and powers under Investment Agreements and Licenses as more particularly
described in the definitions of such terms herein, together with any and all
extensions, modifications, amendments and renewals of such contracts and
agreements and all rights of the Pledgor to receive moneys due or to become due
thereunder or pursuant thereto and to amend, modify, terminate or exercise
rights under such contracts and agreements, but excluding rights under (but not
excluding proceeds of) any lease, agreement, license (including without
limitation any License) or contract that by the terms thereof, or under
applicable law, cannot be assigned or a security interest granted therein in the
manner contemplated by this Agreement unless consent from the relevant party or
parties has been obtained and under the terms of which lease, agreement or
contract any such assignment or grant of a security interest therein in the
absence of such consent would, or could, result in the termination thereof, but
only to the extent that (y) such rights are subject to such contractual or legal
restriction and (z) such restriction has not been rendered ineffective pursuant
to the Uniform Commercial Code of any relevant jurisdiction or any other
applicable law (including the Bankruptcy Code) or principles of equity.
"Copyrights" shall mean, collectively, all of the Pledgor's copyrights,
copyright registrations and applications for copyright registration, whether
under the laws of the United States or any other country or jurisdiction,
including all recordings, supplemental registrations and derivative or
collective work registrations, and all renewals and extensions thereof, in each
case whether now owned or existing or hereafter acquired or arising.
"Copyright Collateral" shall mean, collectively, (i) all Copyrights and
(ii) all Copyright Licenses to which the Pledgor is or hereafter becomes a party
and all other General Intangibles embodying, incorporating, evidencing or
otherwise relating or pertaining to any Copyrights, in each case whether now
owned or existing or hereafter acquired or arising.
"Copyright License" shall mean any agreement now or hereafter in effect
granting any right to any third party under any Copyright now or hereafter owned
by the Pledgor or which the Pledgor otherwise has the right to license, or
granting any right to the Pledgor under any property of the type described in
the definition of Copyright herein now or hereafter owned by any third party,
and all rights of the Pledgor under any such agreement.
"Deposit Accounts" shall mean, collectively, all of the Pledgor's deposit
accounts, whether maintained with the Administrative Agent or any other bank or
depository institution, in each case whether now owned or existing or hereafter
acquired or arising and including, without limitation, any
-2-
<PAGE>
Collateral Account, together with all funds held from time to time therein and
all certificates and instruments from time to time representing, evidencing or
deposited into such accounts.
"Equipment" shall mean, collectively, all of the Pledgor's equipment, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all machinery,
equipment, computer equipment and software, parts, supplies, appliances,
fittings, furniture and fixtures of every kind and nature, wherever located and
whether or not affixed to any real property, all Mobile Goods, and all
accessions, accessories, additions, attachments, improvements, modifications and
upgrades to, replacements of and substitutions for the foregoing, in each case
whether now owned or existing or hereafter acquired or arising.
"General Intangibles" shall mean, collectively, all of the Pledgor's
general intangibles, as defined in the Uniform Commercial Code, whether now
owned or existing or hereafter acquired or arising, including, without
limitation, all Contracts, all Copyright Collateral, Patent Collateral and
Trademark Collateral, all inventions, designs, trade secrets, trade processes,
confidential or proprietary technical or business information, know-how,
registrations, licenses, permits and franchises, all rights under or evidenced
by book debts, notes, bills, drafts, acceptances, chooses in action, causes of
action or Instruments, all indebtedness, obligations and other amounts at any
time owing to the Pledgor from any Person and all interest, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness,
obligations or other amounts (including, without limitation, all Intercompany
Obligations), all judgments, tax refund claims, claims against carriers and
shippers, claims under liens and insurance policies, all rights under security
agreements, guarantees, indemnities and other instruments and contracts securing
or otherwise relating to any of the foregoing, all invoices, customer lists,
books and records, ledger and account cards, computer tapes, disks, software,
printouts and other corporate or business records relating to the foregoing, and
all other intangible personal property of every kind and nature, and all
accessions, additions, improvements, modifications and upgrades to, replacements
of and substitutions for the foregoing, in each case whether now owned or
existing or hereafter acquired or arising, but excluding Accounts and excluding
leases, agreements, licenses (including without limitation Licenses) and
contracts to the extent excluded from Contracts under the definition of such
term herein.
"Instruments" shall mean, collectively, all instruments, chattel paper or
documents, each as defined in the Uniform Commercial Code, of the Pledgor,
whether now owned or existing or hereafter acquired or arising, evidencing,
representing, securing, arising from or otherwise relating to any Accounts,
General Intangibles, Intercompany Obligations or other Collateral, including,
without limitation, any promissory notes, drafts, bills of exchange, documents
of title and receipts.
"Intercompany Obligations" shall mean, collectively, all indebtedness,
obligations and other amounts at any time owing to the Pledgor from its
Subsidiaries and Affiliates and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness, obligations or
other amounts.
"Interests" shall mean, collectively, all partnership, joint venture,
limited liability company or other equity interests in any Person not a
corporation (including, without limitation, any such Person that is or hereafter
becomes a Subsidiary of the Pledgor) at any time owned by the Pledgor, and all
rights, powers and privileges relating thereto or arising therefrom, including,
without limitation, the
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<PAGE>
Pledgor's right to vote and to manage and administer the business of any such
Person pursuant to the applicable Investment Agreement, together with all other
rights, interests, claims and other property of the Pledgor in any manner
arising out of or relating to any such interests, whether now existing or
hereafter arising or acquired, of whatever kind or character (including any
tangible or intangible property or interests therein), and further including,
without limitation (but subject to the provisions of SECTION 5.3), all rights of
the Pledgor to receive amounts due and to become due (including, without
limitation, dividends, distributions, interest, income and returns of capital)
under or in respect of any Investment Agreement, to receive payments or other
amounts upon termination of any Investment Agreement, and to receive any other
payments or distributions, whether in cash, securities, property, or a
combination thereof, in respect of any such interests, all of the Pledgor's
rights of access to the books and records of any such Person, and all rights
granted or available under applicable law in connection therewith, all options,
warrants and other rights exercisable for any of the foregoing, and all
securities convertible into any of the foregoing, in each case whether now or
hereafter existing and any time owned by the Pledgor, together with all
certificates, instruments and entries upon the books of financial intermediaries
at any time evidencing any of the foregoing.
"Inventory" shall mean, collectively, all of the Pledgor's inventory, as
defined in the Uniform Commercial Code, whether now owned or existing or
hereafter acquired or arising, including, without limitation, all goods
manufactured, acquired or held for sale or lease, all raw materials, component
materials, work-in-process and finished goods, all supplies, goods and other
items and materials used or consumed in the manufacture, production, packaging,
shipping, selling, leasing or furnishing of such inventory or otherwise in the
operation of the business of the Pledgor, all goods in which the Pledgor now or
at any time hereafter has any interest or right of any kind, and all goods that
have been returned to or repossessed by or on behalf of the Pledgor, in each
case whether or not the same is in transit or in the constructive, actual or
exclusive occupancy or possession of the Pledgor or is held by the Pledgor or by
others for the account of the Pledgor, and in each case whether now owned or
existing or hereafter acquired or arising.
"Investment Agreement" shall mean any partnership agreement, joint venture
agreement, limited liability company operating agreement or other agreement
creating, governing or evidencing any Interests and to which the Pledgor is now
or hereafter becomes a party, as any such agreement may be amended, modified,
supplemented, restated or replaced from time to time.
"Investments" shall mean, collectively, the Stock and the Interests.
"License" shall mean any Copyright License, Patent License or Trademark
License.
"Material Contracts" shall have the meaning given to such term in SECTION
3.8.
"Mobile Goods" shall mean, collectively, all of the Pledgor's motor
vehicles, tractors, trailers, aircraft, rolling stock and other like property,
whether or not the title thereto is governed by a certificate of title or
ownership), in each case whether now owned or existing or hereafter acquired or
arising.
"Patents" shall mean, collectively, all of the Pledgor's letters patent,
whether under the laws of the United States or any other country or
jurisdiction, all recordings and registrations thereof and applications
therefor, including, without limitation, the inventions described therein, all
reissues,
-4-
<PAGE>
continuations, divisions, renewals, extensions, continuations-in-part thereof,
in each case whether now owned or existing or hereafter acquired or arising.
"Patent Collateral" shall mean, collectively, (i) all Patents and (ii) all
Patent Licenses to which the Pledgor is or hereafter becomes a party and all
other General Intangibles embodying, incorporating, evidencing or otherwise
relating or pertaining to any Patents, in each case whether now owned or
existing or hereafter acquired or arising.
"Patent License" shall mean any agreement now or hereafter in effect
granting to any third party any right to make, use or sell any invention on
which a Patent, now or hereafter owned by the Pledgor or which the Pledgor
otherwise has the right to license, is in existence, or granting to the Pledgor
any right to make, use or sell any invention on which property of the type
described in the definition of Patent herein, now or hereafter owned by any
third party, is in existence, and all rights of the Pledgor under any such
agreement.
"Proceeds" shall have the meaning given to such term in SECTION 2.1.
"Secured Parties" shall mean, collectively, the Lenders (including the
Issuing Lender and the Swingline Lender in their capacities as such, and
including any Lender in its capacity as a counterparty to any Interest Rate
Protection Agreement with the Pledgor), the Documentation Agent and the
Administrative Agent.
"Securities Act" shall have the meaning given to such term in SECTION 6.5.
"Stock" shall mean, collectively, all of the issued and outstanding shares,
interests or other equivalents of capital stock of any corporation (including,
without limitation, any corporation that is or hereafter becomes a Subsidiary of
the Pledgor) at any time owned by the Pledgor, whether voting or non-voting and
whether common or preferred, all options, warrants and other rights to acquire,
and all securities convertible into, any of the foregoing, all interest,
dividends, distributions and other amounts, and all additional stock, warrants,
options, securities and other property, from time to time paid or payable or
distributed or distributable in respect of any of the foregoing, in each case
whether now or hereafter existing and any time owned by the Pledgor, together
with all certificates, instruments and entries upon the books of financial
intermediaries at any time evidencing any of the foregoing.
"Trademarks" shall mean, collectively, all of the Pledgor's trademarks,
service marks, trade names, corporate and company names, business names, logos,
trade dress, trade styles, other source or business identifiers, designs and
general intangibles of a similar nature, whether under the laws of the United
States or any other country or jurisdiction, all recordings and registrations
thereof and applications therefor, all renewals and extensions thereof, all
rights corresponding thereto, and all goodwill associated therewith or
symbolized thereby, in each case whether now owned or existing or hereafter
acquired or arising.
"Trademark Collateral" shall mean, collectively, (i) all Trademarks and
(ii) all Trademark Licenses to which the Pledgor is or hereafter becomes a party
and all other General Intangibles embodying, incorporating, evidencing or
otherwise relating or pertaining to any Trademarks, in each case whether now
owned or existing or hereafter acquired or arising.
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"Trademark License" shall mean any agreement now or hereafter in effect
granting any right to any third party under any Trademark now or hereafter owned
by the Pledgor or which the Pledgor otherwise has the right to license, or
granting any right to the Pledgor under any property of the type described in
the definition of Trademark herein now or hereafter owned by any third party,
and all rights of the Pledgor under any such agreement.
1.2 Other Terms. All terms in this Agreement that are not capitalized
-----------
shall have the meanings provided by the applicable Uniform Commercial Code to
the extent the same are used or defined therein.
ARTICLE II
CREATION OF SECURITY INTEREST
2.1 Pledge and Grant of Security Interest. The Pledgor hereby pledges,
-------------------------------------
assigns and delivers to the Administrative Agent, for the ratable benefit of the
Secured Parties, and grants to the Administrative Agent, for the ratable benefit
of the Secured Parties, a Lien upon and security interest in, all of the
Pledgor's right, title and interest in and to the following, in each case
whether now owned or existing or hereafter acquired or arising (collectively,
the "Collateral"):
(i) all Accounts;
(ii) all Contracts;
(iii) all Deposit Accounts;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Inventory;
(vii) all Instruments;
(vi) subject to the provisions of SECTION 5.1(a), all Investments;
(ix) to the extent not covered or not specifically excluded by
clauses (i) through (viii) above, all of the Pledgor's other personal
property, whether now owned or existing or hereafter arising or acquired;
and
(x) any and all proceeds, as defined in the Uniform Commercial
Code, products, rents and profits of or from any and all of the foregoing
and, to the extent not otherwise included, (w) all payments under any
insurance (whether or not the Administrative Agent is the loss payee
thereunder), indemnity, warranty or guaranty with respect to any of the
foregoing Collateral, (x) all payments in connection with any requisition,
condemnation, seizure or forfeiture with respect to any of the foregoing
Collateral, (y) all claims and rights to recover for any past, present or
future infringement or dilution of or injury to any
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Copyright Collateral, Patent Collateral or Trademark Collateral, and (z)
all other amounts from time to time paid or payable under or with respect
to any of the foregoing Collateral (collectively, "Proceeds"). For purposes
of this Agreement, the term "Proceeds" includes whatever is receivable or
received when Collateral or Proceeds are sold, exchanged, collected or
otherwise disposed of, whether voluntarily or involuntarily.
2.2 Security for Obligations. This Agreement and the Collateral secure
------------------------
the full and prompt payment, at any time and from time to time as and when due
(whether at the stated maturity, by acceleration or otherwise), of all
Obligations of the Pledgor under the Credit Agreement and the other Credit
Documents, including, without limitation, all principal of and interest on the
Loans, all Reimbursement Obligations in respect of Letters of Credit, all fees,
expenses, indemnities and other amounts payable by the Pledgor under the Credit
Agreement or any other Credit Document (including interest accruing after the
filing of a petition or commencement of a case by or with respect to the Pledgor
seeking relief under any applicable federal and state laws pertaining to
bankruptcy, reorganization, arrangement, moratorium, readjustment of debts,
dissolution, liquidation or other debtor relief, specifically including, without
limitation, the Bankruptcy Code and any fraudulent transfer and fraudulent
conveyance laws, whether or not the claim for such interest is allowed in such
proceeding), all obligations of the Pledgor to any Lender under any Interest
Rate Protection Agreement, all Obligations that, but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, would become due,
and all fees, costs and expenses payable by the Pledgor under SECTION 8.1, in
each case whether now existing or hereafter created or arising and whether
direct or indirect, absolute or contingent, due or to become due.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants as follows:
3.1 Ownership of Collateral. The Pledgor owns, or has valid rights as a
-----------------------
lessee or licensee with respect to, all Collateral purported to be pledged by it
hereunder, free and clear of any Liens except for the Liens granted to the
Administrative Agent, for the benefit of the Secured Parties, pursuant to this
Agreement, and except for other Permitted Liens. No security agreement,
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any government or public office, and
the Pledgor has not filed or consented to the filing of any such statement or
notice, except (i) Uniform Commercial Code financing statements naming the
Administrative Agent as secured party, (ii) security instruments filed in the
U.S. Copyright Office or the U.S. Patent and Trademark Office naming the
Administrative Agent as secured party and (iii) as may be otherwise permitted by
the Credit Agreement.
3.2 Security Interests; Filings. This Agreement, together with (i) the
---------------------------
filing of duly completed and executed Uniform Commercial Code financing
statements naming the Pledgor as debtor, the Administrative Agent as secured
party, and describing the Collateral, in the jurisdictions set forth on Annex B
-------
hereto, which have been duly executed and delivered by the Pledgor and delivered
to the Administrative Agent for filing, (ii) to the extent required by
applicable law, the filing of duly completed and executed collateral assignments
in the forms set forth as Exhibits B and C with the U.S. Copyright Office or the
---------- -
U.S. Patent and Trademark Office, as appropriate, with
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regard to registered Copyright Collateral, Patent Collateral and Trademark
Collateral, as the case may be, (iii) in the case of uncertificated Investments,
compliance with Section 8-313 (or its successor provision) of the applicable
Uniform Commercial Code, (iv) as to Mobile Goods covered by a certificate of
title or ownership, the notation of the Administrative Agent's security interest
therein on the applicable certificates of title or ownership, and (v) the
delivery to the Administrative Agent of all chattel paper, promissory notes and
other Instruments included in the Collateral, creates, and at all times shall
constitute, a valid and perfected security interest in and Lien upon the
Collateral in favor of the Administrative Agent, for the benefit of the Secured
Parties, to the extent a security interest therein can be perfected by such
filings or possession of such chattel paper, promissory notes or Instruments, as
applicable, superior and prior to the rights of all other Persons therein
(except for Permitted Liens), and no other or additional filings, registrations,
recordings or actions are or shall be necessary or appropriate in order to
maintain the perfection and priority of such Lien and security interest, other
than actions required with respect to Collateral of the types excluded from
Article 9 of the applicable Uniform Commercial Code or from the filing
requirements under such Article 9 by reason of Section 9-104 or 9-302 of the
applicable Uniform Commercial Code and other than continuation statements
required under the applicable Uniform Commercial Code (it being specifically
noted that the Administrative Agent may at its option, but shall not be required
to, require that any bank or other depository institution at which a Deposit
Account is maintained enter into a written agreement or take such other action
as may be necessary to perfect the security interest of the Administrative Agent
in such Deposit Account and the funds therein, and it being specifically
understood that the security interest of the Administrative Agent in such
Deposit Account, absent such action, might not be perfected).
3.3 Locations. Annex C lists, as to the Pledgor, (i) the address of its
--------- -------
chief executive office and principal place of business and each other place of
business, (ii) the address of each location of all original invoices, ledgers,
chattel paper, Instruments and other records or information evidencing or
relating to the Accounts, General Intangibles or other Collateral, and (iii) the
address of each location at which any Equipment or Inventory (other than Mobile
Goods and goods in transit) is kept or maintained, in each instance except for
any new locations established in accordance with the provisions of SECTION 4.2.
Except as may be otherwise noted therein, all locations identified in Annex C
-------
are leased by the Pledgor. The Pledgor does not presently conduct business
under any prior or other limited liability company name or under any trade or
fictitious name, except as indicated on Annex C, and the Pledgor has not entered
-------
into any contract or granted any Lien within the past five years under any name
other than its legal limited liability company name or a trade or fictitious
name indicated on Annex C.
-------
3.4 Authorization; Consent. No authorization, consent or approval of, or
----------------------
declaration or filing with, any Governmental Authority is required for the valid
execution, delivery and performance by the Pledgor of this Agreement, the grant
by it of the Lien and security interest in favor of the Administrative Agent
provided for herein, or the exercise by the Administrative Agent of its rights
and remedies hereunder, except for the filings described in SECTION 3.2, any
notices required under the Federal Assignment of Claims Act and similar state
statutes and any notice filing with state tax or revenue authorities required to
be made by account creditors in order to enforce any Accounts in such state,
and, in the case of Investments, except as may be required in connection with a
disposition of any such Collateral by laws affecting the offering and sale of
securities generally.
3.5 No Restrictions. There are no statutory or regulatory restrictions,
---------------
prohibitions or limitations on the Pledgor's ability to grant to the
Administrative Agent a Lien upon and security
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interest in the Collateral pursuant to this Agreement or on the exercise by the
Administrative Agent of its rights and remedies hereunder (including any
foreclosure upon or collection of the Collateral, assuming compliance with any
notice and other procedural requirements applicable to such action under law),
and there are no contractual restrictions on the Pledgor's ability so to grant
such Lien and security interest.
3.6 Accounts. Each Account is, or at the time it arises will be, a bona
--------
fide, valid and legally enforceable indebtedness of the account debtor according
to its terms, arising out of or in connection with the sale, lease or
performance of goods or services by the Pledgor.
3.7 Investments. As of the date hereof, the Investments required to be
-----------
pledged by the Pledgor hereunder consist of the number and type of shares of
capital stock (in the case of issuers that are corporations) or the percentage
and type of equity interests (in the case of issuers other than corporations) as
described in Annex A. All of the Investments have been duly and validly issued
-------
and are fully paid and nonassessable (or, in the case of Interests, not subject
to any capital call or other additional capital requirement) and not subject to
any preemptive rights, warrants, options or similar rights or restrictions in
favor of third parties or any contractual or other restrictions upon transfer.
3.8 Material Contracts. As to each Investment Agreement, each Contract
------------------
listed on Annex D, each Contract specified in writing by the Administrative
-------
Agent to the Pledgor at any time after the date hereof, and each other Contract
to which the Pledgor is or hereafter becomes a party and that is material to its
business (the foregoing, collectively, "Material Contracts"), (i) the Pledgor is
not in default in any material respect under such Material Contract, and to the
knowledge of the Pledgor, none of the other parties to such Material Contract is
in default in any material respect thereunder (except as shall have been
disclosed in writing to the Administrative Agent), (ii) such Material Contract
is, or at the time of execution will be, the legal, valid and binding obligation
of all parties thereto, enforceable against such parties in accordance with the
respective terms thereof, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and no defense, offset, deduction or counterclaim will exist in any
material respect thereunder in favor of any such party, (iii) the performance by
the Pledgor of its obligations under such Material Contract in accordance with
its terms will not contravene any Requirement of Law or any contractual
restriction binding on or affecting the Pledgor or any of its properties, and
will not result in or require the creation of any Lien upon or with respect to
any of its properties, and (iv) the Pledgor has (or at the time of execution
will have) furnished the Administrative Agent with a correct and complete copy
of each Material Contract to which it is a party as then in effect.
3.9 Intellectual Property. Annexes E, F and G correctly set forth all
--------------------- ------------ -
registered Copyrights, Patents and Trademarks owned by the Pledgor and as of the
date hereof used or proposed to be used in its business. The Pledgor owns or
possesses the valid right to use all such Copyrights, Patents and Trademarks
listed under its name; all registrations therefor have been validly issued under
applicable law and are in full force and effect; no claim has been made in
writing or, to the knowledge of the Pledgor, orally, that any of such
Copyrights, Patents or Trademarks is invalid or unenforceable or violates or
infringes the rights of any other Person, and there is no such violation or
infringement in existence; and to the knowledge of the Pledgor, no other Person
is presently infringing upon the rights of the Pledgor with regard to any of
such Copyrights, Patents or Trademarks.
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3.10 Documents of Title. No bill of lading, warehouse receipt or other
------------------
document or instrument of title is outstanding with respect to any Collateral
other than Mobile Goods and other than Inventory in transit in the ordinary
course of business to a location set forth on Annex C or to a customer of the
-------
Pledgor.
ARTICLE IV
COVENANTS
4.1 Use and Disposition of Collateral. So long as no Event of Default
---------------------------------
shall have occurred and be continuing, the Pledgor may, in any lawful manner not
inconsistent with the provisions of this Agreement and the other Credit
Documents, use, control and manage the Collateral in the operation of its
business, and receive and use the income, revenue and profits arising therefrom
and the Proceeds thereof, in the same manner and with the same effect as if this
Agreement had not been made; provided, however, that the Pledgor will not sell
-------- -------
or otherwise dispose of, grant any option with respect to, or mortgage, pledge,
grant any Lien with respect to or otherwise encumber any of the Collateral or
any interest therein, except for the security interest created in favor of the
Administrative Agent hereunder and except as may be otherwise expressly
permitted in accordance with the terms of this Agreement and the Credit
Agreement (including any applicable provisions therein regarding delivery of
proceeds of sale or disposition to the Administrative Agent).
4.2 Change of Name, Locations, etc. The Pledgor will not (i) change its
-------------------------------
name, identity or corporate structure, (ii) change its chief executive office or
principal place of business from the location thereof listed on Annex C, or
-------
(iii) remove any Collateral (other than Mobile Goods and goods in transit), or
any books, records or other information relating to Collateral, from the
applicable location thereof listed on Annex C, or keep or maintain any
-------
Collateral at a location not listed on Annex C, unless in each case the Pledgor
-------
has (1) given twenty (20) days' prior written notice to the Administrative Agent
of its intention to do so, together with information regarding any such new
location and such other information in connection with such proposed action as
the Administrative Agent may reasonably request, and (2) delivered to the
Administrative Agent ten (10) days prior to any such change or removal such
documents, instruments and financing statements as may be required by the
Administrative Agent, all in form and substance satisfactory to the
Administrative Agent, paid all necessary filing and recording fees and taxes,
and taken all other actions reasonably requested by the Administrative Agent
(including, at the reasonable request of the Administrative Agent, delivery of
opinions of counsel reasonably satisfactory to the Administrative Agent to the
effect that all such actions have been taken), in order to perfect and maintain
the Lien upon and security interest in the Collateral provided for herein in
accordance with the provisions of SECTION 3.2.
4.3 Records; Inspection. (a) The Pledgor will keep and maintain at its
-------------------
own cost and expense satisfactory and complete records of the Accounts and all
other Collateral, including, without limitation, records of all payments
received, all credits granted thereon, all merchandise returned and all other
documentation relating thereto, and will furnish to the Administrative Agent
from time to time such statements, schedules and reports (including, without
limitation, accounts receivable aging schedules) with regard to the Collateral
as the Administrative Agent may reasonably request.
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(b) The Pledgor shall, from time to time at such times as may be reasonably
requested and upon reasonable notice, (i) make available to the Administrative
Agent for inspection and review at the Pledgor's offices copies of all invoices
and other documents and information relating to the Collateral (including,
without limitation, itemized schedules of all collections of Accounts, showing
the name of each account debtor, the amount of each payment and such other
information as the Administrative Agent shall reasonably request), and (ii)
permit the Administrative Agent or its representatives to visit its offices or
the premises upon which any Collateral may be located, inspect its books and
records and make copies and memoranda thereof, inspect the Collateral, discuss
its finances and affairs with its officers, employees and independent
accountants and take any other actions necessary for the protection of the
interests of the Secured Parties in the Collateral. At the request of the
Administrative Agent, the Pledgor will legend, in form and manner satisfactory
to the Administrative Agent, the books, records and materials evidencing or
relating to the Collateral with an appropriate reference to the fact that the
Collateral has been assigned to the Administrative Agent and that the
Administrative Agent has a security interest therein. The Administrative Agent
shall have the right to make test verifications of Accounts in any reasonable
manner and through any reasonable medium, and the Pledgor agrees to furnish all
such reasonable assistance and information as the Administrative Agent may
require in connection therewith.
4.4 Accounts. Unless notified otherwise by the Administrative Agent in
--------
accordance with the terms hereof, the Pledgor shall endeavor to collect its
Accounts and all amounts owing to it thereunder in the ordinary course of its
business consistent with reasonable business practices and shall apply forthwith
upon receipt thereof all such amounts as are so collected to the outstanding
balances thereof, and in connection therewith shall, at the request of the
Administrative Agent, take such action as the Administrative Agent may deem
necessary or advisable (within applicable laws) to enforce such collection. The
Pledgor shall not, except to the extent done in the ordinary course of its
business consistent with reasonable business practices and in accordance with
sound business judgment and provided that no Event of Default shall have
occurred and be continuing, (i) grant any extension of the time for payment of
any Account, (ii) compromise or settle any Account for less than the full amount
thereof, (iii) release, in whole or in part, any Person or property liable for
the payment of any Account, or (iv) allow any credit or discount on any Account.
The Pledgor shall promptly inform the Administrative Agent of any disputes with
any account debtor or obligor and of any claimed offset and counterclaim that
may be asserted with respect thereto involving, in each case, $100,000 or more,
where the Pledgor reasonably believes that the likelihood of payment by such
account debtor is materially impaired, indicating in detail the reason for the
dispute, all claims relating thereto and the amount in controversy.
4.5 Equipment. The Pledgor will, in accordance with sound business
---------
practices, maintain all Equipment used by it in its business (other than
obsolete Equipment) in good repair, working order and condition (normal wear and
tear excepted) and make all necessary repairs and replacements thereof so that
the value and operating efficiency thereof shall at all times be maintained and
preserved. The Pledgor shall not knowingly permit any Equipment to become a
fixture to any real property.
4.6 Inventory. The Pledgor will, in accordance with sound business
---------
practices, maintain all Inventory held by it or on its behalf in good saleable
or useable condition. Unless notified otherwise by the Administrative Agent in
accordance with the terms hereof, the Pledgor may, in any lawful manner not
inconsistent with the provisions of this Agreement and the other Credit
Documents, process, use and, in the ordinary course of business but not
otherwise, sell its Inventory. Without
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limiting the generality of the foregoing, the Pledgor agrees that it shall not
permit any material amount of Inventory to be in the possession of any bailee,
warehouseman, agent or processor at any time unless such bailee, warehouseman,
agent or processor shall have been notified of the security interest created by
this Agreement and the Pledgor shall have exercised its reasonable best efforts
to obtain, at the Pledgor's sole cost and expense, a written agreement to hold
such Inventory subject to the security interest created by this Agreement and
the instructions of the Administrative Agent and to waive and release any Lien
(whether arising by operation of law or otherwise) it may have with respect to
such Inventory, such agreement to be in form and substance reasonably
satisfactory to the Administrative Agent.
4.7 Contracts. The Pledgor will, at its expense, at all times perform and
---------
comply with, in all material respects, all terms and provisions of each Material
Contract to which it is or hereafter becomes a party required to be performed or
complied with by it and enforce in all material respects the terms and
provisions thereof in accordance with its terms, and will not waive, amend or
modify any provision thereof in any manner other than in the ordinary course of
business of the Pledgor in accordance with reasonable business practices and for
a valid economic reason benefitting the Pledgor (provided that in no event may
--------
any waiver, amendment or modification be made that would materially adversely
affect the interests of the Administrative Agent and the Secured Parties). The
Pledgor will deliver copies of each Material Contract and each material
amendment or modification thereof to the Administrative Agent promptly upon the
execution and delivery thereof. With regard to all leases, contracts, licenses
and agreements that are excluded from the definition of the term "Contracts,"
the Pledgor covenants and agrees to exercise all of its material rights and
remedies under such leases, agreements, licenses and contracts in a commercially
reasonable manner consistent with the interests of the Administrative Agent and
the Secured Parties. The Pledgor will not enter into any Material Contract that
by its terms prohibits the assignment of the Pledgor's rights and interest
thereunder in the manner contemplated by this Agreement, other than as may be
entered into in the ordinary course of business of the Pledgor in accordance
with reasonable business practices and for a valid economic reason benefitting
the Pledgor. The Pledgor further covenants and agrees to use its reasonable
best efforts to obtain any required consent to the collateral assignment of any
Material Contract, in form and substance reasonably satisfactory to the
Administrative Agent, upon the request of the Administrative Agent, and will
deliver copies thereof to the Administrative Agent promptly upon execution and
delivery thereof. The Pledgor will notify the Administrative Agent promptly in
writing upon any termination of any Material Contract, in whole or in part, or
any material breach, default or event of default by any party thereunder.
4.8 Taxes. The Pledgor will pay and discharge (i) all taxes, assessments
-----
and governmental charges or levies imposed upon it, upon its income or profits
or upon any of its properties, prior to the date on which penalties would attach
thereto, and (ii) all lawful claims that, if unpaid, might become a Lien upon
any of its properties; provided, however, that the Pledgor shall not be required
-------- -------
to pay any such tax, assessment, charge, levy or claim that is being contested
in good faith and by proper proceedings and as to which the Pledgor has
maintained adequate reserves with respect thereto in accordance with Generally
Accepted Accounting Principles, unless and until any tax lien notice has become
effective with respect thereto or until any Lien resulting therefrom attaches to
its properties and becomes enforceable against its other creditors.
4.9 Insurance. (a) The Pledgor will, and will cause each of its
---------
Subsidiaries to, maintain and pay for, or cause to be maintained and paid for,
insurance covering commercial general liability, property and casualty, business
interruption and such other risks, and in such amounts and with such
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financially sound and reputable insurance companies, as are usually and
customarily carried by companies of similar size engaged in similar businesses
(and in any event, insuring all Inventory and Equipment against such losses and
risks), and will, and will cause each of its Subsidiaries to, deliver
certificates of such insurance to the Administrative Agent with standard loss
payable endorsements naming the Administrative Agent as loss payee (on property
and casualty policies) and additional insured (on liability policies) as its
interests may appear. Each such policy of insurance shall contain a clause
requiring the insurer to give not less than thirty (30) days' prior written
notice to the Administrative Agent before any cancellation of the policies for
any reason whatsoever and shall provide that any loss shall be payable in
accordance with the terms thereof notwithstanding any act of the Pledgor or any
Subsidiary that might result in the forfeiture of such insurance.
(b) The Pledgor will, and will cause each of its Subsidiaries to, direct
all insurers under policies of property and casualty insurance on the Collateral
to pay all proceeds payable thereunder in excess of $1,000,000 for each loss
directly to the Administrative Agent. The Administrative Agent shall hold all
such proceeds for the account of the Pledgor. So long as no Event of Default
has occurred and is continuing, and subject to SECTION 2.6(d) of the Credit
Agreement, the Administrative Agent shall, at the Pledgor's request, disburse
such proceeds as payment for the purpose of replacing or repairing destroyed or
damaged assets, as and when required to be paid and upon presentation of
evidence satisfactory to the Administrative Agent of such required payments and
such other documents as the Administrative Agent may reasonably request. As and
to the extent required by SECTION 2.6(d) of the Credit Agreement, and in any
event upon and during the continuance of an Event of Default, the Administrative
Agent shall be entitled to receive all proceeds of property and casualty
insurance directly from the insurers and shall apply such proceeds as a
prepayment of the Loans in the order and manner provided in the Credit
Agreement. The Pledgor hereby irrevocably makes, constitutes and appoints the
Administrative Agent at all times during the continuance of an Event of Default,
its true and lawful attorney (and agent-in-fact) for the purpose of making,
settling and adjusting claims under such policies of insurance, endorsing its
name on any check, draft, instrument or other item or payment for the proceeds
of such policies of insurance and for making all determinations and decisions
with respect to such policies of insurance.
(c) If the Pledgor fails to, or to cause any of its Subsidiaries to, obtain
and maintain any of the policies of insurance required to be maintained
hereunder or to pay any premium in whole or in part, the Administrative Agent
may, without waiving or releasing any obligation or Default, at the Pledgor'
expense, but without any obligation to do so, procure such policies or pay such
premiums. All sums so disbursed by the Administrative Agent, including
reasonable attorneys' fees, court costs, expenses and other charges related
thereto, shall be payable by the Pledgor to the Administrative Agent on demand
and shall be additional Obligations hereunder, secured by the Collateral.
(d) The Pledgor will, and will cause each of its Subsidiaries to, deliver
to the Administrative Agent, promptly as rendered, true copies of all material
claims and reports made in any reporting forms to insurance companies. Not less
than 30 days prior to the expiration date of the insurance policies required to
be maintained by the Pledgor and its Subsidiaries hereunder, the Pledgor will,
and will cause each of its Subsidiaries to, deliver to the Administrative Agent
one or more certificates of insurance evidencing renewal of the insurance
coverage required hereunder plus such other evidence of payment of premiums
therefor as the Administrative Agent may request. Upon the reasonable request
of the Administrative Agent from time to time, the Pledgor will, and will cause
each of its Subsidiaries to, deliver to the Administrative Agent evidence that
the insurance required to be maintained pursuant to this Section is in effect.
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4.10 Intellectual Property. (a) The Pledgor will, at its own expense,
---------------------
execute, deliver and record, as promptly as possible (but in any event within 10
days) after the date hereof fully completed collateral assignments in the forms
of Exhibits B and C, as applicable, in the U.S. Copyright Office or the U.S.
---------- -
Patent and Trademark Office pursuant to 35 U.S.C. (S)261, 15 U.S.C. (S)1060 or
17 U.S.C. (S)205, as applicable, with regard to any Copyright Collateral, Patent
Collateral or Trademark Collateral, as the case may be, described in Annex E, F
------- -
or G hereto. In the event that after the date hereof the Pledgor shall acquire
-
any registered Copyright, Patent or Trademark, or effect any registration of any
Copyright, Patent or Trademark or file any application for registration thereof,
whether within the United States or any other country or jurisdiction, the
Pledgor shall promptly furnish written notice thereof to the Administrative
Agent together with information sufficient to permit the Administrative Agent,
upon its receipt of such notice, to (and the Pledgor hereby authorizes the
Administrative Agent to) modify this Agreement, as appropriate, by amending
Annexes E, F and G hereto or to add additional exhibits hereto to include any
- --------- - -
Copyright, Patent or Trademark that becomes part of the Collateral under this
Agreement, and the Pledgor shall additionally, at its own expense, execute,
deliver and record, as promptly as possible (but in any event within 10 days)
after the date of such acquisition, registration or application, as applicable,
with regard to United States Patents, Trademarks and Copyrights, fully completed
collateral assignments in the forms of Exhibits B and C, as applicable, in the
---------- -
U.S. Copyright Office or the U.S. Patent and Trademark Office as more fully
described hereinabove (provided that, notwithstanding the foregoing, the Pledgor
--------
may at its election furnish such notices and execute, deliver and record such
documents and instruments on a quarterly basis with respect to all Copyrights,
Patents and Trademarks that become part of the Collateral during such quarter),
together in all instances with any other agreements, instruments and documents
that the Administrative Agent may reasonably request from time to time to
further effect and confirm the collateral assignment and security interest
created by this Agreement in such Copyrights, Patents and Trademarks, and the
Pledgor hereby appoints the Administrative Agent its attorney-in-fact to
execute, deliver and record any and all such agreements, instruments and
documents for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed and such power, being coupled with an interest, shall be
irrevocable for so long as this Agreement shall be in effect with respect to the
Pledgor (except that compliance with this subsection shall not be required with
respect to any Copyright, Patent or Trademark that the Pledgor has elected to
abandon).
(b) The Pledgor (either itself or through its licensees or its
sublicensees) will, for each material Trademark used in the conduct of its
business, use its best efforts to (i) maintain such Trademark in full force and
effect, free from any claim of abandonment or invalidity for non-use, (ii)
maintain the quality of products and services offered under such Trademark,
(iii) display such Trademark with notice of federal registration to the extent
required by applicable law and (iv) not knowingly use or knowingly permit the
use of such Trademark in violation of any third-party rights.
(c) The Pledgor (either itself or through its licensees or sublicensees)
will refrain from committing any act, or omitting any act, whereby any material
Patent used in the conduct of the Pledgor's business may become invalidated or
dedicated to the public, and shall continue to mark any products covered by a
material Patent with the relevant patent number as required by applicable patent
laws.
(d) The Pledgor (either itself or through its licensees or sublicensees)
will, for each work covered by a material Copyright, continue to publish,
reproduce, display, adopt and distribute the work with appropriate copyright
notice as required under applicable copyright laws.
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(e) The Pledgor shall notify the Administrative Agent immediately if it
knows or has reason to know that any material Patent, Trademark or Copyright
used in the conduct of its business may become abandoned or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the U.S. Patent and Trademark Office, U.S. Copyright Office or any court)
regarding the Pledgor's ownership of any material Patent, Trademark or
Copyright, its right to register the same, or to keep and maintain the same.
(f) The Pledgor will take all necessary steps that are consistent with the
practice in any proceeding before the U.S. Patent and Trademark Office, U.S.
Copyright Office or any office or agency in any political subdivision of the
United States or in any other country or any political subdivision thereof, to
maintain and pursue each application relating to any material Patents,
Trademarks or Copyrights (and to obtain the relevant grant or registration) and
to maintain each registration of any material Patents, Trademarks and Copyrights
used in the conduct of the Pledgor's business, including the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
maintenance fees, and, if consistent with sound business judgment, to initiate
opposition, interference and cancellation proceedings against third parties.
(g) In the event that any Collateral consisting of a material Patent,
Trademark or Copyright used in the conduct of the Pledgor's business is believed
infringed, misappropriated or diluted by a third party, the Pledgor shall notify
the Administrative Agent promptly after it learns thereof and shall, if
consistent with sound business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.
(h) Upon the occurrence and during the continuance of any Event of Default,
the Pledgor shall use its reasonable best efforts to obtain all requisite
consents or approvals from the licensor of each material License included within
the Copyright Collateral, Patent Collateral or Trademark Collateral to effect
the assignment of all of the Pledgor's right, title and interest thereunder to
the Administrative Agent or its designee.
4.11 Mobile Goods. Upon the request of the Administrative Agent at any
------------
time (and promptly upon the occurrence of any Event of Default), the Pledgor
will deliver to the Administrative Agent originals of the certificates of title
or ownership for all Mobile Goods owned by it, together (in the case of motor
vehicles) with the manufacturer's statement of origin with the Administrative
Agent listed as lienholder and odometer statements and together in all other
cases with appropriate instruments or certificates of transfer and delivery,
duly completed and executed, and will take such other action as the
Administrative Agent may deem necessary to perfect the security interest created
by this Agreement in all such Mobile Goods.
4.12 Delivery of Collateral. All certificates or instruments representing
----------------------
or evidencing any Accounts, Intercompany Obligations or other Collateral (other
than checks or drafts, except during the continuance of an Event of Default)
shall be delivered to and held by or on behalf of the Administrative Agent
pursuant hereto, shall be in form suitable for transfer by delivery and shall be
delivered together with undated stock powers duly executed in blank, appropriate
endorsements or other necessary instruments of registration, transfer or
assignment, duly executed and in form and
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substance satisfactory to the Administrative Agent, and in each case such other
instruments or documents as the Administrative Agent may reasonably request.
4.13 Protection of Security Interest. The Pledgor agrees that it will, at
-------------------------------
its own cost and expense, take any and all actions necessary to warrant and
defend the right, title and interest of the Secured Parties in and to the
Collateral against the claims and demands of all other Persons.
ARTICLE V
CERTAIN PROVISIONS RELATING TO INVESTMENTS
5.1 Ownership; After-Acquired Investments. (a) If the Pledgor shall, at
-------------------------------------
any time and from time to time after the date hereof, acquire any additional
capital stock or other equity interests in any Person of the types described in
the definition of the terms "Stock" or "Interests," the same shall be
automatically deemed to be Stock or Interests, as the case may be, and to be
pledged to the Administrative Agent pursuant to SECTION 2.1 (but subject, in the
case of Foreign Subsidiaries, to the provisions of SECTION 6.9 of the Credit
Agreement), and the Pledgor will forthwith pledge and deposit the same with the
Administrative Agent and deliver to the Administrative Agent any certificates or
instruments therefor, together with the endorsement of the Pledgor (in the case
of any promissory notes or other instruments), undated stock powers (in the case
of Stock evidenced by certificates) or other necessary instruments of transfer
or assignment, duly executed in blank and in form and substance satisfactory to
the Administrative Agent, together with such other certificates and instruments
as the Administrative Agent may reasonably request (including Uniform Commercial
Code financing statements or appropriate amendments thereto), and will promptly
thereafter deliver to the Administrative Agent a fully completed and duly
executed amendment to this Agreement in the form of Exhibit A (each, a "Pledge
---------
Amendment") in respect thereof. The Pledgor hereby authorizes the
Administrative Agent to attach each Pledge Amendment to this Agreement, and
agrees that all such Collateral listed on any Pledge Amendment shall for all
purposes be deemed Collateral hereunder and shall be subject to the provisions
hereof; provided that the failure of the Pledgor to execute and deliver any
--------
Pledge Amendment with respect to any such additional Collateral as required
hereinabove shall not impair the security interest of the Administrative Agent
in such Collateral or otherwise adversely affect the rights and remedies of the
Administrative Agent hereunder with respect thereto.
(b) If any Investments (whether now owned or hereafter acquired) included
in the Collateral are "uncertificated securities" within the meaning of the
applicable Uniform Commercial Code or are otherwise not evidenced by any
certificate or instrument, the Pledgor will promptly notify the Administrative
Agent thereof and will promptly take and cause to be taken all actions required
under applicable law, including, as applicable, under Article 8 or 9 of the
applicable Uniform Commercial Code, to perfect the security interest of the
Administrative Agent therein.
5.2 Voting Rights. So long as no Event of Default shall have occurred and
-------------
be continuing, the Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Investments (subject to its obligations
under SECTION 5.1), and for that purpose the Administrative Agent will execute
and deliver or cause to be executed and delivered to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably request in writing
to enable the Pledgor to exercise such voting and other consensual rights;
provided, however, that the Pledgor will not cast
- -------- -------
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<PAGE>
any vote, give any consent, waiver or ratification, or take or fail to take any
action, in any manner that would, or could reasonably be expected to, violate or
be inconsistent with any of the terms of this Agreement, the Credit Agreement or
any other Credit Document, or have the effect of impairing in any material
respect the position or interests of the Administrative Agent or any other
Secured Party.
5.3 Dividends and Other Distributions. So long as no Event of Default
---------------------------------
shall have occurred and be continuing (or would occur as a result thereof), and
except as provided otherwise herein, all interest, income, dividends,
distributions and other amounts payable in cash in respect of the Investments
may be paid to and retained by the Pledgor; provided, however, that all such
-------- -------
interest, dividends, distributions and other amounts shall, at all times after
the occurrence and during the continuance of an Event of Default, be paid to the
Administrative Agent and retained by it as part of the Collateral (except to the
extent applied upon receipt to the repayment of the Obligations). The
Administrative Agent shall also be entitled at all times (whether or not during
the continuance of an Event of Default) to receive directly, and to retain as
part of the Collateral, (i) all interest, income, dividends, distributions or
other amounts paid or payable in cash or other property in respect of any
Investments included in the Collateral in connection with the dissolution,
liquidation, recapitalization or reclassification of the capital of the
applicable issuer to the extent representing (in the reasonable judgment of the
Administrative Agent) an extraordinary, liquidating or other distribution in
return of capital, (ii) all additional membership interests, warrants, options
or other securities or property (other than cash) paid or payable or distributed
or distributable in respect of any Investments included in the Collateral in
connection with any noncash dividend, distribution, return of capital, spin-off,
stock split, split-up, reclassification, combination of shares or interests or
similar rearrangement, and (iii) without affecting any restrictions against such
actions contained in the Credit Agreement, all additional membership interests,
warrants, options or other securities or property (including cash) paid or
payable or distributed or distributable in respect of any Investments included
in the Collateral in connection with any consolidation, merger, exchange of
securities, liquidation or other reorganization. All interest, income,
dividends, distributions or other amounts that are received by the Pledgor in
violation of the provisions of this Section shall be received in trust for the
benefit of the Administrative Agent, shall be segregated from other property or
funds of the Pledgor and shall be forthwith delivered to the Administrative
Agent as Collateral in the same form as so received (with any necessary
endorsements).
ARTICLE VI
REMEDIES
6.1 Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Administrative Agent shall be entitled to exercise in respect of
the Collateral all of its rights, powers and remedies provided for herein or
otherwise available to it under any other Credit Document, by law, in equity or
otherwise, including all rights and remedies of a secured party under the
Uniform Commercial Code as in effect in each relevant jurisdiction, and shall be
entitled in particular, but without limitation of the foregoing, to exercise the
following rights, which the Pledgor agrees to be commercially reasonable:
(a) To notify any or all account debtors or obligors under any Accounts,
Contracts or other Collateral of the security interest in favor of the
Administrative Agent created hereby and to direct all such Persons to make
payments of all amounts due thereon or thereunder directly to the
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<PAGE>
Administrative Agent or to an account designated by the Administrative Agent;
and in such instance and from and after such notice, all amounts and Proceeds
(including wire transfers, checks and other instruments) received by the Pledgor
in respect of any Accounts or other Collateral shall be received in trust for
the benefit of the Administrative Agent hereunder, shall be segregated from the
other funds of the Pledgor and shall be forthwith deposited into such account or
paid over or delivered to the Administrative Agent in the same form as so
received (with any necessary endorsements or assignments), to be held as
Collateral and applied to the Obligations as provided herein; and by this
provision, the Pledgor irrevocably authorizes and directs each Person who is or
shall be a party to or liable for the performance of any Contract, upon receipt
of notice from the Administrative Agent to the effect that an Event of Default
has occurred and is continuing, to attorn to or otherwise recognize the
Administrative Agent as owner under such Contract and to pay, observe and
otherwise perform the obligations under such Contract to or for the
Administrative Agent or the Administrative Agent's designee as though the
Administrative Agent or such designee were the Pledgor named therein, and to do
so until otherwise notified by the Administrative Agent;
(b) To take possession of, receive, endorse, assign and deliver, in its own
name or in the name of the Pledgor, all checks, notes, drafts and other
instruments relating to any Collateral, including receiving, opening and
properly disposing of all mail addressed to the Pledgor concerning Accounts and
other Collateral; to verify with account debtors or other contract parties the
validity, amount or any other matter relating to any Accounts or other
Collateral, in its own name or in the name of the Pledgor; to accelerate any
indebtedness or other obligation constituting Collateral that may be accelerated
in accordance with its terms; to take or bring all actions and suits deemed
necessary or appropriate to effect collections and to enforce payment of any
Accounts or other Collateral; to settle, compromise or release in whole or in
part any amounts owing on Accounts or other Collateral; and to extend the time
of payment of any and all Accounts or other amounts owing under any Collateral
and to make allowances and adjustments with respect thereto, all in the same
manner and to the same extent as the Pledgor might have done;
(c) To notify any or all depository institutions with which any Deposit
Accounts are maintained to remit and transfer all monies, securities and other
property on deposit in such Deposit Accounts or deposited or received for
deposit thereafter to the Administrative Agent, for deposit in a Collateral
Account or such other accounts as may be designated by the Administrative Agent,
for application to the Obligations as provided herein;
(d) To transfer to or register in its name or the name of any of its agents
or nominees all or any part of the Collateral, without notice to the Pledgor and
with or without disclosing that such Collateral is subject to the security
interest created hereunder;
(e) To assign any Copyright Collateral, Patent Collateral or Trademark
Collateral, for such term or terms, on such conditions and in such manner as the
Administrative Agent shall determine; and to license and (to the extent
permitted by applicable law) sublicense, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any Copyright Collateral,
Patent Collateral or Trademark Collateral, throughout the world, for such term
or terms, on such conditions and in such manner as the Administrative Agent
shall determine;
(f) To require the Pledgor to, and the Pledgor hereby agrees that it will
at its expense and upon request of the Administrative Agent forthwith, assemble
all or any part of the Collateral as
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<PAGE>
directed by the Administrative Agent and make it available to the Administrative
Agent at a place designated by the Administrative Agent;
(g) To enter and remain upon the premises of any of the Pledgor and take
possession of all or any part of the Collateral, with or without judicial
process; to use the materials, services, books and records of the Pledgor for
the purpose of liquidating or collecting the Collateral, whether by foreclosure,
auction or otherwise; and to remove the same to the premises of the
Administrative Agent or any designated agent for such time as the Administrative
Agent may desire, in order to effectively collect or liquidate the Collateral;
(h) To exercise (i) all voting, consensual and other rights and powers
pertaining to the Investments (whether or not transferred into the name of the
Administrative Agent), at any meeting of shareholders, partners, members or
otherwise, and (ii) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Investments as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Investments upon the merger,
consolidation, reorganization, reclassification, combination of shares or
interests, similar rearrangement or other similar fundamental change in the
structure of the applicable issuer, or upon the exercise by the Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
Investments, and in connection therewith, the right to deposit and deliver any
and all of the Investments with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may determine, and give all consents, waivers and
ratifications in respect of the Investments, all without liability except to
account for any property actually received by it, but the Administrative Agent
shall have no duty to exercise any such right, privilege or option or give any
such consent, waiver or ratification and shall not be responsible for any
failure to do so or delay in so doing; and for the foregoing purposes the
Pledgor will promptly execute and deliver or cause to be executed and delivered
to the Administrative Agent, upon request, all such proxies and other
instruments as the Administrative Agent may reasonably request to enable the
Administrative Agent to exercise such rights and powers; AND IN FURTHERANCE OF
THE FOREGOING AND WITHOUT LIMITATION THEREOF, THE PLEDGOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE ADMINISTRATIVE AGENT AS THE TRUE AND LAWFUL PROXY
AND ATTORNEY-IN-FACT OF THE PLEDGOR, WITH FULL POWER OF SUBSTITUTION IN THE
PREMISES, TO EXERCISE ALL SUCH VOTING, CONSENSUAL AND OTHER RIGHTS AND POWERS TO
WHICH ANY HOLDER OF ANY INVESTMENTS WOULD BE ENTITLED BY VIRTUE OF HOLDING THE
SAME, WHICH PROXY AND POWER OF ATTORNEY, BEING COUPLED WITH AN INTEREST, IS
IRREVOCABLE AND SHALL BE EFFECTIVE FOR SO LONG AS THIS AGREEMENT SHALL BE IN
EFFECT; and
(i) To sell, resell, assign and deliver, in its sole discretion, all or any
of the Collateral, in one or more parcels, on any securities exchange on which
any Investments may be listed, at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, upon credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as the Administrative Agent may deem satisfactory. If any of the
Collateral is sold by the Administrative Agent upon credit or for future
delivery, the Administrative Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Administrative Agent may resell such Collateral. In no event shall the
Pledgor be credited with any part of the Proceeds of sale of any Collateral
until and to the extent cash payment in respect thereof has actually been
received by the Administrative Agent. Each purchaser at any such sale shall
hold
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<PAGE>
the property sold absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Pledgor, and the Pledgor
hereby expressly waives all rights of redemption, stay or appraisal, and all
rights to require the Administrative Agent to marshal any assets in favor of the
Pledgor or any other party or against or in payment of any or all of the
Obligations, that it has or may have under any rule of law or statute now
existing or hereafter adopted. No demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law, as referred to below),
all of which are hereby expressly waived by the Pledgor, shall be required in
connection with any sale or other disposition of any part of the Collateral. If
any notice of a proposed sale or other disposition of any part of the Collateral
shall be required under applicable law, the Administrative Agent shall give the
Pledgor at least ten (10) days' prior notice of the time and place of any public
sale and of the time after which any private sale or other disposition is to be
made, which notice the Pledgor agrees is commercially reasonable. The
Administrative Agent shall not be obligated to make any sale of Collateral if it
shall determine not to do so, regardless of the fact that notice of sale may
have been given. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. Upon each public sale and, to the extent permitted by applicable law,
upon each private sale, the Administrative Agent may purchase all or any of the
Collateral being sold, free from any equity, right of redemption or other claim
or demand, and may make payment therefor by endorsement and application (without
recourse) of the Obligations in lieu of cash as a credit on account of the
purchase price for such Collateral.
6.2 Application of Proceeds. (a) All Proceeds collected by the
-----------------------
Administrative Agent upon any sale, other disposition of or realization upon any
of the Collateral, together with all other moneys received by the Administrative
Agent hereunder, shall be applied as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, all amounts advanced by the Administrative Agent
for the account of the Pledgor, and all other amounts payable to the
Administrative Agent under SECTION 8.1;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Obligations owing to
the Secured Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Pledgor or any other Person lawfully entitled to receive
such surplus.
(b) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Secured Party that has
entered into an Interest Rate Protection Agreement with the Pledgor for a
determination (which such Secured Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding
Obligations owed to such Secured Party under any such Interest Rate Protection
Agreement. Unless it has actual knowledge (including by way of written notice
from any such Secured Party) to the contrary, the Administrative Agent, in
acting hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Obligations in respect thereof are in existence between any
Secured Party and the Pledgor.
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(c) The Pledgor shall remain liable to the extent of any deficiency between
the amount of all Proceeds realized upon sale or other disposition of the
Collateral pursuant to this Agreement and the aggregate amount of the sums
referred to in clauses (i) and (ii) of subsection (a) above. Upon any sale of
any Collateral hereunder by the Administrative Agent (whether by virtue of the
power of sale herein granted, pursuant to judicial proceeding, or otherwise),
the receipt of the Administrative Agent or the officer making the sale shall be
a sufficient discharge to the purchaser or purchasers of the Collateral so sold,
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Administrative
Agent or such officer or be answerable in any way for the misapplication
thereof.
6.3 Collateral Accounts. Upon the occurrence and during the continuance
-------------------
of an Event of Default, the Administrative Agent shall have the right to cause
to be established and maintained, at its principal office or such other location
or locations as it may establish from time to time in its discretion, one or
more cash collateral bank accounts (collectively, "Collateral Accounts") for the
collection of Proceeds of the Collateral. Such Proceeds, when deposited, shall
continue to constitute Collateral for the Obligations and shall not constitute
payment thereof until applied as herein provided. The Administrative Agent shall
have sole dominion and control over all funds deposited in any Collateral
Account, and such funds may be withdrawn therefrom only by the Administrative
Agent. Upon the occurrence and during the continuance of an Event of Default,
the Administrative Agent shall have the right to (and, if directed by the
Required Lenders pursuant to the Credit Agreement, shall) apply amounts held in
the Collateral Accounts in payment of the Obligations in the manner provided for
in SECTION 6.2.
6.4 Grant of License. For the purpose of enabling the Administrative
----------------
Agent to exercise rights and remedies under SECTION 6.1 at such time as the
Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, the Pledgor hereby grants to the Administrative Agent an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to the Pledgor) to use, license or sublicense any Patent
Collateral, Trademark Collateral or Copyright Collateral now owned or licensed
or hereafter acquired or licensed by the Pledgor, and wherever the same may be
located, and including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of such
license or sublicense by the Administrative Agent shall be exercised, at the
option of the Administrative Agent, only upon the occurrence and during the
continuation of an Event of Default; provided that any license, sublicense or
--------
other transaction entered into by the Administrative Agent in accordance
herewith shall be binding upon the Pledgor notwithstanding any subsequent cure
of an Event of Default.
6.5 Registration; Private Sales. (a) If, at any time after the
---------------------------
occurrence and during the continuance of an Event of Default, the Pledgor shall
have received from the Administrative Agent a written request or requests that
the Pledgor cause any registration, qualification or compliance under any
federal or state securities law or laws to be effected with respect to all or
any part of the Investments, the Pledgor will, as soon as practicable and at its
expense, use its best efforts to cause such registration to be effected and be
kept effective and will use its best efforts to cause such qualification and
compliance to be effected and be kept effective as may be so requested and as
would permit or facilitate the sale and distribution of such Investments,
including, without limitation, registration under the Securities Act of 1933, as
amended (the "Securities Act"), appropriate qualifications under applicable blue
sky or other state securities laws and appropriate compliance with any other
applicable requirements of Governmental Authorities; provided, that the
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Administrative
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Agent shall furnish to the Pledgor such information regarding the Administrative
Agent as the Pledgor may reasonably request in writing and as shall be required
in connection with any such registration, qualification or compliance. The
Pledgor will cause the Administrative Agent to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Administrative
Agent such number of prospectuses, offering circulars or other documents
incident thereto as the Administrative Agent from time to time may reasonably
request, and will indemnify the Administrative Agent and all others
participating in the distribution of such Pledged Securities against all claims,
losses, damages and liabilities caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to the Pledgor by the Administrative Agent or
any other Secured Party expressly for use therein.
(b) The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws as in
effect from time to time, the Administrative Agent may be compelled, with
respect to any sale of all or any part of the Investments conducted without
registration or qualification under the Securities Act and such state securities
laws, to limit purchasers to any one or more Persons who will represent and
agree, among other things, to acquire such Investments for their own account,
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges that any such private sales may be made in such manner and
under such circumstances as the Administrative Agent may deem necessary or
advisable in its sole and absolute discretion, including at prices and on terms
less favorable than those obtainable through a public sale without such
restrictions (including, without limitation, a public offering made pursuant to
a registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner and agrees that the Administrative
Agent shall have no obligation to conduct any public sales and no obligation to
delay the sale of any Investments for the period of time necessary to permit its
registration for public sale under the Securities Act and applicable state
securities laws, and shall not have any responsibility or liability as a result
of its election so not to conduct any such public sales or delay the sale of any
Investments, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after such registration. The
Pledgor hereby waives any claims against the Administrative Agent or any Secured
Party arising by reason of the fact that the price at which any Investments may
have been sold at any private sale was less than the price that might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Administrative Agent accepts the first offer received
and does not offer such Investments to more than one offeree.
(c) The Pledgor agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgor.
6.6 The Pledgor Remains Liable. Notwithstanding anything herein to the
--------------------------
contrary, (i) the Pledgor shall remain liable under all Contracts included
within the Collateral (including, without
-22-
<PAGE>
limitation, all Investment Agreements) to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Administrative Agent of any of its rights or remedies
hereunder shall not release the Pledgor from any of its obligations under any of
such Contracts, and (iii) except as specifically provided for hereinbelow, the
Administrative Agent shall not have any obligation or liability by reason of
this Agreement under any of such Contracts, nor shall the Administrative Agent
be obligated to perform any of the obligations or duties of the Pledgor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder. This Agreement shall not in any way be deemed to obligate
the Administrative Agent, any other Secured Party or any purchaser at a
foreclosure sale under this Agreement to assume any of the Pledgor's
obligations, duties or liabilities under any Investment Agreement, including,
without limitation, the Pledgor's obligations, if any, to manage the business
and affairs of the applicable partnership, joint venture, limited liability
company or other issuer (collectively, the "Partner Obligations"), unless the
Administrative Agent or such other Secured Party or purchaser otherwise agrees
in writing to assume any or all of such Partner Obligations. In the event of
foreclosure by the Administrative Agent hereunder, then except as provided in
the preceding sentence, the Pledgor shall remain bound and obligated to perform
its Partner Obligations and neither the Administrative Agent nor any other
Secured Party shall be deemed to have assumed any Partner Obligations. In the
event the Administrative Agent, any other Secured Party or any purchaser at a
foreclosure sale elects to become a substitute member in place of the Pledgor,
the party making such election shall adopt in writing such Investment Agreement
and agree to be bound by the terms and provisions thereof; and subject to the
execution of such written agreement, the Pledgor hereby irrevocably consents in
advance to the admission of the Administrative Agent, any other Secured Party or
any such purchaser as a substitute member to the extent of the Investments
acquired pursuant to such sale, and agrees to execute any documents or
instruments and take any other action as may be necessary or as may be
reasonably requested in connection therewith. The powers, rights and remedies
conferred on the Administrative Agent hereunder are solely to protect its
interest and privilege in such Contracts, as Collateral, and shall not impose
any duty upon it to exercise any such powers, rights or remedies.
ARTICLE VII
THE ADMINISTRATIVE AGENT
7.1 The Administrative Agent; Standard of Care. The Administrative Agent
------------------------------------------
will hold all items of the Collateral at any time received under this Agreement
in accordance with the provisions hereof. The obligations of the Administrative
Agent as holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement and the other Credit
Documents, are only those expressly set forth in this Agreement and the other
Credit Documents. The Administrative Agent shall act hereunder at the
direction, or with the consent, of the Required Lenders on the terms and
conditions set forth in the Credit Agreement. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest, on behalf of
the Secured Parties, in the Collateral, and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Administrative
Agent, in its individual capacity, accords its own property of a similar nature,
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to the Collateral. Neither the Administrative Agent nor any
other Secured Party shall be liable to the Pledgor (i) for any loss or damage
sustained by the Pledgor, or
-23-
<PAGE>
(ii) for any loss, damage, depreciation or other diminution in the value of any
of the Collateral that may occur as a result of or in connection with or that is
in any way related to any exercise by the Administrative Agent or any other
Secured Party of any right or remedy under this Agreement, any failure to
demand, collect or realize upon any of the Collateral or any delay in doing so,
or any other act or failure to act on the part of the Administrative Agent or
any other Secured Party, except to the extent that the same is caused by its own
gross negligence or willful misconduct.
7.2 Further Assurances; Attorney-in-Fact. (a) The Pledgor agrees that it
------------------------------------
will join with the Administrative Agent to execute and, at its own expense, file
and refile under any applicable Uniform Commercial Code such financing
statements, continuation statements and other documents and instruments in such
offices as the Administrative Agent may reasonably deem necessary or
appropriate, and wherever required or permitted by law, in order to perfect and
preserve the Administrative Agent's security interest in the Collateral, and
hereby authorizes the Administrative Agent to file financing statements and
amendments thereto relating to all or any part of the Collateral without the
signature of the Pledgor where permitted by law, and agrees to do such further
acts and things (including, without limitation, making any notice filings with
state tax or revenue authorities required to be made by account creditors in
order to enforce any Accounts in such state) and to execute and deliver to the
Administrative Agent such additional conveyances, assignments, agreements and
instruments as the Administrative Agent may reasonably require or deem advisable
to perfect, establish, confirm and maintain the security interest and Lien
provided for herein, to carry out the purposes of this Agreement or to further
assure and confirm unto the Administrative Agent its rights, powers and remedies
hereunder.
(b) The Pledgor hereby irrevocably appoints the Administrative Agent its
lawful attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor, the Administrative Agent or otherwise,
and with full power of substitution in the premises (which power of attorney,
being coupled with an interest, is irrevocable for so long as this Agreement
shall be in effect), from time to time in the Administrative Agent's discretion
after the occurrence and during the continuance of an Event of Default to take
any action and to execute any instruments that the Administrative Agent may deem
necessary or advisable to accomplish the purpose of this Agreement, including,
without limitation:
(i) to sign the name of the Pledgor on any financing statement,
continuation statement, notice or other similar document that, in the
Administrative Agent's opinion, should be made or filed in order to perfect
or continue perfected the security interest granted under this Agreement
(including, without limitation, any title or ownership applications for
filing with applicable state agencies to enable any motor vehicles now or
hereafter owned by the Company to be retitled and the Administrative Agent
listed as lienholder thereon);
(ii) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(iii) to receive, endorse and collect any checks, drafts,
instruments, chattel paper and other orders for the payment of money made
payable to the Pledgor representing any interest, income, dividend,
distribution or other amount payable in respect of any of the Collateral
and to give full discharge for the same;
-24-
<PAGE>
(iv) to obtain, maintain and adjust any property or casualty
insurance required to be maintained by the Pledgor under SECTION 4.9 and
direct the payment of proceeds thereof to the Administrative Agent;
(v) to pay or discharge taxes, Liens or other encumbrances levied
or placed on or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
the Administrative Agent in its sole discretion, any such payments made by
the Administrative Agent to become Obligations of the Pledgor to the
Administrative Agent, due and payable immediately and without demand;
(vi) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or advisable
for the collection of any of the Collateral or otherwise to enforce the
rights of the Administrative Agent with respect to any of the Collateral;
and
(vii) to use, sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with any and all of the Collateral as
fully and completely as though the Administrative Agent were the absolute
owner of the Collateral for all purposes, and to do from time to time, at
the Administrative Agent's option and the Pledgors' expense, all other acts
and things deemed necessary by the Administrative Agent to protect,
preserve or realize upon the Collateral and to more completely carry out
the purposes of this Agreement.
(c) If the Pledgor fails to perform any covenant or agreement contained in
this Agreement after written request to do so by the Administrative Agent
(provided that no such request shall be necessary at any time after the
--------
occurrence and during the continuance of an Event of Default), the
Administrative Agent may itself perform, or cause the performance of, such
covenant or agreement and may take any other action that it deems necessary and
appropriate for the maintenance and preservation of the Collateral or its
security interest therein, and the reasonable expenses so incurred in connection
therewith shall be payable by the Pledgor under SECTION 8.1.
ARTICLE VII
MISCELLANEOUS
8.1 Indemnity and Expenses. The Pledgor agrees:
----------------------
(a) To indemnify and hold harmless the Administrative Agent, each other
Secured Party and each of their respective directors, officers, employees,
agents and affiliates from and against any and all claims, damages, demands,
losses, obligations, judgments and liabilities (including, without limitation,
reasonable attorneys' fees and expenses) in any way arising out of or in
connection with this Agreement and the transactions contemplated hereby, except
to the extent the same shall arise as a result of the gross negligence or
willful misconduct of the party seeking to be indemnified; and
(b) To pay and reimburse the Administrative Agent upon demand for all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) that the Administrative Agent may incur in
connection with (i) the custody, use or preservation of, or the sale of,
collection from or other realization upon, any of the Collateral, including the
reasonable expenses
-25-
<PAGE>
of re-taking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, (ii) the exercise or enforcement of
any rights or remedies granted hereunder (including, without limitation, under
ARTICLE VI), under any of the other Credit Documents or otherwise available to
it (whether at law, in equity or otherwise), or (iii) the failure by the Pledgor
to perform or observe any of the provisions hereof. The provisions of this
SECTION 8.1 shall survive the execution and delivery of this Agreement, the
repayment of any of the Obligations, the termination of the Commitments under
the Credit Agreement and the termination of this Agreement or any other Credit
Document.
8.2 No Waiver. The rights and remedies of the Secured Parties expressly
---------
set forth in this Agreement and the other Credit Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No failure or delay on the part of any Secured
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege or be construed to be a waiver of any Default or
Event of Default. No course of dealing between the Pledgor and the Secured
Parties or their agents or employees shall be effective to amend, modify or
discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon the Pledgor in any case shall entitle the Pledgor to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
right of any Secured Party to exercise any right or remedy or take any other or
further action in any circumstances without notice or demand.
8.3 Enforcement. By its acceptance of the benefits of this Agreement,
-----------
each Lender agrees that this Agreement may be enforced only by the
Administrative Agent, acting upon the instructions or with the consent of the
Required Lenders as provided for in the Credit Agreement, and that no Lender
shall have any right individually to enforce or seek to enforce this Agreement
or to realize upon any Collateral or other security given to secure the payment
and performance of the Obligations.
8.4 Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by the Pledgor from,
any provision of this Agreement, shall be effective unless in a writing executed
and delivered in accordance with SECTION 11.6 of the Credit Agreement, and then
the same shall be effective only in the specific instance and for the specific
purpose for which given.
8.5 Continuing Security Interest; Term; Successors and Assigns;
-----------------------------------------------------------
Assignment; Termination and Release; Survival. This Agreement shall create a
- ---------------------------------------------
continuing security interest in the Collateral and shall secure the payment and
performance of all of the Obligations as the same may arise and be outstanding
at any time and from time to time from and after the date hereof, and shall (i)
remain in full force and effect until the occurrence of (x) the payment in full
of the Obligations (other than indemnity obligations not then due and payable
and that survive termination of the Credit Documents), (y) the termination or
expiration of all Letters of Credit under the Credit Agreement and (z) the
termination of the Commitments under the Credit Agreement (the events in clauses
(x), (y) and (z) above, collectively, the "Termination Requirements"), (ii) be
binding upon and enforceable against the Pledgor and its successors and assigns
(provided, however, that the Pledgor may not sell, assign or transfer any of its
-------- -------
rights, interests, duties or obligations hereunder without the prior written
consent of the Lenders) and (iii) inure to the benefit of and be enforceable by
each Secured Party and its successors and assigns. Upon any sale or other
disposition by the Pledgor of any Collateral in a
-26-
<PAGE>
transaction expressly permitted hereunder or under or pursuant to the Credit
Agreement or any other applicable Credit Document, the Lien and security
interest created by this Agreement in and upon such Collateral shall be
automatically released, and upon the satisfaction of all of the Termination
Requirements, this Agreement and the Lien and security interest created hereby
shall terminate; and in connection with any such release or termination, the
Administrative Agent, at the request and expense of the Pledgor, will execute
and deliver to the Pledgor such documents and instruments evidencing such
release or termination as the Pledgor may reasonably request and will assign,
transfer and deliver to the Pledgor, without recourse and without representation
or warranty, such of the Collateral as may then be in the possession of the
Administrative Agent (or, in the case of any partial release of Collateral, such
of the Collateral so being released as may be in its possession). All
representations, warranties, covenants and agreements herein shall survive the
execution and delivery of this Agreement and any Pledge Amendment.
8.6 Notices. All notices and other communications provided for hereunder
-------
shall be given to the parties in the manner and subject to the other notice
provisions set forth in the Credit Agreement.
8.7 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
8.8 Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
8.9 Construction. The headings of the various sections and subsections of
------------
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular.
8.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
Accepted and agreed to:
FIRST UNION NATIONAL BANK, as
Administrative Agent
By: /s/ Bruce W. Loftin
-----------------------------
Title: Senior Vice President
-----------------------------
-28-
<PAGE>
Annex A to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
Pledged Investments
- -------------------
<TABLE>
<CAPTION>
Percentage of
Outstanding
Type of Certificate No. of shares Interests
Name of Issuer Interests Number (if applicable) in Issuer
-------------- ---------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
None.
</TABLE>
<PAGE>
Annex B to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
FILING LOCATIONS
Secretary of State of California
Secretary of State of Colorado
Secretary of State of Connecticut
Secretary of State of Florida
Fulton County, Georgia
Secretary of State of Illinois
Secretary of State of Michigan
Secretary of State of New Jersey
Secretary of State of New York
New York County, New York
Secretary of State of North Carolina
Secretary of State of Ohio
<PAGE>
Annex C to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
LOCATIONS OF CHIEF EXECUTIVE OFFICE, PLACES OF BUSINESS,
RECORDS RELATING TO COLLATERAL, AND EQUIPMENT AND INVENTORY
1. Chief executive office/principal place
of business:
6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
a. 6420 Wilshire Blvd.
Los Angeles, California
b. 110 5th Avenue
New York, New York 10022
c. 333 West Fort Street
Detroit, Michigan
d. 5350 Manhattan Circle Suite 100
Boulder, Colorado 80303
e. Corporate Center Five
Five Concourse Pkwy.
Fulton County, Georgia
f. 815 N. LaSalle Street
Chicago, Illinois
g. c/o Willis Stein & Partners, L.P.
227 West Monroe
Chicago, Illinois 60606
h. 217 Braeside Drive
Hamden, Connecticut 06514
i. 6 West Laurelwood Drive
Lawrenceville, New Jersey 08648
j. 2 Sunset Court
Montville, New Jersey 07045
<PAGE>
3. Equipment or Inventory:
a. 6420 Wilshire Blvd.
Los Angeles, California
b. 110 5th Avenue
New York, New York 10022
c. 333 West Fort Street
Detroit, Michigan
d. 5350 Manhattan Circle Suite 100
Boulder, Colorado 80303
e. Corporate Center Five
Five Concourse Pkwy.
Fulton County, Georgia
f. 815 N. LaSalle Street
Chicago, Illinois
g. inventory located at:
Johnson & Hardin Company
760 Fujitech Road
Lebanon, Ohio 45036
h. inventory located at:
3-Z Printing
U.S. Route 40 West
Teutopolis, Illinois 62467
4. Other places of business:
None.
<PAGE>
Annex D to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
CERTAIN CONTRACTS
1. License Agreement, dated as of August 15, 1996, by and between Robert
E. Petersen and Petersen Publishing Company, as licensor, and Brightview
Communications Group, Inc., as licensee.
2. Agreements, dated May 3, 1996, with World Color Press, Inc., regarding
paper purchasing program.
3. Agreement, dated December 19, 1995, with World Color Press, Inc., as
modified, regarding printing services.
4. Agreement, dated January 12, 1996, with Johnson & Hardin Company,
regarding printing services.
5. Circulation Fulfillment Agreement, dated September 1, 1995, with
Neodata Services, Inc.
6. Agreement, dated December 1981, with Compuname, Inc.
7. Distribution Agreement, dated January 10, 1994, with Warner Publisher
Services, Inc.
8. Distribution Agreement, dated October 18, 1995, with Worldwide
Distribution Services.
9. Publisher Distribution Agreement, dated May 21, 1996, with Retail
Vision.
<PAGE>
Annex E to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
COPYRIGHTS AND COPYRIGHT APPLICATIONS
(see attachment hereto)
<PAGE>
Annex F to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Application or Issue or
Registration No. Country Inventor Filing Date
- ---------------- ------- -------- -----------
<S> <C> <C> <C>
None.
</TABLE>
<PAGE>
Annex G to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
TRADEMARKS AND TRADEMARK APPLICATIONS
(see attachment hereto)
<PAGE>
Exhibit A to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
PLEDGE AMENDMENT
THIS PLEDGE AMENDMENT, dated as of _______________, 19___, is delivered by
PETERSEN PUBLISHING COMPANY, L.L.C. (the "Pledgor") pursuant to SECTION 5.1 of
the Pledge Agreement referred to hereinbelow. The Pledgor hereby agrees that
this Pledge Amendment may be attached to the Pledge and Security Agreement,
dated as of __________, 1997, made by the Pledgor in favor of First Union
National Bank, as Administrative Agent (as amended, modified, supplemented or
restated from time to time, the "Pledge Agreement," capitalized terms defined
therein being used herein as therein defined), and that the Investments listed
on Annex A to this Pledge Amendment shall be deemed to be part of the
-------
Investments within the meaning of the Pledge Agreement and shall become part of
the Collateral and shall secure all of the Obligations as provided in the Pledge
Agreement. This Pledge Amendment and its attachments are hereby incorporated
into the Pledge Agreement and made a part thereof.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
<PAGE>
Annex A to Exhibit A (Pledge
Amendment)
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
Pledged Investments
- -------------------
<TABLE>
<CAPTION>
Percentage of
Outstanding
Type of Certificate No. of shares Interests
Name of Issuer Interests Number (if applicable) in Issuer
-------------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit B to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
COLLATERAL ASSIGNMENT AND GRANT OF SECURITY INTEREST
IN COPYRIGHTS
WHEREAS, PETERSEN PUBLISHING COMPANY, L.L.C. (the "Grantor") is the owner
of the copyrights listed on Schedule A attached hereto, which copyrights are
----------
registered or have pending registrations in the United States Copyright Office
as set forth on Schedule A attached hereto (all such copyrights, registrations
----------
and applications, collectively, the "Copyrights"); and
WHEREAS, the Grantor has entered into a Pledge and Security Agreement (as
amended, modified, restated or supplemented from time to time, the "Security
Agreement"), dated as of _____________, 1997, in which the Grantor has agreed
with First Union National Bank, as Administrative Agent (the "Administrative
Agent"), with offices at One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288-0735, to execute this Assignment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, as security for the payment and
performance of the Obligations (as defined in the Security Agreement), the
Grantor does hereby collaterally assign and grant to the Administrative Agent a
security interest in all of its right, title and interest in and to the
Copyrights, and the use thereof, together with all proceeds and products thereof
and the goodwill of the businesses symbolized by the Copyrights. This
Assignment has been given in conjunction with the collateral assignment and
security interest granted to the Administrative Agent under the Security
Agreement, and the provisions of this Assignment are without prejudice to and in
addition to the provisions of the Security Agreement, which are incorporated
herein by this reference.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ______________________________
Title: _____________________________
<PAGE>
Schedule A
----------
COPYRIGHTS AND COPYRIGHT APPLICATIONS
<TABLE>
<CAPTION>
Application or Issue or
Grantor Registration No. Country Filing Date
------- ---------------- ------- -----------
<S> <C> <C> <C>
</TABLE>
<PAGE>
Exhibit C to Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
COLLATERAL ASSIGNMENT AND GRANT OF SECURITY INTEREST
IN PATENTS AND TRADEMARKS
WHEREAS, PETERSEN PUBLISHING COMPANY, L.L.C. (the "Grantor") is the owner
of the trademarks and service marks listed on Schedule A attached hereto, which
----------
marks are registered or have pending registrations in the United States Patent
and Trademark Office as set forth on Schedule A attached hereto (all such
----------
trademarks, service marks, registrations and applications, collectively, the
"Trademarks") and is the owner of the patents listed on Schedule A attached
----------
hereto, which patents are registered or have pending applications in the United
States Patent and Trademark Office as set forth on Schedule A attached hereto
----------
(all such patents, registrations and applications, collectively, the "Patents");
and
WHEREAS, the Grantor has entered into a Pledge and Security Agreement (as
amended, modified, restated or supplemented from time to time, the "Security
Agreement"), dated as of _____________, 1997, in which the Grantor has agreed
with First Union National Bank, as Administrative Agent (the "Administrative
Agent"), with offices at One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288-0735, to execute this Assignment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, as security for the payment and
performance of the Obligations (as defined in the Security Agreement), the
Grantor does hereby collaterally assign and grant to the Administrative Agent a
security interest in all of its right, title and interest in and to the
Trademarks and the Patents, and the use thereof, together with all proceeds and
products thereof and the goodwill of the businesses symbolized by the Trademarks
and the Patents. This Assignment has been given in conjunction with the
collateral assignment and security interest granted to the Administrative Agent
under the Security Agreement, and the provisions of this Assignment are without
prejudice to and in addition to the provisions of the Security Agreement, which
are incorporated herein by this reference.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: ________________________________
Title: _____________________________
<PAGE>
Schedule A
----------
TRADEMARKS AND TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Application or Issue or
Grantor Mark Registration No. Country Filing Date
------- ---- ---------------- ------- -----------
<S> <C> <C> <C> <C>
</TABLE>
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Patent No. Date Issued Country Description
---------- ----------- ------- -----------
<S> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 4.3
PARENT PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT, dated as of the 6th day of October,
1997 (this "Agreement"), is made by PETERSEN HOLDINGS, L.L.C., a Delaware
limited liability company ("Holdings"), and THE PETERSEN COMPANIES, INC., a
Delaware corporation ("Parent"; each of Holdings and Parent, a "Pledgor," and
collectively, the "Pledgors"), in favor of FIRST UNION NATIONAL BANK, as
administrative agent for the banks and other financial institutions
(collectively, the "Lenders") party to the Credit Agreement referred to below
(in such capacity, the "Administrative Agent"), for the benefit of the Secured
Parties (as hereinafter defined). Capitalized terms used herein without
definition shall have the meanings given to them in the Credit Agreement
referred to below.
RECITALS
A. Parent, Petersen Publishing Company, L.L.C., a Delaware limited
liability company (the "Borrower"), the Lenders, First Union National Bank, as
Administrative Agent, and CIBC Inc., as Documentation Agent, are parties to a
Credit Agreement, dated as of October 6, 1997 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
availability of certain credit facilities to the Borrower upon the terms and
subject to the conditions set forth therein. The Pledgors own all of the
membership interests in the Borrower.
B. As a condition to the extension of credit to the Borrower under the
Credit Agreement, the Pledgors have executed and delivered a Guaranty Agreement,
dated as of the date hereof (as amended, modified or supplemented from time to
time, the "Parent Guaranty"), pursuant to which each Pledgor has guaranteed to
the Secured Parties the payment in full of the Obligations of the Borrower under
the Credit Agreement and the other Credit Documents.
C. It is a further condition to the extension of credit to the Borrower
under the Credit Agreement that each Pledgor shall have agreed, by executing and
delivering this Agreement, to secure the payment in full of its obligations
under the Parent Guaranty. The Secured Parties are relying on this Agreement in
their decision to extend credit to the Borrower under the Credit Agreement, and
would not enter into the Credit Agreement without this Agreement.
D. The Pledgors will obtain benefits as a result of the extension of
credit to the Borrower under the Credit Agreement, which benefits are hereby
acknowledged, and, accordingly, desire to execute and deliver this Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Secured Parties to enter into the Credit Agreement
and to induce the Lenders to extend credit to the Borrower thereunder, each
Pledgor hereby agrees as follows:
1. Pledge and Grant of Security Interest. Each Pledgor hereby pledges,
-------------------------------------
assigns and delivers to the Administrative Agent, for the ratable benefit of the
Lenders (including the Issuing Lender
<PAGE>
and the Swingline Lender in their capacities as such, and including any Lender
in its capacity as a counterparty to any Interest Rate Protection Agreement with
the Borrower), the Documentation Agent and the Administrative Agent
(collectively, the "Secured Parties"), and grants to the Administrative Agent,
for the ratable benefit of the Secured Parties, a Lien upon and security
interest in, all of such Pledgor's right, title and interest in and to the
following, in each case whether now owned or existing or hereafter acquired or
arising (collectively, the "Collateral"):
(i) all of the issued and outstanding membership interests in the
Borrower owned by such Pledgor, and all rights, powers and privileges
relating thereto or arising therefrom, including, without limitation, such
Pledgor's right to vote and to manage and administer the business of the
Borrower pursuant to the Limited Liability Company Agreement, dated as of
September 30, 1996, among the Pledgors and the Borrower (as amended,
modified, supplemented, restated or replaced from time to time, the
"Operating Agreement"), together with all other rights, interests, claims
and other property of such Pledgor in any manner arising out of or relating
to its interest as a member of the Borrower, whether now existing or
hereafter arising or acquired, of whatever kind or character (including any
tangible or intangible property or interests therein), and further
including, without limitation (but subject to the provisions of SECTION 8),
all rights of such Pledgor to receive amounts due and to become due
(including, without limitation, dividends, distributions, interest, income
and returns of capital) under or in respect of the Operating Agreement, to
receive payments or other amounts upon termination of the Operating
Agreement, and to receive any other payments or distributions, whether in
cash, securities, property, or a combination thereof, in respect of such
Pledgor's interest as a member of the Borrower, all of such Pledgor's
rights of access to the Borrower's books and records, and all rights
granted or available under applicable law in connection therewith, and all
additional equity interests in the Borrower (including all warrants,
options and other rights to acquire, and all securities convertible into,
equity interests in the Borrower), whether now or hereafter existing and
any time owned by such Pledgor, together with all certificates, instruments
and entries upon the books of financial intermediaries at any time
evidencing any of the foregoing (collectively, the "Pledged Interests");
(ii) all indebtedness, obligations and other amounts at any time
owing to such Pledgor from the Borrower or from any holder of equity
interests in such Pledgor and all interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness, obligations
or other amounts (collectively, "the Pledged Indebtedness"); and
(iii) all Proceeds of any of the foregoing. For purposes of this
Agreement, the term "Proceeds" shall mean and include all cash, securities
and other property of any nature received or receivable upon the sale,
exchange or other disposition of or realization upon any Collateral,
whether voluntary or involuntary, together with all other payments and
distributions in respect of any Collateral, including pursuant to any
insurance, indemnity or guaranty with respect to any Collateral and
pursuant to any liquidation, reorganization or similar proceeding with
respect to any Pledgor or any issuer of or obligor on any Collateral.
2. Security for Secured Obligations. This Agreement and the Collateral
--------------------------------
secure the full and prompt payment, at any time and from time to time as and
when due (whether at the stated maturity, by acceleration or otherwise), of all
liabilities and obligations of each Pledgor, whether now existing or hereinafter
incurred, under, arising out of or in connection with the Parent Guaranty, this
Agreement or
-2-
<PAGE>
any of the other Credit Documents to which it is a party, including, without
limitation, each Pledgor's liabilities and obligations as guarantor in respect
of all principal of and interest on the Loans, all Reimbursement Obligations in
respect of Letters of Credit, all fees, expenses, indemnities and other amounts
payable by the Borrower under the Credit Agreement or any other Credit Document
(including interest accruing after the filing of a petition or commencement of a
case by or with respect to the Borrower seeking relief under any applicable
federal and state laws pertaining to bankruptcy, reorganization, arrangement,
moratorium, readjustment of debts, dissolution, liquidation or other debtor
relief, specifically including, without limitation, the Bankruptcy Code and any
fraudulent transfer and fraudulent conveyance laws, whether or not the claim for
such interest is allowed in such proceeding), all obligations of the Borrower to
any Lender under any Interest Rate Protection Agreement, all Obligations that,
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due, and all fees, costs and expenses payable by
each Pledgor under SECTION 13, in each case whether now existing or hereafter
created or arising and whether direct or indirect, absolute or contingent, due
or to become due (the liabilities and obligations of the Pledgors described in
this SECTION 2, collectively, the "Secured Obligations").
3. Delivery of Collateral. All certificates or instruments representing
----------------------
or evidencing any Collateral (other than checks or drafts, except during the
continuance of an Event of Default) shall be delivered to and held by or on
behalf of the Administrative Agent pursuant hereto, shall be in form suitable
for transfer by delivery and shall be delivered together with undated stock
powers duly executed in blank, appropriate endorsements or other necessary
instruments of registration, transfer or assignment, duly executed and in form
and substance satisfactory to the Administrative Agent, and in each case such
other instruments or documents as the Administrative Agent may reasonably
request.
4. Representations and Warranties. Each Pledgor represents and warrants
------------------------------
as follows:
(a) As of the date hereof, the Pledged Interests being pledged by each
Pledgor hereunder consist of the percentage and type of equity membership
interests in the Borrower as described beneath such Pledgor's name in Annex A.
-------
The Pledged Interests described in Annex A collectively represent 100% of the
-------
issued and outstanding equity membership interests in the Borrower.
(b) Each Pledgor is, or at the time when pledged hereunder will be, the
sole legal, record and beneficial owner of all Pledged Interests purported to be
pledged by it hereunder, free and clear of any Lien whatsoever other than the
security interest created by this Agreement. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any government or public office, and no
Pledgor has filed or consented to the filing of any such statement or notice,
except for Uniform Commercial Code financing statements naming the
Administrative Agent as secured party.
(c) This Agreement, together with (i) the filing, with regard to each
Pledgor, of duly completed and executed Uniform Commercial Code financing
statements naming such Pledgor as debtor, the Administrative Agent as secured
party, and describing the Collateral, in the jurisdictions set forth beneath
such Pledgor's name on Annex B hereto, (ii) in the case of uncertificated
-------
Pledged Interests, compliance with Section 8-313 (or its successor provision) of
the applicable Uniform Commercial Code, and (iii) the delivery to the
Administrative Agent of all certificates, chattel paper, promissory notes and
other instruments included in the Collateral, creates, and at all times will
constitute, a valid and perfected security interest in and Lien upon the
Collateral owned by such Pledgor in favor of the Administrative Agent, for the
benefit of the Secured Parties, to the extent a security interest therein can
-3-
<PAGE>
be perfected by such filings or possession of such chattel paper, promissory
notes or instruments, as applicable, superior and prior to the rights of all
other Persons therein (except for Permitted Liens), and no other or additional
filings, registrations, recordings or actions are or shall be necessary or
appropriate in order to maintain the perfection and priority of such Lien and
security interest, other than continuation statements required under the
applicable Uniform Commercial Code.
(d) All of the Pledged Interests have been duly and validly issued and are
fully paid and not subject to any preemptive rights, warrants, options or
similar rights or restrictions in favor of third parties, any capital call or
other additional capital requirement or any contractual or other restrictions
upon transfer, except as expressly set forth in the Operating Agreement.
(e) No consent, approval, authorization, exemption or other action by,
notice to, or filing with, any Governmental Authority is required in connection
with the due execution, delivery and performance by each Pledgor of this
Agreement, the pledge of the Collateral hereunder or the exercise by the
Administrative Agent of the voting or other rights and remedies in respect of
the Collateral provided for herein, except as expressly set forth in the
Operating Agreement and except as may be required in connection with a
disposition of any Collateral by laws affecting the offering and sale of
securities generally.
(f) The Pledgors have furnished the Administrative Agent with a correct
and complete copy of the Operating Agreement as in effect as of the date hereof.
The Operating Agreement is in full force and effect and there exists no default,
breach or event of default thereunder by any party. The Operating Agreement sets
forth the entire agreement and understanding of the parties thereto in respect
of the subject matter thereof, and there are no other agreements or
understandings, written or oral, relating to the matters covered thereby.
(g) Annex C lists, as to each Pledgor, (i) the address of its chief
-------
executive office and principal place of business and (ii) the address of each
location of all chattel paper, instruments and other records or information
evidencing or relating to the Collateral of such Pledgor. No Pledgor presently
conducts business under any prior or other corporate or limited liability
company name or under any trade or fictitious name, except as indicated beneath
its name on Annex C, and no Pledgor has entered into any contract or granted any
-------
Lien within the past five years under any name other than its legal corporate or
limited liability company name or a trade or fictitious name indicated beneath
its name on Annex C.
-------
5. Additional Collateral. If either Pledgor shall, at any time and from
---------------------
time to time after the date hereof, acquire any additional membership interests
in the Borrower or Indebtedness of the types described in clauses (i) and (ii)
of SECTION 1 (including the acquisition by Parent, as a result of the
dissolution of Holdings or the merger of Holdings into Parent, of the
outstanding membership interests in the Borrower owned by Holdings as of the
date hereof), the same shall be automatically deemed to be Pledged Interests or
Pledged Indebtedness, as the case may be, and to be pledged to the
Administrative Agent pursuant to SECTION 1, and such Pledgor will forthwith
pledge and deposit the same with the Administrative Agent and deliver to the
Administrative Agent any certificates or instruments therefor, together with the
endorsement of such Pledgor (in the case of any promissory notes or other
instruments), undated stock powers (in the case of Pledged Interests evidenced
by certificates) or other necessary instruments of transfer or assignment, duly
executed in blank and in form and substance satisfactory to the Administrative
Agent, together with such other certificates and instruments as the
Administrative Agent may reasonably request (including Uniform Commercial Code
financing statements
-4-
<PAGE>
or appropriate amendments thereto), and will promptly thereafter deliver to the
Administrative Agent a fully completed and duly executed amendment to this
Agreement in the form of Exhibit A (each, a "Pledge Amendment") in respect
---------
thereof. Each Pledgor hereby authorizes the Administrative Agent to attach each
Pledge Amendment to this Agreement, and agrees that all such Collateral listed
on any Pledge Amendment shall for all purposes be deemed Collateral hereunder
and shall be subject to the provisions hereof; provided that the failure of such
--------
Pledgor to execute and deliver any Pledge Amendment with respect to any such
additional Collateral as required hereinabove shall not impair the security
interest of the Administrative Agent in such Collateral or otherwise adversely
affect the rights and remedies of the Administrative Agent hereunder with
respect thereto. If any Pledged Interests (whether now owned or hereafter
acquired) are "uncertificated securities" within the meaning of the applicable
Uniform Commercial Code or are otherwise not evidenced by any certificate or
instrument, each applicable Pledgor will promptly notify the Administrative
Agent thereof and will promptly take and cause to be taken all actions required
under applicable law, including, as applicable, under Article 8 or 9 of the
applicable Uniform Commercial Code, to perfect the security interest of the
Administrative Agent therein.
6. Certain Covenants of the Pledgors. (a) The Pledgors will cause the
---------------------------------
Pledged Interests to constitute at all times 100% of the equity membership
interests in the Borrower, and unless the Administrative Agent shall have given
its prior written consent, neither Pledgor will cause or permit the Borrower to
issue or sell any new equity membership interests, any warrants, options or
rights to acquire its equity membership interests, or other equity securities of
any nature to any Person other than the Pledgors, or cause, permit or consent to
the admission of any other Person as a member of the Borrower.
(b) Neither Pledgor will sell or otherwise dispose of, grant any options,
warrants or other rights with respect to, or mortgage, pledge, grant any Lien
with respect to or otherwise encumber, any of its Pledged Interests or any other
Collateral or any interest therein, except for the security interest created by
this Agreement.
(c) Neither Pledgor will (i) amend, modify, waive or forgive any provision
of or right arising under the Operating Agreement in a manner that would, or
could reasonably be expected to, have the effect of impairing the position or
interests of the Administrative Agent or any other Secured Party, (ii) cancel or
terminate the Operating Agreement or petition, request or take any other action
that seeks, or that could reasonably be expected, to rescind, terminate, cancel
or suspend the Operating Agreement, to obtain any partition with respect to the
Borrower or to dissolve or liquidate the Borrower. The Pledgors will deliver to
the Administrative Agent from time to time copies of all amendments or
modifications to the Operating Agreement promptly upon completion thereof;
provided that nothing herein shall be deemed to permit any amendment or
- --------
modification not otherwise permitted hereunder.
(d) Each Pledgor will perform and comply in all material respects with all
terms of the Operating Agreement required to be performed or complied with by
it, will maintain the Operating Agreement in full force and effect, will enforce
the Operating Agreement in accordance with its terms and will take all such
action to that end as may from time to time be reasonably requested by the
Administrative Agent.
(e) Each Pledgor will pay and discharge (i) all taxes, assessments and
governmental charges or levies imposed upon it, upon its income or profits or
upon any of its properties, prior to the date on which penalties would attach
thereto, and (ii) all lawful claims that, if unpaid, might become a Lien
-5-
<PAGE>
upon any of its properties; provided, however, that no Pledgor shall be
-------- -------
required to pay any such tax, assessment, charge, levy or claim that is being
contested in good faith and by proper proceedings and as to which such Pledgor
has maintained adequate reserves with respect thereto in accordance with
Generally Accepted Accounting Principles, unless and until any tax lien notice
has become effective with respect thereto or until any Lien resulting therefrom
attaches to its properties and becomes enforceable against its other creditors.
(f) Neither Pledgor will (i) change its name, identity or corporate
structure, (ii) change its chief executive office or principal place of business
from the applicable location thereof listed on Annex C, or (iii) remove any
-------
books, records or other information relating to Collateral from the applicable
location thereof listed on Annex C, unless in each case such Grantor has (1)
-------
given twenty (20) days' prior written notice to the Administrative Agent of its
intention to do so, together with information regarding any such new location
and such other information in connection with such proposed action as the
Administrative Agent may reasonably request, and (2) delivered to the
Administrative Agent ten (10) days prior to any such change or removal such
documents, instruments and financing statements as may be required by the
Administrative Agent, all in form and substance satisfactory to the
Administrative Agent, paid all necessary filing and recording fees and taxes,
and taken all other actions reasonably requested by the Administrative Agent
(including, at the reasonable request of the Administrative Agent, delivery of
opinions of counsel reasonably satisfactory to the Administrative Agent to the
effect that all such actions have been taken), in order to perfect and maintain
the Lien upon and security interest in the Collateral provided for herein in
accordance with the provisions of SECTION 4(c).
(g) Each Pledgor shall, from time to time at such times as may be
reasonably requested and upon reasonable notice, (i) make available to the
Administrative Agent for inspection and review at such Pledgor's offices copies
of all documents and information relating to the Collateral, and (ii) permit the
Administrative Agent or its representatives to visit its offices or the premises
upon which any Collateral may be located, inspect its books and records and make
copies and memoranda thereof, inspect the Collateral, discuss its finances and
affairs with its officers, employees and independent accountants and take any
other actions necessary for the protection of the interests of the Secured
Parties in the Collateral.
(h) Each Pledgor agrees that it will, at its own cost and expense, take
any and all actions necessary to warrant and defend the right, title and
interest of the Secured Parties in and to the Collateral against the claims and
demands of all other Persons.
7. Voting Rights. So long as no Event of Default shall have occurred and
-------------
be continuing, each Pledgor shall be entitled to exercise all voting and other
consensual rights pertaining to the Pledged Interests (subject to its
obligations under SECTION 5), and for that purpose the Administrative Agent will
execute and deliver or cause to be executed and delivered to each applicable
Pledgor all such proxies and other instruments as such Pledgor may reasonably
request in writing to enable such Pledgor to exercise such voting and other
consensual rights; provided, however, that neither Pledgor will cast any vote,
-------- -------
give any consent, waiver or ratification, or take or fail to take any action, in
any manner that would, or could reasonably be expected to, violate or be
inconsistent with any of the terms of this Agreement, the Credit Agreement or
any other Credit Document, or have the effect of impairing in any material
respect the position or interests of the Administrative Agent or any other
Secured Party.
8. Dividends and Other Distributions. So long as no Event of Default
---------------------------------
shall have occurred and be continuing (or would occur as a result thereof), and
except as provided otherwise herein, all
-6-
<PAGE>
interest, income, dividends, distributions and other amounts payable in cash in
respect of the Pledged Interests may be paid to and retained by the Pledgors;
provided, however, that all such interest, dividends, distributions and other
- -------- -------
amounts shall, at all times after the occurrence and during the continuance of
an Event of Default, be paid to the Administrative Agent and retained by it as
part of the Collateral (except to the extent applied upon receipt to the
repayment of the Secured Obligations). The Administrative Agent shall also be
entitled at all times (whether or not during the continuance of an Event of
Default) to receive directly, and to retain as part of the Collateral, (i) all
interest, income, dividends, distributions or other amounts paid or payable in
cash or other property in respect of any Pledged Interests in connection with
the dissolution, liquidation, recapitalization or reclassification of the
capital of the Borrower to the extent representing (in the reasonable judgment
of the Administrative Agent) an extraordinary, liquidating or other distribution
in return of capital, (ii) all additional membership interests, warrants,
options or other securities or property (other than cash) paid or payable or
distributed or distributable in respect of any Pledged Interests in connection
with any noncash dividend, distribution, return of capital, spin-off, split-up,
reclassification, combination of interests or similar rearrangement, and (iii)
without affecting any restrictions against such actions contained in the Credit
Agreement, all additional membership interests, warrants, options or other
securities or property (including cash) paid or payable or distributed or
distributable in respect of any Pledged Interests in connection with any
consolidation, merger, exchange of securities, liquidation or other
reorganization. All interest, income, dividends, distributions or other amounts
that are received by either Pledgor in violation of the provisions of this
Section shall be received in trust for the benefit of the Administrative Agent,
shall be segregated from other property or funds of the Pledgors and shall be
forthwith delivered to the Administrative Agent as Collateral in the same form
as so received (with any necessary endorsements).
9. Remedies. If an Event of Default shall have occurred and be
--------
continuing, the Administrative Agent shall be entitled to exercise in respect of
the Collateral all of its rights, powers and remedies provided for herein or
otherwise available to it under any other Credit Document, by law, in equity or
otherwise, including all rights and remedies of a secured party under the
Uniform Commercial Code as in effect in each relevant jurisdiction, and shall be
entitled in particular, but without limitation of the foregoing, to exercise the
following rights, which each Pledgor agrees to be commercially reasonable:
(a) To notify the parties obligated on any of the Collateral to make
payment to the Administrative Agent of any amount due or to become due
thereunder and receive all such amounts;
(b) To transfer to or register in its name or the name of any of its
agents or nominees all or any part of the Collateral, without notice to the
Pledgors and with or without disclosing that such Collateral is subject to the
security interest created hereunder;
(c) To accelerate any Pledged Indebtedness that may be accelerated in
accordance with its terms, and take any other lawful action to collect upon any
Pledged Indebtedness;
(d) To exercise (i) all voting, consensual and other rights and powers
pertaining to the Pledged Interests (whether or not transferred into the name of
the Administrative Agent), at any meeting of the members of the Borrower or
otherwise, and (ii) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Pledged Interests as
if it were the absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Interests upon the
merger, consolidation, reorganization, reclassification, combination
-7-
<PAGE>
of interests, similar rearrangement or other similar fundamental change in the
structure of the Borrower, or upon the exercise by either Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such
Pledged Interests, and in connection therewith, the right to deposit and deliver
any and all of the Pledged Interests with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Administrative Agent may determine, and give all consents, waivers and
ratifications in respect of the Pledged Interests, all without liability except
to account for any property actually received by it, but the Administrative
Agent shall have no duty to exercise any such right, privilege or option or give
any such consent, waiver or ratification and shall not be responsible for any
failure to do so or delay in so doing; and for the foregoing purposes each
Pledgor will promptly execute and deliver or cause to be executed and delivered
to the Administrative Agent, upon request, all such proxies and other
instruments as the Administrative Agent may reasonably request to enable the
Administrative Agent to exercise such rights and powers; AND IN FURTHERANCE OF
THE FOREGOING AND WITHOUT LIMITATION THEREOF, EACH PLEDGOR HEREBY IRREVOCABLY
CONSTITUTES AND APPOINTS THE ADMINISTRATIVE AGENT AS THE TRUE AND LAWFUL PROXY
AND ATTORNEY-IN-FACT OF SUCH PLEDGOR, WITH FULL POWER OF SUBSTITUTION IN THE
PREMISES, TO EXERCISE ALL SUCH VOTING, CONSENSUAL AND OTHER RIGHTS AND POWERS TO
WHICH ANY MEMBER OF THE BORROWER HOLDING THE PLEDGED INTERESTS WOULD BE ENTITLED
BY VIRTUE OF HOLDING THE SAME, WHICH PROXY AND POWER OF ATTORNEY, BEING COUPLED
WITH AN INTEREST, IS IRREVOCABLE AND SHALL BE EFFECTIVE FOR SO LONG AS THIS
AGREEMENT SHALL BE IN EFFECT; and
(e) To sell, resell, assign and deliver, in its sole discretion, all or any
of the Collateral, in one or more parcels, on any securities exchange on which
the Pledged Interests may be listed, at public or private sale, at any of the
Administrative Agent's offices or elsewhere, for cash, upon credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as the Administrative Agent may deem satisfactory. If any of the
Collateral is sold by the Administrative Agent upon credit or for future
delivery, the Administrative Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Administrative Agent may resell such Collateral. In no event shall the
Pledgors be credited with any part of the Proceeds of sale of any Collateral
until and to the extent cash payment in respect thereof has actually been
received by the Administrative Agent. Each purchaser at any such sale shall
hold the property sold absolutely, free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgors, and each
Pledgor hereby expressly waives all rights of redemption, stay or appraisal, and
all rights to require the Administrative Agent to marshal any assets in favor of
such Pledgor or any other party or against or in payment of any or all of the
Secured Obligations, that it has or may have under any rule of law or statute
now existing or hereafter adopted. No demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law, as
referred to below), all of which are hereby expressly waived by each Pledgor,
shall be required in connection with any sale or other disposition of any part
of the Collateral. If any notice of a proposed sale or other disposition of any
part of the Collateral shall be required under applicable law, the
Administrative Agent shall give the applicable Pledgor at least ten (10) days'
prior notice of the time and place of any public sale and of the time after
which any private sale or other disposition is to be made, which notice each
Pledgor agrees is commercially reasonable. The Administrative Agent shall not
be obligated to make any sale of Collateral if it shall determine not to do so,
regardless of the fact that notice of sale may have been given. The
Administrative Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so
-8-
<PAGE>
adjourned. Upon each public sale and, to the extent permitted by applicable law,
upon each private sale, the Administrative Agent may purchase all or any of the
Collateral being sold, free from any equity, right of redemption or other claim
or demand, and may make payment therefor by endorsement and application (without
recourse) of the Secured Obligations in lieu of cash as a credit on account of
the purchase price for such Collateral.
10. Application of Proceeds. (a) All Proceeds collected by the
-----------------------
Administrative Agent upon any sale, other disposition of or realization upon any
of the Collateral, together with all other moneys received by the Administrative
Agent hereunder, shall be applied as follows:
(i) first, to the payment of all costs and expenses of such sale,
disposition or other realization, including the reasonable costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, all amounts advanced by the Administrative Agent
for the account of the Pledgors, and all other amounts payable to the
Administrative Agent under SECTION 13;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Secured Obligations
owing to the Secured Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this
Agreement, to the Pledgors or any other Person lawfully entitled to receive
such surplus.
(b) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Secured Party that has
entered into an Interest Rate Protection Agreement with the Borrower for a
determination (which such Secured Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding Secured
Obligations owed to such Secured Party under any such Interest Rate Protection
Agreement. Unless it has actual knowledge (including by way of written notice
from any such Secured Party) to the contrary, the Administrative Agent, in
acting hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Obligations in respect thereof are in existence between any
Secured Party and the Borrower.
(c) The Pledgors shall remain jointly and severally liable to the extent
of any deficiency between the amount of all Proceeds realized upon sale or other
disposition of the Collateral pursuant to this Agreement and the aggregate
amount of the sums referred to in clauses (i) and (ii) of subsection (a) above.
Upon any sale of any Collateral hereunder by the Administrative Agent (whether
by virtue of the power of sale herein granted, pursuant to judicial proceeding,
or otherwise), the receipt of the Administrative Agent or the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Administrative Agent or such officer or be answerable in any way for the
misapplication thereof.
11. Each Pledgor Remains Liable. Notwithstanding anything herein to the
---------------------------
contrary, (i) the Pledgors shall remain liable under the Operating Agreement to
perform all of their respective obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Administrative
Agent of any of its rights or remedies hereunder shall not release either
Pledgor from any of its obligations under the Operating Agreement, and (iii)
except as specifically provided for hereinbelow, the Administrative Agent shall
not have any obligation or liability by reason of this
-9-
<PAGE>
Agreement under the Operating Agreement, nor shall the Administrative Agent be
obligated to perform any of the obligations or duties of the Pledgors thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder. This Agreement shall not in any way be deemed to obligate the
Administrative Agent, any other Secured Party or any purchaser at a foreclosure
sale under this Agreement to assume any of either Pledgor's obligations, duties
or liabilities under the Operating Agreement, including, without limitation,
each Pledgor's obligations, if any, to manage the business and affairs of the
Borrower (collectively, the "Member Obligations"), unless the Administrative
Agent or such other Secured Party or purchaser otherwise agrees in writing to
assume any or all of such Member Obligations. In the event of foreclosure by the
Administrative Agent hereunder, then except as provided in the preceding
sentence, each Pledgor shall remain bound and obligated to perform its Member
Obligations and neither the Administrative Agent nor any other Secured Party
shall be deemed to have assumed any Member Obligations. In the event the
Administrative Agent, any other Secured Party or any purchaser at a foreclosure
sale elects to become a substitute member in place of either Pledgor, the party
making such election shall adopt in writing the Operating Agreement and agree to
be bound by the terms and provisions thereof; and subject to the execution of
such written agreement, each Pledgor hereby irrevocably consents in advance,
pursuant to the Operating Agreement, to the admission of the Administrative
Agent, any other Secured Party or any such purchaser as a substitute member to
the extent of the Pledged Interests acquired pursuant to such sale, and agrees
to execute any documents or instruments and take any other action as may be
necessary or as may be reasonably requested in connection therewith. The powers,
rights and remedies conferred on the Administrative Agent hereunder are solely
to protect its interest and privilege in the Operating Agreement, as Collateral,
and shall not impose any duty upon it to exercise any such powers, rights or
remedies.
12. Registration; Private Sales. (a) If, at any time after the
---------------------------
occurrence and during the continuance of an Event of Default, either Pledgor
shall have received from the Administrative Agent a written request or requests
that such Pledgor cause any registration, qualification or compliance under any
federal or state securities law or laws to be effected with respect to all or
any part of the Pledged Interests, such Pledgor will, as soon as practicable and
at its expense, use its best efforts to cause such registration to be effected
and be kept effective and will use its best efforts to cause such qualification
and compliance to be effected and be kept effective as may be so requested and
as would permit or facilitate the sale and distribution of such Pledged
Interests, including, without limitation, registration under the Securities Act
of 1933, as amended (the "Securities Act"), appropriate qualifications under
applicable blue sky or other state securities laws and appropriate compliance
with any other applicable requirements of Governmental Authorities; provided,
--------
that the Administrative Agent shall furnish to such Pledgor such information
regarding the Administrative Agent as such Pledgor may reasonably request in
writing and as shall be required in connection with any such registration,
qualification or compliance. Such Pledgor will cause the Administrative Agent
to be kept reasonably advised in writing as to the progress of each such
registration, qualification or compliance and as to the completion thereof, will
furnish to the Administrative Agent such number of prospectuses, offering
circulars or other documents incident thereto as the Administrative Agent from
time to time may reasonably request, and will indemnify the Administrative Agent
and all others participating in the distribution of such Pledged Securities
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to such Pledgor by the
Administrative Agent or any other Secured Party expressly for use therein.
-10-
<PAGE>
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws as in
effect from time to time, the Administrative Agent may be compelled, with
respect to any sale of all or any part of the Pledged Interests conducted
without registration or qualification under the Securities Act and such state
securities laws, to limit purchasers to any one or more Persons who will
represent and agree, among other things, to acquire such Pledged Interests for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sales may be
made in such manner and under such circumstances as the Administrative Agent may
deem necessary or advisable in its sole and absolute discretion, including at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and agrees that the
Administrative Agent shall have no obligation to conduct any public sales and no
obligation to delay the sale of any Pledged Interests for the period of time
necessary to permit its registration for public sale under the Securities Act
and applicable state securities laws, and shall not have any responsibility or
liability as a result of its election so not to conduct any such public sales or
delay the sale of any Pledged Interests, notwithstanding the possibility that a
substantially higher price might be realized if the sale were deferred until
after such registration. Each Pledgor hereby waives any claims against the
Administrative Agent or any Secured Party arising by reason of the fact that the
price at which any Pledged Interests may have been sold at any private sale was
less than the price that might have been obtained at a public sale or was less
than the aggregate amount of the Secured Obligations, even if the Administrative
Agent accepts the first offer received and does not offer such Pledged Interests
to more than one offeree.
(c) Each Pledgor agrees that a breach of any of the covenants contained in
this Section will cause irreparable injury to the Administrative Agent and the
other Secured Parties, that the Administrative Agent and the other Secured
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall be
specifically enforceable against the Pledgors.
13. Indemnity and Expenses. The Pledgors agree jointly and severally:
----------------------
(a) To indemnify and hold harmless the Administrative Agent, each other
Secured Party and each of their respective directors, officers, employees,
agents and affiliates from and against any and all claims, damages, demands,
losses, obligations, judgments and liabilities (including, without limitation,
reasonable attorneys' fees and expenses) in any way arising out of or in
connection with this Agreement and the transactions contemplated hereby, except
to the extent the same shall arise as a result of the gross negligence or
willful misconduct of the party seeking to be indemnified; and
(b) To pay and reimburse the Administrative Agent upon demand for all
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) that the Administrative Agent may incur in
connection with (i) the custody, use or preservation of, or the sale of,
collection from or other realization upon, any of the Collateral, including the
reasonable expenses of re-taking, holding, preparing for sale or lease, selling
or otherwise disposing of or realizing on the Collateral, (ii) the exercise or
enforcement of any rights or remedies granted hereunder (including, without
limitation, under SECTION 12), under any of the other Credit Documents or
otherwise available to it (whether at law, in equity or otherwise), or (iii) the
failure by either Pledgor to perform or observe any of the provisions hereof.
The provisions of this SECTION 13 shall survive the execution and delivery
-11-
<PAGE>
of this Agreement, the repayment of any of the Obligations, the termination of
the Commitments under the Credit Agreement and the termination of this Agreement
or any other Credit Document.
14. Further Assurances; Attorney-in-Fact. (a) Each Pledgor agrees that
------------------------------------
it will join with the Administrative Agent to execute and, at its own expense,
file and refile under any applicable Uniform Commercial Code such financing
statements, continuation statements and other documents and instruments in such
offices as the Administrative Agent may reasonably deem necessary or
appropriate, and wherever required or permitted by law, in order to perfect and
preserve the Administrative Agent's security interest in the Collateral, and
hereby authorizes the Administrative Agent to file financing statements and
amendments thereto relating to all or any part of the Collateral without the
signature of such Pledgor where permitted by law, and agrees to do such further
acts and things and to execute and deliver to the Administrative Agent such
additional conveyances, assignments, agreements and instruments as the
Administrative Agent may reasonably require or deem advisable to perfect,
establish, confirm and maintain the security interest and Lien provided for
herein, to carry out the purposes of this Agreement or to further assure and
confirm unto the Administrative Agent its rights, powers and remedies hereunder.
(b) Each Pledgor hereby irrevocably appoints the Administrative Agent its
lawful attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, the Administrative Agent or otherwise,
and with full power of substitution in the premises (which power of attorney,
being coupled with an interest, is irrevocable for so long as this Agreement
shall be in effect), from time to time in the Administrative Agent's discretion
after the occurrence and during the continuance of an Event of Default to take
any action and to execute any instruments that the Administrative Agent may deem
necessary or advisable to accomplish the purpose of this Agreement, including,
without limitation:
(i) to sign the name of such Pledgor on any financing statement,
continuation statement, notice or other similar document that, in the
Administrative Agent's opinion, should be made or filed in order to perfect
or continue perfected the security interest granted under this Agreement;
(ii) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(iii) to receive, endorse and collect any checks, drafts,
instruments, chattel paper and other orders for the payment of money made
payable to such Pledgor representing any interest, income, dividend,
distribution or other amount payable in respect of any of the Collateral
and to give full discharge for the same;
(iv) to pay or discharge taxes, Liens or other encumbrances levied
or placed on or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
the Administrative Agent in its sole discretion, any such payments made by
the Administrative Agent to become Secured Obligations of the Pledgors to
the Administrative Agent, due and payable immediately and without demand;
(v) to file any claims or take any action or institute any
proceedings that the Administrative Agent may deem necessary or advisable
for the collection of any of the Collateral
-12-
<PAGE>
or otherwise to enforce the rights of the Administrative Agent with respect
to any of the Collateral; and
(vi) to use, sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with any and all of the Collateral as
fully and completely as though the Administrative Agent were the absolute
owner of the Collateral for all purposes, and to do from time to time, at
the Administrative Agent's option and the Pledgors' expense, all other acts
and things deemed necessary by the Administrative Agent to protect,
preserve or realize upon the Collateral and to more completely carry out
the purposes of this Agreement.
(c) If either Pledgor fails to perform any covenant or agreement contained
in this Agreement after written request to do so by the Administrative Agent
(provided that no such request shall be necessary at any time after the
--------
occurrence and during the continuance of an Event of Default), the
Administrative Agent may itself perform, or cause the performance of, such
covenant or agreement and may take any other action that it deems necessary and
appropriate for the maintenance and preservation of the Collateral or its
security interest therein, and the reasonable expenses so incurred in connection
therewith shall be payable by the Pledgors under SECTION 13.
15. The Administrative Agent; Standard of Care. The Administrative Agent
------------------------------------------
will hold all items of the Collateral at any time received under this Agreement
in accordance with the provisions hereof. The obligations of the Administrative
Agent as holder of the Collateral and interests therein and with respect to the
disposition thereof, and otherwise under this Agreement and the other Credit
Documents, are only those expressly set forth in this Agreement and the other
Credit Documents. The Administrative Agent shall act hereunder at the
direction, or with the consent, of the Required Lenders on the terms and
conditions set forth in the Credit Agreement. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest, on behalf of
the Secured Parties, in the Collateral, and shall not impose any duty upon it to
exercise any such powers. Except for treatment of the Collateral in its
possession in a manner substantially equivalent to that which the Administrative
Agent, in its individual capacity, accords its own property of a similar nature,
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to the Collateral. Neither the Administrative Agent nor any
other Secured Party shall be liable to either Pledgor (i) for any loss or damage
sustained by such Pledgor, or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral that may occur as a result of
or in connection with or that is in any way related to any exercise by the
Administrative Agent or any other Secured Party of any right or remedy under
this Agreement, any failure to demand, collect or realize upon any of the
Collateral or any delay in doing so, or any other act or failure to act on the
part of the Administrative Agent or any other Secured Party, except to the
extent that the same is caused by its own gross negligence or willful
misconduct.
16. Security Interest Absolute. Each Pledgor agrees that its obligations,
--------------------------
and the security interest granted to and all rights of the Administrative Agent,
hereunder are irrevocable, absolute and unconditional and shall not be
discharged, limited or otherwise affected by reason of any of the following,
whether or not such Pledgor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in
any other term of, any Secured Obligations, or any amendment, modification
or supplement to, restatement of, or consent to any rescission or waiver of
or departure from, any provisions of the Credit
-13-
<PAGE>
Agreement, any other Credit Document or any agreement or instrument
delivered pursuant to any of the foregoing;
(ii) the invalidity or unenforceability of any Secured Obligations
or any provisions of the Credit Agreement, any other Credit Document or any
agreement or instrument delivered pursuant to any of the foregoing;
(iii) any sale, exchange, release, substitution, compromise,
nonperfection or other action or inaction in respect of any other
collateral pledged as direct or indirect security for any Secured
Obligations, or any discharge, modification, settlement, compromise or
other action or inaction in respect of any guaranty or other direct or
indirect liability for any Secured Obligations; or
(iv) any other circumstance that might otherwise constitute a
legal or equitable discharge of, or a defense, set-off or counterclaim
available to, either Pledgor, other than the occurrence of (x) the payment
in full of the Secured Obligations (other than indemnity obligations not
then due and payable and that survive termination of the Credit Documents),
(y) the termination or expiration of all Letters of Credit under the Credit
Agreement and (z) the termination of the Commitments under the Credit
Agreement (the events in clauses (x), (y) and (z) above, collectively, the
"Termination Requirements").
17. No Waiver. The rights and remedies of the Secured Parties expressly
---------
set forth in this Agreement and the other Credit Documents are cumulative and in
addition to, and not exclusive of, all other rights and remedies available at
law, in equity or otherwise. No failure or delay on the part of any Secured
Party in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege or be construed to be a waiver of any Default or
Event of Default. No course of dealing between the Pledgors and the Secured
Parties or their agents or employees shall be effective to amend, modify or
discharge any provision of this Agreement or any other Credit Document or to
constitute a waiver of any Default or Event of Default. No notice to or demand
upon either Pledgor in any case shall entitle such Pledgor or the other Pledgor
to any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of any Secured Party to exercise any right or
remedy or take any other or further action in any circumstances without notice
or demand.
18. Enforcement. By its acceptance of the benefits of this Agreement,
-----------
each Lender agrees that this Agreement may be enforced only by the
Administrative Agent, acting upon the instructions or with the consent of the
Required Lenders as provided for in the Credit Agreement, and that no Lender
shall have any right individually to enforce or seek to enforce this Agreement
or to realize upon any Collateral or other security given to secure the payment
and performance of the Secured Obligations.
19. Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by either Pledgor from,
any provision of this Agreement, shall be effective unless in a writing executed
and delivered in accordance with Section 11.6 of the Credit Agreement, and then
the same shall be effective only in the specific instance and for the specific
purpose for which given.
-14-
<PAGE>
20. Continuing Security Interest; Term; Successors and Assigns;
-----------------------------------------------------------
Assignment; Termination and Release; Survival. This Agreement shall create a
- ---------------------------------------------
continuing security interest in the Collateral and shall secure the payment and
performance of all of the Secured Obligations as the same may arise and be
outstanding at any time and from time to time from and after the date hereof,
and shall (i) remain in full force and effect until the satisfaction of all of
the Termination Requirements, (ii) be binding upon and enforceable against each
Pledgor and its successors and assigns (provided, however, that neither Pledgor
-------- -------
may sell, assign or transfer any of its rights, interests, duties or obligations
hereunder without the prior written consent of the Lenders) and (iii) inure to
the benefit of and be enforceable by each Secured Party and its successors and
assigns. Upon any sale or other disposition by any Pledgor of any Collateral in
a transaction expressly permitted hereunder or under or pursuant to the Credit
Agreement or any other applicable Credit Document, the Lien and security
interest created by this Agreement in and upon such Collateral shall be
automatically released, and upon the satisfaction of all of the Termination
Requirements, this Agreement and the Lien and security interest created hereby
shall terminate; and in connection with any such release or termination, the
Administrative Agent, at the request and expense of the applicable Pledgor, will
execute and deliver to such Pledgor such documents and instruments evidencing
such release or termination as such Pledgor may reasonably request and will
assign, transfer and deliver to such Pledgor, without recourse and without
representation or warranty, such of the Collateral as may then be in the
possession of the Administrative Agent (or, in the case of any partial release
of Collateral, such of the Collateral so being released as may be in its
possession). All representations, warranties, covenants and agreements herein
shall survive the execution and delivery of this Agreement and any Pledge
Amendment.
21. Notices. All notices and other communications provided for hereunder
-------
shall be given to the parties in the manner and subject to the other notice
provisions set forth in the Parent Guaranty.
22. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of North Carolina (without
regard to the conflicts of law provisions thereof).
23. Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
24. Construction. The headings of the various sections and subsections of
------------
this Agreement have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular. All terms in this Agreement that are not
capitalized shall have the meanings provided by the applicable Uniform
Commercial Code to the extent the same are used or defined therein.
25. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal by their duly authorized officers as of the date first above written.
PETERSEN HOLDINGS, L.L.C.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
THE PETERSEN COMPANIES, INC.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
Accepted and agreed to:
FIRST UNION NATIONAL BANK, as
Administrative Agent
By: /s/ Bruce W. Loftin
------------------------------------------
Title: Senior Vice President
------------------------------------------
-16-
<PAGE>
Annex A to Parent Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
Pledged Interests pledged by Holdings
- -------------------------------------
Percentage of
Outstanding
Type of Interests
Name of Issuer Interests in Issuer
-------------- --------- ---------
Petersen Publishing Company, L.L.C. Common 99.9%
Pledged Interests pledged by Parent
- -----------------------------------
Percentage of
Outstanding
Type of Interests
Name of Issuer Interests in Issuer
-------------- --------- ---------
Petersen Publishing Company, L.L.C. Common 0.1%
<PAGE>
Annex B to Parent Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
FILING LOCATIONS
A. Petersen Holdings, L.L.C.
-------------------------
Secretary of State of California
Secretary of State of Illinois
B. The Petersen Companies, Inc.
----------------------------
Secretary of State of California
Secretary of State of Illinois
<PAGE>
Annex C to Parent Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
LOCATIONS OF CHIEF EXECUTIVE OFFICE
AND RECORDS RELATING TO COLLATERAL
A. Petersen Holdings, L.L.C.
1. Chief executive office/principal place
--------------------------------------
of business:
-----------
a) 6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
------------------------------
a) 6420 Wilshire Blvd.
Los Angeles, California
b) c/o Willis Stein & Partners, L.P.
227 West Monroe, Suite 4300
Chicago, Illinois 60606
B. The Petersen Companies, Inc.
1. Chief executive office/principal place
--------------------------------------
of business:
-----------
a) 6420 Wilshire Blvd.
Los Angeles, California
2. Records relating to Collateral:
------------------------------
a) 6420 Wilshire Blvd.
Los Angeles, California
b) c/o Willis Stein & Partners, L.P.
227 West Monroe, Suite 4300
Chicago, Illinois 60606
<PAGE>
Exhibit A to Parent Pledge and
Security Agreement
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
PLEDGE AMENDMENT
THIS PLEDGE AMENDMENT, dated as of _______________, 19___, is delivered by
______________________ (the "Pledgor") pursuant to SECTION 5 of the Pledge
Agreement referred to hereinbelow. The Pledgor hereby agrees that this Pledge
Amendment may be attached to the Pledge and Security Agreement, dated as of
__________, 1997, made by the Pledgor in favor of First Union National Bank, as
Administrative Agent (as amended, modified, supplemented or restated from time
to time, the "Pledge Agreement," capitalized terms defined therein being used
herein as therein defined), and that the Pledged Interests listed on Annex A to
-------
this Pledge Amendment shall be deemed to be part of the Pledged Interests within
the meaning of the Pledge Agreement and shall become part of the Collateral and
shall secure all of the Secured Obligations as provided in the Pledge Agreement.
This Pledge Amendment and its attachments are hereby incorporated into the
Pledge Agreement and made a part thereof.
__________________________
By: _________________________________
Title: ______________________________
<PAGE>
Annex A to Exhibit A (Pledge
Amendment)
First Union National Bank, as
Administrative Agent
Petersen Publishing Company, L.L.C.
October 6, 1997
___________________________________
Pledged Interests
- -----------------
Percentage of
Outstanding
Type of Certificate Interests
Name of Issuer Interests Number in Issuer
-------------- ---------- --------- ---------
<PAGE>
EXHIBIT 4.4
Borrower's Taxpayer Identification No. 95-4597937
REVOLVING CREDIT NOTE
$96,250,000 October 6, 1997
Charlotte, North Carolina
FOR VALUE RECEIVED, PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), hereby promises to pay to the order of
FIRST UNION NATIONAL BANK (the "Lender"), at the offices of First Union
National Bank (the "Administrative Agent") located at One First Union Center,
301 South College Street, Charlotte, North Carolina (or at such other place or
places as the Administrative Agent may designate), at the times and in the
manner provided in the Credit Agreement, dated as of October 6, 1997 (as
amended, modified or supplemented from time to time, the "Credit Agreement"),
among The Petersen Companies, Inc., the Borrower, the Lenders from time to time
parties thereto, First Union National Bank, as Administrative Agent, and CIBC
Inc., as Documentation Agent, the principal sum of
NINETY-SIX MILLION TWO HUNDRED-FIFTY THOUSAND DOLLARS ($96,250,000), or
such lesser amount as may constitute the unpaid principal amount of the
Revolving Loans made by the Lender, under the terms and conditions of this
promissory note (this "Revolving Credit Note") and the Credit Agreement. The
defined terms in the Credit Agreement are used herein with the same meaning.
The Borrower also unconditionally promises to pay interest on the aggregate
unpaid principal amount of this Revolving Credit Note at the rates applicable
thereto from time to time as provided in the Credit Agreement.
This Revolving Credit Note is one of a series of Revolving Credit Notes
referred to in the Credit Agreement and is issued to evidence the Revolving
Loans made by the Lender from time to time pursuant to the Credit Agreement.
All of the terms, conditions and covenants of the Credit Agreement are expressly
made a part of this Revolving Credit Note by reference in the same manner and
with the same effect as if set forth herein at length, and any holder of this
Revolving Credit Note is entitled to the benefits of and remedies provided in
the Credit Agreement and the other Credit Documents. Reference is made to the
Credit Agreement for provisions relating to the interest rate, maturity,
payment, prepayment and acceleration of this Revolving Credit Note.
In the event of an acceleration of the maturity of this Revolving Credit
Note, this Revolving Credit Note shall become immediately due and payable,
without presentation, demand, protest or notice of any kind, all of which are
hereby waived by the Borrower.
In the event this Revolving Credit Note is not paid when due at any stated
or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys'
fees.
This Revolving Credit Note shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of North Carolina.
The Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Lender shall not be limited to bringing an action in such courts.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to
be executed under seal by its duly authorized corporate officer as of the day
and year first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
-2-
<PAGE>
Borrower's Taxpayer Identification No. 95-4597937
REVOLVING CREDIT NOTE
$78,750,000 October 6, 1997
Charlotte, North Carolina
FOR VALUE RECEIVED, PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), hereby promises to pay to the order of
CIBC INC. (the "Lender"), at the offices of First Union National Bank (the
"Administrative Agent") located at One First Union Center, 301 South College
Street, Charlotte, North Carolina (or at such other place or places as the
Administrative Agent may designate), at the times and in the manner provided in
the Credit Agreement, dated as of October 6, 1997 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), among The Petersen
Companies, Inc., the Borrower, the Lenders from time to time parties thereto,
First Union National Bank, as Administrative Agent, and CIBC Inc., as
Documentation Agent, the principal sum of
SEVENTY-EIGHT MILLION SEVEN HUNDRED-FIFTY THOUSAND DOLLARS ($78,750,000),
or such lesser amount as may constitute the unpaid principal amount of the
Revolving Loans made by the Lender, under the terms and conditions of this
promissory note (this "Revolving Credit Note") and the Credit Agreement. The
defined terms in the Credit Agreement are used herein with the same meaning.
The Borrower also unconditionally promises to pay interest on the aggregate
unpaid principal amount of this Revolving Credit Note at the rates applicable
thereto from time to time as provided in the Credit Agreement.
This Revolving Credit Note is one of a series of Revolving Credit Notes
referred to in the Credit Agreement and is issued to evidence the Revolving
Loans made by the Lender from time to time pursuant to the Credit Agreement.
All of the terms, conditions and covenants of the Credit Agreement are expressly
made a part of this Revolving Credit Note by reference in the same manner and
with the same effect as if set forth herein at length, and any holder of this
Revolving Credit Note is entitled to the benefits of and remedies provided in
the Credit Agreement and the other Credit Documents. Reference is made to the
Credit Agreement for provisions relating to the interest rate, maturity,
payment, prepayment and acceleration of this Revolving Credit Note.
In the event of an acceleration of the maturity of this Revolving Credit
Note, this Revolving Credit Note shall become immediately due and payable,
without presentation, demand, protest or notice of any kind, all of which are
hereby waived by the Borrower.
In the event this Revolving Credit Note is not paid when due at any stated
or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys'
fees.
This Revolving Credit Note shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of North Carolina.
The Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Lender shall not be limited to bringing an action in such courts.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to
be executed under seal by its duly authorized corporate officer as of the day
and year first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
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<PAGE>
Borrower's Taxpayer Identification No. 95-4597937
SWINGLINE NOTE
$10,000,000 October 6, 1997
Charlotte, North Carolina
FOR VALUE RECEIVED, PETERSEN PUBLISHING COMPANY, L.L.C., a Delaware limited
liability company (the "Borrower"), hereby promises to pay to the order of
FIRST UNION NATIONAL BANK (the "Swingline Lender"), at the offices of First
Union National Bank (the "Administrative Agent") located at One First Union
Center, 301 South College Street, Charlotte, North Carolina (or at such other
place or places as the Administrative Agent may designate), at the times and in
the manner provided in the Credit Agreement, dated as of October 6, 1997 (as
amended, modified or supplemented from time to time, the "Credit Agreement"),
among The Petersen Companies, Inc., the Borrower, the Lenders from time to time
parties thereto, First Union National Bank, as Administrative Agent, and CIBC
Inc., as Documentation Agent, the principal sum of
TEN MILLION DOLLARS ($10,000,000), or such lesser amount as may constitute
the unpaid principal amount of the Swingline Loans made by the Swingline Lender,
under the terms and conditions of this promissory note (this "Swingline Note")
and the Credit Agreement. The defined terms in the Credit Agreement are used
herein with the same meaning. The Borrower also unconditionally promises to pay
interest on the aggregate unpaid principal amount of this Swingline Note at the
rates applicable thereto from time to time as provided in the Credit Agreement.
This Swingline Note is issued to evidence the Swingline Loans made by the
Swingline Lender from time to time pursuant to the Credit Agreement. All of the
terms, conditions and covenants of the Credit Agreement are expressly made a
part of this Swingline Note by reference in the same manner and with the same
effect as if set forth herein at length, and any holder of this Swingline Note
is entitled to the benefits of and remedies provided in the Credit Agreement and
the other Credit Documents. Reference is made to the Credit Agreement for
provisions relating to the interest rate, maturity, payment, prepayment and
acceleration of this Swingline Note.
In the event of an acceleration of the maturity of this Swingline Note,
this Swingline Note shall become immediately due and payable, without
presentation, demand, protest or notice of any kind, all of which are hereby
waived by the Borrower.
In the event this Swingline Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
This Swingline Note shall be governed by and construed in accordance with
the internal laws and judicial decisions of the State of North Carolina. The
Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Swingline Lender shall not be limited to bringing an action in such courts.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Swingline Note to be
executed under seal by its duly authorized corporate officer as of the day and
year first above written.
PETERSEN PUBLISHING COMPANY, L.L.C.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
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<PAGE>
EXHIBIT 4.5
PARENT GUARANTY
THIS GUARANTY AGREEMENT (this "Guaranty"), dated as of the 6th day of
October, 1997 (this "Guaranty"), is made between (a) PETERSEN HOLDINGS, L.L.C.,
a Delaware limited liability company ("Holdings"), and THE PETERSEN COMPANIES,
INC., a Delaware corporation ("Parent"; each of Holdings and Parent, a
"Guarantor," and collectively, the "Guarantors"), and (b) FIRST UNION NATIONAL
BANK, as administrative agent for the banks and other financial institutions
(collectively, the "Lenders") party to the Credit Agreement referred to below
(in such capacity, the "Administrative Agent"), for the benefit of the
Guaranteed Parties (as hereinafter defined). Capitalized terms used herein
without definition shall have the meanings given to them in the Credit Agreement
referred to below.
RECITALS
A. Parent, Petersen Publishing Company, L.L.C., a Delaware limited
liability company (the "Borrower"), the Lenders, First Union National Bank, as
Administrative Agent, and CIBC Inc., as Documentation Agent, are parties to a
Credit Agreement, dated as of October 6, 1997 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
availability of certain credit facilities to the Borrower upon the terms and
subject to the conditions set forth therein. The Guarantors own all of the
membership interests in the Borrower.
B. It is a condition to the extension of credit to the Borrower under the
Credit Agreement that each Guarantor shall have agreed, by executing and
delivering this Guaranty, to guarantee to the Guaranteed Parties the payment in
full of the Guaranteed Obligations (as hereinafter defined). The Guaranteed
Parties are relying on this Guaranty in their decision to extend credit to the
Borrower under the Credit Agreement, and would not enter into the Credit
Agreement without this Guaranty.
C. The Guarantors will obtain benefits as a result of the extension of
credit to the Borrower under the Credit Agreement, which benefits are hereby
acknowledged, and, accordingly, desire to execute and deliver this Guaranty.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to induce the Guaranteed Parties to enter into the Credit
Agreement and to induce the Lenders to extend credit to the Borrower thereunder,
each Guarantor hereby agrees as follows:
1. Guaranty. (a) Each Guarantor hereby irrevocably, absolutely and
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unconditionally, and jointly and severally:
(i) guarantees to the Lenders (including the Issuing Lender and the
Swingline Lender in their capacities as such, and including any Lender in
its capacity as a counterparty to any Interest Rate Protection Agreement
with the Borrower), the Documentation Agent and the Administrative Agent
(collectively, the "Guaranteed Parties") the full and prompt
<PAGE>
payment, at any time and from time to time as and when due (whether at the
stated maturity, by acceleration or otherwise), of all Obligations of the
Borrower under the Credit Agreement and the other Credit Documents,
including, without limitation, all principal of and interest on the Loans,
all Reimbursement Obligations in respect of Letters of Credit, all fees,
expenses, indemnities and other amounts payable by the Borrower under the
Credit Agreement or any other Credit Document (including interest accruing
after the filing of a petition or commencement of a case by or with respect
to the Borrower seeking relief under any applicable federal and state laws
pertaining to bankruptcy, reorganization, arrangement, moratorium,
readjustment of debts, dissolution, liquidation or other debtor relief,
specifically including, without limitation, the Bankruptcy Code and any
fraudulent transfer and fraudulent conveyance laws (collectively,
"Insolvency Laws"), whether or not the claim for such interest is allowed
in such proceeding), all obligations of the Borrower to any Lender under
any Interest Rate Protection Agreement, and all Obligations that, but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, would become due, in each case whether now existing or hereafter
created or arising and whether direct or indirect, absolute or contingent,
due or to become due (all liabilities and obligations described in this
clause (i), collectively, the "Guaranteed Obligations"); and
(ii) agrees to pay or reimburse upon demand all reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred or paid by (y) any Guaranteed Party in connection with
any suit, action or proceeding to enforce or protect any rights of the
Guaranteed Parties hereunder and (z) the Administrative Agent in connection
with any amendment, modification or waiver hereof or consent pursuant
hereto (all liabilities and obligations described in this clause (ii),
collectively, the "Other Obligations"; and the Other Obligations, together
with the Guaranteed Obligations, the "Total Obligations").
(b) The guaranty of each Guarantor set forth in this SECTION 1 is a
guaranty of payment as a primary obligor, and not a guaranty of collection.
2. Guaranty Absolute. Each Guarantor agrees that its obligations
-----------------
hereunder are irrevocable, absolute and unconditional, are independent of the
Guaranteed Obligations and any Collateral or other security therefor or other
guaranty or liability in respect thereof, whether given by such Guarantor or any
other Person, and (to the full extent permitted by applicable law) shall not be
discharged, limited or otherwise affected by reason of any of the following,
whether or not such Guarantor has notice or knowledge thereof:
(i) any change in the time, manner or place of payment of, or in
any other term of, any Guaranteed Obligations or any guaranty or other
liability in respect thereof, or any amendment, modification or supplement
to, restatement of, or consent to any rescission or waiver of or departure
from, any provisions of the Credit Agreement, any other Credit Document or
any agreement or instrument delivered pursuant to any of the foregoing;
(ii) the invalidity or unenforceability of any Guaranteed
Obligations, any guaranty or other liability in respect thereof or any
provisions of the Credit Agreement, any other Credit Document or any
agreement or instrument delivered pursuant to any of the foregoing;
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<PAGE>
(iii) the release of either Guarantor hereunder or the taking,
acceptance or release of other guarantees of any Guaranteed Obligations or
additional Collateral or other security for any Guaranteed Obligations or
for any guaranty or other liability in respect thereof;
(iv) any renewal, extension, increase, decrease, release,
discharge, modification, settlement, compromise or other action or inaction
in respect of any Guaranteed Obligations or any guaranty or other liability
in respect thereof (other than satisfaction of the Termination Requirements
(as hereinafter defined)), including any acceptance or refusal of any offer
or performance with respect to the same or the subordination of the same to
the payment of any other obligations;
(v) any agreement not to pursue or enforce or any failure to
pursue or enforce (whether voluntarily or involuntarily as a result of
operation of law, court order or otherwise) any right or remedy in respect
of any Guaranteed Obligations, any guaranty or other liability in respect
thereof or any Collateral or other security for any of the foregoing; any
sale, exchange, release, substitution, compromise or other action in
respect of any such Collateral or other security; or any failure to create,
protect, perfect, secure, insure, continue or maintain any Liens in any
such Collateral or other security;
(vi) the exercise of any right or remedy available under the Credit
Documents, at law, in equity or otherwise in respect of any Collateral or
other security for any Guaranteed Obligations or for any guaranty or other
liability in respect thereof, in any order and by any manner thereby
permitted, including, without limitation, foreclosure on any such
Collateral or other security by any manner of sale thereby permitted,
whether or not every aspect of such sale is commercially reasonable;
(vii) any bankruptcy, reorganization, arrangement, liquidation,
insolvency, dissolution, termination, reorganization or like change in the
corporate structure or existence of the Borrower or any other Person
directly or indirectly liable for any Guaranteed Obligations (it being
understood and agreed that, as between each Guarantor, on the one hand, and
the Guaranteed Parties, on the other hand, (a) the maturity of the
Guaranteed Obligations may be accelerated as provided in the Credit
Agreement for the purposes of such Guarantor's guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (b) in
the event of any declaration of acceleration of such Obligations as
provided in the Credit Agreement, such Obligations (whether or not due and
payable) shall forthwith become due and payable in full by such Guarantor
for purposes of this Guaranty);
(viii) any manner of application of any payments by or amounts
received or collected from any Person, by whomsoever paid and howsoever
realized, whether in reduction of any Guaranteed Obligations or any other
obligations of the Borrower or any other Person directly or indirectly
liable for any Guaranteed Obligations, regardless of what Guaranteed
Obligations may remain unpaid after any such application; or
(ix) any other circumstance that might otherwise constitute a
legal or equitable discharge of, or a defense, set-off or counterclaim
available to, the Borrower, either Guarantor or a surety or guarantor
generally, other than the occurrence of all of the following: (x) the
payment in full of the Total Obligations (other than indemnity obligations
3
<PAGE>
not then due and payable and that survive termination of the Credit
Documents), (y) the termination or expiration of all Letters of Credit
under the Credit Agreement and (z) the termination of the Commitments under
the Credit Agreement (the events in clauses (x), (y) and (z) above,
collectively, the "Termination Requirements").
3. Waivers. Each Guarantor hereby knowingly, voluntarily and expressly
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waives to the full extent permitted by applicable law:
(i) presentment, demand for payment, demand for performance,
protest and notice of any other kind, including, without limitation, notice
of nonpayment or other nonperformance (including notice of default under
any Credit Document with respect to any Guaranteed Obligations), protest,
dishonor, acceptance hereof, extension of additional credit to the Borrower
and of any of the matters referred to in SECTION 2 and of any rights to
consent thereto;
(ii) any right to require the Guaranteed Parties or any of them,
as a condition of payment or performance by the Guarantors hereunder, to
proceed against, or to exhaust or have resort to any Collateral or other
security from or any deposit balance or other credit in favor of, the
Borrower or any other Person directly or indirectly liable for any
Guaranteed Obligations, or to pursue any other remedy or enforce any other
right; and any other defense based on an election of remedies with respect
to any Collateral or other security for any Guaranteed Obligations or for
any guaranty or other liability in respect thereof, notwithstanding that
any such election (including any failure to pursue or enforce any rights or
remedies) may impair or extinguish any right of indemnification,
contribution, reimbursement or subrogation or other right or remedy of
either Guarantor against the Borrower or any other Person directly or
indirectly liable for any Guaranteed Obligations or any such Collateral or
other security; and, without limiting the generality of the foregoing, each
Guarantor hereby specifically waives the benefits of Sections 26-7 through
26-9, inclusive, of the General Statutes of North Carolina, as amended from
time to time, and any similar statute or law of any other jurisdiction, as
the same may be amended from time to time;
(iii) any right or defense based on or arising by reason of any
right or defense of the Borrower or any other Person, including, without
limitation, any defense based on or arising from a lack of authority or
other disability of the Borrower or any other Person, the invalidity or
unenforceability of any Guaranteed Obligations, any Collateral or other
security therefor or any Credit Document or other agreement or instrument
delivered pursuant thereto, or the cessation of the liability of the
Borrower for any reason other than the satisfaction of the Termination
Requirements;
(iv) any defense based on the acts or omissions of any Guaranteed
Party in the administration of the Guaranteed Obligations, any guaranty or
other liability in respect thereof or any Collateral or other security for
any of the foregoing, and promptness, diligence or any requirement that any
Guaranteed Party create, protect, perfect, secure, insure, continue or
maintain any Liens in any such Collateral or other security;
(v) any right to assert against any Guaranteed Party, as a
defense, counterclaim, crossclaim or set-off, any defense, counterclaim,
claim, right of recoupment or set-off that it
4
<PAGE>
may at any time have against any Guaranteed Party (including, without
limitation, failure of consideration, statute of limitations, payment,
accord and satisfaction and usury), other than compulsory counterclaims;
and
(vi) any defense based on or afforded by any applicable law that
limits the liability of or exonerates guarantors or sureties or that may in
any other way conflict with the terms of this Guaranty.
4. Waiver of Subrogation; Subordination. Each Guarantor hereby
------------------------------------
knowingly, voluntarily and expressly waives, until satisfaction of the
Termination Requirements, all claims and rights that it may have against the
Borrower at any time as a result of any payment made under or in connection with
this Guaranty or the performance or enforcement hereof, including all rights of
subrogation to the rights of any Guaranteed Party against the Borrower, all
rights of indemnity, contribution or reimbursement against the Borrower, all
rights to enforce any remedies of any Guaranteed Party against the Borrower, and
any benefit of, and any right to participate in, any Collateral or other
security held by any Guaranteed Party to secure payment of the Guaranteed
Obligations, in each case whether such claims or rights arise by contract,
statute (including, without limitation, the Bankruptcy Code), common law or
otherwise. Each Guarantor agrees that all indebtedness and other obligations,
whether now or hereafter existing, of the Borrower to such Guarantor, including,
without limitation, any such indebtedness in any proceeding under the Bankruptcy
Code and any intercompany receivables, together with any interest thereon, shall
be, and hereby are, subordinated and made junior in right of payment to the
Total Obligations. Each Guarantor agrees further that if any amount shall be
paid to or any distribution received by such Guarantor (i) on account of any
such indebtedness at any time after the occurrence and during the continuance of
an Event of Default, or (ii) on account of any such rights of subrogation,
indemnity, contribution or reimbursement at any time prior to the satisfaction
of the Termination Requirements, such amount or distribution shall be deemed to
have been received and to be held in trust for the benefit of the Guaranteed
Parties, and shall forthwith be delivered to the Administrative Agent in the
form received (with any necessary endorsements in the case of written
instruments), to be applied against the Guaranteed Obligations, whether or not
matured, in accordance with the terms of the applicable Credit Documents and
without in any way discharging, limiting or otherwise affecting the liability of
such Guarantor under any other provision of this Guaranty.
5. Representations and Warranties. Each Guarantor represents and
------------------------------
warrants to the Guaranteed Parties as follows:
(a) Such Guarantor (i) is a limited liability company or corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the full limited liability company or
corporate power and authority to execute, deliver and perform this Guaranty and
the other Credit Documents to which it is or will be a party, to own and hold
its property and to engage in its business as presently conducted, and (iii) is
duly qualified to do business as a foreign limited liability company or
corporation and is in good standing in each jurisdiction where the nature of its
business or the ownership of its properties requires it to be so qualified,
except where the failure to be so qualified could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
(b) Such Guarantor has taken, or on the Closing Date will have taken, all
necessary limited liability company or corporate action to execute, deliver and
perform this Guaranty and each
5
<PAGE>
of the other Credit Documents to which it is or will be a party, and has, or on
the Closing Date (or any later date of execution and delivery) will have,
validly executed and delivered this Guaranty and each of the other Credit
Documents to which it is or will be a party. This Guaranty constitutes, and upon
execution and delivery thereof each of such other Credit Documents will
constitute, the legal, valid and binding obligation of such Guarantor,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally or by general equitable
principles or principles of good faith and fair dealing.
(c) The execution, delivery and performance by such Guarantor of this
Guaranty and each of the other Credit Documents to which it is or will be a
party, compliance by it with the terms hereof and thereof, and the consummation
of the Transactions, do not and will not (i) violate any provision of its
articles of organization, certificate of incorporation, operating agreement or
bylaws, as applicable, or contravene any other Requirement of Law applicable to
it, (ii) conflict with, result in a breach of or constitute (with notice, lapse
of time or both) a default under any indenture, agreement or other instrument to
which it is a party, by which it or any of its properties is bound or to which
it is subject, (iii) require any approval of its stockholders or members or any
approval or consent of any Person under any agreement to which it is a party,
except for such approvals or consents which will be obtained on or before the
Closing Date and disclosed in writing to the Lenders or such approvals or
consents the failure of which to obtain could not reasonably be expected, singly
or in the aggregate, to have a Material Adverse Effect, or (iv) except for the
Liens granted pursuant to the Security Documents, result in or require the
creation or imposition of any Lien upon any of its properties or assets.
(d) No consent, approval, authorization or other action by, notice to, or
registration or filing with, any Governmental Authority or other Person is or
will be required as a condition to or otherwise in connection with the due
execution, delivery and performance by such Guarantor of this Guaranty or any of
the other Credit Documents to which it is or will be a party or the legality,
validity or enforceability hereof or thereof, other than (i) consents,
authorizations and filings in connection with the Petersen Acquisition that have
been (or on or prior to the Closing Date will have been) made or obtained and
that are (or on the Closing Date will be) in full force and effect, which
consents, authorizations and filings are listed on SCHEDULE 5.4 to the Credit
Agreement, and (ii) filings of Uniform Commercial Code financing statements and
other instruments and actions necessary to perfect the Liens created by the
Security Documents.
(e) There are no actions, investigations, suits or proceedings pending or,
to the knowledge of such Guarantor (after due investigation) threatened, at law,
in equity or in arbitration, before any court, other Governmental Authority or
other Person, (i) against or affecting such Guarantor or any of its properties
that could, if adversely determined, be reasonably expected to have a Material
Adverse Effect, or (ii) with respect to this Guaranty, any of the other Credit
Documents or any of the Transactions.
(f) All representations and warranties contained in the Credit Agreement or
any of the other Credit Documents that relate to such Guarantor are true and
correct in all material respects.
(g) Such Guarantor has been provided with a true and complete copy of the
executed Credit Agreement, as in effect as of the date hereof, and its principal
officers are familiar with the contents thereof, particularly insofar as the
contents thereof relate or apply to such Guarantor.
6
<PAGE>
6. Financial Condition of the Borrower. Each Guarantor represents that
-----------------------------------
it has knowledge of the Borrower's financial condition and affairs and that it
has adequate means to obtain from the Borrower on an ongoing basis information
relating thereto and to the Borrower's ability to pay and perform the Guaranteed
Obligations, and agrees to assume the responsibility for keeping, and to keep,
so informed for so long as this Guaranty is in effect with respect to such
Guarantor. Each Guarantor agrees that the Guaranteed Parties shall have no
obligation to investigate the financial condition or affairs of the Borrower for
the benefit of either Guarantor nor to advise either Guarantor of any fact
respecting, or any change in, the financial condition or affairs of the Borrower
that might become known to any Guaranteed Party at any time, whether or not such
Guaranteed Party knows or believes or has reason to know or believe that any
such fact or change is unknown to either Guarantor, or might (or does)
materially increase the risk of either Guarantor as guarantor, or might (or
would) affect the willingness of either Guarantor to continue as a guarantor of
the Guaranteed Obligations.
7. Payments; Application; Set-Off. (a) Each Guarantor agrees that, upon
------------------------------
the failure of the Borrower to pay any Guaranteed Obligations when and as the
same shall become due (whether at the stated maturity, by acceleration or
otherwise), and without limitation of any other right or remedy that any
Guaranteed Party may have at law, in equity or otherwise against such Guarantor,
such Guarantor will forthwith pay or cause to be paid to the Administrative
Agent, for the benefit of the Guaranteed Parties, an amount equal to the amount
of the Guaranteed Obligations then due and owing as aforesaid.
(b) All payments made by each Guarantor hereunder will be made in Dollars
to the Administrative Agent, without set-off, counterclaim or other defense and,
in accordance with SECTION 2.17 of the Credit Agreement, free and clear of and
without deduction for any Taxes, each Guarantor hereby agreeing to comply with
and be bound by the provisions of SECTION 2.17 of the Credit Agreement in
respect of all payments made by it hereunder and the provisions of which Section
are hereby incorporated into and made a part of this Guaranty by this reference
as if set forth herein at length.
(c) All payments made hereunder shall be applied upon receipt as follows:
(i) first, to the payment of all Other Obligations owing to the
Administrative Agent;
(ii) second, after payment in full of the amounts specified in
clause (i) above, to the ratable payment of all other Total Obligations
owing to the Guaranteed Parties; and
(iii) third, after payment in full of the amounts specified in
clauses (i) and (ii) above, and following the termination of this Guaranty,
to the Guarantors or any other Person lawfully entitled to receive such
surplus.
(d) For purposes of applying amounts in accordance with this Section, the
Administrative Agent shall be entitled to rely upon any Guaranteed Party that
has entered into an Interest Rate Protection Agreement with the Borrower for a
determination (which such Guaranteed Party agrees to provide or cause to be
provided upon request of the Administrative Agent) of the outstanding Guaranteed
Obligations owed to such Guaranteed Party under any such Interest Rate
Protection Agreement. Unless it has actual knowledge (including by way of
written notice from any such
7
<PAGE>
Guaranteed Party) to the contrary, the Administrative Agent, in acting
hereunder, shall be entitled to assume that no Interest Rate Protection
Agreements or Obligations in respect thereof are in existence between any
Guaranteed Party and the Borrower.
(e) The Guarantors shall remain jointly and severally liable to the extent
of any deficiency between the amount of all payments made hereunder and the
aggregate amount of the sums referred to in clauses (i) and (ii) of subsection
(c) above.
(f) In addition to all other rights and remedies available under the Credit
Documents or applicable law or otherwise, upon and at any time after the
occurrence and during the continuance of any Event of Default, each Guaranteed
Party may, and is hereby authorized by each Guarantor, at any such time and from
time to time, to the fullest extent permitted by applicable law, without
presentment, demand, protest or other notice of any kind, all of which are
hereby knowingly and expressly waived by each Guarantor, to set off and to apply
any and all deposits (general or special, time or demand, provisional or final)
and any other property at any time held (including at any branches or agencies,
wherever located), and any other indebtedness at any time owing, by such
Guaranteed Party to or for the credit or the account of such Guarantor against
any or all of the obligations of such Guarantor to such Guaranteed Party
hereunder now or hereafter existing, whether or not such obligations may be
contingent or unmatured, each Guarantor hereby granting to each Guaranteed Party
a continuing security interest in and Lien upon all such deposits and other
property as security for such obligations. Each Guaranteed Party agrees to
notify any affected Guarantor promptly after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
- -------- -------
validity of such set-off and application.
8. Enforcement. The Guaranteed Parties agree that, except as provided in
-----------
SECTION 7(F), this Guaranty may be enforced only by the Administrative Agent,
acting upon the instructions or with the consent of the Required Lenders as
provided for in the Credit Agreement, and that no Guaranteed Party shall have
any right individually to enforce or seek to enforce this Guaranty or to realize
upon any Collateral or other security given to secure the payment and
performance of the Guarantors' obligations hereunder. The obligations of each
Guarantor hereunder are independent of the Guaranteed Obligations, and a
separate action or actions may be brought against either Guarantor whether or
not action is brought against the Borrower or the other Guarantor and whether or
not the Borrower or the other Guarantor is joined in any such action. Each
Guarantor agrees that to the extent all or part of any payment of the Guaranteed
Obligations made by any Person is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid by or on behalf
of any Guaranteed Party to a trustee, receiver or any other party under any
Insolvency Laws (the amount of any such payment, a "Reclaimed Amount"), then, to
the extent of such Reclaimed Amount, this Guaranty shall continue in full force
and effect or be revived and reinstated, as the case may be, as to the
Guaranteed Obligations intended to be satisfied as if such payment had not been
received; and each Guarantor acknowledges that the term "Guaranteed Obligations"
includes all Reclaimed Amounts that may arise from time to time.
Notwithstanding any other provisions contained herein or in any other Credit
Document, no provision of this Guaranty shall require or permit the collection
from either Guarantor of interest in excess of the maximum rate or amount that
such Guarantor may be required or permitted to pay pursuant to applicable law.
9. Amendments, Waivers, etc. No amendment, modification, waiver,
------------------------
discharge or termination of, or consent to any departure by either Guarantor
from, any provision of this Guaranty, shall be effective unless in a writing
executed and delivered in accordance with SECTION 11.6 of the
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<PAGE>
Credit Agreement, and then the same shall be effective only in the specific
instance and for the specific purpose for which given.
10. Continuing Guaranty; Term; Successors and Assigns; Assignment;
--------------------------------------------------------------
Survival. This Guaranty is a continuing guaranty and covers all of the
- --------
Guaranteed Obligations as the same may arise and be outstanding at any time and
from time to time from and after the date hereof, and shall (i) remain in full
force and effect until satisfaction of all of the Termination Requirements, (ii)
be binding upon and enforceable against each Guarantor and its successors and
assigns (provided, however, that no Guarantor may sell, assign or transfer any
-------- -------
of its rights, interests, duties or obligations hereunder without the prior
written consent of all of the Lenders) and (iii) inure to the benefit of and be
enforceable by each Guaranteed Party and its successors and assigns. All
representations, warranties, covenants and agreements herein shall survive the
execution and delivery of this Guaranty.
11. Governing Law; Consent to Jurisdiction. THIS GUARANTY SHALL BE
--------------------------------------
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE GUARANTEED PARTIES AND THE
GUARANTORS DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, EACH GUARANTOR HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR
ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH
CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER
CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY
OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH ANY GUARANTEED PARTY
OR SUCH GUARANTOR IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF,
OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY GUARANTEED PARTY OR SUCH GUARANTOR.
EACH GUARANTOR IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF
APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES
ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE
OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. EACH GUARANTOR
--------------------
CONSENTS THAT ALL SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
DIRECTED TO IT AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE
(3) BUSINESS DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE
PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT
OF ANY GUARANTEED PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST EITHER
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
12. Arbitration; Preservation and Limitation of Remedies. (a) Upon
----------------------------------------------------
demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Guaranty or any other Credit Document
9
<PAGE>
("Disputes") between or among the Guarantors and the Guaranteed Parties, or any
of them, shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
documents executed in the future, or claims arising out of or connected with the
transactions contemplated by this Guaranty, the Credit Agreement and the other
Credit Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA"), as in effect from time to time,
and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be
conducted in the city in which the principal office of the Administrative Agent
is located. The expedited procedures set forth in Rule 51 et seq. of the
-- ---
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or, if such person is not available to serve, the
single arbitrator may be a licensed attorney. Notwithstanding the foregoing,
this arbitration provision does not apply to Disputes under or related to
Interest Rate Protection Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, independently or in connection with
an arbitration proceeding or after an arbitration action is brought. Any party
hereto shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any Collateral by exercising a power of sale
granted pursuant to any of the Credit Documents or under applicable law or by
judicial foreclosure and sale, including a proceeding to confirm the sale; (ii)
all rights of self-help, including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies, including injunctive relief,
sequestration, garnishment, attachment, appointment of a receiver and filing an
involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit the power
of an arbitrator to grant similar remedies that may be requested by a party in a
Dispute. The parties hereto agree that no party shall have a remedy of punitive
or exemplary damages against any other party in any Dispute, and each party
hereby waives any right or claim to punitive or exemplary damages that it has
now or that may arise in the future in connection with any Dispute, whether such
Dispute is resolved by arbitration or judicially.
13. Notices. All notices and other communications provided for hereunder
-------
shall be given in the manner set forth in and subject to the provisions of
SECTION 11.5 of the Credit Agreement and shall be addressed (a) if to either
Guarantor, in care of the Borrower and at the Borrower's address for notices set
forth in SECTION 11.5 of the Credit Agreement, and (b) if to any Guaranteed
Party, at its address for notices set forth in SECTION 11.5 of the Credit
Agreement; or to such other address as any of the Persons listed above may
designate for itself by like notice to the other Persons listed above; and in
each case, with copies to such other Persons as may be specified under the
provisions of the Credit Agreement.
14. No Waiver. The rights and remedies of the Guaranteed Parties
---------
expressly set forth in this Guaranty and the other Credit Documents are
cumulative and in addition to, and not exclusive of,
10
<PAGE>
all other rights and remedies available at law, in equity or otherwise. No
failure or delay on the part of any Guaranteed Party in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
or be construed to be a waiver of any Default or Event of Default. No course of
dealing between either Guarantor and any Guaranteed Party or their agents or
employees shall be effective to amend, modify or discharge any provision of this
Guaranty or any other Credit Document or to constitute a waiver of any Default
or Event of Default. No notice to or demand upon either Guarantor in any case
shall entitle such Guarantor or the other Guarantor to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
right of any Guaranteed Party to exercise any right or remedy or take any other
or further action in any circumstances without notice or demand.
15. Severability. To the extent any provision of this Guaranty is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Guaranty in any jurisdiction.
16. Construction. The headings of the various sections and subsections of
------------
this Guaranty have been inserted for convenience only and shall not in any way
affect the meaning or construction of any of the provisions hereof. Unless the
context otherwise requires, words in the singular include the plural and words
in the plural include the singular.
17. Counterparts. This Guaranty may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their duly authorized officers as of the date first above written.
PETERSEN HOLDINGS, L.L.C.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
THE PETERSEN COMPANIES, INC.
By: /s/ Richard S Willis
--------------------------------------------
Title: Executive Vice President and Chief Financial
--------------------------------------------
Officer
-------
Accepted and agreed to:
FIRST UNION NATIONAL BANK, as
Administrative Agent
By: /s/ Bruce W. Loftin
-----------------------
Title: Senior Vice President
-----------------------
12
<PAGE>
EXHIBIT 10.1
THE PETERSEN COMPANIES, INC.
1997 LONG-TERM EQUITY INCENTIVE PLAN
------------------------------------
1. Purpose.
-------
This plan shall be known as The Petersen Companies, Inc. 1997 Long-
Term Equity Incentive Plan (the "Plan"). The purpose of the Plan shall be to
promote the long-term growth and profitability of The Petersen Companies, Inc.
(the "Company") and its Subsidiaries by (i) providing certain directors,
officers and key employees of, and certain other key individuals who perform
services for, the Company and its Subsidiaries with incentives to maximize
stockholder value and otherwise contribute to the success of the Company and
(ii) enabling the Company to attract, retain and reward the best available
persons for positions of substantial responsibility. Grants of incentive or
nonqualified stock options, stock appreciation rights ("SARs") in tandem with
options, restricted stock, performance awards, or any combination of the
foregoing may be made under the Plan.
2. Definitions.
-----------
(a) "Board of Directors" and "Board" mean the board of directors of
------------------ -----
The Petersen Companies, Inc.
(b) "Cause" means the occurrence of one of the following events:
-----
(i) Conviction of a felony or any crime or offense lesser
than a felony involving the property of the Company or a Subsidiary; or
(ii) Conduct that has caused demonstrable and serious injury
to the Company or a Subsidiary, monetary or otherwise; or
(iii) Willful refusal to perform or substantial disregard of
duties properly assigned, as determined by the Company.
(c) "Change in Control" means the occurrence of one of the following
-----------------
events:
(i) if any "person" or "group" as those terms are used in
Sections 13(d) and 14(d) of the Exchange Act, other than an Exempt Person, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding securities;
or
<PAGE>
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new directors
whose election by the Board or nomination for election by the Company's
stockholders was approved by at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election was previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (other than a
corporation controlled by an Exempt Person), other than a merger or
consolidation which would result in all or a portion of the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets,
other than a sale to an Exempt Person.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means the Compensation Committee of the Board. The
---------
membership of the Committee shall be constituted so as to comply at all times
with the applicable requirements of Rule 16b-3 under the Exchange Act and
Section 162(m) of the Code.
(f) "Common Stock" means the Class A Common Stock, par value $.01 per
------------
share, of the Company, and any other shares into which such stock may be changed
by reason of a recapitalization, reorganization, merger, consolidation or any
other change in the corporate structure or capital stock of the Company.
(g) "Competition" is deemed to occur if a person whose employment with
-----------
the Company or its Subsidiaries has terminated obtains a position as a full-time
or part-time employee of, as a member of the board of directors of, or as a
consultant or advisor with or to, or acquires an ownership interest in excess of
5% of, a corporation, partnership, firm or other entity that engages in any of
the businesses of the Company or any Subsidiary with which the person was
involved in a management role at any time during his or her last five years of
employment with or other service for the Company or any Subsidiaries.
(h) "Disability" means a disability that would entitle an eligible
----------
participant to payment of monthly disability payments under any Company
disability plan or as otherwise approved by the Committee.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(j) "Exempt Person" means (i) any of Willis, Stein & Partners, L.P.,
-------------
James D. Dunning, Jr., Laurence H. Bloch, D. Claeys Bahrenburg, Neal Vitale and
Richard Willis, or any combination of all or any of the foregoing, (ii) any
person, entity or group under the control of or
-2-
<PAGE>
under common control with any party included in clause (i), or (iii) a trustee
or other administrator or fiduciary holding securities under an employee benefit
plan of the Company.
(k) "Fair Market Value" of a share of Common Stock of the Company
-----------------
means, as of the date in question, the officially-quoted closing selling price
of the stock (or if no selling price is quoted, the bid price) on the principal
securities exchange on which the Common Stock is then listed for trading
(including for this purpose the Nasdaq National Market) (the "Market") for the
immediately preceding trading day or, if the Common Stock is not then listed or
quoted in the Market, the Fair Market Value shall be the fair value of the
Common Stock determined in good faith by the Board; provided, however, that when
shares received upon exercise of an option are immediately sold in the open
market, the net sale price received may be used to determine the Fair Market
Value of any shares used to pay the exercise price or withholding taxes and to
compute withholding taxes.
(l) "Incentive Stock Option" means an option conforming to the
----------------------
requirements of Section 422 of the Code and any successor thereto.
(m) "Non-Employee Director" has the meaning given to such term in Rule
---------------------
16b-3 under the Exchange Act.
(n) "Nonqualified Stock Option" means any stock option other than an
-------------------------
Incentive Stock Option.
(o) "Other Company Securities" mean securities of the Company other
------------------------
than Common Stock, which may include, without limitation, unbundled stock units
or components thereof, debentures, preferred stock, warrants and securities
convertible into or exchangeable for Common Stock or other property.
(p) "Retirement" means retirement as defined under any Company pension
----------
plan or retirement program or termination of one's employment on retirement with
the approval of the Committee.
(q) "Subsidiary" means a corporation or other entity of which
----------
outstanding shares or ownership interests representing 50% or more of the
combined voting power of such corporation or other entity, or such lesser
percentage as may be approved by the Committee, are owned directly or indirectly
by the Company.
3. Administration.
--------------
The Plan shall be administered by the Committee; provided that the
Board may, in its discretion, at any time and from time to time, resolve to
administer the Plan, in which case the term "Committee" shall be deemed to mean
the Board for all purposes herein. The Committee shall consist of at least two
directors. Subject to the provisions of the Plan, the Committee shall be
authorized to (i) select persons to participate in the Plan, (ii) determine the
form and substance of grants made under the Plan to each participant, and the
conditions and restrictions, if any, subject to which such grants will be made,
(iii) modify the terms of grants made under the Plan, (iv)
-3-
<PAGE>
interpret the Plan and grants made thereunder, (v) make any adjustments
necessary or desirable in connection with grants made under the Plan to eligible
participants located outside the United States and (vi) adopt, amend, or rescind
such rules and regulations, and make such other determinations, for carrying out
the Plan as it may deem appropriate. Decisions of the Committee on all matters
relating to the Plan shall be in the Committee's sole discretion and shall be
conclusive and binding on all parties. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with applicable federal and state laws and rules and regulations
promulgated pursuant thereto. No member of the Committee and no officer of the
Company shall be liable for any action taken or omitted to be taken by such
member, by any other member of the Committee or by any officer of the Company in
connection with the performance of duties under the Plan, except for such
member's own willful misconduct or as expressly provided by statute.
The expenses of the Plan shall be borne by the Company. The Plan
shall not be required to establish any special or separate fund or make any
other segregation of assets to assume the payment of any award under the Plan,
and rights to the payment of such awards shall be no greater than the rights of
the Company's general creditors.
4. Shares Available for the Plan.
-----------------------------
Subject to adjustments as provided in Section 15, an aggregate of
2,041,269 shares of Common Stock (the "Shares") may be issued pursuant to the
------
Plan. Such Shares may be in whole or in part authorized and unissued, or shares
which have been reacquired by the Company and held as treasury shares. If any
grant under the Plan expires or terminates unexercised, becomes unexercisable or
is forfeited as to any Shares, such unpurchased or forfeited Shares shall
thereafter be available for further grants under the Plan unless, in the case of
options granted under the Plan, related SARs are exercised.
Without limiting the generality of the foregoing provisions of this
Section 4 or the generality of the provisions of Sections 3, 6 or 17 or any
other section of this Plan, the Committee may, at any time or from time to time,
and on such terms and conditions (that are consistent with and not in
contravention of the other provisions of this Plan) as the Committee may, in its
sole discretion, determine, enter into agreements (or take other actions with
respect to the options) for new options containing terms (including exercise
prices) more (or less) favorable than the outstanding options.
5. Participation.
-------------
Participation in the Plan shall be limited to those directors
(including Non-Employee Directors), officers (including non-employee officers)
and key employees of, and other key individuals performing services for, the
Company and its Subsidiaries selected by the Committee (including participants
located outside the United States). Nothing in the Plan or in any grant
thereunder shall confer any right on a participant to continue in the employ of
or the performance of services for the Company or shall interfere in any way
with the right of the Company to terminate the employment or performance of
services of a participant at any time. By accepting any award under the Plan,
each participant and each person claiming under or through him or her shall be
-4-
<PAGE>
conclusively deemed to have indicated his or her acceptance and ratification of,
and consent to, any action taken under the Plan by the Company, the Board or the
Committee.
Incentive Stock Options or Nonqualified Stock Options, SARs in tandem
with options, restricted stock awards, performance awards, or any combination
thereof, may be granted to such persons and for such number of Shares as the
Committee shall determine (such individuals to whom grants are made being
sometimes herein called "optionees" or "grantees," as the case may be).
Determinations made by the Committee under the Plan need not be uniform and may
be made selectively among eligible individuals under the Plan, whether or not
such individuals are similarly situated. A grant of any type made hereunder in
any one year to an eligible participant shall neither guarantee nor preclude a
further grant of that or any other type to such participant in that year or
subsequent years.
6. Incentive and Nonqualified Options.
----------------------------------
The Committee may from time to time grant to eligible participants
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof;
provided that the Committee may grant Incentive Stock Options only to eligible
employees of the Company or its subsidiaries (as defined for this purpose in
Section 424(f) of the Code). In any one calendar year, the Committee shall not
grant to any one participant, options or SARs to purchase a number of shares of
Common Stock in excess of 100,000. The options granted shall take such form as
the Committee shall determine, subject to the following terms and conditions.
It is the Company's intent that Nonqualified Stock Options granted
under the Plan not be classified as Incentive Stock Options, that Incentive
Stock Options be consistent with and contain or be deemed to contain all
provisions required under Section 422 of the Code and any successor thereto, and
that any ambiguities in construction be interpreted in order to effectuate such
intent. If an Incentive Stock Option granted under the Plan does not qualify as
such for any reason, then to the extent of such nonqualification, the stock
option represented thereby shall be regarded as a Nonqualified Stock Option duly
granted under the Plan, provided that such stock option otherwise meets the
Plan's requirements for Nonqualified Stock Options.
(a) Price. The price per Share deliverable upon the exercise of each
-----
option ("exercise price") shall be established by the Committee, except that in
the case of the grant of any Incentive Stock Option, the exercise price may not
be less than 100% of the Fair Market Value of a share of Common Stock as of the
date of grant of the option, and in the case of the grant of any Incentive Stock
Option to an employee who, at the time of the grant, owns more than 10% of the
total combined voting power of all classes of stock of the Company or any of its
Subsidiaries, the exercise price may not be less that 110% of the Fair Market
Value of a share of Common Stock as of the date of grant of the option, in each
case unless otherwise permitted by Section 422 of the Code.
(b) Payment. Options may be exercised, in whole or in part, upon
-------
payment of the exercise price of the Shares to be acquired. Unless otherwise
determined by the Committee, payment shall be made (i) in cash (including check,
bank draft or money order), (ii) by delivery of outstanding shares of Common
Stock with a Fair Market Value on the date of exercise equal to the
-5-
<PAGE>
aggregate exercise price payable with respect to the options' exercise, (iii) by
simultaneous sale through a broker reasonably acceptable to the Committee of
Shares acquired on exercise, as permitted under Regulation T of the Federal
Reserve Board, (iv) by authorizing the Company to withhold from issuance a
number of Shares issuable upon exercise of the options which, when multiplied by
the Fair Market Value of a share of Common Stock on the date of exercise is
equal to the aggregate exercise price payable with respect to the options so
exercised or (v) by any combination of the foregoing. Options may also be
exercised upon payment of the exercise price of the Shares to be acquired by
delivery of the optionee's promissory note, but only to the extent specifically
approved by and in accordance with the policies of the Committee.
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (ii) above, (A) only a whole number of
share(s) of Common Stock (and not fractional shares of Common Stock) may be
tendered in payment, (B) such grantee must present evidence acceptable to the
Company that he or she has owned any such shares of Common Stock tendered in
payment of the exercise price (and that such tendered shares of Common Stock
have not been subject to any substantial risk of forfeiture) for at least six
months prior to the date of exercise, and (C) Common Stock must be delivered to
the Company. Delivery for this purpose may, at the election of the grantee, be
made either by (A) physical delivery of the certificate(s) for all such shares
of Common Stock tendered in payment of the price, accompanied by duly executed
instruments of transfer in a form acceptable to the Company, or (B) direction to
the grantee's broker to transfer, by book entry, such shares of Common Stock
from a brokerage account of the grantee to a brokerage account specified by the
Company. When payment of the exercise price is made by delivery of Common
Stock, the difference, if any, between the aggregate exercise price payable with
respect to the option being exercised and the Fair Market Value of the share(s)
of Common Stock tendered in payment (plus any applicable taxes) shall be paid in
cash. No grantee may tender shares of Common Stock having a Fair Market Value
exceeding the aggregate exercise price payable with respect to the option being
exercised.
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (iv) above, (A) only a whole number of
Share(s) (and not fractional Shares) may be withheld in payment and (B) such
grantee must present evidence acceptable to the Company that he or she has owned
a number of shares of Common Stock at least equal to the number of Shares to be
withheld in payment of the exercise price (and that such owned shares of Common
Stock have not been subject to any substantial risk of forfeiture) for at least
six months prior to the date of exercise. When payment of the exercise price is
made by withholding of Shares, the difference, if any, between the aggregate
exercise price payable with respect to the option being exercised and the Fair
Market Value of the Share(s) withheld in payment (plus any applicable taxes)
shall be paid in cash. No grantee may authorize the withholding of Shares
having a Fair Market Value exceeding the aggregate exercise price payable with
respect to the option being exercised. Any withheld Shares shall no longer be
issuable under such option.
(c) Terms of Options. The term during which each option may be
----------------
exercised shall be determined by the Committee, but, except as otherwise
provided herein, in no event shall an option be exercisable in whole or in part,
in the case of a Nonqualified Stock Option or an Incentive Stock Option (other
than as described below), more than ten years from the date it is granted or, in
the case of an Incentive Stock Option granted to an employee who at the time of
the grant owns
-6-
<PAGE>
more than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, if required by the Code, more than five
years from the date it is granted. All rights to purchase Shares pursuant to an
option shall, unless sooner terminated, expire at the date designated by the
Committee. The Committee shall determine the date on which each option shall
become exercisable and may provide that an option shall become exercisable in
installments. The Shares constituting each installment may be purchased in whole
or in part at any time after such installment becomes exercisable, subject to
such minimum exercise requirements as may be designated by the Committee. Unless
otherwise provided herein or in the terms of the related grant, an optionee may
exercise an option only if he or she is, and has been continuously since the
date the option was granted, a director, officer or employee of the Company or a
Subsidiary. Prior to the exercise of an option and delivery of the Shares
represented thereby, the optionee shall have no rights as a stockholder with
respect to any Shares covered by such outstanding option (including any dividend
or voting rights).
(d) Limitations on Grants. If required by the Code, the aggregate Fair
---------------------
Market Value (determined as of the grant date) of Shares for which an Incentive
Stock Option is exercisable for the first time during any calendar year under
all equity incentive plans of the Company and its Subsidiaries may not exceed
$100,000.
(e) Termination; Change in Control.
------------------------------
(i) Unless otherwise determined by the Committee, if a
participant ceases to be a director, officer or employee of , or to perform
other services for, the Company and any Subsidiary due to death or Disability,
all or any portion of the participant's options and SARs may become fully vested
and exercisable and shall remain so for a period of 180 days from the date of
such death or Disability, but in no event after the expiration date of the
option. Notwithstanding the foregoing, if the Disability giving rise to the
termination of employment is not within the meaning of Section 422(e)(3) of the
Code, Incentive Stock Options not exercised by such participant within 90 days
after the date of termination of employment will cease to qualify as Incentive
Stock Options and will be treated as Nonqualified Stock Options under the Plan
if required to be so treated under the Code.
(ii) Unless otherwise determined by the Committee, if a
participant ceases to be a director, officer or employee of, or to perform other
services for, the Company and any Subsidiary upon the occurrence of his or her
Retirement, (A) each of his or her options and SARs that was exercisable on the
date of Retirement shall remain exercisable for, and shall otherwise terminate
at the end of, a period of not more than one year after the date of Retirement,
but in no event after the expiration date of the options; provided that the
participant does not engage in Competition during such one year period unless he
or she receives written consent to do so from the Board or the Committee, and
(B) all of the participant's options and SARs that were not exercisable on the
date of Retirement shall be forfeited immediately upon such Retirement.
Notwithstanding the foregoing, Incentive Stock Options not exercised by such
participant within 90 days after Retirement will cease to qualify as Incentive
Stock Options and will be treated as Nonqualified Stock Options under the Plan
if required to be so treated under the Code.
-7-
<PAGE>
(iii) If a participant ceases to be a director, officer or
employee of, or to perform other services for, the Company or a Subsidiary due
to Cause, all of his or her options and SARs shall be forfeited immediately upon
such cessation, whether or not then exercisable.
(iv) Unless otherwise determined by the Committee, if a
participant ceases to be a director, officer or employee of, or to otherwise
perform services for, the Company or a Subsidiary for any reason other than
death, Disability, Retirement or Cause, (A) each of his or her options and SARs
that was exercisable on the date of such cessation shall remain exercisable for,
and shall otherwise terminate at the end of, a period of 30 days after the date
of such cessation, but in no event after the expiration date of the options;
provided that the participant does not engage in Competition during such 30-day
period unless he or she receives written consent to do so from the Board or the
Committee, and (B) all of the participant's options and SARs that were not
exercisable on the date of such cessation shall be forfeited immediately upon
such cessation.
(v) Unless otherwise determined by the Committee if there
is a Change in Control of the Company, all of the participant's options and SARs
shall become fully vested and exercisable immediately prior to such Change in
Control and shall remain so until the expiration date of the options and SARs.
(f) Grant of Reload Options. The Committee may provide, in its
-----------------------
discretion, for the grant (either at the time of grant or exercise of an
option), to a grantee who exercises all or any portion of an option for Shares
which have a Fair Market Value equal to not less than 100% of the price for such
options ("Exercised Options") and who pays all or part of such exercise price
with shares of Common Stock, of an additional option (a "Reload Option") for a
number of shares of Common Stock equal to the sum (the "Reload Number") of the
number of shares of Common Stock tendered or withheld in payment of such
exercise price for the Exercised Options plus, if so provided by the Committee,
the number of shares of Common Stock, if any, tendered or withheld by the
grantee or withheld by the Company in connection with the exercise of the
Exercised Options to satisfy any federal, state or local tax withholding
requirements. The terms of each Reload Option, including the date of its
expiration and the terms and conditions of its exercisability and
transferability, shall be the same as the terms of the Exercised Option to which
it relates, except that (i) the grant date for each Reload Option shall be the
date of exercise of the Exercised Option to which it relates, (ii) the exercise
price for each Reload Option shall be the Fair Market Value of the Common Stock
on the grant date of the Reload Option and (iii) no Reload Option may be
exercised within one year from the grant date thereof.
7. Stock Appreciation Rights.
-------------------------
The Committee shall have the authority to grant SARs under this Plan
to any optionee in tandem with options, either at the time of grant of the
related option or thereafter by amendment to an outstanding option. The
exercise of an option shall result in an immediate forfeiture of any related SAR
to the extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of any related option to the extent the SAR is exercised.
SARs shall be subject to such other terms and conditions as the Committee may
specify. An SAR shall expire at the same
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<PAGE>
time as the related option expires and shall be transferable only when, and
under the same conditions as, the related option is transferable.
SARs shall be exercisable only when, to the extent and on the
conditions that the related option is exercisable. No SAR may be exercised
unless the Fair Market Value of a share of Common Stock of the Company on the
date of exercise exceeds the exercise price of the option to which the SAR
corresponds. Prior to the exercise of the SAR and delivery of the cash and/or
Shares represented thereby, the optionee shall have no rights as a stockholder
with respect to Shares covered by such outstanding SAR (including any dividend
or voting rights).
Upon the exercise of an SAR, the optionee shall be entitled to a
distribution in an amount equal to the difference between the Fair Market Value
of a share of Common Stock on the date of exercise and the exercise price of the
option to which the SAR is related, multiplied by the number of Shares as to
which the SAR is exercised. The Committee shall decide whether such
distribution shall be in cash, in Shares, in Other Company Securities or in a
combination thereof.
All SARs will be exercised automatically on the last day prior to the
expiration date of the related option, so long as the Fair Market Value of a
share of Common Stock on that date exceeds the exercise price of the related
option.
8. Restricted Stock.
----------------
The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least six months except as otherwise provided in the third paragraph of this
Section 8), and the time or times at which such restrictions shall lapse with
respect to all or a specified number of Shares that are part of the grant.
The participant will be required to pay the Company the aggregate par
value of any Shares of restricted stock (or such larger amount as the Board may
determine to constitute capital under Section 154 of the Delaware General
Corporation Law, as amended) within ten days of the date of grant, unless such
Shares of restricted stock are treasury shares. The Shares will be held in
escrow by the Company on the participant's behalf during any period of
restriction thereon and will bear an appropriate legend specifying the
applicable restrictions thereon, and the participant will be required to execute
a blank stock power therefor. Except as otherwise provided by the Committee,
during such period of restriction the participant shall have all of the rights
of a holder of Common Stock, including but not limited to the rights to receive
dividends (or amounts equivalent to dividends) and to vote, and any stock
received as a distribution with respect to such participant's restricted stock
shall be subject to the same restrictions as then in effect for the restricted
stock.
Except as otherwise provided by the Committee, immediately prior to a
Change in Control or at such time as a grantee ceases to be a director, officer
or employee of , or to otherwise perform services for, the Company and its
Subsidiaries due to death, Disability or Retirement during any period of
restriction, all restrictions on Shares granted to such grantee shall lapse. At
such time as a grantee ceases to be a director, officer or employee of, or to
otherwise perform services for, the
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<PAGE>
Company or its Subsidiaries for any other reason, all restricted stock granted
to such grantee on which the restrictions have not lapsed shall be forfeited to
the Company.
9. Performance Awards.
------------------
Performance awards may be granted to participants at any time and from
time to time as determined by the Committee. The Committee shall have complete
discretion in determining the size and composition of performance awards so
granted to a participant and the appropriate period over which performance is to
be measured (a "performance cycle"). Performance awards may include (i)
specific dollar-value target awards (ii) performance units, the value of each
such unit being determined by the Committee at the time of issuance, and/or
(iii) performance Shares, the value of each such Share being equal to the Fair
Market Value of a share of Common Stock.
The value of each performance award may be fixed or it may be
permitted to fluctuate based on a performance factor (e.g., return on equity)
selected by the Committee.
The Committee shall establish performance goals and objectives for
each performance cycle on the basis of such criteria and objectives as the
Committee may select from time to time, including, without limitation, the
performance of the participant, the Company, one or more of its Subsidiaries or
divisions or any combination of the foregoing. During any performance cycle,
the Committee shall have the authority to adjust the performance goals and
objectives for such cycle for such reasons as it deems equitable.
The Committee shall determine the portion of each performance award
that is earned by a participant on the basis of the Company's performance over
the performance cycle in relation to the performance goals for such cycle. The
earned portion of a performance award may be paid out in Shares, cash, Other
Company Securities, or any combination thereof, as the Committee may determine.
A participant must be a director, officer or employee of, or otherwise
perform services for, the Company or its Subsidiaries at the end of the
performance cycle in order to be entitled to payment of a performance award
issued in respect of such cycle; provided, however, that, except as otherwise
determined by the Committee, if a participant ceases to be a director, officer
or employee of , or to otherwise perform services for, the Company and its
Subsidiaries upon his or her death, Retirement, or Disability prior to the end
of the performance cycle, the participant shall earn a proportionate portion of
the performance award based upon the elapsed portion of the performance cycle
and the Company's performance over that portion of such cycle.
10. Withholding Taxes.
-----------------
(a) Participant Election. Unless otherwise determined by the Committee, a
--------------------
participant may elect to deliver shares of Common Stock (or have the Company
withhold shares acquired upon exercise of an option or SAR or deliverable upon
grant or vesting of restricted stock, as the case may be) to satisfy, in whole
or in part, the amount the Company is required to withhold for taxes in
connection with the exercise of an option or SAR or the delivery of restricted
stock upon grant or vesting, as the case may be. Such election must be made on
or before the date the amount of tax to
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<PAGE>
be withheld is determined. Once made, the election shall be irrevocable. The
fair market value of the shares to be withheld or delivered will be the Fair
Market Value as of the date the amount of tax to be withheld is determined. In
the event a participant elects to deliver shares of Common Stock pursuant to
this Section 10(a), such delivery must be made subject to the conditions and
pursuant to the procedures set forth in Section 6(b) with respect to the
delivery of Common Stock in payment of the exercise price of options.
(b) Company Requirement. The Company may require, as a condition to any
-------------------
grant or exercise under the Plan or to the delivery of certificates for Shares
issued hereunder, that the grantee make provision for the payment to the
Company, either pursuant to Section 10(a) or this Section 10(b), of any federal,
state or local taxes of any kind required by law to be withheld with respect to
any grant or any delivery of Shares. The Company, to the extent permitted or
required by law, shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to a grantee, an amount equal to any
federal, state or local taxes of any kind required by law to be withheld with
respect to any grant or to the delivery of Shares under the Plan, or to retain
or sell without notice a sufficient number of the Shares to be issued to such
grantee to cover any such taxes, the payment of which has not otherwise been
provided for in accordance with the terms of the Plan, provided that the Company
shall not sell any such Shares if such sale would be considered a sale by such
grantee for purposes of Section 16 of the Exchange Act that is not exempt from
matching thereunder.
11. Written Agreement; Vesting.
--------------------------
Each employee to whom a grant is made under the Plan shall enter into
a written agreement with the Company that shall contain such provisions,
including without limitation vesting requirements, consistent with the
provisions of the Plan, as may be approved by the Committee. Unless the
Committee determines otherwise and except as otherwise provided in Sections 6,
7, 8 and 9 in connection with a Change of Control or certain occurrences of
termination, no grant under this Plan may be exercised within six months of the
date such grant is made.
12. Transferability.
---------------
Unless the Committee determines otherwise, no option, tandem SAR,
performance award, or restricted stock granted under the Plan shall be
transferable by a participant otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code. Unless the Committee determines otherwise, an option, SAR, or
performance award may be exercised only by the optionee or grantee thereof or
his guardian or legal representative; provided that Incentive Stock Options may
be exercised by such guardian or legal representative only if permitted by the
Code and any regulations promulgated thereunder.
13. Listing, Registration and Qualification.
---------------------------------------
If the Committee determines that the listing, registration or
qualification upon any securities exchange or under any law of Shares subject to
any option, SAR, performance award or restricted stock grant is necessary or
desirable as a condition of, or in connection with, the granting of same or the
issue or purchase of Shares thereunder, no such option or SAR may be exercised
in
-11-
<PAGE>
whole or in part, no such performance award may be paid out and no Shares may
be issued unless such listing, registration or qualification is effected free of
any conditions not acceptable to the Committee.
It is the intent of the Company that the Plan comply in all respects
with Section 162(m) of the Code, that awards made hereunder comply in all
respects with Rule 16b-3 under the Exchange Act, that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect to
such intention and that if any provision of the Plan is found not to be in
compliance with Rule 16b-3 or Section 162(m), such provision shall be deemed
null and void to the extent required to permit the Plan to comply with Rule 16b-
3 or Section 162(m), as the case may be.
14. Transfer of Employee.
--------------------
Transfer of an employee from the Company to a Subsidiary, from a
Subsidiary to the Company, and from one Subsidiary to another shall not be
considered a termination of employment; nor shall it be considered a termination
of employment if an employee is placed on military or sick leave or such other
leave of absence which is considered by the Committee as continuing intact the
employment relationship.
15. Adjustments.
-----------
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Committee shall make such adjustment as it deems appropriate in the number and
kind of Shares or other property reserved for issuance under the Plan, in the
number and kind of Shares or other property covered by grants previously made
under the Plan, and in the exercise price of outstanding options and SARs. Any
such adjustment shall be final, conclusive and binding for all purposes of the
Plan. In the event of any merger, consolidation or other reorganization in
which the Company is not the surviving or continuing corporation or in which a
Change in Control is to occur, all of the Company's obligations regarding
options, SARs performance awards, and restricted stock that were granted
hereunder and that are outstanding on the date of such event shall, on such
terms as may be approved by the Committee prior to such event, be assumed by the
surviving or continuing corporation or canceled in exchange for property
(including cash).
Without limitation of the foregoing, in connection with any
transaction of the type specified by clause (iii) of the definition of a Change
in Control in Section 2(c), the Committee may, in its discretion, (i) cancel any
or all outstanding options under the Plan in consideration for payment to the
holders thereof of an amount equal to the portion of the consideration that
would have been payable to such holders pursuant to such transaction if their
options had been fully exercised immediately prior to such transaction, less the
aggregate exercise price that would have been payable therefor, or (ii) if the
amount that would have been payable to the option holders pursuant to such
transaction if their options had been fully exercised immediately prior thereto
would be less than the aggregate exercise price that would have been payable
therefor, cancel any or all such options for no consideration or payment of any
kind. Payment of any amount payable pursuant to the preceding sentence may be
made in cash or, in the event that the consideration to be received
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<PAGE>
in such transaction includes securities or other property, in cash and/or
securities or other property in the Committee's discretion.
16. Termination and Modification of the Plan.
----------------------------------------
The Board of Directors, without further approval of the stockholders,
may modify or terminate the Plan, except that no modification shall become
effective without prior approval of the stockholders of the Company if
stockholder approval would be required for continued compliance with the
performance-based compensation exception of Section 162(m) of the Code or any
listing requirement of the principal stock exchange on which the Common Stock is
then listed.
17. Amendment or Substitution of Awards under the Plan.
--------------------------------------------------
The terms of any outstanding award under the Plan may be amended from
time to time by the Committee in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any award and/or payments thereunder or of the date of removal of
restrictions on Shares); provided that, except as otherwise provided in Section
15, no such amendment shall adversely affect in a material manner any right of a
participant under the award without his or her written consent. The Committee
may, in its discretion, permit holders of awards under the Plan to surrender
outstanding awards in order to exercise or realize rights under other awards, or
in exchange for the grant of new awards, or require holders of awards to
surrender outstanding awards as a condition precedent to the grant of new awards
under the Plan.
18. Commencement Date; Termination Date.
-----------------------------------
The date of commencement of the Plan shall be September 29, 1997,
subject to approval by the shareholders of the Company. Unless previously
terminated upon the adoption of a resolution of the Board terminating the Plan,
the Plan shall terminate at the close of business on September 29, 2007;
provided that the Board may, prior to such termination, extend the term of the
Plan for up to five years for the grant of awards other than Incentive Stock
Options. No termination of the Plan shall materially and adversely affect any
of the rights or obligations of any person, without his consent, under any grant
of options or other incentives theretofore granted under the Plan.
19. Governing Law. The Plan shall be governed by the corporate laws of the
-------------
State of Delaware, without giving effect to any choice of law provisions.
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<PAGE>
EXHIBIT 10.2
THE PETERSEN COMPANIES, INC.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
-------------------------------------
ARTICLE I - PURPOSE
1.01 Purpose.
The Petersen Companies, Inc. Employee Stock Discount Purchase Plan (the
"Plan") is intended to provide employees of The Petersen Companies, Inc.
-----
and its Subsidiary Corporations (hereinafter collectively referred to,
unless the context otherwise requires, as the "Company") an opportunity to
-------
acquire a proprietary interest in the Company through the purchase of
shares of the Class A Common Stock of the Company. It is the intention of
the Company to have the Plan qualify as an "employee stock purchase plan"
under (S)423 of the Internal Revenue Code of 1986, as amended (the "Code").
----
The provisions of the Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section
of the Code.
ARTICLE II - DEFINITIONS
2.01 Base Pay.
"Base Pay" shall mean regular straight-time earnings excluding payments for
--------
overtime, shift premium, bonuses and other special payments.
2.02 Committee.
"Committee" shall mean the individuals described in Article XI.
---------
2.03 Employee.
"Employee" means any person who is employed on a full-time or part-time
--------
basis by the Company and is regularly scheduled to work more than 20 hours
per week and more than five months in any calendar year.
2.04 Subsidiary Corporation.
"Subsidiary Corporation" shall mean any present or future corporation which
----------------------
(i) would be a "subsidiary corporation" of The Petersen Companies, Inc. as
that term is defined in (S)424 of the Code and (ii) is designated as a
participant in the Plan by the Committee.
<PAGE>
ARTICLE III - ELIGIBILITY AND PARTICIPATION
3.01 Initial Eligibility.
Any employee, who shall have completed one hundred eighty (180) days
employment and shall be employed by the Company on the date the employee's
participation in the Plan is to become effective, shall be eligible to
participate in offerings under the Plan which commence on or after such one
hundred eighty (180) day period has concluded.
3.02 Leave of absence.
For purposes of determining initial eligibility for participation in the
Plan, an employee on leave of absence shall be deemed to continue to be an
employee under the Plan for the first (lst) ninety (90) days of such leave
of absence. Such person's initial eligibility to participate in the Plan
shall terminate at the close of business on the ninetieth (90th) day of
such leave of absence unless such person shall have returned to regular
full-time or part-time employment (as the case may be) prior to the close
of business on such ninetieth (90th) day. Termination by the Company of any
employee's leave of absence, other than termination of such leave of
absence on return to full-time or part-time employment, shall terminate an
employee's eligibility to participate in the plan for all purposes of the
Plan and shall terminate such employee's participation in the Plan, and/or
night to exercise any option under the Plan. Any such employee may
reestablish eligibility only by meeting the requirements of (S)3.01 and/or
(S)3.02.
3.03 Restrictions on Participation.
Notwithstanding any provisions of the Plan to the contrary, no employee
shall be granted an option to participate in the Plan or any Offering under
the Plan
(a) if, immediately after the grant, such employee would own stock, and/or
hold outstanding options to purchase stock, possessing five percent
(5%) or more of the total combined voting power or value of all
classes of stock of the Company (for purposes of this paragraph, the
rules of (S)424(d) of the Code shall apply in determining stock
ownership of any employee); or
(b) which permits such employee's rights to purchase stock under all
employee stock purchase plans of the Company to accrue at a rate which
exceeds $25,000 in fair market value of the stock (determined at the
time such option is granted) for each calendar year in which such
option is outstanding.
3.04 Commencement of Participation.
An eligible employee may become a participant by completing an
authorization of a payroll deduction on the form provided by the Company
and filing it with the Human Resources office of the Company on or before
the date set therefor by the Committee, which date shall
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<PAGE>
be prior to the Offering Commencement Date for the Offering (as such terms
are defined below). Payroll deductions for a participant shall commence on
the applicable Offering Commencement Date when his authorization for a
payroll deduction becomes effective and shall end on the Offering
Termination Date of the Offering to which such authorization is applicable
unless sooner terminated by the participant as provided in Article VIII.
ARTICLE IV - OFFERINGS
4.01 Annual Offerings.
The Plan will be implemented by four (4) annual offerings of the Company's
Class A Common Stock (the "Offerings"). The Offerings shall begin on the
---------
first (1st) day of January in each of the years 1998, 1999, 2000 and 2001,
and shall terminate on December 31 of such year. In the discretion of the
Committee, exercised prior to the commencement thereof, each annual
Offering may be divided into four (4) three-month Offerings commencing on
January 1, April 1, July 1 and October 1 of such year and terminating on
March 31, June 30, September 30 and December 31 of such year. The maximum
number of shares issued in the respective years shall be:
. From January 1, 1998 to December 31, 1998: 22,640 shares.
. From January 1, 1999 to December 31, 1999: 22,639 shares plus
unissued shares from the prior Offerings, whether offered or not.
. From January 1, 2000 to December 31, 2000: 22,639 shares plus
unissued shares from the prior Offerings, whether offered or not.
. From January 1, 2001 to December 31, 2001: 22,639 shares plus unissued
shares from the prior Offerings, whether offered or not.
If a three-month Offering is made, the maximum number of shares which may be
issued shall be one-quarter ( 1/4) of the number of shares set forth for the
annual period in which the three-month offering falls, plus, if the Offering is
an April 1 to June 30, July 1 to September 30 or October 1 to December 31
offering, the number of unissued shares, whether offered or not, from the
immediately preceding three-month Offering. As used in the Plan, "Offering
--------
Commencement Date" means January 1, April 1, July 1 or October 1, as the case
- -----------------
may be, on which the particular Offering begins, and "Offering Termination Date"
-------------------------
means the March 31, June 30, September 30 or December 31, as the case may be, on
which the particular Offering terminates.
ARTICLE V - PAYROLL DEDUCTIONS
5.01 Amount of Deduction.
At the time a participant files an authorization for payroll deduction, he
shall elect to have deductions made from his pay on each payday during the
time he is a participant in an Offering at a percentage of his base pay in
effect at the Offering Commencement Date of
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<PAGE>
such Offering specified in such authorization. In the case of a part-time
hourly employee, such employee's base pay during an Offering shall be
determined by multiplying such employee's hourly rate of pay in effect on
the Offering Commencement Date by the number of regularly scheduled hours
of work for such employee during such Offering.
5.02 Participant's Account.
All payroll deductions made for a participant shall be credited to the
participant's account under the Plan. A participant may not make any
separate cash payment into such account except when on leave of absence and
then only as provided in (S)5.04.
5.03 Changes in Payroll Deductions.
A participant may discontinue his participation in the Plan as provided in
Article VIII, but no other change may be made during an Offering and,
specifically, a participant may not, after the Offering Commencement Date
for an Offering, alter the amount of the participant's payroll deductions
for that Offering.
5.04 Leave of Absence.
If a participant goes on a leave of absence, such participant shall elect:
(a) to withdraw, pursuant to (S)7.02., the balance in the participant's
account under the Plan;
(b) to delay commencement of or, if applicable, to discontinue,
contributions to the Plan but remain a participant in the Plan; or
(c) if payments will be made to the participant by the Company during such
leave of absence, remain a participant in the Plan during such leave
of absence, authorizing deductions to be made from such payments by
the Company and undertaking to make cash payment to the Plan at the
end of each payroll period to the extent that amounts payable by the
Company to such participant are insufficient to meet participant's
authorized Plan deductions.
ARTICLE VI - GRANTING OF OPTION
6.01 Number of Option Shares.
On the Commencement Date of each Offering, a participating employee shall
be deemed to have been granted an option to purchase a maximum number of
shares of the Class A Common Stock of the Company equal to an amount
determined as follows:
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<PAGE>
(i) that percentage of the employee's base pay which the employee has
elected to have withheld (but not in any case in excess of ten
percent (10%) ), multiplied by
-------------
(ii) the employee's base pay during the period of the Offering,
divided by
----------
(iii) eighty-five percent (85%) of the market value of the stock
of the Company on the applicable Offering Commencement Date.
The market value of the Company's Class A Common Stock shall be determined
as provided in paragraphs (a) and (b) of (S)6.02. below. If an employee is
paid hourly, such employee's base pay during the period of an Offering
shall be determined by multiplying such employee's hourly rate (as in
effect on the last day prior to the Commencement Date of the particular
Offering) by two thousand eighty (2,080) or, in the case of a three-month
Offering, by five hundred twenty (520), as the case may be, plus any
commission paid by the Company to such employee during the period of the
Offering, provided that any commission paid may be applied to only one
Offering, and provided further that, in the case of a part-time, hourly
employee, the employee's base pay during the period of an offering shall be
determined by multiplying such employee's hourly rate by the number of
regularly scheduled hours of work for such employee during such Offering.
If an employee is a salaried employee, such employee's base pay during the
period of an Offering shall be such employee's annual salary (as in effect
on the last day prior to the Commencement Date of the particular Offering)
or, in the case of a three-month Offering, such employee's annual salary
divided by four (4), in each case plus any commission paid by the Company
to such employee during the period of the Offering, provided that any
commission paid may be applied to only one Offering.
6.02 Option Price.
The option price of stock purchased with payroll deductions made during
such annual offering for a participant therein shall be the lower of:
(a) eighty-five percent (85%) of the opening price per share of the
Company's Class A Common Stock on the Offering Commencement Date or
the nearest prior business day on which trading occurred on the New
York Stock Exchange or any other national trading market for such
stock of the Company if such stock is not then trading on the New York
Stock Exchange; or
(b) eighty-five percent (85%) of the closing price per share of the
Company's Class A Common Stock on the Offering Termination Date or the
nearest prior business day on which trading occurred on the New York
Stock Exchange or any other national trading market if such stock is
not then trading on the New York Stock Exchange.
If the Class A Common Stock of the Company is not admitted to trading on
any of the aforesaid dates for which closing prices of the stock are to be
determined, then reference
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<PAGE>
shall be made to the fair market value of the stock on that date, as
determined on such basis as shall be established or specified for the
purpose by the Committee.
ARTICLE VII - EXERCISE OF OPTION
7.01 Automatic Exercise.
Unless a participant gives written notice to the Company as hereinafter
provided, the participant's option for the purchase of stock with payroll
deductions made during any Offering will be deemed to have been exercised
automatically on the Offering Termination Date applicable to such Offering,
for the purchase of the number of full shares of the Company's Class A
Common Stock which the accumulated payroll deductions in the participant's
account at that time will purchase at the applicable option price (but not
in excess of the number of shares for which options have been granted to
the employee pursuant to (S)6.01.), and any excess in the participant's
account at that time will be returned to the participant.
7.02 Withdrawal of Account.
By written notice to the Treasurer of the Company, at any time prior to the
Offering Termination Date applicable to any Offering, a participant may
elect to withdraw all of the accumulated payroll deductions in his or her
account under the Plan at such time. In such event, the employee will not
be entitled to participate in such Offering.
7.03 Fractional Shares.
Fractional shares will not be issued under the Plan, and any accumulated
payroll deductions which would have been used to purchase fractional shares
will be returned to any participant promptly following the termination of
an Offering, without interest.
7.04 Transferability of Option.
During a participant's lifetime, options held by such participant shall be
exercisable only by that participant.
7.05 Delivery of Stock.
As promptly as practical, after the Offering Termination Date of each
Offering, the Company will deliver to each participant, as appropriate, the
stock purchased upon exercise of the participant's option.
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<PAGE>
ARTICLE VII - WITHDRAWAL
8.01 In General.
As indicated in (S)7.02., a participant may withdraw payroll deductions
credited to the participant's account under the Plan at any time prior to
the Offering Termination Date by giving written notice to the Treasurer of
the Company. All of the participant's payroll deductions credited to
his/her account will be paid to the participant promptly after receipt of
participant's notice of withdrawal, and no further payroll deductions will
be made from the participant's pay during such Offering.
8.02 Effect on Subsequent Participation.
A participant's withdrawal from any Offering will not have any effect upon
the participant's eligibility to participate in any succeeding Offering or
in any similar plan which may hereafter be adopted by the Company.
8.03 Termination of Employment
Upon termination of the participant's employment for any reason, including
retirement (but excluding death while in the employ of the Company or
continuation of a leave of absence for a period beyond ninety (90) days),
the participant's option to purchase stock pursuant to the Plan will
automatically terminate and the payroll deductions credited to the
participant's account under the Plan will be returned to the participant
or, in the case of the participant's death subsequent to the termination of
the participant's employment, to the person or persons entitled thereto
under (S)12.01.
8.04 Termination of Employment Due to Death.
Upon termination of the participant's employment because of the
participant's death, the participant's beneficiary (as defined in
(S)12.01.) shall have the right to elect, by written notice given to the
Treasurer of the Company prior to the earlier of the Offering Termination
Date or the expiration of a period of sixty (60) days commencing with the
date of the death of the participant, either:
(a) to withdraw all of the payroll deductions credited to the
participant's account under the Plan, or
(b) to exercise the participant's option for the purchase of stock on the
Offering Termination Date next following the date of the participant's
death for the purchase of the number of full shares of stock which the
accumulated payroll deductions in the participant's account at the
date of the participant's death will purchase at the applicable option
price, and any excess in such account will be returned to said
beneficiary, without interest.
-7-
<PAGE>
In the event that no such written notice of election shall be duly received by
the office of the Treasurer of the Company, the beneficiary shall automatically
be deemed to have elected, pursuant to paragraph 8.04.(b), not to exercise the
participant's option.
8.05 Leave of Absence.
A participant on leave of absence shall, subject to the election made by
such participant pursuant to (S)5.04., continue to be a participant in the
Plan so long as such participant is on continuous leave of absence;
provided, however, that a participant who has been on leave of absence for
--------
more than ninety (90) days shall not be entitled to participate in any
Offering commencing after the ninetieth (90th) day of such leave of
absence. Notwithstanding the above or any other provisions of the Plan,
unless a participant on leave of absence returns to regular full-time or
part-time employment with the Company at the earlier of (a) the termination
of such leave of absence or (b) three (3) months from the ninetieth (90)
day of such leave of absence, such participant's participation in the Plan
shall terminate on whichever of such dates first occurs.
ARTICLE IX - STOCK
9.01 Maximum Shares.
The maximum number of shares which shall be issued under the Plan, subject
to adjustment upon changes in capitalization of the Company as provided in
(S)12.04, shall be 22,640 shares in the first annual Offering and 22,639
shares in each subsequent annual Offering, (5,660 shares in each three-
month Offering), plus, in each Offering all unissued shares from prior
Offerings whether offered or not, not to exceed 90,557 shares for all
Offerings. If the total number of shares for which options are exercised
on any Offering Termination Date in accordance with Article VI exceeds the
maximum number of shares for the applicable offering, the Company shall
make a pro rata allocation of the shares available for delivery and
distribution in as nearly a uniform manner as shall be practicable and as
it shall determine to be equitable, and the balance of payroll deductions
credited to the account of each participant under the Plan shall be
returned to such participant as promptly as possible.
9.02 Participant's Interest in Option Stock.
No participant will have any interest in stock covered by such
participant's option until such option has been exercised.
9.03 Registration of Stock.
Stock to be delivered to a participant under the Plan will be registered in
the name of the participant or, if the participant so directs by written
notice to the Treasurer of the Company prior to the Offering Termination
Date applicable thereto, in the names of the participant and
-8-
<PAGE>
one (1) such other person as may be designated by the participant, as
joint tenants with rights of survivorship or as tenants by the entireties,
to the extent permitted by applicable law.
9.04 Restrictions on Exercise.
The Board of Directors or the Committee may, in its discretion, require as
conditions to the exercise of any option that the shares of Class A Common
Stock reserved for issuance upon the exercise of such option shall have
been duly listed, upon official notice of issuance, upon a stock exchange,
and that a Registration Statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective.
ARTICLE X - ADMINISTRATION
10.01 Appointment of Committee.
The Board of Directors may appoint a committee (the "Committee") to
administer the Plan, which shall consist of no fewer than two (2) members
of the Board of Directors. No member of the Committee shall be eligible to
purchase stock under the Plan.
10.02 Authority of Committee.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority in its discretion to interpret and construe any and all
provisions of the Plan, to adopt rules and regulations for administering
the Plan, to solicit and retain third party services to assist in
administration of the Plan, and to make all other determinations deemed
necessary or advisable for administering the Plan. The Committee's
determination on the foregoing matters shall be conclusive.
10.03 Rules Governing the Administration of the Committee.
Board of Directors may from time to time appoint members of the Committee
in substitution for or in addition to members previously appointed and may
fill vacancies, however caused, in the Committee. The Committee may select
one (1) of its members as its Chairman and shall hold its meetings at such
times and places as it shall deem advisable and may hold telephonic
meetings. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its
members. The Committee may correct any defect or omission or reconcile any
inconsistency in the Plan, in the manner and to the extent it shall deem
desirable. Any decision or determination reduced to writing and signed by
a majority of the members of the Committee shall be as fully effective as
if it had been made by a majority vote at a meeting dully called and held.
The Committee may appoint a Secretary and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
-9-
<PAGE>
ARTICLE XI - MISCELLANEOUS
11.01 Designation of Beneficiary.
A participant may file a written designation of a beneficiary who is to
receive any stock and/or cash pursuant to the Plan. Such designation of
beneficiary may be changed by the participant at any time by written
notice to the Treasurer of the Company. Upon the death of a participant
and upon receipt by the Company of proof of identity and existence at such
participant's death of a beneficiary validly designated by such
participant under the Plan, the Company shall deliver such stock and/or
cash to such beneficiary. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall deliver
such stock and/or cash to the executor or administrator of the estate of
such participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in it
discretion, may deliver such stock and/or cash to the spouse or to any one
or more dependents of such participant as the Company may designate. No
beneficiary shall, prior to the death of the participant by whom such
beneficiary has been designated, acquire any interest in the stock or cash
credited to such participant under the Plan.
11.02 Transferability.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive stock under
the Plan may be assigned, transferred, pledged or otherwise disposed of in
any way by the participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat
such act as an election to withdraw funds in accordance with (S)7.02.
11.03 Use of Funds.
All payroll deductions received or held by the Company under this Plan may
be used by the Company for any corporate purpose, and the Company shall
not be obligated to segregate such payroll deductions.
11.04 Adjustment Upon Changes in Capitalization.
(a) If, while any options are outstanding, the outstanding shares of
Class A Common Stock of the Company have increased, decreased,
changed into or been exchanged for a different number or kind of
shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split
or similar transaction, appropriate and proportionate adjustments may
be made by the Committee in the number and/or kind of shares which
are subject to purchase under outstanding options and in the option
exercise price or prices applicable to such outstanding options. In
addition, in any such event, the number and/or kind or shares which
may be offered in the Offerings described in Article IV hereof shall
-10-
<PAGE>
also be proportionately adjusted. No adjustments shall be made for
stock dividends. For the purposes of this Paragraph, any distribution
of shares to shareholders in an amount aggregating twenty percent
(20%) or more of the outstanding shares shall be deemed a stock split,
and any distributions of shares aggregating less than twenty percent
(20%) of the outstanding shares shall be deemed a stock dividend.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one (1) or
more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all of the
property or stock of the Company to another corporation, the Company
shall return all of the accumulated payroll deductions to all holders
of options then outstanding under the Plan, and any offering and such
option shall be deemed to have been terminated.
11.05 Amendment and Termination.
The Board of Directors shall have complete power and authority to
terminate or amend the Plan; provided, however, that the Board of
Directors shall not, without the approval of the stockholders of the
Company
(i) increase the maximum number of shares which may be issued under
any Offering (except pursuant to (S)12.04.); or
(ii) amend the requirements as to the class of employees eligible to
purchase stock under the Plan or permit the members of the
Committee to purchase stock under the Plan.
11.06 No Employment Rights.
The Plan does not, directly or indirectly, create any right for the
benefit of any employee or class of employees to purchase any shares under
the Plan, or create in any employee or class of employees any right with
respect to continuation of employment by the Company, and it shall not be
deemed to interfere in any way with the Company's right to terminate, or
otherwise modify, an employee's employment at any time.
11.07 Effect of Plan.
The provisions of the Plan shall, in accordance with its terms, be binding
upon, and inure to the benefit of, all successors of each employee
participating in the Plan, including, without limitation, such employee's
estate and the executors, administrators or trustees thereof, heirs and
legatees, and any receiver, trustee in bankruptcy or representative of
creditors of the employee.
-11-
<PAGE>
11.08 Governing Law.
The law of the State of Delaware will govern all matters relating to this
Plan except to the extent it is superseded by the laws of the United
States.
12.09 Effective Date
The Plan shall take effect upon approval by the holders of a majority of
the stock of the Company entitled to vote either present or represented at
a special or annual meeting of the shareholders, or by written consent or
consents in writing signed by such holders setting forth the action so
taken. If the Plan is not so approved, the Plan shall not become
effective.
-12-
<PAGE>
EXHIBIT 10.3
AMENDMENT NO. 1 TO SECURITYHOLDERS AGREEMENT
--------------------------------------------
This Amendment No. 1 to Securityholders Agreement (this "Amendment")
---------
is made as of September 30, 1997, by and among The Petersen Companies, Inc., a
Delaware corporation formerly known as BrightView Communications Group, Inc.
(the "Company"), Petersen Holdings, L.L.C., a Delaware limited liability company
-------
("Holdings"), and the other Persons executing this Amendment and listed on the
--------
Schedule of Investors attached hereto (each, an "Investor" and all of such
- --------------------- --------
Persons, collectively, the "Investors").
---------
The Company, Holdings and the Investors are parties to a
Securityholders Agreement, dated as of September 30, 1996 among the Company,
Holdings and the Investors (the "Securityholders Agreement"), and wish to amend
-------------------------
the Securityholders Agreement as provided herein. The execution and delivery of
this Amendment is a condition to the obligations of the Company and the
Investors under the Contribution and Recapitalization Agreement, dated as of
September 30, 1997, by and among the Company and the Investors (the
"Contribution Agreement").
----------------------
In consideration of the mutual agreements set forth herein and in the
Contribution Agreement and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Section 2.1(b) of the Securityholders Agreement is hereby
deleted.
2. The fourth sentence of Section 2.3 of the Securityholders
Agreement is hereby amended and restated to read in its entirety as set forth
below:
"Such proxies and powers shall be irrevocable, subject only to Section
-------
2.5 below."
- ---
3. The following is added as Section 2.5 of the Securityholders
Agreement: amended and restated to read in its entirety as set forth below:
"2.5 TERMINATION OF VOTING AGREEMENTS. The provisions of this
--------------------------------
Article II shall terminate automatically and be of no further force or
----------
effect as of the day twenty-one (21) calendar months after the
consummation of the Contribution Transactions, as defined in the
Contribution and Recapitalization Agreement, dated as of September 30,
1997, among The Petersen Companies, Inc., Willis Stein, Nassau Capital
Partners II, L.P., NAS Partners I, L.L.C. and the other Persons listed
on the Schedule of Investors attached thereto, as amended.
---------------------
4. The following is added as Section 6.1(f) of the Securityholders
Agreement:
<PAGE>
"(f) The provisions of this Section 6.1 shall terminate automatically
-----------
and be of no further force or effect upon a Qualified IPO."
5. This Amendment may be executed in two or more counterparts, all
of which taken together will constitute one and the same agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No.1 to Securityholders Agreement as of the date first written above.
THE PETERSEN COMPANIES, INC.
By: /s/ Richard S Willis
-------------------------------------------
Name: Richard S Willis
Title: Executive Vice President and Chief
Financial Officer
PETERSEN HOLDINGS, L.L.C.
By: The Petersen Companies, Inc.
Its: Manager
By: /s/ Richard S. Willis
-------------------------------------------
Name: Richard S. Willis
Title: Executive Vice President and Chief
Financial Officer
WILLIS STEIN & PARTNERS, L.P.
By: Willis Stein & Partners, L.L.C.
Its: General Partner
By: /s/ Daniel H. Blumenthal
-------------------------------------------
Name: Daniel H. Blumenthal
Title: Managing Director
NASSAU CAPITAL PARTNERS II, L.P.
By: Nassau Capital, L.L.C.
Title: General Partner
By: /s/ John G. Quigley
-------------------------------------------
Name: John G. Quigley
Title: Member
NAS PARTNERS I, L.L.C.
By: /s/ John G. Quigley
-------------------------------------------
Name: John G. Quigley
Title: Member
<PAGE>
[Signature Page to Amendment No. 1 to Securityholders Agreement]
PETERSEN PROPERTIES
By: /s/ Robert E. Petersen
-------------------------------------------
Name: Robert E. Petersen
Title: Chairman of the Board
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners
Its: General Partner
By: /s/ Brian J. Richmond
-------------------------------------------
Name: Brian J. Richmond
Title: General Partner
BANKAMERICA INVESTMENT CORPORATION
By: /s/ Christopher J. Perry
-------------------------------------------
Name: Christopher J. Perry
Title: Managing Director
CIVC PARTNERS II
By: /s/ Christopher J. Perry
-------------------------------------------
Name: Christopher J. Perry
Title: A General Partner
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
By: /s/ Jay Levine
-------------------------------------------
Name: Jay Levine
Title: Managing Director
ALLSTATE INSURANCE COMPANY
By: /s/ John M. Goesne
-------------------------------------------
Name: John M. Goesne
<PAGE>
[Signature Page to Amendment No. 1 to Securityholders Agreement]
By: /s/ Corey S. Golde
-------------------------------------------
Name: Corey S. Golde
Title: Authorized Signatories
FUI, INC.
By: /s/ Scott B. Perper
-------------------------------------------
Name: Scott B. Perper
Title: Senior Vice President
NORWEST EQUITY CAPITAL, L.L.C.
By: Itasca NEC, L.L.C.
Its: Managing Member
By: /s/ J.E. Lindahl
-------------------------------------------
Name: J.E. Lindahl
Title: Managing Member
/s/ James D. Dunning, Jr.
-------------------------------------------
James D. Dunning, Jr.
THE LAURENCE H. BLOCH AND CINDY BLOCH
TRUST
By: /s/ Laurence H. Bloch
-------------------------------------------
Name: Laurence H. Bloch
Title: Trustee
/s/ Stuart Karu
-------------------------------------------
Stuart Karu
/s/ Thomas J. Strauss
-------------------------------------------
Thomas J. Strauss
/s/ Irwin Bard
-------------------------------------------
Irwin Bard
/s/ Bernard Shavitz
-------------------------------------------
Bernard Shavitz
<PAGE>
[Signature Page to Amendment No. 1 to Securityholders Agreement]
/s/ D. Claeys Bahrenburg
-------------------------------------------
D. Claeys Bahrenburg
/s/ Neal Vitale
-------------------------------------------
Neal Vitale
/s/ Richard S. Willis
-------------------------------------------
Richard S. Willis
/s/ John Dianna
-------------------------------------------
John Dianna
/s/ Richard P. Lague
-------------------------------------------
Richard P. Lague
/s/ Paul Tzimoulis
-------------------------------------------
Paul Tzimoulis
/s/ David Myers
-------------------------------------------
David Myers
/s/ Ken Elliott
-------------------------------------------
Ken Elliott
/s/ Lee Kelley
-------------------------------------------
Lee Kelley
/s/ Michael Borchetta
-------------------------------------------
Michael Borchetta
/s/ Justin McCormack
-------------------------------------------
Justin McCormack
<PAGE>
[Signature Page to Amendment No. 1 to Securityholders Agreement]
DEAN WITTER REYNOLDS, Custodian for Justin
McCormack IRA Rollover
By: /s/ Timothy J. Walsh
-------------------------------------------
Name: Timothy J. Walsh
Title: Branch Manager
MLPF&S, Custodian FPO James Guthrie IRA FBO
James Guthrie
By: /s/ Frank P. Trapani
-------------------------------------------
Name: Frank P. Trapani
Title: Assistant Vice President
/s/ Charlotte Perkins
-------------------------------------------
Charlotte Perkins
/s/ Amy Wilkins
-------------------------------------------
Amy Wilkins
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q FOR
PERIOD ENDED 9/30/97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,652
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,652
<TOTAL-LIABILITY-AND-EQUITY> 1,652
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (28)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
